McCollum v. Lark
| Decision Date | 17 November 1938 |
| Docket Number | 12460. |
| Citation | 200 S.E. 276,187 Ga. 292 |
| Parties | McCOLLUM et al. v. LARK et al. |
| Court | Georgia Supreme Court |
Rehearing Denied Dec. 3, 1938.
Error from Superior Court, Richmond County; A. L. Franklin, Judge.
Suit by John McCollum and another against Moses Lark and others, to restrain a sale of realty under execution. To review a judgment sustaining demurrers to the petition, petitioners bring error.
Reversed.
Syllabus by the Court.
1. Subrogation is of two kinds. One is legal subrogation, which takes place as a matter of equity, without any agreement to that effect made with any person paying the debt. The other is conventional subrogation, which is applied where an agreement is made that the person paying the debt shall be subrogated to the rights and remedies of the original creditor. Wilkins v. Gibson, 113 Ga. 31, 42, 38 S.E 374, 84 Am.St.R. 204; Cornelia Bank v. First National Bank of Quitman, 170 Ga. 747, 750, 154 S.E. 234.
2. Subrogation will arise only in those cases where the party claiming it advanced the money to pay a debt which, in the event of default by the debtor, he would be bound to pay, or where he has some interest to protect or where he advanced the money under an agreement, express or implied, made either with the debtor or creditor, that he would be subrogated to the rights and remedies of the creditor. Wilkins v. Gibson, supra; Ragan v. Standard Scale Co., 128 Ga. 544, 58 S.E. 31; Lutes v Warren, 146 Ga. 641, 92 S.E. 58; Lee v. Holman, 182 Ga. 559, 186 S.E. 189.
3. 'One who advances money to pay off an encumbrance upon realty at the instance either of the owner of the property or the holder of the encumbrance, either upon the express understanding, or under circumstances from which an understanding will be implied, that the advance made is to be secured by a first lien on the property, is not a mere volunteer; and in the event the new security is for any reason not a first lien on the property, the holder of said security, if not chargeable with culpable or inexcusable neglect, will be subrogated to the rights of the prior encumbrancer under the security held by him, unless the superior or equal equity of others would be prejudiced thereby; and to this end equity will set aside a cancellation of such security and revive the same for his benefit.' Wilkins v. Gibson, supra; Flournoy Plumbing Co. v. Home Owners Loan Corporation, 181 Ga. 459, 182 S.E. 507.
4. 'Knowledge of the existence of an intervening encumbrance will not alone prevent the person advancing the money under an agreement of the character above referred to from claiming the right of subrogation, when the exercise of such right will not in any substantial way prejudice the rights of the intervening encumbrancer.' Wilkins v. Gibson, supra; Merchants' & Mechanics' Bank v. Tillman, 106 Ga. 55, 31 S.E. 794.
5. Where, as in the instant case, it had been adjudicated by a court of competent jurisdiction that a contractor's lien against the realty of the debtor had priority over a lien for rent, such judgment was res judicata between the parties and their privies (Code, § 110-501), and where after the rendition of such judgment the debtor executed and delivered a security deed to a third party, the plaintiff in the instant case, conveying said realty in fee simple to secure a loan, and covenanted therein that 'he is lawfully seized and possessed of said property and has a good right to convey it with the exception of any liens which may have been paid from the proceeds of this loan and transferred to [the plaintiff] for the purposes of subrogation, that it is unencumbered,' and further agreed 'that the [plaintiff] its successors and assigns, shall be subrogated to all right, title, lien, or equity of all persons to whom it may have paid moneys in settlement of liens and charges hereunder, or for the benefit and account of the [debtor] at the time of making the loan evidenced by this security deed, or subsequently under any of the provisions herein,' and a portion of the moneys so loaned were used to pay said contractor's lien which was marked paid and canceled of record, the plaintiff lender is entitled to be subrogated to the rights and remedies of the creditor so paid, and, being thus substituted for and succeeding to the rights of such creditor, became at the time of the payment in privity with the creditor paid. See generally, on privity, Latine v. Clements, 3 Ga. 426, 430; Morris v. Murphey, 95 Ga. 307, 22 S.E. 635, 51 Am.St.Rep. 81 holding privity to be a mutual or successive relationship to the same rights of property. Compare Seaboard Air-Line Ry. v. Ins. Co. of N. A., 18 Ga.App 341, 342, 89 S.E. 438, wherein it was held that no privity existed, in so far as the doctrine of res judicata was concerned, where the right of subrogation accrued before the institution of the suit upon which the judgment was rendered. Therefore the plaintiff may take advantage of the previous judgment declaring the lien to which it is subrogated superior to that of the lien for rent, and may have the sale of the property under the lien for rent enjoined until its rights are decreed in a court of equity.
6. The allegations of the petition making substantially the case as stated above, the court erred in sustaining the demurrer and in dismissing the action.
Henry G. Howard, of Augusta, and Jabe H. Barnett, of Atlanta, for plaintiffs in error.
Fleming & Fleming, of Augusta, for defendants in error.
John McCollum and the Home Owners Loan Corporation brought suit in Richmond County against Moses Lark, a nonresident of the State, and the sheriff and his deputies of Richmond County, seeking to restrain a sale of certain realty levied on by virtue of an execution held by Lark against McCollum. The facts alleged are substantially as follows: McCollum is the owner of certain described realty in Augusta, Richmond County, as evidenced by a warranty deed from one Williams, dated March 18, 1929, and duly recorded. On February 4, 1933, Lark made affidavit and had issued a distress warrant which was duly levied, March 2, 1933, on the real estate conveyed by the deed above mentioned. Entry of service and levy was made on the general execution docket on March 10, 1933. On March 18, 1933, McCollum filed his affidavit of illegality of the levy of the distress warrant, on the ground that the full sum distrained was not due. He filed also a claim setting up that the property levied on was held jointly by himself and his wife and children. Lark filed a motion to strike the affidavit of illegality, on several grounds. The case coming for a hearing, and it being agreed by the counsel for the plaintiff and the defendant that all defense papers in the within case were withdrawn, a consent judgment was rendered in favor of Lark against McCollum, in a lesser amount than the sum sued for. This judgment was dated May 25, 1933. On May 31, 1933, an execution issued on the judgment was recorded on the general execution docket. On September 7, 1933, this execution was levied on the real estate in question. On October 4, 1933, one Saxton filed a claim setting up that said property was not the property of the defendant in execution, but was only the property of the defendant in execution subject to a general contractor's lien for materials furnished and services rendered in the construction of a dwelling-house on said property, in favor of Holloway and Saxton, the lien being dated March 13, 1933, and recorded March 18, 1933. On December 11, 1933, the court entered judgment in the claim case, finding in favor of the claim and dismissing the levy. This contractor's lien, within ninety days from the date of furnishing the last materials and services and within nine months from the filing of the lien, was foreclosed by instituting suit in the superior court of Richmond County, returnable to the November term, 1933. Judgment was obtained January 16, 1934, and an execution issued thereon was recorded on the same date. This judgment and execution were marked paid and satisfied on May 21, 1934, and satisfaction entered on the general execution docket June 19, 1934, the payment having been made from funds borrowed by McCollum from the Home Owners Loan Corporation to whom McCollum, on May 21, 1934, had executed a security deed to secure the loan, which deed was recorded June 18, 1934. The covenants in this deed material to the case, appear in headnote 5. The petitioners contend, for various reasons under the facts alleged, that the contractor's lien is a prior lien on the property, and comes ahead of that held by Lark for rent. The prayers were for injunction restraining the sale under the levy of the execution for rent, and for general relief. Demurrers to the petition were interposed by Lark, on the grounds that under the facts alleged the lien of Lark was superior to that of Holloway and Saxton, and that no facts were alleged showing that the Home Owners Loan Corporation was subrogated to the rights of Holloway and Saxton, and that the allegations do not constitute a valid case in law or in equity. The court sustained the demurrers, and the petitioners excepted.
While as said in Colonial Hill Co. v. Mortgage Bond, etc., Co., 174 Ga. 204, 208, 162 S.E. 531, 533, yet we do think that it would serve a useful purpose if we should discuss and attempt to clarify some of the propositions stated in some of the cases which are directly in conflict with the rulings stated in...
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