Opinion
No. 32649.
April 5, 1937. Suggestion of Error Overruled May 3, 1937.
1. LIENS.
That money was loaned for making of crops on specifically designated land would not entitle lender to equitable lien on crops grown on such land.
2. LIENS.
Agreement of borrower of money for purpose of making crops, that crops should be shipped to lender for sale and application of proceeds to debt, would not raise equitable lien on crops.
3. LIENS.
Where provision for express lien on crops to be grown on three plantations was allegedly omitted by mistake from trust deed securing money loaned to make crops on such plantations and others, in order for equitable lien to arise, agreement was required which clearly indicated intention to make crops security for portion of money loaned for their making.
4. LIENS. Reformation of instruments.
Where provision for express lien on crops to be grown on three plantations was allegedly omitted by mistake from trust deed securing loan to make crops on such plantations and others, clear and convincing evidence would be required to establish equitable lien, or to obtain reformation of trust deed to include express lien.
5. LIENS. Reformation of instruments.
In suit to establish lien on crops to be grown on three plantations, provision for which was allegedly omitted by mistake from trust deed securing loan from credit corporation to make crops on such plantations and others, where trust deed was executed in presence of corporation's treasurer, who was not called to testify, evidence, consisting principally of testimony of corporation's vice-president, who admitted that he was not present at execution of trust deed, held insufficient to authorize reformation of trust deed or granting of equitable lien.
6. LIENS.
Where trust deed on crops to corporation was executed in presence of corporation's treasurer, who did not testify, evidence, consisting principally of testimony of corporation's vice president, who admitted he was not present at execution of trust deed, held insufficient to establish agreement allegedly omitted from trust deed that settlor should pledge as further security similar trust deeds received on relending borrowed money.
APPEAL from chancery court of DeSoto county. HON. L.A. SMITH, SR., Chancellor.
Gerald Chatham, of Hernando, for appellant.
In its broadest sense, an equitable lien is a charge on real or personal property for the payment of some debt or obligation or for the failure to carry out the terms or provisions of a contract, expressed or implied.
The same character of proof necessary to warrant the reformation of an instrument is required in cases of this character seeking to establish an equitable lien. The form of the contract creating an equitable lien is not material for equity looks at the final intent and purpose rather than the form, but an intention to create a charge or lien on the property must clearly appear from the language of the instrument itself, strict proof of such intention being required.
37 C.J. 317, sec. 20.
An expressed stipulation and agreement of the parties for other security excludes the idea of a lien and limits their rights to the extent of the expressed contract which they have made and the taking of security due at a distant day is a waiver of the lien and it is plainly inconsistent with it.
37 C.J. 335, sec. 56.
The lower court having adjudicated in denying reformation that the trust deed sued on was the contract between the parties is positive indication that the appellee intended to rely on the security for the debt and thereby extinguished its right to an equitable lien.
Howell v. Bush, 54 Miss. 437; Cansler v. Sallis, 54 Miss. 446.
The appellees in the case at bar relied on the security they took for the original indebtedness, thus negativing the idea of a lien.
We respectfully submit that the trust deed sued on spoke the real contract between the parties thereto and that this fact has been adjudicated by the lower court in denying the reformation, thus eliminating any question as to an equitable lien.
If the proof was not sufficient to warrant the reformation of the trust deed then it was certainly not sufficient to establish an equitable lien and was wholly inconsistent with the finding of fact by the court in denying the reformation.
Jas. R. McDowell, of Memphis, Tenn., for appellee.
The term "lien" is used in equity in a broader sense than at law. And although it is difficult to define accurately the term "equitable lien," generally speaking, an equitable lien is a right, not recognized at law, and which a court of equity recognizes and enforces as distinct from strictly legal rights, to have a fund or specific property, or the proceeds, applied in full or in part to the payment of a particular debt or demand, a right of a special nature over property which constitutes a charge or encumbrance so that the property itself may be proceeded against in an equitable action. Equity enforces the lien on the principle that a person having obtained the estate of another ought not in conscience to keep it as between them. An equitable lien has the nature of a trust.
37 C.J. 308, sec. 5.
The doctrine of "equitable lien" follows closely the doctrine of subrogation; they both come under the maxim "equality in equity," and are applied only in cases where the law fails to give relief, and justice would suffer without them.
Milam v. Milam, 138 Tenn. 686; 17 R.C.L. 605; 3 Pomeroy, Eq. Jurisp., sections 1237, 1239; Westall v. Wood, 212 Mass. 540, 99 N.E. 325.
There must be an intent to make the particular property, real or personal, a security for the obligation; but, that intent being clear, equity will treat an agreement to give a mortgage or lien, as effective to create an equitable lien, where money has been parted with on faith that there would be a compliance. As Pomeroy says, one of the maxims underlying the doctrine is that equity regards as done that which ought to be done.
Hurley v. Atchinson, etc., R. Co., 213 U.S. 126, 29 Sup. Ct. 466, 53 L.Ed. 729; Leary v. Corovin, 181 N.Y. 222.
An equitable lien for advances may exist where advancements of money or funds are made on the faith of certain property, real or personal, under an agreement or circumstances showing that it was the intention of the parties to pledge such property as security for the advancements, provided the specific property or its proceeds on which the advancements were invested can be traced or identified.
37 C.J. 321, sec. 28.
An equitable lien either arises out of an antecedent and underlying contract, which deals with some special property, or it arises by implication from the conduct and dealings of the parties, the right or charge being completed by equity, in pursuance of the maxim that equity looks upon things agreed to be done as actually performed.
37 C.J. 315, sec. 18.
Where there is an intent to give a lien, and what is done to that end is too defective to create it, but is consistent with its creation and is not a contract for something else, equity will treat as done what was intended to be done, and the lien may be established and foreclosed in the same action.
Bank v. Rogers, 166 N.Y.; Blumenfeld v. Seward, 71 Miss. 342.
In the case at bar, but for the money furnished by complainant the crops upon which we claim a lien would not have come into existence. Undoubtedly, it was the intention of complainant and the late Mr. Haraway that the crops produced with complainant's money on the three places leased from Turley, Alexander and Norvell were to be delivered to complainant, and that a lien should be fixed upon said crops. Of course, if we could have sustained our prayer for reformation of the trust deed, the lien would have been a contract lien, but having failed to obtain a reformation of the instrument, it becomes an equitable lien for the money advanced with which to create the property, and comes within the purview of the Blumenfeld case.
Maynard v. Cocke, 71 Miss. 493; Miller v. Pickens, 26 Miss. 182.
Argued orally by Jas. R. McDowell, for appellee.
The appellee, a corporation domiciled in Memphis, Tennessee, exhibited a bill of complaint against the appellant, administrator of the estate of A.M. Haraway, who died in July, 1936, the allegations of which, in substance, are that, on February 4, 1935, A.M. Haraway, deceased, who will hereafter be simply designated as Haraway, procured a loan of money from the appellee to secure which he gave a deed of trust on designated live stock and crops to be grown during 1935 on three designated plantations in DeSoto county, Mississippi. Haraway was also in possession of and operating three other small plantations. This loan of money to Haraway was made for the purpose of enabling him to grow crops during 1935 on the three plantations described in the deed of trust, and on the three small plantations operated by him but not described therein, and to enable him to supply other persons with money to make crops on other places operated by them. Haraway agreed to include in this deed of trust crops to be grown on the three plantations not described therein, and they were intended to be included therein by both Haraway and the appellee, but were omitted therefrom by a mutual mistake. Haraway also agreed to take deeds of trust on live stock owned, and crops to be grown, by persons to whom he should lend a portion of the money loaned him by the appellee, and, when taken, to deliver them to the appellee as collateral security for the money loaned him by it. Haraway loaned a portion of this money to others and received from them deeds of trust on crops as security therefor, but failed to deliver them to the appellee. The appellant now has in his possession cotton grown on the three plantations omitted from the deed of trust, and also by persons to whom Haraway loaned a portion of the money received by him from the appellee. The prayer of the bill is that the deed of trust be reformed so as to include the crops grown on the three plantations alleged to have been erroneously omitted therefrom, and that the appellee be decreed to have a lien on the crops delivered to the appellant under the deeds of trust taken by Haraway for money loaned others, which deeds of trust he had promised to deliver to appellee as collateral security for the loan to him. There was also a prayer for general relief. The case was heard on bill, answer, and proof, and a decree was rendered denying the appellee a reformation of the deed of trust.
A master was then appointed to ascertain what portion of the money, if any, loaned by appellee to Haraway was actually applied by him to the growing of crops on the three plantations omitted from the deed of trust, who reported that $1,172.67 had been so applied. A decree was rendered again denying the appellee a reformation of the deed of trust, and also denying it a lien on the cotton in the hands of the appellant obtained by him under the deeds of trust executed to Haraway by persons to whom he had loaned a portion of the money received by him from the appellee, but granting it a lien on the cotton grown on the three plantations omitted from the deed of trust to secure payment of the $1,172.67 applied by Haraway to the expense of growing the crops.
By direct appeal, the appellant complains of the lien granted the appellee, and by cross-appeal the appellee complains of the refusal of the court below to reform the deed of trust, and to grant it a lien on the crops grown by persons to whom Haraway had loaned money secured by the deeds of trust hereinbefore mentioned.
Counsel for appellee make no contention in his brief that the court below erred in not reforming the deed of trust, saying, "I shall not discuss the question of whether the deed of trust should have been reformed, because inasmuch as a lien was established by the court, the effect is the same." He then proceeds to argue the correctness of the lien given appellee on the crops omitted from the deed of trust to secure payment of the money actually applied to the production thereof.
Counsel for appellant says that the bill of complaint contains no specific prayer for the granting of this lien, and that it was not so framed as to permit the granting thereof under the general prayer for relief. This may be true, but it is not necessary for us to so hold, and we express no opinion thereon.
The evidence does not disclose that any portion of the money loaned by the appellee to Haraway was allocated, when the loan was made, to the making of crops on any particular one of the plantations operated by Haraway. On the contrary, it was directed solely, prior to the appointment of the master, of an attempt to prove that Haraway agreed to execute a deed of trust on crops to be grown on all six plantations to secure the whole of the loan made by the appellee to him. But, if any specific portion of the money had been loaned to Haraway for the making of a crop on specifically designated land, that fact would not entitle the appellee to an equitable lien on the crops grown thereon to secure the payment of money advanced for the making thereof. Weathersby v. Sleeper, 42 Miss. 732; Allen v. Montgomery, 48 Miss. 101; Alexander v. Berry, 54 Miss. 422; Hart v. Livermore Foundry Co., 72 Miss. 809, 17 So. 769; Tallahatchie Lumber Co. v. Thatch, 117 Miss. 260, 78 So. 154, and Strong v. Krebs, 63 Miss. 338.
It may be, though that fact is not clear, that the evidence discloses that Haraway agreed to ship all the cotton raised by him to the appellee for sale by it, and application of its proceeds to the debt due by Haraway to it, but no equitable lien arises from such an agreement. Allen v. Montgomery, and Alexander v. Berry, supra. In order for the equitable lien here claimed to arise, there must have been an agreement between Haraway and the appellee clearly indicating that they intended to make the crops grown on the plantations omitted from the deed of trust a security for that portion of the money loaned to Haraway, and applied by him to the making of such crops, 3 Pomeroy's Equity Jurisprudence (4 Ed.), section 1235, 37 C.J. 315, and the record discloses no such an agreement.
Under the appellee's evidence, the only lien it could acquire on this cotton was that which would have resulted from a reformation of the deed of trust, which the court correctly declined to reform.
The appellee's case rests mainly on the testimony of its vice president, who, while evidently attempting to tell only the truth as to what occurred, was somewhat confused in his recollection thereof. On direct examination, he said that the agreement for the loan to Haraway was made by him in his office in Memphis, on February 4, 1935, on which day the deed of trust was executed by Haraway, and that the agreement between them was that the crops on all six of the plantations operated by Haraway were to be included in the deed of trust. He did not say how three of Haraway's plantations came to be omitted therefrom, except to say that he was not present when the deed of trust, which he did not read, was prepared by his stenographer. He did not say what directions, if any, he gave this stenographer, who did not testify, but did say, in substance, that it was his custom, after making an agreement to lend money, to call his stenographer, give her directions for preparing the papers therefor, which she would then prepare with the assistance of the person to whom the money was to be loaned. On cross-examination after his memory had been refreshed in reference thereto, he admitted that he was in Florida on the day the deed of trust was executed, and said he had his dates confused; that he had such an agreement with Haraway before February 4, 1935, and after his return from Florida, Haraway told him the omitted plantations had been included in the deed of trust. The loan to Haraway was actually made and the deed of trust taken on February 4, 1935, by the appellee's then and now treasurer, who had full authority to act in the matter. This treasurer did not testify, and there is no evidence whatever as to what occurred between him and Haraway when the loan was made. The absence of this evidence is a fatal defect in the appellee's case, both as to its claim for a reformation of the deed of trust, and for the equitable lien granted it in the court below, the evidence in support of which, before either can be allowed, must be clear and convincing.
The agreement which the appellee and cross-appellant says was made by Haraway to pledge the deeds of trust, including, we will assume, the debts thereby secured, to appellee as additional security for money loaned him by it, if made, was not consummated by delivery of the deeds of trust to appellee. Appellee says, however, that, if this agreement to pledge the deeds of trust was made, though not consummated by delivery thereof, a court of equity, under the maxim, "Equity regards that as done which ought to be done," should grant it a lien on the cotton, and we will assume, but merely for the sake of the argument, that if the evidence disclosed that the agreement here claimed by the appellee was in fact made, the equitable lien claimed by it would arise.
The appellee's vice president testified that the appellee in 1934 loaned money to Haraway secured by a deed of trust on crops, and by pledge of chattel mortgages of the character here in question, and that he agreed with the witness to pursue the same course as to the loan of 1935.
But, as hereinbefore pointed out, the loan to Haraway was made by the appellee's treasurer, in the absence of the vice president, and as this treasurer did not testify, it does not appear what the agreement, on which the loan was then made, was. The equitable lien here sought, therefore, does not arise.
The court below apportioned the court costs between the appellant and the appellee, but since the appellee was not entitled to any relief, it should pay all of such costs.
The decree will be affirmed, except in so far as it granted the appellee an equitable lien on the cotton grown on the three plantations omitted from the deed of trust, and taxes the appellant with a portion of the court costs, which provisions of the decree will be eliminated.
So ordered.