Court Opinion

ID: 3491082
Source: CourtListenerOpinion
Date Created: 2016-07-05 21:59:31.875754+00
Date Added: 2024-06-11T14:14:21.121229
License: Public Domain

The effect of the opinion of Mr. Justice SHARPE herein is to overrule Walker v. Bates, 244 Mich. 582. *Page 452 
Subrogation "from its very nature, never could have been intended for the relief of those who were in a condition in which they were at liberty to elect whether they would or would not be bound." Gadsden v. Brown, 1 Speer's Eq. (S.C.) 37. This, says the Supreme Court of the United States, is perhaps as clear a statement of the doctrine as can be found anywhere.Ætna Life Ins. Co. v. Middleport, 124 U.S. 534
(8 Sup. Ct. 625.). This was the rule recognized in Smith v. Austin,9 Mich. 465, and Kitchell v. Mudgett, 37 Mich. 81. In Desot v.Ross, 95 Mich. 81, complainant was sought to be subrogated. It is said:
"She was a stranger to the title, and as such could not, by payment of the whole or any portion of the mortgage, become subrogated to the rights of the mortgagee."
The court cited in support of this proposition Kelly v.Kelly, 54 Mich. 30, 47; Shinn v. Budd, 14 N.J. Eq. 234, 237;Brice v. Watkins, 30 La. Ann. 21; and quoted with approval fromSanford v. McLean, 3 Paige Ch. (N.Y.) 117, 122 (23 Am. Dec. 773), as follows:
" 'It is only in cases where the person advancing money to pay the debt of a third party stands in the situation of a surety, or is compelled to pay it to protect his own rights, that a court of equity substitutes him in the place of the creditor as a matter of course, without any agreement to that effect. In other cases the demand of a creditor which is paid with the money of a third person, and without any agreement that the security shall be assigned or kept on foot for the benefit of such third person, is absolutely extinguished.' " *Page 453 
In Stroh v. O'Hearn, 176 Mich. 164,177, it is said:
"Subrogation is an equitable doctrine depending upon no contract or privity, and proper to apply whenever persons other than mere volunteers pay a debt or demand which in equity and good conscience should have been satisfied by another."
The court cited Detroit Fire  Marine Ins. Co. v. Aspinall,48 Mich. 238; Lockwood v. Bassett, 49 Mich. 546; Warner v.Hall, 53 Mich. 371; Kelly v. Kelly, supra; White v. Newhall,68 Mich. 641; Palmer v. Sharp, 112 Mich. 420;Dayton v. Stahl, 132 Mich. 360; Sproal v. Larsen, 138 Mich. 142;  Taylor v. Roniger, 147 Mich. 99.
In Palmer v. Sharp, supra, it is held that before subrogation can take place by which a party advancing money to discharge a lien can be substituted in place of the lienor, it must appear that the party so advancing the money is under some legal obligation to make the payment — that such subrogation does not take place in favor of a mere volunteer. And in Parks v.Sherman, 208 Mich. 697, it is said:
"Bouvier's Law Dictionary (8th Ed. 1914), in defining 'subrogation' states that 'a principle which lies at the bottom of the doctrine is that the person seeking it must have paid the debt under grave necessity to save himself a loss. The right is never accorded to a volunteer.'
"This underlying principle is recognized in and applicable to the facts in Stroh v. O'Hearn, 176 Mich. 164, cited by plaintiff, and in other Michigan decisions there referred to. In Palmer v. Sharp, 112 Mich. 420, it is said, 'This is undoubtedly the general rule.' "
In 37 Cyc. pp. 375, 376, it is said:
"It is only in cases where the person paying the debt of another stands in the relation of a surety or *Page 454 
is compelled to pay in order to protect his own interests, or by virtue of legal process, that equity substitutes him in the place of the creditor without any agreement to that effect; in other cases the debt is absolutely extinguished, and thus a mere volunteer or intermeddler who, having no interest to protect and without any legal or moral obligation, pays the debt of another is not entitled to subrogation without an agreement to that effect or an assignment of the debt, the payment in his case absolutely extinguishing the debt."
In 25 R. C. L. pp. 1324, 1325, it is said:
"While subrogation is founded on principles of equity and benevolence, and may be decreed where no contract exists, yet it will not be decreed in favor of a mere volunteer, who, without any duty, moral or otherwise, pays the debt of another; for such a person can establish no equity, and can obtain the right of substitution by contract only."
In French v. Grand Beach Co., 239 Mich. 575, it is said:
"The doctrine of subrogation rests upon the equitable principle that one who, in order to protect a security held by him, is compelled to pay a debt for which another is primarily liable, is entitled to be substituted in the place of and to be vested with the rights of the person to whom such payment is made, without agreement to that effect. This doctrine is sometimes spoken of as 'legal subrogation,' and has long been applied by courts of equity. Stroh v. O'Hearn, 176 Mich. 164,177. There is also what is known as 'conventional subrogation.' It arises from an agreement between the debtor and a third person whereby the latter, in consideration that the security of the creditor and all his rights thereunder be vested in him, agrees to make payment of the debt in order to relieve the debtor from a sacrifice of his property due to an enforced sale *Page 455 
thereof. It is wholly independent of any interest in the property which the lender may have to protect. It does not, however, inure to a mere volunteer who has no equities which appeal to the conscience of the court."
In Walker v. Bates, 244 Mich. 582, a bank, with the abstract of real estate before it showing a lis pendens filed, loaned money on the property without any agreement or understanding for subrogation. It was a stranger to the title, and mere volunteer. An existing mortgage was paid and discharged by the mortgagor with the money procured from the bank or otherwise. The bank claimed it was entitled to subrogation to the rights of the mortgagee of the mortgage which had been paid and to precedence over the rights of those seeking to foreclose a purchase money lien against the property. This case holds that a mere stranger to the title who voluntarily advances money to help a fraudulent holder of real estate pay a mortgage placed by him thereon has equities more appealing to the conscience of the court than those of the real but defrauded owner of the real estate with notice of whose rights the money was advanced. This case stands alone. It violates all the principles underlying the cases involving legal or conventional subrogation in England and America. It is not a precedent to be followed, but an accident to be avoided.
For the reasons above stated, I concur with Mr. Justice SHARPE.