Community Trust Bank of Mississippi v. First National Bank of ClarksdaleAnnotate this Case
First National Bank of Clarksdale (FNB) secured a loan of more than $800,000 with a deed of trust on real property in Oxford with the understanding that the bank would become the primary lien holder on the realty. FNB acquired title insurance from Mississippi Valley Title Insurance Company against the risk of an undiscovered superior lien holder. No formal title search on the property was performed, although Mississippi Valley’s agent did discover the existence of another deed of trust on the property held by Community Trust Bank (CTB). The agent never relayed this information to FNB or to Mississippi Valley and issued the policy without regard to this prior recorded lien. Years later, CTB’s loan went into default and CTB initiated foreclosure proceedings, which alerted FNB to the existence of CTB’s deed of trust on the property. FNB brought suit in Chancery Court to be subrogated to the primary lien holder position on the property in the amount that it had paid to satisfy the original primary deed of trust. After a bench trial, the chancellor found that the doctrine of equitable subrogation applied and granted primary status to FNB. CTB appealed. Upon review, the Supreme Court reversed: based upon the facts presented, subrogation was not equitable.