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CARR-CULLEN COMPANY v. PORTIUS C. DEMING AND OTHERS

Minnesota Supreme Court1928-12-07No. No. 26,827
176 Minn. 1

Summary

Holding. The mechanics' liens are subordinate to the purchase money mortgage because the removal of the existing building was not an actual and visible beginning of the improvement under the statute, and the mortgagee Deming was a bona fide purchaser without notice of any existing lien. The order denying the motion for a new trial is affirmed.

Carr-Cullen Company sought to foreclose mechanics' liens on a Minneapolis property and establish their priority over a purchase money mortgage. Portius Deming owned a lot with a one-story building; he sold it to Kunsch for $5,500, with $500 paid in cash and the remainder secured by a mortgage dated and recorded in early September 1925. Under the sale agreement dated August 31, 1925, Kunsch agreed to erect a new building on the property. Before construction began, Anderson was hired to demolish and remove the existing building (work completed September 2–5) and later to excavate for the new structure (work beginning September 7).

The trial court determined that the demolition and removal work did not constitute an "actual and visible beginning of the improvement" under the mechanics' lien statute, and that the demolition and excavation contracts were separate agreements rather than a single integrated project. Consequently, the court held the mechanics' liens subordinate to the mortgage. The appellate court affirmed, reasoning that removing an existing structure is not lienable work and does not establish lien priority. The mortgagee Deming qualified as a bona fide purchaser without notice of any existing liens; mere knowledge that building construction was planned did not constitute statutory notice of a lien.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Whether demolition and removal of an existing structure constitutes a lienable improvement
  • Whether separate contracts for building removal and excavation should be treated as one integrated project for mechanics' lien purposes
  • Whether a mortgagee's knowledge of contemplated construction constitutes statutory notice of a mechanics' lien

Procedural posture

Five defendants appealed from a trial court order denying their motion for a new trial in a mechanics' lien foreclosure action where the trial court found the liens subordinate to a purchase money mortgage.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

majority opinion

Hilton, J.

Appeal by five defendants from an order denying a motion for a new trial.

Action to foreclose certain mechanics’ liens and to have them declared to be prior to a mortgage. The trial court held that the mechanics’ liens were subordinate to the mortgage. Defendant Deming was the owner of a lot in Minneapolis on which there was a one-story frame business building. It was divided into two parts, one of which was occupied by him as a real estate office and the other was occupied by Mr. Kunsch. Deming sold the property to Kunsch for $5,500, $500 of which was paid in cash and the balance secured by a purchase money mortgage dated September 1, 1925, and properly recorded on September 5, 1925. On August 31, 1925, a written agreement was entered into between Deming and Kunsch embodying the terms of the sale, in which Kunsch agreed forthwith to erect a building upon said premises in a manner described therein and to rent one-half thereof to Deming for a period of five years at $30 per month. Kunsch sold the old building on the lot to one Anderson for $50, he (Anderson) to wreck the same and remove the material and débris therefrom. This work was started on September 2 and was finished on September 5. Kunsch also hired Anderson to make the excavation necessary for the new building, for which he was to receive 70 cents a cubic yard. The excavation work did not begin until September 7.

The court found the facts substantially as above set forth and that the work of excavation begun by Anderson on September 7 Avas the first actual and visible beginning of improvements on said premises and that prior thereto there Avas no work done or material furnished on the premises where the building was to be constructed.

But one question is here involved: Shall the purchase money mortgage or the mechanics’ liens have precedence? The court found, as indicated by its order and as specifically stated in its memorandum, that the agreement entered into between Anderson and Kunsch as to the sale, wrecking and removing of the building was not so linked with the contract for excavating as to make one contract; in other words, that there were two contracts. The court stated, and with this we agree, that the burden of showing that the agreement ivas one which would make the mechanics’ liens prior to the mortgage rested upon said lienholders.

G. S. 1923, § 8494, relating to mechanics’ liens, provides as follows:

“All such liens, as against the owner of the land, shall attach and take effect from the time the first item of material or labor is furnished upon the premises for the beginning of the improvement, and shall be preferred to any mortgage or other encumbrance not then of record, unless the lienholder had actual notice thereof. As against a bona fide purchaser, mortgagee or encumbrancer without notice, however, no lien shall attach prior to the actual and visible beginning of the improvement on the ground.”

The lower court held that the work of wrecking the old building and removing it and the débris from the premises Avas not an “actual and visible beginning of the improvement on the ground.” This holding Avas correct. Lamoreaux v. Andersch, 128 Minn. 261, 150 N. W. 908, L. R. A. 1915D, 204. The situation is no different than it would have been had someone other than Anderson secured the excavating contract and done the work thereunder. The Avork done by Anderson on September 2 to September 5, inclusive, was not of a lienable nature. He was simply removing his OAvn building from the premises. Mechanic’s lien claimants cannot rely on the fact that this building removal work was in progress before the Deming mortgage was recorded to establish a preference over such mortgage.

Deming was a bona fide mortgagee “without notice,” and hence none of the liens here involved could attach and be prior to his mortgage. The mere knowledge by Deming that the erection of a new building upon the lot was in contemplation did not constitute the notice provided for in the statute. The words “without notice” mean “without notice of an existing lien.” Landers-Morrison-Christenson Co. v. Ambassador Holding Co. 171 Minn. 445, 448, 214 N. W. 503, 53 A. L. R. 573; Erickson v. Ireland, 134 Minn. 156, 158 N. W. 918. These decisions are controlling. The findings of the trial court are sufficiently sustained by the evidence and must stand.

Order affirmed.