Capitol Nat. Bank v. Holmes

• Decision Date: 06 April 1908
• Citation: 43 Colo. 154,95 P. 314
• Parties: CAPITOL NAT. BANK v. HOLMES et al.
• Court: Colorado Supreme Court

95 P. 314

43 Colo. 154

CAPITOL NAT. BANK v. HOLMES et al.

Supreme Court of Colorado

April 6, 1908

Appeal from District Court, City and County of Denver; F. T Johnson, Judge.

Action by the Capitol National Bank, a corporation, against Orel Holmes and another. From a judgment for defendant Holmes on his cross-complaint, subrogating him to certain rights under a mortgage, plaintiff appeals. Affirmed.

Bicksler, Bennett & Nye, for appellant.

R. H Gilmore and Miller & Barnd, for appellees.

GODDARD J.

The facts set out in the pleadings and found by the court that are pertinent to the question presented in this case are, in brief, as follows: On the 11th day of March, 1902, Mary Wright was the owner in fee simple and in possession of certain described real estate. On the 11th day of March, 1902, she executed a note for $1,500 to one Hugh McFetrich, and on the same date, to secure the payment of said note, executed a mortgage on said real estate. Thereafter, and on September 10, 1904, the appellant, the Capitol National Bank, caused to be filed with the county clerk and recorder of Adams county, Colo., where the land was situated, a transcript of a judgment obtained against Mary Wright for the sum of $586.77 and costs. On the 19th day of September, 1904, and before the appellant had taken any steps to enforce its judgment by execution, Mary Wright sold, and by warranty deed conveyed, the land to Orel Holmes, one of the appellees herein. Holmes immediately went into possession of said property, and on September 21, 1904, paid said mortgage, and caused the same to be satisfied of record. As alleged in the cross-complaint, and as found by the court below, the defendant Wright had, as an inducement to the said purchase, represented to the defendant Holmes that the said premises were free of all liens and incumbrances except the mortgage given by the defendant Wright to secure to Hugh McFetrich the sum of $1,500 and interest thereon. That previous to the completion of said purchase the defendant Wright furnished to the defendant Holmes an abstract of title prepared by a reputable abstract company which was engaged in the business of furnishing abstracts of title to lands in said Adams county. That thereafter the defendant Holmes had caused said title to be examined by attorneys at law in regular practice in this state, who found the title to the same free from incumbrance except said mortgage as shown by the entries on said abstract of title. That the defendant Holmes, at the time he completed said purchase and paid the amount of said mortgage and filed for record the release of said mortgage, had no actual knowledge of the judgment, and the entry of the same had by accident or otherwise been omitted from the said obstract of title of the said premises. That the defendant Holmes, in making the said purchase, and in examining the title to the said premises, pursued the usual and customary method to inform himself as to the condition of the title to said premises, and adopted the usual and customary cautions in order to learn the condition of the said title, and was, in that behalf, free from negligence, and it was ordered, adjudged, and decreed by the court 'that the defendant Orel Holmes be subrogated to the rights of Hugh McFetrich in and under said mortgage, and that the said mortgage be revived and restored as if the same had never been released, and that the defendant Holmes be regarded as the equitable assignee thereof; that the release of mortgage executed by said Hugh McFetrich * * * be canceled and held for naught, as of the date in which the same was executed by the said mortgagee; * * * and that said mortgage be fully restored on the records where the same is recorded as a lien upon the said premises senior, prior, and superior to the lien of the said judgment of the plaintiff against the defendant Wright.' And thereupon proceeded to foreclose said mortgage in behalf of the defendant Holmes, and ordered that the proceeds realized from a sale of said premises under such foreclosure proceeding be first applied to the payment of the mortgage debt, and the excess, if any, be applied upon the said judgment in favor of the appellant.

The contention of counsel for appellant is that in the circumstances of this case the payment of the mortgage by Holmes and the release of the same on record operated as a satisfaction and discharge of said mortgage, and that its judgment lien thereby became a prior and paramount lien upon said property. To the contrary counsel for appellees insist that the payment of the note and the satisfaction of the mortgage being made by Holmes, without actual notice of the lien of the judgment, and he being, as the court found, free from negligence, and having paid the mortgage under a mistake of fact, that he is entitled in equity to be subrogated to the rights of the original mortgagee under the well-settled equitable doctrine that the mere fact of a charge having been paid off does not ipso facto extinguish it, but if there is any reason for keeping it alive, such as the existence of another incumbrance, equity will not destroy it. The rule invoked is stated by 3 Pomeroy, in his work on Equity Jurisprudence, § 1212, as follows: 'In general, when any person having a subsequent interest in the premises, and who is therefore entitled to redeem for the purpose of protecting such interest, and who is not the principal debtor, primarily and absolutely liable for the mortgage debt, pays off the mortgage, he thereby becomes an equitable assignee thereof, and may keep alive and enforce the lien so far as may be necessary in equity for his own benefit. He is subrogated to the rights of the mortgagee to the extent necessary for his own equitable protection.' In Vaughn v. Consolidated Mining Co., 21 Colo. 54, 39 P. 422, this court held that...