Summary 2006 WY 132

Summary of Decision issued October 17, 2006

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Case Name: Countrywide Home Loans, Inc. and America’s Wholesale Lender (Appellants/Defendants) v. First National Bank of Steamboat Springs (Appellee/Plaintiff)
Bank of New York Trustee Under the Pooling and Servicing Agreement Series 1997 and Mortgage Electronic Systems, Inc. (Appellants/Defendants) v. First National Bank of Steamboat Springs (Appellee/Plaintiff)

Citation: 2006 WY 132

Docket Number: 06-3 and 06-4

Appeal from the District Court of Carbon County, the Honorable Wade E. Waldrip, Judge

Representing Appellants: James R. Salisbury and Sean C. Chambers of Riske, Salisbury & Kelly, PC, Cheyenne. Wyoming. Argument by Mr. Salisbury.

Representing Appellees: Thomas A. Thompson and Brandon W. Snyder of MacPherson, Kelly & Thompson, LLC, Rawlins, Wyoming. Argument by Mr. Thompson.

Issues: Whether the District Court correctly applied the doctrine of equitable subrogation to determine the relative priorities of the mortgages encumbering the subject property.
Holding: The Ketchams owned real property located in Carbon County. On November 12, 1997, they obtained a loan from AWL secured by a mortgage on the property which was recorded in the clerk’s office November 13, 1997. AWL assigned the mortgage to the Bank of New York which was recorded in the clerk’s office on May 26, 1998. June 4, 2002, the property was pledged as collateral for a loan made by First National Bank to Blue Gate West, a Colorado corporation in which the Ketchams were principles and which was recorded in the clerk’s office on July 22, 2002. On April 2, 2003 a third mortgage was executed in favor of Countrywide and MES for a loan of $97,500. The purpose of this loan was to pay off the 1997 AWL mortgage. It was recorded in the clerk’s office on April 15, 2003. The Ketchams made the final payment to AWL in August of 2004. In June 2003, the Ketchams missed a payment to First National Bank on the 2002 mortgage. This constituted default entitling First National Bank to foreclose. First National Bank filed a complaint naming the Ketchams, Countrywide, the Bank of New York, MES and AWL as defendants and claiming theirs was the first and senior lien. MES and Bank of New York failed to answer in time so First National Bank moved for default and the clerk of the district court entered default judgments against them. MES and Bank of New York filed motions to set aside the default judgments and the district court denied those. First National Bank filed a motion for summary judgment that its lien was superior to the interests of all others; the Ketchams were in default and First National was entitled to foreclose. Countrywide and AWL also moved for summary judgment asking the district court to apply the doctrine of equitable subrogation to hold that the 2003 Countrywide mortgage was subrogated to the 1997 AWL mortgage. The district court declined to apply the doctrine of equitable subrogation. It applied Wyo. Stat. Ann. § 34-1-121 to hold that First National Bank’s 2002 mortgage had priority and they granted summary judgment in favor of them.
Standard of Review: Summary judgment is appropriate when no genuine issue as to any material fact exists and the prevailing party is entitled to judgment as a matter of law. The question of whether equitable subrogation should be applied is a question of law and as such is reviewed de novo. The decision to set aside a default judgment under W.R.C.P. 60(b) will be reversed only upon a showing the district court abused its discretion.
Equitable Subrogation: By statute and case decision, Wyoming is a filing date priority jurisdiction. A mortgage properly recorded in the county clerk’s office provides notice to subsequent purchasers and takes precedence over later conveyances. Countrywide asked the Court for an equitable exception to Wyoming’s statutory provision. The Court has recognized equitable subrogation in Wyoming as a creation of courts of equity to prevent manifest injustice. It has been specifically applied to compel payment of a debt, to one who pays a superior lien in order to protect his own lien, and where one pays a debt of another under a reasonable belief that such payment is necessary for his own protection. However, the Court has not applied it as set forth in the Restatements to allow a refinancing mortgagee to step into the shoes of a prior mortgagee for purposes of obtaining lien property. The Court considered the statute and cases from other states and declined to adopt the Restatement. Where the language of the statute is plain and unambiguous and conveys a clear and definite meaning, the court has no right to look for and impose another meaning, but has the duty to give full force and effect to the legislative product. The primary purpose of the recording statute is to secure certainty of title. The Court stated that equitable subrogation has no application where a financial institution extends a loan for the purpose of enabling a mortgagor to pay off an existing mortgage, knowing that a subordinate lien exists on the real estate.
Default Judgment: The Court found unreasonable MES’ expectation and belief that Countrywide was representing its interest and filing an answer on its behalf without further support than that the two entities shared identity of interests.
The Bank of New York asserted its connection as assignee of the 1997 AWL mortgage which was fully released and satisfied two and one-half months after First National Bank filed its complaint for foreclosure arguing they were entitled to have the default judgment set aside as they were not an interested party once the 1997 mortgage was released as set forth in Rule 60(b)(6). The Court stated their difficulties with the Bank of New York’s argument as twofold: whether or not the bank had direct interest, they were named as a defendant, served with the complaint and required to answer within the time contemplated by the rules. They did not answer and provided no explanation for why they did not. The determination whether to grant relief from judgment under Rule 60(b) is discretionary and the Court reverses only on an abuse of discretion. Even accepting the Bank of New York’s claim that it had no interest, the proper course for them was to answer the complaint and/or move for dismissal. In light of that failure, the Court was hard pressed to conclude the district court exceeded the bounds of reason in denying the motion to set aside default judgment filed months later.

Affirmed.

J. Kite delivered the order for the court.

Link to the case: http://tinyurl.com/ykwspm .