Buskirk v. State-Planters' Bank & Trust Co.
| Decision Date | 06 June 1933 |
| Docket Number | 7578. |
| Citation | 169 S.E. 738,113 W.Va. 764 |
| Parties | BUSKIRK et al. v. STATE-PLANTERS' BANK & TRUST CO. et al. |
| Court | West Virginia Supreme Court |
Submitted May 11, 1933.
Syllabus by the Court.
Subrogation will not be allowed except where subrogee has clear right thereto and no injustice will be done to another.
Beneficiaries of junior trust deed which secured tax payments held not entitled, as against beneficiary under senior trust deed to be subrogated to state's tax lien.
Beneficiaries under junior trust deed providing that, in case lienors should pay the taxes, the amount so paid therefor shall be secured by the deed of trust, were not entitled to be subrogated to the lien of the state for taxes, since the word "shall" in the agreement, except when used to denote futurity, meant "must" and therefore trust deed furnished exclusive remedy.
Subrogation being a creation of equity, will not be allowed except where the subrogee has a clear case of right and no injustice will be done to another.
Appeal from Circuit Court, Cabell County.
Suit by George R. Buskirk and another against the State-Planters' Bank & Trust Company, the Life Insurance Company of Virginia and others. From the judgment, the last-named defendant appeals.
Judgment reversed in part and remanded.
John E Jenkins, of Huntington, and Brown, Jackson & Knight and Herman Bennett, all of Charleston, for appellant.
Livezey, Hogsett, McNeer & Delaney, of Huntington, for appellees Buskirk and Switzer.
This is an injunction suit brought on January 14, 1932, by plaintiffs Switzer and Buskirk, as beneficiaries under a junior deed of trust upon certain hotel property, to prevent a sale thereof on January 15, 1932, under the senior deed of trust; to ascertain the liens against the property, their priority, etc.; and to have the property sold by the court. All of which was done, priority being given to the unpaid taxes for 1931 and to the taxes for 1929 and 1930 which had been paid by the junior lienor, as first and second liens, respectively. The senior lienor (by assignment), Life Insurance Company of Virginia, appeals from the adjudication of the taxes paid by the junior lienor as a lien prior to its lien.
The senior deed of trust was given to secure money borrowed by the hotel company to pay on its obligations. From recitals in the junior trust deed it appears that Switzer was at one time either the owner of the hotel property or of an interest therein; that "a portion" of the money borrowed under the senior deed of trust went to him on the purchase price of the hotel; and that the remainder due him was secured by the junior trust deed. Both trust deeds were dated the same day, November 5, 1927; but the one in favor of Switzer expressly recognized the other trust deed as senior.
Each trust deed contained a covenant that the grantor (the hotel company) should pay all taxes, and in its default the trustee or the lienor could pay them and the amount (of taxes) paid would be added to and become part of the sum secured by the trust deed. Each deed also provided that upon the breach of any of the covenants, the entire debt secured should at once become due and payable, if the lienor should so elect. Taxes upon the incumbered property for 1929 were in default, and on October 18, 1930, the senior lienor notified the hotel company and the junior lienor that unless the taxes were paid by October 25, 1930, the entire debt under the senior deed of trust would be declared due and payable. Switzer paid the taxes on October 22d and thus disposed of the threat of foreclosure. A similar series of events occurred in 1931, in regard to the 1930 taxes. Switzer testified unequivocally that he paid the taxes each time to prevent foreclosure by the senior lienor, saying: "I took it that that (the payment of the taxes) was the only way for me to postpone it (the foreclosure)." He made no reference whatever to a tax sale. Switzer assigned a one-half interest in all his claims against the hotel company to Buskirk. As the sole point at issue is a legal one, further detail seems unnecessary.
The junior lienors contend that they should be subrogated to the lien of the state for the taxes paid by Switzer. The senior lienor admits subrogation is ordinarily accorded to one (not a stranger) paying another's taxes, but contends that under the circumstances here the junior lienors are not entitled to subrogation.
The principle seems to be well established that one possessed of a substantial interest in property, who pays taxes thereon for which another is bound, is entitled ordinarily to be subrogated to the right of the taxing power. See Camden v. Coal Co., 106 W.Va. 312, 145 S.E. 575, and the extensive note to that case in 61 A.L.R. 587. But the right of subrogation is not an absolute right, which a paying creditor may enforce at will. Pierson v. Haddonfield, 66 N.J.Eq. 180, 192, 57 A. 471. The right is "a pure equity" and will be recognized only when consonant with right and justice. "Subrogation is founded on equity and benevolence, and is not to be allowed except in a clear case, and where it works no injustice to others." Wallace's Estate, 59 Pa. 401; Sheldon on Subrogation, § 4; 5 Pomeroy, Eq. Juris. (2d Ed.) § 2349; 60 C.J., on Subrogation, § 18. The right "depends upon the facts and circumstances of each particular case, to which must be applied the principles of justice." 25 R.C.L., on Subrogation, § 2; New York Co. v. F. N. Bank (C.C.A.) 51 F. (2d) 485, 77 A.L.R. 1052. The right is not thrust on every creditor who pays a debt of his principal, as the right may be relinquished. "The effect of this principle may be controlled by acts of the parties." Bank of U.S. v. Peter, 13 Pet. 123, 10 L.Ed. 89; Henderson, etc., v. Shillito Co., 64 Ohio St. 236, 60 N.E. 295, 298, 82 Am.St.Rep. 745. A second lienor who satisfies a paramount lien against his principal has the option of succeeding to the rights of the superior lien or resorting to his principal directly. And if it appears that at the time of payment it was the intention of the second lienor to look to the principal, the right of subrogation expires. Post facto intention will not revive the right. Belcher v. Wickersham, 68 Tenn. (9 Baxt.) 111, 120, 121. The right may be extinguished by contract. Northern Trust Co. v. Cons. El. Co., 142 Minn. 132, 138, 171 N.W. 265, 4 A.L.R. 510, and the host of authorities there cited; 60 C.J., supra, § 7.
Equity will not enforce subrogation "in the face of a contract that negatives the idea of subrogation." Capen v. Garrison, 193 Mo. 335, 342, 343, 92 S.W. 368, 370, 5 L.R.A. (N. S.) 838; Sheldon, supra, § 41; 25 R.C.L., supra, § 9; 60 C.J., supra, § 33. An agreement for "another and different" security "negatives the existence of any agreement for subrogation." Taaffe v. Trust Co. (C.C.A.) 275 F. 829, 830. When other security has been agreed upon between the debtor and the creditor, equity will not reconstruct the contract. "Where the party has carved out his own security, the law will not create another in aid." Gilman v. Brown, 1 Mason, 191, 214, Fed. Cas. No. 5,441. The opinion in that case was written by Justice Story when he was on the circuit bench. It was appealed to the Supreme Court of the United States and that principle was reiterated by Chief Justice Marshall. See Brown v. Gilman, 4 Wheat. 255, 291, 4 L.Ed. 564. Accord: 5 Pomeroy, supra, § 2350. Subrogation cannot "be invoked to override and displace the real contract of the parties." Union Mortgage, Banking & Trust Co. v. Peters, 72 Miss. 1058, 1070, 18 So. 497, 500, 30 L R. A. 829.
It may be admitted that in case of payments (such as the ones in question) a natural presumption would arise in favor of subrogation. But a presumption subsides when there is evidence of an intention to the contrary. See Dwight v Hazlett, ...
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