Recording System, Mortgages, Misc.

Question 1

Bona Fide Purchaser

Answer 1

Someone who purchases Blackacre for value AND without notice that someone else got there first

Question 2

Three forms of notice that a buyer may be charged with

Answer 2

“AIR”
Actual - prior to B’s closing, B learns of A
Inquiry - The buyer of real estate has a duty to inspect before transfer of title to see whether anyone else is in possession. If another is in possession, B has inquiry notice.
Record - B is on record notice of A’s deed if at the time B takes, A’s deed was recorded properly

Question 3

Notice Statute

Answer 3

“A conveyance of an interest in land shall not be valid against any subsequent purchaser for value, without notice thereof, unless the conveyance is recorded.”

Rule: if B is a BFP, and were are in a notice jdx, B wins, regardless of whether or not she records before A does.

Question 4

Race-Notice Statute

Answer 4

“Any conveyance of an interest in land shall not be valid against any subsequent purchaser for value, without notice thereof, whose conveyance is first recorded.”

Rule: If B is a BFP and we are in a race-notice jdx, B wins if she records properly before A does.

Question 5

Chain of Title Problem: The Shelter Rule

Answer 5

One who takes from a BFP will prevail against any entity that the transferor-BFP would have prevailed against.

Question 6

Chain of Title Problem: Wild Deed

Answer 6

If a deed, entered on the records (A to B), has a grantor unconnected to the chain of title (O to A), the deed is a wild deed. It is incapable of giving record notice of its existence.

Question 7

Chain of Title Problem: Estoppel by Deed

Answer 7

One who conveys realty in which he has no interest, is estopped from denying the validity of that conveyance if he later acquires that previously transferred interest.

Question 8

Creation of a mortgage

Answer 8

Mortgage is the conveyance of a security interest in land, intended by the parties to be collateral for the repayment of a debt.
Two elements: a debt, and a voluntary lien in debtor’s land to secure the debt
Typically must be in writing to satisfy SOF

Question 9

Once mortgage is created, what are the parties’ rights?

Answer 9

Unless and until foreclosure, a debtor-mortgagor has title and right to possess.
Creditor-mortgagee has a lien ( the right to look to Blackacre in the event of default)
All parties to a mortgage can transfer their interests.

Question 10

Creditor-Mortgagee can transfer his interest by:

Answer 10

1) endorsing note and delivering it to transferee OR
2) executing a separate document of assignment
If the note is endorsed and delivered, the transferee is eligible to become a holder in due course

Question 11

Holder in Due Course

Answer 11

Takes the note free of any personal defenses that could have been raised against original creditor.
Personal defenses: lack of consideration, fraud in the inducement, unconscionably, waiver, estoppel.
Thus, holder in due course may foreclose the mortgage despite any such personal defense.

Question 12

Holder in Due Course and Real Defenses

Answer 12

Holder in Due Course is still subject to real defenses that the maker might raise: "MAD FIFI4"
Material Alteration
Duress
Fraud in the Factum - a lie about the instrument
Incapacity
Illegality
Infancy
Insolvency

Question 13

Criteria to be a holder in due course

Answer 13

1) note must be negotiable, made payable to the named mortgagee;
2) original note must be indorsed, signed by the named mortgagee;
3) original note must be delivered to the transferee. Photocopy is unacceptable.
4) Transferee must take the note in good faith without notice of any illegality; and
5) the transferee must pay value for the note, meaning some amount that is more than nominal

Question 14

Foreclosure

Answer 14

Mortgagee must foreclose by proper judicial action. At foreclosure, the land is sold. The sale proceeds go to satisfying the debt.
If proceeds of sale are less than the amount owed, the mortgagee brings a deficiency action against the debtor.
If there is a surplus, the junior liens are paid off in order of priority. Remaining surplus goes to debtor.

Question 15

Effect of Foreclosure on Junior Lienholders

Answer 15

Foreclosure will terminate interests junior to the mortgage being foreclosed but will not affect senior interests. Once foreclosure of a superior claim has occurred, with the proceeds distributed appropriately, junior lienholders can no longer look to Blackacre for satisfaction.

Question 16

Necessary parties

Answer 16

Those with interests subordinate to those of the foreclosing party, also the debtor/mortgagor.
Failure to include a necessary party results in the preservation of that party’s claim, despite the foreclosure and sale. If a necessary party is not joined, his mortgage remains on the land.

Question 17

Effect of Foreclosure on Senior Mortgage

Answer 17

Foreclosure does not affect any interest senior to the mortgage being foreclosed. The buyer at the sale takes subject to such interest. Foreclosure sale buyer is not personally liable to the senior debt but if the senior mortgage is not paid, the senior creditor will foreclose on the land.

Question 18

Priorities

Answer 18

Creditors must record. Once recorded, priority is determined by the norm of first in time, first in right

Question 19

Purchase Money Mortgage

Answer 19

A mortgage given to secure a loan that enables the debtor to acquire the encumbered land. Has “superpriority” over other mortgages on the land.

Question 20

Redemption in Equity

Answer 20

Equitable redemption is universally recognized up to the date of sale. At any time prior to the foreclosure sale, the debtor can try to redeem the land. Once a valid foreclosure has taken place, the right to equitable redemption is gone.

Debtor/mortgagor may not waive the right to redeem in the mortgage.

Question 21

Statutory Redemption

Answer 21

Recognized in half of the states. Gives the debtor/mortgagor a statutory right to redeem for some fixed period after the foreclosure sale has occurred. Amount to be paid is usually the foreclosure sale price rather than the amount of the original debt.

Question 22

Lateral Support

Answer 22

If land is improved by buildings and an adjacent landowner’s excavation causes that improved land to cave in, the excavator will be liable only if negligent.

In other words, for strict liability to apply, the plaintiff must show that the improvements on his land did not contribute to the land’s collapse.

Question 23

Riparian Doctrine

Answer 23

The water belongs to those who own the land bordering the water course. They share the right of reasonable use of the water. One riparian will be liable if his or her use unreasonably interferes with another’s use.

Question 24

Prior Appropriation Doctrine

Answer 24

The water belongs initially to the state, but the right to divert it and use it can be acquired by an individual, regardless of whether or not he happens to be a riparian owner.
Rights are determined by priority of beneficial use - first in time, first in right. Any productive or beneficial use of the water, including use for agriculture, is sufficient to create the appropriation right.

Question 25

Groundwater

Answer 25

Water beneath the surface of the earth. Surface owner is entitled to make reasonable use of ground water. However, the use must not be wasteful.

Question 26

Surface Waters

Answer 26

Those which come from rain, springs, or melting snow, and which have not yet reached a natural watercourse or basin.
A landowner may change drainage or make any other changes/improvements on his land to combat the flow of surface water. Many courts have modified the common enemy rule to prohibit harm to other’s land.

Question 27

Possessor’s Rights

Answer 27

The possessor of land has the right to be free from trespass and nuisance.

Question 28

Trespass

Answer 28

The invasion of land by physical object. To remove a trespasser, bring an ejectment action.

Question 29

Nuisance

Answer 29

The substantial and unreasonable interference with another’s land use. Does not require physical invasion. Odors and noise could give rise to a nuisance.

There is no nuisance if the problem is the result of plaintiff’s hypersensitivity or specialized use.

Question 30

Eminent Domain

Answer 30

Government’s Fifth Amendment power to take private property for public use in exchange for just compensation.

Question 31

Explicit Takings

Answer 31

Acts of government condemnation (possessory)

Question 32

Implicit Takings

Answer 32

A governmental regulation that, although not intended to be a taking, has the same effect (regulatory)
Remedy: government mus either compensate the owner OR terminate regulation and pay owner for damages that occurred while regulation was in effect.

Question 33

Zoning

Answer 33

Pursuant to its police powers, government may enact statutes to reasonably control land use.

Question 34

Variance

Answer 34

Principal means to achieve flexibility in zoning.
Variance is granted or denied by administrative action.
Proponent must show: undue hardship; and variance won’t decrease neighboring property values.

Question 35

Nonconforming Use

Answer 35

A once lawful, existing use now deemed nonconforming by a new zoning ordinance. It cannot be eliminated all at once unless just compensation is paid. Otherwise, it would be deemed an unconstitutional taking.

Question 36

Exactions

Answer 36

Amenities the government seeks in exchange for granting permission to build. To pass constitutional scrutiny, exactions must be reasonably related (both in nature and scope) to the impact of the proposed development. If they are not, the exactions are unconstitutional.