Appeals court applies doctrine of equitable subrogation to uphold
Where one party refinances a mortgage loan secured by a home owned by
two people, the other party is not immune from foreclosure on the
By Joe Forward, Legal Writer,
State Bar of Wisconsin
17, 2011 – After the brother defaulted on a separate mortgage
loan, the District I Wisconsin Court of Appeals recently applied the
doctrine of equitable subrogation to uphold a foreclosure judgment
against his sister’s interest in a home they both owned.
Nora Dallas and Fredie Rogers, brother and sister, obtained a
quit-claim deed to their mother’s home. In 2003, both executed a
mortgage and mortgage note on the acquired home with Fair Finance
Corporation (Fair Finance) so Rogers could buy a different house.
In 2004, Rogers refinanced with Wachovia Mortgage (Wachovia), formerly
known as World Savings Bank. This loan, secured by a mortgage on the
home Rogers owned with Dallas, discharged the Fair Finance mortgage.
Dallas was not a party to the new loan.
Then Rogers defaulted on the Wachovia mortgage, and Wachovia brought a
foreclosure action against Dallas’s interest. The circuit court
granted summary judgment to Wachovia. Dallas appealed, arguing
foreclosure was not warranted because she did not sign the Wachovia
Mortgage v. Dallas, 2010AP1359 (March 15, 2011), the appeals
court affirmed the circuit court based on the doctrine of equitable
subrogation, ruling that “Wachovia is entitled to foreclose on
Dallas’s interest in the house because the encumbrance on that
interest was discharged by the [Wachovia] loan.”
Noting that subrogation is an equitable doctrine invoked to avoid
unjust enrichment, Judge Ralph Fine explained that Wachovia “paid
the debt for which Dallas was liable.”
“Indeed, if Dallas were able to retain her interest in the
property she and Rogers mortgaged as security for the Fair Finance loan
despite the fact that the Fair Finance mortgage was satisfied by the
[Wachovia] loan, she would be unjustly enriched at Wachovia’s
expense,” Judge Fine wrote. “Wachovia steps into Fair
Finance’s shoes, and there is nothing unfair about this
Fine explained that equitable subrogation does not require a
contractual relationship, so it was immaterial that Dallas did not sign
the Wachovia mortgage or note.