Mid-America Steel, Inc. v. Bjone, MID-AMERICA

• Decision Date: 20 October 1987
• Docket Number: No. 11409,MID-AMERICA,11409
• Citation: 414 N.W.2d 591
• Parties: STEEL, INC., Plaintiff and Appellee, v. David J. BJONE, Davidson Design Center, Defendants, and Rogers, Perlenfein & Associates, Defendant and Appellant. Civ.
• Court: North Dakota Supreme Court

Page 591

414 N.W.2d 591

MID-AMERICA STEEL, INC., Plaintiff and Appellee, v. David J. BJONE, Davidson Design Center, Defendants and Rogers, Perlenfein & Associates, Defendant and Appellant.

Civ. No. 11409.

Supreme Court of North Dakota.

Oct. 20, 1987.

Daniel J. Crothers, of Nilles, Hansen & Davies, Fargo, for plaintiff and appellee.

Jonathan R. Fay, of DeMars, Turman & Johnson, Fargo, for defendant and appellant.

VANDE WALLE, Justice.

Rogers, Perlenfein & Associates ["Rogers"] appealed from a district court summary judgment determining that its mechanic's lien on certain property is subordinate to the interest of Mid-America Steel, Inc. ["Mid-America"] in the property. We affirm.

Mid-America and David Bjone entered into a contract for deed on May 31, 1985, whereby Bjone agreed to purchase a building in downtown Fargo. The contract for deed was recorded on June 5, 1985. Bjone and his corporation, Davidson, Inc., subsequently contracted with Rogers to provide architectural and engineering services, including subcontracting the actual construction, for a complete remodeling of the building.

Mid-America's offices are located across the street from the building sold to Bjone. Mid-America admittedly was aware of Bjone's plans for the building, and Mid-America reviewed drawings and plans prepared by Rogers. Mid-America's president requested that plans be changed to reflect a parking easement adjacent to the building for Mid-America's employees and customers.

Bjone was unable to complete the project and he defaulted on the contract for deed with Mid-America. On June 27, 1986, Rogers filed a mechanic's lien in the sum of $68,907.22.

Mid-America thereafter commenced this action to cancel the contract for deed and seeking a declaration that Rogers's lien was subordinate to Mid-America's rights in the property. Judgment was entered by stipulation against Bjone and Davidson, Inc. Mid-America moved for summary judgment on its claim against Rogers. The trial court granted summary judgment, concluding that as a matter of law the mechanic's lien of Rogers was subordinate to Mid-America's interest as a vendor under a previously recorded contract for deed. Rogers filed this appeal.

The issue presented in this case must be resolved within the context of a motion for summary judgment. Summary judgment is a procedural device available for the prompt and expeditious disposition of a controversy without a trial if there is no dispute as to either the material facts or the inferences to be drawn from undisputed facts, or if only a question of law is involved. Milbank Mutual Insurance Co. v. Dairyland Insurance Co., 373 N.W.2d 888 (N.D.1985). Even when a factual dispute exists summary judgment may be appropriate if the law is such that resolution of the factual dispute will not change the result. Stensrud v. Mayville State College, 368 N.W.2d 519 (N.D.1985).

The sole issue raised on appeal is whether the trial court erred in concluding that there was no genuine issue of material fact and that Rogers's lien was subordinate to Mid-America's interest as a matter of law. Resolution of this issue turns upon the proper interpretation of Section 35-27-07, N.D.C.C.:

"35-27-07. Title of vendor or consenting owner--Subject to liens. When land is sold under an executory contract requiring the vendee to improve the same and such contract is forfeited or surrendered after liens have attached by reason of such improvements, the title of the vendor is subject thereto, but he is not personally liable if the contract was made in good faith. When improvements are made by one person upon the land of another, all persons interested therein otherwise than as bona fide prior encumbrancers or lienors are deemed to have authorized such improvements, insofar as to subject their interest to liens therefor. Any person who has not authorized the same may protect his interest from such liens by serving upon the person doing work or otherwise contributing to such improvement within five days after knowledge thereof, written notice that the improvement is not being made at his instance, or by posting like notice, and keeping the same posted, in a conspicuous place on the premises. As against a lessor no lien is given for repairs made by or at the instance of his lessee, unless the lessor has actual or constructive notice thereof and does not object thereto."

The first sentence of the statute is clear: If the contract between the vendor and vendee requires that improvements be made, the title of the vendor will be subject to any mechanic's lien for such improvements. Rogers does not contend that the contract for deed between Mid-America and Bjone required that improvements be made.

The second sentence of Section 35-27-09 lies at the heart of the parties' various contentions. Rogers contends that Mid-America is the "owner" of the property pursuant to Section 35-27-01(5), N.D.C.C., and that Mid-America therefore is deemed to have "authorized" the improvements under Section 35-27-07. Mid-America replies that the statutory definition of "owner" is of no import, and that, as a contract vendor, it is a bona fide prior encumbrancer who is not deemed to have authorized the improvements and whose interest is therefore not subject to the lien.

The statute provides that when improvements are made "upon the land of another, all persons interested therein otherwise than as bona fide prior encumbrancers or lienors are deemed to have authorized such improvements" and their interests will be subject to the mechanic's lien. It is undisputed that Mid-America had an interest in the subject property. Therefore, its interest will be subject to the lien unless it is a bona fide prior encumbrancer or lienor.

Although both parties focus their arguments upon Mid-America's disputed status as a bona fide prior encumbrancer, we believe that they have overlooked the obvious. Mid-America is clearly exempted from the statute because it is a lienor as a result of having acquired a vendor's lien upon execution of the contract.

We have long recognized that a vendor under a contract for deed who retains the legal title as security for the debt holds a valid lien against the property for the unpaid purchase price:

"Where a sale of land is evidenced by a contract only, and the purchase price has not been paid, and the vendor retains the legal title, the parties occupy substantially the position of mortgagor and mortgagee. The vendor has a lien for his purchase money by virtue of his contract, and a lien which the vendee cannot, by conveyance or otherwise, affect or impair, and which can be extinguished only by payment of the purchase money (see Jones, Liens, Sec. 1107 et seq., where the authorities are fully cited); and necessarily this is not controlled by the use to which the property is applied. If used as a homestead, no one would contend that the vendor could be compelled to execute a deed without full payment, and look to the other property of the vendee for his purchase price, even in the absence of that statutory provision (section 2453, Comp.Laws) making the homestead liable for any debt created for the purchase thereof. Such a vendor is not required to rely upon the technical vendor's lien, which is a creature of equity, and exists where the vendor has parted with the legal title, and may be destroyed at any time by a conveyance by the vendee. He has a more substantial and indestructible lien, created by contract, and of which all the world must take notice."

Roby v. Bismarck Nat'l Bank, 4 N.D. 156, 160, 59 N.W. 719, 720-721 (1894). The continued validity of this vendor's lien has been recognized in a long line of cases. See, e.g., Northwestern Mut. Savings & Loan Ass'n v. Hanson, 72 N.D. 629, 10 N.W.2d 599 (1943); D.S.B. Johnston Land Co. v. Whipple, 60 N.D. 334, 234 N.W. 59 (1930); Semmler v. Beulah Coal Mining Co., 48 N.D. 1011, 188 N.W. 310 (1922).

In addition to the vendor's lien arising from the contract, there is also a statutory lien in favor of the vendor. Section 35-20-01, N.D.C.C., provides:

"35-20-01. Vendor's lien on real property for purchase price authorized. One who sells real property has a special or vendor's lien thereon, independent of possession, for so much of the price as remains unpaid and unsecured otherwise than by the personal obligation of the buyer."

Although the statute provides that it applies to so much of the price as is "unsecured otherwise than by the personal obligation of the buyer," it has been construed to apply where the vendor sells by contract but retains the legal title. See In re Estate of Ryan, 102 N.W.2d 9 (N.D.1960); D.S.B. Johnston Land Co. v. Whipple, supra. This statutory lien is additional to and distinct from the lien arising from the contract. See Roby v. Bismarck Nat'l Bank, supra; see also, Rolette County Bank of St. John v. Hanlyn, 48 N.D. 72, 183 N.W. 260 (1921) (Grace, J., dissenting).

The nature of the vendor's lien has been explained in Weaver v. Blake, 300 N.W.2d 52, 54-55 (S.D.1980):

"A vendor's lien is the equitable right which the seller impliedly retains to subject the land conveyed as security for payment of the purchase money.... The lien is not the result of any agreement between the vendor and the vendee, or of any intention on the part of the grantor to claim it at the time of conveyance.... Such a lien exists unless it clearly appears from the circumstances attending the transaction that the vendor intended to waive or not to rely upon his equitable rights.... The real basis for the existence of a vendor's lien seems to be the broad equitable principle that a person having obtained the estate of another ought not, in good conscience as between themselves, be allowed to keep it and not pay the purchase price...." [Citations omitted.]

In accordance with the foregoing authorities, we conclude that Mid-America had a vendor's lien on the property. Therefore, under Section 35-27-07, N.D.C.C.,...