16. Will the man be likely to prevail?

The general rule of priority is the same for real property security as for personal property security: the first in time to give notice of the secured interest is first in right. For real property, the notice is by recording the mortgage. Recording is the act of giving public notice of changes in interests in real estate. Recording was created by statute; it did not exist at common law. The typical recording statute calls for a transfer of title or mortgage to be placed in a particular county office, usually the auditor, recorder, or register of deeds.

A mortgage is valid between the parties whether or not it is recorded, but a mortgagee might lose to a third party — another mortgagee or a good-faith purchaser of the property — unless the mortgage is recorded.

The property can be sold without paying off the mortgage if the mortgage is assumed by the new buyer, who agrees to pay the seller's (the original mortgagor's) debt. This is a novation if, in approving the assumption, the bank releases the old mortgagor and substitutes the buyer as the new debtor.

The buyer need not assume the mortgage. If the buyer purchases the property without agreeing to be personally liable, this is a sale «subject to» the mortgage. In the event of the seller's subsequent default, the bank can foreclose the mortgage and sell the property that the buyer has purchased, but the buyer is not liable for any deficiency.

Suretyship is an express promise by a third party (the surety) to a creditor to be primarily responsible for the debtor's obligation to the creditor. Simply put, the third party is completely and primarily responsible for the debt of the principal.

C is correct. The man, as the mortgagor, had personal liability for the loan. The purchaser assumed the mortgage debt. As soon as the man paid an overdue installment, he acquired the right to seek reimbursement under the law of suretyship.

A is incorrect. A foreclosure proceeding is not required before seeking reimbursement for payment. The man, as the mortgagor, had personal liability for the loan. The purchaser assumed the mortgage debt. As soon as the man paid an overdue installment, he acquired the right to seek reimbursement under the law of suretyship.

B is incorrect. This answer choice misstates the reason the man will be able to seek reimbursement. The right to seek reimbursement under the law of suretyship requires that the man be personally liable on the loan, which he was. The purchaser assumed the mortgage debt. The man, as the mortgagor, acquired the right to seek reimbursement under the law of suretyship as soon as he paid an overdue installment.

D is incorrect. The man's transfer of the land did not discharge him from his personal liability on the mortgage debt in the absence of a release or other arrangement with the mortgagee. The man, as the mortgagor, had personal liability for the loan. The purchaser assumed the mortgage debt. As soon as the man paid an overdue installment, he acquired the right to seek reimbursement under the law of suretyship.