Opinion
Decided October 21, 1930.
Mechanics' liens — Waiver by lien claimant taking mortgage — Additional real estate and indebtedness covered by mortgage.
A mechanic's lien claimant, who takes a mortgage upon the real estate covered by the lien as security for the debt, waives the lien by operation of law, notwithstanding the mortgage covers other real estate and is given to secure a note of the debtor which includes not only the original debt but other indebtedness due from the mortgagor to the mortgagee.
APPEAL: Court of Appeals for Lorain county.
Mr. G.A. Resek, for plaintiff.
Mr. H.G. King, for defendants Kent.
Messrs. Sawyer, Cummings Strong and Messrs. Fauver Fauver, for defendant the Cleveland Trust Company.
Messrs. Mooney, Hahn, Loeser, Keough Beam and Mr. A.W. Cinniger, for defendant the Citizens Home Savings Association Company.
Messrs. Van Deusen Calhoon, for defendant the Henry Furnace and Foundry Company.
Mr. D.A. Cook, for defendant Wilbur A. Edwards.
This case is here on appeal. The plaintiff started an action in the court of common pleas of Lorain county, and its amended petition contained four causes of action. The first two were for the foreclosure of mechanics' liens upon two different pieces of property. The third cause of action was based upon a promissory note for the sum of $5,100, given to plaintiff by defendants Kent. The fourth cause of action was for a foreclosure of the mortgage given by said Kents to secure said note. The mortgage covered the property described in said mechanics' liens and other real estate.
The defendant Citizens Home Savings Association Company had a mortgage for $3,500 upon each one of the two lots covered by the mechanics' liens of said plaintiff and upon other real estate.
The defendants Kent owned lots 564, 565 and 566 in the Fairhome addition to the city of Lorain, which lots were each 25 feet wide, and at the time of the construction of the houses thereon they placed one upon the dividing line between lots 564 and 565 and the other upon the dividing line between lots 565 and 566; but when plaintiff filed the mechanics' liens for the materials furnished for said houses it described only lots 564 and 565; so it had a lien upon all of lot 564 and half of the house built upon the dividing line between lots 564 and 565, and a lien upon lot 565 and the other half of the house built upon the dividing line between lots 564 and 565, and the south half of the house built upon the dividing line between lots 565 and 566; but it did not have a mechanics' lien upon lot 566 nor upon the north half of the house built upon the dividing line between lots 565 and 566.
One of the mortgages given to the association described and conveyed all of lot 566 and the north half of lot 565, and the other mortgage described and conveyed the south half of lot 565 and all of lot 564.
The mechanics' lien of the plaintiff upon lot 564 amounted to $842.13, and upon lot 565 to $1183.67. On January 21, 1928, which was long after the filing of the mechanics' liens and said mortgages, the plaintiff received from said Kents a note for $5,100, which amount was made up of the amounts of said liens and other debts, and a mortgage securing said note, in which mortgage all of the foregoing lots were described and also the homestead of said Kents located in another part of the city of Lorain.
The defendant Citizens Company claims that the mechanics' liens of plaintiff, which originally were prior in time to its mortgages, were waived by agreement between plaintiff and the Kents at the time said mortgage was given to plaintiff, and also were waived by operation of law.
We have read a transcript of the evidence taken in the trial court, which has been submitted to us for our consideration, it being the only evidence offered, and we are unanimously of the opinion that said defendant has not sustained the burden of proof cast upon it to show such waiver by agreement.
A waiver by operation of law is claimed by virtue of the following section, to wit, Section 8323-6, General Code:
"All liens or claims for liens which may arise or accrue under the terms of this act shall be assignable. No lien provided for in this act shall be defeated or waived by the taking by the lien claimant, from any person of any promissory note or notes or of any security for such debt other than upon the real estate itself, in the absence of a written agreement that the taking of such note or notes or such security shall be a waiver of the lien."
Mechanics' liens are creatures of law, and the right to have them may be given or withheld by the legislature. If the right is given to have them upon certain conditions, those are conditions precedent, which must be complied with to have a valid lien. If the right to have a lien is given, the legislature may provide how, when, and under what circumstances the lien may become void, waived or taken away.
By the foregoing section the legislature clearly intended that a mechanics' lien should remain as security for the debt unless waived by the lien claimant, and by the language used in said section it is expressly stated what acts shall not be a waiver of the lien.
Therefore, the lien is not waived (a) by taking a promissory note or notes to evidence the debt, nor (b) by taking any kind of security for the debt, such as collateral, chattel mortgages, or mortgages upon real estate other than that covered by the lien, unless at the time the note or notes or new security is given it is the intention of the parties that the lien be waived, and the agreement to waive is in writing; and unless there is such intention, so expressed, it will be assumed that the new security is in addition to and not a substitute for the old.
So, how may a lien be waived by the terms of said section?
One of the methods provided therein is by taking other security than the land covered by the lien, with the agreement to waive the lien, if such agreement is reduced to writing.
Another method claimed by said defendant and denied by plaintiff is by taking the real estate covered by the lien as security for the debt; and that claim is based upon that part of the foregoing section which reads as follows:
"No lien provided for in this act shall be * * * waived by the taking by the lien claimant * * * of any security for such debt other than upon the real estate itself."
The words "any security" refer to any kind of security the lien claimant is willing to accept, different from that which he then has, which is the real estate which his lien then covers; so if the lien claimant accepts the lien-covered property as security for his debt, it being the property then covered, it is not "security for such debt other than upon the real estate itself" but is security upon "the real estate itself" and is by the language of said section a waiver of the lien.
A lien therefore may be waived under said section by (a) taking the real estate covered by the lien as security for the debt represented by the lien; or (b) by taking other security, with the agreement to waive the lien, when such agreement is reduced to writing.
So, if the lien claimant takes the land covered by the lien as security for the debt by a method different in form from that which he then has, which of course could be done only by a properly drawn, executed and delivered deed in the form of a mortgage or otherwise, then, as the law clearly states, he by so doing loses his lien and his rights thereunder, because he has taken upon the same land a new and different security of a higher order, which shall be considered as a substitute for the other security which it has displaced.
The evidence in this case shows that the plaintiff took as security for his new note the land covered by the original liens and other land of the defendants Kent, said other land being lot 566 and the homestead of said debtors, to secure not only the amounts of the two liens but the balance of the running account which the Kents owed to said plaintiff. By so doing the plaintiff took as security the original real estate covered by the original liens, and the fact that the note includes other indebtedness of the defendants Kent to the plaintiff, and the mortgage covers other real estate of said Kents, which was not covered by the lien, does not change the fact that the original real estate is still security for the original debts secured by the original mechanics' liens.
"A presumption of law is an inference which, in the absence of direct evidence on the subject, the law requires to be drawn from the existence of certain established facts." 22 Corpus Juris, page 82, Section 25.
It being clearly established by the evidence in this case that the original debts secured by the two mechanics' liens are now secured upon the same land which was covered by the mechanics' liens, it therefore follows, as a presumption of law, that the plaintiff, when it took said mortgage, waived the two mechanics' liens which it had prior thereto.
A decree may therefore be drawn in accordance with this conclusion.
Decree accordingly.
FUNK, P.J., and WASHBURN, J., concur in judgment.