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SUPREME COURT, STATE OF COLORADO Court Address: 2 East Fourteenth Avenue Fourth Floor Colorado State ... - page 6 / 22

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engaged to prepare the title insurance policies and otherwise close the transaction. Proceeds of

the junior mortgage, plus personal funds of the Londres, were used to pay off the senior

mortgage. After the sale, Hicks contacted the buyers and notified them of his lien. He

commenced a judicial foreclosure of the lien. The Court of Appeals, reversing the District Court,

concluded that because the proceeds of the junior mortgage were used to pay off the senior

mortgage, the junior mortgage and the Londres' purchase money were subrogated to the position

of the senior mortgage.

SUMMARY OF ARGUMENT

Application of the doctrine of equitable subrogation in this situation does not remedy an

inequity. Instead, it serves as a tool for a title insurance company to escape the consequences of

its own negligence. This decision, if allowed to stand, throws doubt and uncertainty into real

estate titles and effectively deprives judgment lien creditors of their ability to collect their debts.

Under Colorado law, "constructive notice" has the same effect as actual notice, and

unless a statutory exception (such as the mechanics' lien law) applies, a properly recorded

judgment lien gives the judgment lien creditor the status of a good faith purchaser for value

without notice as against an interest that is recorded later in time. Unrecorded interests are not

valid against anybody who doesn't know about them, and recorded interests are "notice to all the

world" and have priority against all subsequent interests, whether or not there is actual

knowledge. COLO. REV. STAT. § 38-35-109. There are three consequences of this "race-

notice" recording system: (1) it prevents people from creating and then enforcing secret interests

in real property to the detriment of others who acquire rights in the property without notice of

those interests, (2) it insures that purchasers and lenders need only refer to the record for interests

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