Wahl v. Southwest Sav. & Loan Ass'n

• Decision Date: 20 April 1970
• Docket Number: CA-CIV,No. 1,1
• Citation: 467 P.2d 930,12 Ariz.App. 90
• Parties: , 52 A.L.R.3d 779 Elmer F. WAHL and Edward J. Smith, dba Wahl & Smith Refrigeration Company, Clinton Campbell Contractor, Inc., dba Phoenix Brick Yard, an Arizona corporation, Metropolitan Concrete & Materials Co., Ray Lumber Co., an Arizona corporation, and Smith Pipe & Steel Company, a division of the United States Freight Company, a Delaware corporation, Appellants, v. SOUTHWEST SAVINGS & LOAN ASSOCIATION, an Arizona corporation, Appellee. 801.
• Court: Arizona Court of Appeals

Page 930

467 P.2d 930

12 Ariz.App. 90, 52 A.L.R.3d 779

Elmer F. WAHL and Edward J. Smith, dba Wahl & Smith Refrigeration Company, Clinton Campbell Contractor, Inc., dba Phoenix Brick Yard, an Arizona corporation, Metropolitan Concrete & Materials Co., Ray Lumber Co., an Arizona corporation, and Smith Pipe & Steel Company, a division of the United States Freight Company, a Delaware corporation, Appellants, v. SOUTHWEST SAVINGS & LOAN ASSOCIATION, an Arizona corporation, Appellee.

No. 1 CA-CIV 801.

Court of Appeals of Arizona, Division 1, Department B.

April 20, 1970.

Rehearing Denied May 19, 1970.

Review Granted July 7, 1970.

Cox & Hedberg, by John C. Hedberg, Phoenix, for Elmer F. Wahl and Edward J. Smith, Clinton Campbell Contractor, Inc., Metropolitan Concrete & Materials Co. and Smith Pipe & Steel Co.

Engdahl, Jerman, Butler & Estep, by Charles E. Butler, Phoenix, for Ray Lumber Co.

Renaud, Cook, Miller & Cordova, by Joseph B. Miller, Phoenix, for appellee.

HAIRE, Judge.

In this mortgage foreclosure action the trial court was required to determine the relative priorities existing between twenty-four separate mortgages and various materialmen's liens affecting the mortgaged realty. The trial court found that all of the mortgages constituted valid first liens, prior and superior to the liens of the various materialmen defendants. From this determination of priorities, the materialmen have appealed.

The case was determined by the trial court on the basis of an agreed statement of facts with various exhibits attached, together with documentary evidence, oral testimony and depositions admitted into evidence at the time of trial. There are no disputed facts. However, the appellants do question the sufficiency of the evidence to support the trial court's conclusions concerning the knowledge of certain of the materialmen relating to the existence of a portion of plaintiff's mortgages prior to the recording thereof.

In this opinion Southwest Savings & Loan Association, the appellee here and plaintiff in the trial court, will be referred to as Southwest or as the mortgagee. The various appellants, all of whom are claimants of materialmen's liens, will be collectively referred to as either appellants or lien claimants, and where necessary, by their individual names.

This action originated as an action by Southwest to foreclose twenty-four separate mortgages, each covering a separate parcel of real property described therein. The lien claimants counterclaimed to foreclose their alleged liens.

In July of 1963, defendant Arthur DeRose (the owner) was in the process of acquiring through a land trust a parcel of real property located within the town of Avondale, Arizona. He planned to construct an apartment complex consisting of twenty-four buildings on this parcel. In this complex, twenty-one buildings were to contain two apartments each, and three buildings were to contain four apartments each. The construction as to each of the twenty-four buildings was to be basically identical, the only variances being as to size and number of rooms.

The owner entered into a general contract with Becchetti Construction Company (the general contractor) for the construction of all twenty-four buildings. The general contractor in turn made arrangements with the appellants and other suppliers for labor and materials to be furnished in the construction of the project. The general contractor obtained one building permit from the town of Avondale covering the construction of all the improvements. Only one laundry facility was constructed to serve all twenty-four buildings.

Also during this same period, July 1963, the owner successfully negotiated with Southwest for construction financing. The financing was to take the form of twenty-four separate loans, one for each of the apartment buildings involved. For mortgage purposes, the land was to be broken down into twenty-four separate parcels so that each mortgage would cover one building and the land upon which it was constructed. These twenty-four mortgages were executed and delivered to Southwest during August, 1963, but were not recorded at that time.

On September 9, 1963, a deed was recorded from the land trustee as grantor to the owner as grantee, conveying a substantial portion of the total parcel involved in the construction project. On the same date, Southwest recorded eighteen mortgages securing payment of eighteen of the twenty-four loans that had been committed. Each of these eighteen mortgages covered separate contiguous parts, but not the entire area of that portion of the land conveyed to the owner by the September 9, 1963, deed. The general contractor had not commenced construction, nor had any materials been furnished prior to the recordation of these eighteen separate mortgages.

On October 30, 1963, the owner acquired a deed from the land trustee for the balance of the property involved in the apartment project. On that same date, Southwest recorded six additional mortgages, which together covered all the land conveyed to the owner by this latter deed, as well as the unmortgaged balance of the land previously conveyed to the owner by the September 9, 1963, deed. Prior to the recording of these last six mortgages, twenty-one of the buildings were in various stages of construction, including three of the six buildings on the parcels covered by the last six mortgages. Although some of the lien claimants had delivered materials to the project prior to the recording of the last six mortgages, the trial court found as a fact that no materials were furnished by the lien claimants for the buildings covered by the last six mortgages until after the recording of these six mortgages.

Although the entire parcel upon which the apartment project was located was within the limits of the town of Avondale, there was no plat of this parcel recorded at the time of recordation of any of the mortgages referred to in this opinion, nor at the time construction commenced. Further, the boundaries of the lots designated in the plat which was subsequently recorded did not coincide with the boundaries of the above-mentioned mortgaged parcels.

Against this factual background the appellants raise various questions on appeal, the principal contention being that the trial court erred in holding that the liens of the six mortgages recorded on October 30, 1963, were prior and superior to the materialmen's liens asserted by appellants. The appellants have abandoned their original contention that their liens were also prior to the eighteen mortgages recorded before the commencement of any construction. Some of the questions presented for review by appellant Ray Lumber Company differ materially from the questions presented by the other appellants. These will be considered in a separate part of this opinion. Except as concerns the issue of priority, the following portion of the opinion relates primarily to questions raised by the other lien claimants, Elmer F. Wahl and Edward J. Smith, dba Wahl & Smith Refrigeration Company (Wahl); Clinton Campbell Contractor, Inc., dba Phoenix Brick Yard (Clinton Campbell) Metropolitan Concrete & Materials Co. (Metropolitan Concrete); and Smith Pipe & Steel Company, a division of the United States Freight Company (Smith Pipe).

A.R.S. § 33--992, which governs priorities between materialmen's liens and other liens, mortgages and encumbrances, reads as follows:

'The liens provided for in this article, unless otherwise specifically provided, are preferred to all liens, mortgages or other encumbrances upon the property attaching subsequent to the time the labor was commenced or the materials commenced to be furnished. The liens provided for in this article are also preferred to all liens, mortgages and other encumbrances of which the lienholder had no actual or constructive notice at the time he commenced labor or commenced to furnished materials.'

In an early decision the Arizona Supreme Court in interpreting this statute ¹ held that where a general contractor contracts with materialmen and mechanics for the furnishing of labor and materials, the lien given by statute to these materialmen and mechanics relates back to, and attaches as of, the date of the commencement of the building or improvements by the general contractor, regardless of when the materials were actually furnished or the labor performed. Wylie v. Douglas Lumber Co., 39 Ariz. 511, 8 P.2d 256 (1932). We are unable to agree with Southwest's contention that the interpretation of this statute in Wylie was mere dicta. In any event, while we might not have traveled the same route in legal analysis that the court traveled in Wylie, nevertheless we would have arrived at the same destination. In our opinion, the conclusion reached by the court in Wylie concerning the relation back of the materialmen's liens to the commencement of construction is a correct interpretation of the statute. Therefore, whether dicta or legal holding, we adopt and concur in the result reached in Wylie, and hold that under A.R.S. § 33--992, materialmen's and mechanics' liens resulting from materials furnished or labor performed at the instance of a general contractor relate back to, and attach as of, the date of commencement of construction of the improvement involved.

Before we can apply the above-stated principle to the facts at hand, we must determine when the general contractor commenced construction within the meaning of our lien statutes. Did he commence construction when work was started on the first apartment building, or did he repetitively commence construction anew each time work was started on a different building? If there had been a separate construction contract between the owner and the general contractor for each individual building, and if before any construction had commenced the parcel here involved had been broken down into various lots by a recorded map or plat, then in our opinion it would be clear...