Court Opinion

ID: 6820689
Source: CourtListenerOpinion
Date Created: 2022-07-23 19:06:48.476632+00
Date Added: 2024-06-11T16:04:06.827901
License: Public Domain

Spratley, J.,
dissenting.
Mr. Justice Hudgins and I are unable to concur in the disposition of this appeal in view of what we consider to be the controlling facts of the controversy.
Subrogation, purely a creature of equity, is peculiarly dependent upon the facts and circumstances of each particular case. The record contains material and pertinent facts not mentioned, and apparently not considered, in the majority opinion.
In 1915, Mrs. Joynes, by the conveyance to her sons of her one-third share in the 87 acre tract, paid full value for the $700 annuity secured to her by a vendor’s Hen on that entire tract.
Thomas E. and Garnett R. Joynes owned several parcels of land. They gave deeds of trust on their land, including the 87 acres, in 1920 and 1922, securing loans for the respective sums of $20,500 and $22,500. Their mother did not join in these deeds of trust nor waive her Hen against the 87 acres.
In 1925, the sons borrowed $22,500 from the Shenandoah Valley Joint Stock Land Bank, using the proceeds to pay the debts against their lands. The last loan, secured by a deed of trust, was payable in forty semi-annual payments of $973.58 each. The last payment was to become due December 1, 1945.
Mrs. Joynes united in the deed of trust securing this debt. Her purpose in becoming a party thereto is clearly stated by the following provision in the deed of trust:
“Emma K. Joynes unites in this deed for the purpose of subordinating the $700.00 annuity reserved to her in the con*410veyance of her undivided one-third interest in 87.86 acres to Thomas E. Joynes and Garnett R. Joynes, dated February 17, 1915, by deed of record in D. B. No. 70, page 344, and for no other purpose; subject only to the lien of this deed of trust, which is hereby given priority, the annuity reserved shall remain intact.'1'1 (Italics added.)
She assumed no obligation to pay the above debt to the Shenandoah Valley Joint Stock Land Bank. The extent of her agreement was that in the event the debt was not paid as it matured and a sale of the 87 acre tract became necessary to discharge the obligation, then so much .of the proceeds of such sale as might be required to discharge the obligation should be used for that purpose. The balance of the proceeds would necessarily be applied to the payment of her annuity.
On May 14, 1934, the sons executed a mortgage on their lands, including the 87 acre tract, to secure $12,000, payable to the Federal Land Bank. This debt was payable in seventy-one semi-annual installments of $360 each and a final installment of $558.73, due November 14, 1970. On the same day they executed a deed of trust on the identical lands to secure the Land Bank Commissioner a $5,000 bond, payable in fifty-nine semi-annual installments of $83.33 each, the last to become due on May 1, 1967. This mortgage and this deed of trust are held by the appellants.
Mrs. Emma J. Joynes did not join in either the above mortgage or deed of trust; she did not sign the notes or bonds secured thereby; nor did she, in any manner, release or waive her annuity lien against the 87 acres.
Of the total sum of $17,000 borrowed, $13,000 was used in a compromise settlement of the balance due the Shenandoah Valley Joint Stock Land Bank under its deed of trust of December 1, 1925; $5x4.70 was applied to taxes against the two farms; and the remaining $3,485.30 was used in settlement of other judgments and claims, against Thomas and Garnett Joynes, which were subordinate to the annuity lien of Mrs. Joynes. Mrs. Joynes did not receive one penny frorn the proceeds of the two loans.
*411Oñ the date the above mortgage and deed of trust were executed, the liens of record against the land of the two sons, amounting to $29,865.43, were as follows: (1) Taxes, $514.70; (2) Balance due Shenandoah Valley Joint Stock Land Bank, $16,575.21; (3) Past due annuities of Mrs. Joynes, secured by liens against the 87 acres, $7,193.03; (4) Judgment in favor of Northampton Lumber Company, dated November 19, 1929, $2,666.34; (5) Judgment in favor of Northampton Lumber Company, dated January 1, 1932, $892.22; and, (6) Judgment of the Worcester Fertilizer Company, $2,077.23.
Before making the $12,000 and $5,000 loans, the appellants, through their local committee in Northampton county, had both of the farms appraised. The buildings on the two farms were valued at $15,550 and the land at $33,297.90. The committee reported that, “In our judgment the present sale price of the property is $48,847.90,” and recommended the grant of a loan not to exceed $19,700.
Loans of the Federal Bank were restricted to 50% of the appraised value of land, exclusive of buildings, and to 20% of the appraised value of buildings. The recommended loan of $19,700, therefore, meant that the value of the farms was in excess of $39,000, an amount sufficient to cover the taxes, the liens against the lands, and the unpaid annuities due Mrs. Joynes. Mrs. Joynes’ Hen was subordinate to only two items, the taxes and the unpaid balance due the Shenandoah Valley Joint Stock Land Bank.
The vendor’s Hen was a matter of record. AH of the Hens were reported by the appellants’ local attorney to the Federal Land Bank in his abstract of title to the 87 acres. In his report, that attorney specifically referred to the deed of February 17, 1915, creating the Hen in favor of Mrs. Joynes and stated that Mrs. Joynes was living, and that it was necessary for her to unite in the instruments securing the loans. He quoted in fuU the waiver of Mrs. Joynes in the 1925 deed of trust and recommended that the language of the waiver be used in the new papers.
Notwithstanding the above fact, appellants did not request Mrs. Joynes to release or subordinate her Hen to the Hens *412obtained by them from her two sons. They had the mortgage and deed of trust prepared in their Baltimore office. These instruments contain no reference whatever to Mrs. Joynes, to her lien, or to any waiver by her. They were returned to the local attorney, executed by the makers as prepared, and duly recorded. Thereafter, the loans were made.
The evidence does not show that Mrs. Joynes knew anything about the dealings between her sons and the appellants. It is conceded that they were not her agents, and that they had no authority to act for her. Her rights were not affected by any statement or representation made by them.
Certainly, neither the intention of the appellants to obtain a first lien nor the provision of a Federal statute that the Federal Land Bank could lend only upon a first lien can operate in law or in equity to displace the prior hen, lawfully acquired, of an innocent party. If intention is to take the place of diligence and due care, the law of negligence must be revised. The requirement of the statute emphasizes the care to be observed, but it does not fasten liability for lack of due care upon some one not responsible for the negligence.
The failure of the appellants or their representatives to communicate with Mrs. Joynes, under these circumstances, constituted gross negligence.
In Price v. Lovins, 117 W. Va. 624, 187 S. E. 318, 320, this is said: “In the case at bar, there can be no question but that the Jefferson Standard Life Insurance Company, had full knowledge of the prior deed of trust made by the Bowdens to W. T. Lovins, trustee. Not only was this instrument spread upon the public record, but it was there actually discovered and reported by the attorney representing the fife insurance company who, at its instance, examined the public records. Since the Jefferson Standard Life Insurance Company must be held to have gone into this transaction with its eyes open and armed with full information concerning the existing liens upon the property, it is not in position to complain that it is being treated inequitably if it did not receive a first lien upon the property. If it desired a first lien, it was its duty, knowing of the first deed of trust already existing upon the prop*413erty, to seek out the holders of all of the outstanding notes secured by that deed of trust and to procure from them releases or waivers of their liens. Kelly, Conservator v. Bank of Mount Hope (W. Va.), 185 S. E. 215.”
Under the uncontradicted facts, Mrs. Joynes, if the opportunity had been hers, might have decided to force a sale of the property in 1934 and permitted the proceeds to be applied, first, to the payment of the debt of the Shenandoah Valley Joint Stock Land Bank and the balance upon her lien. Without her knowledge or consent, the debt secured by the deed of trust of the Shenandoah Valley Joint Stock Land Bank has been paid and the lien released of record, and new liens for different amounts, with payments due at different times, have been executed and recorded with full knowledge on the part of the holders of those liens of the prior rights of Mrs. Joynes.
The following facts further emphasize what we have said: In the three years following 1934, the loans became in arrears. Land values in Northampton county rapidly declined. It is conceded that the market value of the land is now very much less than it was in 1934, and that in all probability it will not bring a sum sufficient to discharge the obligation due the appellants.
On May 18, 1937, the appellants for the first time, made an. effort to have Mrs. Joynes release and waive her vendor’s lien in favor of their securities. Their letter written on that date by their attorney to Thomas E. Joynes says in part:
“We find upon investigation that this vendor’s lien has never been released of record and am writing to express the hope that you will be able to get Mrs. Emma K. Joynes to execute and put on record a release of this vendor’s lien. So long as it remains unreleased you can see that the general warranty in the mortgage will continue to be broken.
“And inasmuch as the Federal Farm Mortgage Corporation has accepted your payment of $892.50 on account of back installments you can readily see that your request for an extension on the unpaid balances on your installments will be more apt to receive a sympathetic response from the people that you owe if your title is perfected. So if you and *414Mr. Garnett R. Joynes think that you can induce Mrs. Emma K. Joynes to execute a release of the vendor’s lien and waive so far as our mortgages are concerned any back payments on her annuity I shall be very glad if you say so to prepare a little release with the proper recitals and send it on for execution by her.” (Italics supplied.)
The record fails to disclose that, at any time between the execution of the mortgage and deed of trust and the institution of this suit, the appellants made any claim directly or indirectly to Mrs. Joynes that she had agreed to waive the lien securing her annuity, or that her sons had been constituted her agents to make such release. The letter makes no mention of a promise on the part of Mrs. Joynes. On the other hand, it shows that the appellants relied upon the general warranty of the sons notwithstanding the notice they had received of the outstanding annuity hen.
The covenants of title involve a matter of legal liability. They could not have been misleading in view of the disclosure of the state of the title.
None of the cases cited in the majority opinion contain facts similar to those of the instant case, nor do we, in an exhaustive research, find any similar case in which the principle of subrogation has been invoked.
The appellants are asking us to defeat the payment of the vendor’s lien by subrogating them to a former claim against which the vendor’s hen was merely waived, a claim which has been paid out of the proceeds of their loans, but none of which proceeds were used to discharge the vendor’s hen. What they are really trying to do is to correct their negligence and lack of foresight.
The equities of the case favor Mrs. Joynes more than they do the appellants. She was the more innocent of the parties, and if there should be any loss, it should, therefore, be borne by the appellants.
Mrs. Joynes was more than 80 years of age when she died. Her annuity constituted practically all of her property. When she waived her lien as to the Joint Stock Land Bank debt, the value of the property of her sons was such that she might have felt that the risk involved was small. But who *415knows that she would have released her lien as to the later liens? Who has the right to make a new contract for her, without consulting her, extending the payment of loans prior to her lien for twenty or twenty-five years?
Mrs. Joynes alone had the right to determine when, for whom, and under what circumstances and terms she would waive or subordinate her hen. The appellants had the right and did determine the conditions and terms upon which they would make a loan to her sons. They were not secondarily hable for the sons’ debt, nor was Mrs. Joynes primarily or secondarily liable therefor.
Under the foregoing facts, we are of opinion that the rights of Mrs. Joynes are superior to those of the appellants, and that neither legal nor conventional subrogation apphes to divest her of such rights. While we have gone far in Virginia in applying the principles of subrogation, it should be done with a due regard for the rights, legal or equitable, of others.
“It (subrogation) cannot be invoked so as to work injustice, or defeat a legal right, or overthrow a superior or perhaps even an equal equity, or displace an intervening right or title.” Obici v. Furcron, 160 Va. 351, 168 S. E. 340, 91 A. L. R. 848. If this be true, then Emma K. Joynes had a perfect right to dispose of her property in any way she desired.
The following admirable statement is found in 25 R, C. L., under the title of Subrogation, section 9, page 1321:
“Equity violates no law, and it does not assume to make a contract for the parties; it follows the law and upholds it, and when it comes to the relief of one to whom the law cannot afford an adequate remedy it will not in so doing infringe the law or impair its force, nor will it reconstruct the contract between the parties. Accordingly where the terms of the contract, and the conditions arising from its performance, are such as to show that the parties did not intend that subrogation should result in such case it will not result. Equity will not ingraft this doctrine on the transaction in the face of a contract that negatives the idea of subrogation. And the fact that the parties may, through ignorance of the legal con*416sequences of their contract, have thought that they were providing adequate new security for the money advanced, will furnish no foundation for the interposition of this equitable principle if the contract forbids it. Equity cannot reform the contract so as to make for them a contract which it may be conjectured the parties would have made for themselves if they had known what the law was. Subrogation is the creature of equity, and will not be permitted where it will work injustice to the rights of those having equal or superior equities, or where it will operate to defeat a legal right.” (Italics supplied.)
Equity should not reconstruct the contract between the parties nor undertake to deprive the legatees of Mrs. Joynes of rights and property conferred upon them by operation of law. Equity was not intended to invade the field of law but to prevent injustice and preserve and maintain civil and property rights not in contravention of law.
This suit was instituted by Mrs. Joynes in her lifetime to subject the 87 acre tract of land to the payment of her lien thereon. Prior to the adjudication in the trial court, she died testate. In her will she devised and bequeathed her property to Thomas E. Joynes and Garnett R. Joynes for fife, and at their death to other parties.
It so happens that since May 14, 1934, Thomas E. and Gar-nett R. Joynes have been adjudged bankrupts and have received their discharge.
The legatees and the remaindermen in the will of Mrs. Joynes took such estate as Mrs. Joynes had to dispose of. The appellees are, therefore, entitled to stand in the place and stead of their mother. If subrogation could not be applied against her, it cannot be applied against her legatees.
The bequeathed property was no more subject to the claims of the creditors of the bankrupts than other property acquired by them subsequent to their adjudication as bankrupts. Their discharge in bankruptcy is entitled to the effect of a valid law. It wipes out the suggestion of unjust enrichment at the expense of a bona fide creditor for value.
The bankruptcy of the sons and the subsequent bequest to them in no wise affected the rules and principles of subro*417gation. Both took place after the making of the loans in question and are wholly unconnected with that transaction.
However strongly one may believe that a debtor discharged in bankruptcy should, from property subsequently acquired, in good conscience, pay his prior debts, equity cannot supply a device for their collection which survives a discharge in bankruptcy.
The question here is not whether the appellants may pursue what they conceive to be a just claim against Thomas E. Joynes and his brother; but whether they may pursue that claim in equity regardless of their admitted negligence and the equities of an innocent party. Equity cannot be administered as a patent medicine to overcome the ills of gross negligence.
We are of opinion that the decree of the trial court should be affirmed.
Hudgins, J., concurs in this dissent.