Doty v. Enterprise Timber Co.

1. Execution. Right of judgment creditor as against claimant. Sale of property at instance of senior creditor. Where a valid, judgment was recovered and duly enrolled against persons who owned land in the county, on which they had given a deed of trust securing an indebtedness previous to the rendition of the judgment, and execution was duly levied on timber cut from the land by the judgment debtor and sold at private sale, at the instance of the holder of the trust deed to the claimant in execution, in such case the judgment creditor was entitled to the timber as against the claimant in execution, since if the latter had any rights, they were equitable and claimant’s only right, if any, was to have the holder of the trust deed transfer to it the prior lien evidenced by the trust deed, and to be subrogated to the lien thereof in preference to the junior lien of the judgment creditor, and the enforcement of such right could only be had in a court of equity. 2. Subrogation. Parties to action. The right of subrogation, being equitable in its nature, cannot be enforced in proceedings to which those whose equities are affected are not parties. Creditors to whose rights a party seeks to be subrogated are necessary parties to an action to obtain such subrogation.

Appeal from the circuit court of Attala county. Hon. E. Y. Hughston, Special Judge. Levy of execution by L. H. Doty wherein the Enterprise Timber Company was claimant. From a judgment for claimant, .plaintiff in execution appeals. The facts are fully stated in the opinion of the court. It being’ conceded by all the parties hereto, that the judgment, execution, and levy were in all things legal and valid; the only points of inquiry presented by this appeal, are briefly as follows: 1. "Was the judgment of appellant, after its enrollment a lien upon the property herein levied upon? 2. By the simple process of paying to the Senior Lienholder Kelly Bank, if the judgment was a lien the purchase price, did the claimant acquire a title to this property free of the judgment lien? Taking up the points of inquiry in the order in which they are made, brings us to a discussion of section 819 of the Code, which said section of the Code is in words and figures as follows: “A judgment so enrolled, shall be a lien upon and bind all the property of the defendant within the county where so enrolled from the rendition thereof, and shall have priority according to the order of such enrollment, in favor of the judgment creditor, his representatives or assigns, against the judgment debtor, and all persons claiming the property under him after the rendition of the judgment; and a judgment shall not be a lien on any property of the defendant thereto, unless the same be enrolled; but in counties having two judical districts, a judgment shall operate as a lien only in the district in which it is enrolled.” It will be observed from the agreed statement of facts that the property herein levied upon, was owned and in the possession of the judgment debtor on the date of the enrollment of the judgment; that it was purchased by the claimant from the judgment debtor and by a private voluntary sale, and as will be- observed from the statute copied supra, this property was burdened by the judgment lien when said purchase was made. This lien having attached, it could not be defeated by any act of the judgment debtor. It binds the property even in the hands of remote subvendees. Mitchell v. Wood, 47 Miss. 231; Heron v. Walker, 69 Miss. 707. The only possible object of enrollment of such judgments is the protection of judgment creditors against a sale by the judgment debtor of his propery, and in addition thereto the enrollment thereof, if a protection of would-be purchasers. In this case, the claimant purchased with full notice of the junior judgment lien. As was said by the supreme court in the case of Josselyn v. Stone, 28 Miss. 753. “The object of the enrollment is to protect the rights of persons who should become purchasers. ’ ’ From the tenor of the defense interposed by the claimant in the court below, and from the wording of the judgment rendered by the trial court, it seems to be conceded that the judgment of appellant was a lien upon the property levied upon, and should have been enforced, but for the fact that the purchase price paid therefore, was applied to the mortgage debt, or to the prior deed of trust. In other words, it seems from the wording of this judgment, that the trial court was of the opinion that there was a kind of subrogation or substitution brought about when the money that was paid for the timber, was credited upon this prior deed of trust. When we consider the essential elements of subrogation, the lack of application thereof to the case at bar is made so plain that we feel that it is but a waste of time of this court to go into a discussion thereof, yet, lest we be be misunderstood we ask the indulgence of this court for the purpose of presenting the elementary principles that govern the application of this doctrine. In 37 Cyc., page 363, subrogation is defined as follows: “A. In general, subrogation is the substitution of another person in the place of the creditor, so that the person in whose favor it is exercised succeeds to the right of the creditor in relation to the debt.” It is manifest from the judgment of the trial court, the case, or the decision of the case, was made to turn upon some supposed right acquired by the claimant when his money was applied to the debt due under the deed of trust, for in the course of said judgment, it is said: “That C. C. Kelley Banking Company held a prior lien thereon by virtue of a deed of trust executed by defendants and that proceeds of the said logs were applied to the debts secured by said deed of trust, and that plaintiff in execution failed to show that said logs brought an inadequate price.” Therefore, the application of the money to the trust deed was the controlling fact with the learned special judge, and this application of the purchase money, is bound to have had either one of two results, viz; absolutely extinguishment of the deed of trust as to this property, or an assignment of deed of trust or subrogation of the claimant to the rights of the Kelly Bank. It will be remembered here that the claimant Timber Company made a contract for the purchase of this timber with the judgment debtor, and that under this contract of purchase, his liability therefor was primary. It was not forced to buy this timber, and'it owed the judgment debt- or no moral obligation to pay this deed of trust off, nor did it pay the secured debt named in the deed of trust. In 37 Cyc., on page 374, it is said: “D. Subrogation is. allowed only in favor of one who, under some duty or compulsion, legal, or moral, pays the debt of another; and not in favor of him who pays a debt in performance of his own covenants, for the right of subrogation never follows an actually primary liability, and there can be no right of subrogation in one whose duty it is to pay, or in one claiming under him against one who is secondarily liable, or not liable at all.” See also Sec. D, page 375, of same work. ‘ ‘ Subrogation is not a universal remedy for parties who have lost their money. It has its sphere of relief plainly limited by its nature; and before subrogation can be decreed, the facts on which it arises must be distinctly and appropriately alleged and shown, and the equity plainly appear, and the complainant to enforce a right acquired by subrogation should state the facts which give rise to the right claimed. The issue of subrogation must be pleaded, and the subrogee who, on paying the debt, is entitled to be subrogated to the rights of plaintiff, must ask for such relief in his answer.” 37,Cyc. pages 388, 390. We desire to call the attention of the court to the very extensive annotations found in Cyc. supporting the quotations, supra, among which will be found cases from the supreme court of Mississippi. But due tó the fact as mentioned above, the lack of application of this doctrine is so manifest that we will not further cite authorities here. The contention made by the counsel for plaintiff, is reduced to the single proposition that plaintiff in judgment, H. L. Doty, had the right to demand the sale to be made by the trustee as prescribed in the trust deed. The contention is manifestly unsound and untenable, because Doty, was not a party to the trust deed; he had no rights in and to the trust deed and since the trustee and his function in the trust deed was wholly a creation of the parties to the trust deed, and since the sole purpose of having a trustee at all is for the protection of the parties to the trust deed, Doty could have nothing whatever to do with directing the trustee or even demanding that he do anything, and the only party who could demand that he should act at all, would he one of the parties to the deed of trust; and since they, hy mutual agreement, did only what the trust could do, that is, to sell the property at its true value and this must he assumed because there is no complaint to the contrary the trustee’s action in selling it himself could have added nothing whatever either as to the validity of the sale or transfer of title free of incumbrances. If the judgment creditor Doty had desired to avail himself of his only legal right in the premises he should have tendered to the Kelly Bank the full amount of the trust deed and been subrogated to the right of the Kelly Bank to have the trustee foreclose and he could then have levied his execution on any overplus. This the plaintiff did not do, hut contends that the sale as above mentioned operated as a release of the mortgage upon the timber. The facts in the record do not by any means warrant this conclusion. The language in the statement of facts is as follows: “That the claimant, the Enterprise Timber Company, purchased said logs through the said C. C. Kelly Banking Company from the Kosciusko Industrial College and P. II. Thompson hy private sale; that the purchase price of said logs, four hundred and fifty dollars, was paid hy the Enterprise Timber Company to the C. C. Kelly Banking Company prior to the levy of said execution and hy agreement with the Kosciusko Industrial College and said P. H. Thompson was applied on the debt due said Kelly Bank, which debt was secured hy said trust deed as mentioned above. ’ ’ This transaction is one of the ordinary methods in common use. The hanks of this country that take mortgages upon live stock and crops universally adopt the rule of selling the cotton to merchants or brokers by consent of the grantor, and credit his debt with the purchase price thereof without the intervening action of a trustee. Likewise the sale of live stock and other personal property, and the title to same is not affected hy judgment lines. Indeed it would be-a great hardship to hold that the title could not pass free of liens by a sale and delivery of same by and with the consent of grantor and grantee made in good faith to reduce the secured debt by a mortgage and to hold that the expense and delay necessary for the trustee to act, should be required, and that the trustee in person should sell such property according to the terms of the instrument. These empty formalities are of no consequence and have no place in the busy affairs of grantor and grantee when they can readily dispatch their business to much better advantage. The second lienor or creditor cannot complain of the acts of grantor and grantee so long as the same are in good faith as is shown byj this record. Counsel for the plaintiff belabors himself about the law of subrogation and misconceives in a large measure the act and intention of the parties in this case. Should the sale be construed to have been made by the bank for the benefit of the grantor without his knowledge or consent, then the doctrine of subrogation would apply, but as this is not the fact and is not consistent with the spirit or the acts constituting the sale of the timber to the claimant, we do not deem it necessary to elaborate.