Purchase pending Suit to Foreclose Lien.

$318. One who buys land pending a suit to foreclose a mechanic's lien thereon takes title subject to the lien, and is bound by the proceedings in the suit.27 At common law, such suit is not pending, so as to affect purchasers, until the defendant has been brought under the jurisdiction of the court, either by service of summons or voluntary appearance.28 Under the code practice, the decisions on this point are not harmonious. In California it is held that, where no notice of lis pendens is filed, a purchaser who buys after suit is begun may, after a decree of foreclosure has been rendered therein, sue to set aside such decree as a cloud on his title, since notice of a suit is not presume 29 d: while in Colorado it is held that a purchaser of land upon which a lien claim has been filed is chargeable with notice of a suit to foreclose such lien pending at the time of his purchase, although no notice of lis pendens has been filed.30 In a case in Illinois, where the common-law practice prevails, it appeared that, work having been done on a building situated on two lots, a petition to foreclose a lien was filed, mentioning only one lot. Afterwards, and after time for beginning suit as against purchasers had expired, the petition was amended so as to refer to both lots; and it was held that a purchaser who bought after the petition was filed, and before it was amended, took title to the omitted lot, free from the lien, since as to such lot there was no suit pending when he bought.31 In a case in Kansas, suit to foreclose a subcontractor's lien was brought against the owner and the contractor, and a decree entered denying the lien, but rendering personal judgment against the con

27 Ellett v. Tyler, 41 Ill. 449; Glenn v. Coleman, 3 B. Mon. (Ky.) 133; Ombony v. Jones, 21 Barb. (N. Y.) 520; Ambrose v. Woodmansee, 27 Ohio St. 147. A deed recorded after the bill to enforce a mechanic's lien has been filed, though it purports to have been executed previously, cannot affect plaintiff's rights. Mouat v. Fisher (Mich.) 62 N. W. 338.

28 Franklin Sav. Bank v. Taylor, 23 N. E. 397, 131 Ill. 376.

29 Head v. Fordyce, 17 Cal. 149.

30 Empire Land & Canal Co. v. Engley, 33 Pac. 153, 18 Colo. 388.

31 Gardner v. Watson, 18 Ill. App. 386; Watson v. Gardner, 10 N. E. 192, 119 Ill. 312.

tractor.

After this the land was sold, and it was held that this judg

ment was conclusive in favor of the purchaser.3

32

Objections Open to Purchaser.

§ 319. Purchasers may make any defense to the lien that is open to their vendors. Thus, the purchaser is entitled to claim the bar of the statute of limitations when his vendor could.33 And a mechanic cannot establish his claim for work done on a house, as against an innocent purchaser from his employer, where, at the time when the work was done, his employer had counter demands against him more than sufficient to counterbalance the fair price for his work.34 So, too, the purchaser of land from a married woman may resist a mechanic's lien on the ground that his grantor was unable to contract, and therefore could not create a lien.35 He may assume that no credit was given by the lien claimant where the claim filed is silent on that point. But, where the purchaser buys pending suit to foreclose, he cannot raise the objection that notice was not served on his grantor in apt time, if the latter has waived the objection by not raising it in the suit.37

36

Conveyance Subject to Lien.

§ 320. A grantee of the fee in leased land subject to all existing liens and incumbrances thereon, who purchases after the claim is filed to subject the lease to the lien, does not become obligated to pay the debt; nor is he estopped from denying that a lien was placed on the fee. But the vendees or assignees of the owner of an uncompleted building, who purchase expressly subject to claims for liens for work done thereon, will be bound thereby, and stand in his shoes; and, if they refuse to permit the contractor to

32 Irish v. Foulks, 22 Pac. 315, 42 Kan. 370.

33 Watson v. Gardner, 10 N. E. 192, 119 III. 312; Burbank v. Wright, 47 N. W. 162, 44 Minn. 544.

34 Graham v. Holt, 4 B. Mon. (Ky.) 61.

35 Gray v. Pope, 35 Miss. 116.

36 Schneider v. Kolthoff, 59 Ind. 568.

37 Ombony v. Jones, 21 Barb. (N. Y.) 520.

38 Jones v. Manning (Sup.) 6 N. Y. Supp. 338.

41

40

complete the work, he will be entitled to a lien to the extent of the loss sustained.39 One who buys land subject to the payment of a mechanic's lien, and who retains out of the purchase money enough to pay the lien debt, may be liable therefor in a proper action, but not in an action to foreclose the lien, even though he has expressly promised to pay it. The fact that a purchaser takes land subject to mechanics' liens does not prevent such liens from expiring by limitation, nor interrupt the running of the statutory limitation for suing on them.42 A party who, with notice of the nature and amount of the lien of a contractor, takes a conveyance of the property subject to it, cannot be affected by a subsequent alteration of the contractor's contract.43 Where the purchaser of land on which there is a mechanic's lien agrees to pay off the same, and save his grantor harmless therefrom, the lien may be enforced against the land in the hands of the purchaser, without first exhausting the lienor's remedy against the grantor.**

Fraudulent Conveyances.

§ 321. A fraudulent or simulated sale, made for the purpose of defeating the lien or for the purpose of hindering the grantor's creditors generally, has no effect on the lien, and may be set aside at the suit of the lien claimant.45 Where such fraudulent conveyance is made before the claim for lien was filed, the claimant may still file his claim against the grantor, treating the conveyance as an incumbrance, and may, in his suit to foreclose his lien, make the grantee a party, show the transfer to be fraudulent, and obtain a cancellation of it as incident to the foreclosure of his lien.46

39 Howes v. Wire-Works Co., 48 N. W. 448, 46 Minn. 44.

40 Sinclair v. Fitch, 3 E. D. Smith (N. Y.) 677.

41 Mervin v. Sherman, 9 Iowa, 331.

42 Burbank v. Wright, 47 N. W. 162, 44 Minn. 544.

43 Soule v. Dawes, 7 Cal. 575.

44 Cullers v. Bank (Tex. Civ. App.) 29 S. W. 72.

45 Jones v. Trustees, 30 La. Ann. 711; Amidon v. Benjamin, 126 Mass. 276; Meehan v. Williams, 2 Daly (N. Y.) 367, 36 How. Prac. (N. Y.) 73; Gross v. Daly, 5 Daly (N. Y.) 540.

46 Amidon v. Benjamin, 126 Mass. 276; Meehan v. Williams, 2 Daly (N. Y.) 367, 36 How. Prac. (N. Y.) 73; Gross v. Daly, 5 Daly (N. Y.) 540.

47

DIVISION II. MORTGAGEES.

Rights of Mortgagees.

48

§ 322. Mechanics' liens on mortgaged property have been already discussed. It remains to consider the rights and liabilities of the mortgagee with respect to the lien. Mortgagees are given the same rights as purchasers, and, like purchasers, mortgagees are bound to know whether labor or materials have been furnished for the improvement of the mortgaged property within the time allowed for filing lien claims.49 But a mortgagee who receives his mortgage pending a suit to foreclose a mechanic's lien on the property is affected by the suit only to the extent to which the lien is claimed in the pleadings at the time the mortgage is given.50 The Iowa statute requires the claim for a mechanic's lien to be filed within 90 days, and declares that otherwise the lien shall be postponed to the rights of bona fide incumbrancers without notice. Under this statute, it has been held that a mortgagee without actual notice, whose mortgage was given for an old debt, the time for the payment thereof being extended, had priority over the mechanic who filed his claim after the 90 days, and after the filing of the mortgage; and that the burden of proving notice was on the lien claimant.51 A mortgagee's rights are not enlarged by the fact that the mortgage debt was one for which a mechanic's lien might have been claimed had he not waived his lien by taking the mortgage." Where the mortgage contains no provision allowing the mortgagee to pay taxes and insur

47 See ante, §§ 143-156.

48 Gere v. Cushing, 5 Bush (Ky.) 304; Foushee v. Grigsby, 12 Bush (Ky.) 75; Gardner v. Watson, 18 Ill. App. 394.

49 Henry & Coatsworth Co. v. Fisherdick, 55 N. W. 643, 37 Neb. 207; Chapman v. Brewer, 62 N. W. 320, 43 Neb. 890; Vandyne's Ex'rs v. Vanness, 5 N. J. Eq. 485. It has been held in New Hampshire that, in order to secure the statute lien for labor and materials on property against the title or interest of a mortgagee, there must have been a contract for such labor and materials with the immediate owner, of which such mortgagee had notice, actual or constructive, at the time he acquired his interest. Sly v. Pattee, 58 N. H. 102.

50 Watson v. Gardner, 10 N. E. 192, 119 Ill. 312.

51 Hoskins v. Carter, 24 N. W. 249, 66 Iowa, 638.

52 Kendall Manuf'g Co. v. Rundle, 47 N. W. 364, 78 Wis. 150.

ance, and giving him a lien therefor, payments made by the mortgagee for taxes and insurance have no priority over mechanics' liens, even though the mortgage itself is superior to such liens. 53 Where the mortgagee retains part of the money lent, to be kept until the property is discharged of all mechanics' liens, but does not agree to hold such money for the lien claimants, there is no implied trust in their favor upon the money in the mortgagee's hands." The fact that part or all of the materials for which a lien is claimed were furnished after a mortgage was recorded does not render the lien subject to the mortgage if the lien attached before the mortgage was given. 65

Purchase-Money Mortgages.

56

§ 323. The subject of purchase-money mortgages was treated in a previous chapter. The rights of the parties in some cases involving peculiar facts may be considered here. Thus, in a case in Indiana it appeared that the vendee of lots 1 and 2 executed a purchase-money mortgage to the vendor, which was recorded January 7, 1884, and took possession of two lots which he supposed to be those purchased, and erected a house; but July 24, 1884, it was discovered that the house had been erected on lots 1 and 6, and the vendee thereupon surrendered his deed for lots 1 and 2, which he had not recorded, and took from the vendee a deed for lots 1 and 6, and at the same time executed a purchase-money mortgage thereon, which mortgage the vendor afterwards transferred to E. and K. Plaintiffs, who held a junior mortgage given by the vendee, were compelled to pay the mortgage to E. and K; and, on such payment, E. and K. delivered the purchase-money mortgage to the plaintiffs. On this state of facts, the court held that plaintiffs' right, by subrogation to the rights of the owners of the prior mortgage, to a decree of foreclosure thereof, could not be defeated by E. and K. setting up mechanics' liens in their favor for materials for the house,

53 Devereux v. Taft, 20 S. C. 555; Bissell v. Lewis, 9 N. W. 177, 56 Iowa, 231. 5Hadley v. Hill, 73 Ind. 442.

55 Pacific Mut. Life Ins. Co. v. Fisher, 39 Pac. 758, 106 Cal. 224; Flint & Walling Manuf'g Co. v. Douglass Sugar Co., 38 Pac. 566, 54 Kan. 455; Keystone Iron-Works Co. v. Douglass Sugar Co., 40 Pac. 273, 55 Kan. 195.

se See ante, §§ 153, 154.