Case ID: ohio-st_61/html/0413-01.html
Source: Caselaw Access Project
Author: {"author": "Burket, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Miller v. Stark, Adm’r, et al.
    
      Administrator no power to sell or transfer mortgage notes belonging to deceased at his death — Such notes taken by third party regarded as paid as between administrator and third party — But as between third party and subsequent mortgagee, such third party may be subrogated to lien of prior mortgage, when.
    
    An administrator has no power to sell or transfer notes secured by mortgage which belonged to the deceased at the time of his death, and such notes taken up by a third party will be regarded and held as paid, as between the administrator and such third party; but as between such third party and a subsequent mortgagee with notice of the prior mortgage, such third party may be subrogated to the lien of the prior mortgage, when no additional burdens will thereby be imposed upon such subsequent mortgagee, and such third party did not pay the notes to the administrator as a mere volunteer.
    (Decided January 9, 1900.)
    Error to the Circuit Court of Licking County.
    In the month of March, 1883, Friend W. Smith purchased a tract of land in Licking county having a duly recorded mortgage thereon in favor of one Amos Remington for about $4,590.00, which amount Mr. Smith became liable to pay as part of the purchase price of the land. He gave his own note, secured by mortgage duly recorded on the land to one Lester J. Remington, for the balance of the purchase price, one note being for $542.75, and this note was afterward sold, endorsed and delivered to Henry Hubbard, defendant, and the mortgage was assigned to him, the other notes secured by that mortgage having been paid by Mr. Smith.
    Amos Remington died holding said notes, and L. B. Stark became his administrator, and instituted an action to foreclose said mortgage, making said Washington Miller and Henry Hubbard parties, and they filed cross-petitions.
    
      In addition to the above facts the circuit court upon appeal found the following facts:
    “That at the date of the purchase by said Hubbard of said note and at the date of the assignment of mortgage to him, he, the said Hubbard, knew there was a mortgage on the lands, made by said Lester J. Remington to Amos Remington, but did not know the amount due and made no inquiries as to the sum due thereon, and that he made no examination of the records in the recorder’s office of the county in respect of said mortgage.
    That some time in the year 1886 or 1887, the said Friend W. Smith, being in arrear on the overdue notes payable April 1st in the years 1885 and 1886, and being unable to pay the notes to become due thereafter upon said Lester J. Remington notes and mortgages, applied to said Washington Miller, his wife’s father, to pay the amount overdue, being $700.00, and the other notes as they come due, and then said to said Miller that if he would do so, he, the said Friend W. Smith, would deed to his, said Friend W. Smith’s, wife such an amount of said land as would equal the amount of money so paid by said Washington Miller, which said Miller agreed to do for the purpuse of providing a home for his said daughter. That under this arrangement, the said Miller paid to said administrator about $700.00, amount overdue as aforesaid on the notes payable in 1885 and 1886, and took the same up, whereupon he handed the two notes to said Smith with the direction to keep them safely.
    That said Miller at the request of said Smith, and in pursuance of said agreemnt and promise of said Smith to make said conveyance to said Miller’s daughter for the purpose of providing her a home, paid to said administrator the notes which matured in 1888, 1889, 1890, 1891 and 1892, and a balance of $133.34 on the note which matured in 1887, the' balance of which had before then been paid by said Smith, handed each note to said Smith, with direction do keep them safely.
    That the said administrator was informed by said Miller at the time said first payment was made, and afterwards, of the said arrangement under which he had paid said money and taken up said notes. That said Miller under the same arrangement paid to said administrator $400.00, which sum was credited on the notes which matured April 1, 1893.
    That said Smith, after the notes were delivered to him by said Miller, tore off the signature of Lester J. Remington from the notes due in 1885, 1886, 1887, 1888, and 1889, put a pen through the name on the notes due in 1890 and 1891, but did not tear off or mutilate the signature of said Remington upon the note due in 1891.
    That this tearing off and mutilation were not done by the direction or with the knowledge of said Miller. That said notes remained in the possession of said Smith until after the commencement of this action, when they were handed by said Smith to the attorneys of said Miller. That no arrangement or understanding was had or made by said Miller with said administrator touching the notes except that said Miller was paying them for said Smith under arrangement aforesaid, or touching any sale made of them or any of them to said Miller, and none of them were endorsed to said Miller. That the payments made by said Miller were with his own money.
    That said Miller never applied to said Smith to make a deed for said lands to the wife of said Smith, and no such deed was made or approved. That the sums so paid by said Miller in taking up said notes with interest exceed the sum of $3,815.00.”
    
      The circuit court awarded to the administrator the first and best lien for the amount due on the notes still held by him, $2,099.95, to Mr. Hubbard, the next lien for the amount due on his mortgage, $983.46, and refused to subrogate Mr. Miller, and dismissed his cross-petition at his costs.
    Thereupon Mr. Miller filed his petition in error in this court, seeking to reverse the order of distribution, and the judgment against him for costs.
    
      Kibler & Kibler, for plaintiff in error.
    Miller claims ownership of the notes taken by him and an interest in the moneys paid on two other notes, that he had a lien therefor, and his lien is superior to the lien of the administrator of Amos Remington and of Henry Hubbard, and that, if that is not literally true, that he ought to be subrogated to the position of estate of Amos Remington in respect of said notes and the lien thereof. Bank v. Covert, 13 Ohio 240; Winters v. Bank., 33 Ohio St., 250.
    Miller was not a stranger or intermeddler. There was no extinguishment of the debt. The administrator of Amos Remington was advised of the arrangement. The notes or the amounts paid by Miller were to continue or exist, or be in force, so that Miller’s intention to have a conveyance to his daughter could be carried into effect, to the extent of the payments. Penn. v. Egan, 136 N. Y., 262; 24 A. & E. En., pp. 281, 287, note, 291-294; Gans v. Thieme, 93 N. Y., 225; Stayner v. Bowers, 42 Ohio St., 314; Union Mortgage B. & T. Co. v. Peters, 72 Miss., 1058; Crumlich v. Cent. Imp. Co., 38 W. Vt., 390; 3 Pom. Eq., Secs. 1211, 1212, 1213; Amick v. Woodworth, 9 C. C. R., 556; 6 C. D., 496; Sheldon on Sub., Sec. 8.
    
      We admit that a mere stranger, who pays without request of the mortgagor or debtor, and without ratification, cannot invoke the doctrine of subrogation for his relief. But here was the request, and payment on condiion that a corresponding interest in the land would be reversed.
    
      Waldo Taylor and J. B. Jones, for defendants in error.
    We cite the following authorities in support of our position: “Payment is the discharge of a sum due. Payment is a mode of extinguishing obligations. It is an act for the exercise of will, of consent. To constitute a payment, money or some other valuable thing must be delivered by the- debtor to the creditor for the purpose of extinguishing the debt, and the creditor must receive it for the same purpose.
    Payment means satisfaction by money, not by an exchange or compromise, or accord and satisfaction. Maurice v. Hudson River Co., 3 Dwer. N. Y., 426.
    Payment or Purchase. — Where a note or bill is taken up, or a debt paid by a stranger, the question arises whether the transaction amounts to a purchase or a payment. The general rule is, that the demand of a creditor which is paid with the money of a third person, without any agreement that the security shall be assigned or kept on foot for the benefit of such third person, is absolutely extinguished. Where one not a party to the contract pays a debt, it is an extinguishment of the demand, whether made with the consent of the debtor or not. Harrison v. Hicks, 1 Port.(Illa.), 423; Ss. 27 Am. Dec., 638.
    There is an important difference betwen the pay-, ment of a note and the purchase of it from the owner. Payment is the discharge of the debt. The purchase of a note is a contract of sale. Binford v. Adams, 104 Ind., 43; 2 Dan. Neg. Inst. (3d ed.) 1221; Wolff v. Walter, 56 Mo., 292; Burr v. Smith, 21 Bar. N. Y., 262.
    By a Third Party. ■ — • One person cannot, without authority, pay the debt of another and charge the amount against the party for whose benefit the payment was made.
    In the absence of proof to the contrary, it will .be presumed that payment was made by the party bound, and not by another. Ames v. Merchants’ Ins. Co., 2 La. Am., 594; 3 McGee v. San Jose, 68 Cal., 91.
    The payment of a debt by a person not legally liable for it is a satisfaction of the debt, if so received by the creditor. Martin v. Quinn, 37 Cal. 55, 21 Bart N. Y., 262.
    A voluntary payment by a stranger cannot be set up as a defense to an action by the original creditor. Lucas v. Wilkinson, 1 H. & N., 420.
    By stranger, is meant a stranger to the contract. Here the plaintiff is the original creditor. L. B. Stark as administrator, represents him.
    Payment by a stranger for a debtor on his account, and afterwards ratified by him is a good payment. Belshoer vs. Bush, 11 C. B. 191, 22 L. L. C. P., 24.
    A bill of exchange, promissory note, or order for the payment of money, found in the hand of the drawee or maker, is presumptive evidence of its payment. The surrender of a note is prima facie evidence of its payment. Smith v. Hosfer, 5 Cal., 329.
    It was understood by both parties to that transaction, that Smith, by accepting title under that deed, assumed and agreed to pay off and discharge said first; mortgage and the notes secured thereby. By so doing the notes secured by that first mortgage became the personal debt of Smith. It would have been necessary to exhaust him and the lands before recourse could have been had upon Lester J. Remington. Snyder v. Robinson, 35 Ind., 311
    Again, from an examination of the finding of the circuit court it is clear that Miller was a stranger to the legal relations between Smith and Stark, administrator. On the part of Miller it was a voluntary payment without any legal liability to pay. Gould v. McFall, 118 Pa. St., 455; 4 Am. St., 606; City of Camden v. Green, 54 N. J. L., 591; 33 Am. St., 686.
    In this case it is clear that Miller was a stranger to the notes he paid, and it is clear that the notes were not bought by Miller from Stark, administrator, but it is also clear that they were paid and extinguished, and it was so understood by Miller, Smith and Stark. It is well settled that he who pays note or debt is not subrogated. 3 O. O. I., 2 O. D. 1.
    Part payment does not entitle one to subrogation pro tanto. The right does not arise until full payment. People’s Ins. Co. v. Strackle, 2. C. S. C. R., 186; Lawson’s 5 Rights, Remedies and Practice, 4221.
   Burket, J.

The circuit court found as conclusions of lav?, that as between the administrator and Mr. Miller, the transaction extinguished the notes paid oft by Miller, and that he had no right to receive back from the administrator out of the proceeds of the sale of the mortgaged lands, money which he had paid to him in taking up the notes. In this the circuit court was right, because the duty and power of an administrator as to such notes is to collect them, and not to sell or transfer them. Section 6074, Revised Statutes; Jelke v. Goldsmith, 52 Ohio St., 499, 517; and for the further reason that what passed between the administrator and Mr. Miller, as found by the circuit court, showed no right on the part of Mr. Miller to keep the notes alive as against the administrator. The object and purpose was to pay off the mortgage so that Mr. Smith could convey the proportionate amount of the land to his, Smith’s wife, because a conveyance of the land to Mrs. Smith with this large mortgage thereon would be no benefit to her. There was nothing to notify or inform the administrator that Mr. Miller was purchasing the notes and intended to keep them alive, as against him, and the circuit court finds in effect, that he did not buy them, and that they were not endorsed to him.

But while the transaction was a liquidation and payment of the notes by Mr. Miller, as between- him and the administrator, the same is not true as between him and Mr. Hubbard.

Mr. Hubbard 'was not a party to the transaction between Mr. Miller and the administrator, and there is no good reason why he should be benefited thereby, unless Mr. Miller was a mere volunteer, or the payments by him made were in legal effect payments by Mr. Smith, neither of which positions should be inferred or presumed in favor of Mr. Hubbard. His burdens are exactly the same whether the notes taken up by Mr. Miller are held by him or the administrator. The transaction cost him nothing and he should not be benefited thereby. As between Mr. Miller and Mr. Hubbard, Mr. Miller is the equitable owner of the notes taken up by him, and which notes are secured by a mortgage prior in time and right to the mortgage held by Mr. Hubbard.

It is urged that Mr. Smith cancelled the notes after Mr. Miller handed them to him, and that such cancellation destroyed the notes for all purposes, and destroyed the right of subrogation, and that Mr. Miller, by his negligence in putting the notes into the possession of Mr. Smith, enabled him to cancel them, and that Mr. Smith is bound by that cancellation.

The answer to this is that Mr. Miller did not put the notes into the hands of Mr. Smith for cancellation, but for safe keeping; and that the right of subrogation arises, not by reason of the notes, but by reason of the payment of the money. As to the alleged negligence of Mr. Miller, it is sufficient to say that Mr. Hubbard was not harmed by that negligence, and he cannot be heard to complain of the same. His burdens were not thereby increased. Negligence which does not increase the burdens of any lien-holder, does not have the effect to prevent subrogation or destroy the right of subrogation. In many of the cases in which subrogation has been allowed by this court there was more or less negligence.

It is therefore clear, that as betwen Mr. Miller and Mr. Hubbard, the former has a right to be subrogated to the lien of the mortgage securing the notes which he took up, and which is prior to the mortgage held by Mr. Hubbard.

The judgment as to the order of distribution and costs against Mr. Miller will be reversed, and judgment entered giving the administrator the first lien, Mr. Miller the second, and Mr. Hubbard the third, the costs to be paid out of the fund.

Judgment reversed and modified.