By Parks Noyes

I. Introduction

Equitable subrogation as a remedy has been an established common law doctrine in the United States for over a century.[i] Recognized as a “legal fiction,” equitable subrogation arises in situations “whereby an obligation, extinguished by a payment made by a third [party], is treated as still subsisting for the benefit of this third [party], so that by means of it one creditor is substituted to the rights, remedies, and securities of another.”[ii] Equitable subrogation is used “only to further an equitable result” and its use “will be denied where it would lead to an uncontemplated and inequitable result or where it would work any injustice to the right of others.”[iii] The doctrine is highly favored by courts and given a liberal application due to it being “sufficiently elastic to meet the ends of justice.”[iv] It is now applied in a variety of legal contexts and in many jurisdictions across the United States, including North Carolina. Most commonly, the doctrine is invoked in mortgage priority disputes that arise during mortgage foreclosure actions.[v] In November of 2019, a divided panel of the North Carolina Court of Appeals in U.S. Bank Nat’l Ass’n v. Estate of Wood held for the first time that a party in North Carolina could assert the doctrine of equitable subrogation in the real estate purchase transaction context, resulting in a novel expansion of the doctrine under North Carolina law.[vi]
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