Bratzel v. Stafford

14 P.2d 454, 140 Or. 661, 1932 Ore. LEXIS 73

• Court: Oregon Supreme Court
• Decided: September 14, 1932
• Status: Published

Opinions

CAMPBELL, J.

On December 2, 1929, the defendant, L. D. Stafford, acquired title in fee simple to lot 16, in Hollywood, Marion county, Oregon, a tract of land with a dwelling house and a garage thereon. The deed of conveyance was duly recorded December 3, 1929.

The defendants, Hawkins and Roberts, Inc., made a loan to defendant Stafford of $2,000, secured by a mortgage on said property. The mortgage was duly recorded in the mortgage records of Marion county, Oregon, December 3,1929, and is due and unpaid.

On or about December 12,1929, defendant Stafford, without the knowledge of Hawkins and Roberts, Inc., undertook to have the buildings on said premises remodeled and improved.

The bills for lumber and material for the remodeling were not paid, and the mechanics and material men filed liens for their respective claims and subsequently instituted this suit to foreclose said liens.

The circuit court made its decree foreclosing said liens giving them priority on the buildings over the mortgage of defendants Hawkins and Roberts, Inc.; ordered the buildings to be sold separate from the land, giving the purchaser at said sale 30 days from the date of sale to remove the buildings or the right of retaining said buildings upon the land upon payment to the owner of the premises of five dollars per month.

Defendants Hawkins and Roberts, Inc., appeal.

It is admitted by both parties that the decree should be modified so as to eliminate that part of it which would allow the purchaser at the foreclosure sale to retain the buildings upon the land for a longer time than 30 days after sale.

The real and only question presented is: Should the mechanics’ and material men’s liens have priority over the mortgage?

This question involves the construction of the following section of the Code:

“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 sub sequent to the time when the building or other improvement was commenced, or the materials were commenced to be furnished and placed upon or adjacent to the land; also to any lien, mortgage, or other incumbrance which was unrecorded at the time when said building, structure, or other improvement was commenced, or other materials for the same were commenced to be furnished and placed upon or adjacent to the land; and all liens created by this act upon any building or other improvement shall be preferrd to all prior liens, mortgages, or other incumbrances upon the land upon which said buildings or other improvement shall have been constructed or situated when altered or repaired; and in enforcing such lien, such building or other improvement may be sold separately from said land; * * * ” Oregon Code 1930, section 51-103.

It would appear that the legislature intended by the foregoing enactment to protect the mortgagee in his security on the property that was pledged to bim bv the mortgagor. While it does not appear from the record, it is but fair to assume that the buildings on the land were permanent and by their construction became attached to and a part of the realty and could not be detached therefrom without lessening the value of the realty. It is contended by the lienors, although the record fails to disclose it, that by their labor and materials the value of the buildings have been increased, and, therefore, they are entitled to a prior lien on what their labor and materials have produced. This contention would be correct, if it were possible to sever the product of their labor and materials from the realty without diminishing the value of the mortgagee’s security. This enhancement of value, if any, was made without the knowledge or consent of the mortgagee.

The Oregon lien law was adopted by Congress for the Territory of Alaska. The District Court of the Territory in commenting on Cooper Mfg. Co. v. Delahunt, 36 Or. 402 (51 P. 649, 60 P. 1), said:

“In that case, as in the Eyan case, 34 Ore. 73, 54 Pac. 1093, which it cites, the priority allowed to a mechanic’s hen over a mortgage was for an entire new building, while in this case, it is claimed for alterations or repairs. I did not fail to give that fact due consideration, but the statute appeared to me to place alterations and repairs upon the same basis as original construction. In the Delahunt case, the mortgagee, according to Justice Bean’s statement, contended that the priority upon a building allowed by the Oregon statute was only for alterations and repairs, and not for original construction.

“This seems to me to be wholly untenable, and the Oregon Court so decided. It is much more reasonable to argue, as counsel does in this case, that the statute only gives priority to original construction, for the reason that an entire building can be removed from the ground without damage to the original security, while to give priority for an alteration for a mortgaged building, may diminish the mortgaged security. In his opinion, Justice Bean used this language: ‘The statute is not clear, but it seems to us that its evident meaning is that all mechanics ’ liens shall attach to the building or other improvement in preference to prior liens, mortgages, or other incumbrances upon the land, whether such mechanics’ lien is for the original construction, or the alteration or repair, of the building. ’ * * * In this case, I think the unquestioned intent of the Oregon Legislature was to give a mechanics’ lien to the full extent of the claim upon the propertv improved; but I do not think the Legislature intended in accomplishing that result to confiscate security already belonging to another.” Wagner v. Shaw, 6 Alaska 647.

The statute intended that such priority of liens should cover such structures, additions or repairs as may be detached from the land or the permanent buildings thereon without diminishing the value they had at the time a prior mortgage was recorded. This appears to be a reasonable and equitable construction to be placed upon the statute.

Liens are the creatures of the statutes of each state and we are unable to find any other state with a statute identical with ours in regard to this question; therefore, the decisions of the other states, being made under a different statute, are of little value in reaching a correct interpretation of the Oregon statute.

This construction is really not in conflict with the decision of Cooper Mfg. Co. v. Delahunt, supra, as the question of alterations or repairs was not necessarily under consideration therein. This decision distinguishes between severable and non-sever-able structures, alterations, repairs or improvements commenced or made subsequent to the execution and recordation of a mortgage without diminishing the value of the security.

While the defendants Hawkins and Roberts, Inc., in their answer, did not directly seek a foreclosure of their mortgage, yet they did ask for general relief and we think the decree in the case should foreclose their mortgage, order the property sold and the proceeds first applied to the satisfaction of the mortgage debt and any surplus applied pro rata on the labor or material liens, it being admitted that the mechanics’ and material men’s liens are equal in priority.

The decree of the circuit court will be reversed and the cause remanded with instructions to enter a decree in conformity with this opinion. Neither party to recover costs in this court.

It is so ordered.

Bean, C. J., Brown and Belt, J.J., concur.

Petition for rehearing denied November 10, 1932