(b) Penny is the registered proprietor on the certificate of title of a house in
ID: 363428 • Letter: #
Question
(b) Penny is the registered proprietor on the certificate of title of a house in St Kilda. On 1 June 2012 Penny borrowed $50,000 from Alfred to purchase the St Kilda house. This loan was insufficient to purchase the house. On 10 June 2012 Penny borrowed $200,000 from Vertigo Bank Ltd, using a mortgage over the St Kilda house to secure the loan. On 12 June 2012 Vertigo Bank Ltd registered their mortgage. Penny borrowed a further $50,000 on 1 July from Stacey to landscape the garden and purchase modern appliances for her new house. Stacey lodged a caveat on the title of the St Kilda house on 5 July 2012 to protect her interest.
Penny defaults on her loan to Vertigo Bank Ltd. Advise Vertigo how the proceeds of sale of the St Kilda property would be divided between Penny’s creditors. Refer to relevant legislation.
Explanation / Answer
In the case of Mortgaging, Vertigo Bank sell St Kilda Property and recover the money owned by Penny to the Bank. If Bank recovers more amount than Penny owes to them then after deduction of all the expenses for selling and deducting the money from Penny's mortgage, Bank can return the excessive money to Penny.
Now Penny has taken loan from other members but it is not taken on mortgage basis but on personal basis. Thus during the sale of St Kilda house they can not claim any money from Bank which Penny borrowed from them ethically. Thus they will have to recover the excessive money from Penny alone and not the Vertigo Bank as Bank was not involved in the transaction of lending money other than its own.
This way excess money recovered by Bank can be shared with Penny for the house, Penny can then pay of debt of her creditors from that and clear the accounts with them.
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