85 N.J. Eq. 525 | N.J. | 1916
The only question raised by the appeals is that of priority between the mortgage and the lien claims. We think the mortgage, to the extent of $995, is entitled to the priority of a purchase-money mortgage. Disregarding mere form, as we ought (Wallace v. Silsby, 42 N. J. Law 1), it is clear that the only way in which the complainant can receive that part of the purchase price of the land is through the mortgage. If we leave out of consideration the passing and repassing of the check, which was a mere ceremony advantageous only as preserving a written record or as a voucher, the complainant delivered the deed and received the mortgage therefor. It was chargeable with the obligation to advance the $4,600 only when Thornton could make the mortgage, as the agreement required, a valid lien, subject to no encumbrance; unless the mortgage secured the purchase price the complainant would retain a vendor’s lien as a prior encumbrance until actual payment thereof. As Chief-Justice Beasley said, in Wallace v. Silsby, we must look at the intent of the parties and the real nature of the transaction.
The parties meant that the land should be paid for. If not paid for by the mortgage, it has not been paid for at all, and the complainant would still have its vendor’s lien. If paid for by the mortgage, the mortgage is pro tanto a purchase-money mortgage. That is so even if the check be regarded as in fact cash advanced on the mortgage and applied to-the satisfaction of the purchase price. Of the cases where mortgages have been given the advantage of purchase-money mortgages, although they do not purport on their face to be such, it is enough to refer to New Jersey Building Loan and Investment Co. v. Bachelor, 54 N. J. Eq. 600, where Vice-Chancellor Stevens, in a lucid and clarifying opinion, applied the rule to a case of priority between a mortgage and mechanics’ liens. In that case, the mortgage was held entitled to priority, to the extent to which money advanced by it went to pay another person, the grantor, for a part of the purchase-money. The mortgage in that case did not, because it
There is another reason, in the present case, for the priority of the mortgage as to the $995. Prior to October 6th, the estate of Thornton was only an equitable estate. It was at best a mere right in equity to a conveyance, notwithstanding the time fixed by the agreement had passed, upon payment of $995. Until that amount was paid he could not have a deed, and therefore could not have a legal estate. His equitable estate was not subject to lien. Dalrymple v. Ramsey, 45 N. J. Eq. 494. (While this case has not been subject to review in this court, it has been cited without question—Davis v. Mial, 86 N. J. Law 167, 168— and the reasoning of Vice-Chancellor Van Fleet'is unanswerable.) The present lien claimants were without remedy until Thornton got a legal title, and he got no legal title except as the result of the transaction of October 6th, by which the mortgage was substituted pro tanto for the purchase price. Before the lien claimants can have equity, they must do equity, and equity requires that the purchase price, without payment of which Thornton and the complainant never meant that any legal estate should pass, be first paid out of the proceeds of sale.
Whether the balance of the fund after payment of the $995 belongs to the mortgagee or to the lien claimants, depends upon the construction of the Mechanics’ Lien act. Prior to 1895, the act provided that.the deed made upon a sale by virtue of the special execution should convey to the purchaser the estate which the owner had in the lands at the commencement of the building, or which he subsequently acquired. Gen, Slat. p. 2068 § 28. Under that act it was necessarily held that the lien claim had priority over a mortgage given after the building was begun. Erdman v. Moore, 58 N. J. Law '445; New Jersey Building Loan and Investment Co. v. Bachelor, supra. (The mortgages in those cases were given before 1895.) This situation discouraged the loaning of money on new buildings. To cure the evil, the legislature enacted, in 1895 (P. L. 1895 p. 846 § 6),
Both section 14 and section 15 appear in the revised act of 1898, and section 28 of that act, which takes the place of section 23 of the act of 1874, enacts that the conveyance under the special execution shall be subject to the lien of any mortgage recorded or registered under the circumstances contemplated by and in conformity with the provisions of section. 14 or 15. Both sections are necessary to the complete scheme of the act. The difference between them is marked. Section 14 deprives the mortgagee of a legal right he would otherwise have by recording liis mortgage before the commencement of the building, and ■protects him only to the extent of actual advances, but it does not require that those advances should have been, applied to the erection of the new building. Section 15, on the other hand, gives the mortgagee a right he would not otherwise have sinc§ his mortgage is not recorded before the commencement of the building, but, in order that be may have that right, he must show that his advances have been applied to the erection of the new building. By section 14, the legislature cuts down a pre-existing right; by section 15 it gives a new statutory right, evidently upon the theory that one whose money goes into the building ought to stand as well as one whose labor or material goes in, even though by the date of record of his mortgage he would not be entitled to it.
The question remains whether the present case is within section 14 or section 15. The facts bring it exactly within section 14. The owner of the lot (the present complainant) disposed of it to Thornton, a builder, and took a mortgage in excess of the purchase-money price and agreed to pay the excess to thé builder from time to time as the building progressed. The mortgage was simultaneous with the deed; as soon as Thornton bad an estate, to which the mechanics’ lien could attach, it
The decree is affirmed, with costs.