Court Opinion

ID: 9781603
Source: CourtListenerOpinion
Date Created: 2023-08-30 16:54:24.381419+00
Date Added: 2024-06-11T12:11:13.916928
License: Public Domain

*141Justice PLEICONES.
I respectfully dissent. I would affirm the master’s order equitably subrogating Matrix’s refinanced mortgage to its original mortgage, and would not impose the draconian remedy of denying equitable relief to lenders who “fail[ ... ]to have attorney supervision during the loan process as required by law.”
A. Equitable Subrogation
Equitable subrogation is a remedy favored by the courts, and it is to be liberally and expansively applied. So. Bank and Trust Co. v. Harrison Sales Co., Inc., 285 S.C. 50, 328 S.E.2d 66 (1985). The doctrine:
is founded on the fictional premise that an obligation extinguished by a payment made by a third person is to be treated as still subsisting for the benefit of such third person, whereby he is substituted to the rights of the creditor when he has made such payment.
St. Paul-Mercury Indem. Co. v. Donaldson, 225 S.C. 476, 83 S.E.2d 159 (1954) citing Aetna Life Ins. Co. of Hartford v. Town of Middleport, 124 U.S. 534, 8 S.Ct. 625, 31 L.Ed. 537 (1888).
“The purpose of subrogation is to prevent a junior lien holder from converting the mistake of the lender into a magical gift for himself.” United States v. Baran, 996 F.2d 25 (2nd Cir.1993) (internal citation omitted).
It appears that the majority would agree with me that a refínancer has a right to lien priority, if that refinancer uses the theory of “replacement and modification” rather than equitable subrogation. Heretofore, South Carolina has used the doctrine of equitable subrogation to restore a refinancer’s lien to priority, and I would not reverse this order because it used this theory rather than the newly announced “replacement and modification” rule.
In 1927, this Court held that a lender who pays the original mortgage itself, or furnishes money to the mortgagor to pay off an existing mortgage, pursuant to an agreement by which the lender will give a new mortgage, has the equitable right to be subrogated to the paid-off mortgage. Enterprise Bank v. Fed. Land Bank, 139 S.C. 397, 138 S.E. 146 (1927). In this *142situation, the lender furnishing the money is not a volunteer, and becomes secondarily liable for the discharge of the first mortgage under the instruments creating the new mortgage which require the satisfaction of the first mortgage as a condition of the giving of the second. 7d;3 see also James v. Martin, 150 S.C. 75, 147 S.E. 752 (1929) (applying Enterprise Bank and quoting: One satisfying a lien note at the request of the property owner, upon the understanding that he is to have new security upon the property released, acting in ignorance of a second mortgage lien upon the property, although it is on record, is entitled to subrogation to the rights of the first lien holder?).
As the Washington Supreme Court explained, several considerations support a rule that, absent material prejudice to a junior lienholder, equitable subrogation should be automatically available to a mortgage refinancer who can show it expected to have first priority:
1) Equitable subrogation preserves priorities by keeping mortgages and other liens in their proper recordation order;
2) Equitable subrogation accomplishes substantial justice and rests on the maxim that no one (here, the junior lienholder) should be enriched by another’s loss;
3) Facilitating refinancing helps prevent foreclosures; and
4) A liberal equitable subrogation policy reduces title insurance premiums.4
Bank of America v. Prestance Corp., 160 Wash.2d 560, 160 P.3d 17 (2007).
The majority would punish the respondent in this case for failing to anticipate the majority’s decision to alter the theory under which respondent pled, proved, and obtained the result it sought below. I would affirm the master’s decision to equitably subrogate Matrix’s second mortgage to its first, a *143result which is consistent with both our existing law and sound public policy. Cf. Rule 220(c), SCACR (court may affirm for any reason appearing in the record).
B. Unclean Hands
The majority also would expand the relief afforded by the Court of Appeals to a mortgagor who has been the “victim of the unauthorized practice of law” to all lienholders of that mortgagor. See Wachovia Bank, v. Coffey, 389 S.C. 68, 698 S.E.2d 244 (Ct.App.2010) cert. pending (mortgagee cannot foreclose mortgage where loan closed without attorney supervision); compare Hambrick v. GMAC Mort. Corp., 370 S.C. 118, 634 S.E.2d 5 (Ct.App.2006) cert. dismissed April 5, 2007 (mortgagor has no private right of action against mortgagee for the unauthorized practice of law). The purpose of equitable subrogation/replacement and modification is to prevent a windfall to a junior lienholder. I cannot square the policy underlying this purpose with the Court’s proclamation that refusing equitable relief to “bad” lenders will somehow protect the public at loan closings. I see only detriment to the borrowing public5 and a windfall to junior lienholders in this decision which would deny all equitable relief to any “lender who fail[s] to have attorney supervision during the loan process as required by our law ... [in] all filing dates6 after the issuance of this opinion.”

CONCLUSION

I respectfully dissent and would affirm the Master’s order.

. It appears that the lender in Dedes v. Strickland, 307 S.C. 155, 414 S.E.2d 134 (1992) was denied equitable subrogation because it failed to present evidence that its refinancing was conditioned upon the repayment of the first loan. Id. at 159, 414 S.E.2d at 136.

. Citing Nelson & Whitman, Adopting Restatement Mortgage Subrogation Principles: Saving Billions of Dollars for Refinancing Homeowners, 2006 BYU L.Rev. 305.

. I suspect that many mortgagees, denied hope of equitable relief, including the ability to foreclose if an attorney should fail to supervise any of the acts required of him in a loan closing, will choose not to do business in South Carolina, or choose to increase fees to cover potential unrecoverable liabilities.

. I am unsure what filing date the majority is referring to in this passage.