Flashcards Studio

Buyer had an unpaid $50,000 judgment entered against him before buying Ranch. Seller agreed to sell Ranch to Buyer for $500,000. At closing, Buyer paid $100,000 cash, gave Seller a $150,000 mortgage for part of the purchase price, and borrowed $250,000 from Bank, secured by a mortgage on Ranch, to pay the rest of the price. Seller and Bank both recorded their mortgages immediately after closing. The judgment creditor recorded its judgment lien in the county the day before closing.
Bank's mortgage also secured future advances up to $100,000. Bank was obligated to advance $40,000 for roof repairs after closing, but could choose whether to advance any additional funds. After the judgment creditor recorded a second lien and notified Bank, Bank voluntarily advanced an additional $30,000 for fencing. Buyer later defaulted, and Ranch was sold in foreclosure for less than the total debt.
Discuss priority among Seller, Bank, the judgment creditor, and Bank's future advances. Address purchase-money mortgage priority, seller versus third-party purchase-money priority, judgment liens, obligatory and optional future advances, and application of foreclosure proceeds.