MATRIX FINANCIAL SERVICES CORP. v. Frazer
394 S.C. 134
S.C.2011Background
- Appellant Kundinger obtained a California default judgment against the Frazers and enrolled it in Greenville County, South Carolina, in 2001.
- The Frazers refinanced their January 2001 mortgage with Matrix, with Matrix later obtaining the refinance mortgage in 2001; the January 2001 mortgage was assigned to Matrix in June 2001.
- A title search for the refinance was performed September 18, 2001, and the refinance closed November 26, 2001, but the new mortgage was not recorded until April 3, 2002.
- Matrix sought foreclosure of the refinance mortgage, arguing priority over Kundinger’s judgment lien; Kundinger counterclaimed alleging priority because his judgment was recorded first.
- The master-in-equity granted Matrix equitable subrogation to the rights of the January 2001 mortgage, giving Matrix priority over Kundinger’s lien; the order was later reversed by this Court in part.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Matrix is entitled to equitable subrogation to priority. | Kundinger asserts Matrix cannot subrogate to the first mortgage since it refinanced its own debt. | Matrix contends equitable subrogation applies if proper elements are met, restoring priority over Kundinger. | No; equitable subrogation does not apply to a lender refinancing its own debt. |
| Whether Matrix may be barred by unclean hands from equitable relief. | Kundinger argues Matrix acted improperly in closing without attorney supervision. | Matrix contends unclean hands do not bar relief; the doctrine is not the proper basis for decision. | Yes; Matrix is barred due to unauthorized practice of law in closing, precluding equitable subrogation. |
Key Cases Cited
- Dedes v. Strickland, 307 S.C. 155, 414 S.E.2d 134 (1992) (sets out five elements for equitable subrogation)
- Buyers Serv. Co., 292 S.C. 426, 357 S.E.2d 15 (1987) (attorney supervision required in real estate closings)
- Doe v. McMaster, 355 S.C. 306, 585 S.E.2d 773 (2003) (refinancing four steps still require attorney supervision)
- Wachovia Bank v. Coffey, 389 S.C. 68, 698 S.E.2d 244 (Ct.App.2010) (unauthorized practice of law bars equitable relief in closing)
- Enterprise Bank v. Fed. Land Bank, 139 S.C. 397, 138 S.E. 146 (1927) (early subrogation rule when lender pays off prior mortgage)
- James v. Martin, 150 S.C. 75, 147 S.E. 752 (1929) (subrogation principles when lender advances funds for payoff)