Crane v. Mitchell, E-2

• Decision Date: 20 February 1991
• Docket Number: E-2
• Citation: 806 P.2d 698,106 Or.App. 52
• Parties: Edgar D. CRANE and Forrest D. Crane, Appellants, v. Jimmy L. MITCHELL and Florence E. Mitchell, husband and wife, Klamath Production Credit Association and Interstate Production Credit Association, a corporation, Defendants, and State of Oregon, by Director of Veterans' Affairs, Respondent. 88-1466-; CA A60615.
• Court: Oregon Court of Appeals

Page 698

806 P.2d 698

106 Or.App. 52

Edgar D. CRANE and Forrest D. Crane, Appellants, v. Jimmy L. MITCHELL and Florence E. Mitchell, husband and wife, Klamath Production Credit Association and Interstate Production Credit Association, a corporation, Defendants and State of Oregon, by Director of Veterans' Affairs, Respondent.

88-1466-E-2; CA A60615.

Court of Appeals of Oregon.

Argued and Submitted May 23, 1990.

Decided Feb. 20, 1991.

Steven P. Pickens, Medford, argued the cause and filed the brief for appellants.

Joseph H. Hobson, Jr., Keizer, argued the cause for respondent. With him on the brief were E. Shannon Johnson and Lien & Hobson, Keizer.

Before RICHARDSON, P.J., and NEWMAN and DEITS, JJ.

NEWMAN, Judge.

Appellants (the Cranes) appeal from the summary judgment for respondent Oregon Department of Veteran Affairs (DVA) in an action that the Cranes brought to foreclose what they claim is a lien in the amount of $11,635.49 on real property of defendants Mitchell. ¹ In its answer, DVA alleged affirmative defenses of the Statute of Limitations, laches, novation and equitable subrogation. DVA also alleged by counterclaim and cross-claim that, if the Cranes had a lien on the real property, the Mitchells would be in default on their mortgage to DVA; in that event, DVA asked that its mortgage be foreclosed with priority as to Cranes' lien to the extent that the Mitchells had used the DVA loan to acquire a deed to the real property. The Cranes and DVA each filed motions for summary judgment. The court ruled that the Cranes do not have a lien on the real property and are not entitled to summary judgment but did give a summary judgment to DVA. The Cranes assign the summary judgment rulings as errors. We reverse and remand.

The facts are undisputed. On January 28, 1974, the Mitchells purchased real property in Jackson County from the Marshalls under a recorded land sale contract. On February 4, 1978, the Cranes sold a catering business located in that county to the Mitchells. As evidence of the sale, the parties executed a "Purchase Money Security Agreement" that is both a sales and a security agreement. It recites that, as security for the deferred balance of the purchase price of the business, the Mitchells will assign to the Cranes their "purchasers' interest" in the land sale contract with the Marshalls. ² Pursuant to that agreement, the Mitchells and the Cranes signed an "Assignment for Security Purposes" (the assignment), which provides that the Mitchells, as assignors,

"do grant, bargain, sell and assign and convey unto the said Assignees [the Cranes], their heirs and assigns, all of the right, title and interest of the Assignors in and to that certain Agreement of Sale bearing date, the 28th day of January, 1974, between [the Marshalls and Mitchells] * * * by way of which said Contract of Sale, the Seller therein agreed to sell to the Buyer therein, and their assigns, the real property * * * described as follows * * * [a description of the real property follows].

" * * * * *

"[T]he Assignors do hereby covenant to and with the Assignees that they are the owners and holders of said Agreement of Sale; that they have a good and unencumbered right to execute this assignment.

" * * * * *

"The Assignors herein covenant and agree to make all payments falling due under the terms of the agreement of sale herein assigned in strict accordance with the provisions thereof; provided however, that in the event that the Assignors herein default in the terms, coverages and conditions of that certain Purchase Money Security Agreement, herein referred to, the Assignees herein shall have the right to assume full ownership of the interest herein assigned and foreclose the interest of the Assignors in the manner provided by law for judicial foreclosure of mortgages.

"Upon faithful performance by the Assignors herein of all of the terms, covenants and conditions of the Purchase Money Security Agreement above referred to, the within assignment shall be null and void, and the Assignees herein shall release their interest in and to the contract of sale herein assigned in writing, delivered to Assignors." Both parties acknowledged the assignment. On February 9, 1978, it was recorded in the manner that mortgages are recorded.

On August 13, 1979, the Mitchells took a deed to the real property from the Marshalls, paid off the balance of the land sale contract with a portion of a $48,000 loan that they received from DVA and gave DVA a mortgage as security. ³ At that time, the assignment and the purchase money security agreement were in full force and effect. In August, 1981, the Mitchells sold the catering business and executed an "Agreement for Sale" with the Darrs, the purchasers. Under that agreement, the Darrs were to make payments to the Cranes under the purchase money security agreement. The Cranes were not parties to the sale agreement, and they did not receive any payments from the Darrs or the Mitchells after November, 1981. On March 8, 1988, the Cranes notified the Mitchells that they were in default under the purchase money security agreement. On May 13, 1988, the Cranes brought this action to foreclose the purchase money security agreement in the manner provided for judicial foreclosure of mortgages.

On the cross-motions for summary judgment, the court ruled that the Cranes do not have a lien on the real property, because

"a vendee only holds an equitable interest to land subject to a land sale contract and that an assignment of the vendee's interest would only assign the interest in his contract and not an interest in the land itself."

The court granted summary judgment to DVA and denied summary judgment to the Cranes. The court did not consider DVA's affirmative defenses or its cross-complaint and counterclaim for foreclosure of its mortgage.

The parties have narrowly framed the issues before us. The Cranes do not assert that the assignment gave them a lien on the real property before the Mitchells took the deed from the Marshalls. According to the Cranes, the court erred when it granted DVA summary judgment and denied it to them because, under the assignment, they acquired a lien on the real property when the Mitchells got the deed. They also assert that the court erred when it did not hold that their lien is superior to the DVA mortgage. DVA responds that the Cranes never acquired a lien against the real property. It asserts that the assignment gave Cranes "rights only in the contract" and that, when the Mitchells paid off the contract and acquired title, the Cranes had "nothing." DVA does not assert, however, that, if the Cranes did acquire a lien on the real property, it is, nonetheless, entitled to summary judgment. Rather, DVA asserts that, even if the Cranes did acquire a lien, the court did not err in denying...