Annotate this Case

129 S.E.2d 256 (1963)

258 N.C. 653


No. 396.

Supreme Court of North Carolina.

February 1, 1963.

*259 Fred M. Parrish, Jr., Winston-Salem, for plaintiff, appellant.

Frank C. Ausband, Kernersville, and Clyde C. Randolph, Jr., Winston-Salem, for defendant, appellee.

SHARP, Justice.

When a jury trial is waived, findings of fact by the trial judge are conclusive on appeal if there is any competent evidence to support them. Textile Insurance Co. v. Lambeth, 250 N.C. 1, 108 S.E.2d 36. Was there any evidence to support the court's finding that the defendant furnished materials to Davis until April 24, 1961, and that each contested item purchased between November 2, 1959 and April 24, 1961 was a bona fide purchase? The answer must be NO. Here the query does not seek to ascertain whether defendant actually sold Davis the questioned items; the question relates to the purpose of the sale. Did defendant sell Davis the disputed items for the purpose of fully performing its contract with him or merely for the purpose of extending the lien?

*260 G.S. § 44-39 requires the lien of a materialman to be filed within six months after the final furnishing of the materials. The lien is lost if the steps required to perfect it are not taken in the manner and within the time prescribed by law. Equitable Life Assurance Society of United States v. Basnight, 234 N.C. 347, 67 S.E.2d 390.

What is the legal test for determining when the last materials were furnished? The applicable law was stated by Brogden, J., in Beaman v. Elizabeth City Hotel Corporation, 202 N.C. 418, 163 S.E. 117, in a quotation from Breeding v. Melson, 4 W.W. Harr. 9, 34 Del. 9, 143 A. 23, 60 A.L.R. 1252: "There is no conflict between the authorities as to the proposition that the time for filing a claim in a mechanic's lien proceeding, is computed from the date when the last item of work, labor or materials is done, performed or furnished, and that principle is, undoubtedly, correct. But the work performed and materials furnished must be required by the contract, and whatever is done must be done in good faith for the purpose of fully performing the obligations of such contract, and not for the mere purpose of extending the time for filing lien proceedings." (Italics ours.)

Furthermore, in order that the date of the last item be taken as that from which limitation for filing notice of lien shall run, it is essential that the work or materials at different times be furnished under one continuous contract. 57 C.J.S. Mechanics' Liens § 125, p. 632. (Italics ours.)

Where the time allowed for filing a lien has begun to run, the claimant cannot thereafter extend the time within which the lien may be filed by doing or furnishing small additional items for that purpose. District Heights Apartments, Inc. v. Noland Co., 202 Md. 43, 95 A.2d 90, 39 A.L.R.2d 387. Gem State Lumber Co. v. Witty, 37 Idaho 489, 217 P. 1027; Martin Tire and Rubber Co. v. Kelly Tire and Rubber Co., 99 Conn. 396, 122 A. 102.

The reason for the rule is clearly stated in Cahoon et al. v. Fortune Min. & Mill. Co., 26 Utah 86, 72 P. 437:

"To permit a contractor, long after the completion of his contract, to revive or keep alive his right of lien by tacking on and adding to his account by filling additional orders for labor or material not contemplated by his original contract, would throw open wide the doors to fraud and collusion, and in many cases defeat the very purpose and object of the statute, as it would enable the favored creditor to keep alive indefinitely his right to a lien, and at the same time prevent the property subject to lien from being reached by other lienholders whose contracts were entered into subsequent to that of his own. `It is particularly as regards the rights of bona fide purchasers and incumbrancers that the claimants of this lien are held to the strictest compliance with the statutory provisions as to time of its enforcement. Mechanics and materialmen, it is said, should understand that any unreasonable delay in giving public notice of their intention to hold a lien is dangerous, as the public, in purchasing the property, have nothing to warn them after the building is substantially completed, and the statutory period of filing the notice of lien has expired.'"

The only conclusion to be drawn from all the evidence in this case, including the testimony of Lain, is that the items furnished after November 2, 1959 were not for the purpose of completing the house as required by any contract, but for the sole purpose of extending the time for filing the lien which Davis and defendant both feared would discourage a sale of the property. The defendant was not a general contractor on this job. The only contract it had with Davis was to furnish the materials. There was no agreement as to amount or cost. The specifications for the *261 house, if there were any, are not in evidence. It is obvious that the house was substantially completed before May 2, 1960 for it was then occupied by a tenant-optionee who wanted storm doors. The gallon of paint was selected as the April 24th (1961) purchase on the theory that Davis could "use it for something." It was never used.

The evidence establishes that the purpose of the disputed sales was to extend the defendant's time for filing its lien. The defendant acted under a mistake of law, but its attempts to extend the lien constituted legal or constructive fraud which may exist without any fraudulent intent.

"Constructive fraud is a breach of legal or equitable duty which, irrespective of the moral guilt of the fraud feasor, the law declares fraudulent because of its tendency to deceive others, to violate public or private confidence, or to injure public interests. Neither actual dishonesty of purpose nor intent to deceive is an essential element of constructive fraud." 37 C.J.S. Fraud § 2 c.

Whether the materials furnished after the contract had been substantially completed were in good faith and for the purpose of completing the contract or colorably to revive the lien is a question of fact. Sacchetti v. Recreation Co., 304 Mich. 185, 7 N.W.2d 265.

Had this been a jury trial plaintiff would have been entitled to a peremptory instruction. Since the plaintiff alleged fraud the burden is on him to establish it, and he is therefore not entitled to a directed verdict. 57 C.J.S. Mechanics' Liens § 308 k.

The findings of the trial judge to which the plaintiff excepted must be set aside and the case remanded for a new trial.

In the meantime it would appear that plaintiff, if he has not already done so, would be well advised to move below to be allowed to withdraw his bid. There is no sale prior to confirmation. G.S. § 1-339.67.

In Pittsburgh Plate Glass Co. v. Forbes, N.C., 128 S.E.2d 875, this Court affirmed the action of the Superior Court judge in permitting a bidder who had bid too much at an execution sale on the faith of erroneous advice given him by the judgment debtor and his attorney to withdraw his bid. Rodman, J., speaking for the Court said: "Courts are as diligent in protecting purchasers from imposition because of fraud or mistake as they are in protecting judgment debtors in similar situations. While the doctrine of caveat emptor applies to purchasers at execution sales, it does not tie the hands of a court to prevent a manifest injustice not due to the fault or neglect of the purchaser."

As the defendant points out in his brief, plaintiff is in the novel position of seeking to restrain a sale at which he was the last and highest bidder. Defendant contends that plaintiff has committed himself to pay $6,100.00 for whatever interest Davis had in the property at the time it was sold, G.S. § 1-339.68(b), and that the question of priority of liens has become moot. Defendant argues that if plaintiff's deeds of trust were prior to defendant's judgment, the lien of defendant's judgment attached only to Davis' equity of redemption which plaintiff bought at the Sheriff's sale and if defendant's lien had priority the result was the same.

If a third person had become the last and highest bidder at the sale, clearly plaintiff would not have been estopped to maintain the priority of his deed of trust. While the defendant's judgment is in all respects binding as between Davis and defendant, the plaintiff is not bound by it since he was not a party to it. Thomas v. Reavis, 196 N. C. 254, 145 S.E. 226.

The record does not disclose the value of the property. This litigation, however, is convincing proof that it is not worth the encumbrances against it. The record likewise does not disclose what prompted the *262 plaintiff to bid $6,100.00 for the property at the execution sale four days before he brought this action to restrain the Sheriff "from proceeding with the sale."

The only logical explanation is that on the day of the sale he thought defendant's lien had been filed in time. If so, this supposition was caused by the notice of lien which defendant, the judgment creditor, had filed. Defendant may not profit from a judgment priority which it obtained by constructive fraud nor capitalize upon plaintiff's mistake occasioned by it. The doctrine of equitable estoppel, which defendant pleads, does not apply here. Defendant has not changed its position in reliance upon plaintiff's bid. Rowland Hardware & Supply Co. v. Lewis, 173 N.C. 290, 92 S.E. 13.

New trial.