fuuuuuck

Question 1

Deed of trust

Answer 1

borrower conveys title to the land to a person (who is usually a 3rd person but may be the lender) to hold in trust to secure payment of the debt to the lender. Trustee given power to sell the land without going to court if the borrower defaults. Quicker and less costly than judicial foreclosure

Question 2

security loans

Answer 2

— Security is a legal interest in property (real or personal) that is given by the borrower to the lender/creditor to protect the lender in the event that the borrower defaults. Security protects the lender (1) lender is given special rights against borrower to take the property when there is a default – foreclosure rights (2) Lender given priority with respect to that particular asset in front of other creditors.

Question 3

○ Foreclosure Rights:

Answer 3

writ of execution. The Writ directs the sheriff to go out and seize property of the judgment debtor. Certain property is exempt—minimal amount that debtor needs to live—but sheriff can seize everything else. Personal property must be seized over real property. Automobile, bank account, etc… By the act of seizing them, creates a LIEN in favor of judgment creditor (Judgment Lien Creditor). Sheriff then takes assets and sells them at an auction – after paying for costs of collection process, then what is received is given to the judgment debtor. Then the excess goes to the borrower

Question 4

○ Foreclosure if Secure:

Answer 4

if secured by personal property, UCC Article 9 discusses collection on debt. IF you are secured by real property, UCC not applicable but every state has statutes that say what you can do if you are secured by real property. The document securing real property is called a MORTGAGE (creates security interest in real property).

Question 5

○ MICHIGAN MORTGAGE: 2 mechanisms

Answer 5

2 mechanisms (1) judicial foreclosure (2) foreclosure by advertisement

Question 6

○ Give appropriate notice of foreclosure sale

Answer 6

6 weeks. Must be public sale, business hours, at courthouse. County clerk executes deed for this sale. The deed has to be deposited with registrar or deeds within 20 days after the sale. Mortgagee gets money after costs of sale are made.

Question 7

Protection of jduiciaul forclsure

Answer 7

whenever complaint filed, if debtor brings money due, complaint will be dismissed (anytime before judgment of sale); Debtor can bring principal, interest, costs. If judgment has been entered, the debtor can bring into court, principal, interest, costs, in which case the foreclosure action is stayed indefinitely until and unless subsequent default. Can cure BEFORE AND AFTER judgment of foreclosure.

Question 8

Right of redemption

Answer 8

○ Right of redemption: Even if it is sold, many states including MICH have a statutory right for the debtor to buy prop back after foreclosure sale—for specified period. Sale not final at time of sale- sale final after right of redemption. (6 mos in Michigan). Must pay sum that was bid (money paid during foreclosure sale) + interest specified in mortgage from date of sale. Ct has ability to add on to that – taxes and insurance payments that become due during that redemption period.

Question 9

○ Foreclosure by advertisement – does not happen automatically; must be contracted in the mortgage

Answer 9

(a) Most frequently used in MICH – cheaper, faster, doesn’t involve the courts
(b) Private sale mechanism
○ 1) Power of sale is not automatic
(a) MUST BE PUT IN THE MORTGAGE (Box 1)

Question 10

triggers for FBA

Answer 10

○ 2 Trigger = default has occurred; (box 2) lender cannot sue on the debt; they have to elect to foreclose by advertisement instead of suing in court

Question 11

○ Can only sell by advertisement only if:

Answer 11

contractually specify that in your mortgage—mortgage containing power of sale and the mortgage is properly recorded. Must be default, could not have brought suit on the debt (election of remedies), and the party foreclosing must be owner of indebtedness or party affected by it.

Question 12

○ Adequate notice -Publishing:

Answer 12

4 successive weeks at least once a week of publishing in local newspaper. Must post on premises w/in 15 days after first publication of notice. Notice must contain: date of mortgage, description of premises, length of redemption.

Question 13

Sale

Answer 13

public, regular business hours, at place of holding—circuit court OR where premises are located. Person appointed in mortgage OR sheriff. Sale must be highest bidder, Mortgagee can bid.
○ After sale, registered sale deposited with registrar of deeds, after costs satisfied, surplus, paid over to mortgagor or who ever else is entitled to it.

Question 14

○ Statutory right of redemption

Answer 14

different depending on why foreclosed, how much debt, and nature of property – mortgagor may redeem by paying the sum bid+ mortgage rate interest. You’re buying it from the bidder. Most cases, 1 year (longer period than judicial foreclosure). Unless property redeemed, deed effective at end of redemption period.

Question 15

protection

Answer 15

allows debtor to show that property worth lots more and they didn’t get enough; If you don’t satisfy full amount of debt and get highest price possible, then sale may not be good enough.

Question 16

• Murphy v. Financial Development p. 388- foreclosure by advertisement/power of sale MCLA§600.3201:

Answer 16

○○ Π/Murphy contended that Financial/Δ failed to use due diligence in attempting to get a reasonable price for his property in a foreclosure sale. Π sues to set aside sale OR for damages for difference between house’s worth and $ received at foreclosure sale.
○ Held: AFFIRMED- hold for Π—reversed as to attorney fees though. No bad faith so no atty fees.

CONCISE: Mere compliance with statutory requirements may not discharge a mortgagee’s duty to exercise good faith and due diligence in selling the property at foreclosure. 

o DID NOT VOID PURCHASE – if the price had been grossly low to shock conscious of the court then could void; not the case here
○ Damages: difference between fair price for property and the price paid at the foreclosure sale – fair price could be arrived at by due diligence. Fair market price was $54,000 but fair price would have been a little lower but it should have been HIGHER than $27,000. If bad faith, then 54,000 at fair market may have been ok, but here, no evidence of bad faith.

Question 17

a. Installment land Sale K or K for Deeds

Answer 17

arrangement whereby the purchaser takes possession and the seller contracts to convey title to the purchaser when the purchaser has paid the purchase price in regular installments over a fixed period of time. Little functional difference between money mortgage and this. No bank loan necessary, down payment can be minimal, and seller may be willing to sell to persons deemed poor credit risks by institutional lenders.

Question 18

b. MICHIGAN MORTGAGE DEED: CM20A

Answer 18

○ Due-On-Sale Clause: If prop sold or transferred without notice or consent of lender, then lender may demand payment in full for the rest of the mortgage. This triggers payment to be due earlier than they would otherwise be due. Pro-Lender provision. Why is the clause needed? when you sell the prop, it is considered encumbered by the mortgage; They do this for re-negotiating. Second Look Provision. E.g. Borrower pays 8% interest. Now, interest rate is 5%. They do not want to sell to have the money to come in now for the cheaper interest rate. If interest rates have gone up, then they want the money back to re-deploy it at the higher interest rate.
→ If existing mortgage on the property when it is sold, the mortgagee buys subject to the mortgage. Risk for the purchaser because lender to prior owner could take property away. Protect themselves (1) lower purchase price (2) make sure they don’t go into default → make sure they are paying the mortgage and performing obligations.
→ Alternative→ They can assume the mortgage—purchaser liable on the mortgage completely. They can then have total control over whether the loan is paid, property insured, etc… BUT- not always assumable. New purchaser may have to get new mortgage and pay off old mortgage.

Question 19

○ Issue with Assuming: Novation:

Answer 19

Mere fact that mortgage is assumed doesn’t release original mortgagor from its original promissory note—only if lender agrees (novation—explicit agreement by lender to release obligor). In the absence of novation, the lender has 2 obligors (new mortgagor and old mortgagor); the new mortgagor will have to pay the mortgage but if the new guy defaults, the bank can still come after the first mortgagor

Question 20

○ If default under mortgage, debtor can accelerate the amount paid. Acceleration

Answer 20

term for advancing due date for everything not paid. If seller of real property is providing financing to purchaser (can do it same way as bank, loan money, take back promissory note). BUT sellers of real-estate execute Land Contracts – Installment Sale Contract or Land Sale Contract—agreement for sale of real property/land provides for payment of purchaser price to be made instead of lump sum, purchase price paid in installments for a period of time. During this time that purchase price is being made Vendor/Seller retains legal title to the property and legal title is not turned over to Vendee/Purchaser until purchase price is paid in full. Land K combines purchase agreement with elements of a mortgage.

Question 21

○ If default:

Answer 21

1) Declare the K terminated. Then buyer is trespassing and can be thrown off. K remedy, declare the K defaulted, forfeited, terminated, and the vendor/Seller takes possession of the property again and treats vendee as holdover tenant (2) treat land K just as you would a mortgage and force the vendor to foreclose on the property just as you would if this were a mortgage. Property would be sold and vendor entitled to receive proceeds up to default price and vendee would receive what’s left.
• Vendor = seller
• Vendee = buyer
• Mich allows vendor to hold to contract and sue for whatever they haven’t paid OR throw out the contract, keep whatever has been paid, and take the house back MCLA

Question 22

• What if a bad thing found on the title? →

Answer 22

You need to find out if it was paid off – contact the person receiving the payment. If paid off, then get paper saying it is paid off; eg. 2: If transfer of property- then they don’t own property and you have a real problem
o WANT TO MAKE SURE TITLE IS CLEAN = UP + DOWN
o Title companies do this research – not estate lawyers

Question 23

Derivation Principle.

Answer 23

○ Priority: you can’t transfer property to someone if you don’t own it

Question 24

Derivation hypo

Answer 24

→	e.g. O→ T1;  O → T2 --- derivation, T2 gets nothing because T1 had the property first.  
○	Recording acts are exception to the derivation principle – under some circumstances, T2 would have gotten the property.  WHY? → we don’t like secret interests in property—that could mislead others.  So if you want to be sure your interest in property is protected, you have to record (If you don’t give notice by recording, you can lose it to this protected class that relies on the absence notice).  Make your interest no longer secret to the public.  Designed to encourage people to put their real estate interests on record.

Question 25

Race recording

Answer 25

Party recording first prevails
→  knowledge irrelevant; 
Protects the party who records
first wins.  
→ Low administrative costs. 
Look at real estate records- no
Extrinsic fact finding. 
→ most think this system is 
Inherently unfair. 
→ Most states have rejected this 
System for real estate (NC has
 this system)

Question 26

Notice

Answer 26

You win if you don’t have notice. Party prevails if w/o notice 
of unrecorded prior transfer
-  protects subsequent purchaser 
against prior unrecorded 
instruments even though 
subsequent purchaser fails to
 record. 
- focuses on subjective notice 
- Higher administrative costs- inquire
Into the state of mind of subsequent
Purchaser—BUT much fairer.  ½ 
States have notice;

Question 27

Race notice

Answer 27

Protects a subsequent purchaser who doesn’t have notice who actually records first before the prior unrecorded interest. (This is a combo of the last two)
Party prevails if without notice 
of unrecorded prior transfer 
and records first.
→ in order to win against a 
prior purchaser, must acquire
w/o notice AND have to record first.  
→ encourage recording- 
But doesn’t have unfairness of 
Pure race system.  
→ more administratively cost
Free than Notice but more 
Expensive than Race.

Question 28

MICHIGAN STATUTE: Race Notice

Answer 28

Person who wins the race to the recording system will win. first recorded conveyance shall be void against any subsequent purchaser in good faith (not have notice) and for valuable consideration whose conveyance shall be first duly recorded.

Question 29

Shelter rule

Answer 29

Anyone acquiring from a person who would prevail under the recording act also prevails and down the chain.
- recording acts protect not only those specifically mentioned, bona fide purchaser, they also protect anyone who acquires from the protected party even if transferee wouldn’t be protected himself or herself.
- O→ T1; O → T2 records — T1 records T2 doesn’t know about transfer to T1. T2 wins.
- T2 → T3 – T3 records. T3 Loses under race, race notice, and notice statute because T1 has
Recorded. T2 prevails against T1 so anyone acquiring from T2 wins against T1. T3 wins.

Question 30

First transerfee

Answer 30

○ First transferee doesn’t need a recording act to win. IF FIRST, OR ACQUIRED FROM SOMEONE WHO WAS FIRST, THAT IS IT! DO NOT APPLY RECORDING ACTS—First person wins under derivation principle and DO NOT need recording acts.
○ REQUIREMENTS:
- First thing a transferor has to be to take advantage of recording acts, must be subsequent.
- Then he has to have paid for the property
- Value: no requirement that the consideration reflect full market value but the value paid must be greater than nominal. Value doesn’t have to be new (can be in the form of pre-existing debt that is forgiven, does not necessarily have to be out of pocket, doesn’t have to be money)
- Without Notice: Notice can be conveyed in different ways – see below….

Question 31

• Orr v. Byers p. 427- Constructive notice + Doctrine of Idem Sonans (Critically important to get name right)

Answer 31

the doctrine of Idem Sonans

(a) (though a person’s name has been inaccurately written, the identity of such person will be presumed from similarity of sounds between the correct pronunciation + the pronunciation as written)
(b) Often used as a rule of thumb in seeking to identify someone
- Held: AFFIRMED for Δs. Doctrine of idem Sonans is viable for purposes of identification + rule is not inapplicable where the written name is material” and court refuses to extend it to this type of manner.

Question 32

Lewis v. Superior Court p. 450:

Answer 32

CONCISE: A person who records an interest in real estate after a bona fide purchaser takes title thereto is inferior to the BFP, even if that BFP has not paid for the prop in full.

Question 33

Actual notice for recording acts

Answer 33

Oral or written notice 
of prior unrecorded instrument or prior 
claim to property
(subjective 
understanding of 
subsequent purchaser)

Question 34

Constructive recorded documents

propertly

Answer 34

Properly
Recorded Document Itself
Notice of documents properly recorded (whether or not the sub purchaser looks at it. Must be properly indexed. Document actually recorded but shouldn’t have been also causes problems)

Question 35

inquiry notice

Answer 35

Inquiry Notice
Notice of all documents
OR Interests referred to in documents properly recorded→ something in the document that the reader of the document should be looking for something else as well.

Question 36

Notice by possession of prperty itself

Answer 36

Notice of interest held
by someone in actual
possession of property
- must search not only real estate records but also physically examine the property. Someone who has physical possession may have an interest.

Question 37

• Washington Mutual v. JP Morgan CM 22- Constructive Notice by recorded Documents/ Inquiry Notice:

Answer 37

YES; inquiry notice – received loan application indicating expense info about “first mortgage” but other documents contradicted this statement; this would have put a reasonable person on “inquiry notice” to check into it. Π had duty to make further inquiry

(3) Duty to make further inquiry = good faith + reasonable care in following up inquiry which the notice given him suggests – must be from reliable source
- Had Π made property inquiry + not found anything CT suggests they would have held for Π.

Question 38

• Waldorff Ins. & Bonding , v. Elgin National Bank p. 454,- Constructive Notice by possession:

Answer 38

CONCISE: Subsequent successors to legal title, after a K to convey title has been executed, take title subject to all equitable interests of which they have notice.

Question 39

Chain of title

Answer 39

refers generally to the recorded sequence of transactions by which title has passed from a sovereign to the present claimant. Also, period of time for which records must be searched and the documents that must be examined within that time period.

Question 40

Bona fide purchaser (subsequent purchaser in good faith)

Answer 40

a party who purchases property in good faith and for valuable consideration without notice of a defect in title.

Question 41

a. Board of Education v. Hughes, p. 441 & Zimmer Rule- Wild Deed:

Answer 41

○ Δ/Hughes and Duryea & Wilson purchased same lot from Hoerger. Δ/Hughes’s deed did not contain his name. He inserted it later. D & W sold to Board of Education/Π. Δ ‘s deed was recorded before D & W but Board/Π was recorded before either Δ/Hughes or D & W. HO → HU – 1906 – rec dec 16, 1910; HO → D & W – Apr 1909 – rec Dec 21, 1910; D & W → Π/Board – Nov 1909 –rec Jan 27, 1910
○ Held: Reversed- hold for Δ/Hughes. CONCISE: The recording of a deed from a grantee in an un-recorded deed to a third person is NOT notice of the prior unrecorded deed to a subsequent purchaser.

Question 42

ZIMMER PRINCIPLE

Answer 42

race notice statute protects the subsequent purchaser who first records his own conveyance ONLY if all prior conveyances in his chain of title are also recorded. Given that Board deed was not properly recorded, Hughes properly recorded first.