WVMF Funding v. Palmero

Spouses Robert Palmero and Luisa Palmero (defendant) owned a home in Florida. Robert obtained a loan secured by a reverse mortgage on the property. Under the loan, OneWest Bank, FSB (OneWest) (plaintiff) provided funds to Robert, and repayment was due upon the occurrence of a triggering event, such as Robert’s death. Both the note promising repayment and the reverse mortgage securing repayment stated that OneWest’s ability to enforce the loan via a sale of the property was conditioned on a borrower’s death and the property no longer being the principal residence of any surviving borrower. Robert alone signed the loan application and the note, and the note expressly defined the term borrower to mean only persons who signed the note. Both Robert and Luisa signed the reverse mortgage, with Luisa’s signature being necessary because she too had an ownership interest in the home. Although Robert’s and Luisa’s signatures both appeared in signature blocks for borrowers, the mortgage expressly referred to the note as the instrument it was securing and itself expressly defined the term “borrower” to mean only Robert. Sometime after the loan was entered into, Robert died, triggering the repayment obligation. When his estate failed to make payment, OneWest initiated an action to foreclose on the home. Luisa and her two adult children (defendants) opposed the foreclosure, arguing that it was not permissible under the note and mortgage because Luisa, who had signed the reverse mortgage, constituted a surviving borrower and the home remained her principal residence. OneWest argued that Luisa was not a borrower as defined in the loan documents and her ongoing residence in the home therefore did not prevent foreclosure. The trial court concluded that Luisa was not a borrower but nevertheless denied foreclosure based on a federal statute protecting the homestead rights of surviving spouses. The state appellate court rejected the trial court’s reliance on the federal statute but affirmed the denial of foreclosure because it concluded that Luisa was a borrower under the reverse mortgage and her ongoing residence thus prevented OneWest’s enforcement action. WVMF Funding (plaintiff), which had acquired OneWest, appealed.