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The Court of Appeals for Hamilton County, Ohio issued a decision¹ on December 23, 2015, in direct contradiction to a decision² rendered by the Court of Appeals for the adjacent Butler County a year earlier, on virtually identical facts. Both cases dealt with a mortgage holder's right to foreclose after the death of the sole signer of a mortgage on property owned jointly with a right of survivorship.

The Facts of the Cases

In the Butler County case, Gaines and Wilding acquired title to the property jointly with a right of survivorship, and subsequently became married. Gaines was the only signer of the note and the mortgage, but Wilding signed neither. After Gaines died, the creditor sought to foreclose, claiming that Gaines' former interest in the property remained subject to the mortgage.

In the Hamilton County case, Vernon and Theresa Brown acquired title to the property jointly with a right of survivorship. Theresa alone signed the note, and her typewritten name on the mortgage was followed by a handwritten notation "married to Vernon Brown who signs with the sole intent of releasing dower." Theresa signed the signature line above her typewritten name, and Vernon's signature appeared only at the bottom of the mortgage.³ Theresa passed away while the foreclosure case was pending. 

The Issue

Did the surviving owner own the property free and clear of the mortgage, or subject to the mortgage on the decedent's former one-half interest?

The Ohio Statute on Survivorship Tenancy⁴

In Ohio, a survivorship tenancy is created when a deed transfers title to two or more people "for their joint lives, remainder to the survivor of them" or other language showing a clear intent to create a survivorship tenancy. The grantees of such a deed each hold an equal share during their joint lives. A creditor may foreclose on the interest of one or more survivorship tenants by an action to foreclose against the interest of the mortgage signer. In other words, if the property is owned by a husband and wife jointly with a right of survivorship, and only one spouse signed the mortgage, the mortgage holder may foreclose on the mortgage signer's one-half interest in the property. However, the statute is open to interpretation if the sole mortgage signer dies. The two courts reached opposite conclusions in their applications of this statute to the question of whether the death of a joint owner results in a transfer, or an extinguishment, of the decedent's interest.

The Butler County court held that under Ohio law a mortgage does not convey title, but is merely a lien. Hence, when the mortgage signer spouse died, the survivor acquired the decedent's half-interest in the property, subject to the mortgage. Under this court's interpretation, the statute "clearly" provides a procedure for creditors to enforce a mortgage given by only one survivorship tenant. The court stated that to deny foreclosure after the mortgage-signing spouse's death would create commercial uncertainty and allow debtors to avoid claims of creditors simply by the way property is held.

To the contrary, the Hamilton County court held that the mortgage lien was conditioned on the mortgage grantor surviving the other owner, and when the mortgage grantor died, both her interest in the property, and the mortgage, were terminated. The court relied on an Ohio Supreme Court case⁵ pertaining to bank certificates of deposit, under similar circumstances⁵,  and stated that under the "plain terms" of the statute and general principles of Ohio law, the mortgage was extinguished upon the mortgage grantor's death. This court was not persuaded that its decision would create commercial uncertainty and be unfair to mortgage lenders, because this is a rare occurrence, and the lender is negligent if it accepts a mortgage from one joint tenant without ensuring that its mortgage would create an unconditional lien.     

The Lesson for Lenders

A lender intending its loan to be secured by real property in Ohio can easily see from a title exam prior to closing the loan, whether the title to the property is held jointly with a right of survivorship with persons other than the borrower. In such a case, the lender should require either: (1) that all of the title holders join in signing the mortgage as grantors (not merely releasing their dower interest as was done in the Hamilton County case), or (2) that the borrower to obtain title to the property in the borrower's sole name, prior to the closing of the loan. 

Entering into a loan modification agreement presents another good opportunity for the lender to review the title, to ensure that either all owners of property held in a survivorship form have either signed the mortgage or will sign a new mortgage (although a new mortgage might not have priority over intervening liens), or that the borrower acquire title in the borrower's sole name. In the Hamilton County case, the mortgage holder had entered into a loan modification agreement, but failed to take advantage of this opportunity, and ended up suffering a total loss of the balance due on the debt.