Ashton wished to raise additional capital for his business and arranged with Banyon for a $10,000 mortgage on his estate, Blackacre. Ashton did not disclose the fact that he had previously borrowed $10,000 from Clayton by way of a mortgage, and Clayton had not registered his mortgage against the title of Blackacre. Shortly after the mortgage to Banyon was registered, Ashton conveyed the estate to Dayton, for $25,000. Dayton was unaware of the mortgages to Banyon and Clayton and did not examine the title to Blackacre when he registered his deed. Dayton would be obliged to pay Clayton the $10,000 secured by the unregistered mortgage, if Ashton defaulted in payment.

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Dayton, having registered his deed without knowledge of the unregistered mortgage to Clayton and having examined the title, would typically not be held responsible for the debt to Clayton secured by the unregistered mortgage, as unregistered interests generally do not bind subsequent bona fide purchasers or mortgagees who have registered their interest. Clayton's failure to register his mortgage means it does not have priority over Dayton's later registered interest.

Ashton Wished to Raise Additional Capital for His Business and Arranged