RURAL PLUMBING AND HEATING, INC.
v.
HOPE DALE REALTY, INC., et al.
No. 523.
Supreme Court of North Carolina.
February 24, 1965.*336 Bunn, Hatch, Little & Bunn by James C. Little and E. Richard Jones, Jr., and Herman Wolff, Jr., Raleigh, for defendants, *337 property owners of the 26 lots, the holder of the deeds of trust, the trustee, and the title insurance company, appellants.
Lassiter, Leager, Walker & Banks by James H. Walker, Raleigh, for plaintiff appellee.
PARKER, Justice.
Appellants' first assignment of error is that Judge Bundy "erred in signing the judgment affirming the report of the referee for the reason that the evidence is insufficient to support the findings of fact and that the findings of fact are insufficient to support the conclusions of law contained in said report. (Exception #1, R p 121.)"
Appellants have no exception to any specific finding of fact they wish to challenge. In fact, they have no exception to any of the findings of fact. In the appeal entries, they object to the judgment and except to the signing and rendition thereof, and after the appeal entries appears their Exception #1. Their appeal entries were filed on 24 February 1964, and the judgment from which the appeal was taken was entered on 12 February 1964. Their assignment of error "that the evidence is insufficient to support the findings of fact" does not present for review the findings of fact or the sufficiency of the evidence to support them, for three reasons: (1) This part of the assignment of error is not based on an exception or exceptions duly noted, and an assignment of error must be based on an exception, Strong's N.C. Index, Vol. 1, Appeal and Error, § 19; (2) an exception to the judgment does not present for review the findings of fact or the sufficiency of the evidence to support them, Clark Equipment Co. v. Johnson, Comr. of Revenue, 261 N.C. 269, 134 S.E.2d 327; Merrell v. Jenkins, 242 N.C. 636, 89 S.E.2d 242; Strong's N.C. Index, Vol. 1, Appeal and Error, § 22; and (3) the assignment of error as to the findings of fact is broadside. They do not point out specifically the alleged error. Logan v. Sprinkle, 256 N.C. 41, 123 S.E.2d 209; Merrell v. Jenkins, supra; Heath v. Kresky Manufacturing Co., 242 N.C. 215, 87 S.E.2d 300; Suits v. Old Equity Life Insurance Co., 241 N.C. 483, 85 S.E.2d 602; Town of Burnsville v. Boone, 231 N.C. 577, 58 S.E.2d 351.
Appellants have four other assignments of error, all based on their Exception #1, which is to the judgment. They have no other exception set forth in their assignments of error.
Therefore, appellants' appeal presents only this one question: Their general exception to the judgment of Judge Bundy brings here for review the question as to whether or not the findings of fact support his conclusions of law and judgment, and as to whether or not error of law appears on the face of the record proper. Merrell v. Jenkins, supra; Columbus County v. Thompson, 249 N.C. 607, 107 S.E.2d 302; City of Salisbury v. Barnhardt, 249 N.C. 549, 107 S.E.2d 297; Logan v. Sprinkle, supra; Schloss v. Jamison, 258 N.C. 271, 128 S.E.2d 590. It is hornbook law that where no exceptions have been taken to the findings of fact, such findings are presumed to be supported by competent evidence and are binding on appeal. Schloss v. Jamison, supra; Milwaukee Insurance Co. v. McLean Trucking Co., 256 N.C. 721, 125 S.E.2d 25; City of Goldsboro v. Atlantic Coast Line R. R., 246 N.C. 101, 97 S.E.2d 486.
The findings of fact of the referee confirmed by Judge Bundy, and Judge Bundy's additional findings of fact are to this effect: Plaintiff rendered services for, and furnished materials to, Hope Dale, the owner of 26 lots and 26 houses situate on these lots in Hope Dale subdivision, Wake County, in installing plumbing and heating systems in each of these 26 houses, under a contract with Hope Dale that Hope Dale would pay plaintiff $1,145 for each house in which plaintiff installed a plumbing and heating system. This gave rise to a debtor-creditor relationship between plaintiff and Hope Dale. Indubitably, the installation of a plumbing and heating system in each one of these 26 houses increased the value of each *338 house and the lot on which it is situate. After the installation of the plumbing and heating systems in each of the 26 houses, according to a stipulation by the parties here, Hope Dale conveyed by deed these 26 lots and the 26 houses situate thereon to the individual defendants here. Hope Dale has made no payments to plaintiff for installing the plumbing and heating systems in each house situate on lots numbered 4, 35, 37, 38, 42, 43, 46, 72, 73, 74, 75, 76, 79, 80, 81 and 83. Hope Dale has made a payment of $700 to plaintiff for installing the plumbing and heating systems in each house situate on lots numbered 94, 95, 104, 106, 113, 114, 115, 121, 124, and 125. Plaintiff properly filed in the office of the clerk of the superior court of Wake County notices of its liens for labor rendered for, and materials furnished to, Hope Dale in each of the 26 houses within six months after the completion of the work and the final furnishing of the materials in installing a plumbing and heating system in each of the 26 houses on the 26 lots, G.S. §§ 44-38 and 44-39; Equitable Life Assurance Society of United State v. Basnight, 234 N.C. 347, 67 S.E.2d 390, and instituted the instant action to enforce its lien on each of the 26 lots and on each of the 26 houses situate thereon within six months from the date of the filing of the notice or claim of lien on each of the 26 lots and on each house situate thereon, G.S. §§ 44-43 and 44-48 (4); Equitable Life Assurance Society of United States v. Basnight, supra. The record apparently shows that all subsequent encumbrancers and interested parties have been made parties except the receiver of Hope Dale. At least nothing in the record shows otherwise.
Upon these facts Judge Bundy in modifying and affirming the referee's report adjudicated in substance, that plaintiff recover from Hope Dale the unpaid amount due it for installing a plumbing and heating system in each of the 26 houses situate on the 26 lots, and that the unpaid amount due for the installation of the plumbing and heating system in each of the 26 houses situate on the 26 lots is a valid and subsisting lien against each one of the 26 lots, which lien is superior to the claims of all other persons to this action, and that upon the filing of the lien on each of the 26 houses and lots, plaintiff's claim relates back to the time when plaintiff, the lien claimant, began the performance of the work and the furnishing of materials in each of the 26 houses.
G.S. § 44-1 provides in relevant part: "Every building built * * * or improved, together with the necessary lots on which such building is situated, * * * shall be subject to a lien for the payment of all debts contracted for work done on the same, or material furnished." G.S. § 44-43 provides for an action to enforce the lien. G.S. § 44-46 provides for an execution upon a judgment rendered in favor of the claimant of a lien.
Where a lien claimant files notice of a laborers' and materialmen's lien against a building and the lot on which it stands in the office of the clerk of the superior court in the county in which the property is situate, for work done and materials furnished by him in building and improving the building under contract with the owner of the lot, within six months after the completion of the work and a final furnishing of the material, and commences an action to enforce the lien within six months from the date of filing the notice of the lien in the county where the lot is situate, the lien relates back to the time when the lien claimant began the performance of the work and the furnishing of the materials, and takes precedence by reason of such relationship back over an intervening recorded deed of trust made by the owner of the lot since then, or other liens created by the owner since then. The doctrine of relationship back has been established by uniform decisions of this Court and is also inherent in G.S. § 44-1 granting such lien. Equitable Life Assurance Society of United States v. Basnight, supra; Horne-Wilson, Inc. v. Wiggins Bros., Inc., 203 N.C. 85, 164 S.E. 365; King v. Elliott, 197 N.C. 93, 147 S.E. *339 701; Harris v. Cheshire, 189 N.C. 219, 126 S.E. 593; Dunavant v. Caldwell & N. R. R., 122 N.C. 999, 29 S.E. 837; Pipe & Foundry Co. v. Howland, 111 N.C. 615, 16 S.E. 857, 20 L.R.A. 743; Burr v. Maultsby, 99 N.C. 263, 6 S.E. 108, 6 Am. St. Rep. 517; Chadbourn v. Williams, 71 N.C. 444.
In North Carolina, and in other jurisdictions, a laborers' and materialmen's lien on property takes priority over all the property conveyances to purchasers for value and without notice subsequent to the time when labor and materials are furnished, provided notice of the lien is filed for record within the statutory time, and action to enforce the lien is instituted within the statutory time. Burr v. Maultsby, supra; Pipe & Foundry Co. v. Howland, supra; Conlee v. Clark, 14 Ind.App. 205, 42 N.E. 762, 56 Am. St. Rep. 298; Glass v. Freeburg, 50 Minn. 386, 52 N.W. 900, 16 L.R.A. 335; Green v. Williams, 92 Tenn. 220, 21 S.W. 520, 19 L.R.A. 478; Thorn v. Barringer, 73 W.Va. 618, 81 S.E. 846, Ann.Cas.1916B, 625; 36 Am.Jur., Mechanics' Liens, § 190; 41 N.C.L.R. 185.
Plaintiff has acquired no lien under the judgment here on any of the property owned by Hope Dale at the time of the rendition of the judgment here, because such property, if any, owned by Hope Dale vested in the receiver prior to the rendition of the judgment here. National Surety Corp. v. Sharpe, 236 N.C. 35, 72 S.E.2d 109.
Appellants stoutly contend that the Agreed Statement of Account between plaintiff and Midland and Hope Dale on 3 August 1959, which is set forth verbatim above, and which was entered into after the 26 individual defendants had purchased their homes from Hope Dale, to the effect that payments by Midland and Hope Dale to plaintiff for the installation of plumbing and heating systems in houses on lots owned by them should be applied to the payment in full of the installation in the 30 houses first completed (except Lot 36), and $700 each should be applied to 10 of the houses owned by individual defendants here for such installation, and none should be applied in payment of such installation in 16 of the houses owned by individual defendants here, precludes the assertion by plaintiff of the liens against these 26 houses and lots. Appellants contend this amounted to a charging of the lots not released for services done and material supplied on the lots which were released. Appellants further contend that plaintiff waived its lien on 30 lots, and partially waived it on 21 more lots by crediting them with $700 each only 10 of these 21 lots are involved here and as a result has waived any right to claim a lien on the 26 lots here involved. This argument is untenable for reasons set forth below.
It is a well-settled principle of both the common and civil law, which seems to be universally applied, that where a debtor, who owes a number of debts to a creditor, makes a payment to the creditor, he has the right at the time of the payment to specify the debt or debts to which the payment will be applied, and if he fails to do so, the creditor may make the application. If the parties fail to make an application to a specific debt or debts, the duty to do so devolves upon the court. The rationale for the rule is that up to the time of payment the money is the property of the debtor, and being such may be applied as he sees fit. Stone Co. v. Rich, 160 N.C. 161, 75 S.E. 1077, and the cases therein cited; Baker v. Sharpe, 205 N.C. 196, 170 S.E. 657; Nantahala Power & Light Co. v. Clay County, 213 N.C. 698, 197 S.E. 603; Moore v. Parkerson, 255 N.C. 342, 121 S.E.2d 533; 40 Am. Jur., Payment, §§ 110, 111, 112, 113, 117, and 129; 70 C.J.S. Payment § 50. This rule is applicable to payments made by an owner or contractor to one who might assert a mechanics', laborers' or materialmen's lien, unless the circumstances show a different intent. Northern Virginia Sav. & L. Ass'n v. J. B. Kendall Co., 205 Va. 136, 135 S.E.2d 178; Bateson & Co. v. Baldwin Forging & Tool Co., 75 W.Va. 574, 84 S.E. 887, 891; J. S. Schirm Co. of Orange County v. Rollingwood *340 Homes Co., 56 Cal. 2d 789, 17 Cal. Rptr. 1, 366 P.2d 444, 446, 448; 36 Am.Jur., Mechanics' Liens, § 227, pp. 145, 146; 57 C.J.S. Mechanics' Liens § 248, p. 823.
This general rule as to application of payments is subject to the qualification, apparently adopted in a majority of the jurisdictions, that where money is paid by a contractor or the seller of property to a mechanic or materialman out of funds received by the contractor or seller of property from an owner or purchaser whose property is subject to a mechanics' or materialmen's lien, or both, and the purpose of the payment to the contractor or seller was to discharge the indebtedness against a specific house, the mechanic or materialman must apply the payment to discharge the indebtedness if he had knowledge of the source and purpose of the payment. Northern Virginia Sav. & L. Ass'n v. J. B. Kendall Co., supra; Herrman v. Daffin (Mo. App.), 302 S.W.2d 313, and the many authorities there cited; Farr v. Weaver, 84 W.Va. 182, 99 S.E. 395; 57 C.J.S. Mechanics' Liens § 249; 70 C.J.S. Payment § 64; 36 Am.Jur., Mechanics' Liens, §§ 227 and 228; 40 Am.Jur., Payment § 123; Anno., 166 A.L.R. 641.
This qualification to the general rule has no application in the instant case for the following reasons: (1) The joint answer of the defendants has no allegation that any money paid by them or by the 26 individual defendants, or any one of them, to Hope Dale was paid by Hope Dale to plaintiff; (2) there is nothing in the findings of fact to indicate that any money paid by defendants, and especially by the 26 individual defendants, or any one of them, to Hope Dale was paid by Hope Dale to plaintiff; and (3) the Agreed Statement of Account between plaintiff and Midland and Hope Dale shows payments on 10 lots involved here, but it does not show that any of this money came from the defendants, and particularly from the 26 individual defendants here, or any one of them.
Appellants rely upon the case of Weaver v. Harland Corporation, 176 Va. 224, 10 S.E.2d 547, 130 A.L.R. 417, and cases with somewhat similar facts from other jurisdictions. However, these cases are clearly distinguishable on their facts from the instant case, and do not support appellants' contentions. In the Weaver case, the Virginia Supreme Court of Appeals declared several mechanics' liens invalid. There the amount and value of the labor and materials furnished each house upon which a lien was claimed was impossible to determine because of the manner in which the accounts of the claimants were kept. The evidence showed that liens had been released upon the sale of lots with buildings thereon to individual purchasers, and it appears that the amount of the released liens had been transferred to the properties which the owners had not sold. Thus, liens were claimed on these properties in greater amounts than the value of the labor and materials actually furnished to enhance the value of the houses.
In the instant case, according to the findings of fact, the value of the labor done and materials furnished in installing a plumbing and heating system in each of the 26 houses here was $1,145. Liens in the amount of $1,145 are claimed on each of the 16 houses on which nothing has been paid for such installation, and in the amount of $445 on each of the 10 houses on each of which $700 has been paid by Hope Dale for such installation. Consequently, it plainly appears that liens were not claimed by plaintiff on any of the 26 houses here in an amount greater than the value of the labor and materials actually furnished to enhance the value of each of the 26 houses here.
Under the facts shown by the record in the present case, plaintiff had the right on 3 August 1959 to apply the payments previously made to it by Midland and Hope Dale without any specification by Midland and Hope Dale as to the application of the payments to the debts owed by them to plaintiff, as it did in the Agreed Statement of Account between them. To *341 hold plaintiff's liens invalid would permit appellants to take advantage of their failure to follow the prudent practice of requiring Hope Dale to furnish proof that it had obtained releases from laborers, mechanics, and materialmen for the specific houses they bought from it, before they paid the money to it for such houses. If Hope Dale by its principal stockholder, W. M. Newsom, or W. M. Newsom, perpetrated a legal wrong on appellants to the effect that all the mechanics', laborers', and materialmen's liens had been paid by Hope Dale on these houses when they had not been paid, they must seek redress from the doer of the legal wrong. The findings of fact support the crucial conclusions of law and they in turn support Judge Bundy's judgment, and no error of law appears on the face of the record proper. The conclusion we have reached finds support in the case of Northern Virginia Sav. & L. Ass'n v. J. B. Kendall Co., supra.
All appellants' assignments of error are overruled. The judgment of Judge Bundy is
Affirmed.