Wallace v. . Benner

ClaeksoN, J. 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., 195 N. C., 649; Mills v. Apex Ins. & Realty Co., 196 N. C., 223; American Trust *130 Co. v. Jenkins, 196 N. C., 428; First Security Trust Co. v. Lentz, 196 N. C., 398. In a long line of unbroken decisions, the findings of fact of a referee approved by the trial judge cannot be reviewed upon appeal if supported by any competent evidence. It is only when it is objected that there is no evidence or no competent evidence in support of the findings that a question of law is raised which the Supreme Court can decide. Caldwell v. Robinson, 179 N. C., p. 521. In the present action there was competent and sufficient evidence to support the findings of the court below. 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, 195 N. C., 339; Morris v. Y. & B. Corp., 198 N. C., at p. 717. The right of subrogation has its rise, not in contract, but in equity, Powell v. Wake Water Co., 171 N. C., 290. As distinguished from legal subrogation, conventional subrogation is founded on the agreement of the parties in the nature of an equitable assignment, while the former exists where one who has an interest to protect, or is secondarily liable, makes payment of the obligation. Joyner v. Reflector Co., 176 N. C., 274. Many of the authorities hold, which we think correct, that the agreement can be implied from all the facts and circumstances of the particular case. The principle of subrogation does not prevail in favor of a mere volunteer. Blacknall v. Hancock, 182 N. C., 369. *131 ¥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, 135 Ala., 236, sec. 1115; Jones, supra,: “Subrogation may arise by agreement between mortgage debtor and a third person, whereby the latter, upon paying the mortgage debt, is substituted in place of the mortgage creditor in respect to the security. “Where money is advanced to a debtor in pursuance of an express agreement that it is to be used to retire existing liens or encumbrances on his property, and that the creditor who loans the money is to have a first lien upon the property to secure its repayment, such creditor may be subrogated to the rights of the encumbrancer or lienor whose debt has been paid, not only as against the borrower, but as against any one else who subsequently acquires an interest in the property with knowledge of the circumstances under which the money to pay off the encumbrances or liens was advanced.’ Also, ‘if the money is advanced to a debtor to discharge an existing first mortgage upon his 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.’ ” 37 Cyc., pages 471, 472, 473, 474, 475 and 476. 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 *132 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, 225 Ky., 375. In Bank v. Bank, 158 N. C., at p. 243, we find: “The plaintiff’s claim appeals very strongly to the conscience of the court, and we think it is sustained by well-settled principles. The doctrine of subrogation rests upon principles of natural justice and equity, and there are numerous authorities which support the rule that one who, at the request of another, advances money to pay off a security or encumbrance, in which the latter is interested or to the discharge of which he is bound, under the agreement that he shall have the benefit of the creditor’s security, is entitled to be subrogated to the rights of the creditor in the security; and some cases hold that, in the absence of an express agreement, one will be implied that the security shall subsist for the use and benefit of the lender of the money, and it will be so enforced. Gans v. Thieme, 93 N. Y., 225; Levy v. Martin, 48 Wis., 198; Wilkins v. Gibson, 113 Ga., 31.” This Court has long recognized the equitable doctrine of subrogation in numerous cases. Springs v. Harven, 56 N. C., 97; Byerly v. Humphrey, 95 N. C., 151; Liles v. Rogers, 113 N. C., 197; Cutchin v. Johnston, 120 N. C., 51; Moring v. Privott, 146 N. C., 558; Chandler v. Jones, 172 N. C., 569; Caldwell v. Robinson, 179 N. C., 518; Grantham v. Nunn, 187 N. C., 394; Saleeby v. Brown, 190 N. C., 138; Jeffreys v. Hocutt, 195 N. C., 339; Morris v. Cleve, 197 N. C., 253; Morris v. Y. & B. Corp., supra. 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.