Houston v. Bank of America Federal Savings Bank
Nevada Supreme Court
78 P.3d 71 (2003)
After Boone converted the Houstons' (plaintiffs) $740,000 investment for personal use, he deeded property to his ex-wife Donna as part of a divorce settlement, subject to Norwest Mortgage's existing deed of trust; the Houstons sued Boone, recorded notice of the lawsuit against Donna's property, and shortly afterward Bank of America (defendant) acquired Norwest's interest and refinanced the property, paying off Norwest's deed of trust entirely. After the Houstons obtained a judgment against Boone and moved to execute against Donna's property, Bank of America intervened, seeking summary judgment on the theory that it had stepped into Norwest's original priority lien position.
Whether a mortgagee that pays off another party's entire loan is subrogated to that original lender's priority position when the paying mortgagee reasonably expected to receive a security interest with that same priority and subrogation would not materially prejudice intervening interest holders.