State v. Jones

Holmes, J.,

dissenting. I must disagree with the majority as to the holding that the principle of equitable subrogation could not be applied here to the payments made by Cleveland Federal to other lienholders.

*105I agree that this court may not reweigh the evidence, as determined by the trial court and affirmed by the Court of Appeals and hold that there was subrogation by contract. However, in my view, the doctrine of equitable subrogation should be applied here, at least to the lien debts of the IRS and Frank, Seringer & Chaney, C.P.A.’s.

I do not believe that equitable subrogation may be applied in the instance of Cleveland Federal having satisfied its own prior secured debt with the proceeds of the latter secured loan. The doctrine of subrogation in its broadest sense is the substitution of one person for another with reference to a lawful claim or right, or the substitution of another person in the place of the creditor to whose rights he succeeds. Aetna Cas. & Sur. Co. v. Hensgen (1970), 22 Ohio St. 2d 83; 50 Ohio Jurisprudence 2d 376, Subrogation, Section 2. Here, it is my position that Cleveland Federal may not be subrogated to its own original rights. For purposes of subrogation, it may stand in the shoes of others, but not in its own original shoes.

The general rule as to equitable subrogation is that “one who advances money to pay a prior lien, without discovering an intervening lien which a proper examination of the records would have disclosed, is not guilty of such negligence as will prevent his being subrogated to the prior lien as against the intervening lienor, especially where subrogation leaves the latter no worse off than he would have been had the prior lien not been paid.” 73 American Jurisprudence 2d 664, Subrogation, Section 104.

Equitable subrogation is applied in order to prevent unjust enrichment. It is my position that the state will be unjustly enriched if it is given priority over Cleveland Federal as to the two liens of the other creditors. But for the fact that Cleveland Federal discharged the liens of the IRS and the accounting firm, the state of Ohio would have a lien subject to these prior liens.

Although Cleveland Federal or its agent, Midland, or both, were negligent in conducting the title searches, I do not believe that this would be the basis here for denying equitable intervention.

Further, I would hold that the appellees Jones are not entitled to a homestead exemption as against Cleveland *106Federal. R. C. 2329.72 (now 2329.661) specifically provided that the homestead exemption did not apply to a mortgage judgment executed by a debtor.

Accordingly, I would reverse in part, and modify in part, the judgment of the Court of Appeals.

Celebrezze, C. J., concurs in the foregoing dissenting opinion.