Henry owns Blackacre and desires to improve it. On January 1, he signs a contract with Calvin wherein Calvin agrees to clear the property and build a large barn thereon.
Henry owns Blackacre and desires to improve it. On January 1, he signs a contract with Calvin wherein Calvin agrees to clear the property and build a large barn thereon. The contract is for $100,000. Calvin immediately begins preparing for construction, spending the month of January surveying the property. Thereafter (in anticipation of having to pay Calvin), Henry borrows some money from Wells Fargo, which records a deed of trust against Blackacre on February 1. Shortly thereafter, Calvin finishes surveying the property, and he begins grubbing the land and pruning the orchard trees that grow there on February 15. After the grubbing and pruning is finished, two of Calvin’s subcontractors (Audrey and Sophie) begin working on the property, both on March 1. Audrey begins excavating, and Sophie begins laying the footings and foundation. Audrey and Sophie work on the property throughout March and April. Each are owed $15,000 for their work. They both properly prefect their mechanics’ and materialmens’ liens on May 1. Finally, on June 1, Wells Fargo sells its not to Allison, who qualifies as a holder in due course.
1. Assume that everyone seeks to foreclose. Explain to me who has priority and why.
2. Does your answer to Question #1 change if Henry claims to have a defense against Well Fargo’s note? Explain to me why.
3. Assume, for purposes of this question only, that Henry pays out the entire $100,000 contract payment to Calvin after receiving Audrey and Sophie statutory notices. For how much, if any, is each of Audrey and Sophie secured?
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