French v. Grand Beach Co.

• Decision Date: 29 July 1927
• Docket Number: No. 170.,170.
• Citation: 239 Mich. 575,215 N.W. 13
• Parties: FRENCH v. GRAND BEACH CO. et al.
• Court: Michigan Supreme Court

239 Mich. 575

215 N.W. 13

FRENCH

v.GRAND BEACH CO. et al.

No. 170.

Supreme Court of Michigan.

July 29, 1927.

Appeal from Circuit Court, Berrien County, in Chancery; Charles E. White, Judge.

Suit by L. M. French against the Grand Beach Company and others. Decree for defendants, and plaintiff appeals. Affirmed.

Argued before SHARPE, C. J., and BIRD, SNOW, STEERE, FELLOWS, WIEST, and McDONALD, JJ.

Bird, J., dissenting. Milburn & Semmes, of Detroit, and Rolland E. Barr, of St. Joseph (William J. Weldon, of Chicago, Ill., of counsel), for appellant.

Gore & Harvey, of Benton Harbor (Knappen, Uhl & Bryant, of Grand Rapids, of counsel), for appellees Grand Beach Co. and Berrien Circuit Judge.

SHARPE, C. J.

L. M. French, by assignment, became the holder and owner of two promissory notes, the payment of which was secured by a real estate mortgage, executed by the Grand Beach Company, a corporation. On default in the payment of one of the notes she elected to and did declare the entire principal sum of both notes due and payable, as provided for in the mortgage. She soon thereafter filed her bill in the circuit court for the county of Berrien, in chancery, to forecolose the mortgage, and on June 9, 1925, secured the usual decree of foreclosure, under which a sale, pursuant to the statutory procedure therefor, was had. The trial court refused an order of confirmation, owing to certain defects in the proceedings, and a new sale was ordered. It was advertised to be held on April 5, 1926. Before this date had arrived, the Grand Beach Company arranged with Clarence L. Catherman for a loan sufficient to pay the sum decreed to be due Mrs. French and the interest thereon and all costs then incurred, on condition, however, that he should receive from her an assignment of her mortgage and be subrogated to her rights under the decree. A request that Mrs. French should comply with this arrangement was refused by her. Thereupon the Grand Beach Company petitioned the court which had made the decree for an order directing her to do so. Over the objection of Mrs. French, the court, after a hearing on the petition, made an order on March 31, 1926, in which, after reciting that it appeared to the court that Catherman was willing to make such loan providing he could be subrogated to the rights of Mrs. French as holder and owner of the mortgage, and that the Grand Beach Company could thereby secure an extension of time to pay the same, and that it would be in the best interest of the Chicago Title & Trust Company, as trustee for the holders of bonds under a second mortgage on the premises, that the Grand Beach Company ‘be given every opportunity to extend and renew its credit on said mortgage, and realize on the large potential value of the property’ covered by it, and that Mrs. French ‘could in nowise be injured by the granting of the relief prayed for,’ and that ‘the whole plan of refinancing and the extension of time on said mortgage would be the best method known to this court of conserving all of the valuable properties covered by said mortgage in the interest of the said defendant, the Grand Beach Company, as well as its bond mortgage creditors,’ Mrs. French was ordered and directed to execute and deliver to Catherman ‘an assignment of her rights in said mortgage, notes, and decree * * * to the end that said Clarence L. Catherman may become fully subrogated’ thereto, on payment to her of the sum then due her for principal, interest, and costs, fixed by the court at the sum of $13,475. It further provided that the sale advertised for April 5th be adjourned to April 12th.

On April 8th, Catherman, by his attorney, tendered to Mrs. French the amount fixed by the court, and demanded that she execute an assignment, then presented to her, pursuant to the order. This instrument was in the usual form, but contained a covenant on her part that she had ‘not sold, transferred, or conveyed any rights under said mortgage, and is now the owner thereof.’ Mrs. French refused to execute the assignment, and under her direction the circuit court commissioner proceeded with the sale, and the property was purchased by William J. Moore for the sum of $13,500. On the day of the sale, tender was again made, on condition that she execute the assignment, and was refused by her. The trial court refused to confirm the sale made.

On April 26, 1926, a final decree was entered, containing substantially the provisions embodied in the order of March 31st, providing for a further tender and a deposit of the sum bid with the register of deeds, to be paid to Mrs. French on her execution of the assignment, and that she was not entitled to interest thereon after the 12th day of April, 1926.

From this decree plaintiff appeals. She also, by petition to this court, sought a mandamus to compel the trial court to confirm the sale made to Moore. An order to show cause was granted, to which the circuit judge has made return. A similar petition was filed by the purchaser, Mr. Moore, on which an order to show cause was also granted and a return made. The appeal and the petitions for mandamus were submitted at the same time, and they will all be disposed of in this opinion. Counsel for Mrs. French and Mr. Moore very tersely state the question presented:

‘Could Mrs. French be compelled to assign her mortgage, notes, and decree to Catherman?’

It is, however, also contended by them that any tender made by Catherman must have been ‘a present, absolute, unconditional tender intended to be in full payment and extinguishment of the mortgage.’

In fairness it must be said that Mrs. French is the holder of some of the bonds secured by the second mortgage. She is therefore interested in compelling the Grand Beach Company to retire the first mortgage if they wish to save their property. It would seem that otherwise she would have accepted her money and executed the assignment.

The doctrine of subrogation rests upon the equitable principle that one, who, in order to protect a security held by him, is compelled to pay a debt for which another is primarily liable, is entitled to be substituted in the place of and to be vested with the rights of the person to whom such payment is made, without agreement to that effect. This doctrine is sometimes spoken of as ‘legal subrogation,’ and has long been applied by courts of equity. Stroh v. O'Hearn, 176 Mich. 164, 177, 142 N. W. 865. There is also what is known as ‘conventional subrogation.’ It arises from an agreement between the debtor and a third person whereby the latter, in consideration that the security of the creditor and all his rights thereunder be vested in him, agrees to make payment of the debt in order to relieve the debtor from a sacrifice of his property due to an enforced sale thereof. It is wholly independent of any interest in the property which the lender may have to protect. It does not, however, inure to a mere volunteer who has no equities which appeal to the conscience of the court. In speaking of subrogation, it was said in Stroh v. O'Hearn, supra:

‘It is proper in all cases to allow it where injustice would follow its denial, and in allowing it all injustice should be guarded against so far as possible.’

The plaintiff here seeks the aid of a court of equity in the collection of the debt secured by the mortgage. The order made and the decree which followed require an assignment, on her part, only after payment to her of the amount due on the mortgage and interest thereon and all costs and expenses of suit. Clearly, no injustice to her could result from such requirement. The assignment presented to her contains no covenants other than as before stated. It could make no difference to her whether, on accepting the money, she executed an assignment or a discharge. The cases in which this doctrine is applied and the reasons therefor are stated at length in 25 R. C. L. p. 1337 et seq. (§§ 22, 23). We quote therefrom but one sentence:

‘This is a just and reasonable rule. It effects the intention of the parties, preserves to the payor the benefit of his payment, leaves the inferior lienor in his former position, inflicts no injury upon him, prevents injury to the payor through mistake or ignorance of the inferior lien, and works exact justice to all.’

A somewhat similar question was before this court in Moore v. Smith, 95 Mich. 71, 54 N. W. 701. The plaintiff was entitled to dower and homestead rights in lands on which her decreased husband had executed a mortgage to the defendant before their marriage. Statutory foreclosure proceedings were begun and a sale had, at which the mortgagee became the purchaser. Plaintiff sought to redeem, and to protect her rights demanded an assignment of the rights of the mortgagee, who was also the purchaser under the foreclosure proceedings. On refusal she filed a bill to compel execution thereof. It was contended there, as here, that her only remedy was to redeem from the sale. This court said:

‘The fact that the premises had gone to sale did not affect the complainant's right to an assignment of the mortgage from the defendant. Here the only parties interested were the defendant, claiming under the mortgage, and the complainant, who claims and is entitled to a homestead and dower interest in the land. She sought to acquire all the interest which the defendant had; not only to redeem, but to have his claim assigned to her for her protection. This she was entitled to have to the extent of an assignment of the mortgage, and thus to be subrogated to all of defendant's rights and interests in the premises under the mortgage, with a lien thereunder to the extent of the mortgage interest.’

In Leser v. Smith, 219 Mich. 509, 189 N. W. 38, it was held that parents, who furnished the money to redeem from a foreclosure sale on property owned by their son, were equitably entitled to be subrogated to the rights of the mortgagee in the mortgage. The doctrine of subrogation in such cases seems...