Munger v. Curtis — 4 N.Y. St. Rep. 847

Majority

p. 847

James E. Munger, Resp’t, v. George B. Curtis et al., Appl’ts.

(Supreme Court, General Term, Second Department,

Filed December 14, 1886.)

Headnote

1. Mechanic’s lien—To what it attaches—Laws 1885, chap. 842—When IT ATTACHES.

A mechanic’s lien only attaches to the extent of the interest of the owner at the time the notice of lien is filed. And the person entitled to such lien, up to the time he files such notice, is a general creditor with no greater .equities than other general creditors.

2. Same—Does not cut off prior unrecorded mortgage.

A mechanic’s lien will not cut off or affect a prior unrecorded mortgage made in good faith.

8. Creditor—Right to secure himself and loan on security to debtor.

Any person has a right in good faith to loan money and take security from a party who is indebted to others, and a general creditor has a right to obtain security for his debts in preference to other general creditors.

Appeal from a judgment entered at a special term held in Dutchess county, that a certain mechanic’s lien was the first hen on certain premises and that the Savings Bank’s mortgage was second hen, etc.

This action was brought to foreclose a mechanic’s lien upon land in Hatteawan, in the county of Dutchess, Ñ. Y.

Plaintiff and defendant Curtis entered into a contract by which plaintiff was to furnish material and do the carpenter work in building a house on land described in the complaint for $850.40, to be paid for when the building was completed. The building was completed on the 18th day of June, 1886, and accepted by the defendant, Curtis.

On the 18th day of June, 1886, defendant Curtis and his wife executed a mortgage on the said premises to the defendant the Mechanics’ Savings Bank, for $900. The bond and mortgage were delivered to the bank by Curtis at two o’clock in the afternoon of the 19thday of June, and he was paid by the bank $900, the amount of the mortgage. The defendant Curtis, after receiving the $900 from the bank, absconded without paying the plaintiff. The Savings bank sent the mortgage by mail to the county clerk’s office at Poughkeepsie for record, where it was received at seven o’clock p. M., on the nineteenth day of June, and then and there indorsed on the mortgage the day of the month and the hour of receiving the same. On the 18th day of June, 1886, the defendant Curtis executed a mortgage to Tallardy and Aldridge for $300 on the same premises, and which was filed in the Dutchess county clerk’s office for record on the 21st day of June, at seven o’clock and thirty minutes A. m.

On the _21st day of June, 1886, the plaintiff filed a mechanic’s lien in said clerk’s court upon the same premises at eight o’clock a. m. of that day, to secure the payment of his

p. 848

claim of $850.40 and brought this action to foreclose his lien, claiming his lien to be prior to both of said mortgages.

The action was tried before Justice Barnard at the court house in the city of Poughkeepsie on the 28th day of August, 1886, and judgment rendered that said mechanic’s lien was the first hen on said premises; that the Savings bank was the second lien; and the Tallardy and Aldridge mortgage was the third hen.

From that judgment the defendant the Mechanics’ Savings bank appeals to this court.

William R. Woodin, for resp’t; II H. Hustis, for app’lts.

It does not seem to me that section 2, of chapter 342 of the Laws of 1885, has any application to the facts disclosed in this case. No fraud on the part of the defendant, the' Mechanics’ Savings Bank, is shown. It is not necessary to construe that section, as no part of it was intended to cover a case like the one in hand. ' That section only apphes to cases where the money is paid or the incumbrance is put on by collusion with the owner, for the purpose of defrauding the contractor or sub-contractor.

It is the settled law, that a mechanics’ lien, only attaches to the extent of the interest of the owner at the time the notice of hen is filed.

The mortgage to the savings bank was executed on the 19th of June, 1886, and the notice of hen was not filed until June 21st thereafter, hence, the hen only attached to the equity of redemption then held by Curtis. 11 Hun, 305 ; Payne v. Wilson, 74 N. Y., 355 .

The latter case holds that a person entitled to a mechanics’ lien acquires no specific hen until he files his notice, up to that time he is a general creditor, with no greater equities than other general creditors, and he is affected by all equities in favor of those dealing with his debtor. A lien will not cut off or affect a prior unrecorded mortgage made in good faith, and, hence, the struggle here over the question of priority of recording the mortgage and filing the notice of hen was unnecessary. The mortgage was executed and delivered, and the money/paid prior to filing the notice of lien, and the equity of the mortgagee attached prior to the hen without reference to the recording act.

In the absence of proof that the bank colluded with Curtis to defeat the claim and hen of the plaintiff, and was fraudulent and void, the mortgage is entitled to priority.

The fact that the bank knew the plaintiff had not been paid, was immaterial. Any person has a right, in good faith, to loan money and take security from a party who is indebted to others, and a general creditor has a right to

p. 849

obtain security for his debt in preference to other general creditors.

The good faith of the bank here, cannot be questioned. The money raised upon the mortgage was stated by Curtis to be applied to pay off his debt to tile plaintiff. The bank has as good a right to trust Curtis as the plaintiff had; the fact that he turned out to be dishonest, is not the fault of the bank. The plaintiff knew that Curtis was to get the money from the savings bank, and he must have known that he could only get it by giving a mortgage. It is clear to my mind that this case falls within the principle stated in the case of Payne v. Wilson ( 74 N. Y., 355 ).

Judgment reversed and new trial granted, costs to abide event.

This is an action to foreclose a mechanic’s lien, under the provisions of chapter 312 of the Laws of 1885. The first section of that law provides that any person who shall perform labor or furnish materials in the erection of a house may, upon filing the notice of hen prescribed in the fourth section, have a lien for the price and value of the same upon the house and premises to the extent' of the right, title and interest of the owner existing at that time.

Under that law, therefore, persons furnishing labor and materials for the erection of any structure specified therein become creditors at large, with a claim which may ripen into a lien, but he acquires no lien upon the premises until he files the requisite notice prescribed for that purpose.

If, previous to the time of filing such notice of lien, the title to the premises has become vested in another, he can acquire no lien, and his rights in that respect are cut off and lost. So if the premises are incumbered by a mortgage to a bona fide creditor, his claim is subordinate to the lien created thereby. These principles have always been recognized, and they seem to control this case.

The mortgage to the Mechanics’ Savings Bank was honest, and although all the parties assumed that the money procured thereon would be appropriated to the payment of the claim of the plaintiff, yet the bank in no way undertook to make that application, and the law imposed no obligation upon it to do so.

Section 2 of the Laws of 1885 has no application to such a case as this, and affords the plaintiff no relief.

The equities of the parties are equal, and the plaintiff can secure only the relief afforded him by the provisions of the law, and that provides him no rights prior or superior to the Hen of the bank mortgage.

p. 850

The judgment should be reversed and a new trial granted, without costs.

Barnard, P. J., not sitting.