Harms v. Sprague
473 N.E.2d 930 (1984)

  • Harms and his brother owned some property in joint tenancy. The brother died. The brother’s executor (Sprague) refused to give title to the land to Harms, since there was a mortgage, and the lender (Simmons) claimed title to the brother’s interest in the land as collateral for the mortgage. Harms sued to quiet title.
    • In a joint tenancy, if one partner dies, their property interest dissolves and is automatically split up between the remaining partners (in this case just Harms).
    • Actually, Simmons had loaned money to Sprague and the brother had cosigned for Sprague’s loan. So Sprague had an interest in what happened, he wasn’t a neutral party. (Sprague was also got everything in the brother’s will.)
    • Harms was unaware that his brother had entered a mortgage agreement on their property.
  • The Trial Court found for Sprague. Harms appealed.
    • The Trial Court found that when the brother took out a mortgage, the joint tenancy was severed.
      • A joint tenancy is automatically severed under certain conditions. A joint tenancy requires all the partners have the same four things in common: time, title, interest and possession. If one of those is broken, the property becomes a tenancy in common.
        • A tenancy in common can be given away in a will, a joint tenancy cannot.
    • The Court also found that the mortgage survived the death of the brother.
  • The Appellate Court reversed on both issues. Sprague and Simmons appealed.
    • The Appellate Court found that the joint tenancy was not severed.
    • The Court found that the mortgage did not survive the brother’s death.
  • The Illinois Supreme Court.
    • The Illinois Supreme Court looked to previous case law and found that a mortgage does not sever a joint tenancy, unless the loan goes into default and the property is seized by the lienholder.
      • A joint tenancy must maintain unity of title. In this case, the brother never lost title to his interest in the property.
      • If the brother had defaulted on the loan prior to dying, then Simmons would have acquired the brother’s interest in the title.
        • If Harms had died and then the brother defaulted, Simmons might have acquired the entire title of the house, since the brother would have acquired Harms’ interest.
    • The Court found that the mortgage did not survive.
      • The whole concept behind joint tenancy is that upon death that person’s interest dissolves. Nothing is transferred to the other partners. The mortgage is connected to the brother’s interest in the property. That interest was not transferred to Harms, it just disappeared. So the collateral the mortgage was based on doesn’t exist anymore.
  • The bottom line is, don’t take property held in joint tenancy as collateral on a loan because that collateral only exists while the person is alive and if they die, you can’t recover!
    • Make them file a paper conveying their interest from a joint tenancy to a tenancy in common. Then their interest survives their death and you can recover.