Calder Bros. Co. v. Anderson

• Decision Date: 24 August 1982
• Docket Number: 17458 and 17459,Nos. 17449,s. 17449
• Citation: 652 P.2d 922
• Court: Utah Supreme Court
• Parties: CALDER BROS. COMPANY, Plaintiff and Respondent, v. Ross L. ANDERSON, Signs, Inc., Dunn Construction Co., Jarvis Electric Co., Michael Crowley, Michael Crowley dba Star Palace, Star Palace, Inc., et al., Defendants and Appellants. JARVIS & SONS ELECTRIC CO., INC., Plaintiff and Appellant, v. Ross L. ANDERSON and Brent Weeks, et al., Defendants. DUNN CONSTRUCTION CO., and Royden, Inc., Plaintiffs and Appellants, v. Ross L. ANDERSON and Allison Anderson, Brent C. Weeks and Western Star Palace, Inc., Defendants.

Page 922

652 P.2d 922

CALDER BROS. COMPANY, Plaintiff and Respondent, v. Ross L. ANDERSON, Signs, Inc., Dunn Construction Co., Jarvis

Electric Co., Michael Crowley, Michael Crowley dba

Star Palace, Star Palace, Inc., et al.,

Defendants and Appellants.

JARVIS & SONS ELECTRIC CO., INC., Plaintiff and Appellant, v. Ross L. ANDERSON and Brent Weeks, et al., Defendants.

DUNN CONSTRUCTION CO., and Royden, Inc., Plaintiffs and Appellants, v. Ross L. ANDERSON and Allison Anderson, Brent C. Weeks and Western Star Palace, Inc., Defendants.

Nos. 17449, 17458 and 17459.

Supreme Court of Utah.

Aug. 24, 1982.

Robert L. Stolebarger, of McDougal, Haley, Dahl & Stolebarger, Salt Lake City, for Star Palace.

John C. Backlund, of Young, Backlund, Harris & Carter, Provo, for Dunn Const.

Dallas H. Young, Jr., Brent D. Young and Jerry L. Reynolds, of Ivie & Young, Provo, for plaintiff and respondent.

STEWART, Justice:

In case No. 17459 Calder Bros. Company (Calder Bros.) brought an action to foreclose a $490,000 purchase money mortgage against real property sold to Ross Anderson. This action was consolidated in the district court with two other actions brought by independent contractors to foreclose their mechanics' liens against the same property (Nos. 17449 and 17458). The judgment in favor of Calder Bros. in No. 17459 is appealed by defendants Star Palace, Inc., Michael Crowley, and Signs, Inc., on the grounds that the lower court erred in entering default judgments against them, in denying Signs' motion to substitute Micro-Investment as the real party in interest, and in denying Star Palace's motion to vacate an order appointing a receiver. Jarvis & Sons Electric Co., Inc. (Jarvis), Dunn Construction Co. (Dunn), and Royden, Inc. (Royden), appeal the district court's judgments in Nos. 17449 and 17458, establishing Calder Bros.' purchase money mortgage priority over their mechanics' liens.

I. The Mortgage and the Mechanics' Liens (Nos. 17449 and

17458)

On June 14, 1978, Calder Bros. conveyed the real property commonly known as the Star Palace to Ross Anderson by warranty deed. On the same day, Anderson executed and delivered a purchase money mortgage to Calder Bros. The mortgage was not recorded until June 27, 1978. Shortly after the mortgage was recorded, a building permit was obtained from Provo City to make improvements on the property based on a submitted set of plans.

After the deed and mortgage were executed but before the mortgage was recorded, Anderson hired two young men on an hourly basis to help cut weeds, cut down two trees, and grout cracks in the building. They were paid $18.95 for their labor. In addition, a painter was hired to paint the building with paint supplied by an associate of Anderson. He was paid $850. No mechanics' liens were filed as a result of any of the above described work.

After Calder Bros.' mortgage was recorded, Anderson hired Jarvis to perform electrical work, Dunn to resurface the parking area around the building, and Royden to furnish labor and materials. On this appeal, they claim that the trial court erred in holding that their mechanics' liens were subsequent in priority to the purchase money mortgage and that their priority should be established as of the commencement of the maintenance work which occurred prior to the recording of the mortgage.

Utah Code Ann., 1953, Sec. 38-1-5 provides the guidelines for determining the priority of the liens in this case. That section provides:

Priority--Over other encumbrances.--The liens herein provided for shall relate back to, and take effect as of, the time of the commencement to do work or furnish materials on the ground for the structure or improvement, and shall have priority over any lien, mortgage or other encumbrance which may have attached subsequently to the time when the building, improvement or structure was commenced, work begun, or first material furnished on the ground; also over any lien, mortgage or other encumbrance of which the lien holder had no notice and which was unrecorded at the time the building, structure or improvement was commenced, work begun, or first material furnished on the ground.

The purpose of the mechanics' lien act is remedial in nature and seeks to provide protection to laborers and materialmen who have added directly to the value of the property of another by their materials or labor. First of Denver Mortgage Investors v. Zundel and Assoc., Utah, 600 P.2d 521 (1979); Rio Grande Lumber Co. v. Darke, 50 Utah 114, 167 P. 241 (1917). To accomplish that purpose, the phrase "commencement to do work," as used in the mechanics' lien statute, is construed in favor of lien claimants. Bankers Trust Co. v. El Paso Pre-Cast Co., 192 Colo. 468, 560 P.2d 457 (1977). See also First of Denver Mortgage Investors, supra. Materialmen's and mechanics' liens resulting from materials furnished or labor performed relate back to and attach as of the date of the commencement of the first work on the improvement or structure involved. First of Denver Mortgage Investors, supra.

For one contractor's lien to relate back to the commencement of work or supplying of materials by another contractor however, both contractors' projects must have been performed in connection with what is essentially a single project performed under a common plan prosecuted with reasonable promptness and without material abandonment. See, e.g., Miller Electric Co. of Miami, Inc. v. Sweeny, Fla.App., 199 So.2d 734 (1967); National Lumber Co. v. Farmer & Son, Inc., 251 Minn. 100, 87 N.W.2d 32 (1957); Fryman v. McGhee, 108 Ohio App. 501, 163 N.E.2d 63 (1958). Ordinary maintenance or cleanup work does not serve as a basis for "tacking" so as to fix an earlier lien date under Sec. 38-1-5 for labor and materials supplied. 57 C.J.S. Mechanics Liens Sec. 179 (1948).

The building permit, applied for June 20, 1978, a date preceding the recording of Calder Bros.' mortgage, was issued June 28, 1978, a date subsequent to the recording. Drawings made in November, 1977, and later submitted with the application for a building permit, disclosed alterations principally related to the interior of the building. The only exterior improvement shown is a drawing of a building with a peaked roof to replace the existing flat roof.

Nothing in the plans suggested that the painting and maintenance work was part of an improvement project envisioned by the new owners. The work performed prior to the recording of Calder Bros.' mortgage included painting the building exterior, cutting down two trees, clearing weeds, and placing grout in the building. At no point up to and including the time Calder Bros.' mortgage was recorded, was it evident from the inspection of the premises that an improvement had been commenced. ¹ No materials were delivered to the premises prior to the recording of Calder Bros.' mortgage.

The trial court found that the cleanup and painting were insubstantial and constituted ordinary and necessary maintenance rather than the commencement of an improvement to the building within the meaning of the mechanics' lien statute. In addition, the court found that improvements to the exterior of the building subsequent to the recording of Calder Bros.' mortgage rendered the painting "to a large measure valueless." Therefore, it follows that Jarvis & Sons, Dunn, and Royden could not establish the date of their liens as of the commencement of the general maintenance and cleanup work.

In sum, there is ample support in the record to support the trial court's findings that the liens in favor of Jarvis, Dunn, and Royden did not attach prior to the Calder Bros.' mortgage and do not have priority over the mortgage.

II. Default Judgments and Receivership (No. 17459)

Calder Bros. commenced an action on August 21, 1979, against Anderson to foreclose the purchase money mortgage. Signs, Inc., another party with an interest in the property, and Michael Crowley, acting for and on behalf of Star Palace, the party to whom Anderson assigned his interest in the property earlier that year, were also named defendants. ² Star Palace, however, was not initially made a party to the action. On October 15, 1979, Calder Bros. served an amended complaint naming Star Palace a defendant. On October 31, 1979, two weeks after an involuntary petition in bankruptcy was filed against Anderson in the United States Court of Bankruptcy for Idaho, a default judgment was entered against Michael Crowley in the foreclosure action. ³ Approximately two months later, default judgments were entered against Star Palace and Signs.

In January, 1980, Star Palace objected to a trial setting on the ground that the proceedings against Ross Anderson had been stayed as a result of the bankruptcy proceeding. On May 29, 1980, Star Palace, Crowley and Signs moved to set aside the default judgments taken against them, and Signs moved to substitute Micro-Investment as a party in its stead. On August 14, 1980, the trial court denied these motions.

Crowley, Star Palace and Signs argue that the court erroneously entered default judgments against them. They cite the Bankruptcy Act, 11 U.S.C. Sec. 362(a) (1979), which provides in pertinent part:

Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title operates as a stay, applicable to all entities, of--

(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;

(2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title;

(3) any act to obtain possession of property of the estate or of property from the estate;

(4) any act to create,...