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Amstar/First Capital, Ltd. v. McQuade
Citations: 42 Ark. App. 185; 856 S.W.2d 326; 1993 Ark. App. LEXIS 427Docket: CA 92-1373
Court: Court of Appeals of Arkansas; June 30, 1993; Arkansas; State Appellate Court
In a mortgage foreclosure case, the court addressed the priority of a view easement over a previously recorded mortgage. The chancellor ruled that the view easement took precedence, but the appellate court disagreed and reversed the decision. The case began in March 1988 when Big “K” Development Corporation borrowed $1.2 million from First Federal Savings of Arkansas, securing the loan with a mortgage recorded on March 21, 1988. Later, in August 1988, Big “K” transferred Lot 40 to Roddy J. and Martha McCaskill, which included a view easement affecting adjacent lots. The mortgage was partially released without mention of the easement, and First Federal later went into receivership, with Amstar/First Capital acquiring its assets. Big “K” defaulted on the mortgage, prompting Amstar to initiate foreclosure proceedings. The chancellor found that First Federal lacked actual knowledge of the easement but had constructive notice from the deed's recording. Despite agreeing that the easement was valid, the appellate court emphasized that under Arkansas law, the rights of a mortgagee cannot be impaired by actions taken by the mortgagor after the mortgage's execution. The court cited case law establishing that a mortgagor cannot alter the priority of a mortgage once it is executed and that mortgagees are not required to continuously search for new encumbrances. The court also examined claims of acquiescence, waiver, laches, or estoppel presented by the appellees but found no legal basis to support them. The court concluded that Amstar’s mortgage held priority over the view easement as a matter of law and remanded the case for a decree consistent with this ruling. The decision was unanimous among the justices involved.