Davies v. Pugh

McCudloci-i, J. Appellants, J. R. Davies and wife, Clara E. Davies, executed to the Carroll County Bank, to secure payment of an indebtedness of the former to said bank, a mortgage on lands owned by him which constituted his homestead. After the debt fell due, appellee, D. B. Pugh, at the request of appellant J. R. Davies, paid the debt, and the mortgage and note were delivered to him (appellee) by the bank. Subsequently J. R. Davies executed to appellee his promissory note for the amount of said debt, and, as security for payment of said 'note, also delivered to him a mortgage which he executed and acknowledged on the same land, and which purported to be executed and acknowledged by his wife. Upon delivery of the last note and mortgage to appellee he surrendered the old ones. After-wards appellee brought suit in equity to foreclose his mortgage, a decree of foreclosure was rendered, and the land was sold by commissioner of the court and purchased by appelleé.' The present suit was instituted by appellants later to vacate and set aside the decree of foreclosure and sale of the land on the alleged ground that the land constituted the homestead, that Clara U. Davies did not sign or acknowledge the mortgage to appellee, and that she was not served with summons in said foreclosure suit. Appellee filed his answer and cross complaint, denying the allegations of the complaint, and praying that, in the event the court should find that Clara L. Davies did not sign the mortgage, he be decreed a lien on the land by way of subrogation to the rights of the Carroll County Bank under the mortgage executed to it. Appellants filed separate answers to the cross complaint, denying appellee’s right of subrogation under the old mortgage, and pleading the statute of limitation against the debt originally secured by same. The court rendered a. decree vacating and setting aside the foreclosure decree and sale, but decreed a lien on the land in favor of appellee for the amount of the debt paid by him to the Carroll County Bank, and the taxes, etc., subsequently paid on the land. It is fully proved that Mrs. Davies did not sign the mortgage to appellee, and the chancellor so found, but he also found that appellee did.not know this when he accepted it as security for the debt and surrendered the mortgage executed to the Carroll County Bank, which he then held, and which was a valid and subsisting lien on the land. He accepted the new mortgage with the name of the wife signed to it and with a proper certificate of acknowledgment appended, and was justified in assuming that it was. signed and acknowledged by her. Having surrendered a valid security for another which proved invalid because of the failure of the wife to join in the conveyance, appellee was entitled to bé subrogated to the rights under the former. Cliaffe v. Oliver, 39 Ark. 531; Wyman v. Johnson, 68 Ark. 369. But it is said that appellee is riot entitled to subrogation because the mortgage was not assigned to him when he paid the debt to the bank, and' he has not proved an express agreement with Davies at that time that he should hold the mortgage as security for the debt, or that the latter would execute another valid mortgage to secure the debt. It is shown, however,’ that appellee took up the note and mortgage when he paid the money to the bank and held them until the new mortgage was executed. He does not show an agreement at the time that he should hold the mortgage as security, but he did in fact hold it, and under the circumstances such an agreement may fairly be inferred. It is not essential that the agreement should have been expressed in so many words. Rodman v. Sanders, 44 Ark. 504; 6 Pom. Eq. Jur. § 921; Sheldon on Subrogation, § 247; Denton v. Cole, 30 N. J. Eq. 244; Dillon v. Kauffman, 58 Tex. 696; Gans v. Thieme, 93 N. Y. 225; Warford v. Hankins, 150 Ind. 489. This court, in Rodman v. Sanders, supra, said: “The mere lender of money, which the borrower applies in part payment of the purchase money on land, is not substituted to the rights and remedies of the vendor. But one who pays a debt at the instance of the debtor is not a volunteer; and if, when he made the payment, he manifested an intention to keep the prior lien alive for his protection, he will be deemed in equity a purchaser of the incumbrance.” The transaction between appellee and Davies was not a mere loan of money which whs used in paying off a ’ debt due to another. It was more than that. Appellee paid the debt for Davies, took up the note and mortgage, and held them until new security was executed, which afterwards proved invalid. His taking up of the mortgage and retention of it in his possession was the clearest sort of manifestation of his intention to keep the security alive until he was induced to part with it’ in exchange for the new security. It is clear to us that an agreement for the holding of the security by appellee must be implied from these circumstances, and that he is entitled to subrogation to the old security since the new has proved invalid. Appellants insist that the note secured by the old mortgage is barred by the statute of limitation, and that the right of subrogation is also barred. It is sufficient, in answer to this contention, to say that the debt was kept alive by the new note executed by Davies, the debtor. If it be held that the statute of limitation against suits to foreclose mortgages (Kirby’s Digest, § 5399) applies to a suit to enforce the right of subrogation upon a state of facts shown in this case, still the cause of action set forth in the cross-complaint is not barred, as the debt itself has been kept alive, and is not barred. Decree affirmed.