On exceptions to report of referee on reference to report facts, Superior Court may affirm, modify, set aside, or make additional findings, and may confirm or disaffirm report. (C. S., 578, 579);
Hardaway Contracting Co. v. Western Carolina Power Co.,
The question involved: "Where an attorney, who is entrusted with duties of closing a loan for a Land Bank, pays over the net proceeds of the loan to the holder of a first mortgage and, in disobedience to specific instructions from the Land Bank, and contrary to the Federal Farm Loan Act which requires a first lien on farm property, fails to discharge and cancel of record said first mortgage and also a second mortgage known to exist against the land, is the Land Bank entitled to an equitable assignment of, or to subrogation in, the first mortgage to the extent of its money which has been so applied on the first mortgage as against the holder of the second mortgage who received no part of the proceeds of the Land Bank’s loan and who entered into no agreement either to cancel or subrogate his lien? Under facts of this case does the waiver made by the holders of first liens against the property in favor of the defendant Land Bank operate as a legal assignment of the first liens? Under all the facts and circumstances of this case, we think the doctrine of subrogation applies and the North Carolina Joint Stock Land Bank of Durham is entitled to priority over plaintiffs.
Speaking of subrogation, in
Publishing Co. v. Barber,
165 N. C., at pp. 487-8, it is said: “The doctrine is one of equity and benevolence, and, like contribution and other similar equitable rights, was adopted from the civil law, and its basis is the doing of complete; essential, and perfect justice between all the parties without regard to form, and its object is the prevention of injustice.”
Jeffreys v. Hocutt,
The right of subrogation has its rise, not in contract, but in equity,
Powell v. Wake Water Co.,
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¥e tbink the principle applicable in this case is clearly set forth in Jones on Mortgages (8 ed.., 1928), part sec. 1114, pp. 559-560 : “ ‘There is clearly no scope for the operation of the principle of -equitable subro-gation in a case of ordinary borrowing, where there is no fraud or misrepresentation, and the borrower creates in favor of the lender a new and valid security, although the funds are used in order to discharge a prior encumbrance. In such case, the lender is treated as a mere volunteer in the transaction. But the rule is settled that, where money is expressly advanced in order to extinguish a prior encumbrance, and is used for this purpose, with the just expectation on the part of the lender of obtaining a valid security, or where its payment is secured by a mortgage which for any reason is adjudged to be defective, the lender or mortgagee may be subrogated to the rights of the prior éneumbrancer whose claim he has satisfied, there being no intervening equity to prevent. It is of the essence of this doctrine that equity does not allow the encumbrance to become satisfied as to the advancer of the money for such purposes, but as to him keeps it alive, and as though it had been assigned to him as security for the money.’ ”
Bigelow v.
Scott,
In 25 R. C. L., pages 1339-40, under title “Subrogation,” see. 23, after stating that the rule of subrogation has no application to a stranger or volunteer who pays off a prior encumbrance, continues as
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follows: “And if money is advanced to a debtor to discharge an existing first mortgage upon bis property and in pursuance of an agreement that the lender is to have a first lien upon the property for the repayment of the sum loaned, the lender is entitled, as against a junior encumbrancer, to be treated as the assignee of the first mortgage, which has been paid off and discharged with the money loaned, whenever it becomes necessary to do so to effectuate the agreement with the lender, and to prevent the junior encumbrance from being raised accidentally to the dignity of a first lien, contrary to the intention of the parties. This is a just and reasonable rule. It effects the intention of the parties, preserves to the payor the benefit of his payment, leaves the inferior lienor in his former position, inflicts no injury upon him, prevents injury to the payor through mistake or ignorance of the inferior lien, and works, exact justice to all.” R. C. L., sec. 24, pp. 1340-41.
Louisville Joint Stock Land Bank v. Bank of Pembroke,
In
Bank v. Bank,
This Court has long recognized the equitable doctrine of subrogation in numerous cases.
Springs v. Harven,
The exceptions to the general rule to the doctrine of subrogation: (1) The relief is not granted .to a volunteer; (2) nor where the party claiming relief is guilty of culpable negligence; (3) nor where to grant relief will operate, to the prejudice of the junior lien holder.
We do not think defendant Land Bank comes within any of these exceptions. We can see no injustice or wrong done plaintiffs. Plain *133 tiffs’ lien was junior to the others and they still hold the same rights they always had; on the other hand, the Land Bank would have never loaned the money, in fact, it was not permitted to do so by law, except on a first lien, and it took every precaution, that due care required, to see that it had a first lien. It would be inequitable and unconscionable if the Land Bank was not, under facts disclosed on this record, entitled to subrogation. We do not think C. S., 3311, the Connor Act, has any application to the questions here involved. The judgment below is
Affirmed.