Home Owners' Loan Corp. v. Moore

• Decision Date: 02 January 1939
• Docket Number: 33458
• Citation: 184 Miss. 283,185 So. 253
• Parties: HOME OWNERS' LOAN CORPORATION v. MOORE et al
• Court: Mississippi Supreme Court

185 So. 253

184 Miss. 283

HOME OWNERS' LOAN CORPORATION v. MOORE et al

No. 33458

Supreme Court of Mississippi, Division B

January 2, 1939

APPEAL from the chancery court of Forrest county Hon. BEN STEVENS Chancellor.

Suit by the Home Owners' Loan Corporation against B. D. Moore Jr., and others for subrogation to the rights of a canceled mortgage and for cancellation of the lien of an intervening enrolled judgment owned by the named defendant and for foreclosure of the plaintiff's mortgage. Decree for defendants, and plaintiff appeals. Reversed and rendered.

Reversed and judgment here for appellant.

J. E Davis, of Hattiesburg, and J. Thomas Dunn, of Jackson, for appellant.

Appellant acted entirely in accordance with the law governing its operations in granting this loan. Appellant bases its right to subrogation to the lien of the deed of trust in favor of the Hattiesburg Industrial Loan Association and to the tax liens of the State of Mississippi, County of Forrest, and City of Hattiesburg, on the settled principle of law that: "Where a mortgage is executed expressly to raise money to discharge a prior encumbrance and when it is understood that the new mortgage so executed is to be of equal dignity to that of the said prior encumbrance, and the money is so applied, the mortgagee becomes entitled to be subrogated to the rights of the prior encumbrancer when such subrogation is made necessary for the better security of his mortgage debt."

Spence v. Clark, 120 So. 195; Russell v. Gresham, 170 So. 909, 177 Miss. 435.

In her application to appellant, Mrs. Hinton requested a loan to discharge the mortgage indebtedness held against the property by the Hattiesburg Industrial Loan Association and agreed to furnish appellant with a first lien on the property. The proceeds of the loan granted Mrs. Hinton and Mrs. McReynolds were actually used to discharge the mortgage indebtedness to the said Association and the tax liens of the State of Mississippi, County of Forrest and City of Hattiesburg. These facts unquestionably entitle appellant to the benefits of the equitable doctrine of subrogation.

Dorrah v. Hill, 73 Miss. 787, 19 So. 961; Dedeaux v. Cuevas, 107 Miss. 7, 64 So. 844.

The fact that one paying a senior lien may have known of the existence of a junior lien will not defeat his right to subrogation, provided, of course, he had an agreement for subrogation although the senior lien is discharged. On account of this agreement equity simply assigns this security to him.

25 R. C. L., page 1341.

The record shows that the deed of trust in favor of the Hattiesburg Industrial Loan Association was cancelled and discharged of record, at the time the indebtedness secured by it was paid with the funds advanced by appellant. It is submitted, however, that appellant may be subrogated, to the rights of the said deed of trust even though such deed of trust has been discharged of record.

60 C. J., pages 814-815; 25 R. C. L. 1339, par. 23; 2 Jones on Mortgages (8 Ed.), 561-62, sec. 1115.

At the time the judgment was assigned to appellee it was a lien admittedly second and subordinate to the lien of the deed of trust in favor of the Hattiesburg Industrial Loan Association, which, at that time, was outstanding and uncancelled of record. In so far as appellee's reliance upon any other or different status of the records is concerned at the time he "changed his position" his answer and proof are silent. He neither charges nor attempts to prove that he in any way relied on the condition of the records at the time he became the purchaser of the property under his execution sale, and in the absence of such proof he cannot now be heard to say in this court by way of argument that his "change of position" was made on the assumption that his judgment was a first lien.

Talbert v. Melton, 9 S. & M. 9; I. C. R. v. Minor, 69 Miss. 710, 11 So. 101, 16 A.L.R. 672; Richardson v. Foster, 73 Miss. 12, 18 So. 573, 55 A. S. R. 481; James v. State, 77 Miss. 370, 26 So. 929, 78 A. S. R. 527; Queen City Manufacturing Co. v. Blalock, 18 So. 800, 31 L.R.A. 222.

Granting to the appellant the right of subrogation it has prayed for would place all of the parties in exactly the position they intended for it would give to appellant the rights it contracted for and would take from appellee nothing he expected to receive.

25 R. C. L. 1339-40, par. 23; Federal Land Bank v. Newsom, 166 So. 346; Russell v. Gresham, 170 So. 900.

Hannah & Simrall, of Hattiesburg, for appellee.

We take it that there can be no dispute that either a volunteer or a wrongdoer is not entitled to subrogation.

60 C. J. 708, sec. 21.

It is the policy of the law to leave wrongdoers without aid in equity from the burdens of the positions in which they have placed themselves, and the rule is well settled that, as among wrongdoers, equity will not enforce subrogation. Another maxim of equity that is frequently enforced in applying the principle of subrogation is that he who comes into equity must come with Mean hands.

25 R. C. L. 1326, sec. 12.

The act of Congress creating the appellant did not authorize it to engage in a general real estate loan business, but very definitely limited it to making loans on property used by the owner as a home or held by him as his homestead.

U.S. C. A., Title 12, Sections 1462 and 1463.

We think that it is quite clear that the appellant can have no standing in a court of equity to obtain the rights of subrogation under the rules laid down above, when the facts are that it voluntarily and with full knowledge of the circumstances went out and made a loan which it was prohibited by the act of Congress from making. If the appellant was knowingly and wilfully violating the law that created it, certainly it cannot come into a court of equity with "clean hands" and say that it is not a wrongdoer or a volunteer.

In their brief, counsel for the appellant cite quite a number of cases and text writers in support of their contentions that the appellant is entitled to subrogation in this case, proceeding upon the theory that the appellant had no actual knowledge of the existence of the judgment, and that it acted innocently under the honest conviction that it was getting a first mortgage on the property. It is a sufficient answer to these contentions to say that the Chancellor found the facts against the appellant in this connection and his finding of fact is conclusively and amply supported by the record.

Bank of Philadelphia v. Posey, 130 Miss. 530, 92 So. 840; Good v. Golden, 73 Miss. 91, 19 So. 100, 55 Am. St. Rep. 486; Trust Co. v. Peters, 72 Miss. 1058, 18 So. 497.

Although there have been many cases before this court where the right of subrogation was dealt with, we have been unable to find any case where the right of subrogation has been allowed under circumstances even approximating the facts disclosed in this record.

25 R. C. L., page 1341; 60 C. J., pages 814-815, sec. 116.

Argued orally by J. Thomas Dunn, for appellant, and by James R. Simrall, for appellee.

OPINION

Anderson, J.

Appellant, as owner of a mortgage indebtedness against Mrs. Hinton and Mrs. McReynolds on a certain lot in the City of Hattiesburg, alleged to have been their home when the mortgage was executed, filed its bill in the Chancery Court against appellees seeking subrogation to rights of a cancelled mortgage on said property executed by them in favor of the Hattiesburg Industrial Loan Association, and to have cancelled the lien of an intervening enrolled judgment owned by appellee, B. D. Moore, Jr., and for foreclosure of its mortgage. There was a hearing after the overruling of a demurrer, on bill, answer, and proofs, resulting in a decree denying appellant the relief sought. From thai decree, this appeal is prosecuted.

About the material facts, there was no substantial dispute. Appellant's brief contains a fair and correct statement of the Case, which we adopt:

"On April 6, 1933, Mrs. Edwina McSwain Hinton and Mrs. Alberta McSwain McReynolds and Mr. T. J. McReynolds, Jr., (husband of Mrs. Alberta McSwain McReynolds) became indebted to the Hattiesburg Industrial Loan Association in the amount of $ 450, to secure the payment of which they executed to the said Association on that date a deed of trust on certain rem property in the City of Hattiesburg, Mississippi, owned by Mrs. Hinton and Mrs. McReynolds (each having an undivided one-half interest therein), upon which is situated a residence.

"Mrs. Hinton and Mrs. McReynolds subsequently borrowed an additional $ 67.50 from said Association and executed their note to evidence same. Default was made in the payment of the debt to said Association and Mrs. Hinton, on August 1, 1933, made written application to Appellant for a loan to pay off the mortgage debt to said Association and offered as security for said loan a first lien on said property. Mrs. Hinton furnished to Appellant an abstract and certificate of title on said property prepared by Hon. Earle L. Wingo, an attorney of Hattiesburg, Mississippi, which disclosed the only liens or encumbrances against the said property to be the deed of trust in favor of said Association and delinquent taxes due the City of Hattiesburg for...