Magney v. Lincoln Mutual Savings Bank

The issue in this case is whether a state chartered mutual savings bank may enforce a "due-on-sale" provision in a deed of trust when the borrower later assigns his interest in the property and there is no increased risk to the lender.

In 1977, plaintiffs Richard and Lynn Magney purchased a 4-family dwelling. To finance the purchase price of $76,000, Magneys borrowed $55,000 from defendant Lincoln Mutual Savings Bank. They signed a promissory note at 9 V2 percent interest for 25 years, which note was secured by a deed of trust. The Magneys also executed a mortgage of $8,000, junior to the deed…