Mort v. United States
United States Court of Appeals for the Ninth Circuit
86 F.3d 890 (1996)
A trust borrowed $30,000 from the Kerns for a mortgage on property, and the IRS then filed a tax lien against the property for the trust's unpaid taxes; to protect their own interest, the Belmonts loaned the trust money for a second mortgage to pay off the Kerns' mortgage and a state tax lien, but the title insurer failed to discover the existing IRS lien. The Belmonts assigned their interests to the Morts and others (plaintiffs), and after the IRS seized the property, the Morts sought a declaration that their interest, through equitable subrogation into the Kerns' original senior priority position, was superior to the IRS lien; the trial court dismissed, holding the Morts could not claim equitable subrogation without first suing the title insurer.
Whether someone who must pay off another's debt to protect a property interest is entitled to equitable subrogation into the other's priority position.