Nevada Supreme Court issues 1 opinion: real property

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In American Sterling Bank v. Johnny Mgmt. LV, the Nevada Supreme Court, in an en banc opinion authored by Justice Hardesty, addresses application of the doctrine of equitable subrogation where a refinancing mortgage's due date was accelerated.  The Court summarizes the case and its holding:

"We have previously adopted the rule in Restatement (Third) of Property: Mortgages, section 7.6, that a lender whose loan proceeds were used to pay the balance of a prior note is equitably subrogated to the former lender's priority lien position so long as an intervening lienholder is not materially prejudiced.  Houston v. Bank of America, 119 Nev. 485, 490, 78 P.3d 71, 74 (2003).  The Restatement reasons that holders of intervening interests cannot complain about the application of the equitable subrogation doctrine because the intervening lienholder is "no worse off than before the senior obligation was discharged."  Restatement (Third) of Prop.: Mortgages ยง 7.6 cmt. a (1997).

            In this appeal, we consider whether an intervening lienholder suffers an injustice or prejudice precluding equitable subrogation where the terms, including the maturity date, of the refinancing loan are materially different than the terms and maturity date of the senior obligation.  We conclude that material differences in interest rates and payment terms do not cause prejudice to the intervening lienholder because equitable subrogation generally limits the paying lender's priority to the amount and terms of the retired senior obligation.  However, a materially accelerated maturity date for the paying lender's loan can, and did in this case, prejudice the intervening lienholder, precluding equitable subrogation.  We therefore affirm."

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This page contains a single entry by JoNell published on October 28, 2010 10:15 AM.

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