Sovereign Bank v. Gillis

The Gillises (defendants) refinanced their senior WaMu mortgage through WaMu itself, using the new loan to pay off both the original WaMu mortgage and an intervening Independence Community Bank home equity line of credit, but Independence's mortgage was never formally discharged, so the refinanced WaMu mortgage was recorded behind Independence's lien even though that debt had been paid; the Gillises later borrowed more against the still-open Independence line, and eventually defaulted on both. After the WaMu mortgage was assigned to Deutsche Bank (plaintiff) and the Independence mortgage to Sovereign Bank (defendant), both foreclosed and cross-moved for summary judgment on lien priority; the trial court granted summary judgment to Sovereign, reasoning that WaMu's actual knowledge of the Independence lien when refinancing defeated any equitable priority, and Deutsche appealed.