Fagan & Osgood v. Boyle Ice Machine Co. , 65 Tex. 324 ( 1886 )

Robertson, Associate Justice.

decree in the main case of Ayers & Cannon and others v. The Continental Meat company, appoints a receiver to take charge of- the property of the defendant and convert it into money, and contemplates a distribution of the proceeds among the creditors of the company. There is no prayer of the petition, or express provision in the decree, for a dissolution of the corporation, but its extinction is the necessary result of the consummation of what is done and proposed. The effect of the decree is, therefore, to place the assets of the company in process of equitable administration.

In such administration, the usual practice is to ascertain the persons entitled to participation in the distribution of the fund, by the instrumentality of a master in chancery. In this case the court appointed an auditor to perform this service as to general creditors, and, as to those asserting liens, reserved to itself the office of master. The appellee belonged to the latter class, and, in the form of a petition of intervention, presented his claim to the court for adjudication.

Whether Fagan & Osgood had the right to appear and resist appellee’s claim must depend upon the same principles which would decide their right if the claims were presented before a master. The court’s performance of this part for itself could not change these principles.

Who may attend before the master is determined upon the most enlightened and liberal principles of abstract justice. If the fund being administered is not sufficient to pay all, each creditor or distributee is directly interested in the justice of every demand of a degree equal to, or greater than, his own. Every claim which is to be paid before his, lessens the fund out of which he is to be paid, and every claim standing upon equal footing with his, lessens his distributive share. Every creditor whose claim has been recognized or established in any of the modes pointed out by the decree, becomes a quasi party, and may resist, before the master, the allowance of any claim of a dignity equal to, or greater than, his own. If not satisfied with the action of the master he may, upon leave as of course, except to the master’s report, and have his objections to the obnoxious claim passed upon by the court; and we are not sure that he could not, under our laws, have the verdict of a jury upon disputed facts. For full statement of the practice and proceedings before master upon the points considered, see Daniell’s Ch., Pl. and Pr., pp. 1173, 1174, 1175, 1212, 1312, 1317.

In the original suit against the Continental Heat company its insolvency was averred, and, as it was a fact essential to the relief prayed, we may assume that it was proved in the trial which resulted in the decree confirming the appointment of a receiver. The appellee averred that the stockholders owed the company enough to pay all its debts, but this averment was pertinent, only in the event its lien was denied, and, as the lien was established, this issue passed out of the case. Fagan & Osgood averred that the stockholders owed the company, but also that the latter was insolvent. In determing the right of Fagan & Osgood to intervene in the appellee’s case, we think the insolvency of the common debtor was sufficiently averred and proved.

They thus brought themselves clearly within the rule already announced.

Their claim had been allowed by the auditor, they were distributees of a fund insufficient to pay all the demands against it, and the appellees were asserting a right over them to be first paid in full, and we think the court below properly allowed them to defend.

The proceeding instituted by the appellee had all the elements of an independent suit, and was entitled to its own final judgment. The decree entered, establishing the claim and lien, and providing fiar its payment, disposes of that suit, and must be held to be final. See Cowdry v. R. R. Co., 3 Otto 352.

Every claim presented against a fund in the hands of a receiver, if contested before the court, becomes, in effect, a suit against the receiver, which is ended by a final judgment allowing or rejecting the claim; and any party to the contest, dissatisfied with the result, may have the proceeding revised on appeal.

As the judgment appealed from was final, and the appellants were proper parties below, we are authorized to proceed to the consideration of the merits of the controversy.

Art. 3140 of the Eevised Statutes, which provides that the word “person” shall include corporation, disposes of the first of appellant’s objection to the appellee’s lien. See also Martin v. State, 24 Tex. 68, and Bartee v. R. R. Co., 36 Tex. 649.

It is also contended that appellee could not fix and secure its lien after the receiver was appointed. The lien is the creature of the of the law; the registration provided for, preserves it. Huck v. Gay-lord, 50 Tex. 580. The record of the contract, after the receiver was appointed, did not, therefore, newly encumber the property, but fixed and secured upon it an existing lien.

The machinery furnished became a part of the slaughter-house at Fort Worth. It was an essential part of the building itself. It could not be removed without damaging, if not destroying, the entire structure: It certainly constituted material for an improvement, within the meaning of our statute. ' Where the furnisher of such machinery, which is to become part of the realty, has been denied the lien, the courts have reached that result in construing the word house or building ; and Mr. Phillips states that such decisions have been generally followed by amendments of the law—secs. 161, 167. Our statute uses the phrase “house or improvement,” and the latter term, in our opinion, embraces any permanent structure not under the designation of word house. The scope of the legislative purpose is seen in the fact that a lien is given for fixtures and tools furnished. Art. 3164.

The land on which the improvements were erected consisted of twenty-seven and one quarter acres. If it was in the country, of course, all of it was embraced in the lien—art. 3169. If it was in town, the proof sufficiently shows that the entire lot or tract was necessary to the profitable enjoyment of the property erected upon it. If the pleadings of appellee were not sufficiently specific in this particular, the point should have been made in the court below, and not, in the first instance, here.

The appellants’ most material contention is, that, as the contract was made, the machinery delivered, and the title passed in Chicago, the lien provided by our statute could not attach. The case cited in support of this view, (Birmingham Iron F. v. Glen Cove Co., 78 A. Y. 30), is directly in point, and, if regarded as authority, is decisive of this appeal. The single principle, upon which that decision proceeds, is that the law of a state can have no extra-territorial effect. This principle is confined to no country, but is, in the nature of things, obviously and necessarily, both true and universal. A law intended to have such effect is void, not because it is unconstitutional, but because it lacks an essential element of a law—the sanction, the means of enforcement. It is not a law, because it is enacted without authority and may be disobeyed with impunity.

But does the principle apply to the case? The question made is not one of legislative intent, but of legislative power—not what was done; but, assuming that it was the purpose to create the lien in the given case, and that the language used was broad enough to compass the purpose, could such act be law?

The property to be affected, was land in New York, a subject exclusively in the jurisdiction of the laws of New York. The lien provided was such as could only be enforced by the decrees and process of New York courts. The lien is evolved by the law from stated facts. The law has attempted to prescribe the effect, in New York, of a combination of facts, some of which transpired in Connecticut.

The facts, of which the law begets the lien, are: 1—the furnishing of materials on credit; 2—the agreement, tacit or expressed, that they shall be used in the erection of a particular improvement; 3—the erection of the improvement, and, where it is held, as it is predicted it will be in New York, (Kimland on Mech. Liens, sec. 95) that the materials must actually form part of the structure for which they are supplied; 4—the use of the materials in the structure. The contract was made in Connecticut and the goods were there delivered, but the improvement was erected in Sew York and the material was there used.

In Illinois, where it is held that the building must be erected and the material be actually used in its construction, it is held, that the lien attaches, though thé goods are delivered in St. Louis. The lien is consummated by the use of the material, and the law has no extraterritorial effect. Gaty v. Casy, 15 Ill. 189.

But, if the lien accrues when the material is furnished, to be used in a structure,.whether they are so used or not, the effects of the law are still confined within state boundaries. In the one case, the use of the goods in the state, and in the other, the purpose to use them in the state, perfects the lien, but in both, the lien, its subject and the remedy upon it, the law’s effect are precisely the same. The title to the material furnished passes as absolutely when delivered within as without the state. In neither case does any property of the furnisher enter the structure. The contract of the parties may reserve a lien on the material or the improvement, but the statutory lien springs from and requires no such germ. The facts upon which the latter lien grows, are, in themselves, sterile. Their producing quality is supplied by the law; their product, the lien, is on land in the state.

That one or all of the facts, from which the law evolves the lien, transpired beyond the limits of the state, cannot affect the validity of the law, which “spends its force” (Cooley on Const. Lim. 128) entirely within its territory. The effect of the law is wholly in the state, and we can see no objection to that effect being conditioned on a fact wherever it occurs, which transpires locally, but exists ubiquitously.

We conclude that the legislature may give a lien on land in the state, for the price of materials to be used in the erection of an improvement on the land, wherever the goods are purchased and delivered, whether the lien depends upon their actual use in the improvement, or is made to attach upon their delivery, with the purpose that they shall be so used.

Our statute does not, in terms, restrict the lien to cases in which the material is delivered or purchased in this state, but language is used broad enough to embrace purchases made beyond, as well as within, our limits. There is no reason why the manufacturer in Chicago should have a lien when he makes his contract and delivers the materials in Texas, and not have it when the sale and delivery takes place at his factory. The freight and risks of transportation constitute the practical difference, and. we find nothing in the statute making any distinction.

We find no error in the judgment, and it is accordingly affirmed.

Affirmed.

[Opinion delivered January 22, 1886.]