Union Mortgage, Banking & Trust Co. v. Peters & Trezevant

Lead Opinion

Cooper, C. J.,

delivered the opinion of the court.

Repeated examination of the record has failed to satisfy us that Allen & Co. agreed that the mortgage executed by Peace to the appellant, was to have priority over the one he executed to them. There is much in the record suggesting th^t they did, but the fact is not stated to be true by any witness having personal knowledge thereof. Martin, who was a party to the negotiations, is not clear, and seems to have made contradictory statements. Peace is dead, and the Allens both testify that they thought the debt having precedence over their security was that secured by the mortgage to the Freehold Company, as to which there is no controversy in reference to their waiver. The whole correspondence between the senior member of the firm Avhile in New York, with his firm in Memphis, strongly supports his testimony that in his negotiations with attorneys in New York, he thought the attorney was the representative of the Corbin Banking Co., that that company represented the creditor, and that the Freehold Company was the creditor. Strange!)' enough, the fact was not mentioned, during these interviews, that the debt to the Freehold Company had been paid and a new loan secured by Peace from another company, the appellant. Mr. Allen spoke of the debt as a renewal, expressed surprise that the amount had been so greatly augmented by accumulated interest, and, though always recognizing the priority of the security over that of his firm, seems to have labored under the impression, not corrected by the attorney of the appellant, that the debt was that due to the Freehold Company. We do not understand bow the junior member of the firm could then have been of the same opinion, for the year before he had been approached by Martin and requested to consent for his firm that appellant’s security should have precedence, and had declined, stating that if the Corbin Banking Co., in preparing the papers, had made a slip, by reason of which his firm had secured an advantage, it would not be waived. But it does appear that he, in all the correspondence with his father, recognized the priority of right of the claim asserted by the attorney with whom his father was negotiating, and we cannot understand why he should do so, if at the time he remembered or recalled the fact that, by reason of mistake in preparing the new securities, his firm had secured priority. So, too, the recitals in the new security taken by Allen & Co., while suggestive of a distinct recognition of the mortgage to appellant, is not, in our opinion, ho nearly conclusive as counsel for appellant contend. As originally written, it referred to a prior mortgage to the Freehold Company, which fact strongly supports the contention of the Allens that they were referring to the old mortgage. The name of the Freehold Company was, upon the suggestion of Peace, stricken out, and appellant contends, and with force, that this was for the purpose of recognizing the priority of the new mortgage; but the Allens reply that the change; was not made for such purpose, but because Peace told •them the name as written was not the full name of the creditor company, the company making the original loan, as they understood, and that the change was made not to recognize the superior right of a new party, but to correctly name the old creditor, and in this the Allens find support in the fact that a part of this recital refers to the mortgage as ‘ ‘ now of record, ’ ’ which the mortgage to the Freehold Company was, and which that to appellant was not. Considering the sums involved, the business seems to have been very loosely transacted. We cannot say, on the whole evidence, that the parties on one side were not referring to one thing and those on the other to another, and so their minds never met. We can see no other explanation which does not impute perjury to some one, and in that view the testimony may be reasonably harmonized. We, therefore, are of opinion that no contract of waiver is established against Allen & Co., either in fact or by estoppel; but it is entirely certain that appellant or its representative understood from Peace that Allen & Co. had agreed to waive their priority in favor of the new mortgage to be given by him to secure it in the large loan it was to make. Peace’s application for the loan states that the property to be mortgaged was un-incumbered. The Freehold mortgage, for the payment of which a larger part of the money was desired, was unquestionably superior to that of Allen & Co., and there is nothing to suggest the improbable purpose of the lender to pay off the first mortgage, let in the second, and itself accept a third. ,Peace unquestionably agreed to give, to the appellant similar security to that held by the Freehold Company — i. e., a first mortgage on the property. It is true, he did not agree to give the identical security, the old mortgage kept alive for the benefit of the new lender, but the very essence of his agreement was to give a mortgage which should primarily bind the property. This, on the developed facts, he has failed to do. The first question presented is whether, as between Peace and the appellant, the case made would entitle the appellant to relief by the remedy of subrogation. If this be answered in the affirmative, the next inquiry will he whether, by reason of the intervening rights of third persons (Allen & Co.) this relief should be denied.

Cases may undoubtedly be found which would deny subro-gation, under the circumstances, even as between the appellant and Peace. Our dissenting brother will collect them in his opinion; they are cited in the briefs of appellees' counsel, and need not be here again set down. But there are other cases holding a different view, and we think with better reason. The principle of equitable subrogation does not arise from contract (for that is conventional subrogation!, but is a creation of the court of equity, and is applied in the absence of an agreement between the parties, where otherwise, there would be a manifest failure of jristice. It is never enforced for the protection of mere strangers and intermeddlers in the affairs of others, nor can it be invoked to override and displace the real contract of the parties; that is, where the security contracted for is in fact given but its legal effect is not that expected, as in IIowell v. Bush, 54 Miss., 437. Equitable subrogation is in some of its characteristics nearly related to the principle of equitable es-toppel, and may, in a sense, be called the acting and moving, while equitable estoppel is the obstructive, member of the same family.

The objections made by counsel for the appellees (1) that appellant was a stranger to the property, and, therefore, cannot invoke the rule of subrogation, and (2) that, since it was agreed that the securities to which subrogation is now sought should be paid off and discharged, there is nothing to which appellant can be subrogated, are answered by many authorities, [a) One who at the instance of the debtor advances money to be used by the debtor in the payment of a prior security, is not a stranger or intermeddler in his affairs. Sheldon on Subrogation, § 247; Milton v. Mayberriy (Wis.), 6 Law' Rep. Annotated, 61; Emmert v. Thompson, 49 Minn., 386, s.c. 32 Am. St. Rep., 566; Johnson v. Barrett, 117 Ind., 551; Gilbert v. Gilbert, 39 Iowa, 657; 3 Pom. Eq. Jur., § 1212. (b) The fact that the mortgage was paid, and intended to be paid, is immaterial. Equity will consider it as yet alive so long as the rights of parties require. Walker v. King, 45 Vt., 525; Cobb v. Dyer, 69 Me., 494; Wheeler v. Willard, 44 Vt , 640; Barnes v. Mott, 64 N. Y., 397; Texas Land Co. v. Blalock, 76 Texas, 85: Crippen v. Chappel, 35 Kan., 495; Cansler v. Sallis, 54 Miss., 446. In Whitesel v. Tex. Loan Agency, 275 S. W. Rep., 313, precisely the same questions here presented were decided. We have not had access to the report, but doubt not the quotations of counsel from the opinion are correct.

The present case is, as to the matters hereinbefore referred to, fully covered by the decision of this court at the April term, 1894, in the case of McMullen v. Home Investment Co., in which no opinion was written. That case and Cansler v. Sallis, 54 Miss., 446, are decisive also that, since Allen & Co. are, by applying the principles of subrogation, placed in no worse attitude than they originally were,'the fact that they have a mortgage upon the same property cannot defeat the right of subrogation invoked by the appellant.

The fact that the debts protected by the securities to which subrogation is sought are now barred by limitation cannot avail. Peace's representative will not, in equity, be permitted to invoke the statute of limitations to defeat the security to which subrogation is sought. The fraud of Peace, in representing that the property was unincumbered and of accepting from the appellant the large sum of money it advanced on the faith of his representations, would preclude him, if alive, from invoking the lapse of time as a bar to the remedy by which the injury he has sought to inflict can be avoided. He would be estopped to interpose the defense, and his representative, who stands in his shoes, is bound by the same rule. Staton v. Bryant, 55 Miss., 261; Barnett v. Nichols, 56 Ib., 622; Kelley v. Wagner, 61 Ib., 299.

We see nothing inconsistent in the conduct of appellant in claiming under the mortgage executed by Peace, selling thereunder, entering into possession of the land, and attempting to defend its title thus acquired, and, failing in that aspect of the cause, invoking the right of subrogation to the securities the money it loaned has paid. It had reason to believe, from the interviews with Mr. Allen, that his firm recognized the priority of its security; indeed, it appears that no other idea was entertained by Allen & Co. until long after the appellant had caused the mortgage it held to be executed, and after they had foreclosed their own mortgage, to which proceedings the appellant was not made a party, because it was then thought that it was the senior incumbrancer, and therefore not a necessary party to the suit. The status quo ante the cancellation of the securities should be restored, the appellant held to account as a mortgagee in possession of the land, entitled to charge against it all prior incumbrances discharged by the money it loaned.

Tim decree is reversed, and cause rernmded, to he further proceeded -with in riccordcm.ce with this opinion.

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Dissenting Opinion

Whitfield, J.,

dissenting:

I dissent from the judgment of the court. First, the case, as to subrogation, may be condensed thus: Peace, the common debtor of the Freehold Company and Allen & Co., owed the former, say, $26,000, and the latter $25,000, the Freehold Company having the senior and Allen & Company the junior mortgage. Peace wanted more money to pay off the Freehold Company and to farm on. He applied to the Union Company, through its agent, the Corbin Banking Company, for a loan of $38,000, the Corbin Banking Company intentionally and fraudulently keeping off the application the Freehold mortgage and all the Allen & Co. mortgages, the Corbin Banking-Company being the agent of the Union Company. The Union Company, through its said agent, and Dr. Peace, agreed expressly that the Freehold Company’s mortgage should be paid off, satisfied and forever extinguished — not kept alive. It was so paid off; the said mortgage was actually sent by the Corbin Banking Company from New York to Martin, at Memphis, to be delivered up to Peace, and, in the eye of the law, was as effectually in his hands as if actually delivered. Allen & Co. were entirely ignorant of all this — never knew or supposed there was any new creditor, but understood that the Freehold Company's debt was being renewed and continued. The Freehold Company’s debt being thus paid off and satisfied by express agreement of the Union Company, through its agent, the Cor-bin Banking Company, and Peace, and in exact accordance with their actual intention, the Allen & Co. trust-deed stood first in legal priority, Allen & Co. having had nothing whatever to do with the dealings between Peace and the Union Company. My brethren do not differ from me as to Allen & Co. not knowing. They are driven from the ground of estoppel by the clear shining of manifest truth from the face of this record.

The reason why the Corbin Banking Company did, as the agent of the Union Company, so agree that the Freehold Company’s mortgage should be paid and satisfied, and not kept alive, is obvious. That company wanted to shift a bad debt from its shoulders to those of its principal, and secure, besides, to itself the $8,000 it was already out in the purchase of the Hopson decree, and $8,700 it charged as commissions for negotiating, as it puts it, the loan of $38,000; and it purposely concealed from its principal the fact of the existence of the Freehold mortgage, by paying it and discharging it and sending it actually to Martin to be delivered to Peace. The Union Company, through its agent, the Corbin Banking Company, finding out that Allen & Co. stood. upon their legal rights (the Union Company's mortgage not having been executed for some months after the payment of the Freehold mortgage and the execution and recording the Allen & Co. mortgage), that company asks this court, not to apply the principles of subrogation to the facts as they were at the time of the occurrences, not to the real case as thus made by the actual agreement and intent of the parties at the time, but to a state of facts which it alleges but signally fails to prove, to a case conjured up to meet the desperate exigency of its genuine situation. In short, it is an effort to work out subrogation by ax pout facto intention — precisely that; nothing more, 'nothing else. I have not so learned the law of subrogation. So to hold, on the facts of this record, is plainly to hold that in no case, where intervening rights do not appear; under any circumstances, where a prior mortgage is paid off by a new lender, a junior mortgagee can maintain his accruing legal priority, but. that in all cases payment — and payment merely, payment only, payment without any qualification — entitles the lender to subrogation. This may be something else; it is not the creature of equity known as subrogation. Sheldon on Subrogation (2d ed.), p. 364, notes 8 and 9; 240-1, 247; p. 9, note 9; p. 12, note 4; p. 369, notes 2 and 3; p. 371, note 3, with the authorities therein cited, especially Gardenville Association v. Walker, 52 Md., 452.

I refer .especially, also, to Howell v. Bush, 54 Miss., 437, within the principle of which case this case, in my judgment, falls precisely. With all deference, I think the opinion of the court overrules that case. It is impossible for me to distinguish it in principle from the case at bar, and, in my judgment, it is controlling and decisive here.

But, secondly, the Union Company elected its remedy. It repudiated the “Freehold” mortgage as a basis of its claim. Tt allowed it actually, as to Peace, to run past maturity, perhaps the full statutory period, without selling under it. It did sue under its own mortgage, bought under it, is in possession under it, and is sued in ejectment as.so in possession. It is estopped now to change its election.

Case Details

Case Name: Union Mortgage, Banking & Trust Co. v. Peters & Trezevant

Court Name: Mississippi Supreme Court

Date Published: Mar 15, 1895

Citation: 72 Miss. 1058

Court Abbreviation: Miss.