Case ID: ohio-st_58/html/0086-01.html
Source: Caselaw Access Project
Author: {"author": "Williams, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Amick v. Woodworth et al.
    
      Grantee or mortagee cannot be witness to or take acknowledgment of realty conveyance — Must be two witnesses — An interested party paying off prior lien is subrogated to rights of prior lienor, when.
    
    1. A grantee in an instrument for the conveyance or incumbrance of real property is disqualified, on grounds of public policy, to be an attesting witness to its execution, or to act in an official character in taking and certifying the acknowledgment of the grantor.
    2. A mortgage with but one attesting witness beside the mortgagee, or the acknowledgment of which was taken by him as a notary public, is not entitled to record, nor valid, though admitted to record, as against a subsequent properly executed and recorded mortgage.
    3. As a general rule, one having an interest in or lien on property, who pays off for his protection a prior incumbrance upon it, is entitled in equity to be subrogated to all the rights of the prior incumbrancer, and to enforce the security for his reimbursement out of the incumbered estate. This equitable right, however, will not prevail against intervening bona fide purchasers without notice, or those occupying a like position ; nor does it belong to a mere stranger or volunteer who pays the incumbrance.
    4. Where a loan of money is made on an agreement with the borrower that it is to be secured by a mortgage which shall be the first lien on property then incumbered with other liens that are to be paid off out of the money loaned, and they are so paid in order to give the lender the promised security, the latter is neither a stranger nor volunteer, but sustains such relation to the premises and the parties as will entitle him, if his mortgage prove defective, to subrogation to the rights of those whose liens were so paid.
    5. Such person becomes in equity the assignee of the incumbrances paid out of his money, and they will be kept alive, and may be enforced by him, so far as is necessary to reimburse him for the payment so made, as against subsequent mortgagees and judgment creditors with notice of his equity, though the prior liens were released of record, and so appeared when the later liens were acquired.
    .6. The remedy of subrogation in such case is not in conflict with our recording statute which gives effect to mortgages from the time they are filed for record.
    (Decided March 1, 1898.)
    
      Error to the Circuit Court of Hamilton county.
    This is a proceeding in error to reverse a judgment of the circuit court directing the distribution of a fund arising from the sale of the homestead property of Mary A. Woodworth, on Price Hill in Cincinnati. The controversy here is between Marion L. Amick and William R. Amick on one side, and Albert Hughes on the other, concerning the priority of their respective claims to the fund; it being insufficient to satisfy all of them.
    The original action was brought by Marion L. Amick, in the Superior Court of Cincinnati, against Mary A. Woodworth and others, to bring the property to sale and marshal the liens. The petition sets up two judgments recovered by the plaintiff against Mrs. Woodworth, upon which executions were issued, and levied on the property in question ; and also a mortgage on the property made by Mrs. Woodworth and her husband to the plaintiff and William R. Amick jointly. By an amended and supplemental petition, a judgment recovered by the Amicks jointly on one of the mortgage notes is set up, with allegations of the levy of an execution issued thereon on the same property.
    Albert Hughes became a party, and filed an answer and cross-petition containing averments of the ownership of a mortgage on the property for $12,500, prior in time to the mortgage and judgments of the Amicks, and claimed by him to be the first lien. The validity of this mortgage is disputed by the Amicks on the ground that it was not legally attested or acknowledged.
    In the circuit court, to which the cause was appealed, an order was entered by consent for the sale of the property, under which it was sold, and the proceeds brought in for distribution; and on the distribution, that court made a finding of the facts, upon which it ordered the fund, after the payment of the costs and two small claims, to be paid to Hughes. This was insufficient to satisfy his claim, and consequently, there was nothingleft for the Amicks.
    It appears from the finding of facts, that Mrs. Woodworth and her husband applied to Augustus S. Ludlow, an attorney in Cincinnati, to procure a loan of $12,500 for them, offering as security therefor a first mortgage on the property in question. Ludlow, with a view of obtaining the loan, entered into negotiations with Hughes, and some other persons, and having become satisfied that it could be obtained, prepared in due form, notes and a mortgage to himself on the property, and forwarded the same to the husband of Mrs. Wood-worth who was then in the state of Mississippi, where they were duly executed by him, and returned to Cincinnati for execution by Mrs. Wood worth, where she then was. She accordingly signed the notes and mortgage; but the latter was witnessed by Ludlow, who at the same time took and certified her acknowledgment of the execution of the mortgage; Ludlow then being a notary public of Hamilton county. There was but one other witness to her execution of the mortgage, and in this form it was recorded on the 10th day of November, 1890. The money, to secure which the mortgage was given, was in fact loaned by Hughes, through Ludlow who had no interest in the transaction further than his commission for the loan; and the notes and mortgage were duly transferred by Ludlow to Hughes, who understood he was thereby obtaining the first lien on the property.
    
      The facts further show that when the loan was applied for, and when it was made, the Woodworths “agreed that the unpaid taxes and the mortgages then on said premises should be first paid out of the said $12,500.00, so as to make said $12,500.00 mortgage the first lien on said premises; and, that said $12,500.00 mortgage would be the first and only lien on said premises; and in after-wards giving said mortgage to said Ludlow, said Woodworths intended to give a first and valid mortgage lien on said premises. That in furtherance of said agreement, the said Augustus S. Ludlow paid out of said $12,500.00, in payment of valid liens on said premises, as follows:
    
      First — The taxes then a lien on said premises, $362.54.
    
      Second — Mortgage from Mary A. Woodworth and husband, to The Big Four Building & Saving Company, recorded in Mortgage Book 550, page 238, in the Recorder’s office of Hamilton county, Ohio, the sum of $7,012.15.
    
      Third — Mortgage from Mary A. Woodworth and husband to Fifth Ward Building Association, recorded in Mortgage Book 554, page 395, of the Records of said county, the sum of $2,486.93.
    The court further find that on the 23d day of March, 1892, said Mary A. Woodworth reacknowledged said mortgage (to Ludlow) before a notary public in and for said Hamilton county, Ohio, which notary then duly certified such acknowledgment, and C. J. McDairmaid and Annie Moore Woodworth signed as attesting witnesses to such reaeknowledgment.
    Said mortgage was then re-recorded on the 24th day of March, A. D. 1892, at 9:50 o’clock A. M., in Mortgage Book No. 638, page 271, Hamilton county, Ohio, Records.”
    It also appears that in February, 1891, the Amicks sold to the Woodworths certain shares of stock in an incorporated lumber company, and other property, in Mississippi, for six thousand dollars, one-half of which was to be paid in one year, and the other half in two years ; and by the terms of the agreement, which was in writing, the last maturing note given for that indebtedness was to be secured by a mortgage on the Woodworth homestead property on Price Hill, being the property from the sale of which the fund in dispute was produced. This agreement contains the following clause: “it being understood, however, that there is already a prior mortgage lien upon said Price Hill property to secure the payment of twelve thousand five hundred dollars.”
    And in pursuance of this agreement, the mortgage under which the Amicks make claim to the fund was executed ; the covenants in which are as follows: “And the said Mary A. Woodworth and T. H. Woodworth, her husband, for themselves and for their heirs, executors, and administrators, do hereby covenant with the said Marion L. Amick and William R. Amick, their heirs and assigns, that they are the true and lawful owners of the said premises, and have full power to convey the same, and that the title so conveyed is clear, free, and unincumbered; and further, that they will warrant and defend the same against all claim or claims of all persons whomsoever, except a prior $12,500.00 mortgage. ’ ’
    The fourth paragraph of the finding of facts is as follows:
    
      
      11 Fourth — That on said February 21,1891, at the time of taking the above described mortgage, said Marion L. Amick and William R. Amick knew that when said loan of $12,500.00 was made to Mary A. Woodworth that it was made with the express agreement between said Mary A. Woodworth and Augustus S. Ludlow, as such attorney, that out of the said $12,500.00 should be paid said taxes then a lien on said premises, amounting to $362.54, and the said following building association liens, then liens on said premises ; mortgage from Mary A. Woodworth and husband to The Big Four Building and Saving Company, recorded in Mortgage Book 550, page 238, in the Recorder’s office of Hamilton county, Ohio, and then unpaid thereon $7,012.15; and mortgage from Mary A. Woodworth and husband- to Fifth Ward Building Association, recorded in Mortgage Book 554, page 395, of the records of said county, amount then unpaid thereon $2,486.63. They further knew that such money had been so applied to the extent necessary to pay the same.” To which finding the Amicks excepted, “because it is not sustained by any evidence. ’ ’
    In its conclusions of law the court held “that where money has been loaned on a defective mortgage for the purpose of discharging a prior valid incumbrance, and has actually been so applied, the mortgagee may be subrogated to the rights of the prior incumbrancer, whom he has thus satisfied, there being no intervening incumbrances, for value without notice.” And that: “Therefore said Albert Hughes may be granted leave to amend his answer and cross-petition so as to conform to the facts herein-above found as to the fact that said Hughes’ loan was made with the express agreement that the money should be used in payment of said prior valid incumbrances to the extent necessary, that it was so used, and that said Marion L. Amick and Wm. R. Amick knew the same, and may pray for subrogation.” Hughes at once filed an amended answer and cross-petition alleging the facts as found by the court; and it was thereupon adjudged that “Hughes is in law entitled, as against all the liens of said Ann E. Moore, Marion L. Amick, and William R. Amick, to be subrogated to the rights of said liens, amounting to $9,861.12, so as aforesaid paid out of said $12,500.00 loan.” And it was accordingly ordered that the costs, and the two small claims which were admitted to have priority, be first paid out of the fund, and that the balance, amounting to $6,769.00 be paid to Hughes to be credited on the amount to which the court found him entitled. The Amicks excepted to this order, and to the conclusions of law as above stated. Other facts were found by the court; but in the view we have taken of the case, it is not deemed necessary to state them here. A bill of exceptions was also taken, which purports to set out the evidence given on the trial; which, so far as it may be important to do so, will be noticed in the opinion.
    Brief of Franklin T Cahill, for Marion L. Amick, plaintiff in error.
    We contend, first, that the Ludlow mortgage was absolutely null and void as of its first recording, and has no validity whatever as a lien upon the property, as against the liens of the Amicks, except from the date of the second recording.
    
      Since February 22, 1831, by virtue of the Statute, it has been the law in Ohio that a recorded mortgage defectively executed is void as to junior mortgages, even with notice, and as to judgments rendered after the recording’ of the defective mortgage. Swan’s Statutes of Ohio, 265, 647; Revised Statutes of Ohio, section 4133, etc.; Stan-well v. Roberts, 13 Ohio, 148; Mayland v. Combs, 14 Ohio, 428; Whiter. Denman, 16 Ohio, 60; Fosdick v. Barr, 3 Ohio St., 470; Holliday v. Franklin, 16 Ohio, 533 ; White v. Denman, 1 Ohio St., 110 ; Bloom v. Hoggle, 4 Ohio St., 45; Van Thornby v. Peters, 26 Ohio St., 471; Barry v. Harvey, 30 Ohio St., 344; Riley v. Rice, 40 Ohio St., 441.
    A notary can not take the acknowledgment of a mortgage to himself. He can not officiate where he has either a legal or beneficial interest. Upon this question the authorities are unanimous and very numerous. Withers v. Band, 7 Watts, (Pa.) 227; Beaman v. Whitney, 20 Maine, 413; Groesbeok v. Seeley, 13 Mich., 329; Wilson v. Travers & Co., 20 la., 231; Stevens v. Hampton, 46 Mo., 404 ; Hammers v. Dole, 61 111., 307 ; Dail v. Moore, 51 Mo., 589; Wasen v. Conner, 54 Miss., 352; West v. Krehaum, 85 111., 263 ; Davis v. Beazley, 75 Va., 491; Jones v. Porter, 59 Miss., 629; Hogans v. Carruth, 18Fla., 587 ; Green v. Abraham, 43 Ark., 420; Broxone v. Moore, 38 Tex., 645; Boxoden v. Pax^rish, 86 Va., 67.
    Nor can the mortgagee act as an attesting witness. The mortgage is void because there is only one legal, competent witness, the mortgagee not being a competent witness. Townsend v. Downer, 27 Va., 119; Winstead Savings Bank v. Spencer, 26 Conn., 195; Corbett v. Nor cross, 35 N. H., 99; Cooley v. Garter, 23 Ala., 612.
    
      And we contend that, the Ludlow mortgage is not entitled to subrogation. We believe the law to be as laid down in Sheldon on Subrogation, section 8. Eversion v. Kansas Bank, 33 Kansas, 352; Kitchell v. Midget, 37 Mich., 82.
    Brief of William E. Jones, for Albert Hughes, defendant in error.
    The mortgage executed to A. S. Ludlow was executed strictly in accordance with the statutes of Ohio. So far as any of the counsel in this case have been able to find, there is no case reported in Ohio which has held invalid such an execution of a deed or mortgage. The law seems to be well settled that an acknowledgment can not be taken by a party in interest. Wilson v. Trea/r, 20 la., 231; Stevensv. Tlam/pton, 46 Mo., 404; Brotan v. Moore, 38 Texas, 645.
    It is taken for granted by counsel for Hughes that if Ludlow was competent to act as a notary he was also competent to act as a witness.
    Only upon the conditions expressed in the agreement and mortgage can the Amicks enforce their contract, and in doing so they can not repudiate the conditions upon which alone they received the mortgage. Their contract was that they would receive and accept “a first mortgage” on the Sixth Street lot to secure the first note, and for the second note a mortgage on the Price Hill lot, “it being understood, however, that there is already a prior mortgage lien upon said Price Hill property to secure the payment of twelve thousand five hundred dollars. ” Hotaardv. Chase, 104 Mass., 249; Coe v. The Columbus, P.dsI.R. Co., 10 Ohio St., 406.
    
      In the case of Higginson s. Weld, 14 Gray, 165, the court say: “ £It is understood,’ in the ordinary use of that phrase when it is adopted in a written contract, has the same force with ‘itis agreed. ’ ’ ’
    This interpretation is given by Abbott in his dictionary, by Winfield, in Adjudged Words and Phrases, and by Lawson’s Concordance. Barkow v. Sanger, 47 Wis., 507; Winslow v. Dakota Lumber Co., 32 Minn., 237.
    Under the contracts of February 2, 1892, be: tween the Woodworths and the Amicks, it is important that the Hughes mortgage shall be held according to their agreement as the first lien. It is important to a very great degree that the Amicks should agree to that. They did agree to it, accepted their mortgage in accordance with the agreement.
    It was then and now is possible for them to agree that any subsequent or a prior defective lien should be held valid. If they have so agreed, in the absence of fraud or deceit, they are bound by the agreement, although they knew that the lien was defective.
    Biglow on Estoppel, 364; Hermann on Estoppel, section 613; Libbey v. Pierce, 47 N. H., 309; St. John v. Roberts, 31 N.Y., 441; Blackburns. Hall. 91 111., 434.
    After the judgment was confessed the Amicks began this proceeding, asking a court of equity to declare their liens, mortgage and judgment, prior to the lien of the Hughes mortgage on the Price Hill real estate.
    These demands are in violation of both the spirit and letter of their agreements, and will be refused. Hubbard v. Eastman, 7 N. H., 507; 2 Freeman on Judgments, 492; Jones on Mortgages, 71, supra) Kennion v. Kelly, 10 la., 443; Muzzey v. Knight, 8 Kas., 456; Briggs v. Laxo, 4 Johns Ch., 22; Johnson v. Unversam, 30 Ind., 435; McIntosh v. Commissioners, 13 Kas., 456.
    If these agreements stand as they were made, and the court will not vary them unless they are illegal, the Hughes mortgage will be paid in part and the Amicks must cancel their liens of record, although they receive nothing. Pidgeon v. Trustees of School, 44 111., 401; Forgy v. Munnian, 14 Neb., 513; Birkev. Abbottt, 103 Ind., 1.
    It is contended, however, that the later decisions where the Ohio Statutes have been under consideration support the Hughes mortgage. The Central Fust Co. of New York v. The Toledo, C. c& /St. L. B. B. Co., U. S. Circuit Court, No. 3554. Biley v. Bice, 40 Ohio St., 441.
    Very similar to the present case is that of Howard v. Chase, 104 Mass., 249. Bigelow on Estoppel, 355 and 360 (4th Ed.); Pomeroy Eq. Jur., 1205; Herman on Estoppel, section 606; 2 Story Eq. ;341, note, (13th Ed.); Jones on Mortgages, 744, Lawrence v. Fox, 20 N. Y., 268; Fctrnan v. Avid, 44 N. Y.,50; Greitherv. Alexander, 15 la., 470; Johnson v. Thompson, 129 Mass., 398.
    After the evidence was all in, the circuit court directed the defendant, Albert Hughes, to amend his answer and cross-petition so as to allege and claim subrogation. This was evidently done so as to have the pleadings conform to the facts proved. No additional evidence was offered after the amendment. Tradesman’s B. Ass^nv. Thompson, 32 N. J. Eq., 133; Becker v. Walworth, 45 Ohio St., 175.
    Courts of equity are perhaps as frequently called upon, and as uniformly to grant relief resulting from mistakes, as upon any other ground within their jurisdiction. It is one of the fundamental grounds of its jurisdiction. Gobb v. Dyer, 69 Me., 494; Ohaffee v. Oliver, 39 Ark., 531; Patterson v. Birdsall, 64 N. Y., 295.
    The case of Sears v. Patterson, 54 Mo. App., 278, is nearly like the present case. 24 Am. & Eng. Eney. of Law, 270; Jones on Mortgages, section 874; Tyrrell v. Ward, 102 111., 29; Moore v. Season, 44 N. H., 215 ; Peltz v. Clarke, 5 Peters, 481; Ebert v. Gerding, 116111., 271; Paines. Hathaway, 3 Vt., 212.
    Reply brief of Franklin T Cahill, for plaintiff in error.
    The Ludlow mortgage is valid only as of the date of the second recording. The interest that bars a notary from taking the acknowledgment to a mortgage is the legal or the beneficial interest. If the mortgage be to him, or if he be the beneficiary named in it, he can not officiate as notary to take the acknowledgment of the grantor.
    The second mortgagee is not estopped from denying the validity of a prior mortgage, although the covenant against incumbrances in his mortgage contains a clause excepting such prior mortgage. Calkins v. Copley, 29 Minn., 471; Bennett v. Kahn, 67 Wis., 154; Esterbrooh v. Smith, 72 Mass., 572; 29 Minn., 471; 25 Mich., '393; Riley v. Rice, 40 Ohio St., 441; Twitchell v. Drv/ry, 25 Mich., 393; Reed v. Syeke, 27 Ohio St., 285; Thompson, Adnvr., v. Thompson, 4 Ohio St., 333; Weber v. Ziemet, 30 Wis., 283; Freedmans. Auld, 44 N. Y., 50; Jones on Mortgages, sections 740, 744, 746, 749, 751, 757.
    The Amicks were convinced that the Ludlow mortgage was not a valid lien, and henee the concessions they made in the contract of February 2, 1892. Upon any other theory the contract is suicidal for them.
    It was claimed by the other side that this contract also in some way worked an estoppel. It may be put thus :
    Query' — Mrs. Woodworth having on February 27, 1891, given the Amicks a mortgage upon the Price Hill real estate for $3,000.00, at which time both the Woodworths and the Amicks supposed there to be a prior valid mortgage upon the premises, can. the Amicks a year later, having discovered by diligence that such supposed prior mortgage was probably void, deal with Mrs. Woodworth as to the same subject-matter without revealing’ to her the fruits of their diligence? Harris v. Tyson, 24 Pa. St., 347; Fox v. Maohreth, 2 Brown’s Chancery Rep., 420; Laidloio v. Organ, 2 Wheat., 178; Young v. Bumpus, 1 Freeman Oh. Miss., 241; 1 Storey’s Eq. Jur. Oh., Section 148.
    
      J. F. Balckoin submitted a brief for Woodworth» defendant in error.
   Williams, J.

The questions arising in the settlement of the controversy between these parties» are: (1.) Is the mortgage madeby the Woodworths to Ludlow, and by him assigned to Hughes, valid as against the subsequent liens of the Amicks? And if not: (2.) Is Hughes entitled for his protection to enforce the prior liens which were on the property when he obtained his mortgage, and to the payment of which the money loaned by him was applied under agreement with the Woodworths ?

1. The execution, by Mrs. Woodworth, of the mortgage made to Ludlow, was attested by the latter, and by but one other witness ; and her acknowledgment of its execution was also taken and certified by the mortgagee, acting as a notary public. The mortgage so attested and acknowledged was recorded before the Amicks acquired any of their liens on the property. It is contended in behalf of Hughes, that there being nothing on the face of the Ludlow mortgage, other than the identity of name, to indicate that the mortgag’ee was the same person who witnessed its execution, and, as an officer, certified the acknowledgment, it was properly admitted to record, and appeared thereon to have been executed, attested and acknowledged in due form of law when the Amicks obtained their liens, and consequently, is superior to them. Under our statute mortgages of real property executed agreeably to its provisions are entitled to record, and take effect as against subsequent liens from the time they are delivered to the recorder of the proper county for that purpose. Revised Statutes, section 4133. And it is essential to the proper execution of such instruments that they be signed by the mortgagor in the presence of two witnesses who shall attest the signing and subscribe their names to the attestation, and that such signing shall also be acknowledged by the mortgagor before an officer having authority to take the acknowledgment, who is required to certify the same and subscribe his name thereto.

The statute does not in express terms forbid a grantee in an instrument for the conveyance or incumbrance of real property to take and certify the g'rantor’s acknowledgment, nor disqualify him as a witness to its execution, nor declare an instrument so attested and acknowledged to be void. Nor, does the effect of such attestation or acknowledgment on the validity of the instrument appear to have been considered in any reported decision of this court. It is generally held, however, in other states, under statutes similar to ours, that deeds and mortgages so attested and acknowledged are not entitled to record; and, if recorded, are inoperative as constructive notice to persons who subsequently acquire an interest in or lien on the property. The reason given in some of the cases is, that taking an acknowledgment of such an instrument is a judicial, or quasi judicial act, and comes within the rule that one cannot be a judge in his own case. This reason would not apply to the attestation by the grantee. The true reason of the disqualification we apprehend is, that to permit a grantee to attest as a witness the execution of an instrument made to himself, or take its acknowledgment as an officer, where its attestation and acknowledgment are necessary to give it validity, would be against public policy, and practically defeat the real purpose of the law, which is to prevent the perpetration of frauds on the grantors, and afford reasonable assurance to those who deal with or on the faith of such instruments that they are genuine and represent bona fide transactions.

In this particular instance Mr. Ludlow appears to have acted in good faith, and under an honest belief that his acts would be legal because he was but the nominal mortgagee, having no substantial interest, or but a very small one in the mortgage, the real party beneficially interested being Mr. Hughes. The mortgage is nevertheless invalid. The rule of disqualification must be of general application, and not made to depend upon the result of inquiry into the motives of the parties; for such a modification of the rule would necessarily open the door to the mischiefs it was designed to prevent. It is probably unnecessary to notice that this question was not involved in Johnson v. Turner, 7 Ohio, 216, and that case is unaffected.

2. The second execution and acknowledgment by Mrs. Woodworth of the Ludlow mortgage, and its record in that form, were subsequent to the record of the Amicks mortgage and the recovery of their judgments. This, it is claimed, gives them priority of right to the fund in controversy. On the other hand, it is contended in behalf of Hughes that the mortgage to the Amicks is, in effect, made subject to his ; or if not, then, though his mortgage is subordinate to the Amick liens, he is nevertheless entitled to the fund by subrogation to the rights of the prior incumbrancers, to the payment of whose liens the money loaned by him to the Woodworths was applied in pursuance of an agreement with them that his mortgage should be the first lien on the premises.

As the first of these contentions relates only to the conflict between the mortgages, its consideration will become unnecessary if the last is sustained;'for that will dispose of the whole fund. It appears from the record that when Hughes, through Ludlow, made the loan to the Woodworths, to secure which they gave to Ludlow the mortgage in question, there were subsisting incumbrances on the premises to the amount of $9,861; that to procure the loan the Woodworths agreed the mortgage should be the first lien on the property, and in order to make it so, that the money loaned should be applied, as far as was necessary, to the payment of the prior incumbrances ; and, that in pursuance of this agreement the money was so applied and the mortgage executed; the parties believing- and intending it to be the first lien. It failed to become such only through its defective attestation and acknowledgment; and in consequence, the Amicks’ liens, at law, obtained priority over it. Under these circumstances neither Ludlow nor Hughes can be regarded as a mere volunteer in paying off the prior liens, or in the application of the money loaned to their payment. It is a well settled general rule that one who having an interest in or lien on property pays off, for his protection, a prior incumbrance on the property, is entitled in equity to be subrogated to all the rights of the prior incumbrancer, and enforce the security to indemnify himself for such payment out of the incumbered estate. The rule is applicable where a loan of money is obtained by the owner of the property under an agreement that it is to be secured by a mortgage that shall be the first lien, and the money is applied, in whole or in part, to the payment of an existing incumbrance to enable him to furnish the promised security. If, in such case the mortgage prove defective, the mortgagee has such an interest as will entitle him to call to his aid the doctrine of subrogation. This doctrine says Pomeroy, in his work on Equity Jurisprudence, section 1212, “is justly extended to one who, having no previous interest, and being under no obligation pays off a mortgage, or advances money for its payment, at the instance of the debtor party and for his benefit. Such a person is in no true sense a mere stranger and volunteer.” In a note to that section, where the authorities are collected, it is said: “The doctrine is also extended to a person who had no subsequent interest in the premises, and was therefore under no obligation or personal necessity of paying the debt, but who at the instance of the debtor pays off the mortgage for his benefit, or advances the money for its payment, under an agreement that he shall have security for his payment or advances. ’ ’ To the authorities there cited, the following may be added in support of the rule as above stated. Bank v. Bierstadt, 168 Ill., 618; 48 N. E. Rep., 161; George v. Butler, 50 Pac. Rep., 1032. If Ludlow had first taken the mortgage under his agreement with the Woodworths, and then, out of the money loaned paid the previous incumbrances in order to secure the first lien, and thus protect himself against them, there could be no doubt, we think, under the authorities, that he would have had such interest in the premises as would enable him to invoke the remedy of subrogation ; and the fact that they were paid before, or contemporaneously with the execution of his mortgage, does not change, in substance, his relation to the premises, or the parties. See Young v. Morgan, 89 Ill., 200; Patterson v. Burdrall, 64 N.Y., 295, 299; Building Associations v. Thompson, 32 N. J. Eq., 133.

But the remedy is never allowed against an intervening bona fide purchaser without notice of the equity, nor one who occupies a like position* And that protection is claimed here for the Amicks. The trial court found, however, that when they obtained their mortgage, and recovered their judgments against Mrs. Woodworth, they had notice, not only of the actual application of the money loaned by Hughes to the payment of the incumbrances then on the property, but also of the agreement between the Woodworths and Ludlow for their payment out of thé money loaned in order that the mortgage for its security should be the first lien on the premises. That was sufficient notice of Hughes’ complete equitable right of subrogation. But it is insisted that the finding is without evidence to sustain it. An examination of the evidence has satisfied us that while there appears to have been no testimony of direct communication of the facts as found to the Amicks, there were circumstances tending to prove their knowledge of them. Notice may be satisfactorily established by inference from circumstances proven, and not infrequently that is the only character of proof attainable. And though we should differ with the trial court with respect to the probative force of the evidence on this point, the fact that different conclusions may be drawn from it by different persons only serves to show that a consideration of its weight is involved in an inquiry into the finding. In view of this finding it is unimportant that the incumbrances paid out of the money loaned by Hughes were discharged or cancelled on the record, and so appeared when the Amicks acquired their liens. Hughes became in equity the assignee of the incumbrances, and entitled to keep them alive for his reimbursement as against a subsequent incumbrancer with notice of his equity. This equitable result follows, although no actual assignment, written or verbal, accompanies the payment, and'the securities themselves were not delivered over to the person making the payment, and even though the debt be receipted as having been fully paid, and the incumbrance so paid was actually discharged and cancelled of record. Pomeroy’s Eq., sec. 1212.

The rule established by the current of authority is, that when a prior incumbrance is discharged of record, the release not showing- by whom it was paid, a purchaser or subsequent incumbrancer who has no other notice than that afforded by the record may, with safety, assume that the payment was made by the debtor; and he is not put on inquiry to ascertain whether it was paid by a third person under circumstances entitling the latter to subrogation. But when the purchaser or subsequent incumbrancer has notice that the payment was made by one having a lien on, or interest in the property, or under other circumstances which give him a right in equity to subrogation, that right will not be defeated nor affected by the fact that the incumbrance paid by him thereafter appears of record to have been cancelled. He will, notwithstanding, as against such subsequent pur-' chaser or incumbrancer, be entitled as the equitable assignee of the previous incumbrance so paid by him to enforce the same for his reimbursement. Ahren v. Foreman, 46 Minn., 156; Richards v. Griffith, 116 Ill., 216; Tyrall v. Ward, 102 Ill., 29; Robinson v. Lewitt, 7 N. H., 73, 99-100; Persons v. Shaeffer, 65 Cal., 79; Patterson v. Burdrall, 64 N. Y., 295-299; Bank v. Bierstadt, supra.

Nor does the enforcement of the remedy in behalf of Hughes in this case conflict with our recording statute which gives effect to mortgages from the time they are filed for record. His right of subrogation does not grow out of, nor depend upon the mortgage made to Ludlow. In administering the remedy, no effect is given to it. On account of its defective execution it remains invalid and subordinate to the Amick liens. His equity arises entirely from the payment of the prior incumbrances. The defect in the Ludlow mortgage simply created the necessity for resort to the remedy of subrogation in order that he should have reimbursement for the payments so made. He might at the time of payment have taken an assigmment of the incumbrances, and in that event his rig’ht to enforce them as liens superior to those of the Amicks could not be questioned. Equity dispenses with the formality of an assignment in such cases, and treats the securities as assigned to him for his protection, because it is manifestly just that he should have the benefit of them. It would be far from just that the Amicks should have the advantage of the payments made by Hughes, and thus in effect appropriate his money through the mere mistake or inadvertence of the parties resulting in the invalidity of the mortgage by which they intended that he should, and believed he would acquire the first lien on the premises. It seems clear, therefore, that upon the facts found by the circuit court, the right of Hughes to the fund in controversy is superior to the claims asserted by the Amicks against it, and there was no error in awarding it to him. This conclusion renders it unnecessary to consider the question whether the mortgage made to the Amicks was, by reason of the exception in the covenants, and the agreement under which it was made, subject to the Ludlow mortgage.

The objection made to the action of the court in granting Hughes leave to amend his pleadings to conform to the facts proved, and then proceeding to render judgment, is without force. The power to allow such amendments is expressly conferred by the code; and when Hughes filed his amendment the Amicks immediately replied, and no continuance, or opportunity to offer further evidence, was requested by them.

Judgment affirmed.