N.J. Bldg., Loan & Inv. Co. v. Bachelor

• Decision Date: 15 October 1896
• Parties: NEW JERSEY BUILDING, LOAN & INVESTMENT CO. v. BACHELOR et al.
• Court: New Jersey Court of Chancery

35 A. 745

54 N.J.E. 600

NEW JERSEY BUILDING, LOAN & INVESTMENT CO.

v. BACHELOR et al.

Court of Chancery of New Jersey.

Oct. 15, 1896.

Bill by the New Jersey Building, Loan & Investment Company against Ida M. L. Bachelor and others to foreclose a mortgage.

Barton B. Hutchinson, for complainant. Thomas J. Kennedy, for defendant.

McFarlan. Benny Bros., for defendant Walters.

STEVENS, V. C. The complainant's mortgage for $3,300 is dated July 27, 1893, acknowledged July 28, 1893, and recorded September 21, 1893. The defendant McFarlan's mortgage for $1,500 is dated May 31, 1893, acknowledged July 27, 1893, and recorded August 1, 1893. The defendant Walters recovered judgment on his lien claim for $2,323.96. The claim was filed June 18, 1894, and was made by him as contractor for work done and materials furnished in the making of additions to a dwelling house upon the mortgaged premises. The work was begun about June 20, 1893, and completed about November 15, 1893. The questions raised by the pleadings and proofs relate to the priorities of these three incumbrances. So far as the mortgages are concerned, the evidence satisfies me that, while the mortgage of McFarlan is prior in date, the agreement between the parties was that it was to be postponed to the complainant's mortgage. That such an agreement may lawfully be made is unquestionable. Hopler v. Cutler (N. J. Ch.) 34 Atl. 746. The complainant is therefore, as against the defendant McFarlan, entitled to be first paid. The mortgage of the defendant McFarlan, being a purchase-money mortgage, is entitled to priority over the lien claim of the defendant Walters. This is admitted. The important question is whether the lien of the complainant's mortgage is prior to the mechanic's lien, either in whole or in part. The pertinent facts are these: The defendant Ida Bachelor was desirous of purchasing a house and lot belonging to the defendant McFarlan. Not having the money to make the purchase, her husband applied to the complainant, a building and loan association, for a loan. The association having agreed to make it, Mrs. Bachelor was allowed by the vendor to take possession before she took title. After doing so, she contracted with the defendant Walters to make certain additions to the house. Walters began work on or about June 20th, and did a considerable portion of it before the deed was delivered. On the evening of July 27th, at Bayonne, McFarlan, the vendor, signed and acknowledged his deed to Mrs. Bachelor, and formally delivered it to her; and she signed and acknowledged her mortgage to McFarlan, and formally delivered it to him. No money was then paid, and the deed was immediately redelivered to Mc Farlan; It being understood that he would on the next morning take the mortgage to be given to the building and loan association to its office in Trenton, and there receive the whole amount of the loan. Of this loan he was to retain $2,000, and the balance he was to hand over to Mrs. Bachelor. Accordingly on the next morning (July 28th) Mrs. Bachelor signed the bond and mortgage to the building association, and acknowledged the latter before its local attorney. They bore date on July 27th. After they were acknowledged they were taken by the attorney to McFarlan, who on receiving them went to Trenton, and delivered them, and also the deed, to the company's secretary, at its office. He received a check for $2,970, $2,000 of which he retained, and the balance of which he gave to Mrs. Bachelor. The deed, bond, and mortgage were immediately sent by the company, for record, to the clerk's office in Hudson county, instead of to the register's; and, the clerk not handing them to the register, they were not in fact recorded until the 21st day of September following.

On this state of facts, which has the prior Hen,—the building association or Walters? There are several decisions on the general question. In the first place, it is settled that a purchase-money mortgage given by a vendee to a vendor simultaneously with the delivery of the deed will take precedence of a mechanic's lien claim for work done for the vendee before he acquires the legal title. Mackintosh v. Thurston, 25 N. J. Eq. 248; Lamb v. Cannon, 38 N. J. Law, 362; Wallace v. Silsby, 42 N. J. Law, 1. In the second place, it is also settled that if the purchase money, or a part of the purchase money, be advanced by a third person, a mortgage given by the vendee to him simultaneously with the delivery of the deed by the vendor will have like precedence. Bradley v. Bryan, 43 N. J. Eq. 396, 13 Atl. 806; Hopler v. Cutler, supra. In the case in hand a part of the sum lent went to pay the purchase money, and a part of it was paid to Mrs. Bachelor. What she did with it does not appear. Is this mortgage, under the circumstances, entitled to priority over the mechanic's lien, and if so, to what extent? Although the delivery of the deed and the McFarlan mortgage took place on the evening of the 27th, and the delivery of the mortgage to the building association took place on the following day, I still think that the transaction was a single one, and that it was the intention of the parties that it should be so considered. This is apparent from the fact that McFarlan kept possession of the deed conveying the title until he delivered it to the association. At the trial it appears to have been conceded by all parties that McFarlan contemplated making no final delivery of it until then. See colloquy at conclusion of McFarlan's evidence. On this assumption it is plain, under the rules of law I have stated, that the lien of the building and loan association is prior to the Walters lien, so far as the money advanced was used to pay purchase money.

It is, however, argued by Walters' counsel that as to the rest of the money secured the Walters lien is prior. The contention is that, to the extent that the land vests in the grantee beneficially, the lien of the mechanic must prevail. I am of opinion that this contention is well founded. The claim of the vendor of property who takes a mortgage to secure purchase money rests on the most satisfactory grounds. Looking at the substance of the transaction, all that the grantor really parts with, and all that the grantee justly gets, is the equity of redemption, and it is this equity alone which should become subject to the claim of the vendee's creditors. By an extension of the rule, a third person who advances purchase money, if he take a mortgage simultaneously with the passing of the title, is permitted to stand in the shoes of the vendor, and to have the same protection that the vendor has. In this case, too, equity declares that all that the grantee really acquires is the equity of redemption. It would seem, on principle, clear that this ought to be the limit of the extension, and that whatever interest does vest in the grantee beneficially should become subject to such liens and interests as the law imposes upon land in the hands of an owner. The test of...