The Docket: Equitable Subrogation May Be Applied to Series of Prior Payoffs

February 15, 2018

The Docket is a monthly TitleNews Online feature provided by ALTA’s Title Counsel Committee, which reviews significant court rulings and other legal developments, and explains the relevance to the title insurance industry.

Michael N. Russo Jr., director of the law firm Council Baradel, reviews a recent decision by the U. S. District Court that addressed whether equitable subrogation can be applied to previous refinances. He can be reached at

Citation: WELLS FARGO BANK, N.A., as trustee v. FIRST AMERICAN TITLE INSURANCE CO., 2017 WL 3868693; WMN-15-2882 (D. Md. 9/5/2017)

Facts: Insured sued title insurer for denying a claim because it was filed too late. Insured’s lien was extinguished in a foreclosure proceeding on the subject property. After ratification of the foreclosure, the insurer filed a claim for their defective lien. The insurer argued that denial was appropriate because it suffered actual prejudice from the late filing which prevented it from challenging the priority of insured lien in the foreclosure action. Among the theories which could not be asserted after the final ratified sale was the opportunity to assert the superiority of the insured lien by applying equitable subrogation to a series of refinancings.

Holding: After noting that there are no cases in Maryland applying the doctrine of equitable subrogation to a series of refinancings, the U. S. District Court noted that the doctrine of equitable subrogation is “a highly favored doctrine and expansively applied” in Maryland. Thus, the court determined that it was appropriate to look favorably on holdings in other jurisdictions which permitted equitable subrogation to apply, not only to the specific loan paid off at closing, but also to adopt the priority that paid off loan would occupy if it to was equitably subrogated to the loan that it paid off at an earlier refinancing.

Importance to the title industry: Applying equitable subrogation to earlier generations of refinancings permits the title industry to look further back to gain a priority position thus strengthening our ability to obtain priority equitably when there are legal defects in the present lien position

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