Court Opinion

ID: 8198935
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:22:35.889469+00
Date Added: 2024-06-11T16:40:51.271376
License: Public Domain

The following opinion was filed June 29, 1936:
Wicichem, J.
(concurring). Defendant’s position appears to be that as second mortgagee he occupies the position *404of a surety because under certain circumstances he is entitled to subrogation. The question whether a second mortgagee is in any sense a surety would probably not be a profitable one to discuss, for the reason that it is largely a matter of terminology. A second mortgagee is one who has loaned money upon an already incumbered security. In the sense that if the security is inadequate, he may lose some portion of his debt by reason of the failure to liquidate the security at a sufficient price to pay it, his interest in the property and the fact that he sustains this risk may perhaps justify reference to him as a sort of surety. His rights, however, have never been considered to be those of a surety, nor has he in fact ever pledged his credit or property for the debt of another in such a way as to- bring him within the conventional concept of a surety. The difficulty of treating him as a surety in any real sense is illustrated by the fact that defendant's only claim is that by reason of an extension of time, the lien of the first mortgagee should lose its priority. There is no contention that defendant is discharged. There is nothing to discharge him from. Nor does the fact that under certain circumstances he has certain rights by subrogation make him a surety. The doctrine of subrogation is much broader than the doctrine of suretyship, and existence of that right does not inevitably disclose a relationship of principal and surety. In Reddington v. Franey, 131 Wis. 518, 111 N. W. 725, the court said:
“The doctrine of subrogation, by means of which a debt once paid or a security discharged is kept alive as against the principal debtor for the benefit of a third person who, not being a mere volunteer, has paid the debt, is an equitable doctrine, favored by the law because it accomplishes the ends of justice and fair dealing. It is well settled that one who1 is legally bound to pay the debt or who has an interest to protect thereby is not a volunteer. It is also held without substantial conflict of opinion that where a fund is misappropriated. by an agent or trustee, without the owner’s consent to *405the payment of the debt of another, the owner of the fund is not a volunteer, but will be entitled to subrogation if necessary for his due protection.”
The cases have not accorded the second mortgagee the rights of a surety. For example, the release of a first mortgage coupled with a simultaneous execution of a new first mortgage does not release the first mortgage as against the second mortgagee, or subordinate the first mortgage to that of the second, in the absence of some supervening equity. 33 A. L. R. 149; Conner v. Welch, 51 Wis. 431, 8 N. W. 260; Kellogg Brothers Lumber Co. v. Mularkey, 214 Wis. 537, 252 N. W. 596. Nor does modification of the contract between mortgagor and senior mortgagee have this effect. Zastrow v. Knight, 56 S. D. 554, 229 N. W. 925, 72 A. L. R. 389. Defendant must establish some right other than those belonging to a surety in order to- make good his claim to priority.
The first right of the junior mortgagee is to redeem at any time after the maturity of the prior mortgage. Jones, Mortgages, p. 834, § 1363. This is stated by the authorities to be a common-law right, and I can discover no evidence that it is in any sense founded upon the doctrine of subrogation. This right may be grounded in principle upon his interest in the property and the obvious propriety of permitting him to protect it. Whatever its source, however, no action-on the part of the first mortgagee can take this right from the second mortgagee, and particularly it may not be impaired by a new agreement extending the time of payment or otherwise modifying or altering the original note and mortgage.
The next right of the second mortgagee is to be subro-gated to all of the rights of the first mortgagee against the debtor if and when he pays the debt secured by the first mortgage. It may be claimed that, although the first mortgagee may not affect the right of the second mortgagee to re*406deem by a contract extending the time, he may by such a contract so impair his own rights against the mortgagor as to injure those which the second mortgagee will have by subro-gation upon payment of the first mortgage. If the modifying contract is ineffective as against the second mortgagee, it is in my opinion ineffective for all purposes. To hold otherwise would be to permit virtual destruction of the second mortgagee’s right to redeem and make it impossible for the second mortgagee so to exercise this right as effectively to protect his interest. The alterations being void as to him, he is entitled upon payment to be subrogated to the rights of the mortgagee upon the original contract. I think that defendant must fail for the reason that the extension of time was wholly void as to him and did not impair his right to redeem at maturity or his right to be subrogated to the rights of the first mortgagee upon payment. This appears to be established by, or a necessary conclusion from, the rule in the following cases : See Burchard v. Frazer, 23 Mich. 224; Brown v. Hardcastle, 63 Md. 484; In re Hutchinson, 12 Fed. Cas. p. 1082, No. 6,954; Battle v. Jennings Naval Stores Co. 74 Fla. 12, 75 So. 949; Belloc v. Davis, 38 Cal. 242.
It further appears to result from an application of sec. 74.695 (1), (2), Stats., which provides:
“(1) Any person having a lien on real estate against which realty there is a prior lien may pay any or all of the items mentioned in subsection (2), and the amount so paid shall be added to the payor’s lien, bear interest from date of payment at the same rate as that borne when paid, or if no rate was provided for prior to such payment, at the legal rate of interest. All sums so paid shall be collected as a part of and in the same manner as is the lien by virtue of which said payments are made and be entitled to the same priority.
“(2) The items, any or all of which may be paid under subsection (1) are as follows :
“(a) Any past due or defaulted principal or interest of a prior lien.
*407“(b) Any interest or amortized instalment due under a prior lien.
“(c) Premiums and assessment on insurance policies necessary to protect the security of the lienor making such payments or of any prior lien and authorized under the terms of either such lien.
“(d) Taxes or special assessments due and unpaid on any realty covered by the lien with interest, penalties and costs.
“(e) Any portion of a prior lien.
“(f) Any charge for improvements or any other item authorized by statutes or by the terms of any'prior lien.”