                     THE STATE OF SOUTH CAROLINA 

                          In The Supreme Court 


            Independence National Bank, Petitioner,

            v.

            Buncombe Professional Park, LLC, and David DeCarlis,
            s/a David D. DeCarlis, Respondents.

            Appellate Case No. 2013-000915



       ON WRIT OF CERTIORARI TO THE COURT OF APPEALS



                         Appeal from Greenville County 

                    Charles B. Simmons, Jr., Master-in-Equity



                               Opinion No. 27499 

                 Heard February 5, 2015 – Filed February 25, 2015 



                                  REVERSED


            D. Sean Faulkner, of Greenville, C. Mitchell Brown and
            Mattison Bogan, both of Columbia, all of Nelson Mullins
            Riley & Scarborough, LLP., for Petitioner.

            Mary Leigh Arnold, of Mt. Pleasant, for Respondents.


JUSTICE PLEICONES: We granted certiorari to consider the Court of Appeals'
decision in this mortgage priority case. Independence Nat'l Bank v. Buncombe
Prof'l Park, L.L.C., 402 S.C. 514, 741 S.E.2d 572 (Ct. App. 2013). We reverse the
Court of Appeals' decision and reinstate the master's judgment because we find
petitioner Independence National Bank (Bank) is entitled to be equitably
subrogated to the original first mortgage on the property.1

                                          FACTS

Respondent DeCarlis is the sole member of respondent Buncombe Professional
Park, L.L.C. (Buncombe), which owned an undeveloped parcel of land. In 2007,
DeCarlis, as Buncombe's representative, executed a note and mortgage with Bank.
At the same time, DeCarlis executed a personal guaranty. As part of this
transaction, Bank satisfied the existing first mortgage at closing.

Buncombe ceased paying on the 2007 mortgage. As Bank prepared this
foreclosure suit, it learned in 2010 that DeCarlis held what had been, prior to
Bank's satisfaction of the original first mortgage, a second mortgage on the
property executed and properly recorded in 2006. The same attorney represented
both Bank and Buncombe at the 2007 mortgage closing, and had actual notice of
DeCarlis' 2006 mortgage at the time of the 2007 closing since he had conducted
the title search. The attorney testified at the hearing in this matter that he
erroneously neglected to have DeCarlis execute a satisfaction, release, or
subordination of his 2006 mortgage at the 2007 closing in order to effectuate the
parties' agreement that Bank was to have a first mortgage. Since no such document
was executed, DeCarlis' 2006 second mortgage became the first lien, with priority
over Bank's 2007 mortgage.

Bank brought this foreclosure action against both Buncombe and DeCarlis. The
master "reformed" both Bank's 2007 and DeCarlis' 2006 mortgage, subordinating
DeCarlis' mortgage to that of Bank. In a post-trial order following the parties' Rule
59 motions, the master found Bank was equitably subrogated to the original first
mortgage which Bank had satisfied as part of the 2007 closing, thus giving Bank's
2007 mortgage priority over the 2006 DeCarlis mortgage on a second ground.

Buncombe and DeCarlis appealed, and the Court of Appeals reversed. We granted
Bank's petition for a writ of certiorari to review that decision and now reverse on
the equitable subrogation ground.




1
    In light of this ruling, we need not reach the issue of reformation.
                          EQUITABLE SUBROGATION


In order to be equitably subrogated to the original mortgage, Bank was required to
demonstrate:

             (1) 	it paid the original first mortgage;

             (2) 	it was not a volunteer, but had a direct interest in the
                  discharge of that mortgage;

             (3) 	it was secondarily liable for that mortgage;

             (4) 	no injustice would be done to DeCarlis by the allowance of
                  equitable subrogation; and

             (5) 	it did not have actual notice of DeCarlis' 2006 second
                  mortgage at the 2007 closing.

             Matrix Fin. Serv. Corp. v. Frazer, 394 S.C. 134, 714 S.E.2d
             532 (2011), citing Dedes v. Strickland, 307 S.C. 155, 158, 414
             S.E.2d 134, 136 (1992).

The Court of Appeals held that Bank satisfied all the equitable subrogation criteria
except the last, the absence of actual notice. The Court of Appeals held that the
closing attorney was the agent of both Bank and Buncombe, and that his actual
knowledge of DeCarlis' 2006 mortgage, garnered during the title search,
constituted actual knowledge to Bank, his principal. Bank contends this holding
was error, and that an agent's actual knowledge imputes only constructive
knowledge to his principal. We agree.

The rule is that a principal has constructive notice of all the material facts which its
agent, while acting in the scope of his authority, receives notice. See SCJUR
Agency § 94, citing Crystal Ice Co. of Columbia v. First Colonial Corp., 273 S.C.
306, 257 S.E.2d 496 (1979); Bankers Trust of S.C. v. Bruce, 283 S.C. 408, 323
S.E.2d 523 (Ct. App. 1984). The principal's constructive knowledge of a prior
mortgage does not defeat a claim for equitable subrogation. E.g., Dedes v.
Strickland, supra; Enterprise Bank v. Fed. Land Bank of Columbia, 139 S.C. 397,
138 S.E. 146 (1927); Pee Dee State Bank v. Prosser, 295 S.C. 229, 367 S.E.2d 708
(Ct. App. 1988) overruled on other grounds United Carolina Bank v. Caroprop,
Ltd., 316 S.C. 1, 446 S.E.2d 415 (1994).

The Court of Appeals erred in finding Bank had actual notice of DeCarlis' 2006
second mortgage by virtue of its agent's actual knowledge of this lien. Since Bank
had only constructive knowledge of that mortgage, and since it otherwise met the
requirements for equitable subrogation to the original first mortgage it satisfied in
2007, the master correctly ordered that Bank's 2007 mortgage was equitably
subrogated to that mortgage and therefore has priority over DeCarlis' 2006
mortgage.

                                  CONCLUSION

We reverse the decision of the Court of Appeals and reinstate the master's
judgment.

REVERSED.

TOAL, C.J., BEATTY, KITTREDGE and HEARN, JJ., concur.
