Discharge by Mistake
"It is the general rule that, where a mortgage has been discharged by mistake, equity will set the discharge aside and reinstate the mortgage to the position the parties intended it to occupy, where the rights of intervening lienors have not been affected." (Emphasis added). North Easton Cooperative Bank v. MacLean, 300 Mass 285, 15 N.E.2d 241 (1938). The MacLean case was cited inProvident Co-operative Bank v. James Talcott, Inc., 358 Mass 180, 260 N.E.2d 903 (1970). In this latter case Provident held a mortgage on property. While the mortgage remained outstanding a second mortgage to Talcott was recorded. Thereafter the owner wished to refinance the Provident mortgage and when the new mortgage to Provident was recorded the attorney missed the second mortgage to Talcott. Provident then discharged its first mortgage. The question was (as in the Abbott & Costello routine), "Who's on First?" The court stated that where Provident's first mortgage was discharged by mistake and Talcott always intended to and believed that it held the position of a second mortgage, equity would reinstate Provident's mortgage to the amount that would have been secured under its first mortgage had it not been discharged in error.
The reinstatement and preserved priority of the mortgage is based on the principle of equitable subrogation. See the discussion in these notes under Equitable Subrogation – Missed Mortgage.