Equitable subrogation: the evolution of the volunteer and the continued irrelevance of constructive notice.
The doctrine of equitable subrogation, particularly as applied to priority of mortgage liens, has long been a tool used by real property litigators seeking to rectify or mitigate priority issues caused by defectively executed or recorded mortgages. As a general rule, equitable subrogation is available to substitute (subrogate) a refinancing lender to the position of the mortgage or lien that the lender satisfied. The later lender, who anticipated taking the subrogated position when making the subject loan, is permitted to assume the lien priority of the loan it satisfied, notwithstanding its failure to gain de jur priority pursuant to Ch. 695's strict recording rules.
In 1933, the Florida Supreme Court set forth the general principles for the application of equitable subrogation in Florida, as specifically applied to mortgage liens and refinancing lenders:
[O]ne who makes a loan to discharge a first mortgage, pursuant to an agreement with the mortgagor that he shall have a first mortgage on the same lands to secure it ... will be subrogated to the rights of the first mortgagee, notwithstanding there is at the same time a second mortgage of which he (the lender) is ignorant. (1)
In stating this rule, the court considered the equitable basis for protecting the expectations of the intervening lien holder and the refinancing lender, reasoning that "[t]his rule works common justice to all; it prevents injury to [the refinancing lender] who furnished the money to pay off the first mortgage in ignorance of the second; it gives [the refinancing lender] the benefit of its payment, carries out the intention of the parties; and leaves ... the holder of the junior mortgage in his original position." (2)
Since Fed. Land Bank of Columbia v. Godwin, 145 So. 883, 885 (Fla. 1933), the Florida Supreme Court has not receded from this standard. Instead, the court has reiterated that the application of this standard is qualified only by the caveats that it is unavailable to volunteers (3) and should be applied only to the extent that no prejudice to the rights of intervening lien holders results. (4)
The district courts of appeal have followed suit, granting equitable subrogation to relieve a refinancing lender from the strict operation of Florida's recording statutes, (5) even in the face of a lender's negligence. (6) Under this doctrine, the refinancing lender will be subrogated to the value of the lien or obligation that was satisfied, including taxes paid upon the property to protect the security subject to the lien (7) and interest from the date the prior lien was satisfied. (8)
Despite the historical leniency afforded this doctrine by Florida courts, the recent turmoil affecting the Florida real estate market has rendered the question of priority one of immense importance--and increasing litigation. Pervasive over-leveraging of residential and commercial properties across the state has resulted in a glut of foreclosures, while simultaneous deflationary forces have acted to diminish, if not totally eliminate, the value of many inferior lien positions.
To that end, lien holders who intended to occupy a second priority behind existing first lien mortgages, and who may have previously acceded to subordination demands in recognition of their intended second lien positions, have been more active in challenging the subrogation rights of refinancing lenders whose mortgages are defective for any reason.
Under these circumstances, litigators representing the party seeking subrogation are increasingly being called upon to defend the argument that Boley v. Daniel, 72 So. 644 (Fla. 1916), a 1916 Florida Supreme Court opinion, limits the availability of equitable subrogation to refinancing lenders with constructive notice of an intervening lien and who have acted imprudently in taking the mortgage at issue.
This article will discuss Boley, and explain how Boley was intended to affect and limit the doctrine of equitable subrogation by precluding its availability to volunteers. It will then explain how Boley's applicability was altered by three Florida Supreme Court cases rendered in 1933, which collectively redefined the Boley conception of a volunteer. It will conclude by addressing Picker Fin. Group, LLC, v. Horizon Bank, 293 B.R. 253 (M.D. Fla. 2003), the only case rendered in Florida since 1933 to interpret Boley to preclude subrogation based upon constructive notice, and will explain how the Picker court misconstrued and misapplied Boley, and why Boley should not be interpreted to preclude equitable subrogation premised on imputation of constructive notice to a refinancing lender.
In Boley v. Daniel, the appellant mortgagee, Daniel, made a loan to the mortgagor for the expressed purpose of satisfying an existing first mortgage against the subject property, under the belief (9) that no other liens existed. (10) Daniel had no pre-existing interest in and to the property, nor was he under any duty or obligation to satisfy the existing mortgage; he did so purely at the request of the mortgagor. (11) However, an intervening lien did exist, in favor of Boley, and the court was called upon to determine whether Daniel's mortgage should be equitably subrogated to the rights of the lien it had satisfied, and, thus, assume a superior priority to Daniel's intervening lien. (12)
In reaching its conclusion, Boley first discussed the two different forms of subrogation: legal subrogation (now commonly referred to as "equitable") and conventional subrogation. (13) Daniels attempted to avail himself of both aspects of the subrogation doctrine. (14)
The court addressed these doctrines sequentially. (15) It first summarily denied the availability to Daniel of equitable subrogation, under the singular premise that since "Daniel was under no obligation whatever to pay the note that was secured by the first mortgage on the property given by [the mortgagor] to [the first lien mortgagee], and had no interest in or relation to the property, there can be no legal subrogation of Daniel to the rights of the holder of the first mortgage." (16) The court later corroborated this justification as the sole predicate for denying Daniel equitable subrogation, stating that "[b]eing under no duty, legal or otherwise, to pay the first mortgage debts, Daniel is not entitled to a legal subrogation to the prior right that had existed in favor of the first mortgage holder." (17) It is clear, looking at these quotes in the context of the opinion, that the court's determination that Daniel had constructive notice of the existence of Boley's lien was not a predicate for the denial of equitable subrogation.
The court then moved on to the applicability of conventional subrogation, explaining that conventional subrogation requires that an assignment or similar agreement to maintain existing priorities and keep existing security alive must be in existence. (18) In response to Daniel's argument that he intended to occupy a first lien priority, and, thus, be superior to Boley's lien, the court explained that Daniel could not claim an implied agreement that he would occupy a "first lien position" over the Boley mortgage because, if Daniel had intended to do so, he would have included a reference to the Boley mortgage in the recorded satisfaction of mortgage. (19) The court reasoned that if Daniel had intended to keep the first lien security alive and, thus, assume its priority, he would have referenced the Boley lien in the recorded satisfaction; since he did not, and had constructive notice of its existence, the logical conclusion was that Daniel had formulated no such agreement or intent. (20) Thus, Daniel's argument for conventional subrogation was rejected.
As a result of Daniel's inability to recover under either equitable or legal subrogation, the court held that, "[w]hen a first mortgage lien existing against real estate is paid off, the lien of a second mortgage thereon becomes at once, by operation of law, a first lien on the property." (21)
As seen above, there were two separate holdings in Boley: one pertaining to equitable subrogation, and one pertaining to conventional subrogation. The court's holding as to conventional subrogation was clear: Because Daniel could not prove that there was an agreement to keep the first lien security alive (largely due to his constructive knowledge of the existence of the Boley lien and his failure to reference the Boley lien in his recorded cancellation), he could not recover under a theory of conventional subrogation. (22)
The court's holding as to equitable subrogation can be broken down into two subordinate holdings: 1) equitable subrogation is not available to volunteers; and 2) Daniel, a third-party refinancing lender with no prior interest in the property or duty to pay the first lien debt, was viewed by the Boley court as a "volunteer." (23) As is clear from a reading of Boley, the constructive knowledge of Daniel was never applied as a predicate to refuse equitable subrogation.
The court's holding as to equitable subrogation--that it is unavailable to mere volunteers--remains a valid limitation on the availability of the doctrine. However, Boley's definition of a volunteer (which was applied to refuse equitable subrogation to Daniel) was abrogated by three 1933 decisions--Godwin, Dekle, and Brannon--and no longer applies to prohibit a refinancing lender from assuming the lien priority of a satisfied mortgagee.
In Godwin, the First National Bank of Perry (First National) took a first lien priority mortgage from the Godwins on July 13, 1926. (24) On September 6, 1926, the Godwins gave a second lien mortgage to Alderman. (25) On December 30, 1927, the Godwins executed a renewal and extension of the First National mortgage in favor of First National. (26) On August 28, 1928, the Godwins refinanced the second First National mortgage and gave a mortgage to Federal Land Bank of Columbia (Federal Land Bank). (27) Prior to satisfying the second First National mortgage in 1928, Federal Land Bank had no interest in and to the property, nor did the Federal Land Bank have any duty or obligation to satisfy the subject lien. (28)
A contest as to priority ensued when the Alderman and Federal Land Bank mortgages went into default. Alderman claimed first lien priority by operation of law under Boley, while Federal Land Bank claimed first lien priority under principles of equitable subrogation pursuant to the July 13, 1926, First National Mortgage, which the Godwins had renewed in 1927, and which Federal Land Bank had ultimately satisfied and released. (29)
As is clear, the Godwin case exhibited a crucial identity of key facts with those of Boley: Federal Land Bank occupied the same position relative to the land as had Daniel in Boley--a third-party refinancing lender whose only claimed interest in the property was that it had satisfied a superior lien thereon at the request of the mortgagor. (30)
However, whereas Daniel was denied equitable subrogation as a volunteer, the court in Godwin decreed no such prohibition, and permitted the identically situated lender to recover under a theory of equitable subrogation, stating broadly that
one who makes a loan to discharge a first mortgage, pursuant to an agreement with the mortgagor that he shall have a first mortgage on the same lands to secure it ... will be subrogated to the rights of the first mortgagee, notwithstanding there is at the same time a second mortgage of which he (the lender) is ignorant" (31)
This precept, permitting complete and unqualified ignorance by the refinancing lender of any intervening lien, clearly ignores the existence of constructive notice or a balancing of relative negligence as a bar to equitable subrogation. Instead, the court stated the principle justification for this rule, which survives to this day:
It would be grossly inequitable under such circumstances to hold that the appellant was not entitled, as against the holder of the second mortgage, to be treated as the assignee of the first mortgage, and thus by chance or fortune raise the second mortgage to the dignity of the first.... One of the first tests determining the application of this rule is whether or not subrogation to the place of the prior or retired lien puts the holder of the second lien in any worse position than if the prior lien had not been discharged. (32)
In opposition to the liberal rule applied in Godwin, the intervening lender argued that the matter was factually identical to Boley (which it was) and that the same rule applied therein should bar Federal Land Bank from recovering (which, had it been strictly applied, it should have).
In addressing the appellant's argument to this end, the court made a disorganized and fleeting attempt to distinguish Boley from Godwin, stating, inter alia, that Boley turned on the volunteerism of the refinancing lender who did not perform a title search, (33) whereas the lender in Godwin was not a volunteer, and its behavior was far more prudent. (34)
However, given the factual identities of Boley and Godwin (particularly considering that, based on the facts as stated in each case, both lenders had constructive notice of the intervening lien and there is no proof in the record that Daniel failed to search the public records), (35) the only true explanation for the court's action in Godwin is corroborated by Dekle and Brannon. In those cases, the court confirmed that it had altered its definition of volunteerism, so that lenders situated in the position of Daniel and Federal Land Bank were no longer encompassed by the disqualifying definition.
In Dekle, Federal Land Bank had refinanced a first lien intending to be in first position. However, Federal Land Bank was unaware of a previously recorded mortgage given to Dekle. (36) Dekle, of course, claimed priority by virtue of Boley. (37) Land Bank, consistent with its position in Godwin, claimed priority by virtue of having refinanced the lien that had been prior in right and time to the Dekle mortgage, even though the Dekle mortgage was clearly of record prior to the execution of Land Bank's mortgage. (38)
As in Godwin, the refinancing lender in Dekle occupied the same position as the refinancing lender had occupied in Boley. (39) It was a third party, stranger to title, with no legal duty to pay the debt at issue, but having satisfied same solely at the request of the mortgagor and with the intention of succeeding to the priority of the lien it satisfied. (40)
The court, again ignoring the classification of volunteerism that it had set forth in Boley, granted subrogation to the later mortgagee, and held that the Dekle facts were governed by the law stated in Godwin, which enunciated the liberal standard of equitable subrogation. (41)
Dekle also included a helpful special concurrence by Justice Brown, which confirms Godwin and Dekle's effect on Boley, and which bears significant note on this discussion. In this concurrence, Justice Brown recognized That
[w]hile the decision in this case, and in the recent case of ... Godwin ... have, in my opinion, the effect of overruling in part the case of Boley v. Daniel (citation omitted), I nevertheless concur. The opinion in Boley v. Daniel is a strong one. I had long regarded it as the last word on that subject. It was only after considerable study and investigation of the authorities that I became convinced that the [c]ourt would be justified in departing from it. I agree that ... if, in this case, we followed Boley v. Daniel, the decree of the court below would have to be affirmed ... but I also agree ... in holding that the Federal Land Bank is entitled to be subrogated to the lien of the first mortgage ... in accordance with the broader application of the principle of subrogation adopted by us on rehearing in the recent case of Federal Land Bank v. Godwin. (42)
This concurrence makes clear that the Dekle court explicitly recognized that, had it followed Boley, the court would have been compelled to find for Dekle. (43) It also confirms that the Dekle court did not ignore Boley's holding, but considered itself to be in accord with Boley to the extent that volunteerism remained a prohibiting factor in recovery under equitable subrogation--it was the Boley definition of volunteerism that the court had altered.
After Godwin and Dekle, therefore, it is clear that the Supreme Court intended to, and did, explicitly alter Boley's conception of a volunteer. Contrary to the protestations of those who would argue that Boley was never expressly overruled, (44) such action was unnecessary. The true holding of Boley remained unchanged: A volunteer is prohibited from seeking subrogation. What had changed was the court's definition of a volunteer. Nowhere is this alteration clearer than in the final case on subrogation issued that same year: Brannon v. Hills, 149 So. 556 (Fla. 1933).
A borrower, Brannon, gave a mortgage to a lender, Hills. (45) The proceeds of the loan were used to satisfy an existing mortgage on the property, but the mortgage was subsequently determined invalid based upon the marital status of the mortgagor. (46) Again, as in Dekle, the refinancing lender was a different party than the mortgagee that held the mortgage being refinanced and had no duty to satisfy the mortgage at issue; again, the court determined that this lender was not a volunteer and permitted subrogation. (47)
The court confirmed in no uncertain terms that a refinancing lender does not constitute a volunteer, and that the court has adopted the liberal view of subrogation:
In our recent decisions in ... Godwin ... and ... Dekle ..., this Court has definitely aligned itself with the prevailing rule now generally obtaining in the United States to the effect that one who loans money on a defective mortgage for the purpose of discharging a prior valid mortgage on the same property, where it is made to appear that the money is to be used for that purpose, is ordinarily entitled to subrogation to the rights of the prior mortgage. (48)
The court specifically addressed Boley, stating that "Boley v. Daniel ... related to payments by volunteers, pure and simple," (emphasis supplied) and that in cases like Godwin, Dekle and Brannon,
our holding has been that a person advancing money on an apparently good and sufficient new mortgage, to pay off an encumbrance which the money was being obtained to pay off, and which was used for this purpose, is not to be regarded as such a mere "volunteer" as to preclude the right of subrogation. (49)
Again, citing to Godwin, the court references equitable principles that undergird this premise, reiterating that subrogation had been greatly expanded in the nation as a whole, and "'may be employed to relieve from fraud or mistake' where it work(s) no injustice to the rights of innocent third parties." (50)
Conspicuously absent in Brannon, as in Godwin and Dekle, is any statement to the effect that constructive notice precludes the operation of subrogation, or any indication that relative negligence is a factor to consider in applying the doctrine. Such a rule was not applied in Boley, nor was such a rule adopted thereafter. Indeed, any such requirement or prohibition would be wholly inconsistent with the court's repeated and unqualified declarations that, regardless of the refinancing lender's ignorance or mistake, equitable subrogation will be permitted to the extent it works no prejudice to the rights of the intervening lien holder--a party who never anticipated taking a first lien position.
The operative rule regarding equitable subrogation that emerges subsequent to Godwin, Dekle, and Brannon is undeniable: Boley continues to prohibit the application of equitable subrogation to a volunteer, but Boley's definition of a third-party refinancing lender--a party who lends money for the purpose of satisfying a pre-existing first lien intending to succeed to the priority of the obligation satisfied--as a volunteer, is no longer applicable. Instead, equity will permit such lenders to be subrogated to the rights of the refinanced mortgagee, under the liberal and equitable principles repeated in all three of the 1933 cases.
Only one case has been decided in Florida to the contrary of this interpretation: Picker Financial Group, LLC, v. Horizon Bank, 293 B.R. 253 (M.D. Fla. 2003). While not binding upon any Florida court, (51) it purports to interpret and apply Florida law. Therefore, this article will conclude by addressing Picker, and will explain why, in light of the above analysis of Boley, Picker should be awarded no persuasive value.
In May of 2003, Picker Financial Group, LLC, appealed a final order of the Bankruptcy Court to the U.S. District Court for the Middle District of Florida. (52) In the proceedings prior to the appeal, Horizon Bank had prevailed on a claim of equitable subrogation, obtaining an order determining that Horizon's lien upon certain secured property was superior in right and dignity to Picker's lien. (53)
The facts involved were uncomplicated. In November 1996, the debtor had given American Bank (American) a lien on certain property under the UCC in exchange for a loan. (54) In February 1999, in exchange for a second loan, the debtor gave Picker a lien on the same assets it had alienated in favor of American. (55) Finally, in February 2000, the debtor gave Horizon Bank (Horizon) a lien on the same assets that secured the American lien and the Picker lien; however, this time, Horizon satisfied the American lien. (56)
Prior to satisfying the American lien, Horizon had commissioned a UCC search, which disclosed the existence of the Picker lien; however, Horizon failed to review the search results prior to making the subject loan. (57) In addition, due to an existing feud between Horizon and American, American uniformly refused to execute an assignment of any lien satisfied by Horizon. (58) Thus, Horizon did not bother to seek an assignment of American's lien position. (59)
The question before the bankruptcy court, and, thus, before the Picker court on appeal, was whether, under Florida law, Horizon was entitled to be equitably subrogated to the first lien priority of American by virtue of having satisfied American's lien on the subject assets, notwithstanding the fact that Horizon had entirely failed to review the record. (60)
The bankruptcy court had answered this question in the affirmative, justifiably relying upon the liberal view of equitable subrogation, as most recently applied in Suntrust Bank v. Riverside, 792 So. 2d 1222 (Fla. 4th DCA 2001), for the proposition that a refinancing lender is entitled to be equitably subrogated to the rights of the first priority mortgagee even if it has actual notice of the existence of an intervening lien, so long as subrogation will not prejudice the rights of intervening lienors. (61)
In reviewing the bankruptcy court's decision on appeal, however, the Picker court took a more circumspect view of Florida law and concluded that under Boley, Florida law mandated that a lender with constructive notice of an intervening lien who fails to perform a records search is precluded from availing itself of equitable subrogation and that the second mortgage holder becomes a first lienor upon the subject property upon satisfaction of the first priority lien. (62)
This determination was primarily (63) based on the Picker court's finding that Boley applied constructive notice and negligence in concert to deny equitable subrogation, that Godwin had not expressly overruled Boley, and that the Godwin court had, instead, confirmed the Picker court's reading of Boley in its attempt to distinguish Boley from Godwin. (64) As a final predicate, the Picker court also concluded that Boley must be read to preclude subrogation in cases of constructive notice and negligence, since the Florida Supreme Court continues to cite Boley. (65) All of these conclusions, however, were erroneous.
First and foremost, the Picker court's reading of Boley was in error; constructive notice was not applied in Boley to prohibit equitable subrogation. (66) Rather, Daniel was denied equitable subrogation because the court found him to be a volunteer. (67) Daniel's constructive knowledge of the Boley mortgage was not cited as cause to deny him equitable subrogation, but was cited as evidence that he lacked the express intent to be prior in time to the Boley lien. (68) Thus, the Boley court never cited a failure to review the public records as a predicate for denying equitable subrogation, and the Picker court's reliance upon Boley for this conclusion is misplaced.
Furthermore, while Godwin, Dekle, and Brannon did not overrule Boley, they did not need to. As discussed previously, Boley remains good law for the premise that equitable subrogation will not be granted to a mere volunteer. However, Godwin, Dekle, and Brannon served an invaluable function by confirming that Boley's definition of a volunteer has been definitively altered. In the context of this conclusion, it is crucial to note that the Picker court failed to acknowledge the existence of Dekle and Brannon, which may account for the lack of credence given to all three cases' aggregate effect on Boley's definition of volunteerism.
The Picker court, having apparently failed to review Dekle and Brannon, placed great emphasis on the Godwin court's distinguishing of Boley, where Godwin lists the refinancing lender's imprudence as a factor distinguishing Boley from Godwin. The Picker court states outright that the Godwin court's "holding would have been different if, like here, the lender did not examine the record and was not the victim of false representations." (69) However, this conclusion is, again, mistakenly premised upon the belief that constructive notice was a factor in refusing Daniel equitable subrogation and upon the inference made by the Picker court that Daniel had failed to check the public record--a finding that is crucial to the assumptions made in Picker (as well as Godwin's distinguishing language), but that is not substantiated by the Boley opinion.
A reading of Boley confirms that Daniel was denied conventional subrogation based upon his imputed knowledge of the Boley lien. Constructive notice and relative negligence were never predicates for Boley's holding on equitable subrogation and Godwin's meandering effort to distinguish the two cases cannot, and should not, be cited for the proposition that Boley stated otherwise.
Finally, the Picker court gave some credence to the fact that the Florida Supreme Court continues to cite Boley as good law; this conclusion is not in error. However, the implication that this continued citation to Boley corroborates the Picker court's reading of Boley or compels the result reached in Picker is erroneous.
Boley continues to be cited by the Florida Supreme Court for general principles of equity (particularly for Boley's discussion of conventional subrogation), and for the fact that a volunteer may not recover under equitable subrogation. However, a careful review of each citation to Boley since 1933 reveals that Boley has never been cited by the Supreme Court for the rule that constructive notice of an intervening lien bars the award of equitable subrogation in favor of a refinancing lender, nor for Boley's definition of a volunteer. (70)
In sum, and contrary to Picker's holding, had the Supreme Court intended to propagate a rule whereby a refinancing lender is denied subrogation rights if it is on constructive notice of an intervening lien, or that a refinancing lender should be denied subrogation if it fails to make any effort to check the public records, the court's explicit, sweeping holdings that equitable subrogation should be liberally granted, even in the face of a refinancing lender's ignorance or mistake, so long as the relief works no injustice on the rights of intervening lienors, would have been qualified by such a limitation. They were not.
Boley remains valid precedent for the proposition that volunteers should be denied equitable subrogation. However, Boley's conception of volunteerism has been altered by Godwin, Dekle, and Brannon, and no longer applies to prohibit a refinancing lender with no previous interest in the property or obligation to satisfy the debt at issue from being subrogated to the rights of a prior lien holder. Despite the Picker court's holding to the contrary, Boley does not now, nor has it ever stood for the proposition that a lender on constructive notice of an intervening lien--even one who fails utterly to check the public records--is bereft of the benefits of this doctrine. Boley made no such decree, and the Supreme Court has repeatedly emphasized that neither ignorance nor mistake bars the operation of the doctrine. As best stated by the court in Brannon: Boley applies to volunteers, pure and simple.
(1) Fed. Land Bank of Columbia v. Godwin, 145 So. 883, 885 (Fla. 1933).
(2) Id. at 885-86.
(3) Boley v. Daniel, 72 So. 644 (Fla. 1916).
(4) Godwin at 886; see also Fed. Land Bank of Columbia v. Dekle, 148 So. 756 (Fla. 1933); Brannon v. Hills, 149 So. 556 (Fla. 1933); Dantzler Lumber v. Columbia Cas. Co., 156 So. 116, 120 (Fla. 1934) (states that the court is "committed to a liberal application of the rule of equitable subrogation"); Palm Beach Sav. & Loan Ass'n, F.S.A. v. Fishbein, 619 So. 2d 267 at 270-271 (Fla. 1993) (granting subrogation, to the extent of the refinancing lender's payment of the exigent first lien, to refinancing lender who negligently failed to properly supervise execution of mortgage); Dade County Sch. Bd. v. Radio Station WQBA, 731 So. 2d 638 at (Fla. 1999) (citing, for the core tenets of equitable subrogation, to Eastern Nat'l Bank v. Glendale Fed. Sav. & Loan Ass'n, 508 So. 2d 1323, 1324-1325 (Fla. 3d D.C.A. 1987) ("negligence which has not resulted in harm to anyone will not be invoked to permit unjust enrichment of the later lienors through their fortuitous advancement in priority by reason of mistake").
(5) S. Colonial Mortgage Co. v. Medeiros, 347 So. 2d 736 (Fla. 4th D.C.A. 1977); Washington Sec. Co. v. Tracy's Plumbing & Pumps, 166 So. 2d 680 (Fla. 2d D.C.A. 1964); In re: Forfeiture of U.S. Currency in the Amount of Ninety-One Thousand Three Hundred Fifty-Seven and 12/100 Dollars, et al., 595 So. 2d 998 (Fla. 4th D.C.A. 1992) (mortgagee granted subrogation despite its mortgage never having been recorded).
(6) Suntrust Bank v. Riverside Nat'l Bank of Fla., 792 So. 2d 1222, 1227 (Fla. 4th D.C.A. 2001) (applying the Restatement (Third) of Property, which permits subrogation even in the face of actual knowledge by a refinancing lender, and by applying Fishbein and Godwin for the proposition that the refinancing bank's negligence is immaterial so long as the intervening lienor is not prejudiced); E. Nat'l Bank,508 So. 2d 1323 (Fla. 3d D.C.A. 1987); Fishbein, 619 So. 2d 267 (Fla. 1993) (court permitted subrogation by refinancing lender up to the amount satisfied by the lender, despite the lender's negligent failure to ensure proper execution and prevent forgery).
(7) Hochstadt v. Gerl, 678 So. 2d 1310, 1312 (Fla. 4th D.C.A. 1996).
(8) Id.; Radison Prop, Inc. v. Flamingo Groves, Inc., 767 So. 2d 587, 591-592 (Fla. 4th D.C.A. 2000) (court granted the subrogated party interest upon the value of its subrogated lien).
(9) Despite inferences by both the Godwin court and the Picker court that the lender performed no search of public records, there is no actual finding by the Boley court that the refinancing mortgagee did not perform a search of the records prior to taking his mortgage--only that he believed, wrongly, that he was acquiring a first lien position.
(10) Boley v. Daniel, 72 So. 644, 644-45 (Fla. 1916).
(11) Id. at 645-46.
(18) Id. at 645.
(22) Id. at 645-46.
(24) Fed. Land Bank of Columbia v. Godwin, et al., 145 So. 883, 884 (Fla. 1933).
(29) Id. at 884-85.
(30) Id. at 884; Boley, 72 So. at 645.
(31) Godwin, 145 So. at 885 (emphasis added).
(32) Id. at 885-886.
(33) Again, this is an inference by the Godwin court; the Boley opinion never recited that Daniel failed to check the records.
(35) The Picker court inferred that the facts in Godwin and Boley were divergent because the lender in Boley failed to check the records, but the lender in Godwin relied upon an incorrect abstract and the assurances of the mortgagor. Again, there is no explicit finding in Boley that the lender failed to check the records--only that he believed he was receiving a first (and presumptively only) lien.
(36) Fed. Land Bank of Columbia v. Dekle, 148 So. 756 (Fla. 1933).
(41) Id. at 757.
(42) Id. at 758.
(43) See also the dissent of Justice Bufford, at 759-60, who argues that the majority's opinion has the effect of overruling Boley.
(44) See Picker, 293 B.R. 253 (M.D. Fla. 2003).
(45) Brannon v. Hills, 149 So. 556 (Fla. 1933).
(46) Id. at 556.
(47) Id. at 556-57.
(48) Id. at 556.
(49) Id. at 556-57.
(50) Id. at 557.
(51) See State v. Dwyer, 332 So. 2d 333 (Fla. 1976) (Florida Supreme Court recognized that "even though lower federal court rulings may be in some instances persuasive, such rulings are not binding on state courts," and that "[t]he Supreme Court of Florida is the apex of the judicial system of the State of Florida, and its decisions are binding upon this court").
(52) Picker, 293 B.R. 253, 254 (M.D. Fla. 2003).
(53) Id. at 254, 257.
(54) Id. at 254.
(56) Id. at 255.
(60) Id. at 256.
(61) Id. at 257, citing, Suntrust Bank v. Riverside Nat'l Bank of Fla., 792 So. 2d 1222, 1225 (Fla. 4th D.C.A. 2001) (emphasis added).
(62) Id. at 261, 263.
(63) The Picker court also cited the existence of Chs. 695 and 679, which mandate the default "first in time" rules of priority as evidence that constructive notice should bar subrogation. This article will not address this predicate, primary because the doctrine of equitable subrogation acknowledges these default schemes but is designed to circumvent the result of their rigid application to all scenarios. Thus, considering their existence as a bar to the doctrine is counter-productive and illogical.
(64) Id. at 261.
(66) Boley, 72 So. at 645-46.
(69) Picker, 293 B.R. at 262.
(70) Dade County Sch. Bd. v. Radio Station WQBA, 731 So. 2d 638 at 646 (Fla. 1999) (citing, Boley for principles of conventional subrogation); Dixie Nat'l Bank v. Emplrs Commercial Union Ins. Co., 463 So. 2d 1147, 1151 (Fla. 1985) (citing, Boley for principles of conventional subrogation); First Am. Title Ins. Co. v. First Title Serv. Co., 457 So. 2d 467, 473 (citing, Boley for principles of conventional subrogation); Goodwin v. Schmidt, 5 So. 2d 64, 66 (Fla. 1941) (citing to Boley for general principles of equitable and legal subrogation); Hillsborough Inv. Co. v. Tampa, 5 So. 2d 256, 257 (Fla. 1941) (general reference to the doctrine of legal subrogation); Dodge v. Kistler, 191 So. 301, 303 (Fla. 1939) (applying Boley to preclude recovery by a volunteer); Green v. George F. Green Props., Inc., 179 So. 690 (Fla. 1938) (Boley mentioned as having been cited by appellant, but not relied upon); Adler v. Becker, 178 So. 117, 120-121 (Fla. 1937) (cited for premise that second lien should become first by operation of law, but rejected by court); Hirsch v. Lincoln Sec. Co., 160 So. 12, 15 (Fla. 1934) (cited in reference to conventional subrogation); see also Travers v. Stevens, 145 So. 851, 854 (Fla. 1933).
Brian Street graduated from the Florida State University College of Law in 2005. Since that time, he has worked as an associate attorney at Rose, Sundstrom & Bentley, LLP, in Longwood. He practices primarily in the fields of real property and probate, with a majority of his practice devoted to title and lien litigation.
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|Publication:||Florida Bar Journal|
|Date:||Oct 1, 2009|
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