“The recording statute sets forth the general rule that the first mortgage recorded shall have preference over subsequently recorded mortgages.” —Dinkelacker, Judge 

Facts: James and Heather McCarthy (McCarthy) owned a house in Cincinnati, Ohio. The house was purchased with a mortgage loan from Countrywide Home Loans, which recorded its mortgage in the appropriate county recorder’s office. Subsequently, the following events occurred: 

• March 10—McCarthy borrowed money from Fifth Third Bank and gave the bank a mortgage on their house. Fifth Third Bank did not record the mortgage. 
• March 10—McCarthy went to Centex Home Equity Company to refinance the original mortgage loan from Countrywide. 
• March 19—Centex’s title search revealed Countrywide’s loan but did not reveal Fifth Third’s unrecorded mortgage. 
• March 24—The law firm of Santen and Hughes recorded a lien judgment on McCarthy’s house for failure to pay for legal services. 
• April 1—McCarthy closed on the Centex loan. Centex was not informed that McCarthy had previously obtained a loan from Fifth Third. Centex did not conduct a new title search, so it was not aware of the law firm’s recorded lien. The proceeds from Centex’s loan were used to pay off Countrywide’s mortgage. Centex notified its agent, Buckeye Title Company (Buckeye), to record Centex’s mortgage within 24 hours. Buckeye failed to record Centex’s mortgage. 
• April 15—Fifth Third recorded its mortgage. 
• May 2—Centex recorded its mortgage. When Santen and Hughes commenced a foreclosure action against McCarthy’s house, Fifth Third and Centex were brought into the suit. The trial court held that the Santen and Hughes’ lien had first priority. As to the mortgages, the court applied the doctrine of equity and ruled that Centex’s first-in-time but later recorded mortgage had priority over Fifth Third’s later made but previously recorded mortgage. Fifth Third appealed. Issue What is the priority of the lien and two mortgages on McCarthy’s house? 

Language of the Court: Under Ohio law, lien priority is determined by the time of filing. The recording statute sets forth the general rule that the first mortgage recorded shall have preference over subsequently recorded mortgages. Lien priority in this case is hereby established as follows: the Santen and Hughes lien has first priority, the Fifth Third mortgage has second priority, and the Centex mortgage has third priority. 

Decision: The court of appeals reversed the decision of the trial court and ruled that the priority of the security interests on McCarthy’s house were by the recording date: first, Santen and Hughes, second, Fifth Third, and third, Centex. 

Ethics Questions: Was it ethical for Centex to argue that its unrecorded mortgage should take priority over Fifth Third’s prior recorded mortgage?