Life Ins. Co. v. Deitsch

• Decision Date: 14 February 1934
• Docket Number: 24221
• Parties: The Federal Union Life Ins. Co. v. Deitsch Et Al.
• Court: Ohio Supreme Court

189 N.E. 440

127 Ohio St. 505

The Federal Union Life Ins. Co. v. Deitsch Et Al.

No. 24221

Supreme Court of Ohio

February 14, 1934

Mortgages - Subrogation - Third person satisfying first mortgage subrogated to first mortgagee's rights, when - Subrogation unaffected by preference given over prior intervening mortgagee, when - Recording acts create no barrier to subrogation.

1. A third person who, with his own funds, satisfies and discharges a prior first mortgage on real estate, upon the express agreement with the owner of the real estate that he will be secured by a first mortgage on the real estate in question, is subrogated to all the rights of the first mortgagee in such real estate.

2. The fact that such subrogation gives the third party a preference over a prior intervening mortgagee, who had no knowledge of such agreement, in no wise affects the application of the doctrine of subrogation, when the burdens of such prior intervening mortgagee are in no wise increased. (Straman Admr., v. Rechtine et al., 58 Ohio St. 443, approved and followed.)

3. Under such facts and circumstances, our recording acts create no barrier against the application of subrogation.

William Deitsch, having a judgment lien against the real estate of Mary Cornell in Hamilton county, Ohio, brought an action against her to marshal liens and subject her real estate to the payment of his judgment. The Federal Union Life Insurance Company and Maggie Kerbel, being the holders of mortgages on the real estate in question, were made parties defendant and set up heir respective mortgages; each claiming the first and best lien.

The cause was heard in the Court of Appeals of Hamilton county which court made findings of fact and conclusions of law rendered money judgments, marshaled the liens, decreed a sale of the real estate, and directed that upon sale being made the proceeds be distributed in accordance with its findings and conclusions. To that judgment and decree, the Federal Union Life Insurance Company prosecutes error to this court.

The facts are that on and prior to January 25, 1926, Mary Cornell, who was the owner of real estate fronting on Stanton avenue in the city of Cincinnati, which for brevity will be referred to as the "Stanton Avenue property," contracted to purchase from Nettie Lingafelter the premises known as No. 646 Lincoln avenue, Cincinnati, Ohio, which will be referred to as the "Lincoln Avenue property," for the sum of $25,000 cash, the deal to be closed on or about March 1, 1926.

In order to consummate the purchase, Mary Cornell applied to the Federal Union Life Insurance Company to borrow $27,000, and agreed to give as security for the loan a first mortgage on both the Stanton and Lincoln avenue properties. At that time the Western Bank & Trust Company held a first mortgage on the Stanton avenue property, in the sum of $8,490, and the Title Guarantee & Trust Company had a first mortgage on the Lincoln avenue property in the sum of $11,000.

During the afternoon of March 2, 1926, Mary Cornell executed a mortgage to the Federal Union Life Insurance Company in the sum of $27,000, covering the two parcels of property. At the same time, Nettie K. Lingafelter and her husband executed and delivered to Mary Cornell a general warranty deed for the Lincoln avenue property. Out of the $27,000 obtained from the Federal Union Life Insurance Company, the mortgages on both properties were satisfied; the insurance company paying them by checks, the amount thereof being deducted from the $27,000--the balance of which, less some minor expenses, was paid to Nettie K. Lingafelter on account of the purchase price of the Lincoln avenue property.

After contracting for the Lincoln avenue property, Mary Cornell found she did not have enough money to complete the deal, so she applied to her aunt, Maggie Kerbel, who was likewise her housekeeper, for a loan in the sum of $8,000. Mary Cornell already owed this aunt $2,000, and it was agreed that if Mary Cornell would give her a mortgage on both properties in question in the sum of $10,000 she would loan her the $8,000. The loan was made accordingly, and to secure the same Mary Cornell on March 1, 1926, gave Maggie Kerbel one mortgage for $5,000 on the Stanton avenue property and one mortgage for $5,000 on the Lincoln avenue property.

It will be borne in mind that Mary Cornell had not as yet acquired title to the Lincoln avenue property. On March 2, 1926, at 10:25 and 10:26, respectively, the two mortgages were filed for record.

The Federal Union Life Insurance Company claimed it made an examination of the title of the two properties and looked at the general indexes in the office of the county recorder "around noon" on March 2, 1926, and that such examination failed to disclose any notation of Maggie Kerbel's mortgages.

The deed to the Lincoln avenue property was made by Nettie K Lingafelter and husband on March 2, 1926, and the mortgage of the Federal Union Life Insurance Company for $27,000 covering both properties was placed of record at the same time.

It is admitted that the $27,000 loaned by the Federal Union Life Insurance Company was applied to the satisfaction of the Western Bank and Trust Company's first mortgage on the Stanton avenue property, in the sum of $8,490, and the Title Guarantee & Trust Company's first mortgage on the Lincoln avenue property in the sum of $11,000; and it is further admitted that while Maggie Kerbel's $8,000 was a contribution to the purchase fund, none of it was, as a matter of fact, applied toward the satisfaction of either of the first mortgages in question.

The Court of Appeals held that the judgment lien of William Deitsch was junior to both mortgage liens in question; that the mortgage lien of the Federal Union Life Insurance Company was prior to that of Maggie Kerbel on the Lincoln avenue property; and that the lien of Maggie Kerbel was prior to that of the Federal Union Life Insurance Company on the Stanton avenue property.

While there were numerous other lienholders, parties to the action in the court of common pleas, all except those herein referred to, went out of the picture before the cause reached the Court of Appeals.

Mr. O. K. Jones, Messrs. Lorbach & Garver, and Messrs. Kunkel of Kunkel, for plaintiff in error.

Mr. Arthur E. Georgi and Mr. Albert E. Savoy, for defendants in error.

STEPHENSON J.

The issue presented here is between the Federal Union Life Insurance Company and Maggie Kerbel, neither of whom appears to be satisfied with the judgment and decree of the Court of Appeals. While Maggie Kerbel's dissatisfaction is expressed in her brief, she has filed no cross-petition in error, and we can offer her no condolence.

The Federal Union Life Insurance Company claims priority in the Stanton avenue property to the extent of $8,978.99, the amount it paid to the Western Bank & Trust Company to satisfy its first mortgage on the Stanton avenue property, by right of subrogation.

This issue was made by the pleadings, and evidence was introduced to support it.

In one of its findings...