University:
Indiana University Bloomington
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

220

Pages:

2
Author:

bratrochanter

The text covers artisan’s liens, possessory liens, and mortgages, focusing on rights, priorities, and foreclosure procedures under U.S. and Nebraska law. Artisan’s Liens and Possessory Liens 1. Artisan’s Lien Definition and Priority: o An artisan’s lien is created when a person repairs or improves personal property and retains possession until paid. Under Nebraska law, an artisan's lien is prioritized over previously perfected security interests, unless explicitly overridden by statute. o Possession is key; if an artisan voluntarily surrenders possession, the lien is lost. However, if possession is involuntarily lost, some courts allow the lien to persist or be "suspended" and revived upon the artisan regaining possession. 2. Loss and Recovery of Possession: o If possession is lost involuntarily, such as through theft or seizure without the artisan’s consent, courts generally uphold the lien. o When possession is later regained, the lien often resumes its original priority unless affected by a bona fide purchaser or creditor’s claim during the time the owner held the property. 3. Bankruptcy and Liens: o If the property owner (debtor) takes the item without consent postbankruptcy filing, the artisan retains the lien’s priority over other interests. A conditional release also does not negate the lien if it was meant to allow temporary use. Mortgages and Foreclosure Procedures 1. Creation and Recording of Mortgages: o A mortgage is a security interest on real property. To be legally enforceable, it must meet formal recording requirements, which involve identifying the property and terms, notarization, and registration with local authorities. o Recording provides public notice of the lien, crucial for protecting the mortgagee’s priority against later interests or claims. 2. Foreclosure and Redemption Rights: o Foreclosure allows the mortgagee to recover the debt if the borrower defaults. Types of foreclosure include:  Strict Foreclosure: The lender retains the property without a sale, cutting off the borrower’s rights.  Action and Sale: Requires court action, with sale proceeds used to cover the debt, possibly resulting in a deficiency judgment if the sale proceeds fall short.  Power of Sale: Some states allow the lender to foreclose without court action, provided the mortgage includes such a clause. Proceeds from the sale cover the debt, with any surplus returned to the borrower. o Redemption allows borrowers to reclaim their property by repaying the debt before foreclosure completes. Statutes vary on postforeclosure redemption periods. 3. Lender and Purchaser Rights: o Buyers of mortgaged property may acquire it subject to the mortgage or assume it. If they assume it, they become personally liable for deficiencies post-foreclosure. o Mortgagees can assign their mortgage interest, transferring rights to the debt and associated property security. Case Analysis and Legal Implications The case discussed concludes that an artisan's lien retains priority over a lender's security interest even when possession was lost involuntarily. The court favors equitable principles over strict statutory interpretation, emphasizing the artisan’s right to compensation for services that enhanced property value, benefiting the secured lender.