National City Bank,


Judith M. Engler,

Estate of Harold P. Engler,

Minnesota Court of Appeals
Filed January 26, 2010
File No. A09-837

Judith and Harold Engler obtained a mortgage loan from First Franklin Financial Corporation on their homestead. The loan was later assigned to National City Bank. The loan was used to pay off the existing mortgage against the homestead and various debts, including state and property taxes and Judith’s personal debts.

When applying for the mortgage, Judith signed preliminary documents as a potential borrower. At closing, only Harold signed the note and mortgage despite the fact that Judith was present. Harold and Judith were identified as borrowers in the mortgage, but Harold signed as “Borrower” and Judith signed as “Non-Borrower.” Below Judith’s signature was the language “Signing solely for the purpose of waiving any and all Homestead Rights.”

Harold died and Judith stopped making mortgage payments. National City Bank began foreclosure proceedings. The district court found the mortgage was void under Minn. Stat. § 507.02 because it was made without the signatures of both spouses. National City Bank appealed.

Minn. Stat. § 507.02 provides that if the owner of a homestead is married, both spouses must sign the mortgage unless it is a purchase money mortgage. Without the signature of both spouses, the transaction is void. The mortgage at issue was not for purchase money, was secured by a homestead, and the Englers were married. The court determined that Judith’s signature immediately followed by “Non-Borrower” was not sufficient.

The appellate court reversed the findings of the district court. A party that waives all homestead rights waives the protection of Minn. Stat. § 507.02. When looking at a contract to determine if a party has waived their rights, all provisions must be considered. The appellate court concluded that all provisions of the contract indicate that Harold signed the note and mortgage conveying the homestead and Judith consented to the conveyance by waiving her homestead rights. Judith consented to, had full knowledge of, and retained the benefits of the transaction.

A mortgage conveyance of a homestead is generally void under Minn. Stat. § 507.02 if both spouses do not sign the conveyance. When the non-signing spouse actively and knowingly participates in the transaction and waives his or her homestead rights under Minn. Stat. § 507.02, the mortgage may be enforced.

The complete opinion of the appellate court can be found at: http://www.lawlibrary.state.mn.us/archive/ctappub/1001/opa090837-0126.pdf.

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