Guthrie v. Ensign

• Decision Date: 23 February 1923
• Citation: 213 P. 354,36 Idaho 673
• Court: Idaho Supreme Court
• Parties: WILLIAM P. GUTHRIE and ARTHUR M. BOWEN, Copartners Under the Firm Name of GUTHRIE & BOWEN, Respondents, v. LEWIS W. ENSIGN, MRS. LEWIS ENSIGN, His Wife, BOISE DEVELOPMENT CO., a Corporation, THE WYOMING HOLDING CO., a Corporation, DEAN PERKINS, Receiver of WYOMING HOLDING CO., M. F. DEAN, and B. F. OLDEN, Respondents, Appellants; NATIONAL SURETY COMPANY, a Corporation, Intervenor, Appellant, Respondent

213 P. 354

36 Idaho 673

WILLIAM P. GUTHRIE and ARTHUR M. BOWEN, Copartners Under the Firm Name of GUTHRIE & BOWEN, Respondents, v. LEWIS W. ENSIGN, MRS. LEWIS ENSIGN, His Wife, BOISE DEVELOPMENT CO., a Corporation, THE WYOMING HOLDING CO., a Corporation, DEAN PERKINS, Receiver of WYOMING HOLDING CO., M. F. DEAN, and B. F. OLDEN, Respondents, Appellants;

NATIONAL SURETY COMPANY, a Corporation, Intervenor, Appellant, Respondent

Supreme Court of Idaho

February 23, 1923

SURETY - PAYMENT OF INDEMNITY - SUBROGATION - LAND SUBJECT TO MORTGAGE-PURCHASER-RIGHT TO ATTACK MORTGAGE-JUDGMENT CREDITOR.

1. A surety on the bond of a state officer, having paid the state the amount of such officer's defalcation, is entitled to be subrogated to the rights of the state as to a note and mortgage fraudulently obtained from the state by such officer by unlaw fully using state funds in purchasing the assignment thereof from the state, and such right of subrogation may be enforced against an assignee of such note and mortgage who does not show himself to be a purchaser thereof in good faith and for value and without notice of such officer's defective title.

2. One who purchases land subject to a mortgage and deducts the amount thereof from the purchase price is estopped to deny the validity of such mortgage.

APPEAL from the District Court of the Fourth Judicial District, for Blaine County. Hon. H. F. Ensign, Judge.

Action to foreclose a mortgage. Judgment for plaintiffs. Defendants and intervenor appeal. Reversed, with directions to enter judgment of foreclosure in behalf of intervenor.

Judgment reversed. Costs awarded to intervenor.

Hawley & Hawley, for Intervenor and Appellant National Surety Co.

Where a state treasurer embezzles money of the state intrusted to his official care, and with it purchases of the state notes and mortgages of which it is payee and mortgagee, and causes the assignments to be made in the name of a third party, a constructive trust arises in favor of the state, impressed upon said notes and mortgages, and such third person, and the state treasurer, when the instruments are afterward assigned to him, holds the legal title in trust for the state, which is the equitable owner, entitled to require redelivery, and to enforce such notes and mortgages against the makers and mortgagors. (1 Pomeroy, Eq. Juris., 4th ed., sec. 155; vol 3, secs. 1044, 1049, 1051, 1058; Bellevue State Bank v Coffin, 22 Idaho 210, 125 P. 816; Davenport v Burke, 30 Idaho 599, 167 P. 481; Russell v. Bank of Nampa, 31 Idaho 59, 169 P. 180; Martin v Smith, 33 Idaho 692, 197 P. 823; Pioneer Min. Co. v. Tyberg, 215 F. 501, 131 C. C. A. 549, L. R. A. 1915B, 442, and note.)

The cestui que trust may follow such trust property into the hands of any holder other than a bona fide purchaser for value and without notice. (3 Pomeroy, Eq. Juris., 4th ed., sec. 1051.)

One into whose hands such property comes is required to set up bona fides as a defense, and plead such defense with particularity in order to permit evidence thereof to be admitted. (Boone v. Chiles, 10 Pet. (U.S.) 177, 211, 9 L.Ed. 388; Baynard v. Norris, 5 Gill (Md.), 468, 46 Am. Dec. 648; 2 Pomeroy, Eq. Juris., 4th ed., secs. 735 et seq., 784, 785; Ewald v. Hufton, 31 Idaho 373, 173 P. 247; Johansen v. Looney, 31 Idaho 754, 176 P. 778; Weber v. Rothchild, 15 Ore. 385, 15 P. 650.)

And the burden of proof is upon the person claiming to be such purchaser, particularly where the trust is shown once to have existed, or that facts existed sufficient to put a prudent man upon inquiry. (39 Cyc., "Trusts," 570, 631; C. S., secs. 5919, 5922, 5926; 3 R. C. L., "Bills and Notes," pp. 1033-1038; Weber v. Rothchild, supra; Salisbury v. Barton, 63 Kan. 552, 66 P. 618.)

When a note is payable to a named person or order, and is transferred without indorsement, it is not deemed negotiated within the definition of a holder in due course until it is actually indorsed; the transferee has only such title as his transferor had, and cannot claim the benefits to which a holder in due course is entitled. (C. S., secs. 5917, 5919, 5925; 3 R. C. L., "Bills and Notes," p. 1034.)

The transferee is charged with constructive notice, which is conclusive (1) if he have information of extraneous facts sufficient to put a prudent man upon inquiry, and fails to make inquiry; (2) if he have such information, and inquiry would necessarily lead to discovery, whether he in fact does or does not make inquiry. (2 Pomeroy, Eq. Juris., 4th ed., pp. 1145, 1152, 1154; C. S., sec. 5923; 3 R. C. L., "Bills and Notes," p. 1075; Redfield v. Wells, 31 Idaho 415, 173 P. 640.)

Where the surety on the bond of a state treasurer pays the amount of such official's defalcation, which includes the money employed to secure from the state such notes and mortgages, the surety is subrogated to all the rights of the state, and is entitled to foreclosure in its favor. (5 Pomeroy, Eq. Juris., 4th ed., secs. 2343 et seq., 2345, pp. 5206, 5207; In re Bank of Nampa, 29 Idaho 166, 157 P. 1117; Wilson v. Wilson, 6 Idaho 597, 57 P. 708; National Surety Co. v. State Sav. Bank, 156 F. 21, 13 Ann. Cas. 421, and note, 84 C. C. A. 187, 14 L. R. A., N. S., 155; American Bonding Co. v. State Sav. Bank, 47 Mont. 332, 133 P. 367, 46 L. R. A., N. S., 557, and note.)

Upon trial before the court, the court must make written and separate findings of fact and conclusions of law upon every material issue raised by the pleadings either of plaintiff, defendant or intervenor. (C. S., secs. 6866, 6867; Pittock v. Pittock, 15 Idaho 426, 98 P. 719; Stoneburner v. Stoneburner, 11 Idaho 603, 83 P. 938; Sterret v. Sweeney, 15 Idaho 416, 128 Am. St. 68, 98 P. 418; Fehr v. Haworth, 33 Idaho 96, 190 P. 248; American Min. Co. v. Trask, 28 Idaho 642, 156 P. 1136; Carson v. Thews, 2 Idaho 176, 9 P. 605; Standley v. Flint, 10 Idaho 629, 79 P. 815; Wood v. Broderson, 12 Idaho 190, 85 P. 490; State v. Baird, 13 Idaho 126, 89 P. 298; Berlin M. Works v. Dehlbom Lbr. Co., 29 Idaho 494, 160 P. 746.)

A grantee of a mortgagor, taking subject to the mortgage, the grantee's receiver, and a judgment creditor of the grantee, who secured judgment lien after the conveyance, are estopped to deny the validity of the mortgage, especially in the absence of allegations or proof, if alleged, of fraud in its inception. (Hadley v. Clark, 8 Idaho 497, 69 P. 319; Burke etc. Livestock Co. v. Wells, Fargo & Co., 7 Idaho 42, 60 P. 87; Moore v. Boise Land & Orchard Co., 31 Idaho 390, 173 P. 117.)

S. T. Schreiber and C. S. Hunter, for Appellants, Dean Perkins, Receiver, and M. F. Dean.

The court erred in not determining all material issues raised by the pleadings. (Standley v. Flint, 10 Idaho 629, 79 P. 815; Wood v. Broderson, 12 Idaho 190, 85 P. 490; Uhrlaub v. McMahon, 15 Idaho 346, 97 P. 784; Handley v. Sprinkle, 31 Mont. 57, 77 P. 296; Henderson v. Reynolds, 57 Ore. 186, 110 P. 979; Perry on Trusts, sec. 161; 39 Cyc. 1043; Jenkins v. Frink, 30 Cal. 586, 99 Am. Dec. 134; Pomeroy, Eq. Jur., sec. 1049.)

The judgment or decree is erroneous and void for the reason that the same is not supported by proper findings of fact and conclusions of law, and the evidence in the case. (State v. Baird, 13 Idaho 126, 89 P. 298; Later v. Haywood, 14 Idaho 45, 93 P. 374; Ogden on Negot. Ins., sec. 95; Cole Banking Co. v. Sinclair, 34 Utah 454, 98 P. 411; Helmer v. Krolick, 36 Mich. 371; Limerick Nat. Bank v. Adams, 70 Vt. 132, 40 A. 166.)

The court erred in not making the findings of fact and conclusions of law responsive to the issues raised by the pleadings in the case. (Carson v. Thews, 2 Idaho 176, 9 P. 605; Dillon v. Cleveland, 32 Utah 1, 88 P. 670; Hullhurst v. Scharner, 15 Neb. 57, 17 N.W. 259; Hodson v. Eugene G. Co., 156 Ill. 397, 40 N.E. 971; Ogden on Negot. Ins., sec. 143; Green v. Turner, 80 F. 41; Wait on Fraud. Convey., sec. 383; Tilton v. Cofield, 93 U.S. 168, 23 L.Ed. 860; Wilcoxen v. Morgan, 2 Colo. 473; Wade on Notice, sec. 377.)

The court erred in not separately stating its findings of fact and conclusions of law. (Smith v. Faris-Kesl Co., 27 Idaho 407, 150 P. 25; Van Loben Sels v. Bunnell, 120 Cal. 680, 53 P. 266; Jones on Mortgages, 6th ed., sec. 469; Stansel v. Roberts, 13 Ohio 148, 42 Am. Dec. 193; C. S., sec. 6867.)

Subrogation being a doctrine of purely equitable origin and nature in its operation is never impressed so as to defeat or interfere with the superior or equal equities of third persons growing out of express contracts. (Pomeroy, Eq. Jur., sec. 1419, note 1; Sheldon on Subrogation, secs. 1, 63-65.)

The most favorable construction to be placed, then, on the transaction is that it was an assignment. An assignment implies a continued existence of the debt and the equitability does not then arise. (Lamb v. Montague, 112 Mass. 352; Gatewood v. Gatewood, 75 Va. 407; Frisbee v. Frisbee, 86 Me. 444, 29 A. 1115.)

This right cannot be availed of by one who had no agreement or understanding for subrogation nor any just expectation that he would have like security for money paid by him on an existing mortgage. (Bigelow v. Scott, 135 Ala. 236, 33 So. 546; Tait v. American Free Hold Mortgage Co., 132 Ala. 193, 31 So. 623.)

If the debt is the debt of the person who paid it, it is a debt which he has covenanted, his payment of which raises no right of subrogation, but is simply a performance of his own obligation or covenant. (Kellogg v. Colby, 83 Iowa 513, 49 N.W. 1001; Brown v. Sheldon Bank, 139 Iowa 83, 117 N.W. 289; Zimmerman v. Chelsea Savings Bank, 161 Mich. 691, 125 N.W. 424; Dumont v. Fry, 14 F. 293.)

E. M. Wolfe, for Respondent.

The Wyoming Holding Co. purchased the property covered by these mortgages from the Boise Investment Co., subject to said mortgages so expressed in their deeds.

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