## Facts

- George R. Johns and his wife were indebted to Geo. M. McDonald & Co. in the principal sum of \$2,210, evidenced by three promissory notes executed and delivered before May 5, 1908.
- Johns was also indebted to Bechtol in the sum of \$662.16, evidenced by a promissory note executed and delivered before May 4, 1908.
- On May 4, 1908, Johns executed and delivered to Bechtol a mortgage on certain land to secure Bechtol’s pre-existing debt.
- On May 5, 1908, Johns executed and delivered to McDonald a mortgage on the same land to secure McDonald’s pre-existing debt.
- Both mortgages were given solely to secure pre-existing indebtedness; no new or additional consideration was paid, and no extension of time for payment was given as an inducement to either mortgage.
- Bechtol’s mortgage was executed and delivered first, but McDonald’s mortgage was recorded first.
- McDonald claimed it had no notice of Bechtol’s earlier mortgage when it took its own mortgage; for purposes of analysis, the court assumed McDonald lacked notice.
- McDonald sued in the Superior Court of Douglas County to determine priority between the two mortgages; the trial court ruled that Bechtol’s mortgage had priority, and McDonald appealed.
- The recording statute (Pierce’s Code § 4441) stated that deeds and mortgages “shall be valid as against bona fide purchasers from the date of their filing for record,” and that recording “shall be notice to all the world.”

## Issues

1. Whether a mortgagee who takes a mortgage only as security for an antecedent debt, without new consideration or an extension of time, is a “bona fide purchaser” (encumbrancer) for value under Washington’s recording statute.
2. If the mortgagee is not such a bona fide purchaser for value, whether a later-executed but earlier-recorded mortgage can take priority over an earlier-executed mortgage on the same land.

## Decision

- The Supreme Court of Washington affirmed the judgment for Bechtol.
- The court held that a mortgagee who takes a mortgage solely to secure a pre-existing debt, without new consideration or an extension of time, is not a bona fide purchaser (encumbrancer) for value within the meaning of the recording statute.
- Because McDonald was not protected as a bona fide encumbrancer for value, McDonald could not use first recording to defeat Bechtol’s earlier-executed and delivered mortgage.
- Priority therefore remained with Bechtol’s mortgage, which was first in time by execution and delivery.

## Legal Principles

- In applying a recording act that protects “bona fide purchasers,” the term includes bona fide mortgagees or encumbrancers; otherwise, the statute would not apply to mortgages.
- To qualify for recording-act protection as a bona fide purchaser (encumbrancer) for value, the mortgagee must give value in connection with taking the mortgage (such as new consideration or a binding extension of time).
- A mortgage taken merely as additional security for an antecedent debt—without new consideration and without any extension of the debt—is not taken “for value” for purposes of recording-act priority.
- When a later mortgagee is not a bona fide encumbrancer for value, the recording act does not allow that mortgagee to gain priority simply by recording first against an earlier mortgage that was executed and delivered first.

## Conclusion

Because McDonald received its mortgage only to secure an existing debt and gave neither new consideration nor any extension of time, it was not a bona fide encumbrancer for value under Washington’s recording statute; therefore, even though McDonald recorded first and was assumed to lack notice of Bechtol’s mortgage, Bechtol’s earlier-executed and delivered mortgage had priority, and the judgment awarding priority to Bechtol was affirmed.


Geo. M. McDonald & Co. v. Johns, 114 P. 175 (1911)