Southwest Engine Company, a Corporation, Appellant, v. United States of America, Appellee, 275 F.2d 106 (10th Cir. 1960)

John B. Tittmann, Albuquerque, N. M., for appellant.

James A. Borland, U. S. Atty., Albuquerque, N. M., for appellee.

Before MURRAH, Chief Judge, LEWIS, Circuit Judge, and WALLACE, District Judge.

WALLACE, District Judge.

The appellant urges that inasmuch as its mechanic's lien, as a matter of law, had priority over appellee's chattel mortgage, the district court erred in sustaining appellee's motion for summary judgment.

The facts are undisputed. In December of 1956, the Manganese Corporation of Arizona procured a loan from the Small Business Administration;¹  the note given to SBA was secured by a chattel mortgage, embracing specified personalty owned and used by Manganese in its mining operation, which mortgage was recorded in Socorro County, New Mexico, on December 7, 1956. In October of 1958, at the request of Manganese, appellant reconditioned an engine which was included in the SBA chattel mortgage.²  When the repair bill of $1,746.61 was not paid, appellant retained possession of the engine until the appellee filed its writ of replevin.³ 

Specifically, the appellant asserts that a lien in its favor was perfected under the appropriate New Mexico lien statutes,⁴  and that the lien so created was superior to that of appellee's, even though appellee's mortgage was prior in time, for the reason that SBA's chattel mortgage impliedly authorized the mortgagor to maintain the property in good repair and under the New Mexico law where a mortgagee authorizes the reparation, the mortgage becomes inferior to a properly perfected mechanics' lien.⁵ 

At two points, appellant's argument falls short of the critical plateau.

First, it is settled that where a divergence of law exists touching contractual rights in which the United States, exercising its constitutional functions, is involved, federal, rather than local, law governs. United States v. Allegheny County, 1944, 322 U.S. 174, 183, 64 S. Ct. 908, 88 L. Ed. 1209. And, the federal decisions uniformly sanction the lien enforcement principle of "first in time, first in right." United States v. City of New Britain, 1954, 347 U.S. 81, 74 S. Ct. 367, 371, 98 L. Ed. 520; United States v. Ringwood Iron Mines, 3 Cir., 251 F.2d 145, certiorari denied 1958, 356 U.S. 974, 78 S. Ct. 1138, 2 L. Ed. 2d 1148; United States v. Latrobe Construction, 8 Cir., 246 F.2d 357, certiorari denied 1957, 355 U.S. 890, 78 S. Ct. 262, 2 L. Ed. 2d 189.

In addition, the result in the instant case would be unaltered even if New Mexico law were controlling. It has long been the New Mexico rule that lien rights created by a prior mortgage become subordinated to those of a mechanic only where the mortgagee authorizes, expressly or impliedly, the chattel repair. Universal Credit Co. v. Printy, 1941, 45 N.M. 549, 119 P.2d 108. The Maulhardt case, footnote 5, supra, upon which appellant relies, recognized this principle⁶  but held that the mortgagee therein impliedly authorized the controverted repair work inasmuch as the executed mortgage obligated the mortgagor "to keep the said mortgaged property in as good condition and repair as it now is, ordinary wear and tear excepted."⁷  No such requirement, from which the inference of mortgagee authorization can be drawn, exists in the instant case. Contrarily, the chattel mortgage in question provided that the mortgagors were neither to encumber nor to remove the chattel in question without first obtaining written consent from the SBA;⁸  and, the mortgage contained no language which imposed upon the mortgagor a duty to keep the engine in good repair.⁹ 

Accordingly, the judgment is affirmed.