Beaver v. Slanker

Mr. Justice Sheldon delivered the opinion of the Court: As a mere assignee alone of the mortgage, the complainant might not be able to sustain this decree in his favor, as the judgment for the mortgage debt was satisfied in full by the sale under execution of Eleinworth’s land. But, upon the doctrine of subrogation, we think there is sufficient support for the decree. It is the undoubted principle of equity, that if, at the time when the obligation of the principal and surety is given, a mortgage also is made by the principal to the creditor, as au additional security for the debt, then, if the surety pays the debt, he will be entitled to have an assignment of the mortgage and to stand in the place of the mortgagee, and that the mortgage will remain a valid and effectual security in favor of the surety for, the purpose of obtaining his reimbursement, notwithstanding the obligation is paid. The mortgage is regarded as not only for the creditor’s security, but for the surety’s indemnity as well. 1 Story Eq. Jur. § 499; Rogers v. School Trustees, 46 Ill. 428; Phares v. Barbour, 49 id. 370; Jacques v. Fackney, 64 id. 87 ; City National Bank of Ottawa v. Dudgeon, 65 id. 12; Bishop v. O’Conner, 69 id. 431. There can be no question, in the case of Johnsbn himself, the surety, had the land been sold while he owned it, in satisfaction of the judgment, that he would have been entitled to maintain such a bill as the present. The only doubt is, whether the principle in question, of subrogation, applies in favor of a purchaser of the land from Johnson, the judgment against the latter being a lien upon the land purchased. We are of opinion it does. Kleinworth did not make the payment which he did for the certificate of purchase of his land, as a mere stranger or volunteer, but he made it standing in privity with Johnson, the surety, as his assignee of land incumbered with the lien of the judgment against Johnson as surety; and he made it compulsorily, to save to himself his land which had been sold as being bound by this judgment-lien. In Hough v. Ætna Life Insurance Co. 57 Ill. 318, and in Young v. Morgan, 89 id. 199, this court recognized the doctrine that a mere stranger or volunteer could not, by paying a debt for which another is bound, be subrogated to the creditor’s rights in respect to the security given by the real debtor; but that if the person who paid the debt was compelled to pay, for the protection of his own interests and rights, then the substitution should be made. Further, the present proceeding is in the interest of the surety, Johnson, it being in the indirect assertion of his right of indemnity from the mortgaged premises. Johnson sold and conveyed to Kleinworth with covenant of warranty, and so was responsible to the latter for the goodness of the title. Kleinworth, instead of resorting to Johnson, on the latter’s covenant of warranty, and leaving Johnson to have recourse over to the mortgage, proceeds directly against the mortgaged property, which is ultimately liable for the mortgage debt, and in obtaining satisfaction therefrom for the portion of the mortgage debt the sale of his land discharged, secures full indemnity for the surety, Johnson, and thus avoiding circuity of action. And this meets the suggestion, that, in relief of the appellant and other purchasers from Powell, the recourse of Klein-worth should have been against Johnson on his covenant of warranty. If that had been done, then Johnson himself would have been subrogated to the rights under the mortgage, so that, in the end, the result to appellant would have been the same—the subjecting of the mortgaged premises. There is, besides, reason to believe that suit upon the covenant of warranty would have been unavailing. Johnson has deceased, and the records of the probate court show his estate to be insolvent. To be sure, this showing is in respect of personalty only, and there is a possibility of the decedent having left lands which might respond upon the covenant of warranty; nothing appears as to this. The circumstance of Powell having sold the mortgaged lands, and they now being in the hands of purchasers from him, should make no difference. Such purchasers occupy no better position than Powell himself. The mortgage was upon record, and they bought with notice that the lands were mortgaged; that they stood as security for the payment of this mortgage indebtedness, and as indemnity to the sureties against its payment, and that they were liable to be resorted to and sold for the purpose of such security and indemnity. They are now proceeded against but for such purpose, and these purchasers have no equitable cause of complaint. If it be regarded important that they should have had notice that Johnson and Abernathy were sureties only, we think they were chargeable with such notice. The proceedings of the county court under whose order of sale the administrator’s sale of these lands of Biley was made, were a link in the chain of title of the mortgaged lands, and purchasers from Powell must be held as having notice of them. These proceedings show that the sale was to be on a credit, and that the purchaser was to give a mortgage on the land purchased, and a note with personal security; they show the sale of the lands to Powell, and Powell alone gives the mortgage on the lands purchased. These circumstances, we think, afford notice that Powell was the principal in the transaction, and Johnson and Abernathy but his sureties. The answer of Beaver, too, admits such suretyship. There are some minor questions made, which remain to be considered. The bill alleges, under a videlicet, that the judgment was obtained against Powell, Johnson and Abernathy about the -day of November, 1872. The proof shows it was rendered in April, 1869. It is insisted that in this respect there is a fatal variance between the allegations and proof. The bill alleges the events correctly; that the judgment became a lien upon this land of Johnson, which he then owned, and that he afterward sold the land to Kleinworth. The allegations of the bill and the proofs show that the judgment became a lien upon the land while owned by Johnson, and before his conveyance of it to Kleinworth. The allegation as to the time of obtaining the judgment is not one of a descriptive character as respects the judgment, and does not purport to state with exactness the time when it was recovered. We find no merit in this objection. The same may be said in regard to the amount of the judgment. The allegation of the bill is, that the judgment was obtained “for the sum of, to-wit: about $500 and costs of suit, being, in all, a sum not now known to your orator.” The proof shows the amount of the judgment to have been $2562.44. A further objection is, in respect of a mistake in the mortgage from Powell to Buchanan. In the body of the mortgage, in the granting part, the name of the mortgagor appears written in the blank left for the name of the mortgagee, and the name of the mortgagee in the blank left for the mortgagor, the mortgage in all other respects being correct. It is urged that, although as between the parties to the mortgage, this was a mistake that might have been corrected, yet, as against Beaver, an innocent subsequent purchaser from Powell of the mortgaged land, he not knowing of the mistake, the mortgage could not be reformed; that he, not having such knowledge, would be entitled to hold the land unaffected by the mortgage, and so was not compelled to pay the mortgage debt, for the protection of his title to the land. "We think Beaver had notice of the mistake from the recording of the mortgage. The mortgage was signed by Powell, not Buchanan; it purported to secure a debt from Powell to Buchanan, not one from Buchanan to Powell; and the certificate of acknowledgment expressed that the mortgage was acknowledged by Powell. The mistake in the transposition of the names of mortgagor and mortgagee was palpable upon the face of the mortgage. It is objected that there is no prayer in the bill for the reformation of the mortgage, and no decree made therefor. The bill does not ask specifically for the correction of the mistake, nor does the decree by express words order the correction of the mistake; but the bill alleges the mistake, and contains the general prayer for relief; and the decree finds the fact of the mistake, and, if not in terms decreeing its correction, it treats it as corrected, in declaring the mortgage to have been made by Powell, and the mistake in it to be apparent upon reading the whole mortgage, and ordering the sale of the mortgaged land for the satisfaction of the mortgage debt. We find nothing substantial in this objection. The decree will be affirmed. Decree affirmed