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SUPREME COURT, STATE OF COLORADO Court Address: 2 East Fourteenth Avenue Fourth Floor Colorado State ... - page 7 / 22





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that encumber title, and (3) it protects persons who have properly placed their interests of record

from losing the value of those interests to subsequent liens recorded later in time. This promotes

stability, predictability, and marketability of titles, which in turn forms the backbone of a free

market economy. There are no "race-knowledge" recording acts, that provide that people are

only bound by the interests that they know about. That would defeat the purpose of a recording


If the Court determines that equitable subrogation is appropriate in this case, then it is

requested that the Court provide guidance to buyers, lenders and their counsel as to the

application of the rule.


In reversing the lower court, the Court of Appeals relied on Capitol National Bank v.

Holmes, 43 Colo. 154, 94 P. 314 (1908), a case which predates the current statutory scheme in

Colorado, and said that a court of equity may apply the doctrine of equitable subrogation to treat

the new mortgagee and buyers as, in effect, the assignees of the mortgage that was released, if

the court determines that "(1) the subrogee made the payment to protect his or her own interest,

(2) the subrogee did not act as a volunteer, (3) the subrogee was not primarily liable for the debt

paid, (4) the subrogee paid off the entire encumbrance and (5) subrogation would not work any

injustice to the rights of the junior lienholder." 107 P.3d 1009, 1013. Following a line of

reasoning found in the Capitol National Bank case, the Court was also swayed by the notion that

there was no negligence on the part of the junior mortgagee in failing to identify the intervening

judgment lienholder, because the buyers and their lender had purchased title insurance. See 43

Colo. at 162, 95 P. at 317. As a result, and contrary to the explicit intent and purpose of the


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