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19. Is the bank entitled to collect the deficiency from the woman?
Subsequently, the woman stopped making payments on the mortgage loan, and the bank eventually commenced foreclosure proceedings in which the man and the woman were both named parties. At the foreclosure sale, a third party purchased the building for less than the outstanding balance on the mortgage loan. The bank then sought to collect the deficiency from the woman.
A man obtained a bank loan secured by a mortgage on an office building that he owned. After several years, the man conveyed the office building to a woman, who took title subject to the mortgage. The deed to the woman was not recorded. The woman took immediate possession of the building and made the mortgage payments for several years.
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A is incorrect. The woman took title to the office building subject to the mortgage debt, which means that the debt was to be satisfied out of the building. The building is the principal, and the man, as transferor, is the only party liable for any deficiency. This situation can be contrasted with one in which a buyer expressly assumes the mortgage debt. In that case, the buyer would be primarily liable for any deficiency and the seller, absent a release by the mortgagee, would be secondarily liable. Recording the deed would give the bank constructive notice of the transfer but would have no effect on the collection of the deficiency.
C is incorrect. The woman took title to the building subject to the mortgage. Her title to the building allowed her to take possession of the building, but her possession has no effect on the payment of any deficiency judgment. Taking title to the building subject to the mortgage means that the debt is to be satisfied out of the building. The building is the principal, and the man, as transferor, is the only party liable for any deficiency. This situation can be contrasted with one in which a buyer expressly assumes the mortgage debt. In that case, the buyer would be primarily liable for any deficiency and the seller, absent a release by the mortgagee, would be secondarily liable.
D is incorrect. Because the woman took title to the building subject to the mortgage debt, she was a necessary party to the foreclosure proceeding. However, the fact that she took title to the building subject to the mortgage means that the debt is to be satisfied out of the building. The building is the principal, and the man, as transferor, is the only party liable for any deficiency. This situation can be contrasted with one in which a buyer expressly assumes the mortgage debt. In that case, the buyer would be primarily liable for any deficiency and the seller, absent a release by the mortgagee, would be secondarily liable.