Shattuck v. Belknap Savings Bank

[446] The opinion of the court was delivered by Pollock, J. : Two contentions are made by counsel for plaintiff in error to work a reversal of the judgment below: (1) That the taking of the quitclaim deed by the bank operated to merge the mortgage held by it in the legal'title so taken, and thus gave priority to the mortgage of plaintiff in error; (2) that the agreement made by the bank to receive the conveyance of the mortgaged premises and release mortgagors from any deficiency judgment that might remain after exhausting the mortgaged premises operated in equity to create the mortgage of plaintiff in error a paramount lien on the pretnises. L «on®?grantee prevails. As to the first of these contentions, the doctrine is firmly held by this court that where the - holder of a lien acquires the legal title to the property upon which the lien rests, with the intention that such lien shall not be merged in 0 the legal title, such intention will prevail as against junior encumbrancers. (Bowling v. Garrett, 49 Kan. 504, 31 Pac. 135; Rand v. Ft. S. W. & W. Rly. Co., 50 id. 114, 31 Pac. 683.) This is also the settled law in other jurisdictions. (The Delaware Railroad Construction Co. v. The Davenport & St. Paul R. Co., 46 Iowa, 406; Richardson v. Hockenhull et al., 85 Ill. 124; Brooks v. Rice, 56 Cal. 428; Hanlon v. Doherty et al., 109 Ind. 37, 9 N. E. 782; Belknap v. Dennison, 61 Vt. 520, 17 Atl. 738; Coburn v. Stephens, 137 Ind. 683, 36 N. E. 132.) The trial court found that it was not the intention of the bank that its mortgage should merge in the legal title taken, as follows: “But that the taking of said deed by said plaintiff should not affect in any way the right of the plaintiff [447] to foreclose its said mortgage or trust deed, or to obtain judgment upon the note sued on by the plaintiff herein, or its right to proceed in any way against any of the other defendants herein upon said note and mortgage or trust deed.” Not only the express finding of the trial court, from the evidence upon this proposition, is opposed to the contention of merger urged by counsel for plaintiff in error, but it would seem from the authorities that, in the absence of such a finding, it would be conclusively presumed that the intention of the bank was that its mortgage should not merge in the legal title, where the effect of such merger would be to give a junior encumbrancer a paramount lien on the property. Mr. Jones, in his work on Mortgages, section 873, says: “Even when the parties have undertaken to discharge the mortgage upon the uniting of the estates of the mortgagor and mortgagee in the latter, it will still be upheld as a source of title whenever it is for his interest, by reason of some intervening title or other cause, that it should not be regarded 'as merged. .It is presumed, as matter of law, that the party must have intended to keep on foot his mortgage title, when it was essential to his security against an intervening title, or for other purposes of security; and this presumption applies although the parties, through ignorance of such intervening title, or through inadvertence, have actually discharged the mortgage and canceled the notes.” The text is approved in Stantons v. Thompson, 49 N. H. 272; Hanlon v. Doherty, 109 Ind. 37, 9 N. E. 782; Lowman v. Lowman et al., 118 Ill. 582, 9 N. E. 245; Coburn v. Stephens, 137 Ind. 683, 36 N. E. 132. [448] 2. Eiglito{sul)ro_ gationwaived. [447] The second contention of counsel for plaintiff in error is not the defense pleaded in her supplemental answer, but is predicated upon the theory that, by the acceptance of the conveyance upon the agreement [448] made by the bank with the Pollards that ^ woui¿ not hold them for the payment of any deficiency judgment that might remain after exhausting the mortgaged premises by sale under the decree, as found by the trial court, plaintiff in error was deprived of a substantial right and a portion of the security pledged for the payment of her note. This contention, in other words, is that, in the absence of the agreement found to exist between . the bank and the Pollards, it was the privilege of plaintiff in error to pay off and discharge the prior lien held by the bank, and thus, by operation of law, become subrogated to all the rights of the bank, not only as against the mortgaged property, but also to all rights held by the bank to a personal judgment against the mortgagors; and that because of the • agreement of the bank made with the Pollards, she was deprived of a valuable right which, in equity, entitled her to a first lien on the premises. In support of this contention, counsel cites the cases of Coyle v. Davis et al., 20 Wis. 564, and Sexton and another v. Pickett and others, 24 id. 346. Assuming, while not so deciding, the general rule to be as claimed by counsel, is plaintiff in error in a position to avail herself of the same in this case? We think not. It must be conceded that it was the right of plaintiff in error, a junior lien-holder, to pay off the prior mortgage existing upon the premises pledged to secure her obligation, and upon such payment, in equity, to be subrogated to all the rights of the bank against both the property and the makers of the obligation by her discharged. But the right of subrogation, and, as well, the right to make payment of a prior lien upon which the claim of subrogation may be predicated, like all other rights, may be waived or [449] abandoned. (Potts v. Plaisted, 30 Mich. 149; Frost v. Yonkers Savings Bank, 70 N. Y. 553, 26 Am. Rep. 627.) Conceding this right to have existed in this case, although afforded ample opportunity so to do, plaintiff in error neither made nor tendered payment of the prior lien, but, on the contrary, by her answer and cro.ss-petition, expressly denied the validity of the prior encumbrance, pleaded payment, satisfaction, discharge and release of record of the same, and in her supplemental answer setting forth the taking of the quitclaim deed, and the agreement between the parties upon which the same was secured, alleged and relied on an absolute and unconditional release and discharge of the Pollards from all personal liability to the bank and a merger of the prior lien held by the bank in the legal title taken, which contention has been heretofore denied. Hence, it must be held in this case that plaintiff in error, by her acts and conduct, waived the defense of which she now here seeks for the first time to avail herself, and also, by her pleadings upon which the •case went to trial, assumed a position inconsistent with the claim of right made in this court. 3. Excessive judgment' A further contention is made by counsel for plaintiff in error, that the judgment rendered’ is excessive in the amount "of $98.76, arising by reason of error in the computation of interest; that judgment should have been rendered for only $1941.60, whereas judgment was rendered for the sum of $2040.36. This contention is well founded, and the judgment will be modified by deducting from the same as rendered the sum of $98.78 ; and, as modified, the judgment will be affirmed. Dostek, C.J., Smith, J., concurring.