Johnson v. Tootle

Miner, J. (after stating the facts): It appears that when the appellants procured their judgment against Hatch the trust deed was a valid lien upon the property in question for upwards of $3,000, and the judgment was subject to’this lien, pfhe respondents purchased the land in good faith, relying upon the repre [487] sentations of Hatch that tbe trust deed was the only incumbrance upon it, and were in utter ignorance of the judgment. They purchased the land, and as a part of the purchase price paid off the trust deed for the benefit of the respondents, and not for the appellants. The position of the appellants in the meantime had in no way been changed. They did not take their judgment, part witli any property, nor do any act in reliance upon the release of the trust deed. The respondents were not strangers, volunteers, or interineddlers, within the rule which denies a remedy by way of subrogation. Under these circumstances, are the appellants in a position where they can take advantage of the mistake and fraud, and be placed in a better position. because of it? If the lien of the trust deed is released,for the benefit of respondents, the equities of both parties are preserved, and the appellants will have what they had when the judgment was obtained. The promise on the part of the respondents to pay the judgment was solely in consideration that they should obtain and acquire a clear title to the land purchased. As the consideration failed, the promise should not be enforced in equity in favor of appellants, when their position has been in no way changed because of the release of the trust deed. The general principle which runs through nearly all the cases of this character is that, “when the legal rights of the parties have been changed by mistake, equity restores them to their former condition, when it can be done without interfering with any new right acquired on the faith and' strength of the altered condition of the legal rights, and without doing injustice to other persons.” / To apply this principle in this case is to prevent manifest injustice and hardship, and its application will interfere with no superior intervening equities.' In Matzen v. Shaeffer, 65 Cal. 81 [488] the facts are nearly identical with the facts in this case. In that case it appears that “a purchaser of land subject to a mortgage agreed with the owner and mortgagee to pay off the mortgage debt as part consideration for the purchase. The mortgage debt was paid by the purchaser, and the remainder of the purchase price to the owner, who thereupon conveyed the land to the purchaser. Satisfaction of the mortgage was entered on the record. It was held that the transaction operated as an equitable assignment of the mortgage to the purchaser, and was a lien paramount to that of a judgment entered after the mortgage and before the entry of satisfaction.” In the case of Barnes v. Mott, 64 N. Y. 397, the court held in a similar case that: “So much of the judgment as restores the mortgage upon the premises now owned by the plaintiffs, paid off and satisfied by the devisees of Burr, the then owner, and reinstates the same as a lien upon the mortgaged premises, prior and paramount to the lien of the judgment recovered by Orchard and assigned to the defendant, is clearly right. Upon payment of the mortgage by the then owners of the premises, they were entitled to all the rights of the mortgagee, and to an assignment of the mortgage; and, having caused the same to be satisfied under circumstances authorizing an inference of a mistake of fact, equity will presume such mistake, and give the party the benefit of the equitable right of subrogation. To do so in this case is to prevent manifest injustice and hardship, and interferes with no superior intervening equities.” ÍThis doctrine is sustained by the great weight of authority, although there are decisions to the contrary. Barnes v. Camack, 1 Barb. 392; Pearce v. Buell, 22 Or. 29; Emmert v. Thompson, (Minn.) 52 N. W. 31; Gatewood v. Gatewood, 75 Va. 407; Young v. Morgan, 89 Ill. 199; Barnes v Mott, 64 N. Y. 397; Smith [489] v. Dinsmoor, 119 Ill. 656; Bryson v. Meyers, 1 Watts. & S. 120, 425; Hudson v. Dismukes, 77 Va. 242, 247; Yaple v. Stephens, (Kan. Sup.) 14 Pac. 222; 2 Warv. Vend. p. 858, and note 4; Harris, Subr. § 816; Backer v. Pyne, (Ind. Sup.) 30 N. E. 21. Under the facts In this case we are of the opinion that the respondents are within the rule that whenever it is equitable that a security should be kept alive for the benefit of one advancing money to pay it off, and new rights have not attached in dependence of the apparent discharge of the prior security, subrogation will be allowed. In arriving at this conclusion, we have given due weight to the able argument on the part of counsel for the appellants to the effect that one who assumes a debt becomes primarily responsible for it; that payment operates as a discharge, and that the securities cannot be kept alive for his benefit. But, under the facts in this case, we cannot subscribe to a proposition that would work such hardship and injustice as such a holding would impose upon innocent parties where no new rights have been created on the faith and strength of the altered condition of the legal rights. \ The judgment of the court below is affirmed, with costs. \ Zane, C. J., and Baetoh, J., concur.