Aames Capital Corporation v. Interstate Bank of Oak Forest

Aames Capital Corporation (the plaintiff) was an assignee of a mortgage that was refinanced to pay the balance of prior mortgages. The plaintiff sued in foreclosure after the borrowers defaulted on the loan. The Interstate Bank of Oak Forest (the defendant) was a lien creditor for the same property. The defendant claimed priority because its judgment lien was recorded prior to the assignment to the plaintiff. The original mortgage was recorded in 1986 by Hinsdale Federal Savings and Loan. That same year, the mortgage was assigned to Standard Federal Bank. Subsequently, the original mortgagors signed four additional junior mortgages with the Suburban Bank of Elmhurst, which recorded them in 1988, 1989, 1990, and 1991. In 1996, the defendant, with knowledge of the outstanding junior mortgages, recorded a judgment against the mortgagors for $75,891.06. That same year, the mortgagors refinanced the junior mortgages with Pacific Thrift and Loan Company to pay the balance owed to the other banks. The bank paid the prior mortgagors $174,000, took a mortgage on the property, and promptly recorded the mortgage. Later, they assigned the mortgage to the plaintiff. In 1997, the mortgagors defaulted, and the plaintiff sued in foreclosure. The defendant moved for summary judgment, arguing that their judgment took priority over the plaintiff’s mortgage because the judgment was recorded first. The plaintiff claimed that their mortgage took priority, because the plaintiff was subrogated to the rights of Standard and Suburban, who recorded first and were the original mortgagees. The defendant argued that subrogation could not exist without an express agreement. The trial court held that the defendant’s judgment lien, which was recorded first, took priority over the plaintiff’s mortgage. The plaintiffs appeal.