Court Opinion

ID: 3985594
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:41:50.200244+00
Date Added: 2024-06-11T13:51:48.380479
License: Public Domain

In my opinion the judgment appealed from should be so amended as to give to the personal defendants a first lien upon the property involved in this controversy for the money which they advanced for the construction of the service station and for the payment of the mortgage together with interest thereon from and after the time the same was paid by them. The contract for the sale and purchase of the premises in question was executed by the plaintiff and the defendant corporation. The personal defendants were not parties to that contract. It contains, among others, the following provisions:
"Said buyer hereby agrees to pay for said described premises the sum of Twelve Thousand Dollars ($12,000.00), payable at Knight Trust and Savings Bank, a corporation, or their order, in Provo, Utah, strictly within the following times, to-wit: One Hundred Dollars ($100.00) cash, the receipt of which is hereby acknowledged, and One Hundred Dollars ($100.00) on the fifth day of December, A.D. 1929, and One Hundred Dollars ($100.00) on the fifth day of each and every month thereafter until the full sum of Twelve Thousand Dollars ($12,000.00) to be the total amount to be paid by the buyer, including both interest and principal.
"The seller agrees to pay all paving and curb and gutter taxes upon said property, and the general taxes for the year 1929. Further taxes, including special improvement taxes and general taxes are to be paid by the buyer.
"In the event that there are any liens or encumbrances against said premises other than those herein provided for or referred to, or in *Page 104 
the event any liens or encumbrances other than herein provided for shall hereafter accrue against the same by acts or neglect of the seller, then the buyer may, at its option pay and discharge the same and receive credit on the amount then remaining due hereunder in the amount of any such payment or payments and thereafter the payments herein provided to be made, may at the option of the buyer, be suspended until such time as such suspended payments shall equal any sums advanced as aforesaid.
"It is also understood and agreed by and between the parties hereto that as part of the consideration, to-wit: the sum of Twelve Thousand Dollars ($12,000.00), payable as aforesaid, the seller is to erect upon the property hereinabove described an automobile service station, at a cost to the seller of Three Thousand Dollars ($3,000.00), and that upon the payment of the Twelve Thousand Dollars ($12,000.00) by the buyer, to the seller, as herein specified, said property, service station, and any and all improvements upon said property shall belong to and be the property of the buyer, and the seller shall have no right, title, or interest in or to said property, or improvements thereon.
"It is also understood and agreed that the seller is to begin the construction of said service station at once, and to continue with all possible haste until said service station is completed. The plans and specifications of said service station to be subject to the approval of the buyer, any cost of said service station, exceeding the sum of Three Thousand Dollars ($3,000.00) to be paid by the buyer.
"It is also mutually understood and agreed between the parties hereto that there is now upon said property, a mortgage to the Intermountain Building and Loan Association, a corporation, in the sum of Seven Thousand Dollars ($7,000.00), a copy of which said mortgage is hereto attached and made a part of this agreement, with the understanding that the buyer is to deposit in the Knight Trust and Savings Bank, when the same shall become due, the monthly payments provided for in said mortgage, it being mutually understood and agreed that the said mortgage shall be paid in full not later than nine (9) years from the date of this agreement, and the buyer may pay a sufficient amount of the amount herein agreed to be paid to the seller, to pay off said mortgage within said time, it being understood and agreed, however, that in no event and under no circumstances is the buyer to pay to the seller, or to his mortgagees, a sum exceeding Twelve Thousand Dollars ($12,000.00) payable at the rate of One Hundred Dollars ($100.00) per month, said sum to include both principal and interest." *Page 105 
It is clear that by the provisions of the contract just quoted the defendant corporation obligated itself to pay to the plaintiff for the property a total sum of $12,000 in 120 monthly installments of $100 each. None of the parties to this litigation claim that the contract is susceptible of any other construction or that the contract did not express the intention of the parties thereto. There is a provision in the contract that "interest shall be charged on all unpaid portions of the purchase price at the rate of 8% per annum." Such provision, however, must be limited in its application to payments which are past due; otherwise it would be in direct conflict with other provisions of the contract and would be contrary to the intention of the parties thereto. The evidence shows without conflict the following facts: That the personal defendants were stockholders and directors of the defendant corporation; that the plaintiff entered into a contract with one Neal Davis to construct the service station provided for in the contract; that plaintiff failed to pay Davis for the construction of the service station and the personal defendants were compelled to pay for such construction, otherwise Davis would have placed a lien on the property for the amount of the first installment due on the contract and would have refused to complete the construction of the service station; that at the time the contract was entered into it was anticipated by the parties thereto that plaintiff would be able to borrow from the Intermountain Building  Loan Association the sum of $7,000 payable in installments extending over a period of nine years and secured by a mortgage upon the property covered by the contract. For some reason not appearing in the record, the prospective loan was not secured. When the contract was entered into there was a mortgage on the property covered by the contract in favor of the United States Building 
Loan Association of Butte, Mont. A number of installments on that mortgage were in default, and according to the terms of the mortgage the mortgagee was entitled to declare the whole amount of the mortgage due. Under date of March *Page 106 
7, 1930, the United States Building  Loan Association wrote the defendant corporation that:
"In reply to your inquiry of March 5th, we are pleased to advise that the balance due the Association on our mortgage on the Northwest corner of Block 70, Plat `A', Provo City Survey, at this time is $3414.30. We are not acquainted with any other encumbrances against the property.
"Our mortgage calls for monthly payments of $35.10, but is badly delinquent at this time and a payment of $786.66 would be required to place the loan in good standing. This figure includes taxes advanced by the Association and delinquent installments and interest accrued to date.
"Since we are contemplating immediate foreclosure proceedings on our mortgage, we will appreciate your early advice if you desire to place the loan in good standing or take up the entire balance in order to save additional expense."
Neither the plaintiff nor the defendant corporation were in funds with which to pay the mortgage or the amount past due thereon, or to pay Davis for the construction of the service station. There were past-due taxes and unpaid special improvement taxes upon the property at the time the contract was entered into. Plaintiff was, by the terms of the contract, obligated to pay such taxes but failed to pay the same. The general taxes upon the property amounted to about $54 and the special improvement taxes to about $700. The personal defendants, with their own funds, paid Davis for the construction of the service station and also paid off the mortgage held by the United States Building 
Loan Association. They claim that it was necessary for them to advance such money to protect their own interests as well as to protect the interests of the other 500 stockholders of the defendant corporation. In the light of the facts shown by the uncontradicted evidence in this record, there can be no doubt but that such claim was well founded. Under such a state of facts the personal defendants are entitled to be subrogated to the rights of the United States Building *Page 107  Loan Association with respect to the mortgage, and to the rights of Davis with respect to the money which plaintiff agreed to pay for the construction of the service station. They are entitled to such rights of subrogation both as to the plaintiff and the defendant corporation. The following quotations taken from Corpus Juris will serve to indicate the law as announced by the adjudicated cases with respect to the doctrine of subrogation under a state of facts such as are presented by this record:
"One who, acting in a representative or fiduciary capacity, incurs and satisfies obligations to the benefit of his principal, is subrogated to the rights of the principal against others primarily liable, and to the rights of the creditor against the principal." 60 C.J. 781, 782.
"A person who, not being a volunteer, but having an interest in property, pays off an encumbrance on the property in order to protect his interest is entitled to be subrogated to the rights and remedies of the person paid." 60 C.J. 786.
"A purchaser of land on which there is an encumbrance is entitled to free the land from such encumbrance by paying off the debt it secures, and, in the absence of previous contract with the debtor or knowledge of other encumbrances, or failure of his title, he is entitled to be subrogated to the rights of the encumbrancer where the payment is made to protect his own interest or to perfect his own title, which right extends to those claiming under him, and to have the encumbrance kept alive and enforced for his benefit. However, in order for the purchaser to be entitled to subrogation, it is essential that he has, by his payments, extinguished the encumbrance or charge on the property purchased, and that his payments, made in good faith, were made either as the result of compulsion, or for the protection of some interest in the property that was threatened or imperiled by the encumbrance or charge paid. * * *" 60 C.J. 789, 790.
In this case the personal defendants had an interest in the property as stockholders of defendant corporation and also as officers of such corporation. That the title to the property was threatened and imperiled by both the claim of Davis for labor performed and material furnished for the construction of the service station, as well as by the United *Page 108 
States Building  Loan Association on account of its mortgage, is not open to doubt. It is equally clear that the payments of the claim of Davis and of the building and loan association were made in good faith, viz., for the purpose of preventing the property being sold to satisfy those claims. As I view this record it is not of controlling importance whether the evidence of the plaintiff or that of the defendants is to be believed with respect to the recordation of the deed from plaintiff to the defendant corporation. Independent of any authority from the plaintiff to the defendants with respect to the recordation of that deed as security for the payment of the money advanced by the personal defendants, such defendants are, under the doctrine of subrogation, entitled to a first lien upon the property involved. By the terms of the contract between plaintiff and defendant corporation, plaintiff obligated himself to pay off the mortgage upon the property as well as pay for the construction of the service station. He failed to perform those obligations. It is apparent that the interest of the plaintiff as well as the interests of the defendant corporation in the property here involved was preserved by the personal defendants paying the cost of the service station and the mortgage. The equitable principles upon which the doctrine of subrogation is founded do not justify penalizing the personal defendants for their actions in paying off these obligations nor permit the plaintiff to be relieved from paying interest upon the money which the personal defendants paid to satisfy those claims. And, likewise, the defendant corporation is not entitled, in the absence of the consent of the personal defendants, to retain for its own use and benefit the money which was advanced by the personal defendants to pay off the mortgage and the cost of constructing the service station. In any event, the judgment appealed from should be so amended as to require plaintiff to pay interest on the money advanced for the satisfaction of the mortgage as well as the money advanced for the construction of the service station, otherwise plaintiff will, in effect, be relieved of paying *Page 109 
interest on the money advanced by the personal defendants for his use or benefit.