Boevink v. Christiaanse

Hastings, C. This is a suit in equity brought by plaintiff and appellee to establish his right to be subrogated to the ownership of a mortgage executed February 5,1887, by Abraham Christiaanse to the Connecticut Mutual Life Insurance Company upon 80 acres of land in Lancaster county. The original mortgage was for $700. Before its maturity the mortgagor died. At its maturity application was — 257 — made to plaintiff for a loan with which to pay off the amount remaining due, $500. The executrix and plaintiff applied to the county judge for instructions in the matter, and were told by him and by attorney Philpott that she had been authorized to renew the mortgage. Plaintiff advanced the $500. The widow executed to him a note and mortgage, dated May 12, 1892, payable in five years with seven per cent, annual interest. By some mistake it was drawn for $525, and $25 was indorsed upon it the day of its date, leaving the amount $500. The note and mortgage were signed by the widow, as executrix, and purported to be made by such authority. The widow kept the interest paid until some time in 1895. Afterward default was made in the payments of interest and this action was instituted. The petition alleges that the 80 acres of land covered by the insurance company’s mortgage was the homestead of the mortgagor and of his widow, and was worth less than $2,000 in excess of the incumbrances against it. The petition sets out the making of the .note and mortgage by the widow, as executrix, and the obtaining of money upon it from plaintiff; that the loan was made in good faith and under the supposition of both parties that the executrix was authorized to make it. Demurrer was filed to the petition on the ground that it did not furnish facts sufficient to constitute a cause of action, and that the cause of action sued on did not accrue within four years before the commencement of the suit. Leave was taken by plaintiff to amend his petition by interlineation, with leave to defendants to plead by the following Monday. At that time a motion was filed to require the plaintiff to separately state and number the causes of action, and a demurrer to the petition, also, on the ground that it did not state facts sufficient to constitute a cause of action; that there was defect of parties defendant, in that the administrator and the executrix, the person alleged to have executed the mortgage, and the insurance company, the original mortgagee, were not — 258 — named parties defendant. The motion and demurrer were, severally overruled. Subsequently, permission seems to have been obtained to renew the demurrer, and it was again overruled. The defendants excepted. Catharine Christiaanse answered, setting up a life interest-in this land by a devise from the mortgagor. She denied the execution of plaintiff’s note and mortgage by the executrix and denied each allegation of the petition; alleged that plaintiff’s cause of action did not accrue within four years, within five years nor within ten years of the commencement of the action; alleged that no authority was ever given executrix to mortgage the land; that the cause of action did not accrue against the defendant alone but jointly with the personal representative of the mortgagor, his executrix, or her successor; that there was a defect of parties defendant; that the mortgagor’s estate, the mortgagor’s executrix, the person executing the plaintiff’s mortgage, and the Connecticut Mutual Life-Insurance Company, were not made parties; that no attempt was made by plaintiff from May 12, 1892, when he advanced the money, until November 5, 1900, to obtain subrogation to the mortgagee’s right in the Connecticut Mutual Life Insurance Company’s mortgage; that no attempt has been made to collect the money from the mortgagor’s estate though it was amply sufficient to meet the claim; that the estate had been distributed during the eight years plaintiff had failed to assert his rights and that such rights had been waived, and asked judgment for costs. The other defendants answered alleging their descent from the mortgagor and claiming title in fee to the lands. Their answers, in other respects, are substantially in the same terms as the executrix’s. Plaintiff replied by a general denial. The court at the trial found, that Abraham Christiaanse died seized of the 80 acres of land, and owed the Connecticut Mutual Life Insurance Company $500 on a mortgage covering it, and that defendants were related to him as alleged in plaintiff’s petition; that his personal — 259 — property was all consumed in the payment of liabilities other than the mortgage; that at the time of his death, the land was not worth $2,000 above the mortgage; that his wife was appointed and qualified as executrix; that, when the mortgage came due in 1892, there was nothing-on hand with which to pay except the land; that she, to prevent foreclosure, borrowed from plaintiff $500 which were paid on the mortgage; that plaintiff furnished this money under the advice and direction of the county judge of Lancaster county and J. E. Philpott, attorney, with the express understanding and agreement that he was to have a lien upon the land, and that the land would be charged with the repayment of the money and interest; that he furnished the money to the executrix to prevent sale of the land and save her possession of it, relying upon the statements of the county judge, of the executrix and of Philpott, that he was safe in so doing, and that the mortgage of the executrix to him was valid and authorized; that no order of the county court of Lancaster county was ever made authorizing the executrix to borrow money or execute a mortgage; that the executrix ever since obtaining the money had continued to live upon and enjoy the possession of and the income from the land; that she subsequently resigned as executrix, and at the time of this action there was . neither executor nor administrator, and the estate had been fully administered; that no suit at law was ever brought for the money, and that the note and mortgage by the executrix to the plaintiff were void; that the money obtained by that means from the plaintiff was paid to the Connecticut Mutual Life Insurance Company, and thereupon the insurance company released its mortgage of record; that the interest was paid to plaintiff up to March 12, 1895, and there was due at the date of the decree in this action $739. The court finds, as conclusions of law, that plaintiff was entitled to be subrogated to the insurance company’s mortgage; to have the release of that mortgage set aside pnd have the same foreclosed for the sum of $739, and — 260 — to recover costs. Such a decree was entered. Supersedeas bond was given and an appeal taken, and the question now is as to plaintiff’s right, upon this record, to 'such relief. Counsel for defendants say not: First, because plaintiff’s claim of subrogation was barred by the statute of limitations at the time of the commencement of this action, namely, November 5, 1900; Second, because the Connecticut Mutual Life Insurance Company was not made a party defendant; and finally, because the facts do not warrant any such subrogation. As to the first point they cite 24 Am. & Eng. Ency. Law, 322: “The general rule is, that the claimant must take steps to enforce his right of subrogation within the period prescribed as a limitation to the enforcement of simple contracts, for this merely equitable right will not be enforced at the expense of a legal one.” This doctrine seems to relate wholly to cases of subrogation on behalf of a surety or one occupying the position and having rights of a surety to equitable relief, as subsidiary to a legal claim. It rests upon the fact that payment by the surety does not, ipso facto, create in him any title to the securities. His primary claim is against his principal for repayment of the money. Until he has obtained through equity an ownership in the securities, they a,re not his and he has no right to enforce them merely by reason of the payment. As pointed out by Mr. Pomeroy, the right of others than sureties in mortgages, by reason of having paid them off, is in the nature of an equitable assignment rather than than subrogation. 3 Pomeroy, Equity Jurisprudence (2d ed.), sec. 1211. Where the payment, ipso facto, only entitles the payor to be indemnified, and gives him an immediate action at law to recover such indemnity, and his right to the possession and control of any of the securities held by the creditor is merely secondary and for the purpose of insuring such indemnity; whenever the statute of limitations has run aganst the recovery of such indemnity, it would also run against any equitable remedy — 261 — for the obtaining of it. If the transaction, however, as is claimed in the case at bar, results, ipso facto, in an equitable assignment of a mortgage, then rights under it would seem to pass to the assignee and to be enforceable during the life of such mortgage. In the present instance, if the transaction between the plaintiff and the executrix resulted, as the trial court found, in the passing of a void note and mortgage from the executrix to the plaintiff, and the result of the transaction . was that the rights of the Connecticut Mutual Life Insurance Company against this land were equitably transferred to plaintiff, then it would seem that at any time during the life of such mortgage plaintiff could assert such equitable ownership. We have not examined all the cases cited by defendants. They are cited, however, as cases of subrogation on behalf of a surety who has paid his principal’s debt. None of them are claimed to be cases of equitable transfer of ownership in a mortgage, independent of a legal claim. As above suggested, the subrogation in such cases, being a mere incident to the recovery of indemnity, would be lost whenever the action for indemnity became barred. In the case of Betts v. Sims, 35 Neb. 840, the court enforced mortgages much more than four years after their equitable transfer to Sims by reason of their payment by him to protect his supposed title in the land. It is true that in that case Sims was in possession and asserting the mortgages as equitably entitling him to their payment, before he should be ousted. The ordinary rule that limitation statutes do not apply where equity has sole jurisdiction (33 Century Digest, col. 345),' would seem applicable only where there is a distinct equity jurisdiction. The Nebraska statute of limitations seems clearly to have been intended to apply to all the forms of the “civil action” provided for in section 2 of our code. The numerous eases, therefore, gathered in the Century Digest do not seem to furnish us a precedent, but there seems no doubt of the propriety of extending the limit of time within which plaintiff may assert his rights — 262 — in this land, if he has any, to ten- years from the maturity of the original mortgage, and he is amply within such time. It is also urged that the original mortgagee is an essential party to this action, without whose presence it can not he maintained. It is alleged in the petition, not only that the insurance company was paid in full, but that a formal release of its mortgage was placed of record, and a part of the relief asked is the cancelation of this record. Doubtless, und.er ordinary circumstances, when one asks subrogation in reference to a chose in action, he must bring the party, whose position he sedes, into the action. In Aultman, Miller & Co. v. Bishop, 53 Neb. 551, a judgment creditor, whose judgment plaintiff claimed to have paid off, was held to be properly joined. It has been held, however, that it is not necessary to make a judgment creditor a party to any action for subrogation where he has satisfied his claim of record. Rosenthal v. Sutton, 31 Ohio St. 406; Fridenburg v. Wilson, 20 Fla. 359. We see no greater or better reason for requiring a mortgagee who has satisfied his claim of record to be brought into the litigation. In this case, no relief is asked against the original mortgagee. Its rdease of record is a complete estoppel against any claim it could assert against the plaintiff in this case, and a complete protection to defendants if they pay the claim of plaintiff. There seems no good reason why the insurance company should have been included. A more serious question has been whether the facts of this case entitle the plaintiff to any subrogation. Counsel for appellee cite Meeker v. Larsen, 65 Neb. 158, and seek to distinguish that case from the present one, on the ground of an agreement in the present case that plaintiff should have a lien upon the land. In Meeker v. Larsen, however, as in this cáse, a mortgage upon the land was given by the widow. In the present case, the mortgage is signed by the holder of the life estate as “executrix,” and it was supposed by the parties at the time that she was — 263 — authorized to execute it on behalf of the estate to take up the insurance company’s mortgage. How the mortgage was signed in the case of Meeker v. Larsen does not appear, but it does appear that it was intended to give to the plaintiff a lien upon the land covered by the original mortgage. There is in this case no agreement, any more than in that, for the maintenance of the lien.of the original mortgage. There seems to have been no agreement in either case for a “first lien.” The plaintiff in each case, doubtless, supposed he Avas getting, by reason of the newly executed mortgage, a valid lien upon the premises. In Meeker v. Larsen, hoAvever, so far as the opinion indicates, there was nothing from which the court could find an intention of the parties to convey, in the newly executed mortgage, anything more than a lien upon the widow’s life estate. In the present case the court finds that it was intended to mortgage the entire property on behalf of the estate. The mortgage by the widow recited that she had obtained authority for making it. The question, then, in this case, is: Does the furnishing of money to discharge a valid lien,’ under the supposition of the loaner that he is getting a valid lien, entitle him to subrogation, he supposing, and having a right to suppose, that the executrix. Avas authorized to make to him a valid mortgage? The Nebraska cases bearing on this question do not seem directly to determine it. In Betts v. Sims, 35 Neb. 840, a defendant who had taken possession of land under a deed from a possessor whose oAvn deed was void, because not signed by the wife of a homestead tenant, and who, Avhile in possession, without knowledge of the defect had paid mortgages, was held entitled to recover on them as an equitable condition of plaintiff’s recovery of the premises. In Bohn Sash & Door Co. v. Case, 42 Neb. 281, plaintiff, in entire ignorance of an inchoate mechanic’s lien, had furnished money to pay off an old mortgage, and taken a neAV one under an express agreement with the owner of the property that the new mortgage was a first — 264 — lien. The new mortgagee was held to have no right as against the lienholder to subrogation. In Rice v. Winters, 45 Neb. 517, the grantee in a third mortgage, given expressly to raise money to take up a first one, took his security on the faith of an unauthorized release of the second one and upon an express agreement that he was to have a first lien, and was allowed no subrogation as against the second mortgage. These cases, together with Meeker v. Larsen, seem to establish, so far as this state is concerned, that the furnishing of money to pay off a former mortgage and the talcing of a new one, furnish no ground for subrogation on the part of the taker of the new security, although it was taken under the supposition that it conveyed a first lien. It is to be observed, however, that in each of these cases the claimant got something. In each of them.he was chargeable with negligence in not ascertaining the facts or with ignorance of the law. In the present case, the plaintiff was assured by the county judge that the executrix had authority to. make this mortgage. ' If a proper order had been entered by the county judge, she could have made a valid mortgage to take up that of the insurance company. Compiled Statutes, chapter 23, section 344 (Annotated Statutes, 5183). In Wilkins v. Wilkins, 35 Neb. 212, a dictum says that a father, who on the strength of a void bill of sale has paid mortgages on his son’s property, can, probably, be subrogated to the mortgagee’s right, though unable to recover in replevin on his bill of sale. ■ The present facts offer at least as strong a case. The executrix and the plaintiff were certainly not chargeable with negligence in taking the county judge’s assurance as to her authority. The executrix having paid the mortgage and note solely on behalf of the estate, and so made the new one, and not in any manner with intention to bind herself on her own estate, it can not be held to be her own obligation. The plaintiff is remediless, unless he shall be held equitably entitled to the ownership of this mortgage, which he furnished the money to pay. — 265 — In these circumstances, does subrogation, “that creature of equity courts, not owing its existence to statute or to. custom and not depending upon contract, invented and applied to do justice, or to prevent injustice,” furnish a remedy? There is good authority for holding that it does. In the recent case of Cumberland Building & Loan Ass’n. v. Sparks, 49 C. C. A. 510, a'loaner who had furnished money to pay off a prior mortgage, under an agreement that it should have a first lien, and had taken an invalid mortgage for its security, was held entitled to subrogation, not only against the mortgagor, but against another lien-holder who had notice of the facts. The opinion is by circuit judge Thayer. The plaintiff’s own mortgage was unenforceable because of a defective acknowledgment. The supreme court of Illinois, in Home Savings Bank v. Bierstadt, 168 Ill. 618, 61 Am. St. Rep. 146, gave subrogation to one who had advanced money to discharge prior trust deeds, upon the strength of an abstract which failed to show a subsequent trust deed to another person, whose security was not impaired by the change. The Illinois court say that “conventional subrogation” will always be decreed, where it is in accordance with the understanding of the parties, and there is no gross negligence and no injurious result to third parties. Both of these cases are abundantly fortified by other decisions. It would, probably, serve no good purpose to discuss the various other cases. They will be found gathered in Straman v. Rechtine, 58 Ohio St. 443, 51 N. E. 44. Perhaps it should be remarked that where money has been loaned to discharge a prior mortgage, and for any reason the money can not be made on the new mortgage, three reasons for refusing subrogation are found in the cases denying it. These are negligence of the loaner, as in Bohn Sash & Door Co. v. Case and Rice v. Winters, supra; mistake of law which gives no ground of relief, as in Meeker v. Larsen, supra, and in Brown v. Rouse, 125 Cal. 645, 58 Pac. 267; and intervening rights of innocent third parties. None of these appear in this case. — 266 — Defendants contend that the trial court’s finding as to the county, judge’s assurances to plaintiff are unauthorized by the evidence. The testimony, however, shows that the executrix and plaintiff both went to the county judge, explained to him the situation, and he called in Mr. Philpott and assured both of the parties that Mr. Philpott’s advice was trustworthy, and that they acted on the assurance of the county judge. Both seem to have been ignorant. The trial court’s finding that they acted on the judge’s assurance is clearly supported by evidence. Whether or not counsel’s complaint of there being no evidence to sustain the finding that the personal estate was exhausted at the time of the mortgage’s maturity is /well founded, we have made no effort to ascertain. It seems unimportant. There is no showing of any injurious change in the devisees’ position because of plaintiff’s paying the mortgage. It is recommended that the deeree of the district court be affirmed. Ames and Oldham, CO., concur. By the Court: For the reason stated in the foregoing opinion, the decree of the district court is Affirmed.