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John Murtland Inc. v. Empire Trust Co.

February 21, 1930

JOHN MURTLAND, INC., ET AL.,
v.
EMPIRE TRUST CO.



Appeal from the District Court of the United States for the District of New Jersey; John Rellstab, Joseph L. Bodine, and J. Warren Davis, Judges.

Author: Avis

Before BUFFINGTON, Circuit Judge, and THOMSON and AVIS, District Judges.

AVIS, District Judge.

This suit involves a foreclosure proceeding commenced in the United States District Court for the District of New Jersey to foreclose a second mortgage held by Empire Trust Company, trustee, against President Apartment Hotel Company, and covering certain land in Atlantic City in the District of New Jersey.

The President Apartment Hotel Company, the owner of the land, desiring to construct a hotel building thereon, arranged for a second mortgage with Empire Trust Company, trustee, in the amount of $1,500,000 to secure bonds to be issued thereunder, and executed a contract with Walter G. Souders, its president, for the construction of the hotel buildings, and the appellants furnished to the contractor, labor and materials used in the construction thereof.

When the building neared completion, on November 29, 1926, because of financial difficulties, receivers were appointed by the United States District Court, District of New Jersey, for the hotel company and its property generally; the receivers taking possession of all of its assets.

On April 20, 1928, Empire Trust Company, as trustee for the bondholders thereunder, filed a bill to foreclose said mortgage, in the aforesaid United States District Court, against the receivers and sundry other defendants alleged therein to be subsequent lienors.

The appellants, John Murtland, Inc., and sundry other corporations and individuals, claiming to hold liens on said land and building, under the Mechanics' Lien Law of the state of New Jersey, which had actually been entered and recorded subsequent to the execution and recording of appellee's mortgage, were made defendants in the foreclosure proceedings, and, after hearing, the court entered a decree foreclosing the mortgage and decreeing that the lien of the mortgage was prior to all of the mechanics' liens of appellants; the final decree being entered on March 26, 1929. The correctness of this decree is before this court on appeal.

The appellants assert that their mechanics' lien claims are prior in lien on the lands described in the mortgage, for sundry reasons which are hereinafter discussed.

The mortgage of appellee, executed by the proper officers of the President Apartment Hotel Company, was dated June 19, 1925, and recorded in the proper recording office on June 20, 1925.

The lien claims of appellants were filed in the proper office, the first on November 22, 1926, and the last on March 2, 1927; the others at sundry dates between; and it appears that all lien claims were filed within four months of the last work done or materials furnished, in accordance with the law of the state of New Jersey.

As we view this case, it is not necessary to decide whether or not the appellee, as mortgagee, was made a defendant in the summons issued on the mechanics' lien claims, or whether or not the suits were abandoned and claims filed under the liens with the receivers, or whether or not a summons was actually issued.

The questions to be decided are:

(1) Did the court have jurisdiction?

(2) Was the mortgage in question, and being foreclosed, because of the fact that the holders of the bonds were innocent purchasers for value without actual notice of any infirmity in the bonds, prior ...


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