Opinion ID: 567256
Heading Depth: 2
Heading Rank: 1

Heading: Full Payment of the Debt or Claim

Text: 14 The government argues that Universal is not entitled to be subrogated to the rights of the lienholders who were senior to the federal tax lien because they were not paid by Universal. The government contends that the district court erroneously concluded that the prior mortgage liens and encumbrances ... [were] released after being paid in full by Universal. Universal Title, slip op. at 5. The government notes, to the contrary, that the liens were extinguished at closing by payment with money advanced by the Hjelmses and Investors, the Hjelmses' mortgagee. Universal responds that, despite the statement by the district court, the government misconstrues the origin of its right to subrogation. Universal contends, in essence, that Investors and the Hjelmses were entitled to be legally subrogated to the prior liens by virtue of the fact that they paid them at closing in good faith and with the intention of establishing the primary claim to the property, and that this right was conventionally subrogated to Universal under the subrogation clause in the title insurance policy when it effected the release of the federal tax lien. In short, Universal argues that it now stands in the place of the Hjelmses and Investors. For the purposes of this discussion, we accept Universal's characterization of its claim to subrogation. 15 Although we recognize that an insured may contractually assign his or her right to subrogation to an insurer who pays the claim under which the right arises, there is nothing in the stipulated facts of the instant case to support Universal's contention that it discharged the federal tax lien. Universal has paid the Hjelmses nothing; neither has it expended anything that would constitute a payment of the government's lien. According to the escrow agreement, the government's lien was merely transferred from the Hjelmses' property to the escrow fund, pending resolution of the dispute by a court of competent jurisdiction. The escrow agreement expressly retained all of the rights and claims of each party with respect to the disputed lien. In other words, the federal tax lien has not been extinguished; it continues in existence attached to the funds in the escrow account. 4 Therefore, we hold that the mere transfer of the lien from the property to the escrow account was insufficient to entitle Universal to be conventionally or legally subrogated to the rights of the prior lienholders. 16