Court Opinion

ID: 8198841
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:22:29.7467+00
Date Added: 2024-06-11T16:40:51.108597
License: Public Domain

The following opinion was filed January 7, 1936:
Fairchild, J.
The appeal comes on the ruling of the trial court that Gertrude Strelitz was entitled to be subro-gated to the former rights of the appellant in the note and mortgage. The pleadings and the stipulation together with the testimony taken at the trial give us undisputed facts, and leaves for determination only the question of the right of respondent to subrogation. The controlling fact is that the respondent was indebted to the appellant on her note of $15,000. Under the Negotiable Instruments Law, regardless of the inducement which caused her to sign the note, or of the relation between her and the original debtor, she was primarily liable on the note to the payee, and was absolutely required to pay the amount thereof. Farmers Life Ins. Asso. v. Houghton, 207 Wis. 357, 241 N. W. 352; Brannan’s Negotiable Instruments Law, Annotated (4th ed.), pp. 119 and 361; secs. 116.01 and 116.57, Stats. Respondent can have no right to subrogation under the facts of this case. Maurice Strelitz was indebted to the bank. His debt was secured by certain collateral. The value of the collateral decreased, and the payment was due. In order to procure an extension of time, additional security was given. Respondent gave her note for $15,000 to the bank. The only inference to be drawn from the giving of the $15,000 note is that it was given as additional collateral to the whole debt. The learned trial judge called attention in his decision to the fact that “Mr. Baumgarten [vice-president of the bank] testified that when Mr. and Mrs. Strelitz came to the bank and signed the note and mortgage that he advised *447Mrs. Strelitz that ‘now that additional collateral was given extension of time will be given.’ The testimony and stipulated facts clearly indicate that the note and mortgage were given to . . . secure an extension of time.” By this transaction respondent became primarily and not secondarily liable on the note. She did not give the note to the bank to protect her own interests. As between her and Maurice Strelitz, the giving of the note amounted to nothing more than -lending him a certain sum, or property of a certain value. The bank requested security for the payment of this note given by respondent. Security was given in the form' of a mortgage on property owned by Maurice Strelitz, and was joined in by respondent. This mortgage was given as security for the payment of the note of respondent and nothing more. It was not given to respondent as security for repayment of the $15,000 by Maurice Strelitz, but was given to the bank as collateral to respondent’s note. Respondent is not entitled to subrogation because there is nothing arising from the transaction to which she could be subro-gated. The payment of the note did not depend upon her being secondarily liable, nor did she discharge any debt of another acting to protect her own interests, and there was no agreement that she was to have any security. Bank of Bamboo v. Prothero, 215 Wis. 552, 255 N. W. 126. Respondent undoubtably has a claim against her husband’s estate, and there the matter rests so far as this case is concerned. Under the arrangement before the court, the wife added her responsibility to the extent of the $15,000 as additional collateral security to the entire debt. She has met this individual and personal responsibility, and is now free from her direct obligation to the appellant.
Subrogation can only grow out of conditions resulting from the due observance of the contract, and it must not be *448inconsistent with the legal relation of the parties. There is no equitable consideration operating in respondent’s behalf in this situation. Subrogation is a creature of equity, and will never be allowed to the prejudice of the creditor. Knaffl v. Knoxville Banking & Trust Co. 133 Tenn. 655, 182 S. W. 232; National Surety Co. v. Salt Lake County (C. C. A.), 5 Fed. (2d) 34; Story, Equity Jurisprudence, § 499. The established facts, under the law, in any event, would preclude the respondent from the relief she seeks as a balance of some $20,000 still exists on the debt. The general principles of equity affecting subrogation tend to the conclusion that where property of one person is used in partially discharging an obligation owed by another, and the balance of the obligation has not been discharged, the former is not entitled to be subrogated to the position of the obligee. Until the obligation is fully discharged, the obligee is himself entitled to enforce the balance of his claim, and the person whose property has been used in discharging only a part of the claim is not entitled to occupy his position. Musgrave v. Dickson, 172 Pa. 629, 33 Atl. 705; In re Kimbrough-Veasey Co. (D. C.) 292 Fed. 757; New Amsterdam Casualty Co. v. City of Astoria (D. C), 256 Fed. 560; National Surety Co. v. Salt Lake County, supra; Barton v. Matthews, 141 Ark. 262, 216 S. W. 693; Westinghouse Electric & Mfg. Co. v. Fidelity & Deposit Co. of Maryland, 251 Mass. 418, 146 N. E. 711; McGrath v. Carnegie Trust Co. 221 N. Y. 92, 116 N. E. 787; Maryland Casualty Co. v. Fonts (C. C. A.), 11 Fed. (2d) 71.
The conclusion of the matter therefore must be that the appellant bank is entitled to' a judgment as prayed for in its answer and cross complaint. The note having been paid, the mortgage is satisfied. The real estate which was subject to that mortgage is in the estate of Maurice Strelitz, and is *449subject to such claims as may properly be made against that estate.
By the Court. — Judgment reversed, and cause remanded with directions to enter judgment in accordance with this opinion.