Bankers Loan & Investment Co. v. Hornish

Harrison, J., delivered the opinion of trie court. The charge of fraud contained in the bill filed by appellees in this case is wholly unsustained, so far as it concerns the Bankers Loan & Investment Co., the appellant here. On August 20, 1890, B. D. Downey purchased of Mrs. May M. Simmons a house and lot in the city of Roanoke, and executed certain notes for the deferred payments. On the day of sale, Mrs. Simmons and husband executed a deed conveying the property to B. D. Downey, the purchaser, and the latter at the same time executed a deed of trust conveying the property to a trustee to secure to Mrs. Simmons the notes w hich had been executed to her for the purchase money. The deed of trust was duly recorded, but the deed of conveyance from Mrs. Simmons to Downey was lost or destroyed, and never recorded. The purchase money secured by the deed of [611] trust was evidenced by three notes, one for $1,378, which was paid at maturity, and two, each for the sum of $3,087.45, payable one and two years from date, which were transferred by Mrs. Simmons to the “Fidelity Loan & Trust Co.” Afterwards, in September, 1891, B. D. Downey requested Mrs. Simmons and husband, who had previously conveyed the property to him, to execute a new deed conveying the same property to his wife. The new deed was executed and dated back to August 20, 1890, and acknowledged on September 20, 1891. In this deed Mrs. Downey assumes and agrees to pay, as part of the purchase money, the notes executed by her husband, and secured by the deed of trust already mentioned. Being pressed by the Fidelity Loan and Trust Co. for payment of these notes, either Downey, or his wife, it does not clearly appear which, applied to appellant for a loan with which to pay off the purchase money notes held by the Fidelity Loan & Trust Co., amounting to $7,000, agreeing to secure the amount by first lien on the property. Appellant agreed to make the loan, and accordingly, on October 1,1891, Mrs. Downey and her husband conveyed the house and lot to a trustee to secure the same. This entire amount was paid by appellant, at the request of Mrs. Downey and her husband, to the Fidelity Loan & Trust Co., and the purchase money notes to that amount held by said company were taken up uncancelled and held by appellant for further protection, and to avoid, as stated, all contingencies and complications. This, it appears, was done under the advice of counsel, with the knowledge and consent of Mrs. Downey,' her husband, and the Fidelity Loan & Trust Co. The deed of trust securing these notes also remained unreleased. This suit was brought by certain judgment creditors of B. D. Downey to subject this house and lot to the satisfaction of their liens. The proper accounts having been taken, and the cause coming on to be heard, the lower court held that the deed of trust [612] from Mrs. Downey and her husband purporting to convey the property to secure appellant the $7,000-debt mentioned therein, while good as between the parties thereto, was not a valid security superior to the judgments of appellees, against B. D. Downey; that the original purchase money notes held by the Fidelity Loan & Investment Company had been paid off and discharged, and the lien of said deed of trust satisfied; that the judgment liens reported were superior to that of appellant, and decreed accordingly. This decree is erroneous. Whether or not appellant was entitled to hold the notes, taken up under the circumstances already stated, as a bona fide purchaser for value, it is unnecessary to decide. Under the facts and circumstances of this case, appellant was, upon well established principles of natural justice, entitled to be subrogated to the lien of the deed of trust securing the notes paid by it. 3 Pom. Eq. Jur., sec. 1212; Jones on Mortgages, sec. 877; Gatewood v. Gatewood, 75 Va. 407; Hudson v. Dismukes, 77 Va. 242; Price v. Davis, 88 Va. 939; Kline v. Triplett, 25 S. E. 886. It was not necessary, as the lower court seems to have supposed, that the notes should have been assigned to appellant, to entitle it to the benefit of the lien. Subrogation is a very different thing from assignment. It is the act of the law, and the creature of a court of equity, depending not upon contract, but upon principles of law and jus'tice. Gatewood v. Gatewood, supra. Nor was it necessary that appellant should have claimed specifically in its answer the right of subrogation to be entitled to its benefit; it is sufficient if the facts alleged and established by the evidence justify the court in extending its benevolent hand in relief of the party asking its aid and protection. Hudson v. Dismukes, supra. Nor have appellees any right to complain that appellant is subrogated to the original purchase m oney lien paid by it. They have no intervening equity that is prejudiced. The lien that is preserved in favor of appellant was upon the property [613] before and since their judgments were obtained. It was a debt due from their debtor, and has never been discharged by him. Appellees are in no worse position than they were when their judgments were otained, and equity and good conscience forbid that they should be enriched at the expense of appellant. For these reasons, the decree appealed from must be reversed, and the cause remanded for proceedings to be had therein in accordance with this opinion. Reversed.