In: Accounting
Mario has an idea for a new business, but needs start-up money. The bank is not willing to loan him the money because of past business dealings that resulted in Mario being declared bankrupt. Mario tells the bank that this grandmother is willing to mortgage her house in order to get Mario the money that he needs. Mario brings his grandmother, who speaks only Italian, into the bank to sign the mortgage papers. In the presence of the loans officer, Mario describes the documents to his grandmother and she signs them. What the loans officer does not know is that Mario described the documents as an application for a guaranteed investment certificate. One year later, Mario has fallen behind on the repayment of the mortgage and the bank wants to sell the grandmother’s house to get its money back. What is the main legal issue? Can the grandmother do anything to stop the sale of her house?
The case here states that :
Mario has an idea for a new business, but needs start-up money. The bank is not willing to loan him the money because of past business dealings that resulted in Mario being declared bankrupt. Mario tells the bank that this grandmother is willing to mortgage her house in order to get Mario the money that he needs. Mario brings his grandmother, who speaks only Italian, into the bank to sign the mortgage papers. In the presence of the loans officer, Mario describes the documents to his grandmother and she signs them. What the loans officer does not know is that Mario described the documents as an application for a guaranteed investment certificate. One year later, Mario has fallen behind on the repayment of the mortgage and the bank wants to sell the grandmother’s house to get its money back.
Considering the legal issue here, states that bank has completed
all the formalities.
Bank has mortgage papers of the house which grandmother has
signed.
Loans officers have also completed all the formalities of loan with the best of their knowledge and in good faith.
Now, that the default in the payment of loan is done by Mario
who has provided his grandmother's house as mortgage.
The bank is legally eligible to sell the house of grandmother to
recover the payment of loan.
Grandmother cannot do anything to stop the sale of her house but can sue Mario for recovery of the full amount of her house.