Opinion
Hearing Granted by Supreme Court Oct. 17, 1927.
COUNSEL
R. L. Horton, of Los Angeles, for appellants.
Peyton H. Moore, of Los Angeles, for respondent.
OPINION
THOMPSON, J.
On July 11, 1921, A. Schneider (since deceased), as owner, entered into a building contract with the defendant W. T. Jackman Company, as contractor, for the erection of a bungalow court. The contract provides that of the total contract price "Ten thousand (10,000) dollars * * * shall be due and payable on or before four years after date of completion of said buildings and shall be payable in installments of two hundred fifty (250) dollars per month beginning thirty days after the completion of the said buildings." After provision for interest at 7 per cent. per annum, it was further stated that the note evidencing this sum "is to be secured by a trust deed on said property and shall be drawn in favor of Kathryn Thompson, a single woman, and shall be filed for record at once. Said note to be put in trust at Hellman Bank till bldg. completed." The deed of trust was signed on July 12, 1921, in accordance with the understanding, and placed of record on the next day, July 13, 1921. On July 14, 1921, Schneider placed the note in the hands of the Hellman Commercial Trust & Savings Bank, with instructions, signed by himself alone, that the note and trust deed, when returned from the recorder’s office, should be held by the bank until he should notify them to deliver it to W. T. Jackman Company. It is conceded that the note and trust deed were executed, and the trust deed recorded, prior to the commencement of any work on the buildings. During the progress of the work the appellant Hammond Lumber Company informed the contractor and owner that it would not proceed further with the delivery of materials unless it were given security superior to its mechanic’s lien rights. After some negotiation the trust deed note was assigned and delivered to it, contemporaneously with the following instrument:
"Los Angeles, Cal., September 7, 1921. "Hammond Lumber Company, 2010 So. Alameda Street, Los Angeles, Cal.-- Gentlemen: The undersigned, W. T. Jackman Company, have contracted construction work for Abraham Schneider, part payment for which is a trust deed of $10,000 made by said Abraham Schneider in favor of Kathryn Thompson. Said trust deed shall be valid only upon completion of the building according to plans and specifications and contract, or upon the owner signing notice of completion. A. Schneider. "Abraham Schneider: If building is completed and trust deed is valid, then you shall hold same security to this or any other account of W. T. Jackman Company under terms in accordance with your collateral note pledge, copy of which is hereto attached. Yours truly, W. T. Jackman Company, 4372 So. Hoover St., by W. H. Prince. Kathryn Thompson. 1240 No. Cahuenga."
It is apparent and conceded that Kathryn Thompson had no interest in the note, but held the same for W. T. Jackman Company. Notice of completion was filed December 16, 1921.
The plaintiff and respondent did plumbing work upon the buildings and brought action to foreclose his mechanic’s lien. The contest revolves around the question whether the trust deed is superior or inferior to the mechanic’s lien of plaintiff. Judgment was entered for the amount of plaintiff’s lien, in the sum of $4,380.23, together with interest and costs, and for the amount of the appellant Hammond Lumber Company’s lien, in the sum of $20,413.23, together with interest and costs. It was further adjudged that upon sale of the property these amounts should be paid prior to the payment of the trust deed note. The appeal is from the judgment.
Appellants assign three reasons for a reversal of the judgment, one of which is that the mechanic’s lien of plaintiff is insufficient for the reason that while the buildings were constructed upon lots 31 and 32 of tract No. 3499, the lien of plaintiff only refers to lot 32, and that the description of the property by street number is not satisfactorily complete, because it describes the property "as being 1240 and 1244 Cahuenga avenue," when in fact the property was numbered "1240, 1242, and 1244." Whatever question might have been raised as a result of this description is not available to the appellants, for a very obvious reason. Prior to the trial counsel for plaintiff and counsel for the defendant Hammond Lumber Company and Title Guarantee & Trust Company entered into a stipulation concerning the facts, the material portions of which read as follows:
"The claim of J. M. Fickling for $4,055, and interest thereon at 7 per cent. per annum from January 12, 1922, as set forth in his complaint, together with a mechanic’s lien, securing said amount, upon the real property described in the complaint of the said J. M. Fickling, is hereby admitted as established, and further proof thereon is hereby waived. * * * The claim of the Hammond Lumber Company, as set forth in its complaint in a certain action instituted in this court, and numbered 105044 of the records of this court, wherein Hammond Lumber Company was plaintiff and W. T. Jackman et al. were defendants, together with its right to a mechanic’s lien for the amount of said claim upon the real property described in the complaint in said action, shall be deemed established, and further proof of the amount of said claim and of the right to a lien upon the real property, referred to in said complaint, is hereby waived. * * * It is stipulated that the mechanic’s lien claims of the said J. M. Fickling and of the said Hammond Lumber Company, respectively, as above stipulated for, shall be deemed as standing on the same basis, and upon an absolute equality under the law, neither having a preference over the other; it being understood, however, that no stipulation is made as to whether that certain trust deed, executed by Abraham Schneider in favor of the Title Guarantee & Trust Company, upon the real property set up in plaintiff’s complaint, and securing a note for $10,000 in favor of Kathryn Thompson, which said note was assigned to the Hammond Lumber Company, is a prior lien upon said real property superior to the mechanic’s lien of J. M. Fickling, the plaintiff above named, the priority between the lien of said trust deed and the lien of the mechanic’s lien claim of J. M. Fickling being left for the determination of the court in this action."
It is inconceivable that as between two contestants the lien could be both valid and invalid. It is equally impossible that an invalid claim of lien could stand "upon an absolute equality," with a valid lien. In the absence of any claim of fraud or mistake, the appellants by their stipulation are foreclosed of the right to question the validity of the lien.
Appellants also assert that the trial court committed error in striking out portions of the testimony of the witness Paul Hallingby. The witness was relating a conversation had in the presence of W. H. Prince, representing the Jackman Company, and A. Schneider, and among other things testified that "Mr. Prince said that he could give us the trust deed as security with Mr. Schneider’s consent; " that "he said that it [the trust deed] was recorded before any work was done; " and that in response to a query concerning its priority to mechanics’ liens Mr. Prince said "that was a point they were very particular about, because they had a sale arranged for this trust deed." Manifestly, appellants cannot complain because of the exclusion of the statements that the trust deed could be transferred with Schneider’s consent, and that it was recorded before work was commenced, for the reason that these facts are conceded. The other statement stricken is in effect that the trust deed was senior to the mechanics’ liens. It is purely a conclusion of law on the part of the speaker, and could not possibly have aided the court in its determination. The ruling was proper.
We now turn to the most serious question in the case, whether, under the circumstances of this situation, the trust deed is prior to the mechanics’ liens. We collect the rule from the cases of Savings & Loan Soc. v. Burnett, 106 Cal. 514, 39 P. 922, Tapia v. Demartini, 77 Cal. 383, 19 P. 641, 11 Am. St. Rep. 288, Hall v. Glass, 123 Cal. 500, 56 P. 336, 69 Am. St. Rep. 77, Valley Lumber Co. v. Wright, 2 Cal.App. 291, 84 P. 59, Fuller & Co. v. McClure, 48 Cal.App. 185, 191 P. 1027, Harper Reynolds Co. v. Hammond Lumber Co., 51 Cal.App. 74, 196 P. 97, and San Francisco Lumber Co. v. Yates, 54 Cal.App. 109, 204 P. 423, that where the mortgagee in a mortgage recorded prior to the commencement of work on the building is by an enforceable obligation under the duty of advancing money or materials, the lien of the mortgage for the advances is prior to and superior to mechanics’ liens subsequently aceruing by reason of labor done or materials furnished; but that where, as in the case of Fuller & Co. v. McClure, supra, it is optional with the mortgagee named whether he makes the advances, the lien only attaches as of the date of the advancement--at least as against those incumbrances or liens of which he has notice. This result is reached by the law of contract, the promise to advance a definite amount furnishing the consideration for the lien of the mortgage in the one instance, and the advancement itself being the consideration in the other.
The present case, however, instances a situation different from any to which our attention has been directed, in this, that while the beneficiary named was a third party--a stenographer in the employ of the contractor--yet for the purposes hereof it may be deemed (it is conceded) that the beneficiary was the contractor. While by contract there was an enforceable obligation on its part to erect the buildings, there is also included in the provision that it, the contractor, "will furnish all labor and materials necessary for the erection and completion of the buildings"--an obligation on its part to pay for all materials used and labor done in their erection. In the case of Callan v. Empire State Surety Co., 20 Cal.App. 483, 129 P. 978, 981, which was an action brought by the owner against the surety of the contractor to recover moneys paid out to discharge claims for labor and material after abandonment by the contractor, it was definitely determined that a similar clause in a building contract obligated the contractor, not merely to furnish, but to pay for the labor done and material furnished.
Let us suppose, to give the situation greater clarity, that the contractor in this instance obligated itself to advance to the owner the sum of $10,000, and that it had failed, neglected, and refused to advance that or any other sum. Could the contractor or its assignee, who stands squarely in its shoes, urge that the trust deed was superior to the liens for labor and material? Yet that is the argument now advanced. To give the lien of the trust deed preference over the mechanics’ liens would amount to preferring the contractor to the laborers and materialmen, contrary to the plain intent of section 1193 of the Code of Civil Procedure. By this section the Legislature has declared that the claims for work done and materials furnished shall have a preference over any claim of the contractor, who is primarily obligated therefor, and has said, in effect, that the contract price shall constitute a fund for their protection. It would be grossly inequitable to permit a contractor, through the device of a recorded incumbrance, to gain for himself an advantage over his creditors. And, of course, what he cannot gain for himself, he cannot gain for his assignee. Or. to put it another way--and again upon the law of contract--the contractor, having failed to discharge the claims for labor and material in an amount in excess of the trust deed note, has failed in the consideration agreed to be furnished for the trust deed, and the mechanics’ liens therefore must be held to be superior.
Judgment affirmed.
We concur: WORKS, P.J.; CRAIG, J.