Eastern Savings Bank, FSB v. Cach, LLC
55 A.3d 344
Del.2012Background
- CACH, LLC obtained a December 7, 2006 judgment lien against Aaron Johnson and recorded it December 21, 2006 on real property at 19 Sanford Drive, Newark, DE.
- Johnson conveyed the property to himself and his wife as tenants by the entirety on December 19, 2006 and simultaneously mortgaged it to Eastern Savings Bank for $168,000 (recorded December 29, 2006).
- Eastern foreclosed in August 2008; at the April 2009 sheriffs sale Mile High Investments, Inc. purchased the property for $133,000 and the sheriff disbursed proceeds to Eastern’s counsel; no excess remained for CACH after costs and partial satisfaction of the mortgage.
- CACH sued Eastern in the Court of Common Pleas for misappropriation and unjust enrichment; the common pleas court denied summary judgment for CACH and dismissed; the Superior Court reversed.
- On appeal, the issue is whether the sheriffs sale discharged CACH’s judgment lien and how sale proceeds must be distributed among lienholders; the court held that nonmortgage liens are discharged and proceeds follow first-in-time priority.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does sheriffs sale discharge nonmortgage liens like judgments? | CACH argues sale discharges nonmortgage liens against the prior owner. | Eastern contends the sale does not discharge the judgment lien. | Yes; nonmortgage liens are discharged. |
| What is the order of distribution for sheriffs sale proceeds when liens remain after discharge? | CACH asserts first-in-time priority among recorded liens. | Eastern contends a different priority or exception applies due to mortgage timing. | Proceeds are distributed first in time, first in line; CACH has priority as the earlier recorded lien. |
| Do ancillary defenses defeat CACH’s recovery? | CACH contends no defenses bar recovery; the sale discharged its lien and priority rules apply. | Eastern asserts equitable subrogation, collateral attack, or tenancy-by-entirety nuances foreclose recovery. | None of the ancillary defenses defeat recovery; claims barred. |
Key Cases Cited
- Farmers’ Bank v. Wallace, 3 Del. (3 Harr.) 370 (Del. 1841) (sale discharges older judgment liens absent preexisting mortgages)
- Sharpe v. Tatnall, 5 Del.Ch. 302 (Ch. 1880) (mechanic’s lien foreclosures discharged; only mortgages prior to general liens survive)
- Cedar Inn, Inc. v. King’s Inn, Inc., 269 A.2d 781 (Del. Super. 1970) (distribution rule reflects race recording principles; analyze mortgage vs. lien priority)