Rooker v. Benson

83 Ind. 250

• Court: Indiana Supreme Court
• Decided: May 15, 1882
• Docket: No. 10,057
• Status: Published

Opinions

Woods, J.

Action by the appellee, as administrator of the estate of Milford H. Vert, to foreclose a mortgage made by Oliver P. Eooker to Peter Cloud, to which a right of subrogation is claimed, because Vert, as surety for Eooker, had paid .a part of the debt.

The court, by request of one of the defendants, found the facts specially, and stated conclusions of law, to which the appellants excepted. The facts as stated are substantially as follows:

On the 7th day of January, 1873, the defendant Oliver P. Eooker purchased of Peter Cloud the land described in the complaint, and for a part of the purchase-price made to Cloud his five promissory notes, payable respectively, in one, two, three, four and five years, with annual interest at the rate of ten per centum.

On the 17th day of January, 1874, Cloud conveyed said lands to Oliver P. Eooker and his wife America, taking from them a mortgage thereon to secure the payment of said notes.

The first of these notes was paid by said Oliver, but the second, not having been paid, was put in suit, and on the 5th day of March, 1875, a judgment was rendered thereon in favor of Cloud, against Oliver P. Eooker personally, in the sum of $1,660, upon which judgment the appellee’s intestate, on the 25th day of March, 1875, became replevin bail for the stay ■of execution.

On the 7th day of March, 1876, Cloud obtained against his said grantees a judgment and decree of foreclosure for the respective sums due and to become due on the last three of said notes, and, upon an order of sale issued upon the decree, caused the mortgaged lands to be sold by the sheriff, on the 26th day of August, 1876, and became himself the purchaser, for the sum of $1,475, and received from the sheriff a certificate of purchase, which, together with the unsatisfied part of the judgment and decree of foreclosure, on the 4th day of September, 1876, he sold and assigned to Gustavus H. Voss.

Afterward, on the 21st day of December, 1876, Oliver P. Rooker and wife conveyed said lands to the defendant James I. Rooker, by a deed of general warranty, reciting a consideration of $5,000, and containing an exception from the warranty in these words: “ This deed is expressly accepted by the grantee, subject to any and all mortgage and judgment liens now existing against said property,” and at the same time “James I. Rooker agreed to pay the said Peter Cloud debt or judgment evidenced by said last three promissory notes, as consideration for said conveyance; ” but it was agreed between him and his grantors, in the presence of, and without objection from the decedent, Vert, that he was not to pay Vert’s, debt, evidenced by the second purchase-money note, which was then in judgment, and upon which Vert was replevin bail.

Afterward, on the 3d day of January, 1878, in consideration of the sum of $4,800, the amount of his demand, paid to Voss, by James I. Rooker, Voss sold and assigned the said certificate of purchase, and the judgment and decree of foreclosure, to the said James, who has paid delinquent and current taxes to the amount of $400, and has made repairs to the amount of $1,000, which were necessary for the protection and preservation of the mortgaged premises; and since payment of said sum of $4,800 to Voss, there has accrued interest thereon to this date to the amount of $1,920; on the 1st day of November, 1881, Vert was compelled to pay, and did pay, $2,200 in discharge of the judgment upon which he Avas bail.

The statement of the facts may be simplified by leaving out of view the foreclosure of the mortgage, the sale of the premises upon the decree, and the assignment of the certificate of sale and of the unsatisfied remainder of the decree to Voss,, Avho, of course, acquired by the assignment no different nor better rights than Cloud had; so that the questions involved are the same as if James I. Rooker, after making his agreement with Oliver Rooker, had paid directly to Cloud the amount of the last three mortgage notes and had obtained from him an assignment instead of a cancellation of the same as paid and satisfied.

Restated then, the essential facts are these: Oliver P. Rooker and wife, being owners of land subject to a mortgage made to secure his four promissory notes to Cloud, one of which notes has been put into judgment and the judgment stayed by Vert as replevin bail, conveyed the land to James I. Rooker subject, by the terms of the deed, to all existing mortgage and judgment liens; and, at the same time, a parol agreement is made between the grantors and the grantee, Vert being present and not objecting, that said James I. Rooker shall pay as consideration for the land the portion of the mortgage debt evidenced by the last three notes, but shall not pay the judgment on which Vert is replevin bail; he •does pay to Cloud the amount due upon the three notes, and takes an assignment thereof for the purpose of keeping the mortgage alive, in protection of his title, to the exclusion of the claim of Vert to be subrogated. The question is whether •or not he can do this. The court is of the opinion that he ■can not.

. Some stress has been put upon the recital in the finding that Vert was present and made no objection to the agreement between the Rookers; but we deem the fact unimportant. As we construe the agreement, there is nothing in it which was designed to or which can affect injuriously either the legal •or equitable rights of Vert. On the contrary, it was indirectly for his benefit, though he was not a party to it, and he may well have acquiesced in its terms.

The recital in the deed, by which James I. Rooker agreed to accept the title, subject to the liens of existing mortgages &nd judgments, constitutes a written contract, the force of which can not be affected by the parol agreement which was made at the same time, even if such was the design. See Johnson v. Thompson, 129 Mass. 398; Calkins v. Copley, 27 Albany L. J. (Jan. 13th) 34.

It does not appear, however, that there was a purpose to modify the-written stipulation; the parol agreement, as we ■construe it, having reference only to the personal liability assumed by the grantee, which extends only to the last three notes, and not to the part of the mortgage debt which had been put into judgment and stayed by Wert. Notwithstanding the merger of this part of the debt in the judgment, it was still secured by the mortgage, and might have been included in the foreclosure, which was thereafter decreed, or, even after that, might have been made the basis of a second decree. Hill v. Minor, 79 Ind. 48. While, therefore, the judgment was not itself a lien on the land, both because mortgaged land can not be sold by virtue of an execution upon a judgment for the debt secured by the mortgage, code of 1852, section 640, R. S. 1881, section 1105, and because land owned jointly by husband and wife is not subject to sale on execution against either, yet the judgment was evidence pro tanto of the mortgage debt, subject to which the land was conveyed.

It is said, however, that the recital in the deed has the effect simply to release the covenant against incumbrances, in respect to the mortgage and judgment liens referred to. That it does more than this is demonstrable by a single suggestion. If not more, then the vendee who takes a grant subject to a mortgage debt made by his grantor, though his deed be without covenants, may procure an assignment of the debt, and,' suing upon it, compel his grantor to remove the incumbrance, and to that extent get the land for nothing. Equity could not tolerate so gross an injustice; and while, in such a case, the grantee might keep the mortgage alive for the protection of his title, he could not be permitted to look beyond the land for payment of the mortgage debt.

In the case before us, it is clear that Oliver Rooker had an interest in tire performance of the agreement, for thereby the land would be left subject only to so much of the moi’tgage debt as was evidenced by the judgment taken against him, which Wert had stayed, and being a party to the contract, he, of course, had a right of action for its breach, or to enforce it. Devol v. McIntosh, 23 Ind. 529; Miller v. Billingsly, 41 Ind. 489; Tinkler v. Swaynie, 71 Ind. 562. And under the decision in Bird v. Lanius, 7 Ind. 615, followed in numerous later cases, many of which are cited in Rodenbarger v. Bramblett, 78 Ind. 213, it is clear that Cloud, the holder of the debt assumed, had a right to avail himself of the promise.

It follows that the parol agreement of James Rooker to pay three of the mortgage notes was not the sole consideration of the conveyance. The recital in the deed that it was accepted subject to the entire mortgage debt, for that is the effect of the recital, must be regarded as a part of the consideration, no less essential in law, and possibly no less valuable in fact, than the grantee’s personal assumption of a part of the debt.

In this situation of the parties, Vert, upon payment of that portion of the debt for which he had bound himself, became entitled, by subrogation, to all liabilities and remedies, either direct or collateral, of which his creditor might have claimed the benefit.

“ The right of subrogation to the remedies of the creditor on payment of the debt of the principal, is not restricted to the remedies which the creditor had as against the principal, but extends to all the remedies which he had against the principal and others liable for the debt. Nor is the right restricted to the right of the creditor as it exists at the time the surety pays the debt, but is as broad as the right of the creditor at the time of the execution of the contract.” Baylies Sureties and Guarantors, 358. The text is amply supported by the decided cases. See Talbot v. Wilkins, 31 Ark. 411; Butler v. Birkey, 13 Ohio St. 514; Grove v. Brien, 1 Md. 438; Hollingsworth v. Floyd, 2 Har. & Gill, 87; Swan v. Patterson, 7 Md. 164; Magee v. Leggett, 48 Miss. 139; Allison v. Sutherlin, 50 Mo. 274; Henry v. Compton, 39 Tenn. 549; Williams v. Tipton, 24 Tenn. 66; Lidderdale v. Robinson, 12 Wheat. 594; 1 Lead. Cas. Eq. 134, 188; Receivers, etc., v. Wortendyke, 27 N. J. Eq. 658; Kyner v. Kyner, 6 Watts, 221; Bank, etc., v. Potius, 10 Watts, 148; McCormick’s Adm’r v. Irwin, 35 Pa. St. 111; Cheesebrough v. Millard (1 Johns. Ch. 409), 7 ; Hayes v. Ward (4 Johns. Ch. 123), 8 Am. Dec. 554; Rowlett v. Grieve’s Syndics (8 Martin, 483), 13 Am. Dec. 296, and notes; Neely v. Jones (16 W. Va. 625), 37 Am. Rep. 794; Morrill v. Morrill (53 Vt. 74), 38 Am. Rep. 659.

The right is the same, “ even though such securities were acquired” (by the creditor) “without the knowledge of the surety, and after he became bound.” Brandt Suretyship and Guaranty, p. 353, section 261.

The right “does not depend upon privity, nor is it confined to cases of strict suretyship. It is a mode which equity adopts to compel the ultimate discharge of the debt by him who in good conscience ought to'pay it, and to relieve him whom none but the creditor could ask to pay.” McCormick v. Irwin, supra. See Kyner v. Kyner, supra.

The doctrine that the entire demand of the creditor must be paid before the surety can claim the right of substitution is not in conflict with our conclusion. The transaction between James I. Rooker and Voss being held to be, as it was agreed it should be, a payment, the entire debt had been paid to the creditor, when this action was brought, and there remained, according to the strictest statement of the rule in this respect found in any of the cases, no obstacle to the granting of the relief prayed for.

It is, however, perhaps, not quite accurate to say that the surety has no right of subrogation imtil the creditor has been fully paid. In the case of Grove v. Brien, supra, is found the following statement, which seems to be well considered:

“ When a surety pays part of a judgment, it gives him an equitable interest in the judgment to that extent, and the payment does not operate as a credit in favor of, or as a discharge to, the principal, as against the surety, unless with his consent. * * * A partial payment by a surety does not operate as an assignment to him, pro tanto, so as to enable him to exercise any control over the judgment or execution. The original creditor having that power until he is fully satisfied. 2 H. & G. 91, Hollingsworth v. Floyd. But the surety possesses an inchoate equitable interest, to the extent of his payment.”

There is no inconsistency between this and the decisions in Zook v. Clemmer, 44 Ind. 15, and Vert v. Voss, 74 Ind. 565, which, by what is said on this point, mean that “ subrogation can not be enforced until the whole debt is paid to the creditor,” and are not to be construed as denying the existence of an inchoate right. “The equity springs up at the time the relation is entered into, and is consummated when the surety pays the debt.” 1 Lead. Cases in Equity, 135; Wayland v. Tucker, 4 Grat. 267; Brandt, section 266. Where, as in this case, a mortgage debt is divided into distinct parts, and a surety upon one of the parts pays it, there seems to be no good reason why he may not at once be regarded as an assignee pro tanto of the security, though, of course, his right must be postponed to the rights of the creditor or his assignee, until the other parts of the debt shall have been paid.

In the ease of Rodenbarger v. Bramblett, supra, which involved the right of a surety, who had been compelled to pay, to sue upon the promise- of a third party, made to the principal debtor, to pay the debt, it was said: “ The obligation of the defendants’ promise to pay the note, resting, as it did, on an executed consideration, did not depend on an acceptance of the promise by the holder of the note, who was at liberty to accept it or not, as he chose; and, though he did not accept it, it was still a binding promise in favor of Witty, * and- through him in favor of his surety, the appellee. The performance of the promise must have inured to the benefit of the appellee, by discharging his liability, and equity and good conscience concur in requiring that he be allowed to enforce the performance.” And in the same case it was further said: “We should reach the same result, even if it were held that the appellee had only such right as was derived from the holder of the note, under the doctrine of subrogation to, or equitable assignment -of, the creditor’s rights and remedies.”

When it was said in this ease that the creditor was at liberty to accept such promise of a third party or not, as he chose, it was not meant that he might reject or release it to the injury of a surety. On the contrary, in Hayes v. Ward, supra, Chancellor Kent declares that “the creditor must do nothing-to impair” a surety’s.right of substitution.

In the case now before us, therefore, whether Vert’s right' to insist upon the performance by James I. Rooker of his contract as made, be regarded as derived through his creditor Cloud, or through Oliver Rooker, his principal in the debt, the right was clearly his, and the court did not err in so finding.

Judgment affirmed.