Court Opinion

ID: 7889486
Source: CourtListenerOpinion
Date Created: 2022-09-08 21:47:12.557251+00
Date Added: 2024-06-11T16:31:51.572299
License: Public Domain

JohnstON, J.,
dissenting: The money advanced by the Equitable Mortgage Company upon the forged and fraudulent mortgage was loaned for the purpose of discharging a prior valid incumbrance, and had actually been so applied. When these facts had been established, they made a prima facie case entitling the Equitable company to be subrogated to the rights of the prior incumbrancer whose debt had been thus satisfied, there being no intervening rights or incum-brances. (Everston v. Central Bank, 33 Kas. 359; Sheldon, Sub., §8; Harris, Sub., § 825.) By advancing the money and paying the prior incumbrance, the plaintiff succeeded to the rights of the prior mortgagee, and this substitution in no manner disturbed or depreciated thé liens of the subsequent mortgagees. Their securities were just as good after the payment and substitution as they would have been had no payment been made by the Equitable Mortgage Company. It is highly equitable that subrogation should be made, and it appears that it can be made without lessening the rights or doing any injustice to the defendants. The only material *49objection or defense against the subrogation of the plaintiff is the-claim that there are two funds to which plaintiff may resort, on one of which the junior mortgagees have no lien, and that, for their protection, the plaintiff should exhaust the property covered by the fraudulent mortgage given to it before resorting to the lien which it has succeeded to by payment. This doctrine of two funds recognizes that the party who has discharged a prior incumbrance is entitled to subro-gation, and it only provides a rule for marshaling securities and adjusting priorities in the interest of justice and equity. The doctrine, however, is never applied so that it will work injustice to a senior creditor. He cannot be compelled to resort to doubtful securities or to funds upon which he can realize only by litigation. “To confine the senior creditor to one of two. funds, it must be shown that it is sufficient to satisfy his debt.” (Harris, Sub., §§ 496, 497; Sheldon, Sub., § 63.) This fact must be shown by the defendant. When the plaintiff had proved the payment of the prior incumbrance and its right to take the place of the prior incumbrancer, it had established the right of subrogation, and it devolved upon the defendants to show that the fund or property covered by the fraudulent mortgage was available and sufficient without resorting to the other property.
From what appears in the record, the mortgage made by Lowe to the plaintiff was false, fraudulent, and forged, and some of the land which it purported to cover he did not own. The loan was obtained upon a false and forged abstract of title. The mortgage was false and fraudulent, to which the wife’s signature had been forged. The receipt of the register of deeds, showing that the mortgage had been filed for record, was also a forgery. If there are any lands included in the mortgage which were owned by Lowe, his wife has an interest in them which is not conveyed by the mortgage. The loan having been obtained by the grossest fraud, on a false and forged instrument, the plaintiff was at liberty to treat it as being without force or effect, so far as the mortgagors were •concerned. If Lowe has any interest in the mortgaged lands *50against which the plaintiff might enforce its claim, it is of the most dubious and doubtful character, and probably furnishes little if any security for the payment of the money innocently advanced and used in the discharge of a valid debt and incum-brance. If the judgment of the district court is sustained, the plaintiff is entirely cut off from any benefit of its substituted lien, although the interest of Lowe in the lands covered by the fraudulent mortgage may be wholly valueless. The authorities cited in the prevailing opinion do not go to the extent of defeating the senior mortgagee, but, recognizing his superior right, merely suspended the proceedings which he had instituted until the fund or mortgage which was not bound to the other creditors should be pursued and exhausted. The judgments entered in those cases decreed that, after exhausting the funds in which the others had no interest, and any debt or balance remained due to the plaintiff, the original suit should then proceed in the usual course to enforce the payment of such debt or balance, and the junior creditor could then take what remained. (Ferry Co. v. Associates of Jersey Co., 1 Hopk. Ch. 460; Hayes v. Ward, 4 Johns. Ch. 123; Everston v. Booth, 19 Johns. Ch. 433.) This was certainly as far as the district court should have gone in this case, instead of cutting off the plaintiff from any rights under his substituted lien. I think the facts shown in the record entitle the plaintiff to subrogation, and that the judgment of the district court should be reversed.