Bennett v. First Nat. Bank

• Decision Date: 17 January 1905
• Citation: 102 N.W. 129,128 Iowa 1
• Parties: BENNETT v. FIRST NAT. BANK ET AL.
• Court: Iowa Supreme Court

128 Iowa 1

102 N.W. 129

BENNETT

v.FIRST NAT. BANK ET AL.

Supreme Court of Iowa.

Jan. 17, 1905.

Appeal from District Court, Dubuque County; Fred O'Donnell, Judge.

The opinion states the case. Modified.

R. W. Stewart, for appellants.

McCarthy, Kenline & Roedell, for appellee.

WEAVER, J.

This action in equity was begun for the foreclosure of a mortgage and other relief. The claim of the plaintiff is based on the following alleged facts, which, to avoid confusion, are separately stated and numbered:

(1) On January 7, 1897, William G. Watters and Mary Watters made the note and mortgage in suit to A. A. Carter; the mortgage being duly filed for record on the same day.

(2) On October 5, 1897, the Second National Bank of Dubuque obtained a judgment for $15,066.66 and costs in the district court of that county against the Excelsior Brassworks, as principal, and A. W. Hosford, J. W. Watters, P. H. Halpins, Peter R. Martin, Sidonia Hosford, and Mary Watters, as accommodation indorsers and guarantors, in the order named.

(3) On October 14, 1897, the plaintiff herein recovered two several judgments in the same court against the said Mary Watters and William G. Watters for the aggregate sum of $8,034.03 and costs.

(4) On November 29, 1897, the Excelsior Brassworks, the principal defendant in the judgment first named, transferred all its assets in trust to Sidonia Hosford, for the use and benefit of the said Sidonia Hosford and Mary A. Kemler, in their individual right, and as executors of the will of Richard Waller, deceased; and, as a part consideration for said transfer, said Sidonia Hosford and Mary A. Kemler, individually and as executors as aforesaid, assumed the payment of the aforesaid judgment in favor of the Second National Bank. It is also alleged in this connection that, upon the application of Sidonia Hosford, one Amanda L. Hosford was appointed receiver of the Excelsior Brassworks.

(5) Thereafter the First National Bank, with knowledge of the alleged assumption by Hosford and Kemler of the payment of the judgment in favor of the Second National Bank, took an assignment of said judgment, which assignment was filed with the clerk of the district court on March 2, 1901.

(6) On the maturity of the note given to Carter, the makers, William G. Watters and Mary Watters, applied to the plaintiff for a loan of $1,000, with which to take up said obligation; and, at their request, plaintiff undertook to advance the money to the mortgagee, Carter, and to receive and hold the said mortgage as security for the money thus paid out. In accordance with this agreement, plaintiff paid over the money to Carter, and received the note and mortgage.

(7) Soon after this transaction, William G. Watters and Mary Watters applied to plaintiff for a further loan of $500; offering a mortgage on the same real estate as security for its repayment, and representing that said property was incumbered by no liens except the judgments in plaintiff's favor, and the Carter mortgage, then held by plaintiff. The plaintiff, having, as she claims, no knowledge of the lien of the judgment in favor of the Second National Bank, and desiring to accommodate the mortgagors, took from them a new mortgage in renewal of the Carter mortgage, in the sum of $1,000, and for the further sum of $500 then advanced to said mortgagors; and, believing that said mortgage for $1,500 was a first lien upon the property, she caused the old mortgage to be canceled of record.

(8) It is further alleged that although Sidonia Hosford and Mary A. Kemler are primarily liable for the payment of the judgment owned by the First National Bank, and have property not exempt from execution from which the debt can be made, said bank has neglected and refused to enforce payment by them.

(9) The mortgaged property has been, by agreement of all parties, sold, and the purchase money paid into court, to be applied upon the liens involved in this controversy, as shall be found equitable and just.

Upon the case thus made, the plaintiff asks to have the cancellation of the Carter mortgage set aside, and the lien thereof restored, and a foreclosure decreed in her favor. She also asks that the judgments held by her, though inferior in order of time to the judgment held by the First National Bank, be decreed to be superior thereto. Issue being taken upon these allegations, a trial was had to the court, and a decree entered reviving the Carter mortgage, and foreclosing the same in favor of plaintiff, for the principal sum of $1,000, and making the lien of the two judgments held by her superior to the lien of the judgment held by the defendants. From this decree the First National Bank and Sidonia Hosford have appealed. The plaintiff also appeals from so much of the decree as limits her right of subrogation to the Carter mortgage to the principal sum or face of the debt thereby secured.

1. We have no hesitation in affirming that part of the decree which sustained the plaintiff's claim to be subrogated to the lien of Carter under the first mortgage. The plaintiff, as the holder of a judgment lien which was junior to the mortgage, had the right to protect her security by paying the mortgage debt and succeeding to the rights of the mortgagee. Such payment was not the act of a mere intermeddler or volunteer, and the cancellation of the mortgage of record will not necessarily defeat such subrogation, save as against the intervening rights of third parties without notice. This rule was announced by us in the late case of Bowen v. Gilbert, 122 Iowa, 448, 98 N. W. 273, where, as in the present case, a lienholder paid off a prior mortgage, and caused it to be released of record. It is quite certain from the record that plaintiff did not intend to release or waive any security to which she was entitled, but gave up the old mortgage and took the renewal under the belief that she was obtaining a first lien on the property. It is also certain that the defendant bank is in no manner prejudiced by denying to it the unearned advantage which it seeks. The decree in this respect does no more than to hold that a payment made by the plaintiff in good faith to protect her lien shall not operate to destroy the value of that lien, and permit a junior creditor to have precedence over her. The justice of the rule here stated has long been recognized. 3 Pomeroy's Eq. Jur. (2d Ed.) 1212; Ward v. Seymour, 51 Vt. 320;Elliott v. Trainter, 88 Minn. 377, 93 N. W. 124;Ebert v. Gerding, 116 Ill. 217, 5 N. E. 591;Gardner v. Astor, 3 Johns. Ch. 53, 8 Am. Dec. 465;Bank v. Paulsen, 57 Neb. 717, 78 N. W. 303;Young v. Shaner, 73 Iowa, 555, 35 N. W. 629, 5 Am. St. Rep. 701;Wormer v. Waterloo, 62 Iowa, 702, 14 N. W. 331;Gilbert v. Gilbert, 39 Iowa, 657. A very thorough review of the cases may be found in a note to American Bonding Co. v. Bank (Md.) 99 Am. St. Rep. 512-521. Mr. Freeman there says: “When a person having an interest in real property pays money to satisfy a lien thereon in order to protect that interest, he is entitled to be subrogated to the rights of the incumbrancer, and considered as an assignee of the lien, for the purpose of effecting substantial justice, although the lien is discharged of record.” The numerous decisions cited by the eminent annotator fully bear out his statement of the principle. Some point is made in argument because of the fact that, while plaintiff denies all knowledge of the lien held by the...