Gatewood v. Gatewood

• Decision Date: 24 March 1881
• Citation: 75 Va. 407
• Court: Virginia Supreme Court
• Parties: GATEWOOD BY, & C. v. GATEWOOD AND ALS.

75 Va. 407

GATEWOOD BY, & C. v. GATEWOOD AND ALS.

Supreme Court of Appeals of Virginia.

March 24, 1881

1. The right arising from the assignment of a mortgage must be distinguished from a mere right of subrogation to the lien of the mortgage creditor. Assignment is the act of the parties and depends generally upon intention. When the nature of the transaction is such as imports a payment of the debt and a consequent discharge of the mortgage, there can, of course be no assignment, for the lien of the mortgage is extinguished by the payment.

2. A mortgage creditor cannot be compelled to assign the debt and mortgage upon receiving payment; all that can be required of him is an acquittance and a release.

3. The exception to this rule, if it can be so termed, is found in those cases where the party making the payment occupies the position of surety for the debt, or is in some way personally bound for its payment. Such a person may, in equity require an assignment or transfer not only of the mortgage itself, but of all the securities held by the creditor for his protection and indemnity; and although no such assignment or transfer is actually made, a court of equity will treat it as done.

4. If the party making the payment does not occupy the position of surety for the debt, as a general rule he cannot claim to be entitled as assignee, unless by agreement with the creditor.

5. Subrogation is the act of the law and the creature of a court of equity, depending not upon contract, but upon the principles of equity and justice. It presupposes an actual payment and satisfaction of the debt secured by the mortgage.

6. It may be laid down as a rule of almost universal acceptance that when there is a mortgage upon real estate, any person who has the right to redeem such mortgage and actually does redeem it, is entitled for his indemnity to be subrogated to the lien of the mortgage and to hold the land until he is reimbursed to the amount so paid.

7. In such case no proof of interest is necessary to keep the mortgage alive and give him the benefit of it. The payment of the mortgage, together with his relation to the estate, is brought in aid of his title to strengthen and uphold it.

8. It is well settled that a judgment creditor, a junior mortgagee a purchaser of the equity of redemption, a tenant in dower, a tenant by courtesy, and indeed all persons having an interest in the estate may insist upon the redemption of the mortgage in order to the due enforcement of their claims. Accordingly, a married woman who has relinquished her dower may redeem a mortgage, and thus prevent a disastrous foreclosure and sale of the property including her dower interest.

This was a suit in equity in the circuit court of the city of Richmond, brought by Mrs. Georgiana L. Gatewood, by her next friend, Leroy H. Kemp, against her husband, George W. Gatewood, and others, to compel the said George W. Gatewood to execute an agreement between them by which a parcel of land belonging to her was sold and the proceeds of the sale applied to discharge a debt secured by a deed of trust upon a tract owned by the said George W. Gatewood, and which was to be conveyed to her. The controversy in the case was not in fact between the plaintiff and her husband, but between her and judgment creditors of the husband. Subsequent to the deed of trust there was a decree against the claim of the wife, who thereupon obtained an appeal to this court. The case is stated by Judge Staples in his opinion.

J. A. Meredith and J. G. Blackwell, for the appellant.

Kean & Davis, for the appellees.

STAPLES J.

This is an appeal from a decree of the circuit court of the county of Henrico. The case as exhibited by the record is as follows: In October, 1858, George W. Gatewood executed a trust deed upon a tract of land lying in the county of Henrico, upon which he resided, called the " Home Place," to secure the payment of a debt of $5,500 due to James W. Binford. In this deed his wife, Mrs. Georgiana Gatewood, joined, relinquishing her dower interest therein. In the year 1867, Mrs. Gatewood became the owner jointly with her sister, Mrs. Elizabeth Gatewood, wife of Liston T. Gatewood, of a tract of land known as the " Green Meadow Farm," in the county of Henrico, which was conveyed to them by a trustee appointed by their father. Mrs. Gatewood being desirous to retain the home tract, which was encumbered by the deed of trust, entered into an agreement with her husband that she would sell her interest in the " Green Meadow Farm," and with the proceeds of sale pay off the trust deed, upon condition she was secured on the home tract to the extent of her interest in the " Green Meadow Farm." It seems that this agreement was reduced to writing, both the wives uniting. It is in the words following:

" We, Bettie M. Gatewood and Georgiana L. Gatewood, consent to our farm, Green Meadow (given and descended to us by our father), being sold to pay obligations of Mr. George and Liston Gatewood, only on condition that we be secured and receive the same amount from their farms, that our farm, Green Meadow, will sell for and bearing interest until we receive the amount."

With this understanding the " Green Meadow tract" was sold in the year 1868, and Mrs. Gatewood's share of the proceeds, amounting to about $2,000, was thereupon applied to the payment of the debt secured by the deed of trust. No formal release of the deed was ever executed. Nor was anything done in the way of securing to Mrs. Gatewood the payment made with the proceeds of her land. At the time of these transactions, the home tract was subject to the lien of a number of judgments recovered against George W. Gatewood after the execution of the deed of trust.

The existence of these judgments was unknown to Mrs. Gatewood when the sale of her interest in the " Green Meadow tract" was made, and the proceeds invested in the home tract.

Upon this state of facts the judgment creditors insist that the lien of the trust deed has been discharged by the payment of the debt, and as that incumbrance is out of the way, the land is liable to the satisfaction of their judgments; that Mrs. Gatewood having failed to stipulate for an assignment of the trust deed, and being a mere volunteer, cannot claim a right of subrogation to the benefit of the trust creditors.

On the other hand, it has been argued that Mrs. Gatewood must be treated as the equitable assignee of the debt secured by the trust deed, and as such she is entitled to all the rights of the trust creditors. This is the matter of contention between the parties we are now called upon to adjudicate. My first impressions after the argument of this case was concluded were that Mrs. Gatewood, for the want of proper advice, had lost her estate. The injustice of this result was so glaring I determined to give the case a most careful investigation, and that investigation has satisfied me that my first impressions were erroneous. I will now proceed to give the reasons which led me to this conclusion.

In the first place, we must be careful to distinguish between an assignment of the mortgage debt, and a mere right of subrogation to the lien of the mortgage creditor. Assignment is the act of the parties, and depends generally upon intention. Where the nature of the transaction is such as imports a payment of the debt, and a consequent discharge of the mortgage, there can of course be no assignment, for the lien of the mortgage is extinguished by the payment. A mortgage creditor cannot be compelled to assign the debt and mortgage upon receiving payment. All that he can be required to do is to give an acquittance and release.

The exception to this rule, if it can be so termed, is found in those cases where the party making the payment occupies the position of surety to the debt, or is in some way personally bound for its payment.

Such a person may, in equity, require an assignment or transfer not only of the mortgage itself, but of all the securities held by the creditor, for his protection and indemnity; and although no such assignment or transfer is actually made, a court of equity will treat it as having been done.

But if the party making the payment does not occupy the position of surety for the debt, as a general rule he cannot claim to be entitled as assignee unless by agreement with the creditor.

Subrogation is, however, a very different thing from an assignment. It is the act of the law, and the creature of a court of equity depending not upon contract, but upon the principles of...