Union Mortgage, Banking & Trust Co. v. Peters

• Decision Date: 10 June 1895
• Citation: 18 So. 497,72 Miss. 1058
• Parties: UNION MORTGAGE, BANKING & TRUST CO. v. PETERS & TREZEVANT, TRUSTEES, ET AL
• Court: Mississippi Supreme Court

18 So. 497

72 Miss. 1058

UNION MORTGAGE, BANKING & TRUST CO. v. PETERS & TREZEVANT, TRUSTEES, ET AL

Supreme Court of Mississippi

June 10, 1895

FROM the chancery court of the second district of Coahoma county HON. W. R. TRIGG, Chancellor.

This is a bill by the Union Mortgage, Banking & Trust Co., designated herein as the Union Company, against Peters and Trezevant trustees in a deed of assignment from Thomas H. Allen & Co. seeking to enjoin the prosecution of an action of ejectment. Complainant claims title through a foreclosure sale under a trust-deed executed by Dr. James A. Peace to secure his debt of $ 38,000 to complainant, this trust-deed being junior in date to that of Allen & Co. Complainant alleges that Allen &amp Co. agreed that the trust-deed of complainant should have priority over theirs, and also that, by reason of the circumstances attending the taking of complainant's trust-deed, Allen & Co. are estopped to deny complainant's priority. A great deal of testimony was taken pro and con, touching disputed questions of fact as to this, complainant seeking to show that Peace, the common debtor, had falsely and fraudulently represented to the agents of the Union Company who made the loan, that his land was incumbered by only one trust-deed, and that his main purpose in borrowing the money from complainant was to pay off this, a trust-deed of about $ 17,000 due to the American Freehold & Mortgage Co., Limited, which was prior to that of Allen & Co.; and that Allen & Co. knew of this purpose, and assented to the loan upon the understanding that complainant in consideration of its advancing money to pay off this incumbrance, should have priority. The record abounds in charges and countercharges of fraud, but the opinion renders it unnecessary to set out the case in this aspect, or to further notice the controverted questions of fact.

This court, while finding as a fact that Allen & Co. did not agree that the Union Company should have priority, holds that it is entitled, on the equitable doctrine of subrogation, to be substituted to the liens its money discharged. This question being settled, the material facts out of which the court deduces the right of subrogation may be very briefly stated, as follows: Dr. Peace had been, for many years, a customer of Thomas H. Allen & Co., cotton factors, in Memphis, Tenn., and was largely in debt to them. In 1883 this indebtedness amounted to some $ 17,000, and was secured by a trust-deed upon a part of the land in controversy. In that year, Peace made known to Allen & Co. his desire to borrow more money on the plantation, and they consented that he might do so, upon condition that he pay them $ 10,000 of the sum to be borrowed, and, also, consented to take for the balance due them a second trust-deed on the land. Accordingly, Peace applied to the Corbin Banking Co., of New York, and, through it, borrowed from the American Freehold Land Mortgage Co. (known herein as the Freehold Company), $ 26,000, Allen & Co. canceling their trust-deed and taking a second one for their debt. Peace, having thus obtained the money, failed in his promise to pay Allen & Co. the $ 10,000 on their debt, yet they seem not to have taken any action based on this violation of agreement, but, in 1885, took from Peace another trust-deed on the land embraced in that to the Freehold Company. This trust-deed to the Freehold Company matured in 1889, and, Peace desiring to borrow money to pay it off, again negotiated with the Corbin Banking Co., and, through it, procured from the Union Company, complainant herein, a loan of $ 38,000. The agent of the Corbin Banking Co. in negotiating with Peace, preparing the abstracts of title and attending generally to the matter of loan, was one Martin, and it is shown that he knew that Peace wished the money to pay off the Freehold Company's trust-deed, and intended to give the Union Company a first lien on the land, but there is much testimony in the record tending to show that Martin and the other agents and officers of the Corbin Banking Co., purposely concealed from the Union Company the existence of the prior incumbrances. As before stated, it is a controverted question whether Allen & Co. knew that this loan was being obtained, or, knowing it, consented that the trust-deed given to secure it should be prior. Much testimony was taken on this branch of the case. It is adverted to in the opinion of the court, and also in the dissenting opinion. It is not denied that the money borrowed from the complainant was used to pay off the debt of the Freehold Company and a certain decree binding on the land, referred to in the record as the Hopson decree, and that the money was obtained by Peace and advanced by complainant for the purpose of paying off these liens; nor is it denied that they were, when paid, marked satisfied upon the record.

The foregoing statement of facts, with that given in the opinion, is deemed sufficient.

On final hearing, the court below dissolved the injunction and dismissed the bill of complainant and awarded damages on the injunction bond and decreed in favor of Peters & Trezevant, trustees, and Allen & Co. on their cross bill, confirming their title and awarding them possession of the land. From this decree complainant appeals.

Decree reversed and cause remanded.

J. H. Watson, for appellant.

The loan of $ 38,000 made by the Union Company to Peace in 1889 was made for the express purpose of discharging the prior incumbrance, and it was so applied. It is a proper case for the application of the doctrine of equitable assignment by subrogation. 3 Pom. Eq. Jur., § 1211. There is no authority for the position that the right of subrogation depends on privity of contract with the intervening mortgagee. It is extended by analogy to one who, having no previous interest, and being under no obligation to pay off the mortgage, advances money for its payment at the instance of the debtor. 3 Pom. Eq. Jur., 201, 202; Sheldon on Subrogation, pp. 2, 30, 33; 5 Am. St. R., 79; 10 Ib., 86; 17 Ib., 193; 32 Ib., 566; 35 Kans., 95; 27 S.W. 313. And so, where a new mortgage is substituted in ignorance of an intervening lien, the mortgage released through mistake may be restored and given its original priority, 1 Jones on Mortgages, § 971. I call especial attention to the unreported case in this state, McMullen v. Home & For. Inv. Co. (1894).

It would be most unjust to allow the appellees to avail of the statute of limitations as against the right of appellant to subrogation. Staton v. Bryant, 55 Miss. 261; Barnett v. Nichols, 56 Ib., 622. They are not in a position to obstruct the flow of justice.

J. A. P. Campbell, on the same side.

1. On the case made by the pleadings the appellant is entitled to have preserved and enforced the relative priority of the incumbrance paid off with money advanced for that purpose. Equity will not allow an accident or slip or mistake to displace the relative position of incumbrancers where their rights only are involved. For this proposition very many authorities could be cited, but our own cases fully sustain it and need no support. Cansler v. Sallis, 54 Miss. 446; McMullin v. Investment Co., 1896, unreported.

2. On the case made by the pleadings and exhibits the same result follows, on the same ground, for, granting that the Aliens were not parties to an agreement for preservation of the former and then relative priorities, they are not harmed. They were subordinate before, and would remain so after subrogation. As between complainant and Peace, there can be no doubt that the precedence of complainant would be preserved. Allen & Co. occupy no higher ground than Peace.

3. Peace could not, under the circumstances, avail of the fact that the notes are barred. Barnett v. Nichols, 56 Miss. 622; Staton v. Bryant, 55 Ib., 261. The question is not as to barring the debt, but as to whether equity will give effect to the intentions of the parties as to priority. Subrogation is not assignment, but a result wrought out by equity on a given state of facts to effect justice as between the parties.

D. A. Scott, for appellees.

1. The doctrine of subrogation is broad enough to include every instance in which one pays a debt for which another is primarily liable, and which, in equity and good conscience should have been paid by the latter, but it is not to be applied in favor of one who has officiously, and as a mere volunteer, paid the debt of another for which neither he nor his property is liable. Nor is it applied where it will work injustice to others. Sheldon, Subrogation, 1, and cases cited in note. Appellant was a mere volunteer, who, to place its money at interest, negotiated the loan. There will be no subrogation, unless the payment was made either under compulsion or for the protection of some interest of the party making the payment, and in discharge of an existing liability. Ib., §§ 3, 11. He who seeks subrogation must come into equity with clean hands. It will not be applied to relieve a vendee against the consequences of his own wrongful act, or of the wrongful act of another under whom he claims, Ib., § 44. One who pays off a prior incumbrance upon property in which he has no interest to be protected, will not by his payment be subrogated to the lien he has discharged, as against those having an intervening interest. Ib., §§ 243, 245, 248. I refer especially to Bunn v. Lindsay, 95 Mo. 250, s. c. 6 Am. St. R., 48; 40 Mo. 486; 56 Ib., 295; 69 Ib., 667; 87 Ib., 387. As to payment by volunteers, see Slaton v. Alcorn, 51 Miss. 72; Freeman on Judgments, §§ 446, 466; 7 Greenl., 38; Story, Eq. Jur., 1227; Morris v. Lake, 9 Smed. & M., 521; Banks v. Evans, 10 Ib., 35 Rollins v. Thompson, 13 Ib., 522; Griffing v. Pintard, 25 Miss. 173; 24 Am. & ...