Pacific Spruce Corp. v. Oregon Portland Cement Co.

• Decision Date: 01 April 1930
• Citation: 133 Or. 223,286 P. 520
• Parties: PACIFIC SPRUCE CORPORATION v. OREGON PORTLAND CEMENT CO. ET AL. [a1]
• Court: Oregon Supreme Court

286 P. 520

133 Or. 223

PACIFIC SPRUCE CORPORATION v. OREGON PORTLAND CEMENT CO. ET AL. ^[a1]

Supreme Court of Oregon

April 1, 1930

Department 1.

Appeal from Circuit Court, Lincoln County; J. W. Hamilton, Judge.

Suit by the Pacific Spruce Corporation against the Oregon Portland Cement Company and others. From the decree entered, plaintiff and defendant cement company and others appeal.

Affirmed.

Arthur Clarke, of Corvallis (G. B. McCluskey, W. H Waterbury, English & Krause, and R. M. Turner, all of Toledo and Allan G. Carson, of Corvallis, on the brief), for appellant Pacific Spruce Corporation.

L. E Schmitt and B. A. Ewers, both of Portland, for appellant Zimmerman.

Arthur H. Lewis, of Portland (Lewis, Lewis & Finnigan, of Portland, on the brief), for appellants Gray and Kelly.

William C. Palmer, of Portland, for appellant Oregon Portland Cement Co.

Jay L. Lewis, of Corvallis (Yates & Lewis, of Corvallis, on the brief), for appellee Woodcock.

RAND J.

This is a suit to foreclose certain mechanics' liens for labor and material furnished in the construction of a building. The case was submitted upon an agreed statement of facts which presented the sole question of whether the liens should be entitled to priority of payment over the lien of a certain mortgage upon the land. As stipulated, it was agreed that on March 20, 1928, M. E. Woodcock, the mortgagee, executed and delivered to the Newport Hotel Company a warranty deed conveying a certain parcel of land in the city of Newport, and that simultaneously therewith the Newport Hotel Company executed and delivered to him a mortgage upon the land for $2,000, the purchase price thereof. It was also stipulated that the deed and mortgage were both duly recorded on March 22d, two days after their execution and delivery, and that on March 19th, the day before the deed and mortgage were executed, the Newport Hotel Company, without Woodcock's knowledge, commenced to construct a building on said land. In respect to Woodcock's knowledge, it was stipulated that he had no notice or knowledge of the work having been commenced on the building or of material having been furnished therefor until March 27th, five days after his mortgage had been recorded. The stipulation itself and the record are wholly silent upon the question of what, if any, understanding or agreement existed between Woodcock and the Hotel Company prior to the execution of the deed and mortgage. Under these facts, as so stipulated, the learned circuit judge entered a decree holding that as to the land on which the building had been constructed the lien of the mortgage should have priority over the liens sued on, and that as to the building the liens should have priority over the mortgage, and directing that the building should be sold separately from the land and that the purchaser should have the right to remove the same in accordance with the provisions of section 10193, Or. L. From this decision the lien claimants have appealed, contending that they are entitled to a preference over the mortgage, not only upon the building, but also upon the land.

The question of whether the lien of a duly recorded purchase-price mortgage which was executed simultaneously with a deed conveying the mortgaged land is entitled to priority of payment, not as to the building but as to the land itself, over liens for labor and material furnished to the vendee for a building upon which work had been commenced by the vendee before acquiring title to the land is a question which has not heretofore been decided by this court under the statute as it now exists. The question is one which must be determined from the provisions of our own statute.

Section 10191, Or. L., among other things, provides that persons performing labor or furnishing material "to be used in the construction, alteration or repair, * * * of any building, * * * shall have a lien upon the same for the work or labor done or transportation or material furnished at the instance of the owner of the building or other improvement, or his agent." Under this clause, if the labor was performed or the material furnished at the instance of the owner of the building, or his agent, the right to a lien upon the building exists, otherwise not; for the statute expressly limits the right to a lien to cases where the labor or material was furnished at the instance of the owner of the building, or the agent of such owner. This is the only section which confers the right to a lien and defines the cases in which a lien may be acquired, but whether the lien so acquired shall be a lien upon the land upon which the building is constructed must be determined by the other sections of the act.

Section 10192, Or. L., among other things, provides that the land on which the building is constructed shall be subject to the lien, "if, at the time the work was commenced * * * the said land belonged to the person who caused said building or other improvement to be constructed, altered, or repaired; but if such person owned less than a fee-simple estate in such land, then only his interest therein shall be subject to such lien."

Section 10194, Or. L., provides: "Every building * * * constructed upon any lands with the knowledge of the owner or the person having or claiming any interest therein shall be held to have been constructed at the instance of such owner or person having or claiming any interest therein; and the interest owned or claimed shall be subject to any lien filed in accordance with the provisions of this act, unless such owner or person having or claiming an interest therein shall, within three days after he shall have obtained knowledge of the construction * * * give notice that he will not be responsible for the same, by posting, etc." The clear import of the language of the last two sections referred to is that a lien on the building will not attach to the land unless the owner of the building is also the owner of the land or of some interest therein, and then only to the extent of his interest, unless the owner of the land, having knowledge of the construction, fails to give the notice as provided by the statute that he will not be responsible.

Under the stipulation, it was agreed that the Newport Hotel Company, the owner of the building, was not the owner of the land or of any estate or interest therein at the time the work was commenced, and it was also agreed that the work was commenced without the knowledge of Woodcock, who was at that time the owner of the land. The stipulation is that Woodcock had no notice or knowledge until March 27th, which was seven days after the deed and mortgage had been executed and five days after the mortgage had been recorded, and that the deed and mortgage had been executed and delivered simultaneously. Hence, under the provisions of the statute referred to, the liens in question did not and could not attach to the land until the delivery of Woodcock's deed, when the owner of the building took the land subject to the incumbrance of Woodcock's mortgage. Under this state of facts, the first moment of time when the liens upon the building could attach to the land was when the Newport Hotel Company acquired title to the land from Woodcock, because prior to that time it had no interest in the land and when it did acquire title it took the title charged with the lien of the mortgage. It is clear that the statute did not intend to give a lien upon the land except in case of the owner's neglect to give the notice referred to, unless the owner of the building was the owner of some interest in the land, and then only to the extent of his interest therein.

But the lien claimants contend that, by virtue of the provisions of section 10193, Or. L., these liens are entitled to priority over the mortgage. That section provides that: "A lien created by this act upon any parcel of land shall be preferred to any lien, mortgage, or other incumbrance which may have attached to said land subsequent to the time when the building or other improvement was commenced * * * also to any lien, mortgage, or other incumbrance which was unrecorded at the time when said building, structure, or other improvement was commenced, * * * and all liens created by this act upon any building or other improvement shall be preferred to all prior liens, mortgages, or other incumbrances upon the land upon which said building or other improvement shall have been constructed * * * and in enforcing such lien, such building or other improvement may be sold separately from said land; and when so sold, the purchaser may remove the same, etc." Under this section, as held in Cooper Mfg. Co. v. Delahunt, 36 Or. 402, 51 P. 649, 60 P. 1, liens for labor or material relate back to the time when the construction of the building was commenced. Hence, these liens, in so far as they affect the building, relate back to March 19th, when work was commenced, but, in so far as the right of a lien against the land is concerned, these liens, under the provisions of the statute to which we have referred, can only relate back to the first moment of time when the Newport Hotel Company acquired a lienable...