GEORGE H. HIEBER AND EVY W. HIEBER, HIS WIFE, APPELLANTS,
v.
FLORIDA NATIONAL BANK, A NATIONAL BANKING ASSOCIATION, APPELLEE
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This case addresses whether a purchaser who pays off a senior mortgage while mistakenly unaware of a junior lien of record may be subrogated to the senior mortgagee's position. The Florida court held that subrogation is unavailable under these circumstances because purchasers have a duty to consult available lien records, and allowing subrogation would undermine the recording statute's orderly scheme.
The court held that subrogation is not available under these circumstances. A purchaser has a duty to consult available lien records, and applying subrogation would undermine the orderly scheme of the recording statute by creating uncertainty regarding the priorities of recorded encumbrances.
[1] Subrogation will not be permitted to a purchaser who fails to discover a recorded junior lien, even if the purchaser mistakenly believed the senior mortgage was the only…
[2] A purchaser is obligated to consult available records to discover existing liens on real property.
Previewing 2 of 5 headnotes on this case. FLexlaw’s editorially structured points of law — every proposition, pinpointed — are reserved for members.
Join FLexlaw to unlock all legal intelligence“it is incumbent upon a purchaser to consult available records in regard to contemplated real property transactions.”
Establishes the purchaser's duty to investigate liens of record before completing a property purchase.
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Join FLexlaw to unlock all legal intelligenceThe Hiebers purchased mortgaged property in May 1984, applying part of the purchase price to discharge a first mortgage held by AmeriFirst. The seller…
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PER CURIAM.
The question presented here is whether a purchaser of mortgaged property who applies part of the purchase price to discharge a first mortgage while under a mistake of fact as to the existence of a junior lien, even though the junior lien is of record, should be subrogated to the position of the prior senior mortgagee as against the junior lien.
Apparently no Florida case has answered this question. Although a line of cases to the contrary exists,1 we join those jurisdictions that do not permit subrogation under these circumstances.2
The Hiebers 3 purchased the property in May, 1984, applying part of the purchase price to discharge the AmeriFirst first mortgage on the property. The seller represented to the Hiebers that the AmeriFirst mortgage was the only existing lien on the property and gave the Hiebers a warranty deed. The Hiebers’ title company failed to discover Florida National Bank’s validly recorded junior mortgage. Only when the seller defaulted on the junior mortgage and the bank instituted foreclosure proceedings did the Hiebers learn of the junior mortgage. In defense of the foreclosure action the Hiebers sought to be subrogated to AmeriFirst’s position as the superior mortgagee.
We decline to apply the equitable principle of subrogation to grant the Hiebers relief. In a well-reasoned opinion, Belcher v. Belcher, 161 Or. 341, 351, 87 P. 2d 762, 765 (1939), the Supreme Court of Oregon denied subrogation where a purchaser who had paid an existing first mortgage as part of the purchase price failed to discover a junior lien, holding that “it is incumbent upon a purchaser to consult available records in regard to contemplated real property transactions.” According to the Oregon court, a rule requiring a strict application of the doctrine of subrogation that denies subrogation to subsequent purchasers who fail to discover liens is necessary in order to avoid uncertainty regarding the priorities of encumbrances of record. We agree. Although the equitable principle of subrogation is a meritorious doctrine and should be applied where necessary to do justice between the parties, it will not be allowed where its application would lead to confusion by undermining the orderly scheme established by the recording statute.
Here, the junior encumbrance was of record for over a year and could have been ascertained in the exercise of reasonable diligence. The Hiebers’ title insurer was under a duty to discover the lien. Relief from folly of ‘those who in respect of contemplated property transactions do not consult available lien records seems more the task of the school than of the court.” Burgoon v. Lavezzo, 92 F. 2d 726, 733 (D.C.Cir.1937).
Summary judgment is affirmed.
. McDermott v. Steck Co., 138 S.W. 2d 1106 (Tex.Civ.App.1940); Burgoon v. Lavezzo, 92 F. 2d 726, 113 A.L.R. 944 (D.C.Cir.1937); Commonwealth Bldg. & Loan Ass’n v. Martin, 185 Ark. 858, 49 S.W. 2d 1046 (1932).
. Cheswick v. Weaver, 280 S.W. 2d 942 (Tex.Civ.App.1955); Tucker v. Holder, 359 Mo. 1039, 225 S.W. 2d 123 (1949); Belcher v. Belcher, 161 Or. 341, 87 P. 2d 762 (1939); Smith v. feltner, 259 Ky. 833, 83 S.W. 2d 506 (1935); Bank of Canton v. Nelson, 173 Ga. 185, 160 S.E. 232 (1931). See G. Osborne, On Mortgages § 283, at 799 (1951).
.We are informed by appellee that counsel for the Hiebers is actually representing the title insurer.