25 Minn. 15 | Minn. | 1878
On April 16, 1868, one Steinhauer, as principal, and Joseph Bissel and plaintiff as cosureties, executed to one Latto two promissory notes of five hundred dollars each, with interest at twelve per cent, per annum, one payable October 1, 1869, the other October 1, 1870, and, to secure their payment, Steinhauer executed to Latto a mortgage upon forty acres of land belonging to him, and plaintiff executed a mortgage to Latto upon another forty acres of land belonging to him. Each mortgage contained the usual power, and was duly recorded. The first of these notes having fallen due, Latto, on December 16, 1869, recovered judgment against Joseph Bissel and plaintiff for the amount then due on that note and costs, amounting to $529.57. No execution was issued on this judgment, and, on December 28, 1869, Latto, for a valuable consideration paid him by Bissel, released and discharged it. On the same day, Joseph Bissel, without any request or assent of plaintiff, (further than is evidenced by their execution of the notes as cosureties,) paid to Latto the full amount of the indebtedness secured by the notes and mortgages, and, in consideration thereof, Latto, without the knowledge of the plaintiff, assigned the mortgages and debts secured by them to Joseph Bissel, and the assignment thereof was duly recorded. On April 21,1870, Joseph Bissel, as assignee of the mortgages, foreclosed each of them under the power of sale contained in it, and at the sales became the purchaser, and received the proper certificates of sale. The property covered by the Steinhauer mortgage was purchased by Bissel at the sum of $675.50 — considerably more than was due on the first debt or judgment. From the order in which the foreclosures are stated by the'court below, we assume — and defendants in their points admit it to be the fact —that this mortgage was foreclosed first. Bissel then proceeded to sell the plaintiff’s forty acres under the mortgage executed by him, and became the purchaser at such sale. It is the validity of this latter foreclosure, and the standing of plaintiff’s mortgage, which this action involves.
The foreclosure was void for another reason, which will be apparent when we consider the status and rights of the parties with respect to the mortgages and the debts they were given to secure. It is necessary for us to do this, because the defendants complain that the judgment of the court below is not only erroneous in adjudging the foreclosure to be void, but also in adjudging that the mortgage by plaintiff is paid, and no longer a lien on the premises, and directing it to be cancelled, and in adjudging to be .void the assignment from Latto to Bissel. The only ground upon which the mortgage is adjudged paid, and the assignment by Latto to Bissel void, is the payment, by the latter to the former, of the amount of the debts, at the time of the assignment of the debts and mortgages, and of the entry of satisfaction of the judgment. Ordinarily the payment by one joint debtor extinguishes the debt, and discharges all collaterals, so that there is nothing which can pass through an assignment from the creditor. This is the. case, except where, as a consequence of the payment, the right of subrogation or substitution arises, to prevent the extinction of the debt and securities, and to keep them alive for the benefit of the party paying. That a surety paying the debt is entitled to be subrogated, as between him and the principal debtor, to all securities for the debt is, both in
The same principles which support this doctrine are equally applicable between sureties entitled to contribution. The right of subrogation does not depend on contract, but on principles of natural equity. It is just and equitable that, in the peculiar relation of suretyship, whatever is done to assure payment of the debt should enure to the security of all the parties interested, except the one ultimately liable for it, and should be enforceable in favor of the party entitled to receive the debt, and also in favor of a party paying the creditor, for the proportion which the party giving the security ought to pay of the debt. As between cosureties they ought ordinarily, on default of the principal debtor, to pay in equal proportions. If a surety takes security for the debt, it enures not only to his protection, but also to that of the creditor; (Phillips v. Thompson, 2 John. Ch. 418; Moses v. Murgatroyd, 1 John. Ch. 119; New London Bank v. Lee, 11 Conn. 112; Homer v. Savings Bank, 7 Conn. 478; Eastman v. Foster, 8 Met. 19;) and also to that of his cosureties. Hinsdill v. Murray, 6 Vt. 136; Brown v. Ray, 18 N. H. 102; Elwood v. Deifendorf, 5 Barb.
As we have stated, where a joint debtor who is a surety pays the debt, the equitable title to the debt and securities vests in him through the doctrine of subrogation, and this equitable title gives life and validity to an assignment purporting to pass the legal title. That is, where the doctrines of equity preserve the debt and securities from extinction, and vest the equitable title in the surety, it is competent for the parties to change the equitable into a legal title. On no other principle can a debt be transferred by the creditor to one of the joint debtors. The assignment of the debts and mortgages in this case depends for its validity upon Bissel’s right of subrogation upon paying the amount to Latto. As to the first of the notes, and the mortgages so far as they secured that note, the right was perfect, for the debt was due, and the principal debtor was in default, and upon .paying it, an assignment of it by Latto to Bissel would be at once operative. It was not so with the second note. That debt was not due. The principle of subrogation is, that one who has been compelled to pay a debt which ought to have been paid by another, is entitled to a cession of all the remedies which the creditor possessed against that other. McCormick v. Irwin, 35 Pa. St. 111. A merely voluntary payment does not entitle one to subrogation; but one who pays where legally
From these views it follows that the court below was right in adjudging the foreclosure of the mortgage executed by plaintiff, and the certificate of sale executed thereon, to be void, but in error in adjudging the second note and the mortgage executed by plaintiff paid, and cancelling and discharg