Yost-Linn Lumber Co. v. Williams

KNIGHT, J.

These actionsto foreclose materialmen’s liens were consolidated for trial and from the judgment entered therein the defendant Frances Nusewander has appealed. There is no dispute about the facts, and the sole question of law involved is whether, as the trial court held, the liens of the materialmen were superior to a portion of the mortgage lien held by the defendant Frances Nusewander.

According to the admitted facts, the defendants Ray and Emily Williams, in order to finance the construction of a building on a lot of which they were the owners, obtained from the Wilshire Mortgage Corporation a loan of $5,500, evidenced by a note for that amount, secured by a first mortgage on said lot, and a building and loan agreement providing for the advancement and expenditure of the $5,500 as the work on the building progressed. Following the execution of said documents the mortgage corporation opened on its books a building-loan account with the Williams and credited the same with the sum of $5,500. At the same time the Williams also gave a trust deed to the property (which is not here involved) in favor of Jennie C. Ward, to secure the payment of a note for $3,850, the trust deed being made subject to said mortgage. All of the instruments above mentioned bore date August 18, 1926; the mortgage and trust deed were recorded on September 23, 1926, and on October 4, 1926, plaintiffs commenced and thereafter continued up to March 10, 1927, to furnish materials for the erection of said building. In the meantime, to wit, on November 24, 1926, the mortgage corporation assigned its mortgage to the defendant Frances Nusewander; and on December 28, 1926, the Williams deeded the property to the defendant Florence Snyder. With reference to the assignment of the mortgage to Frances Nusewander the court found that at the time it was assigned “the improvements on said real property were partially completed, and that on said date the said Frances Nusewander took

[573]

the said mortgage with full notice of existing claims by materialmen and laborers”. On February 28, 1927, the plaintiff Yost-Linn Lumber Company filed its claim of lien for the materials it had furnished; on March 10, 1927, all work on the construction of the building was abandoned; and on the following day the plaintiff Gordon-Harrison-Russell, Inc., filed its lien for materials furnished. One of the covenants and conditions of the loan agreement provided that “the party of the first part [the mortgage corporation] is not obligated to advance the funds as herein provided, or any part thereof, if said building is not erected in strict accordance with said plans and specifications . . . ”. It also contained the following provision: “It is agreed that in the event that the work of erecting said building is abandoned for a period of thirty days, then the party of the first part may, at its option, but is not obligated to do so, complete said building, using for that purpose the funds remaining in its hands; and any funds so used for such completion shall be deemed as paid to the party of the second part under the terms of this agreement; and any costs and charges incurred in the completion of said building in excess of said amount shall be a lien on the hereinbefore described property and be secured in a like manner as the mortgage and trust deed.”