Ladd & Tilton Bank v. Mitchell

BEAN, J. The only issue in this case is whether the plaintiff is entitled to a judgment for any balance that may remain due after the application of the proceeds of the sale of the real property described in the mortgage. It is contended on behalf of defendants Hattie Mitchell and McKinley Mitchell, whom we will hereafter designate as defendants, as Lewis-Wiley Hydraulic Company, the other defendant, did not answer or appeal; that under the provisions of Section 426, L. O. L., the plaintiff is not entitled to a judgment for such balance or as it is termed, “a deficiency judgment.” The provisions of this section of our Code are ns follows: “When judgment or decree is given for the foreclosure of any mortgage, hereafter executed, to secure payment of the balance of the purchase price of real property, such judgment or decree shall provide for "the sale of the real property, covered by such mortgage, for the satisfaction of the judgment or decree given therein, and the mortgagee shall not be entitled to a deficiency judgment on account of such mortgage or pote or obligation secured by the same.” The transaction delineated by the stipulation was of the same force and effect as though Ladd & Tilton Bank had loaned to the Mitchells $3,375, Lewis-Wiley Hydraulic Company guaranteeing payment thereof, and then the Mitchells had paid the same to the Lewis-Wiley Hydraulic Company, and that company in turn had paid the same to Ladd & Tilton Bank. Instead of taking such a circuitous route, a three-cornered transaction was made. It might be stated that in effect the [674] Mitchells assumed and agreed to pay to Ladd & Til-ton Bank a portion of the money the Lewis-Wiley Hydraulic Company had borrowed from La,dd & Til-ton Bank. The Mitchells were not purchasers of the lots from Ladd & Tilton Bank; Ladd and Tilton Bank were not the sellers of the lots. The mortgage was not executed by the Mitchells “to secure the payment of the balance of the purchase price of real property” within the meaning of the* statute. The original debt of the Lewis-Wiley Hydraulic Company to Ladd & Til-ton Bank was for money loaned by the bank to that company. The mortgage given by the Mitchells .to Ladd & Tilton Bank was in effect given for a loan. 1. The position of the defendants is that the mortgage was a purchase-money mortgage. We think that it may be conceded that it is a general rule, to which there is little dissent, that a mortgage on land executed by the purchaser of the land contemporaneously with the acquirement of the legal title thereto, or after-wards, but as a part of the same transaction, is a purchase-money mortgage, and entitled to preference as such over all other claims or liens arising through the mortgagor though they are prior in point of time; and this is triie without reference to whether the mortgage was executed to the vendor or to a third person: 19 R. C. L., § 196, p. 416; Marin v. Knox, 117 Minn. 428 (136 N. W. 15, 40 L. R. A. (N. S.) 272, and note). But this rule is of little assistance in determining the question in the case at bar involving a construction of Section 426, L. O. L., which was adopted for a different purpose. The decisions, holding that if a loan is secured by a mortgage given on property purchased with the money lent, then such mortgage is a purchase-price mortgage were for the benefit of the mortgagee and not to his [675] detriment. In other words, the courts have construed such mortgages as purchase-price mortgages in order to secure to the mortgagee the full amount of the money advanced. In several jurisdictions, however, it is held that such mortg’ages are not purchase-price mortgages: Heuisler v. Nickum, 38 Md. 270; Eyster v. Hatheway, 50 Ill. 521 (99 Am. Dec. 537). In Heuisler v. Nickum, 38 Md. 270, it was said : “The terms ‘purchase money,’ do not include any money that may be borrowed to complete a purchase, but that which is stipulated to be paid by the purchaser to the vendor, as between them only it is purchase money; as between the purchaser and lender, it is borrowed money. ’ ’ 2. A purchase-money mortgage is defined in 32 Cyc., at page 1267, as follows: “A mortgage given, concurrently with a conveyance of land, by the vendee to the vendor, on the same land, to secure the unpaid balance of the purchase price”: Citing Black’s Law Dictionary. While this definition is not the universal one, it seems to us that in enacting Section 126, L. O. L., the legislature acted with the kind of puirchase-money mortgage in view, as defined above; that is, that the purpose of the law was to encourage and protect the purchaser of real estate, which perchance is made for the purpose of obtaining a home; that it was not the intent of the lawmakers to render it more difficult for such a purchaser to obtain a loan and pay the cash for a home, and receive the benefit of any lower price of the realty that might be made on account of such cash payment. That if the law should be so construed that anyone obtaining a loan and giving a real estate mortgage to a third party not the vendor of the land to secure the payment thereof, when it was contemplated [676] that the money so borrowed should be used in payment for the real property purchased at the time, would be executing a mortgage “to secure payment of the balance of the purchase price of real property,” within the purview of the statute, and that the lender could only look to the property upon a foreclosure proceeding, then the person1 wishing to purchase a home or other real property, would be hampered and his credit impaired, and it might well be said that: “The last state of that man is worse than the first.” In such event, the beneficent purpose of the law would be thwarted. It must be considered that the bank was not speculating in real estate in the transaction; it was doing a banking business. It was not the purpose or the intent of the law to regulate banking business or the loaning of money. The ordinary transactions of a bank do not come within the provisions of the act. Whatever may be the construction of the section referred to when applied to a mortgage executed by a vendee to a vendor.to secure the payment of the balance of the purchase price of real property, we believe that it was not the intention of the legislature that mortgages like the one in question in the present casé should come within the provisions of Section 426, L. O. L. The decree of the lower court is therefore affirmed. Aeeirmeu. Johns, J., not sitting. Burnett, Benson and Harris, JJ., concur in the result.