Summary
In Spence et al. v. Clarke, 152 Miss. 542, 120 So. 195, where a mortgage was executed expressly to raise money to discharge a prior encumbrance with the understanding that the mortgage so executed was to be of equal dignity to that of the prior encumbrance, and the money was so applied, it was held that the mortgagee became entitled to be subrogated to the rights of the prior encumbrancer, where subrogation was necessary for better security of the mortgage debt.
Summary of this case from Box et al. v. EarlyOpinion
No. 27572.
February 4, 1929.
1. APPEAL AND ERROR. Appellate court will not consider special grounds set up in general demurrer.
Appellate court in case of general demurrer will not consider special grounds set up therein, but will examine only the general one.
2. SUBROGATION. Mortgagee furnishing money to discharge prior incumbrance is entitled to subrogation to rights of prior incumbrancer, if necessary for better security.
Where mortgage is executed expressly to raise money to discharge a prior incumbrance with understanding that mortgage so executed is to be of equal dignity to that of prior incumbrance and money is so applied, mortgagee becomes entitled to be subrogated to rights of prior incumbrancer, where subrogation is necessary for better security of mortgage debt.
3. SUBROGATION. Mortgagee advancing money to discharge prior incumbrance without knowledge that land was subject to certain charges held entitled to subrogation.
Mortgagee, furnishing money to discharge prior incumbrance in reliance on representation that land was free of all liens or other incumbrances or charges, and without knowledge that land was subject to certain charges other than constructive knowledge imported by probate and record of will, held entitled to subrogation to rights of mortgagee in original deed of trust.
APPEAL from chancery court of Grenada county, HON. N.R. SLEDGE, Chancellor.
W.M. Mitchell, for appellant.
The bill contains alternative and repugnant aspects, both in its allegations and its prayers for relief. If there had been no answer nor other pleading filed, and complainant had asked for a decree on the face of the bill, which aspect of this bill would the court have taken in rendering such decree? Would it have declared him entitled to a superior lien over that of these defendants under his trust deed, and ordered it foreclosed and the proceeds applied to the satisfaction of his debt in preference to their claims, or would it have declared him entitled to be subrogated to the Turner trust deed and have it revived and foreclosed in his favor?
The bill must not require different parties to the separate aspects; and this a violation of the rules of pleading in this respect; and taken as a whole, it must be so framed that if confessed the court, looking to the bill alone, would not be left in grave doubt as to what is a proper and just decree to be awarded upon the bill as confessed. Griffith's Miss. Chan. Pr., p. 175. We respectfully submit that the bill of complaint violates this well-established rule.
It is well settled that courts of equity do not relieve against deceptive acts which are not charged and shown to have been followed by loss or injury. Where fraud is charged it must be shown that the party thereby misled was injured before he is entitled to relief. Young v. Bumpus, Freeman's Chancery, 250; Griffith's Miss. Chan. Pr., p. 175. The bill shows that the appellee was a pure volunteer, and it is well settled that such a volunteer cannot invoke the doctrine of subrogation in his favor. Mitchell v. Bishop, 1 Miss. Dec. 58; Goode v. Golden, 73 Miss. 91; Berry v. Bullock, 81 Miss. 465; Lyon v. Barton, 88 Miss. 135; Brown v. Brown, 90 Miss. 410; Robinson v. Sullivan, 102 Miss. 581; Prestridge v. Lagar, 132 Miss. 168; Canton, etc., Bank v. Yazoo Co., 144 Miss. 579. Complainant admits this rule, but claims that he was not a volunteer for the reason that his money went to pay off a previous mortgage upon this property, and it therefore was to the benefit of appellants. The case at bar does not meet the requirements set down by the court for the application of this doctrine as against appellants for the following reasons:
1st. Because complainant was not compelled to pay the Turner trust deed to protect his own interests but such payment was a voluntary one made to afford him a good security for loan voluntarily made by him, not to these appellants, but to other parties, without their solicitation, consent, or knowledge.
2nd. Because these defendants were both minors at the time of making the loan and were not legally represented. The indebtedness which it is alleged was paid off by the money was not their liability, and they were not afforded any opportunity to pay it off in order to protect their interests. It would be inequitable and work a grave injustice upon them to apply the doctrine of subrogation in favor of complainant as against them.
3rd. There is no showing of any necessity for the resort to subrogation in order to protect complainant against loss, because there is no allegation of insolvency of those incurring the indebtedness and who are liable therefor, nor even a showing that any demand for payment had been made or any attempt to collect from those owning the notes, either from mortgagors, J.H. and Bertha Spence, or from endorser J.T. Spence.
Pollard Hamner, for appellee.
It is contended that the bill contained alternative and repugnant aspects both in its allegations and its prayers for relief. This cannot be seriously urged as the whole bill is predicated on the trust deed of appellee, the Turner trust deed and the will of J. Ready Spence, all as applied to the particular piece of land in controversy and the priority of the liens of the litigants thereto. The statute settles this question absolutely, "the uniting in one bill of several distinct and unconnected matters of equity against the same defendant shall not be an objection to the bill." Sec. 358, Hem. Code 1917. See, also, Wherry v. Latimer, 13 Miss. 524.
It is next contended that the bill does not charge that complainant has sustained a loss. This cannot be required. No law can require one to sit idly by until another starts a lawsuit against him when his rights are invaded. Can it be said that Clark was required to do nothing to enforce his security when his debt was in default, his interest unpaid and the threat made that these appellees were claiming a paramount lien to his trust deed? We think not.
It is contended that appellee was a volunteer, and not entitled to equitable subrogation. We do not contend that a mere volunteer can be equitably subrogated, but we do contend that the appellee in the case at bar was not a volunteer, and therefore deny the application of the cases cited in counsel's brief to that effect in this case, except in two instances, and these cases support our view. Ligon v. Barton, 88 Miss. 135; Robinson v. Sullivan, 102 Miss. 181; Prestige v. Lazar, 132 Miss. 168.
It is said that the case at bar does not meet the requirements set down by the court for the application of the doctrine of equitable subrogation. But see 3 Pomeroy Equity Jurisprudence, sec. 1212; Capen v. Garrison, 193 Mo. 335; Chaffe v. Oliver, 39 Ark. 542; Hughes v. Thomas, 131 Wis. 315, 11 L.R.A. (N.S.) 744; Scott v. Land Company, 127 Ala. 161, 28 So. 709; Helm v. Linchburg, etc., Bank, 106 Va. 603, 56 S.E. 598; Marx v. Clisby, 130 Ala. 502, 30 So. 517; 25 R.C.L. 343; 25 R.C.L. 1341; Trust Co. v. Peters, 72 Miss. 1058.
On September 29, 1921, Miss J. Ready Spence, then the owner of the lands involved herein, gave a deed of trust on said lands to secure a debt of five thousand dollars to T.A. Turner, with William C. McLean, Jr., as trustee. Before the secured debt aforesaid or any part thereof was paid, Miss J. Ready Spence died testate, and her will, duly probated, devised unto her brother J.H. Spence all her "worldly possessions," and provided further that the said J.H. Spence, who was by said will appointed executor, should as such executor "look after" her two nieces, Mary Ready and Margaret Spence, appellants here; that they should be "well equipped to take care of themselves in the business world, if they so desire;" and further that they "be provided with a home as long as they are single, including all living expenses, and thirty-five hundred dollars each at the age of twenty-two."
When the Turner deed of trust became due and overdue, the executor was unable to pay it, and it was placed by the holder in the hands of the trustee for enforcement, who on the date next herein mentioned was about to proceed to sell the land under said trust deed. On or about March 18, 1923, the executor and general devisee, J.H. Spence, and his wife, Bertha Spence, applied to appellee for a loan of five thousand dollars with which to pay said Turner trust deed, and represented to appellee that, except for said Turner trust deed and the taxes for the year 1923, the title of said J.H. Spence to said land was free and unincumbered, and they tendered said land as security, and also the indorsement of J.T. Spence, uninterested except for accommodation. Appellee thereupon agreed that, if the land upon payment of the Turner deed of trust would be free of all liens or other incumbrances or charges, except for the taxes of the current year, and the applicants would procure and produce a certificate to that effect from the attorney representing the Spences, he would make the loan for the purpose of retiring the Turner incumbrance, and would accept a deed of trust on the land: the notes to be indorsed by J.T. Spence. The certificate of the attorney was furnished showing the title to be as represented by the Spences, and relying on the representations made all as aforesaid, the loan was granted, a deed of trust on said land was executed, and thereupon appellee paid the money, not to the Spences, but directly to McLean, the trustee in the Turner deed of trust, who applied the same to the payment of said trust deed and canceled it of record. Four notes of one thousand two hundred and fifty dollars each to evidence the five thousand dollar loan debt were executed by the Spences to appellee, one of which has been paid.
Apparently no mention during these negotiations was made of the will or of the terms thereof with respect to the charges on the devise of said land to J.H. Spence in favor of the appellant nieces, and it was only after the transaction aforesaid was consummated, but how long after it does not appear, that appellee had any knowledge thereof, other than the constructive knowledge imported by the probate and record of said will. But now the appellants, the nieces, Mary and Margaret, are asserting claim that the charges upon said land in their favor are superior in rank to the deed of trust executed to appellee; wherefore he has filed his bill seeking relief by way of subrogation to the rights of the mortgagee in the Turner deed of trust, and praying that the same be revived in appellee's favor to the extent of the three notes unpaid and held in his hands.
To the bill the appellants filed a demurrer, the several grounds of which are as follows:
"First. Said bill is inconsistent and contains repugnant allegations and prayers for relief and required different parties to each of said inconsistent aspects and leaves the court in doubt as to what would be a proper and just decree to be rendered under the allegations and prayers thereof.
"Second. Said bill does not contain any allegation of loss or injury resulting to the complainant from the alleged misrepresentations charged to have been made by certain of the defendants as to the state of the title of one of the defendants to the land in controversy, nor that there is any impending danger of such loss or injury.
"Third. Because said bill on its face shows that complainant is not entitled to the relief prayed for as against defendants, Margaret Spence and Mary Ready Spence Boulet.
"Fourth. Because there is no equity on the face of the bill."
In their argument upon the first ground of demurrer, appellants cite Miss. Chancery Pr. p. 175; but appellants overlook section 294 of the same handbook, wherein it is shown that grounds of special demurrer must not be set up in a general demurrer, and that, if done, the court will disregard the grounds of special demurrer and look only to the ground or grounds of general demurrer. We therefore forego notice of the special ground and examine only the general one, that "there is no equity on the face of the bill."
In support of this ground, appellants group their argument as follows: The party seeking subrogation must be, first, not a mere volunteer, but an interested party who was compelled to make the payment to protect his own interest; second, refusal to apply the doctrine must be shown to result in loss to him; and, third, its application must not work any injustice to any other interested party. The greater force of appellants' argument proceeds, however, upon the insistence that it is not affirmatively shown by the bill that the failure to obtain the relief prayed will result in any loss to appellee, because, as appellants contend, appellee should first proceed to enforce collection personally against J.H., Bertha, and J.T. Spence, and it is not shown that either of them is insolvent or unable to respond. Inasmuch as J.T. Spence is a mere accommodation indorser, it is not perceived with what justice he should be first called upon to complete the payments for the benefit of appellants in exoneration of the title to lands in which he does not appear to have any interest whatever.
Where a mortgage is executed expressly to raise money to discharge a prior incumbrance, and when it is understood that the new mortgage so executed is to be of equal dignity to that of the said prior incumbrance, and the money is so applied, the mortgagee becomes entitled to be subrogated to the rights of the prior incumbrancer, when such a subrogation is made necessary for the better security of his mortgage debt; and in Johnson v. Barrett, 117 Ind. 551, 19 N.E. 199, 10 Am. St. Rep. 83, a case similar to the case at bar, it is said: "In such a case the payment of the mortgage debt will operate as a discharge of the mortgage, or in the nature of an assignment of it, as may best serve the purposes of justice and the reasonable intent of the parties most interested. This right of subrogation does not depend upon the insolvency of the mortgagor. The mortgagee has the right to enforce, or foreclose, his mortgage, without regard to the solvency or insolvency of the mortgagor, and in that respect the person subrogated succeeds to all the rights of the mortgagee." See, also, Hughes v. Thomas, 131 Wis. 315, 111 N.W. 474, 11 L.R.A. (N.S.) 744, 11 Ann. Cas. 673; Prestridge v. Lazar, 132 Miss. 168, 95 So. 837; Ligon v. Barton, 88 Miss. 135, 40 So. 555; Marx v. Clisby, 130 Ala. 502, 30 So. at page 520; Union Mortgage, Banking Trust Co. v. Peters, 72 Miss. at pages 1070, 1071, 18 So. 497, 30 L.R.A. 829; 3 Pom. Eq. Jur., section 1212.
We are of opinion that the the case stated by the bill brings it well within the field of operation of the doctrine of subrogation, and that the chancellor was right in overruling the demurrer.
Affirmed and remanded.