Court Opinion

ID: 9571084
Source: CourtListenerOpinion
Date Created: 2023-08-21 20:28:59.788054+00
Date Added: 2024-06-11T12:27:53.577988
License: Public Domain

SCHROEDER, Judge,
dissenting:
The majority reaches a harsh result which is not in accordance with what I believe to be the principles of law applicable to this case. Mr. Vanderslice as the original mortgagor sold the property to McFaddin Ranches and McFaddin was to make the payments on the mortgage to Dees. McFaddin did make the payments for a time but then defaulted. Because Vanderslice remained liable on the mortgage, he paid off the underlying debt in an effort to protect the property and his position. *180The majority holds that having paid the mortgage, he accomplished neither objective and was legally entitled to nothing.
In my opinion, when Vanderslice sold the property to McFaddin, he in effect became a surety and ceased being the primary obligor. When Vanderslice paid off the debt, he became subrogated as to the rights of the creditor, Dees. Vanderslice therefore had rights senior to the junior mortgage of appellant. As Vanderslice’s successor in interest, the appellee had similar rights which were properly upheld by the trial court. Osborne states these principles as follows:
“Thus in the law of mortgages, a mortgagor who has sold the property to an assuming grantee and then has had to pay is entitled to be subrogated to all rights of the mortgage creditor, both against the assuming grantee personally and in the mortgaged property in his hands. Similarly, if the sale is subject to the mortgage and the mortgagor is forced to pay, he gets subrogation to the creditor’s security interest in the property now owned by the grantee, it being regarded as the principal and the mortgagor, as to it, surety.” Osborne, Mortgages, § 278, p. 563 (2nd ed. 1970).
I recognize that today’s decision is based upon the fact that the underlying debt in this case was a promissory note. The majority in effect holds that the statutes applicable to negotiable instruments abrogate the suretyship principles otherwise applicable to mortgages. I recognize further that there is considerable authority for such a conclusion in cases holding that suretyship principles do not apply with respect to extension agreements of promissory notes secured by mortgages. See e. g., Mortgage Guarantee Company v. Chotiner, 8 Cal.2d 110, 64 P.2d 138 (1936). See also, Osborne, supra, § 271. However, Osborne states in the heading to that section that such an abrogation rule has been “universally criticized.” Today’s decision is contrary to the only case called to our attention by the parties involving a situation similar to that presented here. Mueller v. Jagerson Fuel Company, 203 Wis. 453, 233 N.W. 633 (1930).
If in fact there had never been any obligation on the part of McFaddin to pay the mortgage, and the obligation had remained solely that of Vanderslice, the principles relied on by the majority might well apply. Here, however, even though McFaddin did not formally assume the mortgage, it did take the property subject to the mortgage and did make payments on it. There is no contention that in making the sale to McFaddin, Vanderslice did anything other than rely upon McFaddin’s payment of the mortgage as part of the consideration for the sale. In those circumstances, the principles of suretyship should apply in order to avoid a wholly inequitable and very substantial loss to appellee coupled with a windfall for the appellant whose security interest was from its inception undeniably junior.