by: Peter J. Gallagher (@pjsgallagher)
Another day, another post about mortgage priority. Last week, I posted about how refinancing a first mortgage impacts its priority -- click here if you don't remember -- and now comes an even more interesting, and more unique, case about mortgage priorities.
In Rosenthal & Rosenthal, Inc. v. Benun, plaintiff was a factoring company (factoring is the sale of accounts receivable at a discount price). It entered into two factoring agreements with several entities owned by Jack Benun and his family (the "Benun Companies"). Each of the factoring agreements was personally guaranteed by defendant, Vanessa Benun, Jack Benun's daughter, and each of her personal guarantees was secured by a mortgage on property she owned in Ocean Township. These mortgages were recorded in 2000 and 2005 respectively. Each mortgage contained both a "dragnet clause" -- a provision stating that if the borrower ever becomes liable to the lender on any other loan, the mortgage will also secure that loan -- and an anti-subordination clause.
In 2007, after both of the above mortgages were recorded, Ms. Benun gave the law firm Riker Danzig a mortgage on the same property in Ocean Township that secured her personal guarantees on the two factoring agreements. The purpose of this mortgage was to secure payment of almost $1.7 million owed to Riker Danzig by Mr. Benun at that time. After the mortgage was recorded, plaintiff's counsel sent an email to Riker Danzig acknowledging the Riker Danzig mortgage. More importantly for the purpose of the Appellate Division;s decision, plaintiff also continued to make disbursements to the Benun Companies under the factoring agreements after the Riker Danzig mortgage was recorded and acknowledged by plaintiff.
