Can a home mortgage be enforced if only one spouse signed it? The answer is, “it depends,” according to two recent decisions by the Minnesota Court of Appeals.

Under the “two-signature rule” of Minn. Stat. § 507.02, if the homeowner is married, then the home cannot be mortgaged or sold without the signatures of both spouses. It has been said that the purpose of the statute is to ensure a secure homestead for families and to protect against the sale of a homestead without the willing signatures of both spouses. The statute has a one-signature exception for purchase money mortgages, that is, a mortgage securing the payment of all or part of the purchase price of the home. For such mortgages only one spouse’s signature is required.

In the December court of appeals decision of Gores v. Schultz, the court voided a mortgage that was signed by the husband who also forged his wife’s signature. In the January decision of National City Bank v. Engler, the court upheld a mortgage that was signed only by the husband as “Borrower.” Here’s how the court arrived at these divergent results.

Court voids mortgage where husband forged spouse’s signature

In Gores v. Schultz, Mr. and Mrs. Schultz bought a house and several months after the purchase, Mr. Schultz signed and delivered a note and mortgage to a realtor who had loaned the couple money for the down payment. Mr. Schultz had signed Mrs. Schultz’s name on the documents, apparently without her knowledge. The Schultzes then sold the house to a new owner who borrowed money from two different banks to fund the transaction. The two banks took mortgages on the house, unaware that Mr. Schultz had given a mortgage on the property to his realtor (the realtor recorded the mortgage only the day before the Schultzes sold the house, which is apparently why this mortgage was not discovered by the banks). The two bank mortgages and the realtor’s mortgage went into default and litigation followed.

The banks challenged the validity of the realtor’s mortgage under the statutory two-signature requirement, arguing that since only Mr. Schultz had signed the realtor’s mortgage and forged his wife’s signature, it was void and unenforceable. The realtor argued that her mortgage was enforceable because (a) it had two signatures and the realtor did not know that the wife’s was forged, (b) the wife approved the mortgage by later consent and conduct, and (c) the one-signature exception for purchase money mortgages applied.

The court of appeals rejected all the realtor’s arguments and voided the mortgage. As to the “two signatures” argument, the court said that there is no authority for enforcing a mortgage for the reason that the realtor did not know that Mrs. Schultz’s signature was forged. The court relied on the general rule that forgery renders a document void and further noted that the evidence conflicted on whether the realtor knew that Mrs. Schultz’s signature was forged.

The court rejected the second argument that Mrs. Schultz later approved or consented to the mortgage because this argument was not raised until after the trial and there was no evidence in the record that Mrs. Schultz gave her later consent or approval.

The court rejected the third argument that the exception allowing one-signature for purchase money mortgages applied because Mr. Schultz gave the realtor the mortgage months after the closing on the house. This time gap violated the requirement that while the mortgage and the deed do not need to be executed on the same day, they both must be part of “one continuous transaction.” The court said that the Schultzes’ purchase and the later mortgage were not part of one continuous transaction because the evidence showed that Mr. Schultz did not agree to give the mortgage until after the closing and the mortgage was not in fact given until months after the closing.

Court enforces mortgage signed only by husband as “Borrower”

In contrast, the court of appeals held in the January 2010 case of National City Bank v. Engler, that a mortgage that had been signed by only one spouse as “Borrower” could be enforced. Mr. and Mrs. Engler refinanced their home in a transaction where Mr. Engler signed the note and mortgage as “Borrower” and Mrs. Engler signed on a signature line identifying her as “Non-Borrower, signing solely for the purpose of waiving any and all Homestead Rights.” After Mr. Engler died and the mortgage went into default, the bank foreclosed. Mrs. Engler argued that the mortgage could not be enforced under the two-signature rule because she had not signed the note and mortgage as a Borrower.

The court disagreed because Mrs. Engler’s signature on the documents expressly indicated that she was waiving her homestead exemption rights under Minnesota law. As the court stated, “A party who waives the homestead exemption waives the right to be exempt from seizure or sale of the homestead under Minn. Stat. § 510.10. A party who waives all homestead rights arguably also waives the protection of Minn. Stat. § 507.02, that one spouse may not convey the homestead without the signature of the other spouse.” Accordingly, the difference between Engler and Gores is that in Engler, the non-signing wife actively and knowingly participated in the transaction by expressly signing a waiver of her homestead rights, while in Gores, the wife had no knowledge of the mortgage transaction, her husband having forged her signature.