Pg 56 Flashcards
When a mortgagee/creditor gets a mortgage in exchange for a loan, is he deemed to be a purchaser for value?
Yes
Who is a mortgagee?
The bank/creditor
Who is a mortgagor?
Person that borrowed the money on their own property
When can a mortgagee get protection from the recording acts?
If the mortgage is in exchange for a debt at the time the debt is created.
The problem often arises where the mortgage is issued after the debt begins, and then you’re not lending money in exchange for a mortgage, so you’re not paying value
If you borrow money from the bank, and the bank gets nervous and asks for security so you issue a mortgage on your property, does the bank have recording act protection on that mortgage?
No, because the bank didn’t pay value for the mortgage. If the mortgage is taken to secure a pre-existing debt, the only way it is taken for value is if it extends the time for the payment
How do computerized record searches change notice?
They allow a search outside of the chain of title, so documents that are there can be found, which gives actual knowledge to a prospective buyer and thereby he is bound by their contents
Is it necessary that a person pay full market value in order to be a BFP?
No. The majority view is that the amount must be substantial in relation to the property’s value and not grossly inadequate. It must be more than nominal consideration
If you buy property for $40,000 and it’s valued at $100,000, can you be a BFP?
Yes because that is a substantial amount.
Is it still considered to be “paying value“ (to earn BFP status) if you pay through goods or services?
Yes
What are some examples of things that would not be considered to “pay value“ for BFP?
Being a donee, promising to pay, giving a mortgage or a lien to secure a future payment, etc.
Is a judgement creditor that is owed money and so he goes to court to get a judgement against the debtor treated as a subsequent purchaser for value?
Split in the courts:
– half the states: judgement creditors cannot benefit from recording acts because they are not reliance creditors since they didn’t go to the public records searching for competing claims before engaging in the transaction that led to the judgment
– the other half of the states: include lien creditors with a special rule that judgement creditors can be protected for subsequent claims, but they lose out to all prior claims, even unrecorded ones
If you mortgage land to Annie and she doesn’t record the mortgage, then you buy a car from Betty and you don’t pay for it, so Betty gets a judgement against you for the car and creates a lien against the land, when the land is sold, who has priority?
Annie has priority because Betty is not a purchaser
When must value be paid in order for someone to be considered a BFP?
It must be paid contemporaneously with or subsequent to the conveyance
If a bank makes an unsecured loan, then asks the debtor to give a mortgage as security, why has the bank not given value?
Because there was no bargain. The only way it would work is if the bank detrimentally changed position. If that didn’t happen then the mortgage would be subordinate to any previous unrecorded conveyance that the debtor made.
What is a secured loan?
This is when the bank has a mortgage interest in the property which can lead to potential ownership problems. Unsecured loans do not cause ownership issues
What are different ways that you can have notice of a previous transaction that would make you not a BFP?
Actual notice, inquiry notice, and constructive notice
If a buyer gets notice of a previous competing claim after he has paid for the property, is he still a BFP?
Yes because the irrevocable detriment was already incurred before he got notice
Is adverse possession affected by the recording statutes?
No, because the recording statutes only apply to conveyances, and adverse possession is not a form of conveyance
If you should have known something, is that considered to be notice that would make you not a BFP?
Yes. You are charged with notice of everything a competent search of the records would find
What are the three types of recording statutes?
– Notice statutes
- Race-notice statutes
– pure race statutes
When do you discuss the recording statutes?
If there are recordings and notice is an issue, you should describe all three types of notice for an essay and write out each one, and then argue which one is relevant
What is involved in notice statutes?
These protect subsequent purchasers if they are BFPs (which means they had no notice of any previous conveyances and they paid value. It goes without saying that if they did not have notice, that means that the previous conveyance was not recorded. If it was recorded, then the person would’ve had constructive notice and would not have been a BFP).
If a statue doesn’t mention recording, it is a notice statute. I.e.: “no documents affecting real estate are valid against subsequent buyers for valuable consideration, without notice, unless filed in the office of the recorder.“
What are the elements of a notice statute?
– Party is a subsequent purchaser, not a first conveyee or a giftee
– and he takes without notice of a prior claimant’s rights
Under a notice statute, if the first buyer hasn’t recorded when a second buyer gets the conveyance, then the first buyer records, then the second buyer records, is the second buyer a BFP?
Yes, because he had no notice when he got the conveyance
