Hofflehaus Inc Owns a Large Piece of Land Known as Schwarzermorgen.It

Multiple Choice

Hofflehaus Inc owns a large piece of land known as Schwarzermorgen.It wanted to use that land as security for loans totaling $6 million.When it explained the situation to Primus Bank,however,it was told that it qualified for a loan of only $4 million.The company accepted the offer of that loan and allowed Primus Bank to take a mortgage over Schwarzermorgen.Primus Bank did not,however,immediately register its mortgage.The next day,the company approached Deuce Bank,asked for a loan of $2 million,and offered security in the form of a mortgage over Schwarzermorgen.The company did not mention that it had already granted a mortgage to Primus Bank and Deuce Bank had no other way of knowing about that first mortgage.Deuce Bank then (1) checked the records at the land registration office and found that there were no interests registered against Schwarzermorgen,(2) loaned $2 million to the company,and (3) immediately filed its own mortgage.The next day,Primus Bank finally registered its mortgage.And later that same day,the company suffered a devastating financial loss.That loss wiped out virtually every asset that the company had,including the $6 million that it had borrowed from the two banks.The company's only remaining asset is Schwarzermorgen.The value of Schwarzermorgen has,however,dropped to $1.5 million.That land has now been sold and the only question before the court concerns the disposition of the $1.5 million in cash.Which of the following statements is TRUE?

A) Each bank will receive half of the value of Schwarzermorgen.
B) Primus Bank will receive $1 million and Deuce Bank will receive $500 000.
C) Deuce Bank will receive $1 million and Primus Bank will receive $500 000.
D) Primus Bank will receive $1.5 million and Deuce Bank must pay $4.5 million to Primus Bank.
E) Deuce Bank will receive $1.5 million.