A, B, and C own Greenacre in equal shares as joint tenants. In Year One, a judgment lien is entered against A for $50,000 in favor of A’s creditor, X. Under applicable law, the lien attaches to A’s interest in any real property for 10 years, or until the lien is satisfied.
A lives on Greenacre, while B and C do not. During Year One, A discovers coal on Greenacre. A immediately begins to mine and sell the coal. By doing so, A earns $250,000 in profit. B and C ask A for a share of the coal profits, but A refuses.
In Year Two, C conveys all of his interest in Greenacre to D. D immediately mortgages his interest in Greenacre to Bank Y for $100,000.
At the end of Year Three, D dies. D’s will devises D’s property as follows: “All interests in real property held by me at the time of my death shall pass to E.” The applicable law has abolished exoneration. D’s estate does not have sufficient funds to pay his debt to Bank Y. The remaining obligation on D’s note is $100,000.
Despite the requests of Bank Y, E refuses to make payments on the mortgage, and Bank Y forecloses on E’s interest in Greenacre. At the foreclosure sale, E’s interest is sold to Buyer Z for $500,000. At the time of the sale, there are no encumbrances on Greenacre other than the judgment lien and the mortgage.
- What rights, if any, do B and C have to the coal profits? Explain.
- Did Bank Y have an enforceable interest in Greenacre after D’s death? Explain.
- After the foreclosure sale, what interests in Greenacre are held by A, B, and Z, respectively? Explain.
- After the foreclosure sale, how should the sale proceeds be distributed? Explain.