Court Opinion

ID: 3299136
Source: CourtListenerOpinion
Date Created: 2016-07-05 17:15:59.129409+00
Date Added: 2024-06-11T13:29:00.675257
License: Public Domain

I dissent from the opinion of the majority of the court in this case. There are some facts stated in the findings which are important to the consideration of the case that are not mentioned, or, at all events, not emphasized, in the prevailing opinion. It is shown in the findings that Ornelas and Martin made an agreement for the purchase and sale of the land mortgaged by Garcia to the ward, for the sum of two thousand six hundred dollars, which was its full value; that at the time this agreement was made Martin did not know of the existence of the Garcia mortgage, but shortly afterwards, upon discovering it, there was a further agreement that Ornelas should execute the mortgage on the land now owned by Harper. It was a part of this agreement that Ornelas should obtain from the probate court an order authorizing him, as guardian of the minor Soledad Ornelas, to release the Garcia mortgage, and to execute to the minor, as security for the original debt, the other mortgage. It further appears that before the transaction was closed and the money paid by Martin to Ornelas, *Page 49 
and some weeks after the agreement to obtain the authority, Ornelas reported to Martin that he had obtained from the court authority to execute the release and mortgage, and that Martin, believing this to be true, closed the deal and paid the money for the benefit of Ornelas. It is to be further noted that the court finds expressly that there was an actual delivery of the second mortgage to the minor.
It is clear from these facts that the giving of the second mortgage was as much, if not more, for the benefit of Martin as for the benefit of the ward.
When the arrangement was thus completed, as the minor was not bound by the release, and the Garcia mortgage was consequently still an outstanding lien upon the land, Martin, in equity, assumed the position of a surety, with Ornelas as the principal debtor and the minor as the creditor. Upon the creation of this relation the right of subrogation accrued to Martin. This right does not depend upon any contract, express or implied, but grows out of the relation of surety and creditor, and the principles of natural justice. (Brandt on Suretyship, sec. 260; Hidden v.Bishop, 5 R. 1. 29; Mathews v. Aikin, 1 N.Y. 595.) From this it follows that the right of subrogation is the same in this case as if the creditor were an adult capable of contracting. The rules regarding subrogation are concisely stated in the Civil Code. "A surety is entitled to the benefit of every security for the performance of the principal obligation held by the creditor . . . . at the time of entering into the contract of suretyship, or acquired by him afterwards." (Civ. Code, sec. 2849) "A surety, upon satisfying the obligation of the principal, is entitled to enforce every remedy which the creditor then has against the principal." (Civ. Code, sec. 2848) These sections are but a re-enactment of the well-settled rules of equity on the subject of subrogation or substitution. (Story's Equity Jurisprudence, secs. 495-502; Brandt on Suretyship, sec. 260 et seq.) It would seem that nothing could be clearer than the right of Martin in this case to the benefit of the Ornelas mortgage. The court finds that it was delivered. Delivery implies acceptance, and, it being for the ward's benefit, acceptance is presumed. (Jones on Real Property, secs. 1276, 1282.) Therefore at, or immediately after, the time when *Page 50 
Martin "entered into the contract of suretyship," or bought the land liable for the debt which Ornelas owed, which is the same thing, the minor, as creditor, held a mortgage on the land of Ornelas for the same debt. Martin's right accrued that instant. Whatever right the infant creditor then held to resort to this mortgage for the payment of this debt, whatever "benefit" it then was to her, Martin at once became entitled to himself, under the provisions of section 2849 of the Civil Code. Upon the election of the ward to enforce the mortgage on his land, followed by his payment of the debt, he became entitled to the further right to enforce the remedy, previously possessed by the ward, of foreclosing the Ornelas mortgage. The right which accrued conditionally upon his becoming surety, then became absolute by the happening of the condition. The creditor is bound to the utmost good faith toward the surety, and is regarded as trustee of the security given to him by the principal debtor. (Brandt on Suretyship, sec. 291.) Under the rules of equity, therefore, the creditor could not take the Garcia mortgage and refuse the Ornelas mortgage, except upon the condition that the Ornelas mortgage should inure to the benefit of the surety. Ornelas was the principal debtor, and he could have no right to complain that his own land was held liable for the debt for the benefit of his surety, although the creditor had elected to pursue the surety, rather than the principal debtor. Martin was a party to the agreement of substitution of the second mortgage, and he paid the consideration to Ornelas, and this created in him rights which equity should not ignore or disregard; and this is more especially true when it is considered that Martin was induced by the fraudulent representation of Ornelas, the principal debtor, to believe that the release was duly authorized by the probate court having jurisdiction of the proceedings in guardianship. The fact that the infant creditor had no right to enforce both mortgages for the payment of her debt, but was required to elect which of the two she would take, to my mind does not affect the right of Martin to subrogation. It is always true in every case of subrogation, where the creditor has a right to resort to either of two funds, both of which are ample for the payment of his debt, that the creditor must elect between the two, and cannot enforce both, the reason being the very obvious *Page 51 
one, that the creditor cannot obtain more than one satisfaction for the same debt, and when he has obtained satisfaction by resort to one fund, he necessarily relinquishes all right to the second. It is also true in every case of subrogation that the title to the fund not taken by the creditor, the legal right to resort to this fund, is always in the creditor, and never is in the surety. But, owing to the necessities of the case, and the desire of the court of equity to effect justice between the parties, it disregards the legal technicalities and allows the surety to avail himself of the fund or security formerly held by the creditor with the same effect as if the creditor had done so. It is true in almost every case of an application for equitable relief that the giving of the relief involves a disregard of some legal obstacle. Thus in a suit for specific performance, the court, in effect, absolutely nullifies the express statute providing that land cannot be conveyed except by written contract; and in a suit to set aside a fraudulent conveyance, equity disregards the legal title and gives the land to the party who in justice ought to have it. There is no greater evasion of legal rights required in this case than in those stated. The creditor had the right to resort to either of the two mortgages. The surety had paid the full value of the land upon the expectation that the second mortgage would be a security for the debt. All the principles of equity and natural justice which gave rise to the original doctrine of subrogation apply with equal force to this case, and require that in equity Martin should have the right to resort to the land of Ornelas, which, for his benefit as well as that of the ward, was mortgaged for the principal debt. There can, therefore, be no question that if Ornelas had not conveyed the land, Martin's right to enforce the mortgage against him would have been absolute.
It is suggested that because Harper purchased the land for its full value, and without notice of the equitable rights of Martin, that, therefore, he took the land freed from this burden. I can see no force in this proposition. The mortgage was recorded, and there was no valid release. On its face it purported to be an absolute mortgage for two thousand five hundred dollars, payable to the minor. Of all this Harper had notice — constructive notice, it is true, but equally as effective in law and equity as actual notice. He was not deceived by any act of Martin, or misled in any way by the *Page 52 
existence of Martin's equity. The mortgage was there apparently in full force. The ward had a perfect right to enforce it. The right of Martin to subrogation was in existence at the time he purchased, because at that time Martin had entered into a contract of suretyship, and under section 2849 of the Civil Code his right had accrued. I know of no principle of law or equity by which it can be held that an equitable right to enforce a legal mortgage, duly recorded, cannot be enforced against a subsequent purchaser, of the land, because of the fact that the subsequent purchaser, although having notice of the mortgage, had no notice of the equity. The mortgage itself being absolute on its face, the legal right carries with it all equities to enforce it.
There is no claim here that both mortgages are to be enforced in favor of the minor. There is but one debt, and as Martin has paid that debt, he is enforcing the mortgage primarily liable for its payment. It is not claimed that either the ward or Martin could enforce against the Ornelas land any surplus of the debt over and above the amount of the mortgage executed by Ornelas, or over and above the amount which Martin paid on the debt. Something is said about Martin's negligence having in some way estopped him from asserting this mortgage against Harper. If his negligence had created an appearance of security upon which Harper had relied in making his purchase, there might be some force in this suggestion, but it is very manifest that nothing of this kind occurred. The mortgage, as above stated, was upon its face positive and unequalified, and Harper had notice of the fact. There can be nothing in the neglect of Martin in failing to demand proof of Ornelas's authority to make the release which could have the effect of estopping him from pursuing his equitable remedy upon the mortgage.
For these reasons, I think it is clear that Martin had the right to pursue the mortgage which was given, in part at least, for his benefit, and that the judgment should be affirmed.
Beatty, C.J., concurred in the dissenting opinion.
  Rehearing denied. *Page 53