Court Opinion

ID: 9661430
Source: CourtListenerOpinion
Date Created: 2023-08-23 22:38:58.074208+00
Date Added: 2024-06-11T18:14:28.483187
License: Public Domain

George Rose Smith, J., dissenting. It does not seem to me that the appellee’s initial advancement of $4,500 is entitled to priority. The statute relied upon by the majority awards priority to a mortgage given for the purpose of making improvements. Ark. Stats. 1947, § 51-605. This $4,500 was advanced for the purpose of paying off preexisting mortgage liens. Had the transaction stopped at that point I do not suppose anyone would contend that the loan was made for the purpose of making improvements. It happens that additional advances provided for by the same mortgage were in fact used for the purpose contemplated by the statute, but I fail to see how this circumstance converts the refinancing of prior mortgages into a loan made for improvement purposes. We must lay aside the possibility that the appellee, as to this $4,500, may be entitled to subrogation to the liens of the mortgages that were paid off with this money. Subrogation has not been sought by the appellee, either in the trial court or here. Furthermore, the majority reach their conclusion by charging laborers and materialmen with the information that an examination of the public records would have disclosed. Such an inspection would not have alerted the appellants to the possibility of subrogation, for the appellee’s mortgage contains no warning that the original $4,500 advancement was to be applied to existing mortgages. If the public record is to govern, a claim to subrogation should be buttressed by language in the mortgage indicating it to be a renewal of an earlier lien. On the main issue I cannot reconcile today’s decision with our holding in People’s Bldg. & L. Ass’n v. Leslie Lbr. Co., 183 Ark. 800, 38 S. W. 2d 759. There the seller of a hotel asserted a claim for unpaid purchase money in the amount of $19,500. But the contract of sale provided that the buyer should make certain repairs and improvements, and the seller knew that the work was being done. Even though the contract of sale purported to protect the seller against liens for labor or material, we held that the seller, by authorizing and requiring the work in question, thereby subordinated its purchase-money claim to the liens of laborers and materialmen. In the case at bar the appellee certainly authorized the work and knew that it was in progress. Indeed, if he was unconditionally required to make the subsequent advances — and the majority so hold — then it is equally true that Stewart was unconditionally required to make the improvements. In that situation the Leslie case, supra, holds that the mortgage lien is subordinate to claims arising from the improvements that were contemplated by both parties to the mortgage. That conclusion seems to me to be entirely just. A mortgagee can protect himself by withholding his advances until the mortgagor submits satisfactory proof that all labor and material have been paid for. This appellee admits in his testimony that he exercised no real diligence in this respect. But, as a practical matter, the mechanic’s lien claimant lacks this opportunity for self-protection. An uneducated laborer, applying for work on a construction job, should not be required to travel to the county seat to attempt what is for him the impossible task of analyzing the public record of deeds and mortgage. In some cases, it is true, the statute does impose that burden upon the laborer; but in the Leslie case we held that it did not exist in the circumstances now before us. I would accordingly hold that the appellee’s mortgage is not entitled to priority to the extent of the first advancement of $4,500. Ward, J., joins in this dissent.