Earlier this month the Appeals Court ruled that a widow was not liable for a home loan her husband received prior to his death. Wells Fargo Bank v. Comeau
The facts of the case were as follows.
– William and Nancy Comeau were joint owners of a house in Groveland, Mass.
– In 2003 William received a loan from Haverhill Cooperative Bank (Haverhill). Both William and Nancy signed the mortgage.
-In 2005, William refinanced the loan with Wells Fargo. Only William signed the mortgage.
– Part of the money from the refinance was used to pay off the 2003 Haverhill mortgage.
-William died in 2008 and Nancy took full ownership of the home.
-William’s estate defaulted on the mortgage payments.
– Because only William signed the mortgage, Wells Fargo was unable to foreclose on the home.
The bank, therefore, brought an action seeking equitable subrogation.
The bank’s attorney argued that Wells Fargo assumed all the rights that Haverhill had over the property because Wells Fargo paid off Haverhill’s 2003 loan.
Both William and Nancy signed the Haverhill mortgage.
Thus, if the court allowed Wells Fargo’s request for equitable subrogation, the bank could foreclose on the home and wipe out Nancy’s ownership.
The Appeals Court denied the bank’s motion.
The court had two rationales for its decision:
[t]he question in such cases is whether [Wells Fargo] reasonably expected to get security with a priority equal to the mortgage being paid… there are no facts in the record to support Wells Fargo’s claim that [it] intended to hold a mortgage on the entire property, not subject to Nancy’s right of survivorship.
[s]ubrogation to a mortgage is usually of importance only when a subordinate lien or other junior interest exists on the real estate…If no such interest existed, the subrogee could simply sue on the obligation, obtain a judgment lien against the real estate, and execute on it…Here, although the 2005 mortgage was extinguished upon William’s death, when his interest in the property passed to Nancy, Wells Fargo still held the 2005 note secured by that mortgage. It could have made a claim against William’s estate for the balance of the note, but chose not to. In our view, the law does not allow Wells Fargo to enlist the aid of the court to transfer to Nancy the obligation of William to pay the note, simply because that is Wells Fargo’s only remaining avenue to recover its funds.
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