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3. In the action, the court will likely rule in favor of which party?
The bank brought an appropriate action to enjoin the vendor from its proposed repossession of the window inserts.
This year, the man has suffered severe financial reverses and has defaulted on his mortgage obligation to the bank and on his obligation to the vendor.
The new windows were expensive. The man purchased them on credit, signed a financing statement, and granted a security interest in the windows to a vendor, the supplier of the windows. The vendor promptly and properly filed and recorded the financing statement before the windows were installed. The man stored the old windows in the basement of Blackacre.
Each new window consists of a window frame with three inserts: regular windows, storm windows, and screens. The windows are designed so that each insert can be easily inserted or removed from the window frame without tools to adjust to seasonal change and to facilitate the cleaning of the inserts.
A man owns his home, Blackacre, which was mortgaged to a bank by a duly recorded purchase money mortgage. Last year, the man replaced all of Blackacre's old windows with new windows.
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Liens that have attached to the title before the mortgage lien are said to be senior to, or prior to, the mortgage lien. Those attaching afterward are said to be junior or subordinate. The purpose of this priority is to establish the order in which lienholders are entitled to foreclose their liens in order to recover their debts. If a property's title has multiple mortgage liens and the loan secured by a first mortgage is paid off, the second mortgage lien will move up in priority and become the new first mortgage lien on the title.
A fixture is a chattel that has been so affixed to land that it has ceased being personal property and has become part of the realty. Fixtures are typically a permanent part of realty such that damage would occur if they were removed. A court will consider the degree to which the item is attached, whether there will be damage to the structure if the item is removed, and whether general custom dictates that such an item stays with a property or goes out with the seller.
C is correct. The outcome of this question is contingent upon whether the window inserts are fixtures or not. Considering that there is a low degree of attachment (the inserts are «easily removable») and no damage will result from the removal, the inserts will not be considered fixtures. The window frames, however, would likely be fixtures. Therefore, the vendor may enforce its lien by repossessing the window inserts.
A is incorrect. Although the bank's mortgage has priority over the vendor's, whether the vendor can remove the window inserts depends upon whether they are regarded as fixtures. The bank's mortgage on the home will be limited to the structure and any items attached to it that have become fixtures.
B is incorrect because it suggests that the window inserts are fixtures. Under the concept of fixtures, a chattel that has been annexed to real property is converted from personal property into real property. However, as explained above, the window inserts are not fixtures because they are easily removable and no damage will result from their removal.
D is incorrect. This answer choice comes to the correct conclusion under the wrong reasoning. As stated above, the reason the vendor will prevail is that the window inserts are not fixtures, not because of the availability of the old windows.