Recording System, Mortgages, Misc. Flashcards
Bona Fide Purchaser
Someone who purchases Blackacre for value AND without notice that someone else got there first
Three forms of notice that a buyer may be charged with
“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
Notice Statute
“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.
Race-Notice Statute
“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.
Chain of Title Problem: The Shelter Rule
One who takes from a BFP will prevail against any entity that the transferor-BFP would have prevailed against.
Chain of Title Problem: Wild Deed
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.
Chain of Title Problem: Estoppel by Deed
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.
Creation of a mortgage
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
Once mortgage is created, what are the parties’ rights?
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.
Creditor-Mortgagee can transfer his interest by:
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
Holder in Due Course
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.
Holder in Due Course and Real Defenses
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
Criteria to be a holder in due course
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
Foreclosure
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.
Effect of Foreclosure on Junior Lienholders
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.
Necessary parties
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.
Effect of Foreclosure on Senior Mortgage
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.
Priorities
Creditors must record. Once recorded, priority is determined by the norm of first in time, first in right
Purchase Money Mortgage
A mortgage given to secure a loan that enables the debtor to acquire the encumbered land. Has “superpriority” over other mortgages on the land.
Redemption in Equity
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.
Statutory Redemption
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.
Lateral Support
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.
Riparian Doctrine
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.
Prior Appropriation Doctrine
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.
