Dimeo v. Gesik

• Decision Date: 29 December 1999
• Citation: 993 P.2d 183,164 Or. App. 567
• Parties: David DIMEO, Respondent, v. Darren B. GESIK, Defendant, and Joseph E. Chrisman and Bonita Jewell Chrisman, Respondents, and Western Bank, a division of Washington Mutual, Appellant.
• Court: Oregon Court of Appeals

993 P.2d 183

164 Or. App. 567

David DIMEO, Respondent, v. Darren B. GESIK, Defendant, and Joseph E. Chrisman and Bonita Jewell Chrisman, Respondents, and Western Bank, a division of Washington Mutual, Appellant.

(97-2918; CA A100631).

Court of Appeals of Oregon.

Argued and Submitted November 30, 1998.

Decided December 29, 1999.

Douglas R. Holbrook argued the cause and filed the opening brief for appellant. With him on the reply brief was Litchfield & Carstens LLP.

Thomas H. Anderson argued the cause and filed the brief for respondent David Dimeo.

No appearance for respondents Joseph E. Chrisman and Bonita Jewell Chrisman.

Before LANDAU, Presiding Judge, and DEITS, Chief Judge, and BREWER, Judge.¹

LANDAU, P.J.

Plaintiff Dimeo initiated this action for judicial foreclosure of a trust deed securing a promissory note. Defendant Western Bank also asserted an interest in the real property at issue based on a subsequent trust deed. Western Bank contended that, although its trust deed was later in time than Dimeo's, it nevertheless was entitled to first priority under the doctrine of equitable subrogation, because it reasonably believed that Dimeo's lien had been discharged. The trial court entered summary judgment in favor of Dimeo, and Western Bank appeals. We reverse and remand.

In reviewing a summary judgment, we determine whether there are any issues of material fact and whether the moving party is entitled to judgment as a matter of law. ORCP 47 C; Jones v. General Motors Corp., 325 Or. 404, 420, 939 P.2d 608 (1997). The fact that this case involves equitable remedies does not alter that standard of review. Cochran v. Connell, 53 Or.App. 933, 938-39, 632 P.2d 1385, rev. den. 292 Or. 109, 642 P.2d 311 (1981).

The following facts are not in dispute. Dorcia Johnson originally owned the property. In March 1995, Johnson sold the property to Gesik, subject to two trust deeds that Johnson had placed against the property. In August 1995, Gesik gave a trust deed to the property to Dimeo to secure a $100,000 loan. In February 1996, Gesik gave a trust deed to the property to the Chrismans to secure another $100,000 loan. All parties' interests were properly recorded.

Meanwhile, in September 1996, Western Bank offered Gesik a $110,000 home equity line of credit, conditioned on the issuance of a standard title insurance policy showing Western Bank's trust deed in the first position. Western Bank received a preliminary title report from Lincoln County Title and Escrow in late September, showing the Dimeo and Chrisman interests in the property. The branch manager of Western Bank telephoned the title company and told an unidentified representative of the title company that the Dimeo and Chrisman liens "would have to be subordinated to Western Bank's required first trust deed position or removed otherwise." The representative assured the branch manager that that would occur.

In early October 1996, the bank received a title report from Stewart Title, an affiliate of Lincoln County Title and Escrow. The title report showed Western Bank in first position and made no reference to the Dimeo and Chrisman liens. The bank relied on the title report and disbursed the funds to Gesik who, in turn, used part of the funds to pay off the two trust deeds that Johnson had placed against the property.

Dimeo then initiated this action seeking judicial foreclosure of his trust deed, naming as defendants both the Chrismans and Western Bank. The Chrismans answered, alleging an interest in the property superior to all but Dimeo. Western Bank counterclaimed against Dimeo and cross-claimed against the Chrismans, alleging that it was entitled to superior position by virtue of the doctrine of equitable subrogation on the ground that it was justifiably unaware that the Dimeo and Chrisman liens had not been discharged. Western Bank moved for summary judgment on its theory of equitable subrogation. Dimeo also moved for summary judgment, arguing that the bank's reliance on the doctrine of equitable subrogation was unavailing, given that it had not acted in justifiable ignorance of the intervening liens. The trial court allowed Dimeo's motion, denied Western Bank's, and entered judgment accordingly.

On appeal, Western Bank argues that the trial court erred in allowing Dimeo's motion and in denying its motion for summary judgment. According to Western Bank, the doctrine of equitable subrogation gives it priority over the Dimeo and Chrisman liens. The bank insists that it reasonably relied on the title company's final report, which did not disclose the liens. Dimeo argues that the trial court ruled correctly, because equitable subrogation is available only when the party seeking it is actually ignorant of the intervening liens, and the ignorance was not a product of its negligence. According to Dimeo, the bank had actual knowledge of the intervening liens through the preliminary title reports, and it was negligent in disbursing funds without first ascertaining whether those liens had been discharged.

The doctrine of equitable subrogation has been described as follows:

"[I]f the holder of a mortgage take[s] a new mortgage as a

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