Final answer:
Stephens, the surety who paid a portion of Diamond's debt, may be entitled to equitable relief after the foreclosure sale. Depending on the surety agreement and local laws, he might have the right to subrogation and receive a portion of the sale proceeds in excess of the remaining debt.
Step-by-step explanation:
When Peter Diamond defaulted on a debt secured by a first mortgage on his plant and land, Stephens, as a surety, paid $250,000 to Carter. Upon foreclosure and sale of the property for $375,000, Stephens may have the right to seek subrogation, allowing him to step into the shoes of the creditor. If there are remaining proceeds after the sale of the mortgaged property, Stephens is typically entitled to reimbursement for the amount he paid on the surety agreement, but this depends on the terms of the surety agreement and local laws.
The sale of the property resulted in $375,000, significantly exceeding the remaining $250,000 that Diamond owed Carter. Thus, after paying off the remaining mortgage debt, there should be a remainder. Stephens's rights to these surplus proceeds would be governed by the principle that sureties who pay off part of a debt are entitled to equitable relief, potentially giving him a claim to part of the proceeds from the foreclosure sale.