Sourcecorp, Inc. v. Norcutt
227 Ariz. 463
| Ariz. Ct. App. | 2011Background
- Sourcecorp obtained a $3,052,488.27 judgment against the Shills; the Shills owned the Prescott, AZ property at issue.
- Sourcecorp recorded the judgment lien in Yavapai County but initially failed to attach the required judgment information statement; an amended filing followed in January 2005.
- The Norcutts purchased the Property from the Shills for $667,500 in November 2004, paying off the Zions Bank first mortgage and senior tax liens with cash.
- First American Title failed to discover Sourcecorp's lien before closing, leaving Sourcecorp with an unrecognized senior claim.
- Sourcecorp sought to execute a writ of general execution; the Norcutts moved to quash, contending Sourcecorp had no valid lien priority and asserting homestead protection.
- The trial court granted summary judgment for Sourcecorp, denying equitable subrogation to the Norcutts and holding the Shills had abandoned homestead rights.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Norcutts are equitably subrogated to Zions Bank's lien | Norcutts paid the prior lien; they claim subrogation rights to the senior position. | Equitable subrogation does not apply to a purchaser paying off a lien; the Norcutts were volunteers and not lenders. | Norcutts are entitled to equitable subrogation to Zions Bank's lien. |
| Effect of recorded judgment information statement on priority | Priority is governed by statutory rules; information statement timing does not preclude lien. | Failure to attach information statement defeats or harms lien priority. | Prior logic preserved; information statement defect does not bar subrogation result here. |
| Whether homestead exemption defeated Sourcecorp's lien | Shills abandoned homestead rights; exemption did not preclude the lien. | Homestead exemption protected the Property from execution. | Issue moot after subrogation finding; not needed for the disposition. |
| Applicability of Lamb and Mosher to a purchaser-subrogee | Lamb limits subrogation to sophisticated lenders with implied agreements. | Mosher allows broader equitable subrogation; paying a lien to protect one's property interest is enough. | Equitable subrogation applies to purchasers paying off an encumbrance to protect their interest; not limited to lenders. |
Key Cases Cited
- Mosher v. Conway, 45 Ariz. 463 (Arizona Supreme Court, 1935) (four elements of equitable subrogation; broad, equitable basis)
- Lamb Excavation, Inc. v. Chase Manhattan Mortgage Corp., 208 Ariz. 478 (Arizona Court of Appeals, 2004) (subrogation depends on priority rights and reasonable expectation of a security interest)
- Byers v. Wik, 169 Ariz. 215 (Arizona Supreme Court, 1991) (creditor may satisfy judgment from property after transfer by debtor)
- Freeman v. Wintroath Pumps-Div. of Worthington Corp., 13 Ariz. App. 182 (Arizona Court of Appeals, 1970) (priority of judgment liens against later claims)
- Kahn v. McConnell, 37 Okla. 219 (Oklahoma Supreme Court, 1913) (volunteer purchaser rationale for subrogation limitations)
- Gutermuth v. Ropiecki, 159 N.J. Super. 139 (New Jersey Superior Court, Ch. Div., 1977) (purchasers paying prior liens and protecting title interests)
- Gutermuth v. Ropiecki, 387 A.2d 385 (N.J. Super. Ct. Ch. Div., 1977) (same as above for comprehensive citation)
- Dietrich Indus., Inc. v. United States, 988 F.2d 568 (5th Cir., 1993) (equitable subrogation for mortgage priority (federal case applying Restatement principles))