McGregor Co. v. Heritage

• Jurisdiction: Oregon
• Parties: The McGREGOR COMPANY, a Washington corporation, Respondent, v. John HERITAGE, dba Heritage Farms, Heritage Farms, Inc., an Oregon corporation; First National Bank of Oregon, a National Banking Institution, Umatilla Branch; and The Pendleton Banking Company, Defendants, Oregon Potato, Inc., an Oregon corporation; 3-D Sales, Inc., a North Dakota corporation; and Brewer Farms, Inc., a corporation, Respondents, Ray Dunn, Petitioner. 21987; CA15357; SC27536.
• Citation: 631 P.2d 1355,291 Or. 420
• Docket Number: No. E,E
• Court: Oregon Supreme Court
• Decision Date: 04 August 1981

Page 1355

631 P.2d 1355

291 Or. 420

The McGREGOR COMPANY, a Washington corporation, Respondent, v. John HERITAGE, dba Heritage Farms, Heritage Farms, Inc., an Oregon corporation; First National Bank of Oregon, a National Banking Institution, Umatilla Branch; and The Pendleton Banking Company, Defendants Oregon Potato, Inc., an Oregon corporation; 3-D Sales, Inc. a North Dakota corporation; and Brewer Farms Inc., a corporation, Respondents Ray Dunn, Petitioner.

No. E 21987; CA15357; SC27536.

Supreme Court of Oregon, In Banc.

Argued and Submitted May 4, 1981.

Decided Aug. 4, 1981.

Leeroy O. Ehlers, Pendleton, argued the cause and filed the briefs for respondents Oregon Potato, Inc., and Brewer Farms, Inc.

No appearance for respondent 3-D Sales, Inc.

Garry L. Reynolds, Hermiston, argued the cause for petitioner. With him on the brief was Morrison & Reynolds, Hermiston.

Milo Pope, Mount Vernon, argued the cause for respondent The McGregor Company. With him on the briefs were Joseph N. Hershberger, Hermiston, and Kilpatricks & Pope, Mount Vernon.

TONGUE, Justice.

This is a suit to foreclose three agricultural services liens under ORS 87.226 against the proceeds of a potato crop grown by Heritage Farms, Inc. Some of the other defendants filed counterclaims to foreclose liens claimed by them. The trial court ruled, among other things, that: (1) plaintiff's liens were invalid; (2) defendant Oregon Potato, Inc. (OPI) had a valid possessory lien for $126,124.77, and (3) defendant 3-D Sales had a valid agricultural services lien for $12,567, and that the interest of defendant Dunn was subordinate to all other liens. Plaintiff appealed to the Court of Appeals, contending that its lien was valid. Defendant Dunn cross-appealed, contending that defendant OPI's possessory lien was lost by transferring it to a third party and that defendant 3-D Sales' lien did not attach to the proceeds of the crop.

The Court of Appeals held that: (1) plaintiff's liens were valid, (2) defendant OPI's lien was not lost by its transfer, and (3) defendant 3-D Sales' lien attached to the proceeds of the crop. 49 Or.App. 489, 620 P.2d 488 (1980). Defendant Dunn filed a petition for review, contending that the Court of Appeals erred in these holdings. We allowed that petition.

Because the facts are not in controversy and are well stated in the opinion by the Court of Appeals, there is no need to restate them, except as they may be pertinent to the disposition of each of the three questions presented by the petition for review.

1. Plaintiff's agricultural services liens were valid.

Defendant Dunn contends that plaintiff's agricultural services liens were invalid because ORS 87.242(2)(b) provides that the notice of the lien must contain "the name of the owner of the chattel to be charged with the lien; * * *" and that this requirement was not satisfied because the notice named John Heritage as the owner of the chattels, whereas the true and actual owner was Heritage Farms, Inc., a corporation. In support of that contention defendant Dunn cites our decision in Timber Structures v. C.W.S.G. Wks., 191 Or. 231, 229 P.2d 623 (1951), in which we said (at 246, 229 P.2d 623) in referring to a lien statute that:

"The statute is strictly construed as to persons entitled to its benefits and as to the procedure necessary to perfect the lien; but when the claimant's right has been clearly established, the law will be liberally interpreted toward accomplishing the purposes of its enactment."

Defendant Dunn also contends that the Court of Appeals, in holding that plaintiff substantially complied with the statute in naming the owner "in the manner given" ignored the plain words of the statute and that the filing of a lien against an individual "does not put a third party on notice that the liens are against the property of the corporation unless the corporation is named."

We agree with the well-reasoned opinion by the Court of Appeals in holding that plaintiff had complied substantially with the requirements of the statute and that its liens were valid under the facts of this case and for the reasons stated in that opinion. We would only add a few additional comments in view of the contentions now made by the petitioner.

Timber Structures, cited by defendant Dunn, involved a mechanics' or materialman's lien statute (now ORS 87.010). In other decisions under that statute, while recognizing the rule as stated in Timber Structures, we have nevertheless held that a showing of substantial compliance with requirements of the statute is sufficient. See, e. g., Lemire v. McCollum, 246 Or. 418, 427, 425 P.2d 755 (1967), citing other cases to the same effect, including Timber Structures. The same rule has also been applied to other statutory liens. See, e. g., Lambert v. Stupek, 237 Or. 498, 501, 392 P.2d 255 (1964), citing other cases to the same effect. See also our recent decision in Steel Products Company of Oregon, Inc. v. Portland General Electric Company et al, 291 Or. 41, 628 P.2d 1180 (1981). As noted by the Court of Appeals (49 Or.App. at 495-96, 620 P.2d 488), this rule of substantial compliance has been applied by the court to sustain the validity of liens in various types of cases. ¹

We have found no previous decision by this court which undertakes to define the term "substantial compliance" as applied in lien cases or to hold what elements are of importance in deciding whether there has been "substantial compliance" in such cases. The Indiana Court of Appeals recently considered this problem in Beneficial Finance Co. v. Wegmiller Bender Lbr. Co., Ind.App., 402 N.E.2d 41 (1980), a case in which a lien filed on property owned jointly by husband and wife omitted the name of the wife. In holding that the lien substantially complied with the statute even though the wife's name was omitted, the court said (at 45):

"(W)hether there has been substantial compliance by the lien claimant depends upon the degree of noncompliance with the letter of the statute, the policy which underlies the particular statutory provision in question, and the prejudice which may have resulted to either the owner of the property or other third parties who have an interest in the real estate. We find there was substantial compliance * * * in the present case."

This is consistent with previous decisions by this court in which we have recognized that lack of prejudice is a proper factor for consideration in such cases. See Mercer Steel v. Park Construction Co., 242 Or. 596, 600, 411 P.2d 262 (1966), and Drake Lumber Co. v. Paget Mortgage Co., 203 Or. 66, 80-81, 274 P.2d 804 (1955).

Defendant Dunn contends in this case that the filing of a lien against an individual does not put a third party on notice that the liens are against property of a corporation unless it is named as the owner. Plaintiff's first claim of lien named "Heritage Farms, c/o John Heritage" and the remaining two named "John Heritage doing business as Heritage Farms." We believe that under the facts of this case these lien notices were sufficient to give adequate notice to third persons, despite these discrepancies. The corporation, whose only directors were John Heritage and his wife, does not contest the validity of the liens. Also defendant Dunn does not question the further statement by the Court of Appeals (49 Or.App. at 496, 620 P.2d 488) that all parties concede that they knew of plaintiff's liens and that there is no claim of prejudice in this case.

Under these facts and for these reasons we agree with the holding by the Court of Appeals that plaintiff's liens were valid.

2. Defendant OPI's lien was not lost by its "transfer."

Defendant Dunn contends that defendant OPI's claim of a common law factor's lien in the sum of $126,124.77 for harvesting, scaling, hauling, processing, packing and selling the potato crop was lost by the assignment of that lien to defendant Brewer Farms, Inc. ² In support of that contention, defendant Dunn, while recognizing that this is a question of first impression in Oregon, cites the decision by this court in Yellow Mfg. Accept. Corp. v. Bristol, 193 Or. 24, 236 P.2d 939 (1951), and the rule as stated in 53 C.J.S. Liens § 17d(3) (1948). ³ Thus, it is contended that the rule should be, as stated in CJS, that although such a lien may be assignable to another without loss of possessory rights against the lien debtor, such an assignment destroys the lien as to third parties.

Again, we agree with the well-reasoned opinion by the Court of Appeals in holding that under the facts of this case defendant OPI's possessory factors lien was not lost by its assignment to defendant Brewer Farms, Inc., but that the lien was still valid as against defendant Dunn for the reasons stated in that opinion. And, again, we would only add a few additional comments in view of contentions now made by petitioner.

First of all, our decision in Yellow Mfg. Accept. Corp. was properly distinguished by the Court of Appeals (49 Or.App. at 502, 620 P.2d 488) in that there the claimant of the lien returned the collateral to the debtor, whereas in this case at the same time that the claim was assigned, the security in the possession of the assignor was transferred to the assignee along with it and was not returned to the debtor. In addition, the funds derived from the sale of the crop were kept intact and placed on deposit and all claimants were notified where they were deposited.

As for reliance by defendant Dunn upon the rule as stated in CJS, we prefer the reasoning of the Court of Appeals (49 Or.App. 502, 620 P.2d 488) which, although recognizing that there is a split of authority in other jurisdictions, adopted in substance, as applied to the facts of this case, the rule as stated in Restatement of Security, § 67(1) (1941):

"Subject to the terms of the bailment where a claim, except that of an attorney, secured by a possessory lien is effectively assigned and the assignee as an...