Chapter 9: Security Interests in Real Property Transactions

Question 1

Installment Contract for the Sale of Land

-When Brooks breached his installment contract for land he had purchased, was Sam entitled to eject Brooks?

Answer 1

-Under common law principles, when the promisor of an installment contract for land breached, he loses all rights to the land. The modern view, however, is to treat such a contract as a mortgage, giving the promisor-mortgagor all rights that a traditional mortgagor has, including the right of redemption and equity in the property.

Question 2

Non-Judicial Foreclosure Sale: Common Law
-Does Mary have any rights against Bank when it was the only purchaser at the non-judicial foreclosure sale and bid only what Mary had owed it, and sold the property a short time later for a substantial profit?

Answer 2

-Under the common law view of non-judicial foreclosure sales, if the lender follows all legal requirements, the fact that is acquires the property for the balance owed and later sells it at a profit is of no consequence. The lender has a right, if not a duty, to do so; it owes its shareholders a duty to be diligent in making a profit

Question 3

Non-Judicial Foreclosure Sale: Modern View
-Does Mary have any rights against Bank if the court takes a modern view of the role of the lender in a non-judicial foreclosure sale?

Answer 3

-Modernly, some jurisdictions take the view that a lender is in a fiduciary relationship with the borrower. As a fiduciary, the lender-Bank owes the borrower the highest duty of care, including but not limited to, “the punctilio of an honor.”