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Sovereign Bank v. Gillis

Appellate Division of the Superior Court of New Jersey
74 A.3d 1 (2013)


Joseph and Eulalia Gillis (defendants) bought real property with a mortgage loan from Washington Mutual Bank, FA (WaMu). Subsequently, the Gillises obtained a home equity line of credit from Independence Community Bank (Independence). The Gillises refinanced their WaMu mortgage through WaMu, using this second WaMu mortgage to pay off the debt from the first WaMu mortgage and the Independence line of credit. However, the Independence mortgage was not officially discharged. As a result, the WaMu-refinanced mortgage loan was recorded behind Independence’s lien even though the Independence debt was fully paid. Subsequent to this recording, the Gillises borrowed additional funds using the Independence line of credit. The Gillises eventually defaulted on both the second WaMu and the Independence mortgages. The WaMu mortgage was assigned to Deutsche Bank National Trust Company (Deutsche) (plaintiff), and the Independence mortgage was assigned to Sovereign Bank (Sovereign) (plaintiff). Deutsche and Sovereign each filed a foreclosure action against the Gillises. Deutsche and Sovereign moved for summary judgment against each other, each claiming that its interest had priority. The trial court granted summary judgment to Sovereign. The court found that since WaMu had actual knowledge of Independence’s line of credit when it refinanced the Gillises’ loan, WaMu was not entitled to equitable priority. Deutsche appealed.

Rule of Law


Holding and Reasoning (Sabatino, J.)

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