Bank of Fayetteville v. Lorwein

88 S.W. 919, 76 Ark. 245, 1905 Ark. LEXIS 51

• Court: Supreme Court of Arkansas
• Decided: July 1, 1905
• Status: Published

Opinion

McCueeoch, J.

There is no equity in the complaint, and the same was properly dismissed. Appellant’s contention is that the decree of July 34, 1900, during the same term of court operated as a vacation of the former decree, and that, as no preference was given in that decree, the bank must be permitted to share in the proceeds of sale. Conceding that such was the effect of the last decree, it does not follow that appellant is entitled to the relief asked? It has come into a court of equity asking the exercise of the peculiar powers of that court to grant affirmative relief, and it must “do equity.” In other words, it must stand, not upon the letter of the decree in its favor which was entered through a mistake, but upon the merit or lack of merit in the cause of action upon which the decree was entered.

Was appellant entitled, upon its intervention in the original suit, to a decree declaring a lien in its favor sharing equally with Lorwein in the sale of the land? That is the question presented. Learned counsel for appellant contends that the bank was entitled to so share, under the ruling of this court in Penzel v. Brookmire, 51 Ark. 105, that, in a controversy between the several holders of separate notes secured by the same mortgage, whether the notes be transferred before or after maturity and regardless of the order of maturity, they “stand aequali jure, and consequently are entitled to participate ratably in the fund derived from the security, if there be not-enough to pay all.” The facts are essentially different here,- however, and a different rule must prevail. The three notes now held by appellant were merged in the decree of 1898 in favor of Lorwein against Nugent and Haupman, and the latter, though by payment of the decree he became subrogated, as against the maker and prior indorsers of the notes, to the rights of Borwein, cannot assert those rights against Borwein’s lien for the other two notes, because he is liable to Borwein as indorser for payment of all the notes. So long as the other two notes and the lien on the land for payment thereof remained unsatisfied and his liability to Borwein continued, he is postponed in the assertion of a lien on the land, and cannot claim the right to participate in the proceeds of sale.

A surety or indorser on a note who has paid only a part of the debt for which he is liable, leaving the balánce unpaid, cannot claim, by subrogation, the right to participate in the securities held for the payment of the debt. He must first pay the whole debt. McConnell v. Beattie, 34 Ark. 113; Schoonover v. Allen, 40 Ark. 132; Sheldon on Subrogation, § 127; Columbia Finance Co. v. Kentucky Union Ry. Co., 60 Fed. 794; Magee v. Leggett, 48 Miss. 139; Gannett v. Blodgett, 39 N. H. 150; Child v. New York, etc., Ry. Co., 129 Mass. 170; Bartholomew v. Salina First Nat. Bank, 57 Kan. 594; Receivers of New Jersey Midland Ry. Co. v. Wortendyke, 27 N. J. Eq. 658. The New Jersey court in the case last cited said: “The right of subrogation cannot be enforced until the whole debt is paid; and until the creditor be wholly satisfied, there ought [to] and can be no interference with his rights or his securities which might, even by bare possibility, prejudice or embarrass him in any way in the collection of the residue of his claim.” ■

Appellant received the notes from Haupman after maturity and charged with notice of the decree rendered upon them. It succeeded only to the rights of Haupman, and can assert no greater rights.

It appears that the land was fairly sold by the commissioner, and the sale was confirmed by the court, and it brought no more than enough to satisfy Borwein’s decree for the amount of the two notes held by him, interest and cost of suit. Therefore appellant shows no right to any of the fund.

Decree affirmed.