Varner v. New Hampshire Savings Bank

Background

This case is a fight between creditors of a bankrupt estate. One group are mortgage lenders who say their mortgages were recorded before any building work began. The other group are contractors who say construction began earlier and that they hold preferred mechanics’ liens under a Kansas law. A district court disagreed with a court-appointed referee, but the Circuit Court of Appeals sided with the referee and gave priority to the mortgage lenders.

Reasoning

The main question was factual: did the claimed work amount to starting the building before the mortgages were recorded? The appeals court found that the evidence did not show such work was performed beforehand. It described what was done as a mere pretense to defeat earlier bona fide liens and therefore held the mortgages took priority. The Supreme Court reviewed the record, found substantial difficulties but concluded the evidence supports the appeals court’s findings, and affirmed that judgment.

Real world impact

The ruling resolves this priority dispute in favor of the mortgage lenders in the bankrupt estate. It reinforces that, on these facts, claimed pre-construction activity did not create earlier mechanics’ liens. The decision turns on the specific evidence here, so its effect outside this case depends on how similar later cases’ facts are.