Wolford v. Bias

Williams, PRESIDENT: Sylvina Wolford and John Wolford, her husband,' purchased from. Emily D. Ireson, W. J. Ireson, her husband, uniting in the conveyance, a house and lot in the town of Williamson, at the price of $1,500, $500 of which was paid in cash by Mrs. Wolford out of her own estate, and she and her husband executed to Mrs. Ireson their four joint promissory notes for $250 each, payable in six, twelve, eighteen and twenty-four months from the 25th of September, 1908, with interest, with the alleged understanding between the obligors that the husband would pay them. He paid no part of them, and the wife paid them out of her own earnings. The vendors granted the property to Sylvina Wolford for life, with remainder in fee to her husband. A vendor’s lien was retained to secure the notes, and it has not been formally released. John Wolford ivas a drunkard and did little toward earning a living. They have lived together, in Williamson, since 1907, or 1908, and sometimes had serious disagreements. Following one of his drunken sprees on the 30th of April, 1913, the record discloses that John Wolford decided to sell his interest in the property and leave his wife. He did sell and convey it to one Henry Harrison, the deed, reciting a consideration of $1,250. The consideration actually paid was $750, $500 of which was cash, and for the balance Harrison executed his note and delivered it to Wolford. B. R. Bias and C. R. C. Wiles, partners, furnished Harrison the money — 351 — with which to make the cash payment, with the agreement that all three of them were to be equal joint owners of said Wolford’s interest. The deed was executed to Harrison. Hater, on the same day, and at his request, Wiles and Bias ■furnished Harrison with $200 to discount and take.up his mote to Wolford, and Harrison swears he paid the money to Wolford and received from him his note and destroyed it. •Shortly thereafter Wiles and Bias purchased Harrison’s interest, paying him $300 therefor, and he then conveyed the whole of John Wolford’s estate in remainder to B. R. Bias, trustee for himself and G. R. C. Wiles. Learning of these conveyances Mrs. Wolford brought this suit in equity against her husband, Mrs. Ireson and W. J. Ireson, her husband, Henry Harrison, B. R. Bias, trustee, and said Bias and G. R. C. Wiles, partners, charging that she had paid the full purchase price to Mrs. Ireson for the land, with the understanding with her husband that she was to be the sole grantee in fee, but that her husband had procured the deed to be written in its present form; that she objected to it, and he told her, if she did not accept it in that form, he would leave her, whereupon she accepted it; that she has added to the property, out of her own means, valuable permanent improvements, costing in all about $521; that her husband was a confirmed drunkard and gambler and Henry Harrison was a gambler and the proprietor of gambling places; that he made her husband beastly drunk for the purpose of inducing him to convey his property to him, and, when he was too drunk to know what he was doing, induced him to convey it to him in consideration of a small sum,, not to exceed $300; that about April 30, 1913, her husband left, and has permanently abandoned her, without cause and she is ignorant of his whereabouts; that she is informed and believes that said Bias, as trustee, holds the property in .trust for the law firm of Wiles and Bias, to secure their fees for legal services to be rendered to said Harrison in any litigation relative to the property. In her bill she expressly exonerates Wiles and Bias of any knowledge of Harrison’s alleged fraudulent design. She prays for a decree against her husband for one-half of the purchase price of the land, with — 352 — interest from the date of the purchase, and for the whole of the value of the improvements she had put upon the house, that she be subrogated to rights of the vendor, Mrs. Ireson, in the unreleased lien, and for general relief. She does not ask to have any of the above mentioned deeds set aside as .being fraudulent. Wiles and Bias .answered, admitting they furnished the necessary money to buy John Wolford’s interest, .with the understanding with Harrison, that all three of them were to be equal joint owners; that later they bought Harrison’s interest, paying him $300 ’for it; that both the deed from John Wolford to Harrison, and the deed from the latter to B. R. Bias, trustee, recite, as the consideration, larger sums of money than were actually paid. They deny that John Wolford was drunk when he executed the deed to Harrison, or that said Bias holds the title to secure fees contracted to be paid to them by Harrison. They do not admit the charge of fraud against said Harrison in purchasing Wol-ford’s interest, and deny any knowledge of it, if there was any fraud, and deny, specially, all other material allegations. They aver that they purchased the property in good faith and paid $1,000 therefor. No other defendant answered. On the pleadings, general replication having been made to the aforesaid answer, and depositions filed on behalf of both the plaintiff and defendants Wiles and Bias, the court dismissed plaintiff’s bill, and she has appealed. The denial of her alleged right to have the unreleased vendor’s lien enforced for her benefit, to the extent of $750, that being her husband’s alleged share of the purchase money paid by her, and refusal to decree a sale of his interest to satisfy the same, is assigned by plaintiff as error. The joint purchase money notes had been paid before John Wolford sold his interest, but the lien retained to secure them had not been formally released on the record. It is urged by counsel for plaintiff, that she occupied the relation of surety for her husband on their joint notes, to the extent of the portion thereof which he should have paid, and having paid it for him, equity subrogates her to the lien of the vendor, against the share, or estate of her husband. This, as a general proposition, is the correct rule in case of a joint pur — 353 — chase by tenants in common, and no authorities need be cited to sustain it. Nor do we think the principle would be different where, as in this case, one takes a life estate and the other a remainder, provided the purchase is joint and the obligation for the purchase price is also joint. The principle rests on the ground of suretyship, existing between joint obligors who, as' between themselves, are primarily liable to pay a certain portion only of the joint debt, and is applied for the protection of the one who discharges more than his ratable share of the burden. The necessity resting upon either grantee of several estates to pay the whole consideration, where it is secured by a joint obligation, in order to protect his particular estate, is just as imperative as in the case of a tenant in common to protect his undivided interest. But this general rule has its exceptions, and the vital question here presented is, are Wiles and Bias dona fide purchasers of John Wolford’s estate, without notice of his wife’s equity, and if so, is her claim to subrogation superior to their right. There is no proof that Wiles or Bias, or even Harrison, knew of the alleged agreement between plaintiff and her husband respecting the amount each should pay on the joint notes. The record does not disclose what part each was primarily bound to pay, or that it was not the primary duty of the plaintiff to pay all the purchase money. The unreleased vendor’s lien, was constructive notice to the purchasers, that the debt was not paid, but Bias inquired of the vendors’ and ascertained that the debt had been paid. He and Wiles are therefore innocent purchasers for value, without notice of plaintiff’s latent equity. Their position is equally as secure as if the lien had been formally released on the record. The formal release provided by statute, if it had been made and recorded, would have furnished them- no more information than they obtained directly from the lienor. Having learned from the vendor that the debt was paid, they were not required to make inquiry of the purchasers, to ascertain if any secret equities existed between them, before they could safely buy. They could assume the debt had been paid by the party, or parties, whose primary duty it was to pay it. “Where the record shows that a prior mortgage has been — 354 — satisfied, without showing by whom payment was made, a purchaser having no other notice than the record may assume that payment was made by the party owing the primary duty to make it; and if the record only discloses that if a certain person paid the mortgage debt he is entitled to subrogation, the purchaser examining the title need not look beyond the record to ascertain whether or not the payment was in fact made by that person. ’ ’ Ahern v. Freeman, 46 Minn. 156, 24 Am. St. Rep. 206. The supreme court of Massachusetts holds, in Rand v. Cutler, 155 Mass. 451, that a junior mortgagee, who took a mortgage upon the faith of what the record disclosed, is protected, and that the right of subrogation can not be invoked to the injury of an innocent third person. This court held, in Hawker v. Moore, 40 W. Va. 49, that the surety’s right of subrogation could not prevail, “to the injury of any one who, by any rule of strict law, or in equity and good conscience, stands on higher ground, or for any reason has a better right. Such an one will not be displaced or his right disturbed. This is the essence of the doctrine of sub-rogation.” Although equity will generally keep a lien alive, even after it has been formally released on the record, for the protection of a surety, it will not do so, if the equity of the surety is latent, and the rights of a subsequent bona fide purchaser have intervened. Richards v. Griffith, 92 Cal. 493, 27 Am. St. Rep. 156, is directly in point. There Bunnell executed his note for $700 to Charles St. Sure payable on November 11, 1886, and a mortgage on certain lands to secure the same. Griffith & Stose recovered a judgment against Bunnell for $303.26, on August 25, 1886. On October 21, 1886, Bunnell executed to plaintiff his note for $1,200, payable two years after date, and also executed and delivered to him a mortgage on the same property, previously mortgaged to St. Sure, and orally agreed with Bunnell that the St. Sure mortgage should be discharged out of the $1,200 loaned. Plaintiff immediately paid St. Sure the amount due him and St. Sure canceled the 'mortgage. ’ An .execution was issued on the Griffith & Stose judgment, and at the sheriff’s sale of the mortgaged property, they became the purchasers 'at the price of $315.60, — 355 — and, no- redemption having been made within the required time, the sheriff executed and delivered to Griffith & Stose a deed for the property. ■ The St. Sure mortgage was recorded August 3, 1885, and the mortgage to plaintiff on October 21, 1886. Under the foregoing state of facts plaintiff contended that, by virtue of his agreement with Bunnell and the payment of the St. Sure mortgage in pursuance thereof, he was entitled to be subrogated to the rights of St. Sure in his mortgage, which antedated the judgment, to satisfy which the land was sold, and that equity should keep alive the mortgage, for his benefit, even though it had been formally released. Griffith & Stose had no notice of the agreement between plaintiff and Bunnell respecting the payment of the St. Sure mortgage out of the money plaintiff loaned Bunnell. The court held that Griffith & Stose were innocent purchasers for value and their rights were superior to plaintiff’s latent equity. The rule almost universally announced by the courts is, that one having a mere latent equity will not be subrogated to the rights of a creditor, if to do so prejudices the rights of an innocent purchaser for value, without notice of such equity. In' addition to the cases cited, the following cases lay down the same principle. Persons v. Shaeffer, 65 Cal. 79; Amich v. Woodworth et al., 58 Ohio St. 86, a case very much in point; and Rice v. Winters, 45 Neb. 517. Copious notes by Mr. Freeman on the doctrine of subrogation will be found at pages 476-533, 99 Am. St. Rep., appended to the case of American Bonding Co. v. National &c. Bank, decided by the supreme court of Maryland. At page 480, dealing with the subject of intervening rights and equities, Mr. Freeman says: ‘ ‘ Since subrogation is a creature of equity, it must be enforced with a due regard to the rights, legal or equitable, of others. It cannot be invoked so as to work injustice, or defeat a legal right, or overthrow a superior or perhaps even an equal equity, or displace an intervening right or title.” Counsel for appellant cite and rely on Tompkins v. Mitchell, 2 Rand. 428, decided by the supreme court of appeals of Virginia. That case does not control in the decision of this case for two reasons: (1) it was decided before the recording act was passed, when it was not necessary for the vendor — 356 — to expressly reserve a lien in Ms deed of conveyance to secure payment of the purchase money; and (2) because it appears, from reading the opinion, that the trustee to whom the insolvent joint purchaser had assigned his interests in the land, did have actual knowledge of the fact that his grantor had not paid his portion of the purchase money. The trustee was, therefore, a purchaser with notice of the equity in favor of the other joint purchaser. The decree is affirmed. Affirmed.