## Facts

- Edward and Regina Houston paid David Boone $740,000 for investment services; Boone converted the funds.
- The Houstons sued Boone and recorded a notice of lis pendens against residential real property in Las Vegas that had been quitclaimed to Boone’s former wife, Donna Boone, in a divorce settlement.
- The district court issued an ex parte prejudgment writ of attachment, recorded early on June 26, 1998, against the property.
- Before the refinance, Norwest Mortgage held a first-priority deed of trust on the property for roughly $342,000.
- Later on June 26, 1998, Bank of America refinanced the property: it paid off the Norwest loan and took and recorded a new deed of trust securing its refinance loan.
- The Houstons later obtained a $740,000 judgment against Boone and sought to execute against the property; Bank of America intervened and the sheriff’s sale was enjoined.
- On cross-motions for summary judgment, the district court ruled Bank of America’s lien had priority via equitable subrogation to Norwest’s deed of trust; the Houstons appealed.

## Issues

1. Whether a refinancing lender that satisfies a prior deed of trust is equitably subrogated to the prior lender’s priority position despite an intervening lien recorded before the new deed of trust.
2. Whether actual or constructive notice of an intervening lien defeats equitable subrogation.
3. What role prejudice to the intervening lienholder plays in determining equitable subrogation and lien priority.

## Decision

- The Supreme Court of Nevada affirmed summary judgment for Bank of America.
- The court held that a subsequent lender that pays off a prior secured debt succeeds to the former lender’s priority position so long as the intervening lienholder is not prejudiced.
- The court concluded the Houstons were not prejudiced because their attachment lien was junior to Norwest’s deed of trust before the refinance and remained junior to the same amount of senior indebtedness after the refinance.
- The court rejected a rigid rule barring subrogation based solely on the refinancing lender’s actual or constructive notice of intervening liens.

## Legal Principles

- Equitable subrogation allows one who pays another’s debt to assume the satisfied creditor’s rights and remedies, including lien priority, when equity requires.
- A refinancing lender may be equitably subrogated to a paid-off senior deed of trust’s priority if granting subrogation does not materially prejudice intervening lienholders.
- Notice (actual or constructive) of an intervening lien does not automatically bar equitable subrogation; the central inquiry is prejudice and avoidance of unjust enrichment.
- In a refinance that replaces an existing first-position lien without worsening junior lienholders’ position, equitable subrogation prevents an intervening lienholder from receiving an unearned jump in priority.

## Conclusion

Bank of America, having used its refinance funds to satisfy Norwest’s first-position deed of trust, was equitably subrogated to Norwest’s priority because restoring that priority did not prejudice the Houstons’ intervening attachment lien, which remained in the same junior position as before the refinance.


Houston v. Bank of Am. Fed. Sav. Bank, 119 Nev. 485, 78 P.3d 71 (Nev. 2003)