Empire Bank registered a first mortgage against Johnston's property in the amount of $250,000 as security for an irrevocable letter of credit it had given on Johnston's account. Johnston posted the letter of credit with a municipality to which the municipality could look should Johnston fail to execute his obligations with respect to a subdivision he was building. Sometime later the Commonwealth Bank registered a second mortgage against Johnston's property in the amount of $750,000. When the second mortgage was registered, Commonwealth Bank advanced the full face value of the loan of $750,000. The Empire Bank received actual notice of the Commonwealth Bank's mortgage. Ultimately a demand was made by the municipality against the letter of credit in the sum of $35,000. The Empire Bank paid the money to the Municipality and claimed priority over the Commonwealth Bank as it had been first to register, even though it knew that the Commonwealth had made prior advances against the security and the property. Does the Empire Bank have priority over the Commonwealth Bank and, if so, to what extent? Discuss the issues of priority raised here.
D.L.R. (3d) 172 (Ont. High Crt.).

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The Answer of Empire Bank registered a first mortgage against Johnston's property in the amount of $250,000 as security for an irrevocable letter of credit it had given on Johnston's account. Johnston posted the letter of credit with a municipality to which the municipality could look should Johnston fail to execute his obligations with respect to a subdivision he was building. Sometime later the Commonwealth Bank registered a second mortgage against Johnston's property in the amount of $750,000. When the second mortgage was registered, Commonwealth Bank advanced the full face value of the loan of $750,000. The Empire Bank received actual notice of the Commonwealth Bank's mortgage. Ultimately a demand was made by the municipality against the letter of credit in the sum of $35,000. The Empire Bank paid the money to the Municipality and claimed priority over the Commonwealth Bank as it had been first to register, even though it knew that the Commonwealth had made prior advances against the security and the property. Does the Empire Bank have priority over the Commonwealth Bank and, if so, to what extent? Discuss the issues of priority raised here.
D.L.R. (3d) 172 (Ont. High Crt.).

Empire Bank Registered a First Mortgage Against Johnston's Property in the Amount