Watts v. HSBC Bank US Trustee
308 P.3d 57
Mont.2013Background
- On Nov. 8, 2006 Watts sold property to David and Debra Marion; PrimeLending financed $248,000 and Watts loaned $62,000; Watts signed a subordination agreement subordinating his loan to PrimeLending's loan.
- Nov. 15, 2006 deeds: PrimeLending deed of trust, Watts deed of trust, and subordination recorded; First American Title Company recorded related documents on Nov. 17, 2006.
- May 1, 2009 Marion defaults; PrimeLending assigns its interest to HSBC on Aug. 11, 2009; trustee sale notice mailed but not received by Watts; sale published and posted at the property.
- Feb. 22, 2010 trustee’s sale; HSBC purchases property for $260,000 and records trustee’s deed on Feb. 23, 2010; Watts later forecloses his own lien but does not obtain property at that time.
- Watts files suit March 22, 2011 seeking to quiet title; HSBC counterclaims; district court grants Watts summary judgment in 2012, then Watts appeals; this Court reverses and remands.
- Key legal question: whether the PrimeLending- HSBC assignment affected the first-priority lien status; the court holds assignment does not defeat PrimeLending’s priority under the subordination agreement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether assignment of PrimeLending's mortgage to HSBC preserved PrimeLending's first-priority lien over Watts. | Watts: assignment prevents priority; HSBC not intended beneficiary. | HSBC/Watts: assignee steps into assignor's shoes; subordination unchanged; HSBC entitled to PrimeLending's priority. | Assignment did not defeat priority; HSBC holds first-priority lien. |
Key Cases Cited
- Hull v. Diehl, 21 Mont. 71 (1898) (assignment transfers mortgage title; does not create a new lien)
- Mort v. U.S., 86 F.3d 890 (9th Cir. 1996) (assignee obtains all powers and rights of assignor)
- Schelling v. Thomas, 274 P. 755 (Cal. App. 1st Dist. 1929) (assignee takes same priority as assignor)
- Berger v. Baist, 6 P.2d 412 (Wash. 1931) (priority remains with original lien holder after assignment)
- Finlayson v. Waller, 134 P.2d 1069 (Idaho 1943) (assignment of mortgage does not disturb priority)
- Bank Western v. Henderson, 874 P.2d 632 (Kan. 1994) (assignment does not affect mortgage priority)
- Fannie Mae v. Kuipers, 732 N.E.2d 723 (Ill. App. 2d. Dist. 2000) (assignment does not affect priority of mortgage)
- Credit Serv. Co. v. Crasco, 2011 MT 211 (Mont. 2011) (assignee stands in the shoes of assignor)
- Massey-Ferguson Credit Corp. v. Brown, 173 Mont. 253 (Mont. 1977) (contract rights are generally assignable)
- Winslow v. Dundom, 46 Mont. 71 (Mont. 1912) (contracts rights are generally assignable unless prohibited)