Monday, August 27, 2012

Modular Home Manufacturer/Installer Left Holding The Bag After Being Stiffed By Customer/Property Owners When Bank Forecloses On Underlying Land

The following facts are taken from a recent court ruling by a California appeals court reported on The Lien Blog:

  1. The owners of two vacant lots contracted with a modular home manufacturer ("Vieira") to buy two full-sized, $200K modular homes and have them delivered to and installed on their land.

  2. Vieira completed the contract in full, but the property owners failed to pay the balance owed on their purchase.

  3. The property owners also stiffed a lender which happened to be holding a mortgage secured by the vacant lots, and consequently, the owners of the two vacant lots were foreclosed upon.

  4. As part of the foreclosure, the foreclosing lender wound up with the modular homes on the basis that the homes, once attached to the land, are no longer personal property, but becomes part of the realty.

  5. Needless to say, Vieira did not acquiesce with this result and moved to assert its mechanics lien claim against the modular homes by reason of the unpaid balance on its contract with the now-foreclosed lot owners.
A California Court of Appeals affirmed a decision of the trial court, which concluded that the common law of fixtures applies and the undisputed facts established that the manufactured homes were fixtures to the real property at the time of the foreclosure and therefore Vieira's property interest in the homes had been extinguished.

For more, see
The Lien Blog: California Court Holds Manufactured Home Is One Big (Attached) Fixture.

For the court ruling, see Vieira Enterprises, Inc. v. City Of Palo Alto, No. A132754 (Cal. App. 1st Dist. Div. 2 August 15, 2012) (Certified for Publication).

Editor's Note
: The underlying facts of this case are much more complicated than what's been described above. For those dealing with modular homes, as well as those dealing with mechanics liens and the common law of fixtures, this case may make for some interesting reading.

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