Title: EILEEN V GRAVES V AMERICAN ACCEPTANCE MORTGAGE
Citation: N/A
Docket Number: 119977
State: Michigan
Issuer: Michigan Supreme Court
Date: April 14, 2004

____________________________________ 
 
 
 
 
 
 
Michigan Supreme Court  
Lansing, Michigan 48909  
Chief Justice 
Justices 
Maura D. Corrigan 
Michael F. Cavanagh 
Elizabeth A. Weaver 
Marilyn Kelly 
Clifford W. Taylor 
Robert P. Young, Jr. 
Opinion 
Stephen J. Markman 
FILED APRIL 14, 2004 
EILEEN V. GRAVES, 
Plaintiff-Appellant, 
v 
No. 119977 
AMERICAN ACCEPTANCE MORTGAGE CORPORATION, 
Defendant-Appellee, 
and 
BOULDER ESCROW, INC., a Nevada Corporation, 
Defendant/Counter and Cross-Plaintiff-Appellee. 
and 
STEVE DIAZ, 
Defendant/Counter and Cross-Defendant. 
BEFORE THE ENTIRE BENCH 
MARKMAN, J.  
ON REHEARING 
The issue before the Court is whether a mortgage given 
on a loan and secured by the mortgagor’s property, the 
proceeds of which are used by the mortgagor to pay off a 
 
 
 
   
 
 
                                                 
  
 
 
land contract debt and thereby acquire legal title to that 
property, is a purchase money mortgage and, if so, whether 
it is therefore entitled to priority over a prior recorded 
lien on that property. 
The Court of Appeals held in the 
affirmative. 
We hold that the mortgage at issue is not a 
purchase money mortgage and, thus, we reverse the judgment 
of the Court of Appeals and reinstate the circuit court’s 
grant of summary disposition in favor of plaintiff. 
Because we hold that the mortgage is not a purchase money 
mortgage, we need not address the additional question 
regarding the priority of purchase money mortgages.1 
I. FACTS AND PROCEDURAL HISTORY 
In 1987, a married couple, Eileen Graves and Steve 
Diaz, purchased by land contract a residence at 72 West End 
in Waterford (the property) from the Giordanos, the vendors 
under the land contract. 
Neither Graves nor Diaz recorded 
the land contract. 
In 1994, the couple divorced and, 
pursuant to the judgment of divorce, Diaz was awarded their 
interest in the property, but Graves was granted a lien on 
the property to secure payment of child support and other 
monies. 
In August of 1994, Diaz, facing forfeiture of the 
1 
We do not deal with the priority of purchase money 
mortgages because the issue is not implicated in this case.
Thus, the concurrence should not be understood as the
position of this Court. 
2  
 
 
property, applied for a loan from defendant American 
Acceptance Mortgage Corporation (American Acceptance) with 
the intent of using the proceeds to pay off the remaining 
debt on the property owed to the Giordanos and thereby 
avoid forfeiture. 
Before the mortgage closing, American 
Acceptance conducted a title search of the property in the 
Oakland County Register of Deeds in both the grantor­
grantee index and the tract index. 
The search reflected 
that the property was owned by the Giordanos, and, because 
the land contract was never recorded, the records showed no 
interest by either Diaz or Graves. 
On the morning of 
September 7, 1994, Graves recorded her judgment lien 
interest in the property with the Oakland County Register 
of Deeds. 
Later that same day, Diaz closed on his loan 
with American Acceptance. 
In connection therewith, Diaz 
executed a mortgage note to American Acceptance secured by 
the property. 
The loan proceeds were used to pay the 
remaining 
balance 
under 
the 
land 
contract 
with 
the 
Giordanos, who delivered a warranty deed to Diaz on 
September 13, 1994, thereby conveying to Diaz legal title 
to the property. 
Diaz recorded his warranty deed on 
October 6, 1994. American Acceptance recorded the mortgage 
on October 5, 1994. 
Before recording the mortgage, 
however, American Acceptance assigned its interest to 
Boulder Escrow, Inc. (Boulder), and Boulder recorded that 
3  
 
 
 
 
assignment on April 13, 1995. 
Because Diaz failed to pay Graves the monies due her, 
Graves filed a motion to enforce her judgment lien, which 
the trial court granted in November of 1995. 
On January 
11, 1996, because Diaz had also defaulted on his mortgage 
obligations, Boulder published a notice of a public auction 
of the property. 
On January 12, 1996, Graves, asserting a 
failure to perform as required under the divorce judgment, 
sued Diaz, American Acceptance, and Boulder to foreclose on 
her judgment lien. 
Boulder filed a cross-claim against 
Diaz for defaulting on his mortgage obligation and a 
counterclaim against Graves asserting the priority of its 
mortgage interest over her judgment lien. 
In April of 
1997, a default judgment was entered against Diaz, who is 
not a party to this appeal. 
Plaintiff Graves and defendants American Acceptance 
and Boulder moved for summary disposition on the issue of 
the priority of the mortgage. 
The circuit court ruled for 
Graves, holding that plaintiff’s first-recorded lien was 
constructively, if not actually, known to defendants and, 
thus, under MCL 565.29, the lien had priority over the 
subsequent mortgage. 
The Court of Appeals reversed that ruling, holding 
that under the authority of Fecteau v Fries, 253 Mich 51; 
234 NW 113 (1931), the mortgage was a purchase money 
4  
 
   
 
 
 
                                                 
  
 
mortgage and was therefore entitled to priority over all 
other liens or interests, even those that were prior 
recorded.2 
Graves sought leave to appeal in this Court. 
In lieu 
of granting leave, we initially issued an opinion per 
curiam in which we reversed the judgment of the Court of 
Appeals, holding that pursuant to Michigan’s recording 
statutes, a property lien that is recorded first in time is 
entitled to priority without regard to a subsequent 
competing purchase money mortgage interest. 
467 Mich 308; 
652 NW2d 221 (2002). 
However, on reconsideration, we 
vacated that opinion per curiam and granted leave to 
appeal. 467 Mich 1231 (2003). 
II. STANDARD OF REVIEW 
This appeal involves consideration of a trial court’s 
ruling on a motion for summary disposition, which is 
reviewed 
de 
novo 
on 
appeal. 
Spiek 
v 
Dep't 
of 
Transportation, 456 Mich 331, 337; 572 NW2d 201 (1998). 
Further, 
the 
specific 
question 
we 
review—whether 
a 
mortgage, the proceeds of which were used to pay the 
remaining debt on a land contract, constitutes a purchase 
money mortgage entitled to priority over a prior recorded 
2 
246 Mich App 1; 630 NW2d 383 (2001). 
5  
 
 
 
  
   
                                                 
 
lien—presents an issue of law that is also reviewed de 
novo. 
Cardinal Mooney High School v Michigan High School 
Athletic Ass’n, 437 Mich 75, 80; 467 NW2d 21 (1991). 
III. ANALYSIS 
Black’s Law Dictionary (6th ed) defines a “purchase 
money mortgage” as “[a] mortgage or security device taken 
back to secure the performance of an obligation incurred in 
the purchase of the property.” 
This definition comports 
with the implicit definition that this Court has given to 
purchase money mortgages in relevant cases, including 
Fecteau. 
In Fecteau at 55, we noted that a purchase money 
mortgage takes effect immediately, as part of the “same 
transaction by which seisin was acquired by the mortgagor.”3 
Further, in Fecteau at 54, we regarded a purchase money 
mortgage as one arising when a mortgagor “purchase[s] 
property and give[s] a mortgage for the purchase-money 
. . . .”4 
3 Black’s defines “seisin” as “Possession of real 
property under claim of freehold estate. . . . Possession
with an intent on the part of him who holds it to claim a
freehold estate.” 
4 In Comstock v Comstock, 27 Mich 97, 99 (1873), we
addressed whether the mortgages at issue were purchase
money 
mortgages, 
questioning 
whether 
the 
“mortgages
mentioned in the pleadings were given for the purchase
money of these premises . . . [whether they were] given, or
meant to be given, back for purchase money . . . .” 
See 
also Hammel v First Nat’l Bank of Hancock, 129 Mich 176,
177-178, 88 NW 397 (1901), quoting United States v New 
Orleans R, 79 US (12 Wall) 362; 20 L Ed 434 (1870), in
6 
 
 
 
                                                 
   
Thus, determining whether a mortgage is a purchase 
money mortgage requires considering whether the obligations 
incurred under the mortgage arose as part of the same 
transaction in which the mortgagor purchased the property 
securing the mortgage. 
The mortgage must have been given 
at the time of purchase of the security so as to constitute 
“one transaction,” and the proceeds must have been used by 
the mortgagor to purchase the security, in whole or in 
part. 
American Acceptance argues that the mortgage received 
from Diaz is a purchase money mortgage because it was 
created as part of the “same transaction” under which legal 
title was conveyed from the Giordanos to Diaz, and because 
the mortgage proceeds were used by Diaz to acquire that 
legal title from the Giordanos. 
We respectfully disagree 
that these facts give rise to a purchase money mortgage. 
This Court has consistently held that under a land 
contract, although the vendor retains legal title until the 
contractual obligations have been fulfilled, the vendee is 
given equitable title, and that equitable title is a 
present interest in realty that may be sold, devised, or 
encumbered. 
In Bowen v Lansing, 129 Mich 117, 119-122; 88 
which we considered a “mortgage for purchase money” as one
that arises when a mortgagor “purchase[s] property and
give[s] a mortgage for the purchase money . . . as one 
transaction.” 
7  
 
 
  
 
 
NW 384 (1901), this Court considered, at length, the rights 
incident to legal ownership and equitable ownership of land 
in a land contract situation. We stated: 
“At law a contract for the purchase of land
gives the vendee no interest in the land; but the
rule is otherwise in equity, which considers the
vendor, as to the land, a trustee for the 
purchaser, and the vendee, as to the money, a
trustee for the seller. In equity the land 
belongs to the vendee, and may be sold, devised,
or incumbered by him, and on his death will
descend to his heirs. Seton v. Slade, 7 Ves. 265,
274 [1802]; Paine v. Meller, 6 Ves. [349] 353
[1801]; Champion v. Brown, [2 NY Ch Ann 163] 6
Johns. Ch. 398 (10 Am. Dec. 343) [1822]. . . . ”
[Quoting Wing v McDowell, Walker’s Cham Rep
(Mich) 175, 181 (1843).] 
This was emphasized by Fitzhugh v. Maxwell,
34 Mich. 138 [1876], where it was again said that
the legal title remained in the vendor as a
trust, and that his only equitable claim upon it
was by way of security for his debt in the nature
of a vendor's lien, which could only be made
effective to devest the vendee's equitable title
by a sale through proceedings to foreclose the 
vendor's lien. 
In Walker v. Casgrain, 101 Mich. 
[604] 608, (60 N. W. 292) [1894], it was said:
“While 
complainant 
holds 
the 
legal 
title,
defendant . . . is the owner in equity. The claim 
of the vendor is but an ordinary money debt,
secured by the contract.” See also, Corey v. 
Smalley, 106 Mich 257, 260 (64 N. W. 13, 58 Am.
St. Rep. 474) [1895]; O’Brian v. Evans, 107 Mich. 
623 (65 N. W. 571)[1895]. 
* * * 
As the foregoing authorities indicate that
the vendor's title is only a trust coupled with
an interest by way of security for a debt, which
is personalty, so the [cases cited by counsel
are] in harmony in holding that the vendee is the
cestui que trust as to the legal title, and that
his interest [i.e., the vendee’s interest] is 
8  
 
 
 
 
 
 
                                                 
 
 
real property, and descends to his heirs . . . . 
It is clear that, upon the death of the
vendor, the chose in action, with the security
represented by the contract, became a part of the
personal assets of the estate . . . . [Bowen at 
119-120 (emphasis added).] 
We acknowledge that in Bowen we did not address the 
specific question at issue in this case. 
Nonetheless, we 
believe the general rules of law stressed in Bowen are 
pertinent here and support a finding that a mortgage, the 
proceeds of which are used to pay off a land contract, is 
not a purchase money mortgage. 
The reason such a mortgage 
is not a purchase money mortgage is because in a land 
contract situation the vendee “purchases” the property upon 
signing the land contract and acquiring an equitable 
interest therein.5
 At that point, the vendee acquires 
“seisin” and a present interest in the property that may be 
sold, devised, or encumbered. 
That the vendee may 
ultimately default on the contract does not negate the fact 
that the vendee has, in a real sense, purchased the 
relevant property. 
That legal title remains in the vendor 
until full performance of all contractual obligations 
5 Black’s defines “purchase” as “To own by paying or
promising to pay an agreed upon price which is enforceable
at law . . . . 
The term ‘purchase’ includes any contract
to purchase or otherwise acquire.” 
This definition 
supports our finding that, upon signing a contract to
purchase property and acquiring equitable title therein,
the vendee has purchased that property.
9 
 
  
 
                                                 
    
likewise does not negate the fact that the vendee has 
already purchased the property. 
The vendor’s legal title, 
as noted in Bowen, “is only a trust coupled with an 
interest by way of security for a debt . . . .”6 
Bowen at 
120. It represents “but an ordinary money debt, secured by 
the contract.” Casgrain at 260. 
Because Diaz already owned the property at the time 
American Acceptance loaned him money in return for a 
mortgage with which to pay off the land contract, the 
mortgage here is not a purchase money mortgage. 
The 
obligations incurred under the mortgage were not for the 
purpose of purchasing the property. 
On the contrary, they 
were for the purpose of discharging a debt, and it was the 
obligations under this original debt that arose as part of 
the same transaction in which the property was purchased. 
6 MCL 565.357(2) of the recently enacted land contract
mortgage act, MCL 565.356 et seq., provides that land
contracts can be mortgaged and that the interests of both
the vendor and the vendee subject to a land contract
mortgage are real property interests. 
Thus, the vendor’s
interest when subject to a land contract mortgage is an
interest in realty. Therefore, the vendor’s interest under
the land contract itself is more appropriately considered
an interest in realty as opposed to personalty. However,
the vendee’s interest, when subject to a land contract
mortgage, is equally an interest in realty. Therefore, the
vendee’s interest under the land contract itself is 
likewise appropriately considered an interest in realty (as
under Bowen). Thus, the land contract mortgage act further
supports a finding that the equitable title conveyed to a
vendee under a land contract evidences an interest in 
realty that may be encumbered, sold, or devised. 
10 
 
 
  
 
                                                 
 
 
 
 
 
  
Accordingly, American Acceptance’s mortgage is not a 
purchase money mortgage and, therefore, we need not address 
the additional question regarding the priority of purchase 
money mortgages.7 
7 We further note that a close analysis of cases in
which this Court has afforded priority to purchase money
mortgages supports our holding that the instant mortgage is
not a purchase money mortgage. 
For instance, in Heffron v 
Flanigan, 37 Mich 274 (1877), we considered the nature of a
mortgage given at the same time that title was acquired as
opposed to a prior mortgage given on the same property
before the mortgagor had acquired title to it. We stated: 
This case differs in no essential from that 
of an ordinary conveyance of land with a mortgage
back at the same time to secure a part or the
whole 
of 
the 
purchase 
price 
or 
for 
other 
purposes. The grantor and mortgagee in such a
case would not suppose, nor would he have any
right to suppose, that his grantee had before 
acquiring the title encumbered it, and if he took
back a mortgage at the same time and had both
conveyances promptly placed upon record together,
he would be doing all that the law required him
to do for the protection of his rights and he
would not be affected by any previous conveyances
which his grantee, the mortgagor, might have 
placed upon record, when he had no title to the 
premises. [Id. at 278 (emphasis added).] 
In 
this 
case, 
American 
Acceptance 
acquired 
its 
mortgage long after Diaz had acquired equitable title to
the property and, therefore, American Acceptance had reason
to know that Diaz may have encumbered the property.
Further, Diaz held title to the property at the time that
Graves placed her mortgage on it. 
Thus, Heffron, which is 
clearly distinguishable from the instant case, leads to the
conclusion that a mortgage granted on property after the 
mortgagor already has acquired title to the property
entitling the mortgagor to encumber the property is not a
purchase money mortgage. 
11  
 
 
 
 
 
IV. CONCLUSION 
We hold that a mortgage, the proceeds of which are 
used to pay off a land contract debt, is not a purchase 
money mortgage. 
Therefore, we reverse the judgment of the 
Court of Appeals and reinstate the circuit court’s grant of 
summary disposition in favor of plaintiff. 
Because 
defendants’ mortgage is not a purchase money mortgage, we 
need not address the additional question regarding the 
priority of such mortgages. 
Stephen J. Markman
Maura D. Corrigan
Michael F. Cavanagh
Marilyn Kelly
Clifford W. Taylor
Robert P. Young, Jr. 
12  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
____________________________________ 
 
 
 
 
                                                 
 
S T A T E O F M I C H I G A N  
SUPREME COURT  
EILEEN V. GRAVES, 
Plaintiff-Appellant, 
v 
No. 119977 
AMERICAN ACCEPTANCE MORTGAGE CORPORATION, 
Defendant-Appellee, 
and 
BOULDER ESCROW, INC., a Nevada Corporation, 
Defendant/Counter and Cross-Plaintiff-Appellee. 
and 
STEVE DIAZ, 
Defendant/Counter and Cross-Defendant. 
WEAVER, J. (concurring). 
I concur with the majority, but write separately to 
make clear that, at this time, the purchase money mortgage 
doctrine remains a part of Michigan jurisprudence.8
 This 
point must be emphasized to provide clarity and stability 
in the law because the current state of the law has been 
My 
concurrence 
is 
based 
on 
the 
unremarkable 
proposition that a vacated opinion has no effect or 
precedential value. 
It is uncertain whether the majority
disagrees 
with 
that 
principle, 
disagrees 
with 
the 
application of that principle to this case, or simply does
not want that principle and its application to be clearly
set out in this case. 
8 
 
 
 
 
 
questioned following this Court’s decision to vacate its 
opinion per curiam in this matter. 
In this case, this Court should not have overturned 
the purchase money mortgage doctrine in an opinion per 
curiam, without granting leave to appeal and having oral 
argument. 
Had we granted leave to appeal and heard oral 
argument, we doubtless would have discovered that the 
purchase money mortgage doctrine was not at issue in this 
case (as we discovered when we vacated our prior opinion 
per curiam, granted leave to appeal, and heard oral 
argument). 
That 
would 
have 
prevented 
the 
current 
situation, where the Court’s actions have caused confusion 
and instability in the law where there was none. 
To date two cases have referenced the uncertainty in 
the law after this Court’s earlier actions—an unpublished 
opinion per curiam from the Court of Appeals, DeGregorio v 
C & C Construction, Docket No. 238429, decided May 20, 
2003, and a case in the Eastern District of Michigan, 
Bednarowski v Wallace, 293 F Supp 2d 728 (ED Mich, 2003). 
See also Michigan Land Title Association newsletter, Dick, 
Abstractions, The Title Examiner, (Winter 2002) ("And, as 
if we needed more confusion, the Michigan Supreme Court 
reversed 
the 
Graves 
decision 
and, 
in 
the 
process, 
dismantled the priority of purchase money mortgages over 
2  
 
 
 
 
 
 
 
prior existing liens; (thank you, very much!) . . . ."). 
While it may be obvious to some, it is important to 
clearly state that because this Court has vacated its prior 
opinion per curiam, its overturning of the purchase money 
mortgage doctrine in that vacated opinion has no effect or 
precedential value. 
Consequently, the purchase money 
mortgage doctrine remains intact in Michigan jurisprudence. 
By issuing this concurrence, I am indicating no 
inclination one way or another concerning the continuation 
or abandonment of the purchase money mortgage doctrine. 
Should the issue be raised in an application for leave to 
appeal in the future, I will decide then whether or not to 
take the issue up for consideration and decision. 
Elizabeth A. Weaver 
3