Dixon v. Morgan

• Decision Date: 13 July 1926
• Docket Number: 1.
• Citation: 285 S.W. 558,154 Tenn. 389
• Parties: DIXON v. MORGAN ET AL.
• Court: Tennessee Supreme Court

285 S.W. 558

154 Tenn. 389

DIXON v. MORGAN ET AL.

No. 1.

Supreme Court of Tennessee.

July 13, 1926

Appeal from Chancery Court, Gibson County; V. H. Holmes, Chancellor.

Suit by C. M. Dixon against John H. Morgan and others. Decree dismissing complaint in Court of Appeals, and complainant appeals. Reversed, rendered, and remanded, with directions.

Cooper & Kinton, of Trenton, for appellant.

W. R Landrum, H. H. Elder, and J. W. Nichols, all of Trenton, for appellees.

McKINNEY J.

The complainant insists that the court should apply the doctrine of subrogation or equitable assignment to the facts of this cause.

The undisputed facts, as set forth in the opinion of the Court of Appeals, are as follows:

"On November 12, 1919, I. G. Wright, his wife joining in the conveyance, conveyed by deed to John H. Morgan a tract of 193 acres of land in Gibson county for a consideration of $30,000, evidenced by promissory notes of Morgan payable to the order of Wright, bearing date of November 12, 1919, as follows: One note for $1,000, due January 1, 1920, one note for $9,000, due January 1, 1920, and five notes for $4,000 each, the first due on January 1, 1921, and the others one on the 1st day of January of each of the succeeding years--all of said notes being secured expressly by a lien retained in said deed. Said deed provided that Morgan should have possession of the land on January 1, 1920 provided that on or before that date he had paid to Wright said notes of $1,000 and $9,000. On December 31, 1919, Morgan and his wife conveyed by deed to J. W. Nichols 68.7 acres of said land for $6,870, Nichols assuming to pay to Wright the $4,000 note due January 1, 1921, and the sum of $2,870 on the second $4,000 note which was due January 1, 1922. These payments being made, on January 4, 1923, Wright executed to Nichols a release of his lien on the 68.7 acres. This transaction was closed and presents no issue in this cause.

On December 31, 1919, Morgan borrowed of the Gibson County Bank the sum of $3,000, with which to supplement a fund of $7,000 which he had, and on the next day he paid to Wright the $10,000 due on said day in satisfaction of the notes aggregating that sum as aforesaid.

On December 31, 1919, Morgan and wife conveyed to A. S. Elder, trustee, the remaining 124 acres of said land to secure the payment of the note of Morgan to the Gibson County Bank in the sum of $3,240 bearing said date and due in one year; the interest at the rate of 8 per cent. per annum was added to the principal.

J. M. Jetton and J. W. Nichols signed said note as accommodation makers with said Morgan. They testify, and it is not denied, that they signed said note on the faith of the security of said deed of trust and for no valuable consideration, but purely as accommodation makers. The money was needed to enable Morgan to make the first cash payment for the land. The deed of trust was filed for record on the day of its execution. The equity of redemption was not waived in this deed of trust. The debt which it was intended to secure has never been paid. It is conceded that Morgan is insolvent. On June 30, 1921, another deed of trust to the same property in the same form was executed by Morgan and wife to secure the same debt, excepting that the equity of redemption was therein waived. It was not registered until October, 1921. It recited that it was made to secure a note due in seven months from June 30, 1921. This note signed by Morgan, Nichols, and Jetton was given in renewal of the former note. Both of said deeds of trust recited that they were given to secure to the Gibson County Bank the payment of the notes and to secure and hold harmless said Jetton and Nichols as sureties on the notes. The deeds of trust recited also that they were made subject to the vendor's lien retained by Wright to secure the payment of the purchase-money notes given to him by Morgan; the principal sum on June 30, 1921, being $13,130.

On January 9, 1922, these deeds of trust being thus of record, Morgan and wife conveyed by deed to complainant, C. M. Dixon, out of said 124 acres a tract of 44.4 acres lying along the public road separating it from the balance of the 124-acre tract. The consideration was $6,660, all of which was paid by Dixon to Wright, $6,000 being paid to him in cash, and for the balance Dixon executed to Wright his note for $660, due January 1, 1923, and said note was paid on said date. Wright executed a written marginal release opposite said deed of record, showing the payment of said note. The deed to Dixon was filed for record on January 21, 1922. In said deed Morgan warranted that the land was unincumbered. Dixon knew of the lien held by Wright, but upon his payment of the $6,000 to Wright, the latter joined in the execution of said deed using the following language:

'I, the undersigned I. G. Wright, hereby join in this deed and hereby convey, release, and quitclaim unto the said C. M. Dixon, his heirs and assigns forever, all the right, title, claim, and interest that I have in and to said above-described tract of land by reason of the lien retained in the deed executed by myself and wife to John H. Morgan, conveying a large tract of land of which the above-described tract is a part, and I join in this instrument simply to release said lien, and do hereby release and discharge said above-described tract of land from the lien retained in the deed executed by myself and wife to said John H. Morgan.'

Dixon was totally ignorant of the existence of the said deeds of trust of record at the time of his purchase from Morgan and until a few weeks before he filed his bill in this cause on April 10, 1924. He did not actually search the records, but he assumed that the lien held by Wright was the only incumbrance on the property. Morgan said nothing to Dixon about these deeds of trust. He testified that he did not think of them, that he did not intend to practice any fraud upon Dixon, and that he did not wish that Dixon suffer any harm from these incumbrances. Morgan was a man of fair natural intelligence but totally unlettered, being unable to read and write. Dixon was a man of some education, of rather shrewd business intelligence, and of much experience as a business man or trader. The two men were neighbors and friends, but there was no special relation of intimate trust or confidence between them. It is claimed by Dixon that the price which he paid for the 44.4 acres, to wit, $6,660, was really an excessive price, at that time, it being at the rate of about $150 per acre, but that he wanted the property for a home. It appears now from the testimony of a number of witnesses that the value of this land, in view of the recent shrinkage of farm lands, is not over $100 per acre. The land contained no improvements, but Dixon improved it by building a barn and some fences, and set out an orchard, costing all together about $500. The bill in this cause was filed by Dixon against Morgan, A. S. Elder, trustee, Jetton, Nichols, Wright, and the Gibson County Bank, praying that Dixon be subrogated to the lien of Wright to the extent of the sum of $6,660 paid by him, with interest as a superior lien to the rights of the bank and Nichols and Jetton under the deeds of trust; that he be given relief on the ground of fraud and mistake because of his ignorance of the actual existence of said deeds of trust; that, if necessary, a sale of the land be made; that, if the proof should show clearly that said land would not sell for as much as the amount paid by him, the land be decreed to him over the rights of any of the other parties to this cause. The bill was demurred to by the defendants, but the demurrers were overruled, and they answered the bill.

The issues are between the complainant and the defendants Gibson County Bank, Jetton, and Nichols. These defendants deny the right of Dixon to subrogation, and insist that the lien held by Wright upon this was totally extinguished. They insist upon the validity of their deeds of trust as paramount incumbrances upon the land, superior to any rights of Dixon. They contend that the assumption by Dixon of so much of the debt of Wright as represented the consideration for this land made it the primary obligation of Dixon; that his payment of said sum was a payment, and no rights held by Wright could pass to him by equitable assignment or subrogation, as the parties did not intend the same at the time of said transaction."

The Court of Appeals held that the complainant was not entitled to the relief sought and dismissed his bill.

In 37 Cyc. 363, it is said:

"Subrogation is the substitution of another person in the place of a creditor, so that the person in whose favor it is exercised succeeds to the rights of the creditor in relation to the debts. The doctrine is one of equity and benevolence, and like contribution and other similar equitable rights was adopted from the civil law, and its basis is the doing of complete, essential, and perfect justice between all the parties without regard to form, and its object is the prevention of injustice. The right does not necessarily rest on contract or privity, but upon principles of natural equity, and does not depend upon the act of the creditor, but may be independent of him and also of the debtor."

The application of the doctrine of subrogation is not controlled alone by the chancellor's conception of right, but its exercise must be governed by judicial discretion; and, in every case where the doctrine is invoked, in addition to the inherent justice of the case, concur therewith some principle of equity jurisprudence as recognized and enforced by courts of equity. 37 Cyc. 367, and note 11.

In Johnson v. Tootle, 14 Utah, 482, 47 P. 1033, it is said:

"The general

...