Queal Lumber Co. v. Lipman ( 1925 )

The appellant Graeser is the owner of a quarter section of land situated adjacent to the White Pole Road, west of the city of Des Moines. On the 17th day of May, 1923, he entered into a lease with one Lipman for about one acre of ground in the southwest corner of said quarter section, the lease to run for a period of 25 years, at an annual rental varying during the term thereof. The lease required the lessee to pay all taxes levied against the premises, provided that said premises should be used for a restaurant and eating house, and also contained the following provisions:

"Lessee agrees to complete prior to August 1, 1923, the construction on the premises herein leased of a building and improvements costing not less than six thousand dollars ($6,000). Neither the lessee nor anyone claiming by, through or under lessee shall have any right to file or place any mechanic's lien of any kind or character whatsoever upon said premises, or upon any of the buildings or improvements thereon, and notice is hereby given that no contractor, subcontractor or anyone else that may furnish any material, service or labor for any buildings or improvements, alteration, repairs or any parts thereof at any time shall be or become entitled to any lien thereon whatsoever. And for the further security of the lessor, said lessee agrees to give actual notice thereof in advance to any and all contractors, subcontractors or other persons, firms or corporations that may furnish any such material, service or labor. At the expiration of this lease, all improvements thereon shall become the property of the lessor."

This lease was filed of record on May 21, 1923, and duly recorded in the office of the county recorder of Polk County, Iowa. Lessee took possession of the premises at or about said time, and proceeded to erect the building and improvements called for by the terms of the lease. No labor or materials were furnished by any of the claimants herein prior to the date of the recording of the said lease.

The appellee and interveners filed their respective claims for mechanic's liens within the time and in the manner provided by statute. No question is raised as to the correctness of the liens or the filing of the same. The question as to the acknowledgment of the liens will be disposed of later.

The lessee, after the completion of the building, occupied it for a short period, and then abandoned the same and absconded. The district court held that the improvements were separate from the realty, and ordered the same sold separately and removed from the premises. From this judgment, appeal is taken.

Of the real questions involved in this case, the first urged is, What is the effect of the provisions of the lease, as against a mechanic's lien? To a fair comprehension of this question, it is necessary to first determine the status of the appellant Graeser under this lease. He was and is the fee title holder. The 25-year lease was an estate carved out of the fee-simple title. It is too elementary to need discussion that the lien claimants cannot acquire a greater interest in the real estate than that held by the lessee. The lessor, aside from receiving the annual rental and having the taxes paid on the leased property, under the terms of the lease was, day by day, acquiring a larger interest in the improvements put upon the property. If the judgment of the lower court is to stand, it amounts in reality to an abrogation of the lease contract, and deprives the lessor of all of his valuable rights under the terms of his contract. As said, after he had day by day acquired an interest in the improvements put upon the property, the decree of the district court would appropriate his interest in the improvements, for the benefit of the lien holders. This is neither law nor equity.

In the making of this lease between the lessor and the lessee, they had the right to provide any terms and conditions they might determine upon, and to place the same in the lease contract, as long as such terms and conditions were not unlawful. To hold otherwise would be to infringe upon the right of private contract. We are unable to find anything in the terms of the lease which could not be the subject of lawful contract between these parties. Having thus made a lawful contract, the lessor proceeded at once to file and record the same.

Section 2925, Code of 1897, provides:

"No instrument affecting real estate is of any validity against subsequent purchasers for a valuable consideration, without notice, unless recorded in the office of the recorder of the county in which the same lies."

As heretofore explained, the lessor, being not only the holder of the fee and reversionary interest, but having a definite and fixed interest in the improvements themselves (which, under the contract of the parties, were undoubtedly of a permanent nature, and therefore a part of the real estate), had a right, under the aforesaid section, to record this instrument.

Much attention has been given by counsel and the court to the question of the recording of this lease; but we do not determine the effect thereof, because the question subsequently discussed herein is controlling in this particular case. We call attention, however, to Maine v. Constantine, 157 Iowa 625, and Loser v.Plainfield Sav. Bank, 149 Iowa 672.

We have settled that a mechanic's lien claimant is not a subsequent purchaser, within the meaning of the Recording Act.Fletcher v. Kelly, 88 Iowa 475. It being thus settled that the mechanic's lien holders are not subsequent purchasers, they then stand in the shoes of Lipman herein, and, as heretofore said, their rights cannot rise higher than his, as against the lessor.Marker v. Davis, 200 Iowa 446.

It is fundamental, under the Iowa Mechanic's Lien Law, that, before one can successfully maintain a lien, he must have a contract with the owner, his agent, trustee, contractor, or subcontractor. It is so provided by Section 3089, Code of 1897, and we have repeatedly held that, without a contract with the owner, no lien can be maintained. Redman v. Williamson, 2 Iowa 488; Wilkins v. Litchfield, 69 Iowa 465; Carney v. Cook, 80 Iowa 747; Littleton Sav. Bank v. Osceola Land Co., 76 Iowa 660;Templin v. Chicago, B. P.R. Co., 73 Iowa 548.

There is no claim whatever made herein (it would not be available, if made) that the lien claimants had any contract whatever with the lessor, Graeser. It must necessarily follow, therefore, that claimants can enforce nothing against Graeser's interest in this property. It is suggested that, because the lease contemplated the making of these improvements, it could be held that Lipman was Graeser's agent, within the meaning of the statute; but this cannot be so held in the instant case, because the lease specifically provides otherwise, and the cases cited by the lien holders herein to support this doctrine are all cases wherein the facts are such that the court could imply the agency. As supporting this doctrine, see Stewart v.Talbott, 58 Colo. 563 (146 P. 771), and cases there cited;Cedar Rapids Sash Door Co. v. Dubuque Realty Co., 195 Iowa 679;Merrill v. Brant, 175 Mich. 182 (141 N.W. 550). For a case identical in fact and reaching the same conclusion, see Turner v.Miller (Tex. Civ. App.), 255 S.W. 237.

It therefore follows that a lien claimant herein could acquire nothing, as against the rights of the lessor, Graeser, in this land and the improvements placed thereon. The most that the lien claimant can acquire is a claim against the full interest of the lessee, Lipman, in this property, with the improvements thereon; and, as held by the lower court, lien claimants were entitled to a foreclosure of their lien against Lipman's interest in the property and improvements.

It is quite apparent, however, that the lower court erred in holding that the improvements could be severed from the real estate without damage to the lessor, because, as heretofore explained, the lessor had acquired specific interest in the improvements that were put upon the place. To sever the improvements from the real estate, as held by the lower court, would be to deprive the lessor of his right, and to sacrifice his property to claimants who had no claim whatever against him or his property. Therefore, the lower court erred in holding that the improvements were severable. We hold that the lien claimants were entitled to foreclosure of their lien and a sale of Lipman's interest in the property, to satisfy their claim, but that the improvements and the leasehold interest of Lipman must be sold together, and that the improvements cannot be removed from the present location. Claimants may have an order made in the district court in accordance herewith, or, on application, may have a decree in this court in accordance with this holding.

One more question is raised herein as to the acknowledgment attached to the lease in controversy. We do not deem a defect of such character of material importance to the case, and therefore give no attention to it. — Modified and affirmed.

EVANS, STEVENS, De GRAFF, and MORLING, JJ., concur.