On August 2, 2011, Division One of the Court of Appeals ruled in Sourcecorp, Inc. v. Northcutt that the buyers of a home, who paid off the prior owner’s mortgage as part of their purchase, were entitled to be equitably subrogated ahead of a judgment creditor of the former owner.  Ordinarily, when one lender funds a refinance of an existing mortgage, that lender’s new security interest will step into the shoes of the previous lender whose debt the new lender is paying, for purposes of determining priority of interest.  Thus, a judgment lien attaching to the property after the original mortgage attaches to the property will still be behind a subsequent lender who pays off the original mortgage.  However, in this case, it was a buyer, who paid cash, who claimed the right to the equitable subrogation.  Sourcecorp, the judgment creditor of the Shills, the previous owners, argued that the buyers, the Northcutts, could not hold a lien against their own property and therefore should not be considered to have stepped into the shoes of the Shills’ original mortgagee.  The Court of Appeals acknowledged there is a split of authority around the country as to whether a purchaser who pays of an existing lien is entitled to be subrogated to the lien priority position of the lender he pays.  The Court of Appeals reversed the summary judgment granted to Sourcecorp, noting that it was not being prejudiced by the application of subrogation, as its judgment lien position was still behind the same amount of money/interest.  The bottom line is that the Northcutts own the home and their purchase price of over $600,000 has priority over the judgment lien of Sourcecorp, but that Sourcecorp does have a judgment lien against any equity over and above that amount.