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BAC Home Loans Servicing LP v. Savankham (Misc. 11-457188) (November 21, 2016)

Link: BAC Home Loans Servicing LP v. Savankham (Misc. 11-457188) (November 21, 2016)

Judge:  Speicher

Keywords: mutual mistake, mortgage, reformation, declaratory judgment, quiet title, equitable subrogation

Issue:  Whether a mortgage is binding on co-owners of a property who never executed a mortgage under the theory of equitable subrogation.

Holding:  Under the circumstances, even though the co-owners are not junior lienholders, the theory of equitable subrogation applies but the plaintiff has failed to establish that fifth and final element of the doctrine, that is, that the “(5) Subrogation [would] not work any injustice to the rights of others.”

Reasoning: “[T]he plaintiffs offered no other evidence at trial concerning the two mortgage loans. The trial record is devoid of information concerning the interest rate on either loan, the monthly payments on either loan, the term of the 2003 loan (the 2007 loan was on a thirty-year amortization schedule), and whether mortgage insurance, insurance escrow or tax escrow, or other non-interest costs were features of either loan. Any of these factors may have affected the relative burden of the two loans. If, for instance, the interest rate and other features of the 2007 loan required significantly higher payments than the corresponding features of the 2003 loan, it may be that subrogating the 2007 mortgage to the position of the 2003 mortgage would work a significant injustice to DeLeon and Bounphasaysonh by subjecting them to significantly stiffer loan obligations than those in the 2003 loan, all imposed without their knowledge of the making of the loan, without their consent to more onerous terms, and without any relative benefit to them from the replacement of the 2003 mortgage with the new mortgage.”