Opinion
Rehearing Denied April 13, 1971.
Blankemore McCarty, Colorado Springs, for plaintiff in error.
Cosgriff & Dunn, John W. Dunn, Leadville, for defendants in error.
PIERCE, Judge.
This case was originally filed in the Supreme Court of the State of Colorado and was subsequently transferred to the Court of Appeals under authority vested in the Supreme Court. The parties appear here in reverse of their order of appearance below; they will be referred to by their designations in the trial court or by name.
Though not a plaintiff in error on this appeal, Empire Valley Ranch, Inc., (Empire Valley) was a defendant in the trial court. In the action below, Beaver Lakes Corporation (Beaver Lakes) was substituted for Colorado Capital Corporation (Colorado Capital), one of the original defendants. The real estate involved herein will be referred to as the 'ranch.'
This is an appeal of an action filed by Ponzie and Paustian to foreclose their mechanics' liens filed against a ranch then owned by Empire Valley. Empire Valley acquired title to the ranch in 1964, and at that time obtained a secured loan from Colorado Capital to cover the purchase price, attorney's fees, and miscellaneous items. The original loan was refinanced by Colorado Capital, and a new deed of trust was duly recorded. No part of the new loan was for construction.
Thereafter, Empire Valley began the improvement of existing roads and the cutting of new roads on the premises. By verbal agreement, both Ponzie and Paustian were hired to do the required work. Neither was ever paid. They filed mechanics' liens against the ranch and subsequently instituted an action to foreclose.
Upon Empire Valley's default on the second note, Colorado Capital filed its notice of election and demand for sale in foreclosure of its deed of trust. The Public Trustee issued a certificate of purchase to Colorado Capital which it assigned to Beaver Lakes, and a deed was issued to Beaver Lakes by the Public Trustee.
The trial court found that the mechanics' liens of Ponzie and Paustian were superior to the deed of trust of Colorado Capital from which the title of Beaver Lakes is derived. Beaver Lakes contends that ruling was in error.
Beaver Lakes argues that the priority between a mechanic's lien and a deed of trust is governed by C.R.S.1963, 86--3--6. This section of the statute establishes the general temporal priorities between mechanics' chanics' liens and prior encumbrances, and under it a deed of trust which is of record and is prior in time to a mechanic's lien has priority.
In this case, however, the applicable statutory provision, and apparently that applied by the trial court, is C.R.S.1963, 86--3--3, which gives a mechanic's lien priority over any previous lien or encumbrance where the work done or material furnished is for 'any entire structure, erection or improvement.' C.R.S.1963, 86--3--3(2) reads:
'When the lien is for work done or material furnished for any entire structure, erection or improvement, such lien shall attach to such building, erection or improvement for or upon which the work was done, or materials furnished, in preference to any prior lien or encumbrance, or mortgage upon the land upon which the same is erected, or put, and any person enforcing such lien may have such building, erection or improvement sold under execution and the purchaser at any such sale may remove the same within thirty days after such sale.'
The meaning of this section was clarified in Atkinson v. Colorado Title & Trust Co., 59 Colo. 528, 151 P. 457, which held:
'The phrase 'for an entire structure' is not used to designate a completed from an uncompleted building, but to distinguish new structures, not beofre existing, from betterments, repairs, improvements, and the like on previously constructed or existing improvements. Church v. Smithea, 4 Colo.App. 175, 35 P. 267.'
The Court then went on to state:
'The statute provides that any person enforcing a mechanic's lien on an improvement in a case like this may have the improvement sold under execution, and that the purchaser may remove the same. The improvement here consisted of the basement walls and foundations, and we will take judicial notice they could not be removed and retain any value. In enforcing the lien on the improvement under these circumstances, the mechanic's lien law does not contemplate a course that will destroy the value of the improvement, and here the only way the improvement can be effectively reached to satisfy the lien against it is to sell the entire property as a whole and pursue some equitable course with the fund realized from the sale which will afford the greatest protection to the rights of all the parties.'
Beaver Lakes contends that C.R.S.1963, 86--3--3 is not applicable to the case at bar because there was no 'structure' under the common meaning of the word. This statute, however, clearly applies to any 'entire' structure, erection or Improvement. The fact that the improvement itself was not connected or related to a building or structure does not necessarily effect its characterization as an 'entire' improvement under the provisions of that statute. See Mazel v. Bain, 272 Ala. 640, 133 So.2d 44, commented upon at 61 Mich.L.Rev. 196. Therefore, the construction of roads, and labor related thereto, may be considered a new structure or improvement not before existing as differentiated from betterments, repairs, improvements, and the like, on previously constructed or existing improvements. See Stinnett v. Modern Homes, 142 Colo. 176, 350 P.2d 197. Such portions of the work, shown to create a new improvement, have priority over a prior recorded deed of trust.
The trial court held that the liens of Ponzie and Paustian were prior to the deed of trust in question, but made no specific finding as to whether the work done by Ponzie and Paustian was for an 'entire structure, erection or improvement' as interpreted by Atkinson, or was merely for maintenance, repair, or improvement of existing structures. Since the court failed to make these critical findings, we are unable to determine whether or not the judgment is correct.
Beaver Lakes' other assignments of error will not now be considered since the issues may not arise upon rehearing by the trial court.
Judgment is reversed and remanded for further hearing and determination of which portions of the work done, if any, were part of the construction of entire new improvements, and if any lien is then established which has priority over the deed of trust, foreclosure sale and distribution shall be made, to the extent applicable, in accordance with the directions set forth in Atkinson, supra.
COYTE and DWYER, JJ., concur.