Grantham v. . Nunn

Adams, J. While the plaintiff seeks by mandatory injunction to compel the cancellation of the deed of trust to E. A. Nunn upon payment of all the notes made to Mrs. Bryan, except the two that were sent to the National Bank of New Bern, the defendant Holton, as we understand, demands either a sale of the land for the payment of the two notes held 'by him or an opportunity by taking up the remaining notes to be subrogated to the rights of Mrs. Bryan. It will be noted, therefore, that the controversy presents the question whether Holton is entitled to subrogation pro tanto, that is, to the amount of the notes which he claims to have paid. Primarily subrogation, or substitution, is a doctrine of equitable jurisprudence. It is a change by which another person is put into the place of a creditor so that the creditor’s rights and securities pass to him, or a legal fiction by force of which an obligation extinguished by the payment of a third party is treated as still subsisting for his benefit, on the ground that such party is entitled to the rights of the creditor whom he succeeds. Subrogation is either legal ■ or conventional, the former arising by operation of law and the latter depending upon a lawful contract. Conventional subrogation occurs where one who has no interest in the subject-matter pays the debt of another, and by agreement becomes entitled to the rights and the securities of the creditor. If a mere stranger or volunteer pay the debt of another without any assignment or agreement for subrogation, when he is neither under legal obligation to make the payment nor under compulsion to do so for the preservation of his rights or property, he is not entitled to subrogation; but a different principle prevails if a person advance money to pay a mortgage debt under an agreement with the owner of the equity that he shall hold the mortgage as security for his advance. In the latter case if the mortgage, instead of being assigned to him, is discharged in whole or in part, he is yet entitled as against subsequent parties in interest to be subrogated to the rights of the mortgagee and *398 to enforce tbe mortgage. Sheldon’s Law of Subrogation, secs. 1, 2, 19, 240; Story’s Eq. Juris. (13 ed.), secs. 493 and note and 500; Bispham on Equity, 454. In Publishing Co. v. Barber, 165 N. C., 478, 486, tbe doctrine is expressly approved, Mr. Justice W'alicer saying: “It bas been beld tbat tbougb a mere volunteer cannot, by paying off a mortgage, acquire an equitable lien or any right of subrogation, yet if be advances tbe money to redeem or pay off a mortgage at tbe request of one wbo is interested or bound to discharge it, be may be protected against sucb person by subrogation.” And in Bank v. Bank, 158 N. C., 239, 244, it is said: “Tbe authorities are entirely agreed tbat where a person advances money to pay off a mortgage debt under an agreement with tbe owner of tbe equity of redemption or bis representative tbat be shall bold tbe mortgage as security for bis advance, but tbe mortgage, instead of being assigned to him, is discharged in whole or in part, be is yet entitled as against subsequent parties in interest to be subro-gated to tbe rights of tbe mortgagee and to enforce tbe mortgage.” It is also beld tbat an agreement by tbe purchaser of an equity'of redemption with bis vendor tbat be will assume and pay tbe mortgage debt will render him personally liable. Kennedy v. Trust Co., 180 N. C., 225; Caldwell v. Robinson, 179 N. C., 518, 524; Brown v. Harding, 171 N. C., 686, 691; Perry v. Adams, 98 N. C., 167; Springs v. Harven, 56 N. C., 96; Scott v. Dunn, 21 N. C., 425 Williams v. Williams, 17 N. C., 69; Oil Co. v. Cotton Co., 46 L. R. A. (N. S.), 1049; 27 A. &.E., 247; 27 R. C. L., 1339, sec. 23. It is, no doubt, in recognition of these principles tbat tbe plaintiff concedes Holton’s right to subrogation as against Taylor; but, conceding this, be contends tbat Holton bas no sucb right as against Mrs. Bryan or any other person bolding notes secured by Taylor’s mortgage or Gran-tham’s deed of trust. In considering this proposition we must remember tbat L. T. Gran-tham, Sloan, and Baker are not parties to tbe action, and tbat tbe plaintiff is tbe only party wbo excepts to his Honor’s ruling. Holton asks tbat it be sustained; and, in tbe absence of an exception, we may assume tbat neither of tbe other defendants cares to have tbe judgment disturbed, and if this be true, we may adjust tbe controversy by determining tbe relative and respective rights of tbe parties chiefly interested in tbe result. This indicates, of course, tbat we are primarily concerned with tbe rights of tbe plaintiff; for if be is not prejudiced by the judgment, be bas no valid reason for assailing it, and we are at a loss to know bow be may be j>rejudiced unless be bas acquired rights which a court of equity ought to protect. Has be acquired sucb rights? He succeeded to Taylor’s title in tbe land by a mortgagee’s deed, executed *399 3 March, 1923. About three years before this deed was made, Holton, at the request of Taylor and L. T. Grantham, paid the second of the two $500 notes, on each of which were written the words “Paid by T. W. Holton,” in order to transfer the notes and secure the amount he had advanced. Taylor was bound by this agreement, the plaintiff acquired Taylor’s title after Holton had received the two notes; the deed of trust securing the notes delivered to Mrs. Bryan was duly registered, and the plaintiff, after maldng his purchase, recognized the validity of the two notes in question by offering to convey to Holton a tract of land in payment. So the plaintiff,' a subsequent party in interest, held the land, in like manner with Taylor, subject to Holton’s equities. Particularly has he no ground of complaint, in view of the fact that the registered deed of trust was constructive notice of the entire indebtedness thereby secured. Bank v. Bank, supra, 251. The plaintiff insists, however, that Holton, upon his own showing, holds only two of the notes executed to Mrs. Bryan, and that, as the remaining notes are outstanding, Holton is not entitled to subrogation pro tanto. It is true, as a general rule, that a person is not entitled to be subrogated to the creditor’s securities unless the debt has been paid in full. The reason is, that if a surety who has made a partial payment is subrogated pro tanto, he will occupy a position of equality with the holder of the unpaid part of the debt; and if the property be insufficient to pay the remainder of the debt for which the surety is bound, the loss will fall proportionately upon the creditor and the surety. But this doctrine, it is said, has in every instance been invoked for the protection of the creditor, and never to defeat contract obligations in the interest of the debtor alone. Shinkle v. Huffman, 71 N. W. (Neb.), 1004. When the right of subrogation is the result of an express agreement, a partial payment may effect a pro tanto subrogation of the creditor’s securities, particularly when the indebtedness is payable in installments and the evidences of the debt are notes maturing at different dates. 25 R. C. L., 13, 18, sec. 6; Am. Bonding Co. v. Bank, 99 A. S. R., 483, note; 27 A. & E. (2 ed.), 205; 6 Am. Cas., 205, note. The mortgagors agreed that Holton should hold his two notes as security, and if a similar agreement is necessary on the part of Mrs. Bryan, her acquiescence in his Honor’s judgment is tantamount to consent. Loeb v. Fleming, 15 Ill. App., 503; Strickman v. Roose, 46 N. E., 680. Finding no error, we affirm the judgment. Affirmed.