Chessport Millworks, Inc. v. Solie ( 1974 )

OPINION

WOOD, Chief Judge.

The trial court held that a lien on personal property based on financing statements and security interests was superior to a landlord’s lien for rents due and to become due. It concluded that defendant had wrongfully withheld certain property from plaintiff, gave judgment for plaintiff in its replevin action but held that damages for the wrongful withholding had not been proved. Defendant appeals. The issues discussed are: (1) priority as between the statutory landlord’s lien and a security interest under the Uniform Commercial Code; (2) whether there was a landlord’s lien; and (3) the extent of the landlord’s lien.

Defendant leased real property to the partnership of Phillips and Kight, doing business as New Mexico Millworks. The term of the lease was November 1, 1965 to October 31, 1973. The rent was $225.00 per month.

Phillips incorporated the business in April, 1967; thereafter, it was known as New Mexico Millworks, Inc. This corporation occupied and used the premises covered by the lease and paid all rentals pursuant to the lease through September 1, 1971. This corporation is now defunct.

During the existence of New Mexico Millworks, Inc., Murdock advanced money to the corporation and took security interests in property owned by the corporation. The earliest security agreement and financing statement referred to in the trial court’s findings of fact is dated September 17, 1970.

On December 16, 1971, New Mexico Millworks, Inc. notified Murdock that it would be unable to pay the indebtedness and also notified Murdock of its decision to deliver possession of all collateral to Murdock.

On December 17, 1971, Murdock gave notice of private sale to be held on January 6, 1972. Defendant received this notice. The sale was held as scheduled. At the sale, Murdock purchased all inventory and assets of New Mexico Millworks, Inc. Thereafter, Murdock transferred title to the inventory and assets to plaintiff. Plaintiff is a corporation; Murdock is its sole stockholder.

On December 23, 1972, defendant, by letter, informed New Mexico Millworks, Inc. and Murdock that he claimed a landlord’s lien on property of New Mexico Mill-works, Inc. located in or on the leased premises.

On January 21, 1972, defendant prevented plaintiff from removing property from the leased premises. On that date he locked the leased premises. Some of the property on the premises had belonged to New Mexico Millworks, Inc. prior to the private sale.

On January 26, 1972, defendant gave notice that unless the indebtedness claimed to be owing from New Mexico Millworks, Inc. was paid within 10 days, [see § 61 — 3— 11, N.M.S.A.1953 (Repl.Vol. 9, pt. 1, Supp.1973)], the property held by defendant would be sold pursuant to § 61-3-12, N.M.S.A.1953 (Repl.Vol. 9, pt. 1).

Priority as between landlord’s lien and security interest.

This point assumes that defendant had a valid landlord’s lien against property of New Mexico Millworks, Inc. which was located on the leased premises. No attack is made on Murdock’s security interest, the private sale and the subsequent transfer of title of property purchased at the sale from Murdock to plaintiff. The issue is which lien was prior — the landlord’s lien or the lien based on the security interest.

The article of the Uniform Commercial Code dealing with secured transactions contains §§ 50A-9-101 through 50A-9-507, N.M.S.A.1953 (Repl.Vol. 8, pt. 1). Section 50A-9-104(b), supra, exempts a landlord’s lien from the article on secured transactions. Section 50A-9-104(c), supra, also exempts “a lien given by statute” except as provided in § 50A-9-310, supra. Compare § 50A-9-102(2), supra. Under the fact situation of § 50A-9-310, supra, there may be a lien having priority over a perfected security interest, such as Murdock’s. Defendant does not claim a priority on the basis of § 50A-9-310, supra.

The landlord’s lien is provided by § 61-3-4, N.M.S.A.1953 (Repl.Vol. 9, pt. 1). Section 61-3-8, N.M.S.A.1953 (Repl.Vol. 9, pt. 1) states: “The priorities of liens provided for by this act [61-3-1 to 61-3-13] shall be fixed as to several lien claimants as of the time of serving notice or of filing suit as provided in section * * * [61-3-11].” This provision pertains to priority between liens established by §§ 61-3-1 to 61-3-13, supra; it does not apply to liens not covered by these sections. Gathman v. First American Indian Land, Inc., 74 N.M. 729, 398 P.2d 57 (1965). Murdock’s security interest is not covered by these sections.

Accordingly, in this case, no statutory provision determines the priority between the landlord’s lien and the security interest.

In Gathman v. First American Indian Land, Inc., supra, the issue was the priority between a judgment lien which attached in February, 1962 and a landlord’s lien based on a lease entered in April, 1961. Gathman, supra, held the landlord’s lien to be prior, stating: “The landlord’s statutory lien attached at the beginning of the tenancy for rental due or to become due under the terms of the lease.”

New Mexico decisions, relied on by plaintiff, are not to the contrary. Owen v. Waukesha Engine and Equipment Company, 74 N.M. 59, 390 P.2d 439 (1964) does not involve a landlord’s lien. In Dees v. Dismuke et al., 30 N.M. 528, 240 P. 198 (1925), the landlord’s lien was conceded to be prior to a chattel mortgage entered subsequent to the original lease. The issue litigated was the priority between the chattel mortgage and a second lease executed subsequent to the chattel mortgage. Ross v. Overton, 29 N.M. 651, 226 P. 162 (1924) does not deal with priority of liens. In Ross, supra, a landlord forcibly took possession of a tenant’s property. The issue involved the enforcement of a landlord’s lien.

Under Gathman v. First American Indian Land, Inc., supra, defendant’s statutory landlord’s, lien attached on November 1, 1965. Murdock’s security interest was perfected September 17, 1970. The landlord’s lien should have been accorded priority.

Whether there was a landlord’s lien.

Plaintiff would avoid the priority to be accorded the landlord’s lien on the basis that no landlord’s lien existed. The several contentions, and our answers, follow.

(a) Plaintiff seems to contend that once the sale on January 6, 1972, occurred, title to the property was exclusively in Murdock. On this basis, it is asserted that defendant had no right to “seize” the property on January 21, 1972. The answer is that if defendant had a landlord’s lien it was prior to any security interest held by Murdock and the private sale to Murdock did not eliminate the prior landlord’s lien. See § 50A-9-504(4), supra.

(b) Relying on Ross v. Overton, supra, plaintiff asserts that defendant wrongfully seized the property on January 21, 1972. The answer is that there was no seizure. The property was on defendant’s premises—the leased land. What defendant did was to prevent plaintiff from removing the property. If defendant had consented to the removal of the property, he would have lost his lien. Section 61—3— 7, supra.

(c) Relying on Ross v. Overton, supra, plaintiff contends defendant had no lien because defendant took no steps to enforce the lien prior to January 26, 1972. This contention mixes two concepts—the existence of the lien and its enforcement. Section 61—3—4, supra, and Gathman v. First American Indian Land, Inc., supra, provide for the lien. Section 61-3-11, supra, pertains to enforcement. Plaintiff’s contention is that the lien was lost because defendant had not taken steps to enforce the lien by January 21, 1972, the date defendant prevented removal of the property. No authority is cited in support of this argument. Nothing in the statutes provides that if defendant preserves his lien by preventing removal of the property, he nevertheless loses his lien if steps for enforcement of the lien have not been taken by the day removal of the property is prevented.

(d) The landlord’s lien for future rents, provided by § 61-3-4, supra, is based on a “lease or other agreement in writing.” Plaintiff contends this basis does not exist between defendant and New Mexico Mill-works, Inc. The lease in evidence is between defendant and the partnership. There is no evidence of a separate lease between defendant and New Mexico Mill-works, Inc. Plaintiff claims there is no evidence that New Mexico Millworks, Inc. ever assumed or was assignee of the partnership lease. The trial court found that New Mexico Millworks, Inc. occupied and used the leased premises and paid rental pursuant to the lease for over three years. These facts establish, prima facie, an assignment of the lease to New Mexico Millworks, Inc. Abbott v. Bob’s U-Drive, 222 Or. 147, 352 P.2d 598, 81 A.L.R.2d 793 (1960); Jensen v. O. K. Investment Corporation, 29 Utah 2d 231, 507 P.2d 713 (1973); 3A Thompson on Real Property, § 1208 (1959 Repl.). Nothing contradicts this prima facie showing.

(e) Plaintiff contends the lease could not be assigned because, in the lease, , the partnership agreed not to assign without the lessor’s written consent. Such a provision is only for the benefit of the lessor and the lessor may waive such a provision. Merrill v. Klein, 51 N.M. 498, 188 P.2d 609 (1947). This provision did not prevent an assignment.

(f) Because there was no “writing” between defendant and New Mexico Millworks, Inc., plaintiff contends that the occupancy of the premises by New Mexico Millworks, Inc. was a tenancy from month to month; that a landlord’s lien would apply only to unpaid monthly rentals; that the oldest unpaid monthly rental is for October, 1971; and, thus, that Murdock’s security interest dating from September, 1970 is prior in time to any landlord’s lien. The answer is that the lease, prima facie assigned to New Mexico Millworks, Inc., was an assignment for the term of the lease. 3A Thompson on Real Property, supra. Whether the priority of the landlord’s lien dates from the original lease or from the assignment, Murdock’s security interest is subsequent in time. Dees v. Dismuke et al., supra, on which plaintiff relies, is distinguishable on its facts.

(g) In July, 1969 defendant sued the partnership for rent due under the lease. In June, 1970 judgment was entered for rent accrued, but unpaid, since March, 1969. Plaintiff contends the lease was terminated by the filing of this lawsuit. The answer is that the judgment affirmed the lease. Plaintiff also contends that the complaint in this lawsuit was an admission by defendant that he considered the partnership, rather than New Mexico Mill-works, Inc., to be the lessee. There is nothing indicating the partnership had been relieved of its lease covenant to pay the rent. Wood v. Bartolino, 48 N.M. 175, 146 P.2d 883 (1944). The partnership being liable for the rent, no question of assignment was involved in the 1969 lawsuit and no admission concerning an assignee of the lease can be inferred.

(h) Plaintiff claims no landlord’s lien is involved because rent, under the lease, has been paid through September 1, 1971, and defendant has not claimed a lien for rent due in October, November and December, 1971. This is factually inaccurate. Defendant claimed a lien for “rent due or to become due by the terms of said lease.”

(i) Plaintiff contends that defendant’s seizure and detention of the property involved violated due process. We consider neither the factual correctness of this claim nor the constitutional issue. No such contention was raised in the trial court and, therefore, will not be considered. Mantz v. Follingstad, 84 N.M. 473, 505 P.2d 68 (Ct.App.1972).

Extent of the landlord’s lien.

(a) On January 21, 1972, when defendant prevented plaintiff from removing property from the leased premises, defendant prevented removal of a truck and trailer. The evidence is that the truck and trailer had been brought to the premises for the purpose of removing property already there. Thus, a question exists as to whether the truck and trailer had “remained” on the leased property and whether they were subject to the landlord’s lien. Section 61-3-4, supra. There is also testimony that some of the property located on the leased premises was property of plaintiff which had not been acquired from New Mexico Millworks, Inc.

(b) There is evidence that the partnership rented additional facilities from defendant. These additional facilities were not described in the original lease. New Mexico Millworks, Inc. paid the rent ($50 per month) on the additional facilities through September 1, 1971. Defendant requested the trial court to find that “a memorandum of the lease for the additional facilities was endorsed on page 1 of the written lease contract.” The trial court refused the requested finding.

The judgment in the 1969 suit to collect unpaid rent states that the additional facilities were the subject of “a valid parole lease running for the term of the written lease.” Defendant testified that at the time of the oral lease there was an addendum to the written lease. This addendum was identified as the handwriting appearing on the first page of the written lease. This handwriting bears no signature. Defendant testified that he was the one who added the handwriting. There is nothing indicating that the lessee agreed to a written addition to the original lease. Absent such evidence, the trial court could properly refuse to find that the oral lease was endorsed to the original written lease.

The landlord’s lien, provided by § 61 — 3— 4, supra, has two parts. There is a lien: (1) for rent due and (2) for rent to become due by the terms of a lease or other instrument in writing. Dees v. Dismuke et al., supra.

The trial court’s refusal to find that the oral lease was endorsed to the written lease has the following consequences. Rent due or to become due under the written lease must be segregated from rent due or to become due under the oral lease. Property formerly belonging to New Mexico Millworks, Inc. must also be segregated according to whether the property was located on the premises subject to the written lease or was located on the premises subject to the oral lease. Such property, located on the original lease premises, is subject to a landlord’s lien for rent due or to become due under the lease. Such property, located on the oral lease premises, is subject to a landlord’s lien only for rent due.

Having ruled that Murdock’s security agreement was superior to the landlord’s lien, the trial court did not decide the issues discussed under this point — that is, it did not decide what property was subject to the landlord’s lien and did not decide the extent of the landlord’s lien on particular items of property. These issues remain open. The parties may invoke a ruling on these issues, on remand, if they so desire.

The trial court determined that plaintiff was not entitled to damages or attorney fees. No attack being made on this ruling, that portion of the judgment is affirmed.

The trial court ruled that the items located on defendant’s premises were the rightful property of plaintiff. It did so on the erroneous basis that Murdockls security interest was- superior to defendant’s landlord’s lien. Accordingly, this portion of the judgment is reversed.

The cause is remanded for further proceedings consistent with this opinion.

It is so ordered.

HERNANDEZ, J., concurs.