by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
JOINT TENANCY; MORTGAGE; SEVERANCE: Mortgage by one joint tenant severs the joint tenancy if the mortgage is not satisfied at the time of the mortgagor joint tenant's death. Schaefer v. Peoples Heritage Savings Bank, 669 A.2d . 185 (Me. 1996).
Husband and wife owned real property as joint tenants with rights of survivorship. Wife executed a mortgage on her interest in the property and subsequently died. The mortgagee sought to foreclose the mortgage. The husband asserted that the death of the mortgagee-joint tenant terminated the lien of the mortgage. The Supreme Court of Maine, in what was apparently a case of first impression in the state, held that a mortgage by one joint tenant, although a conditional conveyance of legal title, severs the joint tenancy unless the mortgaging joint tenant's interest is redeemed. The court states that some of its earlier decisions holding that a lien against the real estate of one joint tenant is extinguished by the death of that joint tenant are not dispositive of the precise issue presented here, but does not indicate the reasons for this conclusion.
Reporter's Comment: The full import of this decision is less than clear based on the court's language. The court says: "When the mortgage is discharged, the mortgagor will remain a joint tenant. When the mortgage is foreclosed, the joint tenancy is severed and the mortgagee becomes a tenant in common. In short, . . . [the wife's] mortgage deed was effective to sever the joint tenancy, subject only to the right of redemption." It would appear that it is the granting of the mortgage and not the action in foreclosure which severs the joint tenancy. However the severance is conditional in that the joint tenancy will be reestablished if the mortgage debt is satisfied.
One wonders what happens to the rights of creditors of the other joint tenant while the mortgage is outstanding. Has the other joint tenant become a tenant in common, such that liens against that joint tenant's interest will survive that joint tenant's death? Will that joint tenant's interest pass through her or his estate, should she or he predecease the mortgaging joint tenant? What happens to the interest of the non-mortgagor joint tenant if that tenant predeceases the mortgagor joint tenant before the mortgage is satisfied? Will there still have been a severance? Will it depend on whether the mortgagee instituted foreclosure proceedings before the non-mortgaging joint tenant's death?
Editor's Comment 1: States vary wildly on the impact of mortgages on joint tenancies. The problem demonstrates why joint tenancies in many states are inadequate title holding devices. Unanticipated adverse results can follow from actions by one tenant wholly without the knowledge of the other tenant. In fact, the results may not even be anticipated by the tenant taking the action.
Editor's Comment 2: From a broad policy perspective, the rule that a unilateral transfer of an interest by one joint tenant severs the tenancy is dangerous anachronism in the modern real estate world. Information as to the state of title to property is readily available to anyone seriously wanting to know. Therefore, parties seeking to take interests in real estate can become aware of the fact that a joint tenancy exists. This is certainly true with regard to mortgagees. If they do not compel their transferor to arrange a severance with the knowledge of the other joint tenant, such parties should take the risk that a survivorship clause will cut them off. Such a rule would preserve the legitimate survivorship expectation of the other joint tenant.
The editor, in short would do away with the concept that transfer of a joint tenant's interest effects a severance. A substitute rule might be that a joint tenant can accomplish a severance by notifying the other joint tenant, although it would be desirable to seek some device to have the fact of severance recorded when it occurs.
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