A commercial lender provided finance on the security of property already mortgaged to the owner’s family on the basis that its security would rank first, ahead of the owner’s parent’s security. The owner defaulted and the commercial lender was granted possession. The parents then sought to exercise their rights to possession and a dispute arose as to whether the commercial lender’s first priority was limited to the proceeds from sale only or extended to enforcement itself.
The court held that a reasonable businessperson would understand the deed to give priority to the securities held by the commercial lender, which included the rights and powers conferred to enable the securities to be effective, namely the right to possession and power of sale. To hold otherwise would be to leave the commercial lender vulnerable to the actions of the family, despite their agreement to subordinate their rights.
The parent’s application was dismissed.