This weekend, I was studying for the Real Property portion of the bar exam. Here is a question that I had a real problem with... perhaps I tend to read too much into some of the questions.  See what you think of this one.

A cyclist was injured when a driver ran a red light.  The cyclist subsequently sued the driver to recover for her injuries, and obtained a money judgment of $50,000.  The state where cyclist and driver reside has the following statute: "Any judgment properly filed shall, for 10 years from filing, be a lien on the real property then owned or subsequently acquired by any person against whom the judgment is rendered."

The cyclist filed the judgment in the county where the driver owned a valuable ranch. Some time later, the driver, who was also injured in the accident, undertook to remodel all the buildings on the ranch to make them wheelchair-accessible.  The driver borrowed $30,000 from a bank for the improvements, securing the loan with a mortgage.  Before he paid any principal on the bank's loan, the driver decided to build a new barn.  He borrowed $20,000 from a financing company for this purpose, also secured by a mortgage on the ranch.  The financing company properly recorded its mortgage.

The driver subsequently defaulted on the banks mortgage, and the bank brought a foreclosure action, joining the financing company in the proceeding.  The foreclosure sale resulted in $90,000 in proceeds after all expenses and fees were paid.  The driver still owes the cyclist $50,000, the bank $30,000, and the financing company $20,000.

How should the foreclosure proceeds be distributed?

(A) The cyclist is entitled to $50,000, the bank is entitled to $30,000, and the financing company is entitled to the remaining $10,000.

(B) The cyclist is entitled to $50,000, the bank is entitled to $30,000, and the driver is entitled to the remaining $10,000.

(C) The bank is entitled to $30,000, the financing company is entitled to $20,000, and the driver is entitled to the remaining $40,000.

(D) The bank is entitled to $30,000, and the driver is entitled to the remaining $60,000.

I'm curious what you guys think, since this is an area of law that we all have some experience with.  I missed this one, so don't be afraid to guess the wrong answer.  I'll come back and post my incorrect selection and the correct answer according to the authors of the study questions.

Best,
Robert A. Franco
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