Daily Development for
By: Patrick A.
Randolph, Jr.
Elmer F. Pierson Professor of
Of Counsel: Blackwell Sanders Peper Martin
Kansas City,
prandolph@cctr.umkc.edu
JOINT TENANCIES; SEVERANCE; MORTGAGES: A mortgage by one
joint tenant does not equitably bind the other joint tenant, even when the
proceeds are used to acquire the property in question,
and the death of the mortgagor joint tenant results in the other joint tenants
expanding their title through survivorship, free and clear of the mortgage.
Townsend v. Chase Manhattan Mortgage
Corp., No. 234412 (
http://www.michbar.org/opinions/home.html?/opinions/appeals/2002/111502/16945.pdf
Plaintiff Townsend and his mother acquired property in joint
tenancy with right of survivorship, and mother alone gave a note and mortgage
to lender for the mortgage amount. Later
the note and mortgage were assigned to Defendant Mortgagee.
Mother died and son made no payments on the mortgage. Mortgagee
foreclosed, and Plaintiff moved to have the foreclosure set aside.
The trial court granted Mortgagee's
motion for summary judgment, stating that, on the basis of the law, as well as
the equities, the mortgage was not destroyed by mother's death. Amazingly, the court appears to have gone on
to conclude that not only mother's interest, but also Plaintiff's interest, was
bound. Here is some of the trial court's (very off the cuff) ruling, which was quoted extensively
by the appeals court:
" . . . Paragraph 12 clearly states that the assigns
and successors in interest are bound.
The mortgage is the security.
They didn't loan this money to Mrs. Townsend as an unsecured creditor,
and willing to take the risk on a thirty year mortgage that if she passes away,
their interest in the property will be extinguished. That mortgage, it seems to me, secures an
interest in the property, and not in Mrs. Townsend, and what have you.
And that the security interest, it seems to me, reading the
statute that's been cited and the case law, that that the security interest
continues on upon her death. It would
be a windfall. It would be an absolute
windfall if that were the criteria here for James Townsend to get this property
debt free, simply because of the unfortunate death of the mother, relative or
whoever it might is.
But it doesn't even reach that point of being an issue of
equities, and what have you. I'm
convinced that from a legal perspective, and this
mortgage and this note in her name continued on upon the death of Mrs. Townsend
and continues to be an obligation."
Fortunately, someone on the appeals court must have known
enough property law to pass the bar, and on appeal, the Michigan Court of
Appeals reversed.
First the court noted that the plaintiff was not trying to
avoid the debt, which presumably was still owed by Mrs. Townsend's estate, but
only the mortgage, which had nothing to which it could attach once her interest
was destroyed by her death and his survivorship.
The appeals court notes that the trial court conception that
the surviving joint tenant was bound as an "assign" is erroneous
because the joint tenant took his interest at the same time that the mortgagor
did. The court characterizes each of the
joint tenancy interests as a life estate with a contingent remainder. The bank did have one case on which it could
hang its hat - a
The court noted that the intervention of equity is sought
here to save the bank from the consequences of its own mistake - when it failed
to compare the title to the property to the identity of its mortgagor. The court notes: "We think it
insufficient to invoke equity to save the mortgagee
from its own mistake, particularly where the mortgagee
is a sophisticated commercial lender."
Comment: No less a lender's advocate than Jack Murray has
commented: "What was the lender *thinking* here." Of course, the answer is - not much.
There is some authority, however, that has bailed out
lenders in this situation in title theory states by concluding that a mortgage
will constitute a severance of the joint tenancy, creating a tenancy in
common. There is also some authority in
lien theory states that a mortgage will create a pro tanto
severance of the joint tenancy, to the extent necessary to protect the mortgagee's interest.
See W. Stoebuck & D. Whtiman,
The Law of Property 191 (3d ed. 2000). The editor believes, and apparently Jack
Murray would concur, that such a ruling stretches the law too far to protect a
lender so negligent that it didn't make sure it was getting a mortgage from the
owner of the property.
In any event, even that kind of reasoning would not have
availed the mortgagee here, because the parties used
a special kind of alternative joint tenancy that the editor has only seen in
Michigan - one that is non- severable and indeed has
the effect of creating mutual life estates with a contingent remainder in fee
in the survivor. The possibility of such
joint tenancies in
Maybe the lender's lawyers had the same law school property class as the trial court judge.
Readers are urged to respond, comment, and
argue with the daily development or the editor's comments about it.
Items in the Daily Development section
generally are extracted from the Quarterly Report on Developments in Real
Estate Law, published by the ABA Section on Real Property, Probate & Trust
Law. Subscriptions to the Quarterly Report are available to Section members
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