MBE Session #2 (M/E)

(M nuisance) A private company managed a publicly funded experimental project for the conversion of garbage into energy through biological means. Despite locating the project in a sparsely populated area on land purchased from a real-estate investment trust, the company has nevertheless received complaints from those living near the project about the repugnant smells emanating from the site. One neighbor who rents a farmhouse for use as his personal residence on an annual basis from an individual farmer can no longer reside on the property. He has filed suit against the company, seeking damages. Of the following doctrines, which provides the neighbor with the best chance for recovery? Answers: Private nuisance Public nuisance Constructive eviction Waste Rationale:

Answer choice A is correct. A private nuisance is a substantial, unreasonable interference with another individual's use or enjoyment of his property. The interference may be intentional, negligent, reckless, or the result of abnormally dangerous conduct. Anyone with possessory rights in the property may bring a nuisance claim. Here, the smells emanating from the project prevent the neighbor from living in the farmhouse. Although this interference is clearly substantial, it is arguable as to whether it is unreasonable. Nevertheless, of the four options, a private nuisance provides the neighbor with the best chance of recovery. Answer choice B is incorrect. A public nuisance is an unreasonable interference with the health, safety, or property rights of the community. Although the smells emanating from the project site are adversely affecting those who live in the area, to recover for a public nuisance, a plaintiff must show that he suffered a different kind of harm than that suffered by the rest of the community. There is no indication that the harm suffered by the neighbor is different in kind from that suffered by the rest of the community in this case. Answer choice C is incorrect because constructive eviction is based on a landlord's substantial interference with the tenant's use and enjoyment of the leasehold premises by breaching a duty owed by the landlord to the tenant. Here, there is no landlord-tenant relationship between the private company that is managing the experimental project and the lessee of the neighboring farmhouse. The lessor of the farmhouse is an individual farmer. The conduct of the individual farmer has not caused the neighbor's issue. Answer choice D is incorrect. Although the neighbor is complaining of the adverse effects of the handling of garbage, a legal action for waste is available only to a plaintiff who holds an interest in the same property as the defendant, such as a life tenant and a remainderman or a tenant-in-common against another tenant-in-common. Because the neighbor does not have a property interest in the site where the project is being conducted and the private company does not have a property interest in the farmhouse rented by the neighbor, waste is not available as a cause of action that the neighbor can pursue against the company.

(M foreclosure) A developer obtained a loan from a bank to construct an apartment building. The loan was evidenced by a note and secured by a mortgage on the apartment building. After making the required installment payments on the note to the bank for several years, the developer defaulted on the loan. The bank elected not to foreclose on the mortgage, but instead, sued the developer personally for the unpaid balance of the note because the note contained an acceleration clause that made the entire unpaid balance due upon default. The court rendered a judgment in the bank's favor. The bank promptly and properly filed the judgment creating a lien, pursuant to the applicable state law, on any real property then owned or subsequently acquired by the developer for the next 10 years. Subsequently, the developer secured a loan from a private investor to purchase a small strip mall. This loan was also evidenced by a note and secured by a mortgage on the mall. Once again, after making the required installment payments on the note to the private investor for several years, the developer defaulted on this note. The private investor filed an action to foreclose on the mortgage it held on the mall. The bank was made a party to this action and sought to enforce its judgment lien against the mall. The court recognized the rights of both the private investor and the bank in the mall, and ordered the sale of the mall. The proceeds from the sale, after the costs associated with the sale were paid, were more than sufficient to satisfy the developer's outstanding obligation to the private investor or judgment obtained by the bank, but not both. Who has priority to the net sale proceeds? Answers: * The private investor, because the funds from the loan were used to purchase the mall. The private investor, because the investor initiated the foreclosure on the mall. The bank, because the judgment lien occurred before the mortgage on the mall. The bank, because a judgment lien has priority over a mortgage

Answer choice A is correct. A purchase-money mortgage is a mortgage granted to (i) the seller of real property or (ii) a third-party lender, to the extent that the loan proceeds are used to acquire title to the real property or construct improvements on the real property if the mortgage is given as part of the same transaction in which title is acquired. A purchase-money mortgage has priority over mortgages and liens created by or that arose against the purchaser-mortgagor prior to the purchaser mortgagor's acquisition of the property, whether or not recorded. Here, with regard to the mall, the private investor has a purchase money mortgage because the developer used the funds loaned by the private investor to purchase the mall. Consequently, the private investor's mortgage has priority over any other mortgages or liens on the mall. Answer choice B is incorrect. Although the private investor initiated the foreclosure action, the private investor's priority to the net proceeds from the sale of the mall stems from the status of the investor's mortgage as a purchase money mortgage, not from the private investor's role as plaintiff in this action. Answer choice C is incorrect because, although the judgment lien was created prior to the creation of the mortgage on the mall, the investor's mortgage on the mall has priority because it was a purchase money mortgage. Answer choice D is incorrect because a judgment lien does not automatically have priority over a mortgage.

(E/M delivery & recording deed) A man purchased undeveloped land with a bank loan secured by a mortgage on the property. The deed and mortgage were promptly recorded. A year later, the man decided to sell the property to a wealthy widower. The widower purchased the property, recorded his interest, and assumed the mortgage. Several years later, the widower gave the property to his daughter. The widower did not tell his daughter about the mortgage but instead continued to make the mortgage payments. The deed, which contained no mention of the mortgage, was promptly recorded by the daughter. When the widower died, he devised all of his real property to his daughter. He left the remainder of his estate to his son. Following the widower's death, no one made payments on the loan, causing it to fall into default. May the bank foreclose on the property? Answers:* Yes, because the bank recorded its mortgage. Yes, because the daughter received the property as a gift. No, because the daughter recorded her deed that made no mention of the mortgage. No, because of the exoneration of liens doctrine.

Answer choice A is correct. Every jurisdiction has enacted a recording statute. However, if the recording act does not govern, the common law first in time, first in right rule generally applies to determine priorities between competing interests in land. All of the recording acts require that the later grantee acquired the property for value in order to be protected by the act. Here, the daughter received the land as a gift, so she cannot claim protection of the recording act, and the common law first in time rule gives priority to bank. This analysis seems to implicate answer choice B, however that is not the end of the inquiry. Under the shelter rule, a grantor who is protected by the act can pass that protection on to a grantee who would otherwise by unprotected. Here, the daughter is not protected by the shelter rule because the widower is, himself, not protected by the recording act. Because the bank properly recorded its mortgage prior to the widower's purchase of the property, the widower was (i) on notice of the mortgage, and/or (ii) failed to record first. Thus, under any recording act, the widower is not protected because the bank properly recorded its interest. It is for this reason that the daughter is also not protected under the shelter rule. Answer choice B is incorrect because the manner in which the daughter acquired the property is irrelevant. The bank would have prevailed even had the daughter purchased the land from the widower because the bank recorded its mortgage prior to the man's transfer of the land to the widower, providing notice and/or recording first under any type of recording act. Answer choice C is incorrect because although the daughter had no personal knowledge of the mortgage nor did the deed reference the mortgage, she took the property subject to the recorded mortgage. Answer choice D is incorrect because the exoneration of liens doctrine does not apply to the mortgage on the land. The land was transferred to the daughter prior the widower's death; it did not pass to the daughter through the widower's will.

(E cov running with land) A farmer owned a very large, undivided tract of land. He sold a parcel from the northeast corner of the land to a rancher. The deed to this parcel included a covenant under which the rancher and the rancher's "heirs and assigns" agreed to purchase all of their animal feed from the farmer for a fair market price. For many years, the rancher purchased all of his animal feed from the farmer. When the rancher died, his son inherited the ranch. The son was unsatisfied with the quality of the animal feed sold by the farmer and began purchasing all of his animal feed from another supplier. The farmer brought an action against the son to enjoin him from purchasing animal feed from another supplier. In a jurisdiction that follows the common law for all applicable issues, what is the son's best defense against the farmer's action? Answers: The covenant does not touch and concern the land. The covenant is an unduly restrictive restraint on alienation. There is no horizontal privity of estate between the son and the farmer. There is no vertical privity of estate between the son and the rancher. Rationale:

Answer choice A is correct. To run with the land, a covenant must touch and concern the land, which means that the benefit or burden must affect both the promisee and the promisor as owners of the land, and not merely as individuals. The benefit in this case is an economic benefit, rather than a benefit affecting the land's physical use. Therefore, it arguably fails to touch and concern the land. Answer choice B is incorrect because the covenant does not prevent the son from selling the property. Answer choice C is incorrect. Although it is true that there is no horizontal privity between the son and the farmer, such privity is not required. For the burden of the covenant to run to the son, there must have been horizontal privity between the farmer and the rancher. Here, there was such privity because the rancher bought the parcel of land to which the covenant allegedly applies from the farmer. Answer choice D is incorrect because the rancher owned the parcel in fee simple absolute, and the son inherited the entire servient estate; consequently, vertical privity exists between the son and the rancher.

(M water air support) A landowner sold the right to access and remove oil from below the surface of the property to a company. As a consequence of the removal of the oil, the ground subsided, although the company exercised reasonable care and complied with all laws and regulations. The landowner's residence, which had been on the property long before the landowner purchased the land, was damaged due to the subsidence. Can the landowner recover from the company for the damage to his residence? Answers: Yes, because the property damaged was a personal residence. Yes, because the residence predated the company's oil rights. No, because the company exercised reasonable care in removing the oil. No, because the company complied with all laws and regulations.

Answer choice B is correct. A landowner enjoys the right to subjacent support when the landowner transfers the rights to access and remove oil or minerals from the property. The transferee of such rights is strictly liable for any damage that occurs to existing structures on the land as a consequence of subsidence caused by the removal of the oil or minerals. Answer choice A is incorrect because the right to subjacent support with regard to structures on the land does not turn on the type of structure on the land, but on the time of construction of the structure in relationship to the time of the transfer of the mineral rights. Answer choice C is incorrect because the exercise of care by the company does not protect the company from strict liability. Answer choice D is incorrect because, although compliance with all laws and regulations may demonstrate the reasonableness of the company's actions in removing the oil, it does not protect the company from strict liability with regard to existing structures.

(M/E Concurrent estates) Upon her death, the owner of six acres of undeveloped land devised her property to her brother and sister as "joint tenants with the right of survivorship" with a 1/3 interest in the land allocated to the owner's brother and a 2/3 interest in the land allocated to the owner's sister. Neither the brother nor the sister transferred their interest in the land during their lifetime. The brother, upon his death, willed his interest in the land to a friend. The sister later died intestate. Her sole heir inherited all of her property. Who owns the undeveloped land? Answers: The sister's sole heir owns the six acres of undeveloped land outright. The sister's sole heir owns a 2/3 interest and the brother's friend owns a 1/3 interest in the land as tenants in common. The sister's sole heir owns four acres of the land, and the brother's friend owns two acres of the land, each in fee simple absolute. The sister's sole heir owns a 2/3 interest and the brother's friend owns a 1/3 interest in the land as joint tenants with the right of survivorship.

Answer choice B is correct. Although the owner used the term "joint tenants with the right of survivorship" in devising the undeveloped land to her brother and sister, each held their interest in the property as tenants in common with one another. They did not own equal shares of the land because the sister was devised a 2/3 interest, while the brother was devised a 1/3 interest. Thus, they did not satisfy the unity of interest requirement to holding the property as joint tenants with the right of survivorship. However, because the owner did indicate by use of the term "joint tenants with the right of survivorship" that she wanted her brother and sister to own the land jointly, they took their respective interests as tenants in common. A tenancy in common is not subject to the right of survivorship. Consequently, upon the brother's death, his 1/3 interest in the land passed pursuant to the terms of his will to his friend. Upon the sister's death, her 2/3 interest in the land passed in accord with the intestacy laws to her sole heir. Answer choice A is incorrect because as discussed above, the owner's brother and sister held their interests in the undeveloped land as tenants in common, thus there is no right of survivorship. Had the undeveloped land been held as a joint tenancy with the right of survivorship, the sister's sole heir would own the property outright. Answer choice C is incorrect. The brother and sister took their respective interests as tenants in common because the owner indicated by use of the term "joint tenants with the right of survivorship" that she wanted her brother and sister to own the land jointly. As tenants in common, each person had an undivided share of the entire six acres, a common characteristic of concurrently held property. Thus, neither person owned a specific acreage. Answer choice D is incorrect. Although the owner used the term "joint tenants the right of survivorship" in devising the undeveloped land to her brother and sister, each sibling held their interest in the property as a tenant in common with one another. Since they did not own equal shares of the land, they did not satisfy the unity of interest requirement to holding the property as joint tenants with the right of survivorship. Answer Popularity Index

(E concurrent estates) Two brothers own a large parcel of land as joint tenants. The parcel contains 10 acres of undeveloped land and is surrounded by public roads. The applicable zoning ordinance allows the land to be developed for residential use, commercial office space, or both. The brothers disagree about how to develop the land. The older brother wants to build a single-family home for himself and his family. The parcel has been in their family for generations and he does not want to sell the land. The younger brother wants to build an office park or sell the parcel. The land is located in a developing area and the sale price would be high. After weeks of heated debate about how to develop the land, the older brother filed a partition action with the court. Should the court partition the property? Answers: Yes, the court should sell the property at a public auction. Yes, the court should divide the property into two equal parcels. No, because the brothers did not agree to voluntarily partition the property. No, because a joint tenancy, unlike a tenancy in common, cannot be partitioned.

Answer choice B is correct. A tenant in common or a joint tenant has the right to unilaterally partition the property. This can be either voluntarily through the parties' agreement or involuntarily through court action. Courts prefer a partition in kind if the division is practical and fair. In this case, the property can be divided equally between the brothers without any unfairness. Each brother would own 5 acres of land to develop (or sell) as he chooses. The zoning ordinance is broad and both parcels will have access to public roads, so a partition in kind is fair and practicable here. Answer choice A is incorrect because courts prefer a partition in kind. If the facts indicated impracticality or unfairness, the court would sell the property at a public auction and split the proceeds equally. However, neither is present here. Answer choice C is incorrect because voluntary partition is only one method. A joint tenant can also seek an involuntary partition through court action. Answer choice D is incorrect because a joint tenancy, like a tenancy in common, may be partitioned voluntarily or by court action.

(E performance) The owner of a used car lot put the property up for sale. A car dealer was looking for another car lot upon which to sell its cars, and it made a generous offer to the owner. The owner and the dealer promptly executed a valid land sales contract for the used car lot, which contained all of the essential terms. Prior to the closing date, the owner's estranged son discovered that his father had contracted with the dealer to sell the car lot. The son immediately contacted the dealer and truthfully informed him that his father only had a life estate interest in the car lot, and that he had a future interest in the property in fee simple. The son also said that he would not agree to the sale unless his father paid him $25,000. The owner promised the dealer that his son would agree to the sale because he would pay him $25,000 in the future. On the closing date, the dealer refused to close. The owner has filed an appropriate action against the dealer for specific performance. Will he prevail? Answers: No, because the owner may not keep his promise. No, because the title was unmarketable. Yes, because the owner conveyed marketable title. Yes, because the owner had a life estate in the car lot.

Answer choice B is correct. Absent contrary language, an implied covenant of marketable title (i.e., a title free from defects) is part of a land sales contract, regardless of the type of deed created. Here, the owner was obligated to deliver to the dealer marketable title on the date of the closing. Because the son had a future interest in the car lot and did not agree to the conveyance, the title is unmarketable, and the dealer is not obligated to close. For this reason, answer choice C is incorrect. Answer choice A is incorrect because it is irrelevant whether the owner keeps his promise to pay his son $25,000. The central issue is that the dealer cannot be forced to close the deal because the owner did not provide marketable title on the date of closing. Answer choice D is incorrect because a life estate owner cannot provide marketable title when the future interest holder does not agree to the conveyance.

(M transfer) An investor purchased undeveloped land with the aid of a loan from a bank. The loan, which was evidenced by a note, was secured by a mortgage on the property. The note contained a "due on sale" clause. Subsequently, the investor sold the land to a developer. The bank agreed to waive the "due on sale" clause if the developer assumed the mortgage, which the developer did; the waiver was silent as to the note. The following year, the developer failed to make timely payments on the note, resulting in a default. The developer filed for bankruptcy, and his personal liability for the note was completely discharged. Would the bank be successful in an action against the investor based on the default of note? Answers: Yes, because the developer is no longer liable on the note. Yes, because the investor is liable on the note. No, because the bank waived the "due on sale" clause. No, because the developer assumed the mortgage.

Answer choice B is correct. Following the transfer of a mortgage, the investor, as maker of the note, remains liable on the note absent a release by the bank or other act that would discharge the investor's liability. Answer choice A is incorrect because the investor's liability to the bank for the default does not depend on the developer's liability. A discharge of the developer does not discharge the investor. Answer choice C is incorrect because although the bank waived the "due on sale" clause, which would have triggered the investor's liability for the full amount of the loan upon the sale of the land, the bank did not release the investor from liability on the note. Answer choice D is incorrect because assumption of a mortgage by a transferee of the mortgaged property does not eliminate the transferor's liability, but instead makes the transferee also liable to the mortgagee for payment of the note. The elimination of the transferee's personal liability through bankruptcy does not absolve the transferor of liability with respect to the note.

(E transfer) An individual obtained a loan from a bank to purchase a house for use as a residence. As security for the loan, the individual granted the bank a mortgage on the house. Due to an oversight by a bank employee, the mortgage was not recorded. After three years during which time the individual complied with the terms of the loan, the individual sold the house to a third party. Under the terms of the sale, the third party obtained a new loan from the bank with the same terms as the individual's loan, and the bank agreed to excuse the individual's loan obligations. The third party did not live in the house, but instead rented it out to a couple. Five years later, the couple moved out, and the third party, unable to find another renter, failed to make the required payments on the loan. The bank has filed an action against the individual to recover the unpaid balance of that loan. Which of the following is the individual's best defense to this action? Answers: There is no privity of estate between the individual and the bank. There was a novation with regard to the individual's obligation to the bank. The bank failed to record the mortgage. The individual is personally liable to the bank, but only secondarily.

Answer choice B is correct. The third party entered into a new loan with the bank and the bank agreed to excuse the individual's loan obligation (a novation). Consequently, the individual is not personally liable to the bank. Answer choice A is incorrect because, although the individual is no longer in possession of the property, the individual would nevertheless remain liable for repayment of the loan in the absence of a novation. Answer choice C is incorrect because, while the failure to record a mortgage can affect the bank's rights in the house with respect to other creditors, it does not alter the bank's rights with respect to the individual and the initial loan. Answer choice D is incorrect because the novation results in the individual not being personally liable to the bank, even in a secondary capacity.

(E conveyance) A widower who owned a vacation cabin in the mountains executed a will under which the cabin was devised to his niece. The will contained a residuary clause that devised the testator's remaining estate to his son. Subsequent to the execution of the will, the widower sold the cabin and invested the proceeds in an oceanside condominium. After the death of the widower, the personal representative of his estate determined that the niece was entitled to the condominium. The son has challenged this determination in court. Which of the following legal concepts provides the strongest support for the son's position that the condominium should pass under the terms of the will to him? Answers: Intestate succession Ademption Exoneration Lapse Rationale:

Answer choice B is correct. Under the doctrine of ademption, the transfer of property by a testator subsequent to the execution of a will removes the property from his estate and the devise of the property is adeemed. Here, the son could contend that the devise of the cabin to the widower's niece was adeemed when the widower sold the property during his lifetime. Answer choice A is incorrect because rules regarding intestate succession only apply to the extent that a decedent has not devised his property by a will. Here, the will contains a residuary clause that passes the remainder of the widower's estate that is not otherwise devised to the son. Consequently, the widower's will, and not the rules regarding interstate succession, govern the transfer of the widower's property upon his death. Answer choice C is incorrect because the doctrine of exoneration applies to the payment by the decedent's estate of an encumbrance on real property that is devised to a beneficiary. Here, there is no indication that either property was subject to a mortgage or lien. Answer choice D is incorrect because the doctrine of lapse applies when a designated beneficiary in a will dies before the testator. The doctrine prevents the devise from passing to the beneficiary's descendants. Here, the niece has survived the widower.

(M/H delivery & recording) A professor made a gift of rental property to her daughter. Subsequently, the professor sold the rental property to a buyer. Prior to the sale, the professor supplied the buyer with the records that indicated the rent received and the expense associated with the property. The professor also fraudulently stated that her daughter was managing the property for her. The buyer did not directly question the daughter, who was unaware of the professor's actions with regard to the property. The day after the sale, the buyer and daughter met by chance. The daughter learned of her mother's sale of the property and the buyer learned of the gift of the property to the daughter. The next day the buyer properly recorded her deed, but not before the daughter had properly recorded her donative deed. The professor vanished with the sale proceeds. The recording act of the jurisdiction reads: "No conveyance or mortgage of real property shall be good against subsequent purchasers for value and without notice unless the same be first recorded according to law." In an action to determine ownership of the rental property between the buyer and the daughter, will the buyer be successful? Answers:* Yes, because the daughter received the property as a donee. Yes, because the buyer purchased the property without notice of the prior transfer. No, because the daughter recorded her deed first. No, because the buyer learned of the prior transfer before recording his deed.

Answer choice C is correct. Because the jurisdiction follows a race-notice recording statute, the buyer cannot prevail if the daughter records her deed first (as is the case here). Answer choice A is incorrect because, although the recording act does not protect a subsequent grantee who is a donee from an unrecorded deed, it does protect any grantee (including a donee), who records his deed prior to a subsequent grantee recording his deed. Answer choice B is incorrect because, even though the buyer did not have actual, constructive, or inquiry notice as to the prior conveyance, the buyer did not record her deed before the daughter recorded hers. Answer choice D is incorrect because, although knowledge obtained after a conveyance does not constitute notice, the buyer lost the race to record. [The foregoing NCBE MBE question has been modified to reflect current NCBE stylistic approaches; the NCBE has not reviewed or endorsed this modification.] Answer Popularity Index

(E crops) A widow held a life estate in a house and several acres of land in a semi-rural area. She lived in the house and harvested berries from the numerous wild berry bushes on the property each June. The widow personally consumed the berries or gave them away to family and friends, but did not sell them to third parties. One May, just before the berries were to be harvested, the widow died. The widow's children, her heirs, sought to enter the land to harvest the berries, but the remainderman, the new owner, objected, claiming that he had sole right to the berries Do the heirs have the right to return and harvest the berries? Answers: Yes, because the berries were the widow's personal property. Yes, because the widow would have been able to harvest them had she survived. No, because the berries grew wild. No, because the widow did not sell the berries to third parties.

Answer choice C is correct. Fructus naturales are wild crops that are not cultivated; such crops are considered real property and pass automatically with the land. Here, title to the land, including the unharvested berries, reverted to the remainderman at the time of the widow's death. Accordingly, the remainderman has the sole right to the berries. Had the berries been fructus industriales, that is, had the widow purposely planted and cultivated the berries, then they would have been considered personalty. Answer choice A is incorrect because the berries were not yet the widow's personal property; they would have become her personal property if she had already harvested them, and they would have been considered personalty had she cultivated them. However, because they grew wild, they pass with the land. Answer choice B is incorrect because, while it is true that she would have been able to harvest them had she survived, the land, including the berries, passed to the remainderman at the time of her death. Answer choice D is incorrect because what the widow did with the berries is irrelevant to the question of whether her heirs are entitled to enter the land and harvest them.

( M/e mortgages) After inheriting a substantial amount of money, a man purchased a large estate in the mountains adjacent to a ski resort intending to operate the estate as a seasonal rental property used exclusively to generate rental income. The man made the purchase with cash. Unable to properly manage his wealth, he was impoverished a few months later. He therefore procured a mortgage on the estate from a credit union, and the mortgage was properly executed and recorded. In light of a struggling economy, credit union executives were confident the man would default on the loan and wanted to ensure the estate was properly maintained in anticipation of a subsequent sale. The credit union therefore sought to obtain a court order confirming its right to possession of the estate in order to make repairs and prevent further deterioration of the property. Could the credit union take possession of the estate? Answers: No, in a title theory state, absent default by the mortgagor. No, in a lien theory state, unless the mortgage included an acceleration clause. Yes, in a title theory state, until the mortgage has been fully satisfied. Yes, in a lien theory state, because the mortgagee is considered the owner of the land during the term of the mortgage.

Answer choice C is correct. In a title theory state, legal title is in the mortgagee (here, the credit union) until the mortgage has been fully satisfied. Thus, the mortgagee is theoretically entitled to take possession at any time, although the mortgagee is typically prohibited by the terms of the mortgage from taking possession of the property before default occurs. As such, the credit union can make repairs, take rent, prevent waste, and lease out vacant space. Answer choice A is incorrect because in a title theory state, the mortgagee has the right to possession even if the mortgagor has not yet defaulted. Answer choice B is incorrect. It is true that the mortgagee cannot take possession prior to foreclosure in a lien theory state because the mortgagor is considered to be the owner of the land until foreclosure. However, an acceleration clause would not change that outcome here. An acceleration clause provides that the full amount of the mortgage obligation becomes due upon default. It does not change what party has a right to possess the mortgaged property. Answer choice D is incorrect because in a lien theory state, the mortgagee cannot take possession prior to foreclosure because the mortgagor is considered to be the owner of the land until foreclosure.

(E foreclose) A businessman mortgaged his residence as security for a bank loan, the proceeds of which were used in his business. The bank duly recorded the mortgage. Subsequently, the businessman obtained a second loan for his business, this time from a private investor. The businessman again pledged his residence as security for this second loan. The promissory note executed by the businessman provided that the sole remedy for the private investor upon default of the loan obligation was foreclosure on the mortgage. Several years later, the businessman failed to make timely payments to the private investor and defaulted on that loan. Can the private investor foreclose on the mortgage of the residence? Answers: No, because the businessman has not defaulted on the senior bank loan. No, because a mortgage is unenforceable if the borrower is not personally liable for the loan to which the mortgage serves as security. Yes, because the mortgage secured repayment of the loan and the loan was in default. Yes, because the private investor's mortgage, as the more recent mortgage, has priority over the bank's mortgage on the residence.

Answer choice C is correct. The private investor, as a mortgagee, may enforce his mortgage through foreclosure proceedings upon default of the obligation for which the mortgage serves as security. Note that the rights of the senior interest are not affected by the foreclosure. Answer choice A is incorrect because, while the bank's mortgage on the businessman's residence has priority over the private investor's mortgage, the investor can still foreclose on his mortgage even though the bank's mortgage is not in default. Answer choice B is incorrect because the private investor, as mortgagee, may enforce its mortgage even though there is no personal liability with regard to the obligation for which the mortgage serves as security. Answer choice D is incorrect because a mortgage, as a property interest, is subject to the general "first in time, first in right" rule. Consequently, while the private investor is entitled to foreclose on his mortgage, that mortgage does not have priority over the bank's mortgage on the residence.

(M covenant running with land) A rancher subdivided a portion of his ranch that had recently been annexed by the city into 30 two-acre lots. The rancher filed a subdivision plan that restricted the use of each lot to one single-family residence, but placed no other restrictions on the lots. The rancher then sold a lot to a speculator. The deed contained the single-family residential restriction, but no other restrictions. Immediately thereafter, the housing market in the area plummeted and the rancher was unable to sell any of the remaining lots for almost three years. During the next two-year period, the rancher sold 28 of the remaining 29 lots. At the time that the portion of the ranch was annexed by the city, the city's building code prohibited a single-family residence of more than two stories. After the rancher sold the first lot to the speculator, but before he sold any of the remaining lots, the city, acting in response to complaints by developers, modified its building code to permit three-story single-family residences. However, the rancher did not want any of the residences built on the lots to be as high as his own three-story residence located on the ranch. Thus, he included in the deeds to each of the 28 lots that he sold after the market rebounded a two-story height restriction for each single-family residence. The rancher made the speculator aware of this height restriction by letter, but the speculator did not respond. Subsequently, the speculator sold his lot to a couple. The deed to the couple contained the single-family residence restriction, but made no mention of the two-story height limitation. The rancher, upon learning of the couple's plans to construct a three-story family residence, has filed suit on his own behalf, as well as the owners of the other 28 lots, seeking an injunction to prevent the couple from building a three-story family residence. All of the 28 owners of the other lots who have built residences on their lots have not violated the two-story height restriction. For whom is the court likely to rule? Answers: The rancher, because the common scheme of the two-story height restriction was readily apparent to the couple. The rancher, because he made the speculator aware of the height restriction before the speculator sold his lot to the couple. The couple, because the two-story height restriction was not contained in their deed, the speculator's deed, or the subdivision plan. The couple, because the city building code takes priority over a private restrictive covenant.

Answer choice C is correct. The two-story height restriction was not contained in the couple's deed, the speculator's deed, or the recorded subdivision plan. Therefore, this restriction cannot be imposed on the couple's use of the lot as either a real covenant or an express equitable servitude. Answer choice A is incorrect because the common scheme did not exist at the time that the rancher transferred the first lot to the speculator, but was developed by the rancher in response to the change in the city building code. Even if the couple was aware of the common scheme from the fact that there were no three-story residences on any of the other developed lots, this awareness does not bind them as owners of their lot to that common scheme because the rancher failed to manifest an intent to bind their lot to that scheme at the time that he sold it to the speculator. Had the rancher evidenced his intent to impose this restriction on all thirty lots prior to the sale of the lot to the speculator, such as by including a provision in the subdivision plan, then the speculator and the couple might have been subject to the restriction as an implied reciprocal servitude. Answer choice B is incorrect because, as with the couple's awareness of the common scheme, the speculator's knowledge of the two-story height restriction did not arise until after he had become the owner of the lot. Moreover, the height restriction was not included in either deed or the subdivision plan. Answer choice D is incorrect. Although the couple is subject to the city's building codes, if they were also subject to the two-story height restriction found in the deeds of the 28 lots (which they are not), then the private restriction could still be enforced. The owners of private property may subject their property to greater restrictions on the use of their property than are imposed by a governmental entity.

(M mortgage alternatives) In anticipation of the Fourth of July holiday, a fireworks dealer borrowed money from a lender to finance the purchase of fireworks to sell at a roadside stand. Later the same day, the dealer transferred ownership of real estate to the lender. The deed, which contained no mention of the loan, was promptly recorded by the lender. When the dealer paid off the loan, the dealer demanded that the lender return the property, contending that the parties had an oral agreement that the lender would return the property when the loan was paid off. The lender instead sold the property to an unrelated third party who had no knowledge of the loan. If the dealer files an action seeking the return of the property, which of the following would likely be the largest stumbling block to his success? Answers: The parol evidence rule prohibits the introduction of evidence regarding the agreement. The statute of frauds prohibits the oral transfer of property rights. The property has been sold to a good faith purchaser. The lender recorded the deed.

Answer choice C is correct. While a court may recognize an equitable mortgage (or one created through fairness, not an explicit agreement) even though the deed provides for the absolute transfer of the real property, a court will not order the return of the property if there are countervailing equities, such as the ownership of the property by a good faith purchaser. Answer choice A is incorrect because, although the parol evidence rule prohibits the introduction of prior or contemporaneous evidence that contradicts a written agreement, that writing must be the final and complete expression of the parties' agreement. Here, the dealer is contending that the deed was not the complete expression of the agreement between himself and the lender. Answer choice B is incorrect. While the statute of frauds does require that an interest in property cannot be transferred without written evidence of the transfer, in this case there is a writing -- the deed. The dealer seeks to introduce oral evidence that explains that the written document was intended to serve as security for the loan. Answer choice D is incorrect because, although recording the deed may protect the lender from claims advanced by subsequent purchasers of the property, recording offers no protection from a claim that the transfer of the deed was intended as security for the loan.

(E water air support) A painter and a dentist own adjacent parcels of land. A one-story building was located on each of the parcels. The dentist's office was on her parcel. The painter lives in the rear portion of the building on his parcel and runs a morning painting class in the front room. Last year, the dentist decided to demolish her office and build a three-story office building, planning to rent out the additional office space. After obtaining all of the necessary governmental approvals and verifying that the zoning code will allow the construction, she demolished her old office and began construction of the three-story building. As construction progressed, the painter realized that the new structure would cast a dark shadow over his property. Because his painting class relied primarily on natural light, he predicted that the structure would significantly reduce his profits by deterring student attendance. The painter brought an action against the dentist to enjoin the construction and to demand damages for his predicted loss of business. He even presented uncontroverted evidence that another painting studio had suffered an extreme drop in profits when deprived of natural light. How should the court rule on the painter's action? Answers: Award the painter monetary damages. Grant the injunction requested by the painter. Hold in favor of the dentist, because the construction complied with the zoning code and the dentist obtained all necessary approvals. Hold in favor of the dentist, because the painter does not have a legal right to natural light.

Answer choice D is correct. A property owner, as an attribute of owning the property, does not have a legal right to sunlight or to a view. Consequently, the painter cannot prevent the dentist from constructing his three-story building. Answer choice A is incorrect. A property owner may collect damages for a private nuisance. A private nuisance is a substantial, unreasonable interference with another individual's use or enjoyment of his property. Because the painter does not have a legal right to sunlight on his property, the dentist's blockage of sunlight that would otherwise fall on the painter's property is not an unreasonable interference, particularly since the blockage results from the dentist's appropriate use of his own property, constructing a higher building to make money, rather than solely to interfere with the painter's access to sunlight. Consequently, the painter cannot recover damages for any potential damage to his business based on a private nuisance. Answer choice B is incorrect. Injunctive relief can also be a remedy for a nuisance claim, but as explained above, the painter cannot succeed in a nuisance action against the dentist. Instead, he would have to rely on an enforceable negative easement or restrictive covenant. Because none exists on these facts, the painter cannot obtain an injunction. Answer choice C is incorrect because the dentist's compliance with these rules and regulations would not ensure her success in this action if the painter had a legally enforceable right to natural light under a negative easement.

(M transfer) A limited partnership purchased land with a loan from a bank. Neither the individual partners nor the limited partnership was personally obligated to repay the loan. As security for the loan, the limited partnership granted the bank a mortgage on the land. Subsequently, the limited partnership sold the land to a buyer. The buyer did not enter into an agreement with respect to the limited partnership's loan. After the sale, the limited partnership defaulted on the loan. The applicable jurisdiction follows the lien theory of mortgages. Can the bank foreclose on the land owned by the buyer? Answers: No, because the buyer did not agree to assume the limited partnership's loan. No, because no one was personally obligated to repay the loan. Yes, because the applicable jurisdiction follows the lien theory of mortgages. Yes, because the buyer took the land subject to the mortgage.

Answer choice D is correct. Although the buyer did not assume the limited partnership's loan, the buyer nevertheless took the land subject to the bank's mortgage. Consequently, although the buyer was not personally liable to repay the loan, the bank has the right to enforce its security interest through foreclosure. Answer choice A is incorrect because, even though the buyer did not assume personal liability for the limited partnership's loan, the buyer did take ownership of the land subject to the bank's mortgage. Answer choice B is incorrect because a mortgage is enforceable even though no one is personally liable to perform the obligation for which the mortgage serves as security. Answer choice C is incorrect because the fact that the applicable jurisdiction follows the lien theory of mortgages is irrelevant to the mortgagee's ability to foreclose on mortgaged property. Regardless of whether a jurisdiction follows the lien or title theory of mortgages, a person who acquires property that serves as security for an obligation takes the property subject to the loan.

(M/E Concurrent estates) A widower owned a parcel of land. At his death, ownership of the parcel of land was transferred by his will to his three adult children as joint tenants with the right of survivorship. Several years later, the youngest child sold his interest in the parcel to an investor. Recently, the oldest child died, willing all of his real property to his daughter. Who currently owns the parcel of land? Answers: The investor, the daughter of the oldest child, and the middle child of the widower each own a one-third interest in the parcel as tenants in common. The investor and the middle child of the widower each own a one-half interest in the parcel as joint tenants with the right of survivorship. The investor and the middle child of the widower each own a one-half interest in the parcel as tenants in common. The investor owns a one-third interest and the middle child of the widower owns a two-thirds interest in the parcel as tenants in common.

Answer choice D is correct. Although the widower's three children held the parcel of land as joint tenants with the right of survivorship, each holding a one-third interest in the parcel, the sale by the youngest child of his interest in the parcel to the investor resulted in the severance of the joint tenancy with respect to that interest. However, it left intact the joint tenancy with the right of survivorship between the middle child and the oldest child. Thus, following the sale by the youngest child, the investor held a one-third interest as a tenant in common with the oldest child and the middle child. The oldest child and middle child each held a one-third interest as joint tenants with the right of survivorship. Upon the death of the oldest child, the middle child became sole owner of the two-thirds share of the parcel that had been held by the oldest child and the middle child as joint tenants. Therefore, the middle child holds a two-thirds interest in the parcel as a tenant in common with the investor, who holds the remaining one-third interest in the parcel. Answer choice A is incorrect because although the youngest child's sale of his interest did result in the severance of the joint tenancy with respect to that interest, it left intact the joint tenancy with the right of survivorship between the oldest child and the middle child. Due to the right of survivorship, the oldest child's interest in the parcel did not pass by will to his daughter upon his death. Instead, the oldest child's interest passed to the middle child. Moreover, although the investor and the middle child own the parcel as tenants in common after the death of the oldest child, the middle child owns a two-thirds interest in the parcel, and the investor owns a one-third interest in the parcel. Answer choice B is incorrect because the youngest child's sale of his interest resulted in the severance of the joint tenancy with respect to that interest. Accordingly, the investor holds only the youngest child's one-third interest as a tenant in common. Answer choice C is incorrect. Although the investor and the middle child own the parcel as tenants in common after the death of the oldest child, the middle child owns a two-thirds interest in the parcel, and the investor owns a one-third interest in the parcel.

(M options and right of first refusal ) In exchange for $1,000, the owner of a ranch granted a potential buyer a 90-day option to purchase the ranch at $10 million. The next day the owner was stricken with an illness that has left the owner unable to manage her own affairs. As a consequence a guardian for the owner's property has been appointed. The option holder proposed to the guardian that he would purchase the ranch immediately for $9.5 million. The guardian rejected this offer. On the 90th day, the option holder mailed his intent to exercise the option, which the guardian received on the following day. The guardian has refused to sell the ranch to the option holder. In an action brought by the option holder to compel the guardian to sell the ranch, if the court rules for the guardian, what is the reason? *Answers: The option holder failed to record the option. The option terminated at the time that the owner became incapacitated. The option was revoked by the option holder's counteroffer. The option holder failed to timely exercise the option.

Answer choice D is correct. The guardian did not learn of the option holder's decision to exercise the option until after the expiration of the 90-day period. The mailbox rule, which treats an acceptance as valid upon the mailing of the acceptance, does not apply to the exercise of an option. Answer choice A is incorrect because a property right is valid as between the parties that created the right without being recorded. Answer choice B is incorrect because an option contract, unlike an offer, does not terminate upon the incapacity of the grantor of the option. Answer choice C is incorrect because, although an offeree rejects an offer by making a counteroffer, an option holder may propose to alter the terms for purchasing the property subject to the option without sacrificing the right to exercise the option.

(E adverse possession) Twenty-five years ago, a hunter found a cabin in a remote wooded area while on an extended hunting trip with his friend. The hunter and his friend stayed in the cabin for the season and left when the weather became too severe for the cabin to be habitable. Upon returning to town, the hunter asked around to find out who owned the cabin. A bartender, believing in good faith that the hunter was describing a different cabin, stated that he owned the cabin. The hunter paid the bartender and received a quitclaim deed to the bartender's cabin, erroneously believing that the deed was to the cabin that the hunter had found. The hunter and his friend used the cabin every hunting season. Last year, the hunter's friend died. Shortly after the friend's death, the true owner of the cabin, who had been incarcerated for 30 years, was released from prison. The true owner brought a suit against the hunter to quiet title to the cabin. The statutory period for adverse possession in the jurisdiction is 25 years. If the true owner wins his suit against the hunter to quiet title to the cabin, what is the most likely reason? * Because the hunter shared the property with his hunting buddy, his use of the property was not exclusive for the statutorily required time. The hunter's quitclaim deed made his use of the cabin permissive, negating the hostility requirement of adverse possession. The hunter's seasonal use of the cabin is neither notorious nor significantly continuous to meet the statutory requirements of adverse possession. The statute of limitations did not run against the true owner because he was imprisoned at the inception of the adverse possession.

Answer choice D is correct. The statute of limitations for quiet-title actions against those alleging adverse possession does not run against a true owner who is afflicted with a disability at the inception of the adverse possession. Insanity, infancy, and imprisonment may all qualify as disabilities that toll the statute of limitations. Answer choice A is incorrect because, although possession cannot be shared with the true owner or the public while establishing adverse possession, two or more people can join together to create a tenancy in common by adverse possession without violating the requirement of "exclusive use." Answer choice B is incorrect because the hunter's quitclaim deed does not affect his ability to meet the requirements of adverse possession. Although one of the required elements of adverse possession is hostility, the transfer of a real-property interest through a quitclaim deed does not by itself negate the hostility requirement of adverse possession. The hunter still occupied the cabin with the intention of exercising ownership rights over it, meeting the "hostility" requirement of an adverse-possession claim. Answer choice C is incorrect because seasonal or infrequent use may be sufficiently continuous if it is consistent with the type of property that is being possessed.