The Washington State Supreme Court relied heavily upon the writings of Pepperdine's William H. Rehnquist Professor of Law, Grant S. Nelson, and Dale A. Whitman, the James E. Campbell Endowed Professor of Law at the University of Missouri - Columbia, in its recent opinion in the case of Bank of America, N.A. v. Prestance Corporation.
The opinion cites an article professors Nelson and Whitman wrote entitled, "Adopting Restatement Mortgage Subrogation Principles: Saving Billions of Dollars for Refinancing Homeowners," which was published in the Brigham Young University Law Review. The restatement section referenced is the American Law Institute's Restatement of Property (Third): Mortgages--on which professors Nelson and Whitman were co-reporters.
Bank of America, N.A. v. Prestance Corporation examined the issue of lenders recovering money when multiple loans in default are secured by the same foreclosed property. In the case, Sakae Sugihara had a first mortgage secured by her home from Washington Mutual, and a second mortgage from Bank of America also secured by the same home. Subsequently, she sought a loan from Wells Fargo Bank West that would be used in part to pay off the first mortgage. Through this arrangement, Wells Fargo expected to take the position of Washington Mutual, having first priority to recover upon loan default. At the same time, Bank of America claimed that Wells Fargo was aware of the second mortgage held and should not be allowed to assume first priority.
A section of the restatement explains that if a subsequent lender pays off the first mortgage it generally may take the position of having first priority of payment in the case of a defaulted loan. Furthermore, it does not matter whether the later lender is aware of other loans secured by the same property.
In Bank of America, N.A. v. Prestance Corporation, the court adopted professors Nelson and Whitman's reasoning in its findings that Wells Fargo's knowledge of Bank of America's prior loan secured by Sugihara's property was irrelevant. The court further concluded that allowing Wells Fargo to have first priority for recovery in a defaulted loan situation did not put Bank of America in any worse position than it would have been had Wells Fargo not paid off the Washington Mutual loan.
Professors Nelson and Whitman discount any argument that the title insurance industry will be harmed by adoption of the restatement rule. As the Washington State Supreme Court stated, "Nelson and Whitman spoke with 'a variety of executives representing major title insurance companies and mortgage lenders from all geographic areas of the country. . . Their comments were unanimous in one important respect-they supported either judicial or legislative adoption of the Restatement subrogation rule.'"
Professor Nelson is widely considered one of the leading real estate law professors in the country--publishing numerous books and articles on real estate finance law, property, and remedies. His works include: Real Estate Transfer, Finance and Development (with Dale A. Whitman) 7th ed. St. Paul: West Group (2006); Real Estate Finance Law (with Dale A. Whitman) 4th ed. St. Paul: West Publishing (2002); and Contemporary Property (with W. Stoebuck and Dale A. Whitman) 2nd ed. St. Paul: West Publishing (2002).