October 2011 Vol. 4, No. 9




Wachovia Mortgage, FSB v Dallas, 332 Wis 2d 426, 797 NW2d 930, 2010 AP 1359 (Wis Ct App 2011).

Facts:Nora Dallas and her brother, Fredie Carl Rogers, took out a mortgage from Fair Finance Corporation on a house they co-owned. One year later, Rogers took out a loan from Wachovia Mortgage (then professionally known as World Savings Bank) and secured it by mortgaging the property co-owned with Dallas. The Wachovia loan paid off the Fair Finance loan. Dallas had signed the mortgage and the mortgage note with Fair Finance but did not sign either document with Wachovia.

When Rogers defaulted on the loan, Wachovia brought a foreclosure action that included Dallas&€™ interest in the property. Wachovia did not seek a deficiency judgment against Dallas; any judgment against Dallas would affect only her interest in the property and not her personal assets. The circuit court granted summary judgment in favor of Wachovia. Dallas appealed, arguing that because she did not sign the mortgage with Wachovia she should not be subject to the foreclosure action.

Holding:Affirmed. The court of appeals held that summary judgment was appropriate because no facts were in dispute and as a matter of law Wachovia was entitled to foreclose on Dallas&€™ interest in the property. The court held that because the Wachovia loan paid off the Fair Finance loan, Dallas was subject to the mortgage regardless of whether she signed the note. The court based its holding on the doctrine of equitable subrogation. The doctrine may be applied "whenever a person other than a mere volunteer pays a debt which in equity and good conscience should be satisfied by another."Rock River Lumber Corp v Universal Mortgage Corp of Wisconsin, 82 Wis 2d 235, 262 NW 2d 114 (Wis 1978).

Wachovia assumed Dallas' debt to Fair Finance by paying off the Fair Finance mortgage with the loan to Rogers. Dallas would be unjustly enriched if she were allowed to avoid foreclosure on her interest in the property, because she did not satisfy her loan from Fair Finance. Therefore, the court may invoke the doctrine of equitable subrogation and allow Wachovia to foreclose against Dallas.

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[Last update: 10-18-11]