In re McGuire

• Decision Date: 04 May 1905
• Docket Number: 1,852.
• Citation: 137 F. 967
• Parties: In re McGUIRE.
• Court: U.S. District Court — Northern District of Ohio

137 F. 967

In re McGUIRE.

No. 1,852.

United States District Court, N.D. Ohio, Eastern Division.

May 4, 1905

C. P Winbigler, for claimant.

J. W Mykrantz, for trustee.

TAYLER District Judge.

This matter is before the court on the petition of the trustee for the review of the decision of the referee with reference to the claim of G. A. Cassell.

The facts in the case are as follows: McGuire, the bankrupt, in October, 1902, purchased a farm for $3,500, giving in payment $500 in cash, and six notes for $500 each, the first payable April 1, 1904, and the others annually thereafter, the notes being secured by mortgage on the farm. The mortgagee transferred the first three notes. When the first note became due, Cassell, at the request of the mortgagor, and upon the mortgagor's promise to turn over to him this first note advanced the mortgagor the money with which to pay the note which was taken up by McGuire and given to Cassell. There seems to have been some argument between McGuire and Cassell on the one hand, and the agent of the holder of the note on the other, at the time of the negotiations for payment of the note, the latter refusing to assign the note, and stating that he would mark it 'Paid'; but at the time of the payment no such indorsement was made.

Cassell claims that he is entitled to be subrogated to the rights of the original payee of the note under the mortgage executed by McGuire to secure it, and this claim is disputed by the trustee. The contention of the claimant was sustained by the referee.

The doctrine of subrogation will be applied, in general, wherever any person, other than a mere volunteer, pays a debt or demand which, in equity and good conscience, should have been satisfied by another. Was Cassell, in the dealings above recited, a mere volunteer? In the case of Home Savings Bank v. Bierstadt, 168 Ill. 618, 48 N.E. 161, 61 Am.St.Rep. 146, the court says:

'Subrogation, as a principle of equity jurisprudence, is generally confined to the relation of principal and surety and guarantors, or to a case where a person is compelled to remove a superior title to that held by him in order to protect his own, and also to cases of insurers. * * * Whilst these general heads include the doctrine and principles of subrogation, that doctrine has been steadily expanding and growing in importance and extent in its application to various subjects and classes of persons. This equitable principle is enforced solely for the accomplishment of substantial justice, where one has an equity to invoke which cannot injure an innocent person.

The right of subrogation which springs from the mere fact of the payment of a debt, and which is included under the heads first above stated, is what is termed legal subrogation, and exists only where included within those classes. But, in addition to this principle of legal subrogation, there exists another principle, which is termed conventional subrogation, which results from an equitable right springing from an express agreement with the debtor, by which one advances money to pay a claim for the security of which there exists a lien, by which agreement he is to have an equal lien to that paid off, whereupon he is entitled to the benefit of the security which he has satisfied with the expectation of receiving an equal lien. * * * It is the agreement that the security shall be kept alive for the benefit of the person making the payment which gives the right of subrogation, because it takes away the character of a mere volunteer.'

In the case of Wilkins v. Gibson, 113 Ga. 31, the court says, on page 43, 38 S.E. 374, 379, 84 Am.St.Rep. 204:

'In a case where a stranger pays off the debt of another which is secured by deed or mortgage, the parties have a right to agree that the payor will have the same priority as the

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