Grand Forks herald. [volume] (Grand Forks, N.D.) 1916-1955, 1918-03-04
LOANS AND LIENS

LOANS AND LIENS
The discussion Of the bearing. which the new North
Dakota seed grain law has on the operation Of the fed
eral land loan law brings into view the rather obvious
fact that there cannot, in the nature of things. be two
first liens on the same piece of property.
The object of placing a lien of any kind against
property, whether by law or by agreement, is to render
the claim represented by the lien secure up to the value
Of the property involved. An ordinary mortgage conveys
by title to property. 1t does not bar the sale of the
property. But it provides that upon the maturity of the
claim, if it be not paid, the property may be sold to sat
isfy it, regardless of any contracts that may have been
made with reference to it in the meantime. Except
where special arrangements for some other method are
made claims become liens against property in the order
in which they are formally filed as such, and the first
must be fully satisfied before any other can become a
charge against the property.
The reason for all this is clear. A man wishes to
borrow money upon the security of his land. He and
the loaner make satisfactory arrangements as to the
amount to be loaned, and a first mortgage is given. The
creditor is secured because he knows that he can obtain
the repayment of his loan through the sale of the prop
erty If payment is not otherwise made. If it were pos
sib!e after such a mortgage had been given to place
against the property some other lien which would take
precedence over the mortgage the value of the security
would be impaired. and. because of the element Of I'M
certainty involved, the owner would no longer he able
to borrow money on the security of his land.
No matter what other liens may be filed, an excep-
ton is always made in favor of taxes. Strictly speaking,
public taxes are always a first lien against land, and a
so-called first mortgage becomes a second lien, to be
satisfied only after all taxes have been paid. This is in
accordance with the sound, and necessary principle that
debts due to the state must be paid before other debts
can be recognized, and before the machinery Of the state
may be used for their collection.
In most states, at different times. provision has been
made for other liens which take precedence over liens
represented by mortgages and similar tokens of indebt-
edness. Taxes levied for special Improvements, such as,
bitches fall into a class between general taxes and debts
due to individuals. These are commonly treated as gen.
eral taxes, and with them become first liens. There is
an equity in this, because, while the amount of the tax
so levied brings in a claim ahead of that of the mort
gage, and for a purpose other than that of general gov
eminent, the property itself is benefited by the improve
ment represented by the tax, hence the value of the Sc
curty is not impaird.
Provision has also been made for liens for labor,
for material, and SO forth, for the making of improve
ments on the property, and in theory these are similar
to taxes for special improvements in that while a prior
-<claim is placed against the property, the property itself
has been enhanced in value by the making of the i'm
provements. The tendency Of this practice, however,
has been so to multiply such claims as to introduce d
S - AAS vi Ao~oio AAIo lar 1OdIlu6
OF money on real estate security. Contracts have been
let for improvements beyond the ability Of the owner to
pay for them: liens have been filed: and the holder Of
what would otherwise have been a perfectly safe and
satisfactory first mortgage has found his margin of safe
ty exhausted by liens for improvements imprudently
made. the payment for which might easily exhaust the
entire value of the property.
Because of this abuse. which operated distinctly to
the disadvantage Of the borrower by making It more
difficult for him to obtain a loan. lien laws have pven
very radically revised. In our own state no such lien
may be filed against real estate except with the consent
of the mortgage. This restores the real estate mort
gage to its position of perfect security, subject only to
levies made for public taxes or taxes for special i'm.
aaprovenents ordered by the state or its representatives
One Of the conditions of the federal farm loan law
Eth that loans made under that law shall be secured BY
as first mortgages-that is. first liens-upon the propert,
AFFECTED. The new seed grain law provides that indebt
incurred for the purchase Of seed grain under TIL,
law shall first be a lien against the crop, and. IL thu
ssassdebt is not. paid by October 15 Of the year in which th
M Indebtedness is incurred It shall then become a first lel
ssNagyainst the land itself and be collected in the same man
S nsr In which taxes are collected. AZ
There can be no question that IL the seed grain Iiel
HI8Xtakes precedence over the federal government mortgag
sassagthe margin Of security for which provision is made Ii
S4hes farm loan law is diminished BY Just that much, and
aas the farm loan law very distinctly requires the govern
sa@sinents to be protected by a first lien, It Ii not clear hoy
sssssdthoss Al charge of the operation OF that branch of tn
s~SSaahedesai businsssss can make loans without further leSts
3Ma1Af5oh.M state or hatiOnal. The suggestion thar come
mo attorney generals ONCE that tho seq gran
SItsbailty Il tre.tsd 81 ! tax mag, perhaps, point 4 Va