Cooper, Treas. v. Haynes ( 1930 )

The treasurer of Summit county commenced an action in the common pleas court against Harry G. Haynes and wife to sell certain lots to pay taxes. All lienholders, including mortgagees and judgment and mechanic's lien claimants, were made parties defendant.

Upon the hearing of said action, said court determined the priorities of liens and decreed that they be paid in the following order: First, taxes; second, the balance due on the John and Sadie Harner mortgage; third, balance due on the Central-Depositors Bank Trust Company judgment; fourth, the balance owing the Hudson Lumber Company on its mechanic's lien for material, and the balance due other mechanic's lienholders, all in equal priority. The priorities of other liens are immaterial in this court.

The case is in this court upon the appeal of the Hudson Lumber Company. The agreed statement of facts presented to this court, so far as is material in this court, is as follows:

"1. On June 5, 1917, the Akron Realty Company executed a blanket mortgage to John Harner and Sadie Harner, Vol. 592, page 27, covering lot 273 and numerous other lots, which mortgage was due June 5, 1919, and was unpaid on July 17, 1929, and is still unpaid. Balance due, $8127.79, with interest from Dec. 29, 1929.

"2. On May 20, 1921, the Akron Realty Company conveyed lot 273 and other lots to Harry G. Haynes by warranty deed recorded in Vol. 886, page 330. Said lot still stands in Haynes's name.

"3. On April 18, 1929, the Kenmore Banking Company, now the Central-Depositors Bank Trust Company, obtained a judgment against Harry G. Haynes, of Twenty-one Thousand and Fifty-four and 41/100 Dollars ($21,054.41) in Common Pleas Court, case No. 75064, and execution issued thereon was levied on lot 273 one week later.

"4. On July 17, 1929, construction of a house was started on lot 273."

Counsel for said lumber company contend that the title to said lot 273 is defective, within the meaning of Section 8317, General Code, for the reason that there was a valid and subsisting mortgage and a live judgment lien upon said lot at the time the construction of the new building on said lot was commenced; that said mortgage and judgment made the title to said lot unmarketable, and that this is especially so in view of the fact that one of the conditions of said Harner mortgage was broken, in this, that the mortgage was past due and at that time subject to foreclosure, and that the property was also subject to sale upon said judgment; that the mechanic's lienholders are thus entitled to a lien on the building, separate and apart from the land, superior to said mortgage and judgment, and that the liens of said mortgage and judgments are superior to the mechanic's liens only upon the land.

It is conceded that Harry G. Haynes was the owner in fee simple of said lot 273, subject only to said Harner mortgage and the judgment of the bank, at and before the time the construction of the new building was commenced, and that there was no other defect in the title of said Haynes to said real estate at that time or since, except judgments and mechanic's liens subsequently obtained.

Hence the sole question at issue is, Does a valid and subsisting mortgage upon real estate, with condition broken, or a live judgment upon which execution has been issued and levied upon real estate, create a defective title to such real estate within the meaning of Section 8317, General Code? Said section reads as follows: "Any person furnishing labor, machinery, material or fuel for the erection of a new building or structure upon land to which the person contracting for such erection has no legal title or to which the title shall be defective, shall have a lien therefor upon such building or structure, and the forfeiture or surrender of any title or claim of title, or equitable interest by such contracting person to such land shall not defeat the lien upon such building or structure of such person furnishing labor or material, as aforesaid. In case the property covered by a lien is held by the vendee in a land contract, or by a lessee, and he surrenders or forfeits his rights thereunder, the person or persons holding such liens may be subrogated to the rights of such vendee or lessee, as his rights existed immediately before such surrender or forfeiture, by performing the covenants contained in such contract or lease within thirty days after he shall have actual notice of such forfeiture. Any lien claimant may pay off any prior recorded lien, incumbrance or mortgage, and shall thereupon be subrogated to all the rights of the prior holder of such lien, incumbrance or mortgage."

It is a well-established rule that the intention of the Legislature must be gathered from the language used and all the provisions of the law bearing upon that particular subject, and that the language of a statute should be construed in the common acceptance of the meaning of the words used and consistent with the common sense of the community, in the absence of anything in the statute showing that a different meaning was intended.

Thompson on Real Property, in Volume 3, Section 2315, in discussing the subject of "title," says: "It signifies, not the fact of his possession, but his right of possession. Sometimes the word ``title' is used in a general sense, as including any title or interest; but ``title' in common acceptance, and when used in reference to real property, implies an estate in fee. When we speak of a man as having title to certain lands, the ordinary understanding is that he is the owner of the fee. A person is said to have title to that which is of right his property, and his property is that over which he may of right exercise an exclusive dominion."

It is apparent that under the above rules the Legislature intended the words "legal title" to mean an estate in fee, and when the Legislature used the term "no legal title," it meant a title something less than a fee, and, when it used the term "land * * * to which the title shall be defective," it had reference to some defect in an apparent legal title; that is, some defect in the recorded chain of title.

It will be observed that said Section 8317 specifically provides for the protection of the mechanic's lienholder only upon a new building or structure, under three separate contingencies: The first contingency gives a lien on the buildings alone when the contracting person has no legal title or the title is defective, and further provides that if such person forfeits or surrenders his claim of title or equitable interest, that shall not defeat the lien on the building; the second makes special provision for the mechanic's lienholder to be subrogated to the rights of the contracting person where the land is held by land contract or lease and such person surrenders or forfeits his rights thereunder; and the third provides that a mechanic's lienholder may pay off and be subrogated to the rights of a prior lien, incumbrance or mortgage.

It is thus seen that this section in and of itself clearly recognizes that a lien or mortgage may be upon the real estate at the time the construction of a new building is commenced, and that it is not a defect in the title. This section also recognizes an equitable interest as practically synonymous with a defective title, and makes a distinction between a defective title, or equitable interest, and a land contract or lease, and a lien, incumbrance or mortgage. It was therefore evidently not the intention of the Legislature that a mortgage or judgment lien would create a defective title.

Furthermore, Section 8321, General Code, which provides when a mechanic's lien shall attach, the period it shall continue, and within what time foreclosure proceedings may be commenced, also provides that the mechanic's lienholders shall have no priority among themselves, except that those performing manual labor shall have a preference for labor performed within thirty days of the last labor, and designates over what other liens and incumbrances the mechanic's liens shall have a preference.

Concerning the priority as to other liens, that section reads: "Second. They shall be preferred to all other titles, liens or incumbrances, which may attach to or upon such construction, excavation, machinery, or improvement, or to, or upon the land upon which they are situated, which shall either be given or recorded subsequent to the commencement of said construction, excavation, or improvement."

It will be observed that priority is given to mechanic's liens over other liens and incumbrances only when "given or recorded subsequent to the commencement of said construction, excavation, or improvement." The only reasonable inference to be drawn from this section is that all other titles, liens or incumbrances given before the commencement of the improvement are recognized as liens having priority and not as defects in the title.

Moreover, it must be remembered that the mechanic's lien is purely statutory and that there is no right of lien on the property of the owner except such as is given by statute; that the mechanic's lien law provides in detail when, how and by whom such liens may be obtained and how the lienholder and the owner may protect their respective rights; that the statutes creating mechanic's liens were conceived in equity and are based upon and justified only upon the elementary principle that when a building is constructed upon land it becomes a part of the real estate, thereby increasing its value, and that it is only equitable and just that the persons who contributed labor and material to the improvement are entitled to look to the whole property for compensation. 40 Corpus Juris, "Mechanics' Liens," page 44, Section 5; Hummer v. Parsons, 111 Ohio St. 595, 146 N.E. 62;Harper Kirschten Shoe Co. v. S. B. Shoe Co., 16 Ohio App. 387.

It is upon this equitable principle that the several sections of the Mechanics' Lien Law, except said Section 8317, provide for such lien on the building only as a part of the real estate, and that such lien shall attach only to "the interest, leasehold or otherwise, of the owner, part owner, or lessee * * * at the time the work was commenced or materials were begun to be furnished * * * and also to * * * any subsequent acquired interest" therein.

It is thus clearly the purpose of said Section 8317 to extend this equitable principle far enough to give the laboring man and materialman a lien on the building alone, only in the event the person contracting for the building does not have a fee-simple or legal title to the land, as it will be noted that when the land is held by land contract or lease this section gives the mechanic's lienholder only the right to be subrogated to the rights of such vendee or lessee, respectively, should they abandon such contract or lease, and does not provide for a lien on the building alone irrespective of the contract or lease. It will also be noted that this section specifically provides only that the mechanic's lienholder "may pay off any prior recorded lien, incumbrance or mortgage" and be subrogated thereto, and does not provide for a lien on the building apart from the land.

While the title to real estate on which there is an uncanceled mortgage or against which there is a judgment may sometimes be spoken of as defective in connection with the sale of real estate or the offering of it as security for money loaned, the existence of such mortgage or judgment in reality constitutes a mere incumbrance or lien upon the legal title, rather than a defect in the title. We are therefore clearly of the opinion that, to make a title defective within the meaning of said Section 8317, there must be some defect which is not a mere lien with a definite amount due as security for a debt, which can be removed by the owner at will by the payment of the debt, but rather there must be some adverse claim affecting the fee itself and going to the right to exercise dominion over the premises involved.

It thus follows that a valid and subsisting mortgage with condition broken, or a live judgment upon which execution has been issued and levied, does not create a "defect" in the title to the real estate incumbered by them, within the meaning of said Section 8317, General Code.

Decree accordingly.

PARDEE and WASHBURN, JJ., concur.