QUESTION #2 Bill Farmer owns a 1-acre tract of property that has an empty barn located in the middle of the property. He decides to open a small bourbon distillery in the barn. He purchases and has installed $20,000 worth of distillery equipment. In order to install the distillery equipment, Big Liquor Supply Company digs a 30-foot deep pit to hold the tank, installs numerous pipes along the walls of the barn, 2 and drills multiple holes thru the attic and thru the roof to install exhaust piping. The installation is very intricate and takes 7 full days and involves installing drywall, installing braces, connecting pipes and other extensive construction. The lead construction manager for Big Liquor Supply Company tells Farmer, "That system isn't going anywhere; it would take a lot of dynamite to get that unit loose." Famer signs a Promissory Note with Big Liquor Supply Company that outlines he will make monthly payments for the next 5 years to pay the $20,000 cost of the distillery equipment and installation. Oddly, the purchase agreement defines the distillery system as a "fixture partially attached to real estate." Big Liquor Supply Company does not file a mortgage with the county clerk's office. Immediately after installing the distillery system, Farmer decides the distillery business is going to be too much work, and he wants to retire and move to Florida. Farmer contracts to sell the property, including the barn and the distillery equipment, to Brad Bratton and Dan Bratton for $350,000. At the time of signing the purchase/sale contract with Farmer, Brad Bratton knows about a $3,000 judgment lien that is filed against him at the county clerk's office. The lien was filed by Strong Roofing LLC who won a lawsuit against Brad regarding a past dispute with about a roof installation on a different property that Brad owns. At the time of signing the purchase/sale contract with Farmer, Dan Bratton is fighting a lawsuit filed against him by Worldwide Credit Card Company. Dan owes Worldwide $50,000 and he does not have available cash to pay the outstanding balance. The lawsuit is ongoing but there has not been a judgment entered against Dan. In order to avoid these personal issues, after Brad and Dan sign the contract in their individual names, they form "Bratton Distillery LLC" which they register with the Secretary of State. They plan to use the LLC to hold the property and operate the business. Brad and Dan hire Frank Steel, known locally as "Attorney Frank", to complete a title examination and perform the closing. They are borrowing $300,000 from Smalltown Bank, who agrees to accept Attorney Frank's title opinion letter and agrees to let Attorney Frank handle the closing. Attorney Frank is an experienced real estate attorney but does not normally work for Smalltown Bank. Multiple times during closing preparation, Attorney Frank and the loan officer from Smalltown Bank discuss the transaction, and the loan officer sends Attorney Frank an email stating, "We are counting on you to make sure we have properly drafted loan documents executed by Bratton Distillery LLC, and we are counting on you to make sure we have a recorded Mortgage in first lien position." Attorney Frank reads the email and forwards the email to his paralegal staff, but he does not respond to Smalltown Bank's email. At closing: (1) There is a typographical error in the General Warranty Deed that Attorney Frank prepared: the General Warranty Deed transfers the property from Farmer to Brad Bratton and Dan Bratton (in their individual names), but the Deed should have transferred the property into the name of Bratton Real Estate LLC. 3 (2) Despite the Deed transferring the property into the name of Brad Bratton and Dan Bratton (in their individual names), Smalltown Bank drafted the Promissory Note and Mortgage in the name of Bratton Real Estate LLC. (3) Farmer signs an Owner Affidavit that all his debts have been paid on the property, although he still owes $18,000 on the Promissory Note that he signed in favor of Big Liquor Supply Company. (4) Brad Bratton and Dan Bratton both sign a Buyer Affidavit that no outstanding liens are filed against them, nor are there any lawsuits pending against them. (5) Attorney Frank issues a title examination letter with typographical error: the letter is addressed only to Brad Bratton and Dan Bratton (in their individual names); Attorney Frank does not address or deliver the letter to Bratton Distillery LLC or to Smalltown Bank. The letter says that the property is "clear" of any liens. Two days after closing, but before the Deed and Smalltown Bank's Mortgage is recorded, Worldwide Credit Card Company wins the lawsuit against Dan and immediately files a Judgment Lien at the county clerk's office. Four days after closing, the Deed and Smalltown Bank's Mortgage are recorded at the county clerk's office. One month after closing, Farmer quits paying Big Liquor Supply Company. Big Liquor Supply Company immediately files a lawsuit against Farmer and wins, then immediately files a Judgment Lien in the county clerk's office. Five months after closing, Brad and Dan see a copy of the Deed and realize the property is vested in their individual names, not Bratton Distillery LLC. They call Attorney Frank who prepares a Special Warranty Deed that transfers the property from Brad and Dan (individually) to Bratton Real Estate LLC. Brad and Dan execute the Special Warranty Deed and it is filed in the county clerk's office. After working hard for six months after closing, Brad and Dan's company is a complete failure, and Bratton Real Estate LLC begins missing loan payments due to Smalltown Bank, so Smalltown Bank has no option but to file a lawsuit and foreclose on the property. In preparing the foreclosure lawsuit against Bratton Distillery LLC for failure to pay the Promissory Note, Smalltown Bank's foreclosure attorney discovers all the facts listed above. Therefore, Smalltown Bank's foreclosure lawsuit lists the following defendants: 1. Bratton Distillery LLC 2. Strong Roofing LLC 3. World Credit Card Company 4. Big Liquor Supply Company 5. Brad Bratton and Dan Bratton (each individually) 6. Attorney Frank

4 After the property is sold by the Master Commissioner, who gets paid first, second, third and fourth (who has "priority") amongst Smalltown Bank, Strong Roofing LLC, World Credit Card Company, and Big Liquor Supply Company? Your answer should include an explanation of each party's most effective argument and chance of success.

Can Smalltown Bank recover money from Attorney Frank? Why or why not?

Can Smalltown Bank recover from Brad Bratton and Dan Bratton (in their individual names), or can they only seek recovery from Bratton Real Estate LLC? Why or why not?