Opinion
No. 39347.
February 7, 1955.
1. Mortgages — vendees under purchase contract — note and deed of trust — given lender — who financed construction of home — improperly cancelled.
Record on appeal from decree in action involving priority of liens arising out of home construction, failed to disclose any conditions or circumstances which justified Trial Court's cancellation of note and deed of trust given to lender who financed construction, on ground execution did not meet legal requirements of valid obligations.
2. Mortgages — recording — delay — effect — as between parties to instrument.
Delay in recording deed of trust does not affect its validity as between parties to instrument.
3. Mortgages — notes — deed of trust — security for advances made — supported by consideration.
Where note and deed of trust were given as security for advances to be made for payment of labor and material to enable completion of construction of house on lot, and advances were made, note and deed of trust were supported by consideration.
4. Estoppel — holders of legal title — estoppel to deny validity of deed of trust — from refusing to convey legal title.
Holders of legal title to lots who had agreed to convey to purchaser and who had assisted purchaser in his efforts to secure loan for construction of home on one of the lots, were estopped to deny validity of deed of trust given by purchaser and were estopped from refusing to convey.
5. Estoppel — owner — permitting his land to be mortgaged — estopped from asserting title — against mortgagee.
Where owner of land knowingly permits his property to be mortgaged or sold by another to one who is, to owner's knowledge, relying on apparent ownership of person executing the conveyance, such conduct, irrespective of who benefits by transaction, will estop owner from asserting his title against mortgagee or grantee.
6. Mortgages — vendor and purchaser — priority of liens.
Holders of legal title to lots who had agreed to convey to purchaser and who had assisted purchaser in his efforts to secure loan for construction of home on one of lots were entitled to purchase money lien, and same was superior to lien of deed of trust given by purchaser to finance construction.
7. Estoppel — vendees under purchase contract — estopped to deny trustee's title — in deed of trust — executed to finance construction.
Lot purchasers who gave deed of trust on lot were estopped thereby from denying title of their grantee, though legal title remained in their vendors.
8. Mortgages — vendees' interest under purchase contract — deed of trust on — valid as between parties.
That parties who executed note and deed of trust on lots did not have fee title but only vendees' interest under a purchase contract did not affect validity of note or deed as between parties thereto.
9. Mortgages — monies advanced — to finance home construction — recovery on note evidencing indebtedness.
Where lot purchasers had contract with builder to build house for $9,000 and paid $1,200 and gave note and deed of trust to lender in amount of $7,500 to finance balance, and lender actually advanced $7,593.67 thereunder, lender was entitled to recover $7,500 plus interest, plus attorney's fee though total recovery plus amount paid by lot purchasers to builder exceeded $9,000 contract price.
10. Mortgages — home construction contract — credit on for advances.
Where lot purchasers contracted with builder and gave note and deed of trust for $7,500 to lender for advances to be made by lender to builder, and lender made advances of $7,593.67, lot purchasers were entitled to credit for $7,500 upon contract price.
11. Mortgages — home construction contract — monies loaned to finance — subcontractors — priority of liens.
Where contractor had been paid $1,200 cash and $7,500 by advances which had been made by lender and for which lender had taken note and deed of trust from equitable owner, lender was entitled to priority of lien to extent of $7,500, over claims of subcontractors and materialmen who had served no notices until after action for foreclosure of deed of trust had been commenced. Sec. 372, Code 1942.
12. Vendor and purchaser — decrees — priority of liens — marshalling of assets.
In action involving priority of liens, Court's decree, if sale of lots was necessary to satisfy vendor's purchase money lien, would make provision for marshalling of assets so as to protect rights of lender whose mortgage lien covered only one of lots and improvements located on the one lot. Sec. 372, Code 1942.
13. Mortgages — lender advancing monies to finance construction — subcontractors — materialmen — priority of liens.
Where lender was entitled under deed of trust, given as security for advances to general contractor, to priority of lien on amount due contractor on purchase price, subcontractors and materialmen were entitled to share $300 balance of such amount due contractor, with priority in $300 balance over lender's claim for interest and attorney's fees under deed of trust. Sec. 372, Code 1942.
Headnotes as approved by Kyle, J.
APPEAL from the Chancery Court of Jackson County; W.S. MURPHY, Special Chancellor.
J.D. Stennis, Jr., Biloxi, for appellant.
I. It is the duty of the Chancery Court, when discovery is sought as to the terms of a contract with reference to the sale of land, and complainant's cause of action or some part thereof is materially based upon such contract, which has been withheld from complainant, to compel the production thereof and the answer fully, by the defendants, of the bill of complaint, giving complete, distinct and particular response to all matters sought to be discovered which are within the knowledge of the defendant or of which he can reasonably obtain knowledge. Tarpley v. Wilson, 33 Miss. 467; 19 Am. Jur., Estoppel, Secs. 123, 129; 36 Am. Jur., Secs. 209, 213, 238-9 pp. 796, 798, 810; Griffith's Miss. Chancery Practice, Sec. 432.
II. Unless the Court rules on appropriate pleadings to narrow the issues, sustaining motions to strike irrelevant, incompetent, redundant and elsewhere in the same pleading contradicted allegations, or demurrers to cross-bill in whole or in part as to the legal sufficiency of the matters pleaded therein, both the Trial Court and the Appellate Court are faced with a record containing more irrelevant, incompetent and immaterial testimony in regard to the issues thereby erroneously raised than there is made on the trial of the real issues in the cause. Secs. 1289, 1300, Code 1942; Griffith's Miss. Chancery Practice (2d Ed.), Secs. 372, 374.
III. Prejudicial and reversible error is committed by the Trial Court in the denial of the right of complainant's counsel to cross-examine a defendant as an adverse witness through the office of what is termed leading questions. Wagley v. Colonial Baking Co., 208 Miss. 815, 45 So.2d 717; Sec. 1710, Code 1942.
IV. When objection is raised to leading questions directed to the witness by his own attorney, on direct examination, it is error on the part of the Court to overrule such objection if those questions call for a "yes" or "no" answer when the questions rather than the answers state factual matter about which there is a controversy. Griffith's Miss. Chancery Practice (2d Ed.), Sec. 577.
V. The erroneous admission in evidence of irrelevant and immaterial matter or of a spurious document, previously pointed out to be such, can serve no purpose than to increase the volume of the record and the work of counsel and the Court.
VI. Where a promissory note and deed of trust to secure the same are executed by the owner or one afterwards to acquire the property, with the knowledge and written consent of the holder of title thereto, in favor of one to furnish the payroll to pay the laborers for the construction of a residence, and also furnishing materials going into said construction, with the knowledge and consent of the contractor who is otherwise unable to continue said construction, said payee in said promissory note and cestui que trust in said deed of trust is not limited to the balance which might otherwise have been due under the construction contract; but on the contrary, looking to the owner or one afterward to acquire title, who has acted with the knowledge and consent of the one holding title, rather than to the contractor for the payment of said promissory note, he is entitled to recover the full amount of said promissory note, together with interest thereon and together with the attorney's fees or collection fees therein provided for if the same be not paid at maturity and be placed in the hands of an attorney for collection and suit be brought thereon, to be made from said property and improvements thereon, if upon the execution of said promissory note and deed of trust the payee extended the makers thereof a line of credit from which was furnished the money to pay the workmen on said job and materials going into said construction in the full amount of said promissory note, and which deed of trust is a lien on said property superior to and to the exclusion of the claims of subcontractors, if it exceed in amount what otherwise would be the balance due on said building contract. 19 Am. Jur., Estoppel, Secs. 5-6, 10, 12, 16, 20 pp. 603, 606-8, 610-14, 618; 36 Am. Jur., Mortgages, Secs. 22, 24 p. 702.
VII. A deed of trust, even on property afterward to be acquired, executed in order to obtain the money with which to pay the laborers on a building to be erected and to obtain materials for the erection thereof has priority over the liens of laborers and materialmen and subcontractors to the extent of the money advanced thereon to pay labor and the materials furnished thereunder which actually went into the construction of the building. If by reason of the delay in the filing of said deed of trust for record, the claims of any such laborers or materialmen or subcontractors have displaced the position of priority of the lien of said deed of trust, the person to whom said deed of trust was entrusted for the purpose of the same being recorded and to whom the recording fees have been paid, even though only collaterally connected with the execution thereof, is liable to the cestui que trust for any loss sustained by him by reason of such change in the position of priority of said deed of trust. Buckwalter v. McElroy, 205 Miss. 54, 38 So.2d 317; First Natl. Bank of Greenville v. Virden, 208 Miss. 679, 45 So.2d 268; Herrin v. Warren, 61 Miss. 509; Planters Lumber Co. v. Griffin Chapel M.E. Church, 157 Miss. 719, 128 So. 76; Walker v. Macon Creamery Co., 165 Miss. 121, 146 So. 442; Weiss, Dreyfous Seiferth, Inc. v. Natchez Investment Co., Inc., 166 Miss. 253, 140 So. 736; Wenger v. First National Bank, 174 Miss. 311, 164 So. 229; Secs. 356-61, 363, 372-3, 380, Code 1942; 19 Am. Jur., Estoppel, Secs. 34, 40, 42, 46, 62, 64, 66-7, 87, 91-5, 106, 121, 123, 126-7, 129, 152 pp. 634, 639-45, 676-90, 694-6, 743-4, 747-53, 758, 778-9, 781-4, 809; Anno. 50 A.L.R. 668-973.
VIII. When it is brought to the Trial Court's attention, by motion timely filed, that in the rendition of a final decree the Court has committed errors in the finding of the facts and the conclusion of the law, the Special Chancellor ought to reopen and correct said decree. Walker v. Macon Creamery Co., supra.
Karl Wiesenburg, Pascagoula, for appellees William C. Wilson and Lyna L. Wilson.
I. This dispute is between the materialmen on one side and the beneficiary under the deed of trust, Sam Strangi, on the other side. Both sides, however, in their argument and by inference, suggest to the Court that appellee, Wilson, be required to pay more than the $7,800, which he admittedly owes.
II. The thesis is unsupported by any decision of this Court, or by any Court. The Court found that appellee had a contract whereby Marshall agreed to build a house for $9,000, that the appellee had complied with his part of the contract, that there would be $7,800 available to pay the aggregate claims, and that this amount was insufficient by $2,710.26 to pay all claims.
III. Conceding the above, it is immaterial to appellee how disbursement should be made. Assuming the deed of trust to be valid, a point as to which appellee expresses no opinion in this brief, his liability to Strangi would have been no more than the $7,500 he agreed to pay, well within the $7,800 he owes. Appellee owes Strangi only for such advances as were made to Marshall as actually went into the construction of the house. Chancellor v. Melvin, 211 Miss. 590, 52 So.2d 366; Chears Floor Screen Co. v. Gidden, 159 Miss. 288, 131 So. 426; Citizens' Lumber Co. v. Netterville, 137 Miss. 310, 102 So. 178; City Coal Lbr. Co., Inc. v. Gulf Refining Co., 184 Miss. 260, 185 So. 250; Deposit Guaranty Bank Trust Co. v. J.F. Weaver Lumber Co., 215 Miss. 183, 60 So.2d 600; Herrin v. Warren, 61 Miss. 509; Stubbs v. Capital Paint Glass Co., 160 Miss. 832, 131 So. 806, 135 So. 495; United States F. G. Co. v. Parsons, 154 Miss. 587, 122 So. 544; Wenger v. First Natl. Bank of Biloxi, 147 Miss. 311, 164 So. 229; White's Lbr. Supply Co. v. Rea, 158 Miss. 695, 131 So. 259.
Howard A. McDonnell, Arnaud Lopez, Biloxi, for appellee August H. Parker, d/b/a August H. Parker Plumbing and Heating Company.
I. The holders of statutory liens should not be unjustly defeated in their claims. First Natl. Bank of Greenville v. Virden 208 Miss. 679, 45 So.2d 268.
II. Priority of all instruments, and notice thereof controlled by date of filing for record; take effect when. Sec. 869, Code 1942.
III. Appellant's alleged deed of trust is a void instrument and conveys to him nothing, and secures to him nothing. Livelar v. Livelar (Miss.), 6 So.2d 915.
IV. In fact and in law, there existed no contract between appellee Wilson and his alleged contractor Marshall.
V. The Chancery Court did substantial justice in holding that the lien of appellee, Parker, and other material men, is of equal dignity with that of appellant, Strangi. It is further our belief that the Court committed error in holding that appellee Wilson's liability be limited to $7,800. It is, therefore, respectfully submitted that the decree of the Chancery Court should be in part affirmed and in part reversed.
Robert H. Oswald, Pascagoula, for appellee City Lumber and Supply Company.
I. Where materialmen in good faith furnish material on a job without notice or knowledge of the existence of an unrecorded deed of trust on the property, and thereafter assert their claims in Court, each materialman is entitled to share ratably in the funds remaining, and their claims are prior and superior to the lien of the deed of trust.
II. The priority of the lien of a laborer is personal to the individual performing the labor, and where a third party pays the laborer for his work, under an agreement with the contractor and owner to provide money for the labor, such third party is thereby subrogated to the claim of the laborers insofar as the laborers, contractor, and owner are concerned, but is not entitled to have such claims charged against the funds remaining on the contract insofar as there are other disinterested parties who furnished labor or materials and asserted their claims in Court. Sadler v. Glenn, 190 Miss. 112, 199 So. 305.
III. Where an unbonded contractor disposes of the proceeds of a construction contract to the detriment of subcontractors, laborers or materialmen, such disposition is subordinate to the claims of the subcontractors, laborers, or materialmen. Sec. 373, Code 1942.
Watts Colmer, Pascagoula, for appellees Back Bay Lumber and Box Factory, Saucier Brothers, and Rhodes Floor Covering.
I. It is the fundamental principle that the claims of innocent third parties are subordinated to the lien of the deed of trust only from the date the deed of trust is filed for record; therefore, in considering the case at bar as it relates to the various materialmen, the deed of trust was not filed for record until after the job was completed and of course all material having been furnished by the materialmen. All of the materialmen who asserted their claims in Lower Court are entitled to share pro-rata any sums of money remaining due from the Wilsons who occupy the house.
II. Strangi is not entitled to the benefit of a statutory lien and is not entitled to a subrogation of the rights of the parties or laborers who were paid under the arrangement by Strangi and Marshall. Sadler v. Glenn, 190 Miss. 112, 199 So. 305.
III. When an unbonded contractor disposes of the proceeds of a construction contract to the detriment of subcontractors, laborers or materialmen, such disposition is subordinate to the claims of the subcontractors, laborers or materialmen. Sec. 373, Code 1942.
This case is before us on appeal by Sam Strangi, complainant, from a decree of the Chancery Court of Jackson County establishing the order of priorities of the claims of the appellant and other materialmen and subcontractors against the funds due and owing to the contractor, G.A. Marshall, for the construction of a dwelling house in the City of Ocean Springs for W.C. Wilson and his wife.
The record shows that during the summer of 1950 Frank Haviland and Rose Mary D. Haviland, his wife, agreed to convey to William C. Wilson the land described as Lots 6 and 17 of the Edgewater Court Subdivision of the City of Ocean Springs, for the sum of $1,150. Wilson was a member of the armed forces of the United States at that time and was stationed at Keesler Field near the City of Biloxi; and after making arrangements for the purchase of the lots Wilson applied through William R. Barber of Gulfport for a Veterans Administration loan to enable him to purchase the lots and construct the dwelling house. A tentative approval of the loan for the sum of $8,800 was obtained. The value of the lot on which the building was to be located was fixed at $1,000. Wilson was to provide the sum of $1,200 in cash to be applied to the payment of the construction cost of the building which was not to exceed the sum of $9,000. Wilson then entered into a contract or agreement with G.A. Marshall, doing business as The Marshall Engineering Company, for the construction of a dwelling house on Lot 6 for the sum of $9,000.
After work had been started on the building, Joe Walsh, Marshall's foreman, learned that the Marshall Engineering Company would be unable to obtain a temporary loan for the financing of the project through William R. Barber; and Walsh approached the appellant, Sam Strangi, who operated a lumber yard in the City of Biloxi, for the purpose of having Strangi advance the necessary funds to defray the balance of the construction cost. Strangi agreed to finance the construction cost in an amount not to exceed $7,500 upon the condition that Wilson and his wife execute a note for that amount and a mortgage deed of trust on the lot on which the building was being erected to secure the payment of same. Walsh had the note and deed of trust prepared by William R. Barber, and had the Wilsons execute the note and deed of trust on February 16, 1951. The deed of trust was not filed for record, however, until July 30, 1951.
After the note and deed of trust had been executed, Strangi furnished building materials, upon Walsh's orders, and also money which was used in paying for labor on the job, and the work on the building proceeded without interruption. Strangi's bills for lumber and other building materials amounted to $3,106.59. The sums advanced by him for labor amounted to $4,487.08, making a total advancement of materials and money in the sum of $7,593.67.
The building was completed during the month of July, and at that time Strangi learned that there were claims due and owing by Marshall to other materialmen in the total amount of $2,916.56.
The $7,500 note signed by Wilson and his wife and payable to Strangi became due ninety days after date, and Strangi being unable to foreclose his deed of trust, because the legal title to the lot was still vested in the Havilands, filed his bill in the Chancery Court for the purpose of having the property subjected to the payment of the mortgage indebtedness due and owing to him. W.C. Wilson and his wife, Frank Haviland and his wife, G.A. Marshall, and William R. Barber, who had been named as trustee in the above mentioned mortgage deed of trust, and the above mentioned materialmen were named as parties defendant. The complainant in his bill asked that the deed of trust executed by Wilson and his wife to secure the payment of said note be held to constitute a first lien upon said Lot 6 of the Edgewater Court Subdivision, together with the improvements thereon, except as to the amount due Frank Haviland on the purchase price of the lot; and the complainant asked, that the legal title to the property be divested out of the Havilands and be vested in a special commissioner for the purpose of having the property sold to satisfy the indebtedness due and owing to him. The complainant also asked that a decree be entered in favor of the complainant against Wilson and his wife for the amount due on the note. The complainant asked for a discovery by the defendants, Frank Haviland and William C. Wilson, as to the terms of the written contract entered into between them for the sale of said lot by Haviland to Wilson, and that the defendants be required to produce a copy of the contract.
The Wilsons in their answer admitted that they had entered into a contract with Marshall for the construction of a dwelling house on the lot which the Havilands had agreed to convey to them, and that they had executed the note and mortgage deed of trust to Strangi, copies of which were attached to the bill of complaint. But the Wilsons in their answer denied that they were liable for the payment of the $7,500 note for the reason that the note and deed of trust were conditionally delivered upon the premise that the building would be constructed and approved by the Veterans Administration and that a G.I. loan would be made "which contingency was prevented from occurring by the deliberate act of the complainant, Sam Strangi, in filing this suit."
The Wilsons made their answer a cross bill, and in their cross bill alleged that they had contracted with Marshall for the construction of the dwelling house for the sum of $9,000, that they had paid to Marshall the sum of $1,200, and that the balance which they owed to Marshall was $7,800; that the materialmen named in the original bill as codefendants had dealt directly with Marshall and had not given the required notice of their claims to the cross-complainants and were not entitled to a lien of any kind upon the property. The cross-complainants asked that their total liability to Strangi and the other materialmen be limited to the $7,800, and that the court determine the rights of priority between Strangi and the other claimants, and that the cross-complainants be granted a reasonable time within which to effectuate a loan to satisfy the liens decreed by the court; and the cross-complainants asked that the deed of trust executed by them on February 16, 1951, to secure the payment of the $7,500 note be cancelled.
The materialmen, who had been named as parties defendant, filed their petitions of intervention under the materialmen's lien statute. The cause was heard by the chancellor on the pleadings and proof, and at the conclusion of the testimony the chancellor incorporated in his decree his findings of fact and his conclusions of law.
The chancellor found that Marshall had agreed to construct the house for Wilson for the sum of $9,000; and that Wilson had paid to Marshall during the months of January and February, 1951, the sum of $1,200 on the contract price, leaving a balance of $7,800 to be paid. The chancellor found that after Marshall's foreman had failed in his effort to obtain temporary financing of the project through William R. Barber, Strangi agreed to finance the balance of the construction cost of the building, not to exceed the sum of $7,500, provided Wilson and his wife would execute and deliver to him a note for that amount and a mortgage deed of trust on the property to secure the payment of same; and that Wilson and his wife executed the note and the mortgage deed of trust on February 17, 1951. The chancellor found that Strangi thereafter advanced to Marshall money for the payment of labor in the total sum of $4,487.08 (which included the sum of $203, for which check was issued on February 17, 1951), and building materials in the additional sum of $3,106.59, making a total of $7,593.67, and the chancellor found that, but for the financing of the project by Strangi, the house would not have been completed.
The chancellor also found that the other materialmen named in the original bill of complaint had furnished materials and services for which they had not been paid in amounts as follows: Saucier Brothers, $498.28; Rhodes Flooring Carpeting Company, $287.00; Parker Plumbing Company, $520.00; City Lumber and Supply Company, $863.53; Back Bay Lumber Company, $649.00; and Combel Hardware Company, $98.45. The total amount of all of the unpaid claims was $10,510.26.
The chancellor found that Haviland and his wife resided on the land adjacent to the lot on which the dwelling house had been constructed; that they were familiar with the agreement that Wilson had entered into with Marshall for the construction of the dwelling house on Lot 6, and that they knew of the efforts that were being made to finance the construction of the dwelling house and had endeavored to assist Wilson in obtaining a loan; and that they had stated in open court that they intended to convey to Wilson Lots 6 and 17 for the price of $1,150, notwithstanding the agreement dated March 1, 1951, which had been executed long after the construction work on the dwelling house had begun; and the chancellor held that, in view of the above mentioned facts, they should be estopped from doing otherwise, and that they should be compelled to execute a conveyance of said lots to Wilson for the sum of $1,150, and that they should be given a lien on the property to secure the payment of said purchase price.
The chancellor held that the deed of trust and the note executed by Wilson and his wife to Strangi should be set aside and cancelled, "for the reason the conditions and circumstances under which they were executed were not such as to meet the legal requirements of valid and binding obligations." The chancellor held that out of the $7,800 due Marshall under the contract Strangi should be paid the sum of $4,284.08 as a reimbursement for the amounts advanced by him after February 17, 1951, for the payment of labor on the job, and that the balance of the $7,800 should be distributed pro rata among Strangi and the other materialmen and subcontractors.
The above mentioned findings were recited in the decree which the chancellor signed. The chancellor ordered that Wilson and his wife pay to Strangi, out of the balance of $7,800 which they still owed to Marshall, the contractor, the above mentioned sum of $4,284.08 as a reimbursement to him of the amounts advanced by him to Marshall for the payment of labor bills, and that they then pay to Strangi and the other materialmen and subcontractors pro rata the remaining part of the $7,800 as set forth in the decree. The decree also provided that Haviland and his wife immediately convey Lots 6 and 17 of the Edgewater Court Subdivision to Wilson, and that they have a first lien against the property to secure the payment of the agreed purchase price of $1,150. The court also awarded judgments to Strangi and each of the other claimants against Marshall for the balances found to be due them after the pro rata distribution had been made among them of the remaining part of $7,800, as stated above. And, lastly, the decree provided that Wilson should pay to the Havilands the said sum of $1,150 immediately, and that he be given sixty days from April 1, 1953, within which to obtain a loan for the permanent financing of the above mentioned $7,800 indebtedness; and the clerk of the court was appointed special commissioner to sell the property should Wilson fail to pay the amounts decreed to be paid by him, as provided in the decree.
From the above mentioned decree Sam Strangi, the complainant and cross-defendant, has prosecuted this appeal; and Naif Jordan, doing business as Back Bay Lumber and Box Factory, Saucier Brothers, G.H. Rhodes, doing business as Rhodes Floor Covering, and the City Lumber Supply Company, materialmen, have filed cross-assignments of error.
The main points argued by the appellant's attorneys as ground for reversal on this appeal are that the court erred in holding that the $7,500 note and mortgage deed of trust given to secure the same, which were executed by G.A. Wilson and his wife on February 16, 1951, in favor of the appellant, should be cancelled "for the reason the conditions and circumstances under which they were executed were not such as to make the legal requirements of valid and binding obligations," and in refusing to permit the appellant to recover the full amount of the $7,500 note, with interest and attorneys' fees, as provided therein, and in limiting the amount of the indebtedness owing by the Wilsons to the appellant for the payment of which the appellant was entitled to a prior lien superior to the lien of the subcontractors, to the $4,284.08 advanced by the appellant to Marshall for the payment of labor employed on the job.
The main point argued by the cross-appellants' attorneys in support of their cross-appeal is that the court erred in holding that the cross-appellee's claim for the sum of $4,284.08, which represented the amount advanced by the cross-appellee for the payment of labor, was entitled to priority over the claims of the materialmen and subcontractors, and in directing that the said sum of $4,284.08 be paid to the cross-appellee before any payment should be made to the cross-appellants.
In as much as our decision on these points will dispose of most of the other questions involved in this appeal, we shall discuss these points first.
(Hn 1) We think that the chancellor erred in holding that the $7,500 note and mortgage deed of trust executed by W.C. Wilson and his wife to Sam Strangi on February 17, 1951, should be set aside and cancelled, "for the reason the conditions and circumstances under which they were executed were not such as to meet the legal requirements of valid and binding obligations." We are unable to determine from the decree itself what the conditions and circumstances were which in the chancellor's opinion rendered the note and deed of trust invalid; and the record, we think, fails to disclose any such conditions or circumstances which would justify the cancellation of the note and deed of trust.
(Hn 2) It is true that the deed of trust was not recorded until July 30, 1951; but the delay in recording the deed of trust did not affect its validity or the binding force of the obligation as between the parties to the instrument.
(Hn 3) It is also true that Wilson and his wife averred in their answer that there was no consideration for the execution of the note and deed of trust. But there is no merit in this contention. The proof showed conclusively, and the chancellor found, that Strangi refused to advance the $7,500 for the payment of labor and material to enable the contractor to proceed with the construction of the building, unless Wilson and his wife would agree to bind themselves for the repayment of such advancements and secure the same by a mortgage deed of trust on the property. Strangi advanced the above mentioned sum of $4,487.08 in money for the payment of labor, and in addition thereto building materials of the value of $3,106.59. All of the advancements of building materials with the exception of building materials of the value of $378.95 delivered prior to February 17, 1951, were made in reliance upon the note and deed of trust executed by Wilson and his wife, and after receiving the benefit of the transaction the Wilsons are not in a position to assert that they are not bound by the obligation which they assumed to enable Marshall to complete the work on the house.
(Hn 4) It is also argued, however, on behalf of some of the materialmen, that the chancellor was justified in holding that the deed of trust was invalid for the reason that the legal title to the lot on which the building was located was still vested in Frank Haviland and his wife, and that the Wilsons had no title to the property and could convey no title to the trustee. But the proof showed, and the chancellor found, as we have already stated, that Frank Haviland and his wife had agreed to convey Lots 6 and 17 to the Wilsons for the sum of $1,150, and Frank Haviland so testified during the trial, and the chancellor found that the Havilands were estopped by their conduct from doing otherwise.
Haviland and his wife were not only estopped from refusing to carry out their agreement to convey Lots 6 and 17 to Wilson for the sum of $1,150, as the chancellor stated; but they were also estopped from asserting their title against Wilson's mortgagee.
(Hn 5) "Where the owner of land knowingly stands by and permits his property to be mortgaged or sold by another to one who is, to the owner's knowledge, relying on the apparent ownership of the person executing the conveyance, such conduct, irrespective of who benefits by the transaction, will estop the owner from asserting his title against the mortgagee or grantee." 19 Am. Jur., p. 748, Estoppel, par. 91.
(Hn 6) But the Havilands were entitled to a purchase money lien on the lots to secure the payment of the purchase price of $1,150; and the chancellor very properly recognized the superiority of that lien over the lien of Strangi's deed of trust and expressly provided in his decree that, in the event the property should be sold to satisfy the claims of the creditors, the $1,150 owing by Wilson to them should be paid out of the proceeds of the sale before any of the funds were applied to the payment of the other indebtedness.
(Hn 7) So far as the Wilsons are concerned, they are in no position to deny the equitable title conveyed by them to the trustee in the deed of trust executed to secure the payment of the $7,500 note due and owing to Strangi. The Wilsons are estopped by their own deed from denying the title to the lot conveyed by them to the trustee. 19 Am. Jur., p. 606, Estoppel, par. 10; Meyers v. American Oil Co., 192 Miss. 180, 5 So.2d 218; Perkins v. White, 208 Miss. 157, 43 So.2d 897; Walters v. Merchants Manufacturers Bank of Ellisville (Miss.), 67 So.2d 714.
In the case of Meyers v. American Oil Company, supra, the Court said: "Nothing is better settled in this state than the rule that the grantor and all persons in privity with him shall be estopped from ever afterwards denying that, at the time his deed of conveyance was executed, he was seized of the property which his deed purported to convey, and that mortgages and deeds of trust are within this rule. By statute, Sec. 2125, Code of 1930, the rule is extended even to quitclaim deeds. The effect of this doctrine of estoppel by deed is the same as if in the deed itself, or in the mortgage, there had been inserted with valid force the express provision that it then and there conveyed not only the title then possessed by the grantor in the property therein described, but all that he might thereafter acquire."
(Hn 8) The deed of trust executed by Wilson and his wife to Strangi to secure the $7,500 note was not void, even though the legal title to the lot had not been conveyed to Wilson at the time of the execution of the deed of trust; and Strangi had a right to invoke the aid of a court of equity to subject the property to the payment of the indebtedness due and owing to him.
We think that the chancellor erred in holding that the note and the mortgage deed of trust given to secure the payment of same should be cancelled, and in refusing to permit the appellant to recover the full amount of the note, with interest and attorney's fee.
(Hn 9) It is true that the chancellor found that Wilson had a contract with Marshall for the construction of the house for $9,000, and that Wilson had paid to Marshall $1,200, leaving a balance due of only $7,800, and that when the interest and attorney's fee are added to the principal of the $7,500 note the total amount of the mortgage indebtedness due and owing to Strangi will exceed the $7,800. But Strangi's suit against the Wilsons is based upon the note and the mortgage deed of trust given to him by the Wilsons after the construction work on the house had been begun; and the Wilsons' liability to Strangi on the note and the mortgage deed of trust was not limited by the terms of the contract between Wilson and Marshall. The proof showed that the total amount of money and materials advanced by Strangi was $7,593.67, and that the entire amount was actually expended for labor and materials that went into the construction of the building. It is not claimed that any payments have been made on the note. Strangi was therefore entitled to a decree against the makers of the note for the sum of $7,500, with interest and attorney's fee as provided in the note, and for a foreclosure of the deed of trust.
We come now to a consideration of the claims of the subcontractors and other materialmen, who were named as codefendants in the original bill of complaint, and who have filed cross-assignments of error on this appeal. The main contention of their attorneys is that their claims should have priority over the claim of the appellant, Strangi, for the reason, first, that the appellant's deed of trust was not filed for record until after the job was completed and the lien of the appellant's deed of trust did not become effective as to innocent third parties until the deed of trust was filed for record; and, second, that the appellant, Strangi advanced money to the contractor Marshall and was therefore not entitled to a statutory lien under the rule laid down in Sadler v. Glenn, 190 Miss. 112, 199 So. 305.
Both of these contentions are in our opinion unsound.
(Hn 10) When Wilson executed his promissory note for the sum of $7,500 and the mortgage deed of trust on the property to secure the payment of same, for the purpose of having Strangi advance money to the contractor for the payment of labor and materials to be used in the construction of the building in the sum of $7,500 and Strangi made such advancements to the contractor, as he had agreed to do, Wilson was entitled to credit for the $7,500 as a payment on the contract price. Lake v. Brannin, 90 Miss. 737, 44 So. 65; Chancellor et al. v. Melvin et al., 211 Miss. 590, 52 So.2d 360; Deposit Guaranty Bank Trust Co. v. Weaver Lumber Co., et al., 215 Miss. 183, 60 So.2d 598.
In the case of Lake v. Brannin, supra, the Court held that, where the owner had employed a firm of carpenters to make certain improvements on his residence for a stipulated price, and long prior to the time at which written notice was served on him by the appellees of any claim that they had against the contractors, such owner had obligated himself and became indebted to other materialmen for materials furnished by them which it was the duty of the contractors to supply, the amount due the contractors under the contract with the owner, which might be subjected to the payment of the appellees' claims, was necessarily reduced in amount by whatever sum the materials that had been obtained from such other materialmen amounted to.
In Chancellor et al. v. Melvin et al., supra, the Court said:
"In the absence of a statutory provision to the contrary, the owner may make payment to his principal contractor in any method and at any time they agree upon. Rockel, Mechanics' Liens (1909), Sec. 67; 57 C.J.S., Mechanics' Liens, Section 251. There are numerous cases in which the owner was held to have paid his contractor by giving him in good faith a promissory note for the amount due on the contract, even though the note was not paid until after stop notices had been given to the owner. McGranahan Lumber Co. v. Pyramid Asbestos Roofing Co., Tex. Civ. App. 1929, 18 S.W.2d 224; Cramer v. Dallas Lumber Co., Tex. Civ. App. 1926, 283 S.W. 596; George E. Sealy Co. v. Ards Building Corp., 1926, 216 App. Div. 313, 214 N.Y.S. 768, affirmed in 1927, 244 N.Y. 505, 155 N.E. 899."
(Hn 11) The claims of the subcontractors and other materialmen were claims against G.A. Marshall, the contractor. None of those parties dealt directly with Wilson, the owner. None of them gave notice in writing to Wilson of their claims against Marshall or took any action under Section 372, Code of 1942, until after this suit was filed. But, if such notices had been given before the house was finished, such notices would have been effective to bind Wilson for no greater amount than the amount due Marshall at the time the notices were given. The record shows that Wilson had paid to Marshall the sum of $1,200, and that Wilson had executed the $7,500 note to Strangi for money and materials to be used by Marshall in the construction of the building. After crediting Wilson with these two amounts, the only amount remaining in the hands of Wilson that could be bound for the payment of the claims of the subcontractors and other materialmen was $300. The $300 had not been paid at the time this suit was filed, and the subcontractors and other materialmen were entitled to have that amount in the hands of Wilson subjected to the payment of their claims.
The rule applied by the Court in Sadler v. Glenn, supra, which is cited in the briefs of the cross-appellants, has no application to the facts in this case. In that case Sadler had no dealings with White, the owner of the property, relative to the advancements of money which he agreed to make to Glenn, the contractor, to enable Glenn to pay for laborers, and White assumed no obligation to reimburse Sadler for the advancements made by Sadler to Glenn. In this case Strangi dealt directly with Wilson, the owner. Strangi declined to make the advancements of money and building materials to Marshall, unless Wilson and his wife obligated themselves directly for the payment of the $7,500.
For the reasons stated above, the decree of the lower court will be reversed and the cause remanded for further proceedings in conformity with the views hereinabove expressed. The Havilands should be required to convey to Wilson the lots mentioned above, as they have agreed to do, and the Wilsons should be allowed a reasonable length of time, as provided in the former decree, within which to obtain a loan for the purpose of paying to the Havilands the $1,150 purchase price of the lots, and for the purpose of paying to Strangi the mortgage indebtedness due and owing to him; and if the indebtedness is not paid within the time allowed the property should be sold under the orders of the court for the payment of the indebtedness. (Hn 12) In the event it becomes necessary for the court to order a sale of the lots to satisfy the purchase money lien of the Havilands for the $1,150, provision should be made in the decree for the marshalling of the assets so as to protect the rights of Strangi whose mortgage lien does not cover Lot 17, but only Lot 6 and the improvements located thereon. Judgment should be entered against Wilson in favor of the subcontractors and other materialmen for the $300 balance due under the contract with Marshall, and said balance should be applied pro rata to the payment of the claims of the subcontractors and other materialmen entitled to share in the distribution thereof.
(Hn 13) In the event the property should be sold for the payment of the mortgage indebtedness due and owing to Strangi, the claim of Strangi for the principal sum of $7,500 should be given priority over the claims of the subcontractors and other materialmen for the $300 balance due and owing by Wilson under his contract with Marshall; but after the payment of the $7,500 principal due and owing to Strangi, the claims of the subcontractors and other materialmen for the $300 balance due and owing to Marshall should have priority over the additional amount due Strangi as accrued interest on the $7,500 note and as attorney's fee.
Reversed and remanded.
McGehee, C.J., and Hall, Lee and Holmes, JJ., concur.