Equitable Subrogation

With the collapse of the Arizona commercial real estate market there has been an explosion in the amount of litigation in which lenders who refinance construction loans for "projects gone bad" claim that their subsequent lien on the property (gained at the time of refinancing) has priority over the mechanic's liens of the general contractor. The theory the lenders rely on is called "equitable subrogation." Here is a recent decision on a lender's motion for summary judgment on its equitable subrogation claim written by Judge Haines from the Bankruptcy Court for the District of Arizona in the Mortgages Ltd. case.
Haines Decision

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