In 1977, Algin and Doris Nolan purchased their house with a $200,000 mortgage-secured loan from Phyllis Ranier (plaintiff). In 1983, Mount Sterling National Bank (defendant) loaned the Nolans $125,000 for home improvements, but only after Ranier agreed to subordinate her first mortgage to the bank's second mortgage on the Nolan's property. In 1985, without informing Ranier or taking a third mortgage, the bank loaned an additional $75,000 loan to the Nolans. Instead of applying the Nolans' monthly payments to pay off the second mortgage, the bank used those payments to pay down the 1985 loan. The bank obtained a judicial foreclosure order when the Nolans stopped making their monthly payments. The foreclosure sale netted $181,000. The trial court awarded over $140,000 of that amount to the bank. This sum represented the $125,000 unpaid balance on the 1983 loan, plus interest, court costs, and attorney fees. On appeal, an intermediate court affirmed the trial court's judgment. Ranier appealed to the Supreme Court of Kentucky.