Trustees of Roman Catholic High School v. McCann
91 A. 1051, 246 Pa. 28, 1914 Pa. LEXIS 469 (1914)
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Rule of Law:
A mechanics' lien has priority over a mortgage that was recorded after construction began but before the lien was filed. This priority relates back to the commencement of construction and is not defeated by a temporary suspension of work, provided the suspension was at the owner's request with the mutual intent to resume, and the unfinished state of the building provided notice to the mortgagee.
Facts:
- A contractor began construction on a building for an owner.
- In September 1907, work was temporarily suspended at the owner's request due to financial difficulties.
- Both the owner and the contractor intended to resume work on the building as soon as conditions warranted.
- On March 11, 1908, a second mortgage on the property was recorded by a lender.
- The lender's officers had visited the property before taking the mortgage and observed its unfinished condition.
- On July 17, 1908, the contractor filed a mechanics' lien for labor and materials furnished for the project.
- The building was never completed under the original contract because of the owner's continued inability to provide funds.
Procedural Posture:
- The first mortgage on the property was foreclosed, and the property was sold by the sheriff on February 1, 1909, creating a fund for distribution to junior creditors.
- The mechanics' lien claimant had previously initiated a scire facias proceeding to obtain a judgment on its lien.
- After the sheriff's sale, the scire facias proceeding went to trial, resulting in a jury verdict and judgment in favor of the lien claimant.
- An auditor was appointed to determine the priority of distribution of the foreclosure sale proceeds between the second mortgagee and the mechanics' lien claimant.
- The auditor found in favor of the mechanics' lien claimant, giving its lien priority.
- The second mortgagee (appellant) appealed the auditor's determination to the Supreme Court of Pennsylvania.
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Issue:
Does a mechanics' lien have priority over a mortgage recorded after construction commenced but before the lien was filed, when work on the building was temporarily suspended due to the owner's financial issues before the mortgage was recorded?
Opinions:
Majority - Mr. Justice Elkin
Yes, the mechanics' lien has priority over the mortgage. A mechanics' lien relates back to the commencement of work on the building, making it senior to any mortgage recorded after construction has begun. The court found that the suspension of work was temporary, caused by the owner's financial issues, and not an abandonment of the project by the contractor. The six-month statutory period for filing a lien runs from the completion of the contract, which had not occurred. Crucially, the mortgagee had notice of the lien's potential priority because its officers saw the visibly unfinished building before recording their mortgage, putting them on notice that liens for prior work could exist and would relate back to the start of construction.
Analysis:
This case reinforces the strength of the 'relation-back' doctrine for mechanics' liens, clarifying its application during a temporary work stoppage. It establishes that a suspension caused by the owner, without intent to abandon the project, does not sever the lien's continuity for priority purposes. The decision places a significant due diligence burden on lenders, who cannot rely solely on the state of the public record but must also conduct physical inspections of a property. A visibly unfinished construction project serves as constructive notice that unfiled but senior mechanics' liens may exist.
