Jeffrey Mort Pamela Mort Fred Strefling Jeffrey Tobian v. United States

Appellants Jeffrey and Pamela Mort, Jeffrey Tobian, and Fred Strefling (collectively, “the Morts”), assignees of a promissory note secured by a deed of trust, brought an action in the United States District Court, District of Nevada, for injunctive relief and a declaratory judgment that their trust deed interest was superior to a federal tax lien. The Morts acquired their interest after the Internal Revenue Service (IRS) filed a tax lien on the property, but argued that they were entitled to be equitably subrogated to the priority position of the lender whose loan was paid off by their assignor. The district court denied the parties’ cross-motions for summary judgment and dismissed the Morts’ action without prejudice, concluding that equity jurisdiction should not be exercised until the Morts first pursued any legal remedies they may have against their title insurer. The Morts argue on appeal that (1) the district court erred in not reaching the merits of its equitable subrogation claim, and (2) they are entitled to be equitably subrogated as a matter of law. We agree with both arguments and reverse.

BACKGROUND

On December 12, 1990, Cathryn Myers (also known as Cathryn…