CPAnet Forum: R6

Active Topics

Memberlist

Help

REG STUDY GROUP
CPAnet Forum : REG STUDY GROUP

Topic: R6 (

Topic Closed)

Author

Message

<< Prev Topic | Next Topic >>

bala
Major Contributor

Joined: 09 Jan 2009
Online Status: Offline
Posts: 355

Posted: 11 Jul 2009 at 21:37 \| IP Logged

On June 10, 1990, Bond sold real property to Edwards for $100,000. Edwards assumed the $80,000 recorded mortgage Bond had previously given to Fair Bank and gave a $20,000 purchase money mortgage to Heath Finance. Heath did not record this mortgage. On December 15, 1991, Edwards sold the property to Ivor for $115,000. Ivor bought the property subject to the Fair mortgage but did not know about the Heath mortgage. Ivor borrowed $50,000 from Knox Bank and gave Knox a mortgage on the property. Knox knew of the unrecorded Heath mortgage when its mortgage was recorded. Ivor, Edwards, and Bond defaulted on the mortgages. Fair, Heath, and Knox foreclosed and the property was sold at a judicial foreclosure sale for $60,000. At the time of the sale, the outstanding balance of principal and accrued interest on the Fair mortgage was $75,000. The Heath mortgage balance was $18,000 and the Knox mortgage was $47,500.
Fair, Heath, and Knox all claim that their mortgages have priority and should be satisfied first from the sale proceeds. Bond, Edwards and Ivor all claim that they are not liable for any deficiency resulting from the sale.
The above transactions took place in a jurisdiction that has a notice-race recording statute and allows foreclosure deficiency judgments.

Indicate (A) if the mortgage has first priority, indicate (B) if the mortgage has second priority, and indicate (C) if the mortgage had third priority. What is the priority of the mortgage for Knox Bank?

A. First priority.
B. Second priority.
C. Third priority.

ans is C. how?

bryris
Major Contributor

Joined: 07 Dec 2008
Location: United States
Online Status: Offline
Posts: 624

Posted: 11 Jul 2009 at 21:48 \| IP Logged

Here is why:

The Fair bank mortgage was already recorded. Heath took on the second mortgage for the property with "constructive notice" of the existing first mortgage. But Heath didn't record.

Then we have Knox, who knew of the previous unrecorded mortgage. Because of this knowledge, Knox is not a BFP (bona fide purchaser). Accordingly, in a race-notice state, the first BFP to record had priority. Since knox is not a BFP, even if it did record before Heath, it would still be third (last) in the order.

If it was a race state, then Heath and Knox better make a run for it, because whoever gets there first will have second place.

In a notice state, Knox comes in third again, because the first in time BFP to secure, is second regardless of filing. Accordingly, Heath already holds 2nd place.

Hope that helps.

__________________
REG - 97
FAR - 97
BEC - 90
AUD - 97

bala
Major Contributor

Joined: 09 Jan 2009
Online Status: Offline
Posts: 355

Posted: 12 Jul 2009 at 22:40 \| IP Logged

Thanks bryris for a wonderful explanation.

CharliePapaAlfa
Major Contributor

Joined: 06 May 2009
Online Status: Offline
Posts: 452

Posted: 13 Jul 2009 at 15:48 \| IP Logged

I wish people on here wouldn't use Becker chapters(or any other brand's for that matter) as the subject of posts. I have no clue what "R6" means. I'm going to assume it's chapter 6 in Regulation. I'm also going to assume you're taking this from Becker, since Becker people seem to be the only people that assume that everybody uses Becker, which is a false assumption.

__________________
B 81 5/18/09
A 50,63,64,82 8/28/08
R 84 8/24/09
F 60,65,76 4/13/09

Search for other posts by CharliePapaAlfa

bryris
Major Contributor

Joined: 07 Dec 2008
Location: United States
Online Status: Offline
Posts: 624

Posted: 13 Jul 2009 at 19:07 \| IP Logged

Becker does seem to hold the majority market share of CPA prep products. They are orders of magnitude more expensive than the competition. I am sure they are quite good, but others seem to get the job done just as well.

__________________
REG - 97
FAR - 97
BEC - 90
AUD - 97

Sorry, you can NOT post a reply.
This topic is closed.

Printable version

You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot delete your posts in this forum
You cannot edit your posts in this forum
You cannot create polls in this forum
You cannot vote in polls in this forum