Court Opinion

ID: 9534586
Source: CourtListenerOpinion
Date Created: 2023-08-07 04:41:11.345536+00
Date Added: 2024-06-11T13:31:57.482641
License: Public Domain

Wahl, J.,
dissenting: I respectfully dissent from the majority opinion. It appears to me that the majority opinion places an overly broad construction on K.S.A. 58-2305 and condones commercially unsound practices by lenders.
*275The very brief statutory statement covering purchase money mortgages is found at K.S.A. 58-2305 and reads: “A mortgage given by a purchaser to secure the payment of purchase money shall have preference over a prior judgment against such purchaser.” There is nothing within this statute to cover a priority for future construction costs or any other improvements which the purchaser may wish to place upon the land. It covers only that which is in being when the loan for purchase was obtained. The legislature could easily have included construction costs in the statute, but, not having done so, the addition cannot be judicially grafted upon the statute.
RTC essentially argues that Anchor should not be held to know what the record reflects because it is too much effort and paperwork to find out and that to deny the construction portion of the loan the protection of K.S.A. 58-2305 would have a “chilling effect” on the lending business. This argument is not impressive, and it may well be an attitude which contributed heavily to the savings and loan debacle now facing this nation.
Banks and other commercial lenders have, for years, dealt with the doctrine of lis pendens, K.S.A. 60-2201, and the constructive notice of recorded documents. They simply searched the record to determine the status of their proposed loan. Such a search is not chilling to the lending business. It is not burdensome to the lender or the borrower. It is simply a good business practice which results in sounder loans. Had Anchor searched the records, it would not have found a judgment lien against the lot in question, but it would have found an action pending against its borrower which could ripen into such a lien and which would affect the loan.
Curiously, this issue has not before arisen in Kansas, and not many sister state appellate courts have considered it. Missouri considered it in Westinghouse Elec. Co. v. Vann Realty Co., 568 S.W.2d 777 (Mo. 1978), and held that purchase money protection applied only to the purchase price of the land and not to that part of the mortgage securing costs for buildings to be constructed upon the land. New York reached the same general result in Syracuse Savings & Loan Association v. Hass, 134 Misc. 82, 85, 234 N.Y.S. 514 (1929).
*276Georgia has held otherwise in Hand Trading Company v. Daniels et al., 126 Ga. App. 342, 190 S.E.2d 560 (1972), concluding that, even though no house existed on the lot at the time of the mortgage, the loan was made for the purpose of purchasing the lot and building a house on it.
The Georgia ruling is a boon to lenders who do not wish to search the record, but it totally ignores the rights of prior judgment creditors who made the record. It also opens a door for the borrower-mortgagor to apply part of the loan proceeds to other purposes, as apparently happened in this case.
I would reverse the judgment of the trial court and remand the case with directions to enter judgment for RTC for $39,000, the cost of the land, plus interest, as a purchase money mortgage, and to enter judgment for the trustee of the Perry Sharp Trust for $25,558, with interest and costs, as a second lien on the property sale proceeds.