Enforcing a Mortgage Against a Non-signing Spouse

When a couple takes out a mortgage loan but one of the two does not sign the mortgage, can the lender foreclose on the mortgage in the event of default on the loan?

It would appear not, under Minnesota statutory law, at least. Minn. Stat. 507.02.

Wells Fargo, however, is now appealing just such a finding by U.S. District Court Judge Ericksen. Oral argument before the Eighth Circuit was February 13. Joel Karnitz v. Wells Fargo, N.A., Ct. File No. 08-2100 (8th Circuit, 2009).

Wells Fargo relies on Minnesota Supreme Court case law (Seitz, Fuller) which, it argues, should control — i.e., equitable estoppel — rather than the plain meaning of the Minnesota statute. Wells Fargo’s “extra-legal” argument to the Eighth Circuit: if you rule for the Karnitz couple, they will get their home “free and clear” notwithstanding the fact that the record is clear that Ms. Karnitz was fully aware of the mortgage loan and the absence of her signature could only be seen as an oversight. As one judge on the panel editorialized, “That seems to be extraordinarily inequitable.”

This is a straight-forward case of rigid statutory interpretation vs. a more nuanced judicial statutory interpretation, taking fairness, policy, and, arguably “common sense” into account. Interestingly, this is a case where a so-called conservative jurist who would normally subscribe to a strict statutory reading might be sympathetic to the lender and a so-called liberal, perhaps inclined to favor the home-owners, might invoke the “strict statutory interpretation” that liberals normally eschew.