Opinion ID: 1837688
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Heading Rank: 1

Heading: Nature of a Judgment of Foreclosure on a Mechanic's Lien

Text: Barber Lumber argues the district court erred in refusing to hold Celania personally liable. Barber Lumber contends a mechanic's lien foreclosure is no different than an ordinary mortgage foreclosure, and thus should result in personal liability. Barber Lumber points to prior cases in which we stated that enforcement of a mechanic's lien is not truly an action in rem, or against the property, but rather must be commenced against a named defendant. See, e.g., Redman v. Williamson, 2 Clarke 488, 490 (Iowa 1856) (The action for a mechanic's lien, is not a proceeding against the property.... It must be against some person by name, as defendant....); Soc'y Linnea v. Wilbois, 253 Iowa 953, 959, 113 N.W.2d 603, 607 (1962) (Its enforcement is not an action in rem; it must be commenced against a defendant by name....). From these statements and several portions of Iowa Code chapter 572, Barber Lumber contends foreclosure of a mechanic's lien results in personal liability against the owner of the property in question. We reject these arguments. A judgment of foreclosure on a mechanic's lien is not a personal judgment. See Capitol City Drywall Corp. v. C.G. Smith Constr. Co., 270 N.W.2d 608, 613 (Iowa 1978) (in action to foreclose mechanic's lien, no basis for personal judgment against owner); Willverding v. Offineer, 87 Iowa 475, 478-79, 54 N.W. 592, 593 (1893) (in the absence of a contract with owner, mechanic's lien does not impose personal liability). The [mechanic's lien] statute does not impose personal liability on the owner for the amount of the lien, but rather limits the remedy of the lienholder to foreclosure of the lien and sale of the owner's property interest. Roger W. Stone, Mechanic's Liens in Iowa, 30 Drake L.Rev. 39, 44 (1980) (footnote omitted). Cases such as Redman and Society Linnea merely stand for the principle that An action on a mechanic's lien is an action on a contract.... An action for foreclosure of a mechanic's lien must be referable to a contract binding some person who has a beneficial interest in the property. A claim against the property in the absence of such a contract could not be maintained. Roger W. Stone, Mechanic's Liens in IowaRevisited, 49 Drake L.Rev. 1, 4-5 (2000) (citing Soc'y Linnea, 253 Iowa at 959-60, 113 N.W.2d at 606-07 and Northwestern Nat'l Bank of Sioux City v. Metro Ctr., Inc., 303 N.W.2d 395, 401 (1981)) (internal quotations omitted). See, e.g., Redman, 2 Clarke at 490 (dismissing mechanic's lien judgment against house where contract was made with individual who had no interest in the land); Soc'y Linnea, 253 Iowa at 959, 113 N.W.2d at 607 (mechanic's lien improper where agreement was made with someone who did not have, or represent to have, a present beneficial interest in the property). In the present case, the requisite agreement was between Poe, the contractor, and Celania, the owner of the house and land. Redman and Society Linnea do not justify the conclusion a judgment of foreclosure of a mechanic's lien is in personam, in the sense that the named defendant is personally liable. The mechanic's lien only attaches to the real property on which the benefit was conferred, even though the action is not pleaded against the property, i.e., it is not styled in rem. Iowa Code section 572.5, a section of the mechanic's lien statute entitled Extent of Lien, states: [T]he entire land upon which any building or improvement is situated, including that portion not covered therewith, shall be subject to a mechanic's lien to the extent of the interest therein of the person for whose benefit such material was furnished.... See also Iowa Code § 572.8 (A person shall perfect a mechanic's lien by filing with the clerk of the district court of the county in which the building, land, or improvement to be charged with the lien is situated, ... (emphasis added)). [1] The mechanic's lien statute does not expressly provide that a judgment of foreclosure on a mechanic's lien is a personal judgment. Instead, [t]he mechanic's lien is a statutory security device. It may be defined as a statutory charge imposed upon real property in favor of one who has furnished labor or material for its improvement. Note, Owners' Liability to Subcontractors Under the Iowa Mechanic's Lien Law, 47 Iowa L.Rev. 144, 144 (1961) (emphasis added, footnotes omitted). When we remarked in Redman and Society Linnea that an action to enforce a mechanic's lien is not an action in rem, we were simply pointing out a plaintiff may not file an action against the property absent a showing of an agreement with an owner, or one who at that time had an estate or interest in the land. Soc'y Linnea, 253 Iowa at 959, 113 N.W.2d at 607; see also Redman, 2 Clarke at 490 (If there has been no contract with the owner of the land, no lien can attach by virtue of the labor done, or materials furnished, in the erection of a house upon it.). This requirement devolves from the ultimate principle that [s]ome beneficial ownership in real property by one who receives the benefit of labor and material under a contract, express or implied, has always been held a necessary element to the establishment of a mechanic's lien in Iowa. Soc'y Linnea, 253 Iowa at 958, 113 N.W.2d at 606 (citations omitted); see Note, Owner's Liability to Subcontractors Under the Iowa Mechanic's Lien Law, 47 Iowa L.Rev. at 146 (Such a contract or consent serves as a foundation for the subcontracts and the resulting right of subcontractors to establish liens against the property.). Thus, we have refused to enforce a mechanic's lien where the named defendant did not have title to, or any present beneficial interest in, the land. Soc'y Linnea, 253 Iowa at 959, 113 N.W.2d at 607; Redman, 2 Clarke at 490-92. These cases do not support the conclusion that a judgment of foreclosure on a mechanic's lien is a personal judgment. Of course, an owner who has contracted for an improvement under chapter 572 ... may encounter personal liability to the contractor for breaches of the construction contract. Roger W. Stone, Mechanic's Liens in Iowa, 30 Drake L.Rev. at 90. Absent privity, however, a subcontractor may not garnish an owner's wages to satisfy a judgment of foreclosure on a mechanic's lien. Such is the difference between a mechanic's lien and an ordinary mortgage foreclosure. In practice, however, even though the statute does not provide for the personal liability of an owner ... this benefit is seldom of much consequence to the owner who wants to keep its property or improvement. Id. In the present case, Barber Lumber named Celania the defendant in the action to foreclose the mechanic's lien, because Celania had both a contract with Poe and a beneficial interest in the property. In this limited respect, the mechanic's lien foreclosure is not truly a proceeding in rem. But the judgment cannot impose personal liability, and is not, in this sense, in personam. The parties agree there is no privity of contract between them. Our decision today accords with the weight of authority. There must be a contractual relation established between the owner of the property and the lienor to support a personal judgment against the owner in an action for foreclosure of the lien ... a subcontractor or supplier who is not in privity of contract with the owner generally may not obtain a personal judgment against the owner. 53 Am.Jur.2d Mechanic's Liens § 447, at 434 (1996) (footnotes omitted). The highest courts of jurisdictions with similar statutes have reached the same result. See, e.g., Harbridge v. Six Points Lumber Co., 17 Ariz. 339, 152 P. 860, 863 (1915); Brannan Sand & Gravel Co. v. Santa Fe Land & Improvement Co., 138 Colo. 314, 332 P.2d 892, 895 (1958); Pierson v. Sewell, 97 Idaho 38, 539 P.2d 590, 595-97 (1975); Pendleton v. Sard, 297 A.2d 889, 893 (Me. 1972); Keeley Lumber & Coal Co., Inc. v. Dunker, 76 S.D. 281, 77 N.W.2d 689, 692 (1956). To hold otherwise would wreak havoc upon the well-defined and long-established legal relationships amongst owners, contractors, and subcontractors. If a judgment of foreclosure of a mechanic's lien were construed to be a personal judgment against the owner, it would, in essence, elevate the relationship between Barber Lumber and Celania to a contractual one without there having been a contract between these parties. This would, by operation of law, elevate a subcontractor into a contractual relationship with an owner who it may not have ever met or known. The district court ruled Celania remained personally liable for costs and attorney fees. For the reasons discussed below, we find Barber Lumber was not entitled to attorney fees. We do not, therefore, reach the issue of whether an award of attorney fees in an action to foreclose a mechanic's lien constitutes a personal judgment.