A man was the fee simple owner of a tract of land, upon which he maintained and operated an orchard as his sole source of income. The man mortgaged the land to a woman to secure the payment of a loan she made to him. The loan was due at the end of the growing season of the year in which it was made. Halfway through the growing season, the man left the state due to severe health and personal problems; his whereabouts were unknown. The woman learned that no one was responsible for the cultivation and care of the orchard on the land. She undertook to provide, through employees, the care of the orchard and the harvest for the remainder of the growing season. The net profits were applied to the debt secured by the mortgage on the land.
During the course of the harvest, a business invitee was injured by reason of a fault in the equipment used. Under applicable tort case law, the owner of the premises would be liable for the invitee’s injuries. The invitee brought an appropriate action against the woman to recover damages for the injuries suffered, relying on this aspect of tort law.
In such lawsuit, judgment should be for:
A. The invitee, if, but only if, the state is a title theory state, because in other jurisdictions a mortgagee has only a lien but no title interest.
B. The invitee, because the woman was a mortgagee in possession.
C. The woman, because she acted as agent of the owner only to preserve her security interest.
D. The woman, if, but only if, the mortgage expressly provided for her taking possession in the event of danger to her security interest.
{ 12 comments… read them below or add one }
C
B
Mortgagee in possession assumes risk of tort liability.
Answer B is correct. In exercising her right to possession upon default, the woman became a mortgagee in possession and incurred the same liability in tort as the record title owner.
Answer A is incorrect. “If, but only if” are words of warning on the MBE that are most likely included in an incorrect answer choice. As a mortgagee in possession, the woman has the same liabilities as the property owner.
Answer C is incorrect. Marie had a right to enter the property to prevent waste that would jeopardize her security interest.
Answer D is incorrect. This is incorrect for the same reasons set out in (A) and (C).
B
Mortgagee (lender) hired the employees to bring in the crop. The she applied the profits to the loan balance. She was standing in the shoes of the owner. She is liable for injuries in place of the absent owner.
(I wonder if she could get insurance while she was running the operation that she did not own? Lack of liability insurance means she would be personally liable for the injuries. Not good for her. )
I think the best answer is B. The woman was on the land because it is presumed that the man had defaulted on the loan (i.e. he left the state with no say as to his whereabouts). Since this incident with the business invitee occurred during the middle of the loan period, she is a mortgagee in possession, and does not have title to the land since the mortgage has not yet matured.
Upon further review, I am changing my answer to (A).
(C)
I believe A is the correct answer. I agree with BV’s rationale.
B
B is correct answer in my opinion
A is correct. I like B because a mortgagee may wish to take possession of the property before foreclosure as “woman” has done here; further, a mortgagee in possession takes on a duty to manage the property in a careful and prudent manner and potential liability in tort to anyone injured on the property. However, I am going with A because the call of the question focuses on invitee relying on the aspect of tort law whereby the owner of the premises would be liable for the invitee’s injuries. Under the title theory, legal title is in the mortgagee (“woman”) until the mortgage has been satisfied or foreclosed, whereas the mortgagee is the holder of a security interest only and the mortgagor is the owner of the land until foreclosure in a lien theory state. Here, foreclosure has not yet occurred. Moreover, default has not yet occurred. This is a tricky question because the invitee wins by relying on a theory of mortgagee in possession outside this specific call of the question. That said, I like A best.
B – should have a better reason than it just looks good. But it does. Simplisticly, she is the owner as the prior owner defaulted on his loan and the property guaranteed payment.