Southwest Title & Trust Co. v. Norman Lumber Co.

• Decision Date: 14 May 1968
• Docket Number: No. 42590,42590
• Parties: SOUTHWEST TITLE & TRUST CO., Inc., a corporation, Plaintiff in Error, v. NORMAN LUMBER COMPANY, a corporation, and CAP Interiors, Inc., a corporation, Defendants in Error.
• Court: Oklahoma Supreme Court

Page 430

441 P.2d 430

1968 OK 71

SOUTHWEST TITLE & TRUST CO., Inc., a corporation, Plaintiff in Error, v. NORMAN LUMBER COMPANY, a corporation, and CAP Interiors, Inc., a corporation, Defendants in Error.

No. 42590.

Supreme Court of Oklahoma.

May 14, 1968.

Syllabus by the Court

1. Where a mortgage company voluntarily lends money to parties purchasing a residence, before it has any right or interest in the residence to protect, and a part of the loan's proceeds is used to satisfy a mortgage indebtedness incurred by the previous owner of the residence; but, without obtaining an assignment of said previous mortgage, the new lender allows it to be released, and takes a new mortgage as its security, its new mortgage does not succeed to the previous priority of saif first mortgage, and said new lender is not entitled to be equitably subrogated to the first mortgagee's rights, absent proof of any agreement that the first mortgage indebtedness would be satisfied in that manner, or that the new lender believed in good faith that its security would be substituted of record for the one released and cancelled.

2. Where it appears that the residence was planned and constructed, with no provision for finish flooring other than the installation of wall-to-wall carpeting over the house's sub-flooring, the supplier and installer of said carpeting, if unpaid, may perfect a materialman's lien, on the basis of his claim, under Tit. 42 O.S.1961, § 141.

Appeal from the District Court of Cleveland County; Elvin J. Brown, Judge.

Action on a promissory note and to foreclose a real estate mortgage on a residence, wherein various suppliers of labor and material, for the residence's construction, intervened. After judgment for plaintiff and the suppliers claiming mechanic's and materialman's liens, but adjudicating some of the latter to have priority over its real estate mortgage lien, plaintiff mortgagee appealed. Affirmed.

George A. Fisher, of Hanson, Fisher, Tumilty, Peterson & Tompkins, Oklahoma City, for plaintiff in error.

W. Samuel Dykeman, Oklahoma City, for defendant in error, CAP Interiors Inc. Fielding D. Haas, Ben Benedum, T. R. Benedum, Norman, for defendant in error, Norman Lumber Co.

BLACKBIRD, Justice.

This appeal involves an action on a promissory note and to foreclose a real estate mortgage to secure its payment, covering residential property at 217 Sherwood, in Moore, Oklahoma. The prospective builder of the residence, Executive Homes of Norman, Inc., procured a so-called 'construction loan' of $15,800.00 from Security National Bank & Trust Co., of Norman, Oklahoma. The money derived through this loan constituted the building fund for paying the cost of the residence's construction. To secure the loan repayment, Executive Homes of Norman executed and delivered to said Bank a real estate mortgage on the property, that was filed of record in March, 1965.

Thereafter, on April 4, 1965, Executive Homes entered into an oral contract with the defendant in error, Norman Lumber Company, hereinafter referred to merely as 'Lumber Company', to furnish certain materials for use in the construction of said residence. Pursuant to said contract, Lumber Company started furnishing said materials on April 6, 1965, and continued to do so through July 17, 1965.

On or about June 8, 1965, Executive Homes entered into a contract with the defendant in error, CAP Interiors, hereinafter referred to merely as 'CAP', to furnish certain labor and materials, including the installing of certain floor coverings in the new residence. The first of these materials was furnished the same date.

Thereafter, Executive Homes sold the new residence to a Mr. and Mrs. Charles M. Ermey. To make the purchase, Mr. and Mrs. Ermey negotiated a twenty-one-thousand-dollar loan from Oklahoma Mortgage Company. The Ermey's obligation to repay said loan was evidenced by the promissory note for that principal amount, dated June 21, 1965, which they signed and delivered to said Mortgage Company, promising to repay it at the rate of $116.13 per month. The note's payment was secured by a real estate mortgage, dated the same date, which the Ermeys executed and delivered to said Mortgage Company. This mortgage was guaranteed by a 'Mortgage Guaranty Policy', issued to Oklahoma Mortgage Company by plaintiff in error, hereinafter referred to as 'plaintiff'. Part of the proceeds of this loan, to the extent of $16,034.74, was used in paying off Executive Homes' above mentioned construction loan from Security National Bank & Trust Company. Said Bank thereafter released its above mentioned real estate mortgage of record on June 23, 1965.

Executive Homes failed to pay Lumber Company and CAP for the materials they had furnished, as aforesaid; and, in September, 1965, those suppliers, hereinafter referred to collectively as 'materialmen', filed separate materialmen's liens for the debts, thus incurred, in the principal amounts of $2934.18 and $920.26, respectively, plus interest and attorney's fees.

The Ermeys failed to pay the September, 1965, monthly installment on their loan from Oklahoma Mortgage Company, and thereafter continued to default on payment subsequently due thereon.

In January, 1966, said Mortgage Company assigned its real estate mortgage on the property to plaintiff; and plaintiff instituted the present action approximately a month later.

In the action, the Materialmen, Lumber Company and CAP, asserted their above mentioned claims against the property and sought foreclosure of their above mentioned materialmen's liens in appropriate pleadings of intervention.

At the trial, it was stipulated, among other things, in substance, that the lien Norman's Security National Bank & Trust Company had obtained on the property (through its mortgage securing repayment of the above mentioned construction loan), was the first lien that even attached itself to the property, and it had been prior to all others.

In the judgment the trial court thereafter entered in said action during March, 1967, it held that the materialmen's liens of Lumber Company and CAP were prior and superior to the real estate mortgage lien plaintiff had obtained on the property through the above mentioned assignment from Oklahoma Mortgage Company; and judgment was entered accordingly.

After the overruling of its motion for a new trial, plaintiff perfected the present appeal.

Plaintiff urges there is error in the trial court's judgment in two respects. Under one proposition, it argues that said court erred in impressing the realty with a lien in CAP's favor on account of its furnishing materials, which plaintiff says were personal properly and never became a part of the realty. Under another proposition, plaintiff argues, in substance, that the court erred in not treating it as 'subrogated in equity' to the aforementioned stipulated priority of Security National Bank & Trust Company's original construction loan mortgage, to the extent of the part of said mortgage indebtedness in the amount of $16,034.74 which was paid out of the twenty-one-thousand-dollar loan fund Oklahoma Mortgage Company, plaintiff's assignor made available to the Ermeys for use in purchasing the property.

Materialmen concede that in 'closing the loan' it made to the Ermeys, Oklahoma Mortgage Company transmitted to Security National Bank & Trust Company (our of the proceeds of said loan), the $16,034.74 then due on said Bank's previous construction loan to Executive Homes, in order to clear the property's title of the encumbrance of said Bank's mortgage; but they assert, in essence, that, as far as the record shows, said Mortgage Company volunteered to do this, at a time when it had no interest in the property and therefore had nothing to protect, nor any obligation, or compulsion, by agreement, or otherwise, either to make a loan on the property, or to pay off the previous one made by said Bank to Executive Homes. They infer that if Oklahoma Mortgage Company had desired subrogation to the rights of the Norman Bank--the original mortgagee--it should have taken an assignment of said Bank's mortgage on the property, in connection with the satisfaction of the indebtedness, whose payment was secured by it. In this connection, see Tit. 42 O.S.1961, § 19. To support their argument that the doctrine of equitable subrogation cannot be invoked by plaintiff, they cite Citizens State Bank of Tulsa v. Pittsburg County Broadcasting Co., (Okl.) 271 P.2d 725, in which this Court reviewed some of its previous decisions on the subject, and quoted from Owen v. Interstate Mortgage Trust Co., 88 Okl. 10, 211 P. 87, 30 A.L.R. 816, as follows:

'One who, having no interest to protect,...