J.I. Kislak Mortgage Corporation v. William Matthews Builder, Inc.
Superior Court of Delaware
287 A.2d 686 (1972)
J.I. Kislak Mortgage Corporation (Kislak) (plaintiff) entered into a construction-loan agreement with William Matthews Builder, Incorporated (Matthews) (defendant). Under the agreement, Kislak was to release funds to Matthews if work was completed in agreed-upon phases of construction and Matthews provided receipts showing that all subcontractors had been paid. Kislak’s agent routinely inspected the site and authorized release of payments under the agreement. However, unknown to Kislak, Kislak’s agent fraudulently authorized payments for incomplete work. As a result, only some of the subcontractors on the project were paid. Kislak sued to foreclose on the construction mortgage. After the foreclosure action began, Bachman and Wood (Bachman), an unpaid subcontractor, filed mechanics’ liens against the property. Bachman intervened in the foreclosure action, alleging that Bachman’s mechanics’ liens took priority over Kislak’s progress payments made to Matthews after Bachman began work as a subcontractor. Kislak countered that Kislak’s lien had priority over the mechanics’ liens, because the mortgage was executed and recorded before Bachman began work on the property. Bachman moved for summary judgment.
Rule of Law
Holding and Reasoning (Christie, J.)
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