Kemp v. Thurmond

In January 1971, E. C. Thurmond III and Doris Thurmond (defendants) applied to Martin Bank for a $25,000 construction loan to be used for the construction of a single-family dwelling. In May 1971, the Thurmonds obtained a commitment from First Federal Savings and Loan Association of Fulton (First Federal) to Martin Bank for $25,000 upon the completion of the construction of the home. Martin Bank’s $25,000 construction loan was secured by a trust deed, to be paid from the proceeds of the permanent loan. The trust deed secured an initial disbursement of $2,500 and any additional sums thereafter loaned by Martin Bank to Thurmond, not to exceed $25,000. At the time of the trust deed’s execution and recordation, no labor or materials had been furnished nor had labor been performed. In addition to the initial $2,500 disbursement, the Thurmonds also received advances of $7,500, $5,000, and $10,000, with all funds used toward the construction of the dwelling. Builders Supply Company, Inc., and K-T Distributors Inc. (collectively, the builders) (plaintiffs) filed and perfected a mechanic’s lien against the Thurmonds’ property. It was also undisputed that at the time of the additional advances, construction had commenced. The builders asserted that the mechanic’s lien had priority because it attached at the commencement of work, which occurred prior to the subsequent installments made pursuant to the trust deed. Martin Bank argued that the trust deed had priority because it secured a total obligation of $25,000, regardless of when the installments were made. The court of appeals held that Martin Bank’s lien was superior, and the builders appealed.