Dowdy v. Blake , 50 Ark. 205 ( 1887 )

Cockrill, O. J.

Blake and Todd purchased a tract of land in Desha county from Treadwell, in 1869, for $11,000,, Todd paying $5,000 of the purchase price at that time. They executed their notes for the deferred’payments of purchase money, and their grantors reserved a lien upon the lands sold to secure the payment. In 1871 Treadwell brought suit in Tennessee against Blake and Todd to recover a bal-' anee of $2,000 and interest which he claimed was due hina on the purchase. The defendants resisted the suit and succeeded in reducing the. amount claimed, but judgment was rendered against them for $1,607.27 with interest and costs of suit. Execution issued against the defendants upon this judgment and Blake was compelled to satisfy it. ' This was-in February, 1876. In the meantime Blake and Todd had-a settlement of their affairs, adjusted the burden of the unpaid Treadwell debt equally between them, agreed in writing upon a partition of the lands, and without executing deeds to-•carry the partition into effect, each entered into the possession of his separate share. After this Todd executed a deed •of trust upon the lands set apart to him to secure a debt he owed Dowdy, reciting in the deed that the lands were “free from incumbrance except a small balance for the purchase money.” This was intended by Todd and understood by Dowdy and the trustee named in the mortgage, to refer to the purchase money due Treadwell, the payment of which Todd and Blake were then contesting in the Tennessee litigation. Todd made default in the payment of his mortgage debt, and the trustee named in the mortgage advertised the land for sale in accordance with the power conferred by the deed. His advertisement of sale contained the statement that be would sell the land “subject to a balance of $865 or thereabouts of purchase money.” Dowdy became the purchaser at the trustee’s sale in March, 1876, to satisfy his debt. This present suit was commenced in December of-the same year by Blake against Dowdy to subject the lands purchased by the latter from Todd to the payment of one half of the Treadwell judgment. The court below granted the plaintiff the relief he desired. Dowdy has appealed. His counsel submits that the questions which arise are, did Treadwell, the original vendor, have a lien on the lands in controversy when Blake discharged the execution against Todd and himself ; and if so, can Blake be subrogated to Treadwell’s security and enforce it for any part of the amount so paid, against the lands in the hands of Dowdy, Todd’s vendee?

1. Vendor and Vender : Lien for purchase money reserved in deed: Waiver. The reservation of a specific lien in the deed executed by Treadwell to Todd and Blake to secure the purchase money thereafter to be paid for the land, and the acceptance of the deed by the grantees, created an equitable mortgage, (Robinson v. Woodson, 33 Ark., 307; Ober v. Gallagher, 93 U. S., 199; 3 Pomeroys Eq., secs. 1255 et seq.), and the security was not waived or lost by- reason of the fact that the vendor-took notes from his vendees for the unpaid purchase money, and afterwards sued at law and obtained judgment in per-sonam against them thereon. Richardson v. Green, 46 Ark., 267. Treadwell’s security was intact when Blake paid the debt. If Todd had not parted with his interest in the land would Blake be subrogated to Treadwell’s right to resort to it for "the repayment of any part of the purchase money ? , In Bisp-hamfs Principles of Equity it is said to be the rule that the right of subrogation does not exist “ between parties who are equally bound — as for example co-partners, co-obligors, and co-contractors.” Sec. 337. The same doctrine is stated in terms almost as broad by the annotators of the leading cases in equity (Dering v. Earle of Winchelsea, vol. 1, pt. 1, 147; Aldrich v. Cooper, vol. 2, pt. 1, 281,) and in Engles v. Engles, 4 Ark., 286; S. C. 38 American Dec., 37, the rule as thus announced seems to have been followed by this court in a •case where one co-purchaser had paid more than his share of the purchase money — though the attention of the court in that case was not directed to the doctrine of subrogation.

The broad statement of the rule as given above cannot be said to be generally sustained by the adjudicated cases, and much authority qualifying if not denying it, at least as far -as co-obligors are concerned, might be quoted. Thus in the case of Pratt vs. Law, 9 Crunch, 456, (S. C. 5 Wheat., 429), three persons mortgaged their joint property to indemnify the drawer of bills of exchange drawn for their mutual accommodation ; sold the bills and divided the proceeds equally among themselves, each agreeing to pay one-third of the amount if the bills should be returned protested ; they were so returned and Greenleaf, one of the three mortgagors, paid the whole debt. The qnestion, arose between the assignee in bankruptcy of Greenleaf and one who had acquired title to the interest of the other two mortgagors in the mortgaged property by purchase at sheriff’s attachment sale after the bills had been taken up by Gfreenleaf. It was argued there as here, that payment by one of the co-obligors discharged the mortgage (see page 482), but the court held that a two-thirds equitable interest in the mortgage passed to the mortgagor who discharged the debt, and that the assignee succeeded to it and could enforce it against the land in the possession of the subsequent purchaser. The court say: u Had these bills not been taken up, and the holder prosecuted all the drawers and endorsers to insolvency, there can be no doubt that the holder would have been entitled to charge the mortgage premises, in equity, with the payment of the bills. But what difference is there, in-equity, between the-case of any other holder of these bills, and that of Gfreenleaf,. who, liable, equitably, only for one-third was compelled to take up the whole, and did it with his own funds. It consists only in this; that the one becomes creditor for the whole; the other only for two-thirds.”

It is not difficult to dispose of the question now under consideration when the relation of the parties — that is,, of Todd and Blake, is understood. A joint note having been given by them to the vendor for the purchase money, they were principal debtors in their relation to him, and were jointly and severally bound to him for the whole amount. But the purchase was made for their equal benefit. The-land was to be shared equally between them, and the implication of law, in the absence of an agreement to that effect,, is that they intended to adjust the burden of the purchase in like proportion. This is upon the maxim qui sentit com— .modum, sentiré debet et onus. The obligation between themselves was therefore that each should discharge one-half the-burden, and each become the surety of the other to the-extent of the debt which the other was to pay. McGee v. Russell, 49 Ark.; Owen v. McGeehee, 61 Ala., 440; Ackerman’s Appeal, 106 Penn. St., 1; Seetzler v. Mitchell, 37 Id., 82 ; Grafts v. Mott, 4 Comstock, 604; Chipman v. Morrell, 20 Cal., 130; Goodall v. Wentworth, 20 Maine, 322; Fletcher v. Grover, 11 N. H., 368; Stokes v. Hodges, 11 Rich So. Eg., 135; Sheldon on Subrogation, sec. 169.

Now when one in the situation of a surety pays the debt of him who is primarily liable, equity puts him in the place of the creditor whose debt- he has discharged, and gives him the benefit of the securities which the creditor has obtained from the principal debtor. Though no assignment of the security is actually made, equity, treats it as having been done. Newton v. Field, 16 Ark., 232.

“ The principle is a general one,” says Mr, Bispham, “and will apply in every instance (except in the case of a mere stranger) where one man has paid a debt for which another is liable.” It is eminently calculated'to do exact justice between persons who are bound for the performance of the same duty or obligation, and is therefore much encouraged and protected.” Principles of Equity, secs. 336, 337.

“ It is a mode,” says Judge Strong, in McCormick v. Irwin, 35 Penn. St., Ill, “ which equity adopts to compel the ultimate discharge of the debt by him who in good conscience ought to pay it, and to relieve him whom none but the creditor could ask to pay,”' and it is not confined to cases of strict suretyship. Schoonover v. Allen, 40 Ark., 136.

From these statements of the general principles of subro-gation, it seems clear that one co-purchaser who has paid a part of the common obligation which the other in good conscience ought to have paid, and for which, as between themselves he is primarily liable, would be substituted to the rights of the creditor in order that injustice might not be done. But we are not without analogous cases to sustain the position.

The equity of subrogation springs out of the right to contribution, and is only one of the means by which that right is enforced. Bisph. Equity, sec. 335. The cases recognizing the right to contribution are therefore in point. The right-of contribution between co-purchasers has been frequently recognized and enforced. Owens v. McGeehee and other cases-supra. As direct authority upon the question, we quote from the opinion in the case of Ackerman’s Appeal, 106 Penn. St., supra.: “ In Gerhardt v. Jordan, 1 Jones, 325, (11 Penn. St.), it was held that- the rule (as to subrogation)' embraces purchasers in common of an estate bound by a joint lien; as between themselves, the purpart of each is-liable to contribute only its proportion ot the common burden, and beyond this, is to be regarded simply the surety of the remaining purparts. In this respect they are to be -treated as the’ several estates of joint debtors, one being surety of the other; and if the purpart of one is called upon to pay more than its due proportion, the tenant or his lien creditors, upon the principle settled in Flemming v. Weavery 2 R., 128; Crofts v. Moore, 9 Watts, 451, and Neff v. Miller, 8 Barr, 347, is entitled to stand in the place of the satisfied creditor, to the extent of the excess, which ought to have been paid out of the other shares.” The doctrine of Gerhardt v. Jordan was recognized in the late case of Watson’s Appeal, 9 Norris, 426 (90 Penn. St.), where it was said by Mercur, J., “ As between two mortgagors of land held by them as tenants in common, and third persons, each mortgagor is liable for the whole sum secured by the mortgage ; but as between themselves each is liable for one-half only. As to the other half, each is surety for the other.”

2. Subrogation : Of co-purchaser of land to vendor’s security. In Simpson v. Gardnier, 97 Ill., 237, where two persons purchased land, receiving a deed therefor, not in severalty, but to them in common, gave their joint notes for the unpaid purchase meney, secured by their joint mortgage on the entire tract, and one of them was compelled to pay the whole amount of the notes and interest to save his own share of the land, it was held, that the party so paying off the incum-brance was entitled to contribution, and to be subrogated to the rights of the mortgagee, and to enforce the lien of the mortgage as to the money paid aboVe his own proper share. To the same effect are Williams v. Perry, 20 Ind., 437; Fisher v. Dillon, 62 Ill., 379.

For the purposes of subrogation there is no difference between a vendor’s lien by reservation in the deed, and the mortgage given back by the vendee to secure the purchase money. 3 Pomeroy’s Eq., secs. 1255 et seq. The Illinois and Indiana cases cited are therefore directly in point. The case of a joint mortgage by tenants in common is also analogous,, and in such cases it- is held that if one of the tenants pays off the whole debt, the lien of the mortgage is preserved as against his defaulting co-tenants to reimburse him. Sheldon on Sub., secs. 2, 172-3, and cases cited.

It follows that Blake’s equity was perfect as against Todd. Does Dowdy, his vendee, stand in a better position ? “ Where the right of subrogation exists as against a principal debtor,, it may also be enforced against one claiming under him as a purchaser with notice.” White & Tudors note to Aldrich v. Cooper, 2 Leading Cases in Equity, pt. 1, p. 280.

Dowdy purchased with notice. Aside from being charged with constructive notice of the purchase money incumbrance by the reservation of the lien in Treadwell’s deed to Todd and Blake, which is a link in his chain of title, and was also of record, before he acquired an interest in the land, the deed of trust under which he acquired his title', recites that the land was then subject to the payment’of a balance due from his vendor for the purchase money. He knew of the pendancy of the Tennessee suit to recover of Todd and Blake the amount then due on that account. His claim is' that ,when he purchased at the trustee’s sale he supposed the lien had been discharged by the payment .made on the Tenues-see judgment. It is not probable that Dowdy believed this to be true, for we find the trustee then advertising to sell the land, subject to a lien for the purchase money, equal in amount to about one-half of the Tennessee judgment. As the trustee makes the sale in such cases at the request of the beneficiary, and ordinarily acts under his advice, it is most probable that the statement contained in the notice of sale was made with Dowdy’s acquiescence. But the proof does not show that he knew of it, and if we concede that the trustee exceeded his authority in advertising that he would sell the land subject to the specific amount named as a lien, it does not relieve Dowdy. It is charged in the complaint and admitted in the answer that at the time of the partition between the purchasers an adjustment of the burden of the purchase price was made, and that it was then agreed between them that the residue, whatever the result of the suit then pending between them and Treadwell might be, should be borne equally. This occurred before Dowdy’s deed of trust was executed. Nothing thereafter transpired to deceive or mislead him. We are not informed that either the judgment record or record of the reserved lien in the deed had been cancelled or in any manner satisfied. Both must have warned Dowdy that the lien was still subsisting. If he was informed that one of the parties to the judgment, without knowing which, had paid the amount of the recovery to the judgment creditor, he was not justified in supposing that the lien was extinguished, because he is charged with knowledge that equity would preserve the incumbrance if the payment was made by Blake to protect him from loss by reason of paying Todd’s share. Blake’s obligation to discharge the incumbrance was not altered by the substitution of Dowdy for Todd.

The case of Clark v. Warren, 55 Ga., 575, is relied upon by the appellant to sustain the position that one co-purchaser is morally and equitably bound to pay off and discharge the mortgage debt for the protection of the vendee of the other co-purchaser. That case seems to belong to the •class refusing to extend the doctrine of subrogation to co-obligors. If that is not the meaning of the case it is authority to the point stated. But we cannot assent to the proposition that one of two co-purchasers who stand upon the same footing has the power to clothe his vendee, who is in the full knowledge of all the facts, with a better garb than invests his own rights, thereby increasing the burden •of his co-owner without fault on the.part of the latter.

If we regard Todd as Blake’s principal, and the land; after the sale to Dowdy, as his surety, the failure to sue Todd before his adjudication as a bankrupt, which occurred at an unknown day in 1876, did not release the land. Hawkins v. Mimms, 36 Ark., 145.

It does not appear from the bill, as the appellant assumes, "that Dowdy became the purchaser of a part only of the Todd land, or that Todd is still the owner of a part. If there •could have been a marshalling of assets, and Dowdy desired it, he should have brought the proper parties before the •court and adopted the ordinary means to effect that result. Woodruff v. Ringo, 43 Ark., 469. He made no effort in any form to do so, and the objection now comes too late.

Affirm.