Shwiff v. City of Dallas

• Decision Date: 24 July 1959
• Docket Number: No. 15595,15595
• Citation: 327 S.W.2d 598
• Parties: Estelle SHWIFF, Appellant, v. CITY OF DALLAS, Appellee.
• Court: Texas Court of Appeals

Page 598

327 S.W.2d 598

Estelle SHWIFF, Appellant, v. CITY OF DALLAS, Appellee.

No. 15595.

Court of Civil Appeals of Texas, Dallas.

July 24, 1959.

Rehearing Denied Oct. 2, 1959.

Marvin G. Shwiff, Dallas, for appellant.

H. P. Kucera, City Atty., N. Alex Bickley, Ted P. MacMaster and John W. Davidson, Assts. City Atty., Dallas, for appellee.

DIXON, Chief Justice.

This suit was filed by appellee City of Dallas to enforce a landlord's lien which it claims is superior to appellant's claim of title to certain property which the city asserts is affixed to leased realty. Appellant Estelle Shwiff claims title to the property free and clear of appellee's lien by virtue of a constable's bill of sale executed following foreclosure of a chattel mortgage lien. Estelle Shwiff had been substituted as party defendant following the death of her husband, Sol G. Shwiff, purchaser at the foreclosure sale. A summary judgment was rendered in favor of the city.

On November 4, 1947, Barish Produce Company, a corporation, with Joe Barish as president, borrowed $5,000 from Sol G. Shwiff, Alfred Shwiff, Hyman Shwiff, Morris Levine and Morris Robinson, all of whom were stockholders in Barish Produce Company, and all of whom were related by marriage to Joe Barish. This loan was not secured by a mortgage of any kind on the property of Barish Produce Company.

On September 14, 1948, Barish Produce Company, as tenant, entered into a tenyear written lease agreement with the City of Dallas, as landlord, covering Units 13 and 14 in the Dallas Municipal Market Building at a rental of $578.98 per month. The lease also provided for a rental of $650 per month on a month to month basis should there be any holding over by lessee after expiration of the lease term. This lease contract was not filed for record.

The written agreement further expressly provided that the city should have a lien as security for rent upon 'all of the goods, wares, chattels, implements, fixtures, furniture, tools and other personal property which are or may be put on the demised premises.'

Soon after entering into possession of the leased premises Barish Produce Company installed a refrigeration system for the purpose of cooling the leased units.

By May 7, 1955, Barish Produce Company had become involved in financial difficulties, and on that date executed a chattel mortgage upon its assets, including the refrigeration system, to Sol G. Shwiff, Alfred Shwiff, Hyman Shwiff, Morris Levine and Morris Robinson. This mortgage was to secure the $5,000 loan originally made in 1947. The mortgage was recorded in the Chattel Mortgage Records of Dallas County, Texas, but it was not recorded in the book endorsed 'chattel mortgage records on realty' in accordance with Art. 5498, V.A.C.S.

In May 1957 the mortgagees filed suit to foreclose their chattel mortgage lien against the assets of Barish Produce Company. Judgment was entered in their favor. On July 15, 1957, at a constable's sale the assets of Barish Produce Company, including the refrigeration machinery, were sold to Sol G. Shwiff for $5,000. Sol G. Shwiff, the purchaser, never did take possession of the property, or remove it from the leased premises. The property was allowed to remain on the premises in possession of Barish Produce Company. The city was not notified of the sale.

Barish Produce Company failed to meet its rental payments due in August and September 1957, and the city terminated the lease contract. However the Company continued in possession of the premises as a holdover through the month of January 1958.

Sometime prior to November 1, 1957, the city filed suit against Barish Produce Company and Sol G. Shwiff for rentals due, for $600 damages to a wall, and for foreclosure of its landlord's lien. In an amended petition filed February 21, 1958, the city sought recovery of judgment for $4,357.96 together with foreclosure of its lien. The amount of the damages to the wall was not then and is not now contested. The property sold to Sol G. Shwiff at the constable's sale was still on the leased premises in possession of Barish Produce Company, the tenant.

Motions for summary judgment were filed by the City of Dallas and by Sol G. Shwiff. On March 14, 1958, judgment was rendered in favor of the city against Barish Produce Company for $4,357.96 and for foreclosure of its landlord's lien.

On December 8, 1958, the motion for summary judgment of the city against Estelle Shwiff in regard to priority of its lien was sustained, and the motion of Estelle Shwiff who had been substituted as a party for Sol G. Shwiff, deceased, was overruled. Summary judgment was accordingly entered in behalf of the city for $4,357.96 and foreclosure of the city's lien as superior to Estelle Shwiff's claim of title to 'all the refrigeration machinery and its accessories, motors, compressors, attached accessories, pipes, refrigerating units and cooling tower plant with its accessories.' It will be noted that the foreclosure judgment in favor of the city did not include furniture, chairs, desks and other personal property which Sol G. Shwiff had bought at the constable's sale in July 1957. It included only the machinery and attached accessories and the cooling plant and accessories.

In her points on appeal Nos. 1 and 2 appellant Estelle Shwiff asserts error on the part of the trial court in overruling her motion for summary judgment and in sustaining appellee's motion.

In support of her first two points appellant asserts that when the rentals became in arrears in August 1957, the property in controversy was no longer owned by the tenant, Barish Produce Company, but had become the property of Sol G. Shwiff, who had bought it at the constable's foreclosure sale on July 15, 1957; and since a landlord's lien attaches only to property of the tenant and not to property of others in posession of the tenant, the city did not have a lien on the property in controversy. West Development Co. v. Crown Bottling Co., Tex.Civ.App., 90 S.W.2d 887.

It is appropriate to point out here that Shwiff's claim of title, being derived from a mortgage foreclosure sale, cannot be accorded a higher priority rating than can be accorded the mortgage which was foreclosed. The rule is especially applicable in this case since Sol G. Shwiff, the purchaser at the foreclosure sale, was himself one of the mortgagees. So the question before us narrows down to this: was the lien claimed by the city as landlord superior to the chattel mortgage which the tenant, Barish Produce Company, executed May 7, 1955, to Sol G. Shwiff, Alfred Shwiff, Hyman Shwiff, Morris Levine, and Morris Robinson?

Art. 5238, V.A.C.S., gives to a landlord a lien on property of the tenant located in a leased building. All other claimants of interest in the tenant's property are hold to have constructive notice of this statutory lien in behalf of the landlord. Lehman v. Stone, 4 Willson Civ.Cas.Ct.App. Sec. 121, 16 S.W. 784; Stoma v. Filgo, Tex.Civ.App., 26 S.W.2d 1100; 27 Tex.Jur. 170. So the five persons who took a mortgage on the personal property of Barish Produce Company did so with constructive notice of the statutory landlord's lien of the City of Dallas. On the other hand because of the failure of the mortgagees to file their mortgage for record in the book endorsed 'chattel mortgage records on realty's in accordance with Art. 5498, V.A.C.S., the city did not have constructive notice of the mortgagee's claim of a lien against the fixtures in the leased building. The record before us shows that the city did not have actual notice or knowledge of the mortgage or the subsequent foreclosure sale until this controversy arose. Under these circumstances we believe that the statutory landlord's lien of the city on the fixtures is superior to the unrecorded chattel mortgage lien upon which appellant's claim of title to the fixtures is based. Lynch v. Cock, Tex.Civ.App., 195 S.W.2d 773.

Appellant relies on that part of Art. 5238 which provides that rents to become due shall not continue or be enforced for a longer term than the current contract year whether the same be in the first or any other year of such lease or rental contract. We do not believe that the above statutory rule is applicable here for two reasons: (1) the rents involved in this controversy are rents already accrued and past due, they are not rents to become due in the future; (2) because the mortgage relied on by Shwiff was not recorded as required by Art. 5498, V.A.C.S., the city did not have constructive knowledge (and the record shows it did not have actual knowledge) of the claimed mortgage lien against the fixtures, hence the landlord's lien should prevail. Lynch v. Cock, Tex.Civ.App., 195 S.W.2d 773; General Motors Acceptance Corp. v. Bettes, Tex.Civ.App., 57 S.W.2d 263; Universal Credit Co. v. Gasow-Howard Motor Co., Tex.Civ.App., 73 S.W.2d 909, 911.

We are aware of cases holding that a mortgage which is recorded during one current year of a lease contract is superior to a statutory landlord's lien for rents which accrue during a subsequent...