MORTAGES

Hambly was the owner of a block of land in fee simple. He arranged a mortgage on the property with Blake for $50,000, and the mortgage was duly registered in the appropriate Land Registry Office. Hambly used the funds for the renovation of an existing building on the premises, but discovered that he had insufficient funds to complete the changes he wished to make.

A few months later, he borrowed the sum of $10,000 from his friend Clark and gave a second mortgage on the property as security. Clark did not register the mortgage; instead, she placed it in her safety deposit box, with the intention of registering it at some later date.

When the renovations to the building were completed, Hambly decided to install a swimming pool on the grounds. He borrowed $5,000 from Simple Finance Co. to pay the pool contractor for the installation. Simple Finance, as security for its loan to Hambly, took a mortgage on the property. The mortgage was registered the same day that the funds were given to Hambly.

Shortly thereafter, Hambly arranged a party to celebrate the completion of the swimming pool and invited his many friends to attend. At the party, Clark mentioned to Anderson, another friend of Hambly, that she held a mortgage on Hambly's property, and that she would like to dispose of it in order to have the funds available for another more attractive investment.

Anderson expressed an interest in the purchase of the mortgage and, after some discussion, agreed to give Clark $9,000 for it. The next day, Anderson paid Clark the $9,000 for the mortgage (on which the full $10,000 principal was owing) and received an assignment of the mortgage. When Anderson realized that the mortgage itself had not been registered, he had the documents registered immediately. Unfortunately, he failed to notice the mortgage to Simple Finance in his examination of the title to the property.

Hambly was killed in an automobile accident a few days before he was scheduled to make his first payments on the mortgages. His only asset was his interest in the property. Blake institutedpower of saleproceedings when the first payment required under the mortgage became overdue. An appraisal of the property indicated that it had a market value of approximately $60,000.

Discuss the position of the parties in this case. Indicate their rights in thepower of saleaction.

Comment on the possible outcome of the case.