Aames Capital Corporation v. Interstate Bank of Oak Forest

Aames Capital Corporation (plaintiff) was the assignee of a mortgage that refinanced and paid off earlier recorded mortgages held by Standard Federal and Suburban Bank. The Interstate Bank of Oak Forest (defendant) was a judgment lien creditor for the same property that, in 1996, recorded a $75,891 judgment against the mortgagors with knowledge of the outstanding junior mortgages. That same year the mortgagors refinanced with Pacific Thrift, which paid off the prior banks, took and recorded a new mortgage, and assigned it to Aames. After the mortgagors defaulted, Aames sued to foreclose. Interstate argued its earlier-recorded judgment had priority and that subrogation required an express agreement. The trial court ruled Interstate's judgment took priority, and Aames appealed.

Whether a mortgagee that refinances a mortgage to pay off a prior recorded mortgage is subrogated to the priority of the original mortgagee.