Martsolf v. Barnwell

1. Report of Referee; When Conclusive as to Facts. Where a ease is tried before a referee who reports his findings of fact and conclusions of law, and no motion is made to set aside the report, the findings .of fact become conclusive as to the facts of the case. 2. ---- Conclusions of Law, for the Court. The conclusions of law, however, drawn from these facts remain for consideration by the court, and if it is satisfied that the referee erred in such conclusions, it is its duty to apply the law correctly, and render such judgment as is appropriate to the facts. 3. Pbiority of Liens — Mortgagee, and Mechanic. Under the lien law of 1871, where a mortgage was executed and recorded on August 21st, and a contract to erect a hotel was executed and the work thereon commenced on August 23d, the lien of the mortgagee is prior to the mechanic’s lien of the contractor. 4--- Where such mortgage did not upon its face provide for future advances, yet as a matter of fact the money was paid over at different times to the mortgagor, and only a small portion before the commencement of the work, but it did not appear that any part of the work done or materials furnished, which were not paid for and for which a lien was claimed, were so due and furnished before the last advancement of money by the mortgagor upon said mortgage, the lien of the mortgagee was properly adjudged the prior lien.

Error from Sedgwioh District Court. An action to foreclose a mortgage was brought by Charles McDougall as plaintiff, against Egbert J. Blood and wife, as mortgagees. Martsolf and Barnwell were joined as co-defendants. They answered separately — Martsolf claiming a mechanic’s lien on the mortgaged premises, under a contract dated August 23d 1871, and Barnwell claiming under a' mortgage executed and recorded two days earlier. The case was referred to C. C. N., who reported the facts as to each claim, but found as conclusions of law that Martsolf s lien was first, Barnwell’s second, and McDougall’s third, in order of priority. The district court, at the September Term 1873, upon -the facts as reported, held that the referee erred in respect to the liens of Martsolf and Barnwell, and gave judgment in favor of the several lien-holders, and in the order of priority as follows: In favor of Barnwell, $5,000; in favor of Martsolf, $1,754.50; in favor of McDougall, $1,551. Martsolf appeals, and brings the case here on error for review. The findings of fact by the referee being undisturbed by the court, are conclusive as to the determination of the questions of fact. The referee finds that the Barnwell note and mortgage were made August 21st, 1871-; that prior to that time Martsolf and Blood had agreed upon the terms of their contract, and it had been reduced to writing by Barnwell, and there was then an understanding had between Blood, Barn-well, and Martsolf, that Barnwell was to furnish the money to pay Martsolf, and to furnish it as the work progressed. Martsolf then had the right to suppose, when he began work, on the 23d, that no money had been advanced or would be advanced by Barnwell to Blood until after the work should be commenced. He had the right to suppose that Barnwell would not have any lien upon the premises until money was actually advanced, and then only to the extent of the advancement. (17 Ohio, 371.) He had the right to suppose that he would be entitled to a lien from the date of the commencement of the work. (Laws 1872, ch. 141, §1.) And although the mortgage was of record, in the absence of any proof of actual knowledge of it, and in the absence of proof of any knowledge that $400 had been advanced by Barnwell under the mortgage, he had the right to rely upon the arrangement made previously as to the time when the advances were to be made. This arrangement, which existed between the three, was evidently entered into in view of the terms of payment as expressed in Martsolf’s contraer with Blood. The referee further finds that Barnwell from first to last recognized Martsolf as having the prior lien. But in any event, under the authorities cited, Barnwell could not claim a first lien for more than $400. But there are two things which should not be overlooked in determining even that: Barnwell, by his conduct, and agreement with Martsolf and Blood, represented to Martsolf that $6,000 would be advanced to pay him for the work — that this money should be advanced as the work progressed, in accordance with the terms of the engagements of Blood to himself. In violation of this engagement, Barnwell advanced Blood $400 before the work commenced, and before Blood was under any obligation to pay Martsolf anything; and finally failed ahd refused to advance the whole sum as he had agreed; and it is reasonable to suppose Martsolf would have been paid in full if Barnwell had kept his agreement. These facts estop Barn-well from claiming even the $400 as a prior lien. Notwithstanding the fact that Barnwell’s mortgage was made and recorded before' Martsolf made his contract, or commenced work, the referee found that Martsolf’s lien was prior to the mortgage, and gave as his reasons for this conclusion of law the following: “1st. The contract for the building was written out by Barnwell before the 21st of August 1871, and was executed August 23d, in presence of Barnwell; therefore, Barnwell is estopped to deny the priority of Martsolf’s lien. “ 2d. When the mortgage was made to Barnwell, (August 21st,) and the contract with Martsolf, (August 23d,) Blood only owned one-half of the lots. He afterward (December 18th 1871,) and before the filing of Martsolf’s lien (January 29th 1872,) perfected his title to the whole property; therefore, such subsequently-acquired title inured, by operation of law to the benefit of the junior lien, to the exclusion of the senior.” It is needless to say, that no rules of law or equity were even incidentally mentioned as tending to support such propositions. The lien under which plaintiff in error claims is purely the creature of statute law. Its terms, its force, its effect, and its priority, must be determined by that law. The lien law of 1871 is broad enough as it is, and the referee was not justified in interpolating new provisions by way of experiment. There might have been some shadow of excuse, if it had been shown, or even asserted, that Barnwell had concealed the existence of his mortgage. On the contrary, it is shown, and the fact dwelt on by the referee, that Martsolf knew all about the mortgage, and that Barnwell was to furnish the money to build the house. Under such circumstances the following, in the mechanic’s-lien law of 1871, p. 252, will be found to not inaptly express the true rule of priority between the parties: ' “Sec. 1. * * * Such lien shall be preferred to all other liens and incumbrances which may attach to or upon such lands * * * subsequent to the commencement of such building.” It seems too plain for argument, that the whole proceedings before the referee were based either upon the deliberate intention to ignore the rights of a nonresident, or in gross ignorance of what those rights were. It may be a valid presumption of fact, that all persons who agree to erect houses will be compelled to file a lien to secure their pay; but the referee in this case makes it a presumption of law! The law presumes that every man will pay his debts, but, with prudent foresight secures to the creditor a remedy in any case where the presumption fails. Thus, 'the presumption of law in this case was, that Blood would voluntarily pay Martsolf what he owed him. But in case he did not, the law contracted for him that Martsolf should have a lien upon the premises improved, to date from the commencement of the improvements. All persons acquiring an interest after work is begun, do so warned by the law of a contingency which, if it arises, postpones their interest or claim to the lien of Martsolf. But the law does not, and cannot say, that a lien legally acquired upon property which is in no other way incumbered, can afterward, by operation of law, be postponed to the lien of a party who, at the time of making the first lien had no lien, and no right to a lien. The second conclusion of law is equally objectionable. It may be conceded that the subsequently-acquired title of the mortgagor inured to the benefit of his mortgagee, and other lien-holders; but how it would have the effect to make the last lien better than the first is not so plain. If such after-acquired title does inure to the benefit of prior grantees, (and it is admitted that it does,) it has the effect to make perfect the grantor’s title, and dates that perfected title back to the time of the first conveyance. In other words, the sheriff’s deed of December 18th 1871 made Blood’s title good on the 21st of the preceding August, and left the mortgagee and lien-holder’s questions of priority in the same situation they would have been had Blood’s title been originally perfect. On the 18th of December 1871, then, Blood’s title became perfect. How, under such circumstances, can it be held, that an inchoate lien — a lien not yet in existence, a lien which may never exist, and which in truth does not become a lien until January 29th 1872 — can relate back and take precedence of a mortgage duly recorded before the commencement of the work upon which the lien is founded ?