McKINLEY v. A. L. SCOTT LBR. CO.

McKINLEY v. A. L. SCOTT LBR. CO.
1926 OK 50
248 P. 326
118 Okla. 205
Case Number: 12659
Decided: 01/19/1926
Supreme Court of Oklahoma

McKINLEY et al.
v.
A. L. SCOTT LBR. CO.

Syllabus

¶0 1. Mechanics' Liens -- Guaranty -- Vendor and Purchaser--Materialman as Guarantor to Vendee--Liability of Vendee for Price of Material.
Where a contract for the conveyance of real property under process of improvement is entered into in writing, by the terms of which the vendor obligates himself to convey the same free of all liens and incumbrances except two specifically mentioned mortgages and said contract is thereafter unconditionally guaranteed in writing by one of the materialmen furnishing material for such improvements upon the consideration that the vendee will permit the vendor to withdraw a purchase money note from escrow, which is done, such guarantor is not entitled to personal judgment against the vendee for amount of material furnished and used in such improvements which is in excess of the purchase price agreed to be paid for the property.
2. Mechanics' Liens--Materialmen's Lien--Release--Delivery on Condition not Communicated.
Where a loan is required to complete certain improvements on real property, and the loan is made on condition that releases of all liens or claims for material be executed and delivered before the proceeds of the loan are paid out, a lien claimant executing such release and delivering it to the loan company through the agency of the borrower cannot, after the loan is paid out, have said release canceled oil the ground that it was delivered to the borrower on condition that claimant's lien should be discharged from the proceeds of the loan, such condition not being communicated to the loan company or its agent, nor agreed to by the loan company or its agent.
3. Same--Duress as Ground for Cancellation of Release.
Nor will such release be canceled on the ground of duress, where its original delivery to the loan company's agent was voluntary, but it was afterward obtained from him through fraudulent representations and he recovered possession thereof through duress.

Robert Wimbish and W. C. Duncan, for plaintiffs in error.
W. F. Schulte, for defendant in error.

LOGSDON, C.

¶1 There are 11 assignments of error, but in the view taken of the case here it will only be necessary to consider the 8th and 10th, which read:

"(8) The trial court erred in rendering judgment in favor of the defendant in error, A. L. Scott Lumber Company, and against these plaintiffs in error, to which the plaintiffs in error duly excepted.

"(10) That the judgment of the trial court is contrary to law and is not supported by the evidence."

¶2 There is practically no conflict in the evidence upon material questions involved. Upon the trial the testimony developed a state of facts as follows: H. C. Wilson was the owner of lot 6, block 3, Belmont addition to the city of Ada. He contracted with the plaintiff, A. L. Scott Lumber Company, for lumber and material with which to erect on the above described lot a six-room dwelling house. During the progress of the work, and before the building was completed, he made a contract to sell the property to the defendant J. P. McKinley for a consideration of $ 2,421. McKinley and his partner were agents at Ada for the Farm & Home Savings & Loan Association. In the contract between Wilson and McKinley it was agreed that Wilson should take a loan with this association for the sum of $ 1,800, to be secured by mortgage on these premises, and that McKinley should assume the payment of this mortgage as a part of his purchase price for the property. It was further agreed that McKinley should likewise assume a second mortgage for the balance of the unpaid purchase price of the lot, and should pay to Wilson the sum of $ 112 in cash, and execute a note for the sum of $ 300 with interest due 12 months after date. On Wilson's part he agreed and bound himself to complete the building in all respects as called for by the plans and specifications, and to convey the property to McKinley by warranty deed free from all incumbrances except the two mortgages, above mentioned. This contract between Wilson and McKinley was reduced to writing, dated July 9, 1917, and with the deed and McKinley's note, was placed in escrow in a bank to await the completion of the building and the furnishing and approval of the abstract. During the pendency of the loan application, the loan company required a release of all liens, or claims which could become liens, against the property before it would advance the $ 1,809 required. Wilson procured this release which was signed by practically all of the laborers and materialmen, including the plaintiff, A. L. Scott Lumber Company, and turned the same over to McKinley as the agent of the loan company. About the same time Wilson was in need of some money and applied to McKinley for permission to withdraw the $ 300 note from escrow in the bank, in order that he might negotiate the same and procure funds for his personal use. As a consideration for permitting the withdrawal and using of this note by Wilson, A. L. Scott Lumber Company executed and delivered to McKinley the following guaranty of the contract of H. C. Wilson with McKinley:

"That the firm of A. L. Scott Lumber Company will guarantee that H. C. Wilson will complete a certain building and other improvements located on lot 6 in block 3, Belmont addition, in accordance with a certain contract dated the 9th day of July, 1917, and by and between H. C. Wilson and John P. McKinley of Ada, Okla."

¶3 When the $ 1 800 loan was secured it was deposited in a bank at Ada to the personal credit of John P. McKinley, and was paid out by him upon the joint orders and with the joint consent of H. C. Wilson and A. L. Scott Lumber Company, in satisfaction of claims for material and labor used and incurred by Wilson in the construction of said improvements. Nothing was paid on the claim of A. L. Scott Lumber Company for the reason that the other material and labor bills amounted to $ 2,507, or nearly $ 100 more than the price which McKinley agreed to pay for the property.

¶4 It is further disclosed by the testimony that when the release of lien executed by the A. L. Scott Lumber Company was given by it to Wilson, he delivered the same to McKinley in violation of his agreement with A. L. Scott Lumber Company to deliver it only upon payment of its claim. Neither McKinley nor the loan company knew of this agreement between Wilson and the lumber company, and the release was received and accepted by them without conditions. Afterward Wilson went to McKinley and requested the return of the release to him for the purpose of procuring the signature of another lien claimant, whom he represented had been overlooked. This representation by Wilson was false and was made merely for the purpose of recovering possession of the release. The testimony is in conflict as to what then occurred, Wilson and one other witness testifying that McKinley forced him to surrender the release by threats of bodily injury. This is denied by McKinley.

¶5 At the conclusion of all the testimony defendants requested the court to instruct the jury as follows:

"You are instructed that if the plaintiff in consideration that the defendant John P. McKinley released to the contractor, H. C. Wilson, the $ 300 note that was then in escrow, and delivered the same to said Wilson, and that for said consideration the plaintiff executed and delivered to the defendant John P. McKinley said guaranty that said building would be completed according to contract, then the defendant John P. McKinley would have the right to pay the proceeds of said loan on any and all claims for labor and material due on said building before paying anything to the plaintiff, and that the plaintiff would be entitled to recover of the defendant John P. McKinley only such amount as might be left after paying all valid claims for labor and material expended on said residence as above stated, and if he applied the full proceeds of said loan in the payment of such claims, then the defendant John P. McKinley would not be liable to the plaintiff in any amount, and you will return a verdict for him."