Court Opinion

ID: 4711151
Source: CourtListenerOpinion
Date Created: 2021-08-12 00:36:37.927677+00
Date Added: 2024-06-11T08:07:07.416104
License: Public Domain

Talmadge, J.
(concurring) — I concur in the result the *223majority reaches, but I reach that result by an entirely different approach.
Subrogation in suretyship is of ancient lineage. Its roots extend to Roman law. Saul Litvinoff, Subrogation, 50 La. L. Rev. 1143, 1149 (1990); Allied Fidelity Ins. Co. v. Environmental Quality Council, 753 P.2d 1038, 1041 (Wyo. 1988). "It came to us through the civil law, and it was from the civil law that the courts of chancery derived both the term and doctrine.” 73 Am. Jur. 2d Subrogation § 5, at 602 (1974). Justice Black stated the principle in Pearlman v. Reliance Ins. Co., 371 U.S. 132, 136-37, 83 S. Ct. 232, 9 L. Ed. 2d 190 (1962):
Traditionally sureties compelled to pay debts for their principal have been deemed entitled to reimbursement, even without a contractual promise. . . . And probably there are few doctrines better established than that a surety who pays the debt of another is entitled to all the rights of the person he paid to enforce his right to be reimbursed.
I disagree with the majority that the Honeys’ relationship with the lender controls whether the Honeys had a surety relationship with Mid-Valley. The Honeys paid Mid-Valley’s debt to the lender; they were plainly a surety. Matthews v. Hinton, 234 Cal. App. 2d 736, 44 Cal. Rptr. 692 (1965), the case the majority opinion relies upon, is inapposite because the issue in that case was whether Matthews could claim surety defenses with respect to the creditor. The court correctly said no, but did not address the question of whether Matthews was a surety with respect to the principal. The question in this case is precisely that, i.e., whether the Honeys were a surety with respect to Mid-Valley, the principal. Matthews does not provide an answer to that question. Here, the Honeys were a surety with respect to Mid-Valley insofar as they paid Mid-Valley’s debt to the lender.
The mere existence of a suretyship does not establish the right to subrogation, however. "Subrogation in all its phases appeals to the conscience of the court, and the *224court is clothed with wide discretion in its application.” Arthur Adelbert Stearns, The Law of Suretyship § 11.1, at 441 (James L. Elder ed., 5th ed. 1951).
Subrogation has been characterized as an eminently just doctrine, a pure unmixed equity, one of the benevolences of the law, created, fostered, and enforced in the interest and for the promotion of equity and justice, and to prevent injustice. Being founded on principles of natural reason and justice, it is a highly favored doctrine, which is to be given a liberal application, and which the courts are inclined to extend rather than to restrict. Perhaps no doctrine of equity jurisprudence is more beneficent in its operation, and perhaps none stands in higher favor.
73 Am. Jur. 2d Subrogation § 7, at 603 (1974) (citations omitted). Subrogation "is not a matter of strict right, but is purely equitable in its nature, dependent upon the facts and circumstances of each particular case, and that it will not be enforced when it would be inequitable.” Gray v. Ja-cobsen, 13 F.2d 959, 960, 48 A.L.R. 583 (D.C. Cir. 1926). "The doctrine of subrogation is a device to promote justice.” Acer v. Hotchkiss, 97 N.Y. 395, 402 (1884). Thus, as the courts of equity of old, we must look to the result that will promote the most justice in this case.
The Honeys put at risk property worth $9 million without setting forth in writing the rights and duties of the parties stemming from the subordination of the Honeys’ interest in the property. Had Mid-Valley completed the project as planned, the Honeys stood to gain the value of the capital improvements to their property, as well as increased rent. There is no intimation of oppression, duress, or incompetence in the negotiation of the agreement between the Honeys and Mid-Valley. There is no intimation of unequal bargaining power. Indeed, as the owner of the property, the Honeys appear to have been in a superior bargaining position.
A compensated surety, like a bonding company, typically requires the principal to pledge assets the surety can go against if the surety must pay the principal’s debt. The *225Honeys did not obtain such a pledge from Mid-Valley or the Mid-Valley principals. Thus, from all appearances, the Honeys took a business risk in the hope of a financial reward stemming from the increased value of their property. They took no steps to insure themselves against the risk of loss. Unfortunately for them, the failure of Mid-Valley dashed their expectations.
The Honeys now ask us to rectify that failure. They want the courts to make a contract they failed to make, allowing them to obtain reimbursement for their loss from Mid-Valley. I see no justice in such a result. The Honeys freely took a business risk and lamentably suffered a loss. They did not contract to indemnify themselves against that loss. It is not for the courts to write contracts for those who do not write them for themselves. No equities support the Honeys’ claim.
In summary, I disagree with the majority’s failure to find a suretyship here. Even though the Honeys were a surety, however, the equities do not support the application of subrogation. I therefore concur in the majority’s disposition of the case.