Summary
In Arnold v. Green (116 N.Y. 566) it was said that the remedy of subrogation is no longer limited to sureties and quasi sureties, but includes so wide a range of subjects that it has been called the "`mode which equity adopts to compel the ultimate payment of a debt by one who in justice, equity and good conscience ought to pay it.
Summary of this case from Durante v. EannacoOpinion
Argued October 31, 1889
Decided November 26, 1889
Lucius N. Bangs for appellants. E.A. Nash for respondent.
This appeal presents the single question whether, under all the circumstances of the case, the defendant should have been substituted in the place of Mr. Wadsworth as the owner of the mortgage in question. Did he by the fact of payment become the equitable assignee of the security and entitled to enforce it for his own reimbursement and the protection of his interest in the land? Under some circumstances the payment of a mortgage does not satisfy it or destroy its lien, because equity regards the person making the payment as the owner thereof for certain definite purposes and keeps it alive and preserves its lien for his benefit and security. According to the well-established principles upon which the doctrine of equitable assignment by subrogation rests, if the person paying stands in such a relation to the premises that his interest, whether legal or equitable, cannot otherwise be adequately protected, the transaction will be treated in equity as an assignment. (Sheldon on Subrogation, §§ 1, 3, 14, 16; 3 Pomeroy's Equity Jur. § 1211; Jones on Mortgages, § 874.) The remedy of subrogation is no longer limited to sureties and quasi sureties, but includes so wide a range of subjects that it has been called the "mode which equity adopts to compel the ultimate payment of a debt by one who in justice, equity and good conscience ought to pay it." (Harris on Subrogation § 1; Barnes v. Mott, 64 N.Y. 397, 401; Stevens v. Goodenough, 26 Vt. 676; Harusberger v. Yancey, 33 Gratt. 527; Smith v. Cosan, 42 Conn. 244.) While a mere volunteer, with no obligation to pay or interest to protect, is not entitled to its aid, it is frequently applied in favor of a vendee of encumbered real estate, who, although not personally liable, has paid the debt of another which is a charge upon the land, and which, if not paid, might cause him to lose his interest therein. Under such circumstances the debt, although paid and satisfied in form, is regarded in equity as neither paid nor satisfied in fact, but by operation of law the former holder ceases to be the creditor, while the person paying takes his place as owner of the debt and security unimpaired. Where, within the limitations suggested, benefit may result to the person paying without injury to the person who should pay, equity casts the burden upon the latter, who ought in fairness to bear it, provided it will not work injustice or disturb the rights of other creditors of a common debtor. (Id.; Johnson v. Zink, 51 N.Y. 333; Cole v. Malcolm, 66 id. 363; Twombly v. Cassidy, 82 id. 155; Gans v. Thieme, 93 id. 225, 232; Averill v. Taylor, 8 id. 44, 51.)
These principles, when applied to the facts of this case, sustain the judgment as modified by the General Term. The defendant was the purchaser of land subject to two incumbrances, the earlier of which was a mortgage for a large sum past due, and the other a decree in Surrogate's Court, the subject of which was still in litigation. He was the vendor of the same land, subject to the same incumbrances, but no part of the principal of the purchase-price had been paid, and interest thereon was past due and unpaid. The land itself was the primary fund for the payment of said incumbrances, neither of which was the personal debt of the defendant, but either of which, if enforced, would require him to raise the money and pay it, or else lose his interest in the premises. He held the legal title to the land as security for the payment of the purchase-price, and as trustee for the plaintiffs, the equitable owners. It did not appear that the land was adequate security for the amount there was against it, including the demand of the defendant. It is clear, therefore, that he was not a mere volunteer or stranger, because he had an actual interest to protect against two prior liens, either of which might be enforced at any time, involving trouble, expense and the possible loss of his claim. The danger of interference may have been remote, but there was nothing to protect him against a change of mind on the part of the holder of the mortgage or on the part of the plaintiffs. Freedom from interference depended upon moral assurance, not upon legal right. How can he be called a stranger to a debt whose land is the primary fund for the payment of such debt? A stranger or volunteer, as those terms are used with reference to the subject of subrogation, is one who, in no event resulting from the existing state of affairs, can become liable for the debt, and whose property is not charged with the payment thereof and cannot be sold therefor. A payment made by one who was liable to be compelled to make it, or lose his property, will not be regarded as made by a stranger. Where the person paying has an interest to protect he is not a stranger. Even if he holds the title to land merely as security, still he has an interest that is insecure, in a legal sense, as long as the prior lien is past due and held by another. (Harris on Subrogation, §§ 795-798; Sheldon on Subrogation §§ 245, 246; Jones on Mortgages, § 877.)
It is insisted, however, that the payment made by the defendant was not a fair effort to protect his property, but that his method was underhanded and his object uncertain. This is doubtless true, and it gave the court jurisdiction to require the defendant to so handle his security as not to injure the plaintiffs, and to place them as nearly as possible in the same position as if he had not paid the mortgage. Owing to his misconduct he was properly compelled not only to defer the enforcement of his security until the plaintiffs had had a reasonable time to find another holder for the mortgage, but also to pay the entire costs of the litigation. The plaintiffs cannot, with propriety, complain of the decree as modified, because they lose nothing by it. They are substantially situated as they were before the payment was made. They should not, therefore, be permitted to take advantage of the defendant by insisting that an effect be given to the payment which was not intended and which would be inequitable. They come into a court of equity seeking, among other things, relief from their own default in not paying the interest upon the law day. ( Stevenson v. Maxwell, 2 N.Y. 408.) As they seek equity from the defendant, they must do equity toward him; and when they receive all that they contracted for, it would not be equitable for them to avoid paying for it as they agreed. Equity will not permit them to receive the equivalent of $6,000 for nothing and at the same time to demand its aid for further relief against the person who parted with that sum for their benefit, even if his methods were indirect and his object questionable. On the other hand, it will give to each party his own; to the plaintiffs the land, and to the defendant the money and security, but, under the circumstances, will require him to so use the latter as not to take any advantage of his vendees.
If the plaintiffs had made a tender before the defendant made the payment, or if they could not have been placed in the same situation, substantially, that they were in before the payment was made, different questions would have arisen for consideration in relation to which we express no opinion.
We think that the judgment should be affirmed, but, under the circumstances, without costs.
All concur, except BROWN, J., dissenting, and BRADLEY and HAIGHT, JJ., not sitting.
Judgment affirmed.