Daily Development for
Monday, December 14, 1998
by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
COTENANCIES; PARTITION; MORTGAGES: Where a mortgage attaches to a cotenant's interest after a partition has been ordered, the property may be sold free and clear of the mortgage claim but the mortgage will attach to the cotenant's share of the proceeds.
Ponton v. Poisson, 709 A.2d 1047 (R.I. 1998).
The parties were joint tenants in the subject property during the course of their marriage. They were divorced, but apparently no partition occurred at that time. A few years later, one of the parties petitioned for partition. The court entered an order appointing a commissioner to carry out a partition by sale. At the time, both parties were engaged in a business and the business. While the partition proceeding was pending and after the appointment of the commissioner, the business entered into a lease and guaranteed the business' lease obligations through mortgages on only one of the cotenants' interests.
Shortly thereafter, and again before the sale, the business apparently went bankrupt and a trustee in bankruptcy disputed in the partition proceedings the validity of the mortgages on the property (for reasons not disclosed in this case. The trial court found the mortgages valid. To facilitate the sale of the property pending the trustee's appeal of the trial court's ruling, the mortgagee agreed to discharge its mortgages on the real estate and reaattach them, if they proved valid, to the sale proceeds.
The Rhode Island Supreme Court viewed this case as one of first impression in Rhode Island, but relied upon an ALR annotation as stating the general rules pertaining to the situation. It held that the mortgage on one cotenant's interest could attach to that interest following the entry of an order of partition, but that the attachment was subordinate to the partition itself, and the effect of the mortgage was to attach the proceeds of the partition only.
Comment: The approach protects whatever reliance interest might exist in the other cotenant, who sought the partition prior to the granting of the mortgage, although such protection is somewhat anomalous in this case because the secured debt actually may be a debt of both cotenants, although only one of them gave a security interest.
If the mortgage is granted prior to the partition action, things get a lot stickier. Is this a severance? Some jurisdictions say yes, so that the mortgagee is protected in the event of the death of the mortgagor cotenant.
But this causes difficulty for the cotenants if the mortgagor later pay off the mortgage and the parties actually did intend to hold joint tenants and not as tenants in common. Therefore, other jurisdictions find no severance. A third school of thought finds a severance solely to the extent necessary to protect the mortgagee, and would not apply the severance to the properties following the discharge of the mortgage. The editor has questioned the notion of "protecting the mortgagee" here, since the mortgagee theoretically is or should be aware of the joint tenancy when it makes the loan, and consequently is undeserving of any special treatment that might limit the rights or expectations of the joint tenants.
But the case at hand is a much easier one, because the parties are already engaged in the process of separating their interests.
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