## Facts

- Elmer and Anita Ketcham owned residential real property in Wyoming.
- The property was encumbered by a senior mortgage originally made through America’s Wholesale Lender (AWL) and later held in a securitized trust for which the Bank of New York acted as trustee; Mortgage Electronic Systems, Inc. (MERS) was involved in the mortgage’s recorded chain.
- The property was also encumbered by a junior mortgage in favor of First National Bank of Steamboat Springs, N.A. (First National Bank or FNB).
- Countrywide Home Loans, Inc. (Countrywide) made a refinancing loan to the Ketchams, and the loan proceeds were used to satisfy the AWL/Bank of New York senior mortgage.
- After the refinance, the prior senior mortgage was released of record, and Countrywide expected its new mortgage to occupy the senior (first-priority) position.
- The Ketchams later defaulted on the FNB mortgage, and FNB filed a foreclosure action asserting that, under Wyoming’s recording statute, its mortgage was prior to Countrywide’s because FNB’s mortgage was recorded earlier.
- Countrywide (and related defendants, including AWL) argued that because Countrywide’s loan paid off the former senior mortgage, Countrywide should be placed in that paid-off mortgage’s priority position through equitable subrogation.
- In the same foreclosure case, default judgments were entered against the Bank of New York and MERS after they did not timely appear or respond; they later moved to set aside the defaults.
- The district court granted summary judgment to FNB on priority and denied the motion to set aside the default judgments. The appeals were consolidated, and the Wyoming Supreme Court reviewed both rulings.

## Issues

1. Whether the district court correctly refused to apply equitable subrogation and instead applied Wyoming’s “first in time is first in right” recording statute to hold that FNB’s earlier recorded mortgage had priority over Countrywide’s refinance mortgage.
2. Whether the district court abused its discretion by denying the Bank of New York and MERS’s motion to set aside the default judgments entered against them.

## Decision

- The Wyoming Supreme Court affirmed the summary judgment ruling that FNB’s mortgage had priority under Wyoming’s recording statute.
- The court declined to use equitable subrogation to move Countrywide into the priority position of the satisfied senior mortgage in these circumstances, where doing so would defeat the priority of an intervening lien that was properly recorded.
- The Wyoming Supreme Court also affirmed the district court’s denial of the Bank of New York and MERS’s motion to set aside the default judgments, finding no abuse of discretion.

## Legal Principles

- Under Wyoming’s recording statutes, mortgage priority generally follows the rule that the first properly recorded lien has priority over later recorded liens.
- A refinancing lender that pays off a prior mortgage is not automatically entitled to the paid-off mortgage’s priority position; courts will not reorder recorded priorities through equitable subrogation when doing so would harm an intervening lienholder whose interest was properly recorded.
- Equitable relief is less likely where the refinancing lender had notice of the intervening recorded lien and could have protected itself through available transactional steps (for example, obtaining a subordination agreement or confirming the intended priority before releasing prior security).
- A district court’s decision on a motion to set aside a default judgment is reviewed for abuse of discretion; the movant must show a sufficient basis under the governing procedural standards, and appellate courts will not reverse absent a clear error in that discretionary decision.

## Conclusion

The Wyoming Supreme Court held that FNB’s earlier recorded mortgage retained priority over Countrywide’s refinance mortgage under Wyoming’s recording statute and refused to reorder that priority through equitable subrogation after the senior mortgage was satisfied and released; it also upheld the district court’s denial of the Bank of New York and MERS’s request to set aside default judgments entered against them.


Countrywide Home Loans, Inc. v. First National Bank of Steamboat Springs, 2006 WY 132, 144 P.3d 1224 (2006)