Court Opinion

ID: 8195266
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:18:31.522181+00
Date Added: 2024-06-11T16:40:44.958725
License: Public Domain

The following- opinion was filed December 7, 1926:
Eschweiler, J.
When the ten-year $10,500 purchase-money. mortgage, a concededly good and paramount lien upon the 165 acres, became due in March, 1922, instead of adopting the plain and simple plan of buying such mortgage from the Schaumberg estate and thereby continuing it as such absolutely safe and sure security, and, if six instead of five per cent, interest was desired thereafter, securing such by some extension agreement to that effect, Pittz, apparently relying upon the suggestion or advice of the attorney administering the Schaumberg estate (who was none of the counsel in the present case), blindly takes a new mortgage by one merely in possession under a land contract and with the public record disclosing the mortgage to the bank of September, 1921. On discovery of the mistake in March, 1924, he apparently concedes, through the same attorney, that the first mortgage of the bank is now paramount to any possible security he might claim. Then, after the bank’s second mortgage has been recorded, Pitts, in blind disregard of what the slightest inspection would have disclosed, and having actual knowledge of the bank’s mortgage of September, 1921, accepts the new mortgage of May 10th executed by the Mur-phys, father and son, to secure the $10,500, and now applies to a court of equity to have the results of his blind confidence *89and great carelessness wiped out and to be placed, so far as the security on the real estate is concerned, ahead of one who exercised due diligence in protecting its own rights and who committed no fraud in so doing.
The doctrine of subrogation in equity, whereby the court permits one subsequently dealing with an interest or supposed interest in property to be placed in the same position or with the same rights against the property as one having prior dealings with it; that the element of fraud need not necessarily exist; that mere mistake may be.enough; and that it is not based upon contract, — has been so often stated in prior decisions of this court that we shall do no more than cite for definitions: Poluckie v. Wegenke, 137 Wis. 433, 437, 119 N. W. 188; Hughes v. Thomas, 131 Wis. 315, 319, 111 N. W. 474; Charmley v. Charmley, 125 Wis. 297, 304, 103 N. W. 1106; and as illustrating the application of it, the cases just above cited and such as Lashua v. Myhre, 117 Wis. 18, 22, 93 N. W. 811; Stewart v. Stewart, 90 Wis. 516, 521, 63 N. W. 886; Wilton v. Mayberry, 75 Wis. 191, 43 N. W. 901; Levy v. Martin, 48 Wis. 198, 206, 4 N. W. 35.
That it is a pure, unmixed equity, with its foundations resting on natural justice and was derived from the civil law, is well stated in Prairie State Bank v. U. S. 164 U. S. 227, 231, 17 Sup. Ct. 142. See, also, 37 Cyc. 370; 25 Ruling Case Law, 1314.
The outstanding features of this case as we view it and that must control its disposition are as follows:
1. The $10,500 mortgage of 1912 by William Murphy, Sr., was known to all persons subsequently, and now, concerned as intended to be a first lien to secure payment of the balance of the purchase price of this farm.
2. No part of such obligation has as yet been really paid.
*903. Pitts is not a volunteer, but had and has a direct financial and substantial interest in the fund represented by that mortgage.
4. There are no equal or superior equities to those of Pittz.
5. The plaintiff has advanced no money (other than the $640) in reliance upon either of the mortgages, each being taken as subsequent security for prior debts.
6. Plaintiff 'suffers no wrong if denied the relief granted below, — it thereby merely obtained an unbargained-for advantage.
7. The Murphys, Sr. and Jr., could not be heard to assert any advantage to themselves or to either of them as against Pitts by reason of these transactions, because equity would not listen to or aid them in taking advantage of him.
8. The plaintiff’s priority, if sustained, was only possible through the direct aid of Murphys, Sr. and Jr., who themselves would be prevented from reaping any benefit.
9. Plaintiff’s priority, if any, can exist only through the bank’s advancement in its security by reason of Pitts’s blind confidence in Murphy, Jr.’s, statements and his possession of the farm, and Pitts’s want of ordinary diligence.
The question therefore resolves itself to this: Ought the plaintiff, under these circumstances, though diligent and not fraudulent, be permitted to retain a record priority which in practical effect cancels and discharges entirely unpaid a first and purchase-price mortgage, or that which was the substitute for or the equivalent of a vendor’s lien on this farm?
Much authority can be found to support the result reached in the court below, namely, that the childlike confidence of Pitts; his indifference to the ordinary precautions for self-protection in transactions of this kind; his failure to ascertain that which the public records disclosed; the apparent concession by his attorney that the 1921 mortgage of the bank was paramount, — all amounted to the gross negligence such *91as requires the door of a court of equity to remain closed to him.
Among authorities to that point, and the two particularly relied upon by respondent, are Conner v. Welch, 51 Wis. 431, 8 N. W. 260, where the court expressly held that gross negligence bars such relief. We think, however, that the facts there recited (pp. 441-443) so differentiate that from this case as to prevent its being here controlling, and as is pointed out in Hughes v. Thomas, 131 Wis. 315, 322, 111 N. W. 474, supra, the rights of a third party had there intervened; Webber v. Frye, 199 Iowa, 448, 202 N. W. 1, also holding that inexcusable negligence may bar the right to subrogation, but there it was denied to one who deliberately paid a prior mortgage and caused it to be extinguished, and, as the court found, so intended to do, without informing himself of other existing equities in the form of mechanics’ liens. The general rule is stated to be that inexcusable neglect is a bar. 37 Cyc. 373; Bispham, Equity (9th ed.) sec. 191.
Many cases are cited by respondent bearing upon the question of fraud as affecting the right to this relief. We do not deem such material, however, because this case is not to be decided upon the ground of whether Murphy, Jr., did or did not deceive the defendant Pittz by any representations. 37 Cyc. 370; 25 Ruling Case Law, 1314. The cases cited to the effect that mere volunteers cannot be protected by sub-rogation are also beside the mark.
We appreciate, however, that this equitable doctrine of subrogation is to further the ends of natural justice and that it can properly be invoked for relief against the result of the suitor’s own mistakes and ignorance, for, as said in Dixon v. Morgan (Tenn.) 285 S. W. 558, 562, instances for the application of the rule can hardly ever exist in the absence of some negligence on the part of one seeking such relief. From the very nature of this doctrine of subrogation its *92mantle must many times, like the garment of charity, cover and wipe out a number of sins of omission or commission.
We feel justified, therefore, in saying that even in such an extreme case as is here presented, there being' no equities equal or superior to those of Pitts, he is entitled, except for the details hereinafter mentioned, to have preserved for him a paramount lien on this farm for the unpaid $10,500 of the purchase price. That we find no similar case where such a doctrine has been applied, though it causes us to hesitate, yet it is not enough to cause us to deny the relief which seems so consonant with natural justice.
However, the following cases out of many illustrate the extent to which this doctrine of subrogation has been extended: Kent v. Bailey, 181 Iowa, 490, 164 N. W. 852; Dixon v. Morgan (Tenn.) 285 S. W. 558; Stephenson v. Grant, 168 Ark. 927, 271 S. W. 974; Detroit & Northern M. B. & L. Asso. v. Oram, 200 Mich. 485, 167 N. W. 50; Hodge v. Dunlop, 49 N. Dak. 125, 190 N. W. 551.
That payment was made to the Schaumberg estate in 1922 for this mortgage and that it was then released by the executrix does not necessarily extinguish it. Krugmeier v. Hackett, 134 Wis. 57, 60, 113 N. W. 1103; Sullivan v. Williams, 210 Ala. 363, 98 South. 186, 33 A. L. R. 147, note p. 149.
Upon the grounds and for the reasons above stated, we think defendant Pitts was entitled to have the lien of the $10,500 mortgage of 1912 as originally given maintained as a continuing and living paramount lien upon this farm. But he is entitled to have it maintained as it was originally, namely, a five per cent, interest-bearing obligation, and as such only, and cannot have it recognized as of the new rate of interest at six per cent, by the agreement with Murphy, Jr., in March, 1922.
When the bank took its second mortgage in 1924 it then in good faith and in proper reliance upon the record advanced $640, and in further consideration for such mortgage re*93duced the rate of interest from seven to six per cent, to the Murphys upon their prior obligations of the three notes of September 6, 1921. For such'$640 and the amount of interest that the bank waived or loses by so reducing the rate it should be entitled to protection as against the defendant Pitts. The plaintiff bank, therefore, is entitled to foreclosure as against the farm for the amount of the said $640 with interest and for a further sum representing the loss in interest by the aforesaid reduction, together with the costs allowed in the court below; the defendant Pitts is then entitled to a foreclosure on said farm of his $10,500 mortgage with any unpaid interest computed at five rather than six per cent, since March, 1922, and with his costs as against the defendants Murphy, Sr. and Jr.
By the Court. — Judgment reversed, to be modified as indicated in the opinion; respondent to pay the clerk’s fees on this appeal, and neither party to have other costs here as against the other.
A motion for a rehearing was denied, with $25 costs, on February 8, 1927.