The Saginaw Bay Company seeks to enforce a mechanics lien on certain lands by virtue of a contract entered into by and between James C. Thompson and the Saginaw Bay Co. whereby the Company furnished certain material in construction work on said lands.
The Home Savings and Loan Co. attempted to prove construction loan mortgages on said property, but it appears from the testimony that the funds provided by said mortgages were used indiscriminately on two separate parcels of property, no record being kept of the amounts expended towards the construction of each separate house.
The evidence tends to show that the construction was commenced prior to the recording of said construction mortgages. It also appears from the record that one Charlotte Mintz also held a mortgage against said parcels of land, said mortgage being recorded subsequently to those held by the Home Savings and Loan Co. As this mortgage was executed by the owner at the same time that he purchased said land, mortgagee claimed a purchase money mortgage. Evidence tends to show that this mortgage was a purely commercial transaction involving a bonus of $500. The Court of Appeals held:
1. Where a construction loan mortgage is filed on property, and subsequently thereto mechanic’s liens are filed on the same property, the work and material on said liens being furnished previously to the recording of said mortgages, the mortgagee must comply strictly with the statute to enable him to establish priority over said mechanic’s lien.
2. In determining whether a mortgage is entitled to priority as a purchase money mortgage, the test is not whether the mortgage is given to the vendor, but whether it is used as purchase money.
3. Where a prospective purchaser obtains a loan from a third person to pay the purchase money, and a mortgage is executed to secure such loan as part of the transaction by which the deed was transferred, such mortgage has priority over mechanic’s liens arising out of improvements on the property commenced by the purchaser before he acquired title.
4. In this case no evidence was .introduced to show that it was so used.
A decree entered for Saginaw Bay Co. and other mechanic’s lien holders.