Liens and Mortgages Flashcards
(19 cards)
1
Q
Lien
A
- a right against collateral (collateral = the property that secures the borrowing)
2
Q
Types of Liens
A
- “security interest” = a voluntary lien giving a conditional property right (on nonpayment of a loan) and a priority right
- mortgage = a security interest specifically in real property
- chattel mortgage = security interest in personal property (though also sometimes just generally referred to as “security interest”)
3
Q
Potential Problem w/ Liens
A
- need to be very wary of undisclosed liens on property (notice is particularly important for this, but problem of potentially not having notice for personal property)
4
Q
Timmer v. Gray - Facts
A
- Farmer Heaton borrows money from the Farmers Home Administration (FmHA) -> loan is secured by a lien, at least in part, on some harrow discs he owns
- Heaton defaults on the loan and declares bankruptcy -> FmHA sells the discs (sight unseen) to the Timmers for $75
- Meanwhile, the discs are on land owned by Glowack (Heaton leased land from him) -> Glowack allows neighbor Gray to take the discs, and Gray arranges for their repair by Maggert -> significant increase in value
- Timmers then sue for replevin, and Maggert counterclaims for the value of the repair work
5
Q
Timmer v. Gray - Decision
A
- court finds that FmHA had “possession (technically just rights to possess) after Heaton defaulted
- court grants Maggert’s counterclaim -> doesn’t want unjust enrichment for Timmers
- court says equitable lien only enforceable against bona fide purchasers -> decides Timmers don’t qualify as bona fide purchasers b/c, although they had no notice, the $75 doesn’t count as valuable consideration
6
Q
Equitable Lien vs. Statutory Lien
A
- equitable liens typically imposed by courts for reasons of fairness (you don’t need to have possession of the property to get one)
- statutory liens - stem from statutes rather than common law
7
Q
Minnesota Mechanics’ Lien Statute
A
- relevant to Timmer v. Gray - Maggert could’ve imposed a mechanics’ lien under the statute, but only if he’d still had possession of the discs
8
Q
Why isn’t Timmer v. Gray an issue of accession?
A
- no accession because no transformation - repair does not count, need to actually change the object significantly
9
Q
Murphy v. Financial Development Corp. - Facts Leading Up to Sale
A
- Murphy became unemployed February 1981 -> fell seven months behind on mortgage by Sept. -> lender gives notice of foreclosure in Oct.
- Pl’s try to avoid foreclosure by paying the seven months’ arrears, but failed to pay approx. $643 in costs and fees -> foreclosure sale gets postponed until Dec. 15
- Lenders posted notice of the postponement on the mortgaged house as well as the City Hall + Post Office -> pl’s made Oct payment + sought but failed to get further postponement
10
Q
Murphy v. Financial Development Corp. - Foreclosure Sale
A
- sale attended only by the Murphys, representatives of the lenders, + attorney who had been engaged to conduct the sale
- lenders were the only ones to bid -> their bid of $27,000 roughly the amount owed on the mortgage
- later that day, the attorney who’d conducted the sale encountered another client who offered the lenders $27,000 -> they made counteroffer of $40,000 -> w/in two days, client + lenders agreed to price of $38,000
11
Q
Murphy v. Financial Development Corp. - Procedural Posture
A
- Murphys filed suit, seeking to set aside foreclosure sale of their home, or, in alternative, money damages
- trial court found in favor of Murphys-> said bad faith + no due diligence
12
Q
Murphy v. Financial Dev. Corp. - Decision + Reasoning
A
- court said sellers in foreclosure sale must satisfy statutory requirements + a duty of good faith and due diligence in protecting the interest of the mortgagor -> lenders here did not act in bad faith, but they did violate due diligence (low price, plus they did very little to publicize the sale)
- damages = difference between the price they paid at the sale + the “fair price”, not the fair market value (fair price is just what would’ve been paid for the property if it had been sold in a reasonable fashion)
13
Q
Why not use fair market value for Murphy?
A
- court’s implication is that even a sale w/ due diligence would’ve yielded less than the fair market value (uncertainty of foreclosure sales due to equity of redemption - you don’t necessarily want to pay full value)
14
Q
Equity of Redemption
A
- right of owner to save the property by paying off the debt
- approx. half states also have statutory right of redemption -> mortgagor has a time period (up to two years) can pay the price paid by the purchaser at the purchase sale to regain the property
15
Q
Skendzel v. Marshall - Core Issue
A
- core issue= if you create something that looks like a mortgage, courts will treat it as a mortgage (don’t want people to escape measure put in place to protect those in mortgage relationship)
16
Q
Process of Foreclosure
A
- mortgagees (lendors) can’t use self-help against defaulting mortgagors (borrowers)-> they need to go through elaborate process of foreclosing on the mortgage
17
Q
Strict Foreclosure
A
- lendor goes into equity court + court sets a strict time line on the mortgagor’s equity of redemption (if they don’t pay off the debt by the end of this, mortgagee gets the property)
18
Q
Judicial Foreclosure
A
- mortgagee files an action seeking foreclosure sale
- at any time in the process, debtor can pay off the debt + keep the property
- judicial foreclosure sale usually administered by the courts (although some states allow parties to include provisions for a private foreclosure sale-> process then subject to scrutiny by the courts)
19
Q
Deficiency Judgment
A
- only available in some states
- means the lender/mortgagee could get further money from the mortgagor if the foreclosure sale doesn’t fully cover the debt
