Opinion
No. 27616.
February 11, 1929.
1. MORTGAGES. Deed of trust covering land and ginning machinery and "equipment" did not include seed house constructed on leased railroad right of way ( Hemingway's Code 1927, sections 2443, 2580).
Deed of trust covering land on which a public cotton gin was situated, stating that it was the intention to convey and deliver to the trustee all ginning machinery and equipment of every kind and character, whether same be located on the described lands or to be located thereon, held not to embrace a seed house located on leased railroad right of way so as to take precedence over materialmen's lien, in accordance with Code 1906, section 2784, and section 3058, as amended by Laws 1926, chapter 150, section 1 (Hemingway's Code 1927, sections 2443, 2580); the word "equipment" meaning whatever is used in equipping, and usually being applied to movable and not to immovable property.
2. MORTGAGES. Intention to include seed house in deed of trust is of no efficacy as against materialman without notice of claim.
The fact that parties to deed of trust covering land and public cotton gin may have intended to embrace therein seed house located on leased railroad right of way is of no efficacy as against materialman furnishing materials used in construction of seed house without notice of any claim thereto under deed of trust.
APPEAL from chancery court of Humphreys county, HON. J.L. WILLIAMS, Chancellor.
Butler Snow, for appellant.
Under chapter 81, Mississippi Code of 1906, and amendments thereto, as construed in Big Three Lumber Company v. Curtis, 130 Miss. 74, the appellant had a lien upon the seed house in question from the time Cain purchased the lumber to be used in the seed house, effective as to purchasers or encumbrancers for a valuable consideration without notice from the time of commencing the suit to enforce the lien.
It will be seen from the facts stated that appellant sold the lumber and the seed house was erected therefrom in October, 1926, on certain land leased by Cain from the Y. M.V. Railroad Company, and that the deed of trust from Cain in favor of the Refuge Cotton Oil Company was not executed and recorded until June 1, 1927.
The lower court found, and for the purpose of this discussion, we assume that the seed house was not in fact embraced in the Refuge Cotton Oil Company deed of trust.
It further appears that the appellant on August 9, 1927, filed its petition in the circuit court of Humphreys county, Mississippi, to enforce its lien upon the seed house and that prior to the 15th day of November, 1927, when the Refuge Cotton Oil Company had the gin property deeded by Martak to Hutchins that it had notice of the appellant's lien against the seed house and the bill under which the trust deed was corrected was not filed until December 23, 1927, long after the Refuge Cotton Oil Company had actual notice of the lien, and it will be noted that the primary purpose of the bill is to have the court adjudicate that the deed of trust is superior to the lien of the appellant.
Under these circumstances, it would seem that it was manifest error for the court to reform the deed of trust and give it priority over the lien of appellant on the seed house. Goodbar Co. v. Dunn, 61 Miss. 618; Sack v. Gilmer Dry Goods Co., 115 So. 339; Nugent v. Priebatsch, 61 Miss. 402; Miss. Valley Co. v. Railroad, 58 Miss. 849; Duke v. Clarke, 58 Miss. 465; Weidman v. Carpenter, 65 Colo. 63; Wixon v. Wixon, 76 Colo. 392; White v. Denman, 16 Ohio St. 59; Thorpe v. Helmer, 275 Ill. 86.
In Weidman v. Carpenter, 65 Colo. 63, the court cites with approval Goodbar Co. v. Dunn, supra. In the Colorado case mentioned the court holds that a judgment lien under recording statutes similar to those in Mississippi stands upon the same footing as that of a purchaser in good faith, and that a mortgage cannot be reformed to the prejudice of the judgment lien creditor.
It would seem that the appellant here stands in a better position than would a judgment lien creditor. Appellant sold the material to Cain upon the faith of his ownership of the leasehold interest in the land, free and unencumbered and, under the statute, his lien became effective from the date of the contract as to a creditor with notice and from the date of beginning suit, as a creditor without notice. Appellant sold the material before the deed of trust was given and at a time when the property upon which the seed house was located was wholly unencumbered. He began suit to enforce his lien without notice of the alleged equity of the Refuge Cotton Oil Company to have the deed reformed and without actual notice of the deed of trust. On the other hand the Refuge Cotton Oil Company made no investigation or inquiry according to the proof in the case, to ascertain whether the seed house was on or off the one acre of land embraced in its deed of trust. The abstract, which it had, showed that the one acre of land adjoined the right of way of the railroad company and the most casual inspection would have shown that the seed house was on the right of way of the railroad company. So, we say that under any view of the case it was error to reform the deed of trust to the prejudice of the appellant.
Montgomery Montgomery, for appellees.
This court has held in Big Three Lumber Co. v. Curtis, 130 Miss. 74, 93 So. 487, that a mechanic's lien as to buildings erected is effective as against prior encumbrances upon the land, but not as to subsequent purchasers or encumbrancers without notice.
The authorities cited by appellant do not apply here. In each of the cases cited, there was a deed, or deed of trust, which failed to impart notice to a subsequent creditor, or purchaser for value, because the deed, or deed of trust, was either not recorded, or failed to describe the property. In none of these cases, cited by appellant, was there any negligence or violation of any statute on the part of the party who was awarded a priority. In each case, there was negligence on the part of the vendee or mortgagee, which had resulted in failure to impart notice to a subsequent purchaser or creditor who was innocent.
A careful reading of the deed of trust from Cain to the Refuge Cotton Oil Company will show that it contains recitals sufficient to put a reasonably prudent man on inquiry, and accordingly, the appellant was charged with notice thereby. The gin plant and all equipment used in connection therewith was expressly covered by the trust deed. For the broad meaning of the word "equipment," see Landau v. Sykes, 98 Miss. 495, 54 So. 3.
A reasonably prudent man, after having read this deed of trust, to the oil company, would have inquired about the status of the seed house and, accordingly, the appellant was charged with notice. Dead River Club v. Stovall, 147 Miss. 385, 113 So. 336.
Butler Snow, for appellant, on questions propounded by the court.
The court invites a discussion of the following question: "Is the seed house included in the following portion of the description of the property conveyed in the deed of trust from Cain to the Refuge Cotton Oil Company, to-wit: `It being our intention to convey and de liver to said trustee all ginning machinery and equipment of every kind and character whether the same be now located on the above-described lands, or to be located thereon.'"
(1) In no event is the seed house covered by the word "equipment," because it is not within the locality of the description. (2) The seed house is not "equipment."
It will thus be seen that "locality" is made an essential part of the description. Certainly, a conveyance of all "ginning machinery and equipment" without definite location, or otherwise specifically describing it, would be absolutely void. Nicholson v. Karpe, 58 Miss. 34; Houston v. Totten, 1 Miss. Dec. 241; Redfield v. Montgomery, 71 Miss. 113; Kelly v. Reid, 57 Miss. 89; Bowman v. Roberts, 58 Miss. 126; 11 C.J. 456, 458; 5 Enc. of Law 556, et seq.
The seed house is not "on the above-described lands." It is on the right of way of the railroad company some distance from the gin and entirely off "the above-described lands."
We are not unmindful of the construction placed upon the word "equipment," in Landau v. Sykes, 98 Miss. 495. But we insist that a seed house situated upon a piece of property leased for a term of years and which is realty or a chattel real is not "equipment." 20 C.J. 1301; 22 R.C.L. 902; Elliott v. Payne (Mo.), 239 S.W. 851, 23 A.L.R. 706; Annotated Cases 1913B, 198.
Montgomery Montgomery, for appellees, on questions propounded by the court.
The cases cited by appellant in regard to location apply where the instrument covers chattels in general terms, and there would be no other method of identification, except by location. There was only one seed shed, or seed house. It was connected to, and was being used in the operation of the gin. The acre on which the gin stood, joined the railroad right of way, and the seed house was in close proximity to the gin and a necessary part of the outfit. See 11 C.J. 457 et seq.
The instrument covers all of Cains' ginning machinery and equipment located in Humphreys county, Mississippi, whether the same be located on the particular acre of land or other lands in the county. This certainly indicates that the mortgagors are the owners and have possession; that the property is located in Humphreys county, Mississippi, and under the well-known law of mortgages in Mississippi, the instrument clearly indicates that the property is to remain in Cain's possession until default in payment.
In Mississippi, and elsewhere, it is always competent for a mortgagor to encumber all property of a certain class and description, especially where it is limited to one county. Kelly v. Reid, 57 Miss. 89.
In Wasson v. Connor, 54 Miss. 351, the description in the trust deed was upheld which showed ownership only and parol evidence was held competent to explain and identify the subject-matter. 43 L.R.A. (N.S.) 165 and note.
Argued orally by Geo. Butler, for appellant, and M.V.B. Montgomery, for appellee.
This is an appeal from a decree correcting the description of property embraced in a deed of trust executed by Cain to the Refuge Cotton Oil Company, and declaring the lien thereof to be superior to a materialmen's lien of the Y.D. Lumber Company on a portion of the property embraced in the deed of trust as corrected.
The case was submitted to the court below on bill, answer, and proof, and the essential facts, in substance are as follows:
In May, 1926, and prior thereto, Cain owned and operated a public cotton gin, located on land owned by him and adjoining the right of way of the Yazoo Mississippi Valley Railroad Company. This company executed to him a lease to a portion of its right of way adjoining the land on which the gin was located, with permission to erect a cotton seed house thereon. This seed house was erected by Cain and used by him in connection with his gin for storing cotton seed, which was transferred from the gin by means of a blow pipe. In May, 1926, Cain executed to the Buckeye Cotton Oil Company a deed of trust, on the gin and the land owned by him on which it was located, to secure the payment of two promissory notes executed by him to the Buckeye Cotton Oil Company. In June, 1927, the Refuge Cotton Oil Company paid the Buckeye Cotton Oil Company's debt due by Cain and received an assignment of Cain's notes to it, secured by the deed of trust executed by Cain, and also received from Cain a deed of trust on the same property securing the notes assigned to it by the Buckeye Cotton Oil Company and an additional indebtedness due it by Cain. In July, 1927, Cain executed a trust deed to one Martak, for the use and benefit of the Refuge Cotton Oil Company, securing the indebtedness due by Cain to that company, including therein the property covered by the two deeds of trust which also remained in full force and effect. Afterwards, Martak executed a deed to the land owned by Cain and on which the gin was situated to Hutchins. In October, 1926, the seed house was destroyed by fire, and it was rebuilt by Cain with material purchased from the Y.D. Lumber Company, for which he did not pay. In August, 1927, this company sued Cain for the price of the material furnished him and used in the construction of the seed house, and obtained a judgment against him therefor, including a materialmen's lien on the house for the amount due it under the provisions of section 3058, Code of 1906; section 1, chapter 150, Laws of 1926; Hemingway's 1927 Code, section 2580.
The deed of trust from Cain to the Refuge Cotton Oil Company describes the land on which the gin is situated, but not that leased by him from the railroad company on which the seed house is situated, and then proceeds as follows: "Upon which said lot is situated the Bellewood gin, together with all buildings and machinery of every kind and description thereon situated. . . . It being our intention to convey and deliver to said trustee all ginning machinery and equipment of every kind and character whether the same be now located on the above-described lands, or to be located thereon; also all ginning machinery, tools and equipment of every kind or character which are now owned by us, or either of us, or which may be hereafter acquired by us, or either of us, by purchase or otherwise, during the continuance of this trust, whether the same be located on the above-described lands, or any other land."
The sale by the Y.D. Lumber Company to Cain of the materials with which the seed house was constructed was not evidenced by any writing, and the Refuge Cotton Oil Company had no notice thereof when it received its deed of trust from Cain. When the Y.D. Lumber Company instituted suit for the price of the materials against Cain and obtained its judgment therefor, no change had taken place in the possession and use of the property, both still being in Cain, and it had no notice of Cain's deed of trust to the Refuge Cotton Oil Company.
After the Y.D. Lumber Company had obtained its judgment against Cain, the Refuge Cotton Oil Company exhibited its original bill in the court below against Cain, the Yazoo Mississippi Valley Railroad Company, the Y.D. Lumber Company, and others, alleging that its deed of trust and trust deed covered the seed house, and praying that it be decreed that "the Refuge Cotton Oil Company is a subsequent encumbrancer of the seed house in question for a valuable consideration without notice or knowledge of the claims of the Y.D. Lumber Company; that the deeds from J.J. Cain to C.J. Martak, and from C.J. Martak to J.E. Hutchins, Jr., conveyed the said seed house, reforming the said deeds so as to expressly include the said seed house — if this be found necessary — and will hold that the said J.E. Hutchins, Jr., holds title to the said seed house free and clear of all claims of the Y.D. Lumber Company; that the judgment of the Justice Court in favor of the Y.D. Lumber Company . . . be held to constitute no lien upon the aforesaid seed house; and that all rights, equities and claims on the part of the defendants in this cause to the said seed house be annulled and cancelled as a cloud upon the complainant's title; that if the said seed house is located upon the right-of-way of the Yazoo and Mississippi Valley Railroad Company, then that the said seed house be held to be the property of your complainants subject to such usual lease contracts as a railroad company customarily executes with reference to such property."
The decree of the court below corrects the description of the property conveyed by the deed of trust from Cain to the appellant so as to include the land leased by Cain from the Yazoo Mississippi Valley Railroad Company on which the said seed house is located; and it is further ordered, "adjudged and decreed that the lien of the complainant, the Refuge Cotton Oil Company, upon the aforesaid property, including the seed house thereon, is expressly held to be prior and superior to that of the Y.D. Lumber Company, and that the rights of the Y.D. Lumber Company, under its circuit court judgment are subordinate to the lien of the Refuge Cotton Oil Company upon the said property."
The appellee's contentions are:
(1) That the seed house is embraced in the description of the property conveyed by Cain in his deed of trust to the Buckeye Cotton Oil Company and the trust deed to Martak.
(2) That the seed house is embraced in the description of the property conveyed by Cain in his deed of trust to the appellant, but, if not, the court below committed no error in correcting the description of the property therein so as to include the seed house, and, as it had no notice of the Y.D. Lumber Company's claim to a lien on the seed house when the deed of trust was executed, the court committed no error in decreeing that the lien of the deed of trust on the seed house is superior to that of the Y.D. Lumber Company's judgment against Cain.
The court below did not deal in its decree, with the deed of trust from Cain to the Buckeye Cotton Oil Company and his trust deed to Martak, and therefore denies the appellee any relief predicated thereon. No cross-appeal was taken, and no cross-assignment of error was filed by the appellee complaining thereof; consequently no question relative thereto is here presented.
The seed house is not covered by the description of the property conveyed by the deed of trust, unless embraced in the following language: "It being our intention to convey and deliver to said trustee all ginning machinery and equipment of every kind and character whether the same be now located on the above described lands, or to be located thereon." If the seed house is included in this description, it can only be because embraced in the words "equipment of every kind and character." We will assume, for the purpose of the argument only, that this description covers all equipment of every kind and character, whether located on the land described or not. The question then is, Is the seed house included therein? The word "equipment" means "whatever is used in equipping . . . the collective designation for the articles comprising an outfit." Webster's International Dictionary. In Landau v. Sykes, 98 Miss. 507, 54 So. 3, Ann. Cas. 1913B, 197, the word was held to include not only the machinery with which a manufacturing plant was necessarily equipped, but the office furniture used in connection with the operation thereof. It is usually applied to movable and not to immovable property. Every manufacturing and other industrial establishment must, of necessity, be located on real property, and generally within a building thereon, but such property is not usually considered a part of the equipment of the establishment, unless, possibly, the context in which the word is used necessarily implies that such is the case. Had this intrument conveyed only the gin, its machinery and equipment, it would undoubtedly have conveyed no interest in the real property on and in which the gin is situated, and the fact that it specifically conveyed a part of the real property would seem also to exclude the other real property from inclusion in the word "equipment." Compare 20 C.J. 1301; 22 R.C.L. 902, and the authorities there cited; also Standard Boiler Works v. National Surety Co., 71 Wn. 28, 127 P. 573, 43 L.R.A. (N.S.) 162; and U.S., to Use of Thomas Laughlin v. Morgan (C.C.), 111 F. 474.
Under section 3058, Code of 1906, as amended by section 1 of chapter 150, Laws of 1926 (Hemingway's 1927 Code, section 2580), the appellant's lien on the seed house for the price of the material furnished by it therefor did not "take effect as to purchasers or encumbrances for a valuable consideration without notice thereof" until the commencement of its suit against Cain for the enforcement of its lien thereon. Cain's deed of trust to the Refuge Cotton Oil Company was executed and recorded prior to the commencement of that suit, and, had the seed house been included in the property therein conveyed, it would have taken precedence of the appellant's lien thereon for the material furnished for its construction. Section 2784, Code of 1906; chapter 239, Laws of 1924; Hemingway's 1927 Code, section 2443. That the parties to that deed of trust may have intended to embrace the seed house therein is of no effect as against subsequent lien creditors, unless it contains a recital calculated to put a prudent person on notice thereof, and it contains no such recital. It is therefore of no efficacy as against the Y.D. Lumber Company, and cannot be corrected as against it, for the reason that it acquired its lien on the seed house without notice of the Refuge Cotton Oil Company's claim thereto. Sack v. Gilmer Dry Goods Co., 149 Miss. 296, 115 So. 339; Goodbar Co. v. Dunn, 61 Miss. 619; Nugent v. Priebatsch, 61 Miss. 402; Mississippi Valley Co. v. Railroad, 58 Miss. 849.
The decree of the court below must be reversed in so far as it affects the Y.D. Lumber Company, but, as the other parties thereto have not appealed therefrom, the case will not be remanded, but the decree will be set aside and a decree will be rendered here in accordance with the decree of the court below, except that the prayer of the bill that the lien of the appellant's deed of trust be decreed to be superior to that of the Y.D. Lumber Company will be denied.
Reversed in part, and final judgment here.