By Debra Smith, Esq.
Associate Commercial Counsel
A recent case in the Second Department in New York has expanded the long-standing position held on the issue of equitable subrogation. Before delving into the details of the specific case, it may help to explain the concept. Equitable subrogation is a doctrine recognized in most states and a common issue in the world of real estate and lending. This doctrine enables a lender that pays off an existing loan to stand in the shoes of the lien holder it paid off for priority purposes. This is an equitable remedy that allows, in certain circumstances, for the lien holder (lender) to change its priority position to the extent of the lien paid.
How does equitable subrogation work? And how does the recent NY case expand the application of equitable subrogation in the Second Department?