Real Estate Law 11th Edition By Jennings - Test Bank

Real Estate Law 11th Edition By Jennings – Test Bank

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Sample Questions Are Posted Below

Chapter 05 Fixtures
TRUEFALSE
1. A purchase money security interest in fixtures does not arise automatically.
(A) True
(B) False
Answer : (A)
2. Priority between an unperfected secured party and an unrecorded mortgage is first to file wins.
(A) True
(B) False
Answer : (A)
3. Mortgages always take priority over purchase money security interests.
(A) True
(B) False
Answer : (B)
4. Counters bolted to the floor in a department store would be considered fixtures.
(A) True
(B) False
Answer : (B)
5. A lien creditor who has perfected his interest always takes priority over a secured party.
(A) True
(B) False
Answer : (B)
6. The degree of annexation is always controlling in determining whether property is real or
personal.
(A) True
(B) False
Answer : (B)
7. A hot air heating system is probably an example of a fixture.
(A) True
(B) False
Answer : (A)
8. The English rule with regard to trade fixtures was that all trade fixtures were real property.
(A) True
(B) False
Answer : (B)
9. The higher the degree of ownership of the annexor, the more likely property attached to his
premises will be treated as a fixture.
(A) True
(B) False
Answer : (A)
10. Through agreement, parties to a contract may treat as fixtures those things that would normally
be classified as personal property.
(A) True
(B) False
Answer : (A)
11. The type of party who is seeking classification of a fixture as opposed to personal property is an
irrelevant factor in that classification.
(A) True
(B) False
Answer : (B)
12. Perfected secured parties can obtain priority over other parties by obtaining the other parties’
consent.
(A) True
(B) False
Answer : (A)
13. Article IX of the U.C.C. pertains to fixtures only.
(A) True
(B) False
Answer : (B)
14. An Article IX security interest requires a written agreement for fixtures.
(A) True
(B) False
Answer : (A)
15. A financing statement on a fixture is properly filed centrally.
(A) True
(B) False
Answer : (B)
16. A financing statement must always have the signature of the debtor.
(A) True
(B) False
Answer : (A)
17. A financing statement is effective for five years.
(A) True
(B) False
Answer : (A)
18. In a landlord/tenant relationship, attached items are more likely to be treated as personal
property.
(A) True
(B) False
Answer : (A)
19. Trade fixtures are personal property.
(A) True
(B) False
Answer : (A)
20. Proof of a PMSI is the burden of the creditor claiming priority.
(A) True
(B) False
Answer : (A)
21. The failure to refile a financing statement after 5 years from the original filing does not affect
the creditor’s priority.
(A) True
(B) False
Answer : (B)
22. A creditor who advances funds for a purchase of a fixture can never have priority over a
previously recorded mortgage.
(A) True
(B) False
Answer : (B)
23. A solar water heating system in a home is an example of a fixture.
(A) True
(B) False
Answer : (A)
24. Growing crops are considered part of the real property.
(A) True
(B) False
Answer : (B)
25. Washers and dryers are generally fixtures in homes.
(A) True
(B) False
Answer : (B)
26. Emblements are naturally growing vegetation.
(A) True
(B) False
Answer : (B)
27. Tenants whose crops aren’t harvested prior to their lease termination lose their interest in those
crops.
(A) True
(B) False
Answer : (B)
28. Fixtures are land interests.
(A) True
(B) False
Answer : (A)
29. A PMSI recorded on January 2, 2015, for an air conditioner affixed on December 31, 2015, takes
priority over an existing mortgage recorded on June 1, 2009.
(A) True
(B) False
Answer : (A)
30. Wall-to-wall carpeting in a residence is a fixture.
(A) True
(B) False
Answer : (A)
31. A tenant’s sign attached to its leased property in a strip mall is a fixture.
(A) True
(B) False
Answer : (B)
32. Authentication is a requirement for an Article 9 security agreement.
(A) True
(B) False
Answer : (A)
33. A financing statement must be authorized to be valid.
(A) True
(B) False
Answer : (A)
34. An electronic agreement can satisfy the requirements for a security agreement.
(A) True
(B) False
Answer : (A)
35. A debtor can create a valid security agreement through authentication.
(A) True
(B) False
Answer : (A)
36. An Article 9 financing statement is valid for 10 years.
(A) True
(B) False
Answer : (B)
37. An Article 9 financing statement can be renewed within the six-month period just prior to its
expiration.
(A) True
(B) False
Answer : (A)
38. Authentication under Article 9 requires a hard-copy signature.
(A) True
(B) False
Answer : (B)
39. All Article 9 fixture perfections require the financing statement to be filed in the real property
records.
(A) True
(B) False
Answer : (A)
40. A secured party has priority over an unsecured party under Article 9.
(A) True
(B) False
Answer : (A)
41. A subsequent perfected secured creditor cannot take priority over an already existing mortgage.
(A) True
(B) False
Answer : (B)
42. A subsequent PMSI creditor cannot take priority over a prior perfected PMSI creditor.
(A) True
(B) False
Answer : (B)
43. A secured creditor who removes its collateral from a property that is about to be foreclosed upon
must pay the foreclosing creditor for the loss of value to the property that results from the removal.
(A) True
(B) False
Answer : (B)
44. Secured and perfected creditors who finance home improvements after the property has already
been mortgaged are second in line after the mortgage company.
(A) True
(B) False
Answer : (B)
45. Mortgage companies cannot foreclosure until higher priority Article 9 secured creditors are
paid.
(A) True
(B) False
Answer : (B)
46. In determining assessed value of a property, appraisers tend to favor inclusion of items as
fixtures.
(A) True
(B) False
Answer : (A)
47. In determining reimbursement for real property damages by an insurer, courts tend to favor
classifying property as a fixture.
(A) True
(B) False
Answer : (A)
48. The effect of filing a financing statement in the incorrect filing office is losing perfection on the
security interest.
(A) True
(B) False
Answer : (A)
49. A financing statement for fixtures requires a filing in the property records.
(A) True
(B) False
Answer : (A)
50. To obtain PMSI priority, a creditor must file the financing statement within 10 days of
annexation of the personal property to the real property.
(A) True
(B) False
Answer : (B)
51. Consumer PMSIs in fixtures do not need to be filed or recorded.
(A) True
(B) False
Answer : (B)
52. Consumer PMSIs are exceptions to the first-in-time, first-in-right priorities.
(A) True
(B) False
Answer : (B)
53. PMSI creditors have the right to remove their secured property from the real property prior to
foreclosure by the mortgage company.
(A) True
(B) False
Answer : (A)
54. A PMSI in consumer fixtures can be filed with property or personal property records and still be
valid.
(A) True
(B) False
Answer : (B)
55. PMSIs financing statements can be filed after annexation and still be valid.
(A) True
(B) False
Answer : (A)
MULTICHOICE
56. Which of the following is not required in a security agreement?
(A) Signature of the debtor
(B) Description of the collateral
(C) Address of the secured party
(D) All of the above are required
Answer : (C)
57. Which of the following is not a PMSI creditor?
(A) A bank financing the purchase of an air conditioner
(B) A solar heat company financing a customer’s purchase of solar panels
(C) A cabinet company financing a tenant’s purchase of cabinets for his apartment
(D) All of the above are PMSI creditors
Answer : (D)
58. Who has priority over a secured party under the general rules?
(A) A perfected secured party
(B) A heating system purchased with a credit card
(C) A non‑secured party
(D) None has priority
Answer : (A)
59. A perfected PMSI creditor has priority over:
(A) Unrecorded mortgages.
(B) Secured creditors.
(C) Subsequent mortgages.
(D) a, b and c
Answer : (D)
60. In a home sale, which of the following is most likely to be treated as a fixture?
(A) A couch
(B) A ceiling fan
(C) A lawn mower
(D) All of the above
Answer : (B)
61. Which factor will be controlling in determining whether an item is a fixture?
(A) Intent
(B) Degree of annexation
(C) Whether it is a trade fixture
(D) None of the above
Answer : (A)
62. A bill of sale:
(A) Passes title to a fixture.
(B) Passes title to personal property.
(C) Is part of a deed.
(D) Both a and c
(E) None of the above
Answer : (B)
63. Under Article IX, filing for fixtures is:
(A) Generally local.
(B) With the secretary of state.
(C) Central.
(D) None of the above
Answer : (A)
64. If an item is classified as a trade fixture:
(A) It is a fixture that passes with the land.
(B) It is personal property.
(C) It cannot be personal property.
(D) None of the above
Answer : (B)
65. First Federal financed the purchase of O’s home and recorded a mortgage on September 12,
2015. O decided to build a swimming pool in the backyard. First Interstate loaned O $10,000 for the
pool and recorded a mortgage on October 15, 2015. Who has priority?
(A) First Federal
(B) First Interstate
(C) The Pool Company
(D) None of the above
Answer : (A)
66. Suppose that First Interstate had loaned O money for the purchase of a Solar Water Heating
system. O purchased the system on February 1, 2015. He installed the system on February 9, 2015.
First Interstate filed a financing statement on February 8, 2015. Who has priority in the solar
system?
(A) First Federal
(B) First Interstate
(C) The Solar Company
(D) None of the above
Answer : (B)
67. Which of the following is not required for a valid financing statement?
(A) Name of creditor
(B) Name of debtor
(C) Description of the property
(D) Both a and c
(E) All of the above are required
Answer : (E)
68. Which of the following will not result in a PMSI in the creditor?
(A) A store allowing a customer to purchase an air conditioner on credit
(B) A farmer pledging his equipment as collateral
(C) A loan for the purchase of a solar system
(D) Both b and c
(E) None of the above
Answer : (B)
69. Which of the following is most likely to be considered a fixture in a residential sale?
(A) Ceiling fan
(B) Refrigerator
(C) Sofa
(D) Above-ground spa
Answer : (A)
70. Which of the following is most likely to be considered a fixture in the sale of an apartment
complex?
(A) Desk in the rental office
(B) Refrigerators in each apartment
(C) Office computer
(D) None of the above
Answer : (B)
71. Carey leased his steak house from Consiglio. Carey would not buy the property, and Consiglio
tripled the rent. Carey vacated the restaurant and took with him a walk‑in freezer, a dishwasher and
an air conditioner. Which of the following would be most significant in determining whether Carey
could take the items with him?
(A) The fact that he had put them there with Consiglio’s permission
(B) The fact that Consiglio wanted to sell the property
(C) The fact that the items are trade fixtures
(D) None of the above
Answer : (C)
72. Which of the following is not a factor in determining whether an item is a fixture?
(A) Who attached the item
(B) The relationship of the fixture to the property
(C) The damage caused by removal
(D) All of the above are factors
Answer : (D)
73. Jones, Inc., is purchasing a 24-unit motel from Ramona Dirkson. The rooms in the motel have
beds, bed linens, chairs, tables, lamps and televisions. The beds, lamps and televisions are bolted to
the floors of the rooms because Ramona wanted to prevent guest thefts. If the parties fail to specify
in their purchase and sale agreement, what items are likely to be considered fixtures?
(A) The bed linens
(B) The beds, lamps and television
(C) All of the items will likely be fixtures because of their relationship to the property
(D) None of the items because of ease of removal
Answer : (C)
74. What is the difference between a fixture and a trade fixture?
(A) There is no difference; both are fixtures
(B) The owner is taxed on fixtures but no trade fixtures
(C) A trade fixture is personal property
(D) A trade fixture is real property
Answer : (C)
75. When must a PMSI fixture creditor file a financing statement to take priority over previously
perfected creditors?
(A) Within 20 days of the fixture’s annexation
(B) Within 20 days of the fixture’s purchase
(C) Within 20 days of the creation of the security interest
(D) Within 20 days of the debtor’s signature
Answer : (A)
76. Which of the following meets the Article 9 authentication requirement for a security interest?
(A) E-mail
(B) Fax
(C) Signature
(D) All of the above
Answer : (D)
77. Which is the most important factor in determining whether an item is a fixture or personal
property?
(A) Degree of attachment
(B) Who wants to know
(C) Degree of land ownership
(D) Agreement of the parties
Answer : (D)
78. Jane borrowed money to purchase her home. The mortgage securing the loan for $263,000 was
recorded on May 1, 2015. Jane entered into the following transactions: Pool, second mortgage – July
1, 2015
Custom draperies purchased on credit with security interest filed – July 17, 2015 following
installation on July 10, 2015
Which creditor has priority?
(A) The mortgage lender
(B) The pool company/second mortgage
(C) The drapery company
(D) a and b have equal priority
Answer : (C)
79. The following series of events/transactions occurred on Bert Easley’s ranch:
March 3, 2010 – Bert buys the ranch for $900,000; gives a mortgage to First Interstate Bank (FIB) to
secure the loan
April 12, 2012 – Bert gives First Federal (FF) a new mortgage (lower rate); FF pays off the FIB loan
balance
August 17, 2014 – Bert installs wind power equipment and signs a security agreement with WP3 (the
wind power seller); WP3 does not record a financing statement
If Bert defaults, what is the order of the creditor priorities?
(A) FIB, FF, WP3
(B) WP3, FF
(C) WP3, FIB, FF
(D) FF, WP3
Answer : (D)
80. If a debtor defaults on payments to a PMSI perfected fixture creditor, what are the creditor’s
remedies?
(A) None, the fixtures are part of the real property
(B) The creditor can remove the fixtures
(C) The creditor has rights of removal if there are no other creditors with interests in the property
(D) The creditor can collect the debt from the other creditors with interests in the property
Answer : (B)
81. Under the UCC Secured Transaction Article, what is the order of priority for the following
security interests in store equipment? I. Security interest in an air conditioner sold to a homeowner
to replace an existing unit on the home’s roof that was perfected by filing on April 15, 2014
II. A mortgage on that same home recorded on January 3, 2010
III. A purchase money security interest on new windows for the home that attached on April 11,
2009 and was perfected by filing on April 20, 2014
(A) I, III, II
(B) II, I, III
(C) III, I, II
(D) III, II, I
Answer : (B)
82. In order for a security agreement to be authenticated:
(A) There must be a signed, written agreement.
(B) There can be an electronic signature.
(C) The debtor must also sign a financing statement.
(D) The security agreement must be recorded.
Answer : (B)
83. When there is a dispute over whether an item is a fixture or personal property, which of the
following statements is correct?
(A) When the dispute is between an insurer and a homeowner over whether property destroyed in a
fire was covered real property or personal property, the courts favor the insurer.
(B) When the dispute is between a tenant and a landowner over whether something the tenant has
done to the leased premises is a fixture, the courts favor the landlord.
(C) When the dispute is between a buyer and a seller over whether an item is real property and
passes with the land, the courts favor the seller.
(D) The courts do not favor parties in fixture litigation; only degree of attachment controls.
Answer : (C)
84. determine whether the items would be fixtures or personal property.
Partitions installed by a tenant in an office building for purposes of creating cubicles for employees.
(A) Fixture that remains on the property and belongs to the landlord
(B) Personal property of tenant
Answer : (B)
85. determine whether the items would be fixtures or personal property.
Display cases in a department store.
(A) Trade fixture
(B) Fixture
(C) Personal property of the department store
(D) Both a and c
Answer : (D)
86. determine whether the items would be fixtures or personal property.
A refrigerator purchased by a homeowner for installation and use in her mortgaged home.
(A) Fixture
(B) Personal property
Answer : (B)
87. Charles E. Williams paid for the purchase and installation of a guttering system for his home by
Hanke Brothers with a Wells Fargo Home Projects Visa card. Under the terms of this particular Visa
card, Williams agreed to pay Wells Fargo a principal amount plus interest in return for payment for
the guttering system by Wells Fargo to Hanke Brothers. Wells Fargo made payment, and Hanke
Brothers then installed the guttering system. Wells Fargo did not file a financing statement on the
guttering system. Williams defaulted on his mortgage and the mortgage company brought
foreclosure action. Wells Fargo said that it was entitled to the guttering system because it was
personal property purchased with a credit card. The mortgage company maintains that the failure to
file a financing statement means that Wells Fargo is simply an unsecured creditor as any credit card
company would be. Which of the following is correct?
(A) Wells Fargo is a PMSI creditor in personal property who is entitled to recover the cost of the
guttering system out of any foreclosure proceedings.
(B) Wells Fargo is out of luck because of its failure to file a financing statement on a fixture.
(C) Wells Fargo is not a PMSI creditor because the debtor financed the guttering indirectly through
the Visa card.
(D) Wells Fargo is a PMSI creditor but cannot take priority over the mortgage company because of
its failure to file a financing statement.
Answer : (A)
88. Wells Fargo is foreclosing on its June 2007 mortgage (recorded on June 17, 2007) on Jordin
Levin’s home because she has been in default on her mortgage with Wells Fargo for over six months,
from June 1, 2009 through December 31, 2009. Jordin had Classy Closets install cupboards in her
garage just two months prior to the foreclosure. Classy Closets filed a financing statement on
November 17, 2009. Jordin owes Classy Closets $2,300 for the cabinets. When Classy Closets is
notified of the foreclosure on January 17, 2010, Classy Closets arrives at Jordin’s home and removes
the cabinets. The removal caused some damage to the garage floor and also left some holes in the
drywall that require repair. The total cost of repair is $158. Wells Fargo says the value of the home
is reduced by $2,458 because of Classy Closets’ removal of the cabinets and the damages.
Who has priority in the garage cabinets?
(A) Wells Fargo because it was first to record
(B) Classy Closets because it is a PMSI creditor
(C) Neither has priority until the foreclosure is complete
(D) None of the above
Answer : (B)
89. Wells Fargo is foreclosing on its June 2007 mortgage (recorded on June 17, 2007) on Jordin
Levin’s home because she has been in default on her mortgage with Wells Fargo for over six months,
from June 1, 2009 through December 31, 2009. Jordin had Classy Closets install cupboards in her
garage just two months prior to the foreclosure. Classy Closets filed a financing statement on
November 17, 2009. Jordin owes Classy Closets $2,300 for the cabinets. When Classy Closets is
notified of the foreclosure on January 17, 2010, Classy Closets arrives at Jordin’s home and removes
the cabinets. The removal caused some damage to the garage floor and also left some holes in the
drywall that require repair. The total cost of repair is $158. Wells Fargo says the value of the home
is reduced by $2,458 because of Classy Closets’ removal of the cabinets and the damages.
Assuming Classy Closets is entitled to remove the cabinets, what obligations would it have to Wells
Fargo?
(A) No obligations because it had priority
(B) The obligation to pay $2,458 for the damages caused to Wells Fargo
(C) No obligations because Jordin is responsible for any damages to Wells Fargo
(D) The obligation to pay $158 to Wells Fargo
Answer : (D)
90. Sam Furber purchased a home in 2007 for $636,000, giving a mortgage to CNN Mortgage Co.
for $500,000. After moving in, Sam had a built-in dining cabinet and bookshelves installed. He
financed the shelving with Libraries, Inc., a total of $22,000. Libraries filed a financing statement on
the security interest in the shelving on March 18, 2008. The shelving and cabinet are attached to
the walls of the home. In 2009, Sam had a home theater installed by Living Entertainment. Living
Entertainment financed the installation, a total of $41,000, through a security interest and filed a
financing statement on September 9, 2009. The home theater includes an in-wall screen as well as
projection equipment suspended from the ceiling and 12 recliner chairs. Sam lost his job and has
defaulted on his mortgage payment. CNN is foreclosing on Sam’s home.
Where would the financing statement for Libraries have to be filed to be valid?
(A) They are not required to be filed because they are purchased money security interests
(B) They must be filed centrally with state records
(C) They must be filed locally with the land records
(D) None of the above
Answer : (C)
91. Sam Furber purchased a home in 2007 for $636,000, giving a mortgage to CNN Mortgage Co.
for $500,000. After moving in, Sam had a built-in dining cabinet and bookshelves installed. He
financed the shelving with Libraries, Inc., a total of $22,000. Libraries filed a financing statement on
the security interest in the shelving on March 18, 2008. The shelving and cabinet are attached to
the walls of the home. In 2009, Sam had a home theater installed by Living Entertainment. Living
Entertainment financed the installation, a total of $41,000, through a security interest and filed a
financing statement on September 9, 2009. The home theater includes an in-wall screen as well as
projection equipment suspended from the ceiling and 12 recliner chairs. Sam lost his job and has
defaulted on his mortgage payment. CNN is foreclosing on Sam’s home.
What would happen if Living Entertainment filed its financing statement centrally?
(A) It would be invalid
(B) Living Entertainment would be perfected and secured on the chairs and the equipment
(C) Living Entertainment would have filed correctly and would be protected for the full amount
financed
(D) None of the above
Answer : (B)
92. Sam Furber purchased a home in 2007 for $636,000, giving a mortgage to CNN Mortgage Co.
for $500,000. After moving in, Sam had a built-in dining cabinet and bookshelves installed. He
financed the shelving with Libraries, Inc., a total of $22,000. Libraries filed a financing statement on
the security interest in the shelving on March 18, 2008. The shelving and cabinet are attached to
the walls of the home. In 2009, Sam had a home theater installed by Living Entertainment. Living
Entertainment financed the installation, a total of $41,000, through a security interest and filed a
financing statement on September 9, 2009. The home theater includes an in-wall screen as well as
projection equipment suspended from the ceiling and 12 recliner chairs. Sam lost his job and has
defaulted on his mortgage payment. CNN is foreclosing on Sam’s home.
Assuming that the perfection filings are in the right place, what is the order of priority on the
foreclosure proceeds?
(A) CNN, Libraries, and Living Entertainment
(B) Libraries, Living Entertainment, and CNN
(C) CNN and Libraries only because Living Entertainment’s financing relates to movable property,
not fixtures
(D) CNN only has priority
Answer : (B)
93. Miriam Jensen purchased a fixer-upper home for $189,000 on January 4, 2015. The mortgage
from Fifth Third Bank was recorded that same day in the amount of $175,000. On January 7, 2015,
Miriam hired a contractor to install a new roof on her home. Miriam agreed to pay the contractor
over time. The contractor filed a lien on her home on January 10, 2015, after the roof was installed.
On January 23, 2015, Miriam purchased all new kitchen appliances including a built-in microwave, a
built-in double oven, a countertop porcelain stove, and a refrigerator with panels that match the new
cabinets her contractor was installing in the kitchen. Miriam purchased all of the appliances from
Spencer TV and Appliance. The appliances were installed on January 30, 2015. Spencer’s took a
security agreement on January 23, 2015 and filed a financing statement on January 31, 2015. On
February 1, 2015, Miriam bought a new bathtub for her bathroom that was installed by her
contractor on February 5, 2015. Miriam had purchased the bathtub from Golden Baths and signed a
security agreement on February 1, 2015. Golden Baths filed a financing statement on February 6,
2015. Miriam lost her job on July 23, 2015 and had to cease paying her mortgage. Fifth Third Bank
foreclosed on the home on August 15, 2015. Miriam owed $174,000 at the time of foreclosure.
She owes the following amounts to various creditors:
Spencer’s $17,000.00
Golden Bath $2,200.00
Roofing contractor $4,500.00
Where would the financing statement for the bathtub be filed?
(A) Where real estate transactions are recorded
(B) With the secretary of state – a central filing
(C) The bathtub is a personal good and a PMSI and need not be recorded
(D) The security agreement, not the financing statement, must be filed
Answer : (A)
94. Miriam Jensen purchased a fixer-upper home for $189,000 on January 4, 2015. The mortgage
from Fifth Third Bank was recorded that same day in the amount of $175,000. On January 7, 2015,
Miriam hired a contractor to install a new roof on her home. Miriam agreed to pay the contractor
over time. The contractor filed a lien on her home on January 10, 2015, after the roof was installed.
On January 23, 2015, Miriam purchased all new kitchen appliances including a built-in microwave, a
built-in double oven, a countertop porcelain stove, and a refrigerator with panels that match the new
cabinets her contractor was installing in the kitchen. Miriam purchased all of the appliances from
Spencer TV and Appliance. The appliances were installed on January 30, 2015. Spencer’s took a
security agreement on January 23, 2015 and filed a financing statement on January 31, 2015. On
February 1, 2015, Miriam bought a new bathtub for her bathroom that was installed by her
contractor on February 5, 2015. Miriam had purchased the bathtub from Golden Baths and signed a
security agreement on February 1, 2015. Golden Baths filed a financing statement on February 6,
2015. Miriam lost her job on July 23, 2015 and had to cease paying her mortgage. Fifth Third Bank
foreclosed on the home on August 15, 2015. Miriam owed $174,000 at the time of foreclosure.
She owes the following amounts to various creditors:
Spencer’s $17,000.00
Golden Bath $2,200.00
Roofing contractor $4,500.00
Which of the following is a security interest in fixtures?
(A) The roofing interest
(B) The bathtub
(C) Fifth Third Bank’s
(D) None of the above
Answer : (B)
95. Miriam Jensen purchased a fixer-upper home for $189,000 on January 4, 2015. The mortgage
from Fifth Third Bank was recorded that same day in the amount of $175,000. On January 7, 2015,
Miriam hired a contractor to install a new roof on her home. Miriam agreed to pay the contractor
over time. The contractor filed a lien on her home on January 10, 2015, after the roof was installed.
On January 23, 2015, Miriam purchased all new kitchen appliances including a built-in microwave, a
built-in double oven, a countertop porcelain stove, and a refrigerator with panels that match the new
cabinets her contractor was installing in the kitchen. Miriam purchased all of the appliances from
Spencer TV and Appliance. The appliances were installed on January 30, 2015. Spencer’s took a
security agreement on January 23, 2015 and filed a financing statement on January 31, 2015. On
February 1, 2015, Miriam bought a new bathtub for her bathroom that was installed by her
contractor on February 5, 2015. Miriam had purchased the bathtub from Golden Baths and signed a
security agreement on February 1, 2015. Golden Baths filed a financing statement on February 6,
2015. Miriam lost her job on July 23, 2015 and had to cease paying her mortgage. Fifth Third Bank
foreclosed on the home on August 15, 2015. Miriam owed $174,000 at the time of foreclosure.
She owes the following amounts to various creditors:
Spencer’s $17,000.00
Golden Bath $2,200.00
Roofing contractor $4,500.00
What are the rights of Spencer’s upon Fifth Third Bank’s foreclosure?
(A) To wait until the sale and hope the sale proceeds cover the debt
(B) To repossess the appliances
(C) Spencer’s has no rights because Fifth Third Bank is first in priority
(D) None of the above
Answer : (B)
96. Miriam Jensen purchased a fixer-upper home for $189,000 on January 4, 2015. The mortgage
from Fifth Third Bank was recorded that same day in the amount of $175,000. On January 7, 2015,
Miriam hired a contractor to install a new roof on her home. Miriam agreed to pay the contractor
over time. The contractor filed a lien on her home on January 10, 2015, after the roof was installed.
On January 23, 2015, Miriam purchased all new kitchen appliances including a built-in microwave, a
built-in double oven, a countertop porcelain stove, and a refrigerator with panels that match the new
cabinets her contractor was installing in the kitchen. Miriam purchased all of the appliances from
Spencer TV and Appliance. The appliances were installed on January 30, 2015. Spencer’s took a
security agreement on January 23, 2015 and filed a financing statement on January 31, 2015. On
February 1, 2015, Miriam bought a new bathtub for her bathroom that was installed by her
contractor on February 5, 2015. Miriam had purchased the bathtub from Golden Baths and signed a
security agreement on February 1, 2015. Golden Baths filed a financing statement on February 6,
2015. Miriam lost her job on July 23, 2015 and had to cease paying her mortgage. Fifth Third Bank
foreclosed on the home on August 15, 2015. Miriam owed $174,000 at the time of foreclosure.
She owes the following amounts to various creditors:
Spencer’s $17,000.00
Golden Bath $2,200.00
Roofing contractor $4,500.00
The property sold for $170,000 at the foreclosure sale. All improvements that Miriam made were
included in the sale of the house. Who has first priority on the proceeds?
(A) The roof contractor
(B) Spencer’s
(C) Golden Bath
(D) Fifth Third Bank
Answer : (C)
97. Miriam Jensen purchased a fixer-upper home for $189,000 on January 4, 2015. The mortgage
from Fifth Third Bank was recorded that same day in the amount of $175,000. On January 7, 2015,
Miriam hired a contractor to install a new roof on her home. Miriam agreed to pay the contractor
over time. The contractor filed a lien on her home on January 10, 2015, after the roof was installed.
On January 23, 2015, Miriam purchased all new kitchen appliances including a built-in microwave, a
built-in double oven, a countertop porcelain stove, and a refrigerator with panels that match the new
cabinets her contractor was installing in the kitchen. Miriam purchased all of the appliances from
Spencer TV and Appliance. The appliances were installed on January 30, 2015. Spencer’s took a
security agreement on January 23, 2015 and filed a financing statement on January 31, 2015. On
February 1, 2015, Miriam bought a new bathtub for her bathroom that was installed by her
contractor on February 5, 2015. Miriam had purchased the bathtub from Golden Baths and signed a
security agreement on February 1, 2015. Golden Baths filed a financing statement on February 6,
2015. Miriam lost her job on July 23, 2015 and had to cease paying her mortgage. Fifth Third Bank
foreclosed on the home on August 15, 2015. Miriam owed $174,000 at the time of foreclosure.
She owes the following amounts to various creditors:
Spencer’s $17,000.00
Golden Bath $2,200.00
Roofing contractor $4,500.00
Using the same foreclosure facts from #41, determine who has second priority.
(A) The roof contractor
(B) Spencer’s
(C) Golden Bath
(D) Fifth Third Bank
Answer : (B)
98. Miriam Jensen purchased a fixer-upper home for $189,000 on January 4, 2015. The mortgage
from Fifth Third Bank was recorded that same day in the amount of $175,000. On January 7, 2015,
Miriam hired a contractor to install a new roof on her home. Miriam agreed to pay the contractor
over time. The contractor filed a lien on her home on January 10, 2015, after the roof was installed.
On January 23, 2015, Miriam purchased all new kitchen appliances including a built-in microwave, a
built-in double oven, a countertop porcelain stove, and a refrigerator with panels that match the new
cabinets her contractor was installing in the kitchen. Miriam purchased all of the appliances from
Spencer TV and Appliance. The appliances were installed on January 30, 2015. Spencer’s took a
security agreement on January 23, 2015 and filed a financing statement on January 31, 2015. On
February 1, 2015, Miriam bought a new bathtub for her bathroom that was installed by her
contractor on February 5, 2015. Miriam had purchased the bathtub from Golden Baths and signed a
security agreement on February 1, 2015. Golden Baths filed a financing statement on February 6,
2015. Miriam lost her job on July 23, 2015 and had to cease paying her mortgage. Fifth Third Bank
foreclosed on the home on August 15, 2015. Miriam owed $174,000 at the time of foreclosure.
She owes the following amounts to various creditors:
Spencer’s $17,000.00
Golden Bath $2,200.00
Roofing contractor $4,500.00
Using the same foreclosure facts from #41, determine who has third priority.
(A) The roof contractor
(B) Spencer’s
(C) Golden Bath
(D) Fifth Third Bank
Answer : (A)
99. Miriam Jensen purchased a fixer-upper home for $189,000 on January 4, 2015. The mortgage
from Fifth Third Bank was recorded that same day in the amount of $175,000. On January 7, 2015,
Miriam hired a contractor to install a new roof on her home. Miriam agreed to pay the contractor
over time. The contractor filed a lien on her home on January 10, 2015, after the roof was installed.
On January 23, 2015, Miriam purchased all new kitchen appliances including a built-in microwave, a
built-in double oven, a countertop porcelain stove, and a refrigerator with panels that match the new
cabinets her contractor was installing in the kitchen. Miriam purchased all of the appliances from
Spencer TV and Appliance. The appliances were installed on January 30, 2015. Spencer’s took a
security agreement on January 23, 2015 and filed a financing statement on January 31, 2015. On
February 1, 2015, Miriam bought a new bathtub for her bathroom that was installed by her
contractor on February 5, 2015. Miriam had purchased the bathtub from Golden Baths and signed a
security agreement on February 1, 2015. Golden Baths filed a financing statement on February 6,
2015. Miriam lost her job on July 23, 2015 and had to cease paying her mortgage. Fifth Third Bank
foreclosed on the home on August 15, 2015. Miriam owed $174,000 at the time of foreclosure.
She owes the following amounts to various creditors:
Spencer’s $17,000.00
Golden Bath $2,200.00
Roofing contractor $4,500.00
Why don’t the standard first-in-time, first-in-right priority rules apply?
(A) They do apply
(B) Because there are PMSI security interests in real property
(C) Because liens always take priority
(D) Because Fifth Third Bank did not file properly
Answer : (B)
ESSAY
100. O owns Blackacre, a lovely home in Phoenix, which is worth $100,000. Blackacre is mortgaged
to M for $80,000. The mortgage provides that to secure the $80,000 debt, O mortgages “all the
following described real estate (description omitted) including all fixtures, improvement and
appurtenances thereto, including those now existing or hereafter added to the property.” The
mortgage is duly recorded. Thereafter O purchases some lovely decorative mirror squares from
Mike’s Mirrors on credit ($800). O then hires Harry to attach the mirrors (with a rather strong glue)
to the east wall of his living room. Harry charges O $150 for his labors. Mike properly filed a
financing statement on the mirrors – before Harry began installation. Harry files a mechanic’s lien
for the labor he performed when he was finished. (Filed after Mike; Mike filed after M). O pays
nothing to Mike and Harry. Mike wants his mirrors and Harry wants to be paid. M objects saying his
mortgage is superior to their rights. What results?
Graders Info :
Students should discuss terms such as PMSI, filing, after‑acquired clause, etc. Mike has priority as
PMSI, then M, then Harry. Mike can repossess so long as damage of removal is repaired.
101. Jones has installed solar water heater panels on the roof of his home. The panels are connected
by pipes to the water heater (located in the house). Jones’ neighbor, Smith, has added a second story
and a balcony to his (Smith’s) home. The new addition prevents the sun from hitting Jones’ panels
and Jones has not had a warm shower for a month. a. Does Jones have any rights against Smith for
the prevention of the obstruction?
b. Are the solar panels fixtures or personal property? Are any facts missing that are necessary for
this determination?
c. Suppose Jones’ home is subject to a mortgage. The mortgage agreement has a clause covering all
additions to the property. The mortgage was recorded on April 2, 2007. Jones had purchased the
equipment for the solar panels on credit from Solar Water, Inc. on November 19, 2009. What steps
should Solar Water, Inc. take to assure its interest in the panels?
d. Is there any way Solar Water can enjoy priority over the bank’s mortgage?
Graders Info :
a. No, not unless an easement has been or is obtained b. Annexation – part of water system; now an
integral part of the home; probably a fixture
c. Should execute security agreement and financing statement and file.
d. Since it is a PMSI, should file locally to perfect and take priority over mortgagee.
102. April 1, 2014 – O signs construction mortgage for construction of his home; Bank records
construction mortgage August 15, 2014 – O signs permanent mortgage for purchase of newly‑built
home that covers home and all after‑acquired property/fixtures; Bank records mortgage
October 15, 2014 – Sears allows O to purchase on credit a new hot water heater
October 20, 2014 – O installs hot water heater
October 22, 2014 – Sears files financing statement
January 2, 2015 – O defaults on mortgage payment
February 2, 2015 – O declares bankruptcy
Discuss who will have priority in bankruptcy.
Graders Info :
The construction mortgage is paid and irrelevant; Sears has a perfected PMSI – has priority over
Bank’s mortgage.
103. Discuss whether each of the following would be fixtures or personal property. a. Sign on store
premises (purchased by tenant)
b. Wallpaper in a store (installed by tenant)
c. Microwave ovens in a restaurant
Graders Info :
a. Trade fixture; tenant must repair any removal damage b. Tenant trade fixture, but removal would
cause more damage than cost of wallpaper
c. Trade fixtures
104. Discuss whether each of the following would be a fixture or personal property. Be certain to
discuss all relevant factors in making your determination. a. In a residence, a sofa and chair that are
made of the same fabric as the draperies. The buyer of the residence wants to know.
b. Would the answer be different if the house were being taken by eminent domain?
c. A floor cable for PROFS, the IBM intraoffice communication system. The tenant wants to know if it
can take it when the lease expires.
d. Refrigerators in an apartment complex that is being sold.
Graders Info :
a. Probably will still be personal property; buyer could negotiate to have included with the house,
but they are still usable in seller’s new property in spite of matching aspect b. Yes – would probably
be treated as fixtures in order to give the owner maximum value
c. Would be a trade fixture but there would probably be significant damage upon its removal if it is
in‑wall.
Items to consider: who installed; can others use it? Lease provisions on fixtures?
d. Probably a fixture since it is a commercial transaction.
105. Decide the order of priority for the following creditor’s and explain why. April 12, 2015 – Wells
Fargo mortgage on residential property of Jane Miyamoto is recorded
April 30, 2015 – Paddock Pool Company records second mortgage within 10 days of beginning pool
construction
May 15, 2015 – Desert Vista Landscaping records lien within 10 days of completing Jane’s
landscaping
May 30, 2015 – Saguaro Fans records PMSI in fans installed in Jane’s home nine days after their
installation
Graders Info :
1.Saguaro Fans – PMSI recorded within 10 days 2.Wells Fargo – Original mortgagee, first in time
3.Paddock – Second mortgage, no priority status
4.Desert Vista – lien, no priority status
106. Explain the purpose of a bill of sale in a real estate transaction.
Graders Info :
When it is unclear whether an item is personal property or a fixture, the bill of sale assures that title
passes.
107. Place the following creditors on one residential property in order of priority. January 1, 2014 –
Initial mortgage (recorded)
March 1, 2014 – Second mortgage for swimming pool (recorded)
June 1, 2014 – PMSI security interest in new air conditioner that is installed on the property
September 1, 2015 – Sears kitchen remodeling with new built-in appliances (PMSI recorded)
Graders Info :
1. Sears 2. Initial mortgage
3. Second mortgage
4. Air conditioner creditor (failed to record)
108. Robert S. Custer owns approximately 97 acres in Cumberland Valley Township, Bedford
County, where he operates a nursery business. In March 2015, Custer purchased an electric
generator for $1,500. Custer had the generator installed on a concrete pad near his greenhouses
and then had a steel shed type of enclosure installed around the pad and generator. The generator is
bolted to the concrete to prevent vibrations and reduce noise. The generator is needed for back-up
electricity for heating the greenhouses should an outage occur. Custer has run into financial
difficulties and the bank is foreclosing on the land on which the nursery is located. Custer is
vacating the premises and wants to take the generator with him. Is the generator a fixture or
personal property?
Graders Info :
The critical points for discussion are: a. The nature of the use: the generator is apparently a critical
part of nursery operations because of the importance of preserving the temperature in the
greenhouses.
b. The party who attached the generator was the owner of the property – higher intent of it being a
fixture.
c. What type of damage is done by its removal. Custer could leave the pad and the shed or even just
the pad and not damage a 97-acre nursery. The generator is just bolted and could be removed, thus
leaving a shed in place that can be used for other purposes.
d. The presence of the generator probably increased the value of the land.
e. If Custer were moving and selling the property, the generator would probably be a negotiable
item between buyer and seller.
109. Explain the right of a mortgage company that is foreclosing on a property where there are
other perfected and secured parties.
Graders Info :
The mortgage company has to either allow the creditors to take the fixtures with them and
reimburse the mortgage company for a decline in value or pay out the proceeds to these creditors in
the order in which they have priority and distribute according to that priority.
110. William and Virginia Britton own a one-acre parcel of land near Detroit’s Metropolitan Wayne
County Airport. They operate several small industrial businesses in the industrial building located on
their land. In 1992, Wayne County began acquiring a total of 550 acres around the airport for
expansion purposes. Wayne County offered the Brittons $188,580 for their property. The Brittons
disputed the amount for not including the value of their trade fixtures. Listed as trade fixtures were
the following: tanks, air compressors, forklifts, scales, storage racks, hose-braiding machines, pipe-
threading machinery, hydraulic pumps, grinding machinery, and work tables. It also included such
miscellaneous items as a coat tree, an electric clock, a first-aid kit, file cabinets, a refrigerator, a
metal folding chair, a flatbed truck, trash drums, and lawn mowers. Should the county be required to
compensate the Brittons for these items in a taking of real property?
Graders Info :
Property is “fixture” for condemnation purposes if it satisfies a three-part test, that is, if it is actually
or constructively annexed to realty, its adaptation or application to realty being used is appropriate,
and there is intention to make property a permanent accession to realty. The Brittons were entitled
to value-in-place for fixtures and for all other property, condemnee was only entitled to moving
costs. All of the trade fixtures would not be classified as fixtures for purposes of eminent domain
compensation. The moving expenses would be required.
111. Robert S. Custer owns approximately 97 acres in Cumberland Valley Township, Bedford
County, where he operates a nursery business. In March 2001, Custer purchased a used greenhouse
for $1,500,disassembled it, transported it by flatbed pickup truck to his property, where he stored it
until May 2004, and then reassembled it. The greenhouse is an arch-shaped structure that is 30 feet
by 96 feet in size, and is approximately 12 feet high at its highest point. The greenhouse is
constructed by 24 vertical pipes on each side. These vertical pipes are inserted two feet into the
ground and are connected at the top to arch-shaped pipes. Plastic covering is attached to the
arching pipes and serves as a covering for the structure. Because of the addition of the greenhouse
to the property, the Board increased the assessed value of the buildings on Custer’s property for the
2004 tax year from $11,124 to $19,978, an increase of $8,854. Custer appealed to the Board
contending that the greenhouse should not be assessed because it was not real estate. Evaluate
whether the greenhouse is a fixture, and properly included in the assessment, or personal property.
Be sure to consider whether the fact that it is the assessor makes a difference in your evaluation.
Graders Info :
Chattels used in connection with real estate are of three classes: First, those which are manifestly
furniture, as distinguished from improvements and not peculiarly fitted to the property with which
they are used; these always remain personalty …Second, those which are so annexed to the property
that they cannot be removed without material injury to the real estate or to themselves; these are
realty, even in the face of an expressed intention that they should be considered personalty…. Third,
those which, although physically connected with the real estate, are so affixed as to be removable
without destroying or materially injuring the chattels themselves, or the property to which they are
annexed; these become part of the realty or remain personalty, depending upon the intention of the
parties at the time of the annexation; in this class fall such chattels as boilers and machinery affixed
for the use of an owner or tenant, but readily removable. The green house creates the necessary
environment for raising plants and will be affixed to the property until it is worn out, the nursery
business fails, or Custer and his wife no longer occupy the property…. [T]he green house is realty
and taxable as real estate.
In assessment cases, the assessor tends to win because the value of the property is increased by
less-than-permanent attachment that are integral to the property. In a sales transaction, it is
possible that the portable greenhouse would not be included. The same would be true if the nursery
owner had been merely a tenant on the land – probably would have been a trade fixture only.