Part 6- Credit, Chapter 28: Introduction to Credit and Secured Transactions, Doc 5

Here is a breakdown of the questions and cases provided, along with explanations and legal considerations based on property law, liens, and foreclosure processes: 1. Type of Foreclosure in Pope v. Pelz   Question: The mortgage clause allows Pope to enter and sell the property at a public sale if Pelz defaults. Answer: This clause contemplates a private power of sale foreclosure. Here, no court involvement is required, and Pope can directly sell the property, unlike action and sale foreclosure, which mandates judicial oversight. 2. Miller’s Right to Declare Forfeiture Against Kimball   Question: Miller retained title and had contractual rights to forfeit the contract if Kimball did not fulfill obligations, including paying real estate taxes. Kimball refused to pay interest on overdue taxes. Answer: Miller was justified in declaring a forfeiture. Her right to demand payment for unpaid taxes plus interest was clearly stipulated in the agreement. Kimball’s refusal to comply justified her action to terminate the contract and reclaim the property. 3. Iowa Marine’s Mechanic’s Lien on the Bull Head   Question: Iowa Marine claimed a mechanic's lien for moving and storing a fishing trawler, asserting its right to retain the vessel until paid. Answer: Iowa Marine may have a valid mechanic’s lien under Illinois law, which extends lien rights to services related to repairing or maintaining boats. Since the company provided necessary services in moving and securing the trawler, the lien likely applies. 4. Navistar's Claim on Towing and Storage by Allen’s Garage   Question: Navistar offered to pay towing but not storage charges, while Allen’s Garage demanded full payment. Answer: Allen’s Garage is likely entitled to a common law lien for both towing and storage. Under common law and commercial practices, garages can retain possession of vehicles until full payment for services is received, including storage if reasonably related to the original service. 5. Personal Liability for the Second Deed of Trust (Behs v. Gromers)  Question: The Behs assumed the second deed of trust on the property. After foreclosure on the first mortgage left no proceeds for the second, City Mortgage sought to hold them liable.  Answer: The Behs became personally liable when they “assumed” the second deed of trust. In real estate, assuming a mortgage or deed of trust typically means the buyer agrees to take on personal responsibility for any unpaid balance, unlike buying “subject to” a mortgage, where liability remains solely with the original owner. 6. Validity of Mechanic’s Lien Against Collinses’ Property   Question: Bowen-Rodgers Hardware provided materials to the contractor, who used them for other properties. The company filed a lien against the Collinses’ property. Answer: The lien likely does not apply to the Collinses’ property if the materials were not used there. Mechanic’s liens generally attach to the specific property that directly benefitted from the provided labor or materials. Since the materials were allegedly used elsewhere, the Collinses’ property may not be subject to the lien. 7. Common Law Liens and Property Rights (Allen’s Garage and Navistar)   Question: Allen’s refused to release the truck until all charges, including storage, were paid. Answer: Allen’s Garage holds a valid common law lien for towing and likely for storage as well, allowing it to retain possession until full payment. Common law liens permit service providers to secure payment by holding onto the property they serviced, particularly if storage is reasonably necessary. 8. Ethical Considerations in Declaring Forfeiture (Land Contract Scenario)   Question: In situations like selling a farm on a land contract, ethical questions arise when enforcing forfeiture after a buyer faces financial hardship. Answer: Courts often balance enforcing contracts with fairness, especially when hardships arise. Judicial discretion sometimes allows buyers more time to cure defaults, and sellers may be encouraged to seek repayment alternatives before enforcing forfeiture, ensuring both legal and equitable considerations are met. These cases illustrate key principles in lien laws, foreclosure rights, and buyerseller liabilities in real estate transactions.