Court Opinion

ID: 9660952
Source: CourtListenerOpinion
Date Created: 2023-08-23 22:24:48.297115+00
Date Added: 2024-06-11T18:14:23.639510
License: Public Domain

Sam Robinson, Associate Justice, dissenting. The majority has held that once a building project is commenced and material is supplied for the construction on credit, then one who subsequently takes a construction money mortgage to secure a loan to the property owner does so at the risk of having his mortgage declared inferior to anyone who thereafter supplies material for the project. To so hold is to strain our lien statutes to an extent never intended by the Legislature. Ark. Stats. § 51-601 provides a materialman with a lien on a building and the land on which it is situated upon his furnishing materials for the construction of the building. Ark. Stats. §§ 51-605 and 607 when read together declare that all prior and subsequent encumbrances on the land and building thereon, except a construction mortgage, are inferior to the lien of the materialman. In point of time the liens in this case were created as follows: (1) Big Rock, (2) East, (3) Planters, and (4) Young. The majority hold that Big Rock has priority over East, and this is no doubt correct, but in addition the majority say that the lien belonging to East is inferior to that of Planters and Young through a theory of “relation back”. The reasoning employed by the majority is that Planters and Young prevail due to the strength of the lien which Big Rock has, not on the strength of their own liens which were created subsequent in time to that of East, the mortgagee. With this reasoning I cannot agree. The majority relies heavily on Apperson v. Farrell, 56 Ark. 640, 20 S. W. 514, but that case is not in point because it was decided in 1892 on the basis of the 1873 lien statutes (Acts 1873, No. 107), which made no provision for a construction mortgage. Our present lien statutes (Ark. Stats. § 51-601, et seq.) which supersede the 1873 Act do have such a provision. A discussion of the other cases which the majority cite for the “relation back” theory would unduly lengthen this dissent. Suffice it to say that all of the cases cited have one common thread of fact running through them which is of the upmost importance in distinguishing them from the ease at bar; in none of the cited cases is more than one materialman seeking to prevail over a mortgagee who had loaned money to further the project, and in each instance the materialman seeking the lien had actually furnished material on the job' before the mortgage was recorded. In the case now under-consideration if the contest were between one mortgagee- and one materialman, i. e., Big Rock and East, then of course, Big Rock would prevail because it furnished the material before the mortgage was recorded, but the majority say Planters and Young also prevail over East. It will be recalled that they furnished material after the mortgage was recorded. I fear the economic repercussions which will flow from the majority opinion. Following the rule set down by the Court today, no individual or lending institution can safely loan money to further a building project after one nail has been driven which has been purchased on credit. A lender willing to make a construction loan and. take a mortgage to secure it can not gain security for Ms loan by searching the records to determine the extent of prior liens on a building project, ascertain the amount of work done and materials furnished, and then act on the basis of such information. If he advances money on a project upon which construction has already begun, his mortgage would be inferior to those who might subsequently furnish labor or materials for the project. Prudent money lenders are not so reckless that they will chance seeing their security vanish into thin air. The ultimate blunt of the majority's decision will be felt by those who desire to build, but are unable to finance the entire venture from their own funds. For the foregoing reasons I respectfully dissent from the opinion of the majority.