On February 1, Frost bought a building from Elgin, Inc. For $250,000. To complete the purchase ,Frost borrowed $200,000 from Independent and and Gave Independent a mortgage for that amount; gave Elgin a second mortgage for $25,000; and paid $225,000 in cash. Independent recorded its mortgage on February 2 and /Elgin recorded its mortgage on March 12.
The following transactions also took place:
- On March 1, Frost gave Scott a $20,000 mortgage on the building to secure a personal loan Scott had previously made to Frost.
- On March 10, Scott recorded this mortgage.
- On March 15, Scott learned about both prior mortgages.
- On June 1, Frost stopped making payments on all the mortgages.
- On August 1, the mortgages were foreclosed. Frost, on due date, owed Independent, $195,000; Elgin, $24,000; and Scott, $19,000.
A judicial sale of the bilding resulted in proceeds of $220,000 after expenses were deducted. The above transactions took place in a notice-race jurisdiction.
Frost may redeem the property before the judicial sale only if
a. There is a statutory right of redemption.
b. It is probable that the sale price will result in a deficiency.
c. All mortgages are paid in full.
d. All mortgagees are paid a penalty fee.
Answer: C
Tax
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