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MMLU / A developer built a mini-mall in the city. In order to finance the construction…
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question
A developer built a mini-mall in the city. In order to finance the construction of the mall, the developer obtained a
$500,000 commercial loan from a bank. The loan was secured by a mortgage that contained an after-acquired property clause that provided:"(The developer) hereby covenants that the terms of this mortgage shall apply to all after-acquired property which said mortgagor shall hereafter acquire; andMortgagee-bank's security interest in such after- acquired property shall take priority over all other parties claiming an interest in such property. "The bank duly recorded this mortgage on August 15, 2007. On September 6, 2008, the developer purchased a four-story office building in a nearby city. The building was in need of much renovation. To finance the improvements, the developer borrowed $250,000 from his friend. As consideration for the loan, the developer executed a promissory note for $250,000, payable to the friend in 10 years and secured by a mortgage on the office building. This mortgage was dated September 9, 2008 and recorded the following day. During the early part of 2009, the developer experienced serious financial setbacks and failed to make the monthly mortgage payments to the bank and the friend. After the developer went into default on both loans, the bank instituted a foreclosure action on both the mini-mall and the office building. The friend intervened, claiming that his security interest in the office building took priority over the after-acquired rights claimed by the bank. This jurisdiction maintains a grantor grantee index and has the following recording statute in effect:"An unrecorded mortgage, deed, or other instrument is invalid as against a subsequent mortgagee or bona fide purchaser for value without notice. "In determining which security interest in the office building should be given priority, the court should hold in favor ofPlain-text mathematical notation (without MathML)
A developer built a mini-mall in the city. In order to finance the construction of the mall, the developer obtained a $500,000 commercial loan from a bank. The loan was secured by a mortgage that contained an after-acquired property clause that provided:"(The developer) hereby covenants that the terms of this mortgage shall apply to all after-acquired property which said mortgagor shall hereafter acquire; andMortgagee-bank's security interest in such after- acquired property shall take priority over all other parties claiming an interest in such property. "The bank duly recorded this mortgage on August 15, 2007. On September 6, 2008, the developer purchased a four-story office building in a nearby city. The building was in need of much renovation. To finance the improvements, the developer borrowed $250,000 from his friend. As consideration for the loan, the developer executed a promissory note for $250,000, payable to the friend in 10 years and secured by a mortgage on the office building. This mortgage was dated September 9, 2008 and recorded the following day. During the early part of 2009, the developer experienced serious financial setbacks and failed to make the monthly mortgage payments to the bank and the friend. After the developer went into default on both loans, the bank instituted a foreclosure action on both the mini-mall and the office building. The friend intervened, claiming that his security interest in the office building took priority over the after-acquired rights claimed by the bank. This jurisdiction maintains a grantor grantee index and has the following recording statute in effect:"An unrecorded mortgage, deed, or other instrument is invalid as against a subsequent mortgagee or bona fide purchaser for value without notice. "In determining which security interest in the office building should be given priority, the court should hold in favor of
Original LaTeX notation
A developer built a mini-mall in the city. In order to finance the construction of the mall, the developer obtained a $500,000 commercial loan from a bank. The loan was secured by a mortgage that contained an after-acquired property clause that provided:"(The developer) hereby covenants that the terms of this mortgage shall apply to all after-acquired property which said mortgagor shall hereafter acquire; andMortgagee-bank's security interest in such after- acquired property shall take priority over all other parties claiming an interest in such property. "The bank duly recorded this mortgage on August 15, 2007. On September 6, 2008, the developer purchased a four-story office building in a nearby city. The building was in need of much renovation. To finance the improvements, the developer borrowed $250,000 from his friend. As consideration for the loan, the developer executed a promissory note for $250,000, payable to the friend in 10 years and secured by a mortgage on the office building. This mortgage was dated September 9, 2008 and recorded the following day. During the early part of 2009, the developer experienced serious financial setbacks and failed to make the monthly mortgage payments to the bank and the friend. After the developer went into default on both loans, the bank instituted a foreclosure action on both the mini-mall and the office building. The friend intervened, claiming that his security interest in the office building took priority over the after-acquired rights claimed by the bank. This jurisdiction maintains a grantor grantee index and has the following recording statute in effect:"An unrecorded mortgage, deed, or other instrument is invalid as against a subsequent mortgagee or bona fide purchaser for value without notice. "In determining which security interest in the office building should be given priority, the court should hold in favor of
choices
- the bank, because its mortgage was recorded prior in time.
- the bank, because the after-acquired property clause in its mortgage is enforceable and takes priority over the friend's subsequent security interest.
- the friend, because the bank's prior recorded mortgage is outside the friend's chain of title.
- the friend, because an after-acquired property clause is void against public policy and cannot encumber real estate subsequently acquired by the mortgagor.
subject
professional_law
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