Mortgages and Security Interests Flashcards
Can the court award possession to Scorpio if (1) Homer buys a house from Hank Scorpio using 10Y monthly installment contract, (2) Scorpio retains title but allows Homer and his family could occupy the premises, (3) once Homer makes all payments, title will transfer, (4) acceleration clause + forfeiture clause allows Scorpio to terminate Homer’s contract, regain possession and retain payments already made, (5) Homer failed to make payment in Y7, (6) Scorpio proceeded to evict Homer, (7) Homer showed up and tendered the missed payments, (8) Cypress Creek treats installment contract as lien theory mortgage and doesn’t recognize strict foreclosures?
No - there has not been a foreclosure sale, which is necessary b/c Homer and Scorpio’s installment contract would have been recharacterized as a mortgage and strict foreclosures without a sale is prohibited - the acceleration clause is valid though and Homer would not have been able to keep possession despite tendering the missed payments - he would’ve needed to tender the entire outstanding amount in order to stave off a foreclosure sale
Can the bank still go after Homer based on default of the note if (1) Homer bought undeveloped land using a mortgage, (2) note contained due on sale clause, (3) Homer then sold land to Carl, (4) bank agreed to waive due on sale b/c Carl assumed the mortgage, (5) waiver was silent on note, (6) Carl started to miss payments and defauted, (7) Carl filed for BR and got note discharged as to him?
Yes - Homer is still liable on the note b/c as the maker of the note, he was still liable without a release or other act by the bank that would discharge his obligation to the bank - even though Carl assumed the mortgage, this doesn’t eliminate Homer’s liability but instead just also makes Carl liable for payment of the note as well - the discharge of Carl’s obligation in BR does not affect Homer’s obligation
Can a bank foreclose to collect outstanding obligation if (1) lent non-recourse loan to investor w/ mortgage on investor’s residential building, (2) loan had acceleration clause in the event building is sold unless bank gave permission to sell, (3) investor sold building to firm, who personally assumed liability for loan, (4) bank tried to collect full outstanding amount from firm?
Yes - bank can enforce due on sale clause and since firm didn’t want to pay the full amount outstanding, bank could foreclose to collect on the amount, bank can either go after firm personally or foreclose on the property
Can lender pursue owner for deficiency judgment if (1) lender has mortgage on building, (2) loan is nonrecourse, interest only for 5Y w/ balloon payment at the end, (3) 3Y in, hurricane damaged building, (4) owner didn’t do anything to protect building, (5) loan agreement was silent about repair obligations, (6) after 5Y owner couldn’t pay, (7) forecloseure was less than amount of the loan?
Yes - owner had a duty not to commit waste to the extent that the waste impairs the lender’s security - even though hurricane damage is not waste, owner’s failure to take action to prevent further damage would be waste - especially since buildings in the area increased in value but this decreased, which is due to owner’s failure to keep it repaired; only if owner commits waste can lender get deficiency b/c this is non-recourse loan
Can lender bring foreclosure against Homer if (1) Homer bought home w/ mortgage from lender, (2) acceleration clause if home sold or transferred w/o permission from lender, (3) Homer established trust and transferred home to trust, (4) lender tried to get Homer to pay all outstanding due b/c of acceleration clause but Homer refused?
No - normally acceleration clauses are enforceable but federal law gives Homer a residential real property exemption to enforcement of an acceleration clause because he is transferring his home to a living trust; Homer is also not in default
Can bank maintain an action against Lois to repay the loan if (1) Lois borrowed money for a mortgage to buy a home, (2) Lois sells the home to Bonnie, who assumed liability for payment of the note, (3) home then exceeded outstanding amount on note and lender released its mortgage, (4) loan defaulted soon after?
No - even though Bonnie assumed liability, Lois still remained liable, until the bank released its mortgage, which eliminated its recourse to recover the amount of the note in the residence, thereby discharging Lois’ obligation - this is true even though Lois can seek personal liability of Bonnie - it isn’t enough that between Bonnie and Lois that Bonnie agreed to assume the note, the bank must do something like a novation or release the mortgage, like it actually did
Can Moe recover the rest of the outstanding debt from Ned if (1) Ned bought building from Moe for leftorium w/ promissory note + mortgage, (2) Ned then sold leftorium to Apu, who assumed liability for the rest of the obligation, (3) at Apu’s request w/o Ned’s knowledge, Moe released the mortgage, (4) building FMV > unpaid obligation, (5) Moe sued Ned for unpaid portion?
No - Moe’s release of mortgage discharged Ned from personal liability, whereas normally Ned would have still been liable even if Apu assumed the mortgage - doesn’t matter that the release happened w/o Ned’s knowledge
Can Milhouse assert Comic Book Guy’s defense of duress against Supplier if (1) Comic Book Guy fell behind on promissory note used to buy very expensive Radioactive Man comics, (2) before due date, Comic Book Guy asked for extension, (3) Supplier wanted mortgage on his store in exchange, (4) Comic Book Guy refused so Supplier threatened to turn him in for illegal gambling, (5) Comic Book guy agreed under duress and Supplier recorded, (6) Comic Book Guy gave the store as a gift to Milhouse, who assumed obligation, (7) Supplier instituted foreclosure?
Yes - Milhouse took the mortgaged store as a gift and is therefore entitled to assert Comic Book Guy’s defenses against the Supplier - Milhouse would be precluded from asserting these defenses however, if he bought the store from Comic Book Guy with the mortgage priced in
What portion of the sales proceeds does Bank have over Artie Ziff if (1) Mr. Burns enters into mortgage agreement on 1/1 with Bank to finance construction on another power plant, which Bank records, (2) Bank gives Mr. Burns $6M total, $1M immediately, then $1M increments at 2mo intervals, (3) in May, Bank loaned $3M and Burns gets $500K loan from Artie Ziff, which is also secured by new power plant, and Artie recored (4) in Aug, Bank gave another $1M after knowing about Artie’s mortgage, (5) in Oct, Bank had already given another $1M before Burns defaulted on both, (6) Bank didn’t advance last $1M, (7) Bank foreclosed on new power plant?
Up to the entire $5M that Bank actually loaned Mr. Burns - Bank was obligated to make bi-monthly loans of $1M so it will get priority over Artie regardless of whether it has actual knowledge or not of Artie’s mortgage
Between the Bank and Butters, whose claim has priority if (1) Randy hit Butters with his car and is being sued for negligence, (2) Randy got a mortgage on his farm to fund his new Tegrity business, (3) the Bank didn’t care that he had a pending legal action and recorded mortgage anyway, (4) Butters won the suit and got damages, for which he got a lien on Randy’s farm, (5) Randy defaulted on the mortgage and couldn’t satisfy Butter’s judgment, (6) Bank foreclosed + named Butters as another party, (7) Colorado is race notice, (8) judgments have 12Y attachment life?
Bank - its mortgage preceded the resolution of Butters’ suit so it has priority over Butters’ judgment lien, which was subsequently filed by Butters - also Bank filed first so Butters is deemed to have constructive notice - Bank only had notice of the pending action but not final resolution, a pending action would not give priority to Butters over the Bank
Can Stewie successfully challenge an action by Mort if (1) Stewie bought property from Mort for $50K using $30K mortgage from a Bank and $20K mortgage from Mort, (2) Stewie missed payments on Bank’s mortgage, (3) Bank tried to foreclose but Stewie redeemed the mortgage, (4) Stewie defaulted on his loan to Mort, who initiated foreclosure?
No - Stewie defaulted, which allowed Mort to initiate foreclosure proceedings - redemption of Bank’s mortgage did not affect Mort’s mortgage, as Stewie still owed Mort money
Can Frank Grimes regain title to his auto repair garage if (1) Frank Grimes borrowed money to buy an auto repair garage, transferring his title to a Title Company through a deed of trust, (2) Title Co can transfer title to lender if Grimey defaults and doesn’t redeem the garage w/in 3M, (3) deed of trusts are recognized in Oregon, (4) Grimey defaulted and lender told Title Co, (5) Title Co transferred title to lender after Grimey couldn’t redeem in 3M, (6) Grimey tried to redeem in month 4 but lender rejected?
Yes - the clause limiting time to redeem to 3M is invalid b/c Grimey has the right to redeem property by satisfying the obligation anytime before the property is actually foreclosed, for both mortgages and deeds of trusts - while Grimey could waive this right after default, the deed of trust cannot contractually waive this right - as such Grimey would still be permitted to redeem his auto garage
What will happen to the bank’s foreclosure action on all three lots that Homer bought if (1) Homer got a mortgage to buy parcel of land that he divided into three lots, (2) Homer sold one lot to Lenny and another to Carl, (3) Lenny and Carl used mortgages to buy their plots from Homer, neither of which was from the same bank that Homer borrowed from, (4) Homer defaulted so bank is trying to foreclose on all three parcels of ladn, (5) Lenny and Carl are protecting their interests as much as possible?
Bank must first foreclose against the lot that Homer retained, then against the lots in the reverse creation date order, ie: go after the newest ones first - normally bank would be able to foreclose on any of Homer’s lots but when junior interests are involved, the Doctrine of Marhsaling Assets requires the bank to proceed against Homer’s lot first, then proceed against whichever lot had the most recent mortgage, etc.
Why did the court award the bank $25K if (1) Homer got a $70K mortgage to buy Barney’s Bowlarama, (2) Homer then got a 2nd loan for $30K from the same bank and mortgaged the Bowlarama, (3) Homer was personally liable for both loans, (4) each loan has an acceleration clause, (5) Homer defaulted on the first loan so the bank bought the Bowlarama at a private f/c sale for $70K despite the FMV being $75K, (6) Homer defaulted on the 2nd loan so bank brought action against Homer for the face value of $30K?
To prevent unjust enrichment of th ebank - the Bowlarama was worth $75K so the court imputed that to be the value of the Bowlarama to be deducted from what Homer owed the bank - ($100K Principal - $75K FMV = $25K recovery) - otherwise bank would get a $5K windfall - in this case the deficiency judgment was still permitted b/c if not, then the court wouldn’t have awarded the bank anything
Can Gail the Snail enforce the mortgage against the Waitress if (1) Waitress bought a home with a mortgage, (2) while she was away at rehab, Frank pretended to own the home and sold it to Gail the Snail subject to the mortgage, (3) Gail paid off the mortgage before learning of Frank’s fraud, (4) Gail after learning about the fraud, demanded that Waitress make payments to her due under the mortgage?
Yes - Gail paid off the the Waitress’ obligation under the mortgage, so under doctrine of subrogation, she becomes the owner of the obligation and can demand payments from Waitress so that the Waitress is not unjustly enriched - otherwise Waitress would have a windfall from no longer being required to make mortgage payments
