Monroe Savings Bank, Plaintiff, v. First National Bank of Waterloo, Appellant; Tri-Bro Supply Co., Inc., et al., Respondents, 50 A.D.2d 314

Summary

The court held that the N.Y. Lien Law § 13(3) trust covenant was without effect because the corporation could not agree to receive as a trust fund money that was previously advanced to it and that was spent long before the execution of the mortgage, which included the trust fund covenant. The mere fact that the mortgage contained the required trust fund covenant should not afford the bank a priority over subsequently filed mechanics' liens when in fact no trust fund was created. The transformation of the June, 1971 security agreement into the April, 1972 mortgage without adding to or creating an actual trust res should not afford the bank a priority over subsequently filed mechanics' liens. Because the 1972 mortgage created a lien unrelated to the improvement of the property, it should not have priority over a valid mechanics' lien. The court found that despite the fact that respondent company's appliances could all be removed with little or no damage to the realty, the items were ...