Aames Capital Corporation v. Interstate Bank of Oak Forest

Aames Capital Corporation (Aames) (plaintiff), the assignee of a mortgage that was refinanced to pay the balance of prior mortgages, sued in foreclosure after the borrowers defaulted on the loan. Interstate Bank of Oak Forest (Interstate) (defendant) claimed that its judgment lien, which was recorded before Aames became the assignee, took priority over the Aames mortgage. Patrick and Diane Wangler obtained the original mortgage in 1986 from Hinsdale Federal Savings and Loan. Federal Savings and Loan recorded the mortgage that same year and assigned it to Standard Federal Bank (Standard). The Wanglers subsequently signed four junior mortgages with Suburban Bank of Elmhurst (Suburban). The four mortgages were recorded in 1988, 1989, 1990, and 1991. In 1996, Interstate, with knowledge of the outstanding Standard and Suburban mortgages, recorded a judgment against the Wanglers in the amount of $75,891.06. That year, the Wanglers refinanced the mortgages with Pacific Thrift and Loan Company (Pacific) to pay the balance of the debt owed to Standard and Suburban. Pacific paid the prior mortgagees $174,000 and took a mortgage on the Wangler property. Pacific recorded the mortgage and assigned the mortgage to Aames. In 1997, the Wanglers defaulted on the note, and Aames sued in foreclosure. Interstate moved for summary judgment, arguing that the Interstate judgment took priority over the Aames mortgage because the judgment was recorded before the Aames mortgage was recorded. Aames claimed that the Aames mortgage took priority, because Aames was subrogated to the rights of Standard and Suburban, the original mortgagees. Interstate countered that subrogation could not exist absent express agreement. The trial court held that Interstate’s judgment lien, which had been recorded earlier in time, took priority over the Aames mortgage. The court granted summary judgment to Interstate. Aames appealed.