A law firm (the Firm) sought an order for equitable subrogation to the Toronto-Dominion Bank's (TD) first mortgage interest.
The Firm had paid insurance proceeds to TD after erroneously disbursing them to the mortgagors, Yousefie and his spouse, without including TD as a co-payee, despite instructions.
The property had been sold under power of sale, and the Firm sought priority over TD's equitable mortgage and three other registered mortgagees in the surplus funds.
The court dismissed the Firm's motion, finding that the criteria for equitable subrogation were not met, as the Firm did not pay off the mortgage at the mortgagor's request with the intention of becoming a first mortgagee, nor did it fully discharge the mortgagors' obligation to TD.
Furthermore, the Firm had caused its own loss, TD was not unjustly enriched, and the Firm had alternate remedies.
Granting subrogation would prejudice the other mortgagees who had bargained for their priority.
