ALI-ABA Course of Study Commercial Real Estate Defaults ...

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a Mortgagor acquires a prior mortgage directly or through an agent, the
foreclosure of such mortgage will not divest the junior lien. 147
5.15.5 Purchase Money Mortgage States. Several federal circuit courts have
held that under specified circumstances rewriting, extending or modifying
loan terms may, under the "Transformation Rule," constitute a novation
that results in loss of purchase money mortgage status. 148 The minority
rule is that the loan is treated as being, in effect, two loans one of which
retains its special lien status. 149
5.15.6 Circular Lien Priorities. Circular lien issue may arise where a party with
a prior lien is on actual notice of the rights of one of several later lien
holders. Conflicts among statutory priority provisions may also create
circular lien issues. For a rational analysis of a solution see Tile House v.
Cumberland Fed. Sav. Bank. 150
5.15.7 Personal Property and Fixture Issues. 151
5.16 Jury Trial Waivers. Although these are generally upheld 152 where it is
established that the waiver was knowing and intelligent. Several states had held
pre-litigation waivers to be unenforceable. 153
147 Ray v. Atkins 421 S.E.2d 317 (205 Ga App 85 (1992)
148 Dominion Bank of Cumberland v. Nuckolls, 780 F.2d 408 (4th Cir. 1985); In Re Manuel, 507 F.2d 990 (5th
Cir. 1975); In Re Freeman, 956 F.2d 252 (11th Cir. 1992).
149 See Pristas v. Landaus, 742 F.2d 797 (3rd Cir. 1984).
150 942 S.W. 2d 904 (Ky 1997).
151 See Philip Ebling & Steven Weise, What a Dirt Lawyer Needs to Know about New Article 9 of the UCC, 37
Real Prop., Prob. and Trust Jr. 191 (Summer 2002).
152 See Phoenix Leasing, Inc. v. Sure Broadcasting, Inc., 843 F.Supp. 1379 (D.Nev. Jan. 13, 1994).
153 See also discussion at Item 3.15.
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