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SUPREME COURT, STATE OF COLORADO Court Address: 2 East Fourteenth Avenue Fourth Floor Colorado State ... - page 5 / 22

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The trial court ruled that the purchasers and their lender were bound by the constructive

notice afforded by the recording act, and that the doctrine of equitable subrogation did not apply

in this situation, because the Londres and Chase Manhattan were not originally liable on the

debt, but were buyers and a lender, respectively. The Court of Appeals reversed and granted the

Londres, as to their over $400,000.00 of cash paid, and Chase Manhattan Mortgage, as to the

loan proceeds funded, an equitable subrogation to the position of the mortgage originally held by

Washington Mutual, which loan was paid off at closing.

The Real Estate Law Section of the Colorado Bar Association believes that it has been

the intent of the Colorado Legislature, since the adoption of COLO. REV. STAT. § 38-34-101 in

1927, that title to real estate, the interests which affect it, and the priorities of various interest

holders, be capable of determination by reference to record title. Applying the doctrine of

equitable subrogation here will have the effect of creating priorities in real estate determinable

only by resort to facts extrinsic to the records, and is contrary to Colorado law. Granted that a

court of equity has the power to intervene where strict application of the law will work an

injustice, such an extreme result is not warranted under the circumstances presented here.

SUMMARY OF FACTUAL BACKGROUND

Property owned by Grubbs was encumbered by a first mortgage payable to Washington

Mutual (the "senior mortgage"). Hicks, who had obtained a judgment against Grubbs, properly

recorded a judgment lien against the property (the "intervening judgment lienholder"). Several

months later, Grubbs sold the property to the Londres, who obtained a new mortgage payable to

Chase Manhattan Mortgage (the "junior mortgage"). The Londres and Chase Manhattan

Mortgage did not know about the judgment lien, as it was not discovered by the title company

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