Guy v. Leech

This is an appeal by the defendant from that portion of a judgment which decrees that the mechanic’s lien of plaintiff is superior to the first mortgage held by defendant and appellant upon certain real property in the county of Los Angeles. There were three actions involving the same issues, which were consolidated by the trial court and tried at the same time. In one of the actions the plaintiff Haslwanter sought to foreclose a mechanic’s lien, and Sarah L. Bond, the appellant here, was made one of the defendants, as she held a first mortgage upon the

In the second suit, George F. Guy sought to enforce a mechanic’s lien against the property and to have it declared superior to the mortgage. This was resisted by the mortgagee Bond. Before a determination was had of the questions raised in these suits, the mortgage became due by reason of default in some of its terms, and the mortgagee Bond sought to foreclose the same in yet another suit, in which said lien claimants were joined as defendants. It was stipulated that the complaints in the mechanic’s lien foreclosures should be considered the answers and cross-complaints of said claimants in the mortgage foreclosure suit of Sarah L. Bond. The actions were consolidated, and the one issue presented in them all was, whether or not the mechanic’s lien of the respondent was superior to the mortgage. The court found that it was, and from such determination the appellant prosecutes this appeal.

[1] The facts' with relation to this question are: Harry It. Leech was a builder and he borrowed from Sarah L. Bond $3,000 for the purpose of building a house. For this amount he gave her his note, which was secured by a mortgage upon the house, then partially constructed. This mortgage was dated May 9, and recorded May 19, 1917. Leech had previously built houses, which were financed by building loans, and had purchased the lumber therefor from the respondent. In borrowing the money to carry on the work he had given first mortgages, and the respondent had furnished the lum-' ber and had taken deeds of trust subject to the first mortgages upon the property upon which the work was being done. In this instance, Leech and Guy—it is admitted by both of them—undertook to make the same arrangement, and Guy agreed to furnish the lumber and to take a deed of trust in payment therefor, subject to the first mortgage. He did furnish the lumber in accordance with this understanding and it was used in the construction of the house. This construction work was well under way when Leech applied to Mrs. Bond’s agent, Patterson, for the loan of $3,000. Mr. Patterson testified that he called up Mr. Guy on the telephone when Leech applied for the loan; that he told him

Within a month Leech became involved in financial difficulties and did not complete the house. It appears from the record that the plumbing and a portion of the painting, and other minor matters, were left uncompleted, and that it would cost about $200 to finish the house. Leech ceased work upon the house, and the cement contractor, Halswanter, who had not been paid, filed his notice of lien for $230, which lien was adjudged in these consolidated actions to be superior to the mortgage, and is not disputed by the appellant.

In October, 1917, Leech being in default in the payment of interest upon the first mortgage, Mr. Patterson, the representative of the mortgagee, telephoned to Guy, who had the trust deed, and Guy said that he would pay the interest as soon as he could get a deed from Mr. Leech conveying the property to him. He later paid the interest and said he had received a deed from Leech. Guy had called upon Leech in October and had asked what was to be done about

In November, 1917, Guy filed his notice of lien and returned to Leech the trust deed and note and the quitclaim deed. He made no reconveyance of the property, but merely returned to Leech the evidences of the transfer of interest to himself. So far as the record shows, the trust deed is still on record unreleased and affects the title to this property. Guy now seeks to enforce his mechanic’s lien. He takes the position that he accepted the trust deed in payment for his lumber upon the understanding that it was to be subject only to the first mortgage, and upon the understanding that the house would be completed by Leech, and that as an intervening lien has accrued and the house is not completed, he does not wish to rely on his trust deed, but wishes to enforce his mechanic’s lien. His explanation of his return of the quitclaim deed to the property, given to him in October by Guy, is that it was not a grant deed and was not signed by the wife of Leech, and that, therefore, it was not a deed satisfactory to him, and he had consequently returned the instrument to Leech.

We may eliminate the question of the sufficiency of the second deed and of Guy’s acceptance thereof; for it appears to us that the facts regarding the trust deed are decisive of this case. Respondent agreed, as appears by his own testimony, to accept the trust deed in payment of his debt, which trust deed was to be inferior to the building money mortgage given to Mrs. Bond. He represented to Mrs. Bond that this would be done after he had been told that she would consider the loan a heavy one unless he agreed to do this. In other words, he, by his representations, caused her to believe in the security of the loan and to advance the money. The advancement of this money by her for the building was an advantage of him, as he was selling the lumber, and had sold lumber under such conditions to Leech for several other houses. He acted in accordance with his representations and took the trust deed. His later disappointment in re

The question of law involved here is carefully discussed, both upon principle and authority, in the cases cited to us by the appellant, most of which are reviewed by our own supreme court in the case of Martin v. Becker, 169 Cal. 301 , at page 309 et seq., [Ann. Cas. 1916D, 171, 146 Pac. 665 ]. It is said in the case of Martin v. Becker, supra, in enumerating the different classes of cases in which the taking of new or additional security operates to destroy an existing lien— that where it would be fraud upon other claimants to permit the earlier lien to be held valid, equity interposes and declares it to have been waived or lost by the taking of the later security, or what is, in effect, the same, erects a bar to its enforcement.

The respondent is estopped to set up as against this appellant that he did not accept the trust deed in payment for bis material and in lieu of any lien which the law allowed to him therefor. [2] Respondent seeks to avoid the force of the facts constituting the estoppel by reason of the fact that the estoppel was not pleaded. While it is true that the general rule requires an estoppel to be pleaded, yet it has been held that there is an exception to this rule where the party is without knowledge that his claim must ultimately rest upon an estoppel. (Donnelly v. San Francisco Bridge Co., 117 Cal. 417 , [ 49 Pac. 559 ].) In the present case, the appellant did not rely upon an estoppel as the foundation of her claim. She believed and alleged that Guy had accepted the trust deed in payment of his debt. The evidence upon the trial disclosed the fact that Guy was denying his

There are, however, no findings upon which we could order a judgment to be entered decreeing the priority of appellant’s mortgage lien. We have no power to make findings for the trial court. (Blood v. La Serena L. & W. Co., supra.) Therefore, the. judgment, in so far as it relates to the lien of the respondent Guy, and in so far as it decrees that lien to be superior to the mortgage of the appellant, is reversed.

Nourse, J., and Brittain, J., concurred.

A petition to have the cause heard in the supreme court, after judgment in the district court of appeal, was denied by the supreme court on July 19, 1920.

All the Justices concurred, except Wilbur, J., and. Lennon, J., who were absent.