Investors Savings v. Keybank Nat.
38 A.3d 638
| N.J. Super. Ct. App. Div. | 2012Background
- Kelliher refinanced a prior loan (1st Constitution Bank) with a new mortgage from ISB, using ISB funds to pay off the old mortgage.
- Keybank had a pre-existing judgment against Kelliher recorded September 30, 2008, before ISB closed the ISB loan.
- ISB's title search (August 1, 2008) showed no judgments; closing occurred October 3, 2008 with an affidavit stating no judgments, attaching the earlier search.
- ISB's mortgage was recorded October 21, 2008; ISB disbursed $1,330,000 (plus $54,107.64 from Kelliher) to discharge the old mortgage and cover closing costs.
- Keybank notified ISB of its judgment after ISB closed, and a subsequent title/search indicated the Keybank lien; ISB sued for equitable subrogation to priority over Keybank's judgment.
- The trial court held ISB's mortgage was equitably subrogated to the old mortgage's priority, over Keybank's judgment; Keybank appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ISB is equitably subrogated over Keybank's judgment | ISB should take the old mortgage's priority via equitable subrogation | Keybank's judgment should retain priority as an intervening lien | Yes; ISB is equitably subrogated to the old mortgage's priority over Keybank |
| Whether ISB had actual knowledge of Keybank's judgment at closing | ISB did not have knowledge; no evidence of actual knowledge | ISB knew or should have known about the judgment | No actual knowledge shown; exception does not apply |
| Whether negligent title search defeats subrogation | Negligence should affect subrogation rights | Negligence should not bar subrogation absent prejudice | Negligence not dispositive; prejudice not shown; subrogation allowed |
| Takings Clause challenge to subrogation | Subrogation may amount to an unlawful taking | Takings claim not properly preserved and lacks merit | Not a taking; no new rule creating takings issue |
Key Cases Cited
- Trus Joist Corp. v. Nat'l Union Fire Ins. Co., 190 N.J. Super. 168 (App.Div. 1983) (subrogation in refinancing context when old mortgage is paid off)
- First Union Nat'l Bank v. Nelkin, 354 N.J. Super. 557 (App.Div. 2002) (new mortgagee may subrogate to old mortgage priority absent actual knowledge)
- First Fid. Bank v. Travelers Mortg. Servs., Inc., 300 N.J. Super. 559 (App.Div. 1997) (subrogation principles in refinancing context)
- Metrobank for Sav., FSB v. Nat'l Cmty. Bank, 262 N.J. Super. 133 (App.Div. 1993) (supporting subrogation priority despite intervening liens)
- Kaplan v. Walker, 164 N.J. Super. 130 (App.Div. 1978) (negligence and subrogation considerations)
- Cliffside Park Title & Guar. & Tr. Co. v. Progressive Theatres, Inc., 122 N.J. Eq. 109 (Ch. 1937) (discussion on negligence threshold in subrogation context)
- Inst. Bldg. & Loan Ass'n v. Edwards, 81 N.J. Eq. 359 (Ch. 1913) (early equitable subrogation precedent)