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MMLU / A seller and a buyer signed a contract of sale for improved real property. The…

Problem

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question

A seller and a buyer signed a contract of sale for improved real property. The contract contained a financing contingency for a certain percentage of the purchase price. The buyer obtained the requisite financing from a bank. At the closing, the buyer executed a note to the seller for a portion of the purchase price, which note was not secured by a mortgage. The buyer then executed a second note, secured by a mortgage to executed a second note, secured by a mortgage to the bank, applying the bank loan proceeds to the purchase price of the property. The bank had actual knowledge of the prior note to the seller. The bank promptly recorded its mortgage. The buyer is now in default on both notes. There is no applicable statute. Which party has priority?

choices

  1. The bank, because its loan satisfied the financing contingency in the contract of sale.
  2. The bank, because its note is secured by a purchase money mortgage.
  3. The seller, because the bank had actual knowledge of the seller's note.
  4. The seller, because he retained a vendor's lien that was first in time.

subject

professional_law

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Source and history

task_id
186c0c0f-1162-529b-a7b0-77680f3d8627
task_key
all--test--186c0c0f-1162-529b-a7b0-77680f3d8627
task_revision_id
1
config / split
all / test

Official source

initial import