GMAC Mortgage, LLC v. Pharis
328 Ga. App. 56
Ga. Ct. App.2014Background
- GMAC loaned Hall, secured by a mortgage on Hall's Bainbridge home; part of the loan paid off JP Morgan Chase's prior lien.
- During the loan process, Hall's husband, via a limited power of attorney, opened a $50,000 line of credit with First National Bank of Decatur County secured by a second lien on the property; the First National lien was recorded before GMAC's loan.
- First National foreclosed; Pharis purchased the property at the foreclosure sale in December 2010.
- GMAC filed suit for equitable subrogation to preserve priority of its lien and for unjust enrichment; the trial court granted Pharis summary judgment on both claims.
- The court of appeals reversed, finding genuine issues of material fact on inexcusable neglect and prejudice, and held unjust enrichment may survive given Pharis’s constructive knowledge of GMAC's intended first-priority lien.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether GMAC is entitled to equitable subrogation as a matter of law | GMAC intended to subrogate to the prior lien and faced no inexcusable neglect and no prejudice to Pharis | GMAC had constructive notice of the intervening First National lien and was a mere volunteer | Not entitled to judgment as a matter of law; material facts in dispute |
| Whether GMAC can pursue unjust enrichment against Pharis | GMAC should recover because Pharis knew GMAC intended first-priority lien and was unjustly enriched | Unjust enrichment requires no knowledge or should be barred by negligence | Disputed; the trial court erred in granting summary judgment; unreached issues remain |
Key Cases Cited
- Davis v. Johnson, 241 Ga. 436 (Georgia 1978) (subrogation when new loan secures senior lien)
- McCollum v. Lark, 187 Ga. 292 (Georgia 1938) (subrogation where debtor and creditor agree to first lien; revival of lien)
- Barron, 173 Ga. 242 (Georgia 1931) (mere volunteer not entitled to subrogation (disapproved later))
- Bankers Trust Co. v. Hardy, 281 Ga. 561 (Georgia 2007) (subrogation not available to mere volunteer; disapproved context)
- Federated Mut. Ins. Co. v. Northland Ins. Co., 254 Ga. 402 (Georgia 1985) (constructive knowledge and subrogation considerations)
- Callan Court Co. v. Citizens & Southern Nat. Bank, 184 Ga. 87 (Georgia 1937) (subrogation principles and liens)
- Reidling v. Holcomb, 225 Ga. App. 229 (Georgia 1997) (unjust enrichment when recipient knew value; distinguishable from case)
- Citifinancial Svcs. v. Varner, 320 Ga. App. 170 (Georgia 2013) (title examination and subrogation considerations)
- Greer v. Provident Bank, 282 Ga. App. 566 (Georgia 2006) (subrogation extending to protect justice among parties)
- Massey Assocs. v. Whitehorse Inns of Ga., 265 Ga. 320 (Georgia 1995) (purchaser at foreclosure takes title divested of later incumbrances)