Murphy v. Baldwin

BabNes, J.

This case has been well briefed and ably argued at the bar, and the learned circuit judge has favored us with a terse and lucid opinion setting forth his views.

The errors assigned are: (1) The court excluded testimony which should have been received. (2) The court should have found as a fact that Baldwin agreed to give plaintiff security for his indorsement. (3) The court should have held as a matter of law that plaintiff was entitled to subrogation, regardless of any promise to give security. (4) The court should have held that plaintiff believed in good faith that he was to receive security for his indorsement, and in such a case he was entitled to be subrogated to the rights of the creditor whose debt he paid.

1. On the trial plaintiff sought to prove by the cashier of the bank where the indorsed note was discounted that plaintiff informed him that he expected to be secured for his indorsement. The evidence was excluded. Questions were asked which pertained to the time at which the transaction took place as well as to a later period. There was no pretense that Baldwin was present at any of these conversations. All such evidence was held to be incompetent because self-serving and hearsay. It is not claimed that the evidence was competent unless made so by certain questions asked of plaintiff on cross-examination and on redirect. He testified on cross-examination that he told the bank directors that he was to have mortgage security for his indorsement. This evidence related to *570 a time long after the note was indorsed. On redirect examination he testified that he made such a statement' about the time the bank took the note. The court said that it would eliminate all this testimony from consideration in deciding the case. We think it was entirely proper for the court to say that it would not consider incompetent testimony that had been admitted and that it would not receive any more evidence of a like character. In effect, though not in form, the court struck out the incompetent evidence that had been admitted. It would, we think, be a surprise to the profession to learn that in the trial of equity cases, where great latitude is often allowed in offering evidence, the court, once having-admitted incompetent testimony without objection, could not decline to consider it.

2. The finding that there was no promise to give security cannot be disturbed. The statement of Baldwin about giving security was made when he sought to borrow $10,000 from the plaintiff. A different arrangement was made at a later date, and Baldwin says he did not agree to secure the plaintiff on his indorsement. The principal witnesses were plaintiff and Baldwin. The condition of the evidence was such that a finding either way upon it would not be disturbed by this court. We are not satisfied that the trial judge proceeded on any erroneous' theory in reaching a conclusion on the facts.

3. The main question in the case arises on the contention that on the facts found plaintiff was entitled to subrogation. Decisions can be found both ways on the proposition. On the one hand it seems equitable enough, where money or credit is borrowed to enable a debtor to pay a mortgage, and this fact is known to the parties and it is so used, that the party who in fact pays the debt should be placed in the shoes of the creditor who has been paid. On the other hand, it is a maxim of equity that it aids the diligent. The plaintiff was in a position where he might have exacted security if he desired *571 it. If Re could not obtain it, lie might withhold his indorsement. Not having done what prudence would dictate, should a court of equity supply a remedy to relieve him of the result of his carelessness ? We think the question has heen answered adversely to the plaintiff by the decisions of this court. It is difficult to see wherein the plaintiff is in any different or better position than he would have been had he loaned the money outright instead of indorsing defendant’s paper. This court is committed to the doctrine that in the case of a loan of money or credit unaccompanied by a promise to give security, no right of subrogation exists, even where it is understood that the money is to be used in paying a secured debt'. Downer v. Miller, 15 Wis. 612 ; Watson v. Wilcox, 39 Wis. 643 . The rule of these cases is approved in Wilton v. Mayberry, 75 Wis. 191 , 43 N. W. 901 . The case of Downer v. Miller is exactly in point, in that it holds that a party loaning his credit to pay an existing indebtedness is not entitled to subrogation in the absence of an agreement to give security. Had the plaintiff been obliged to pay the mortgages to protect some lien of his own on the mortgaged property, or had the debtor agreed to give security on the mortgaged property, or had the plaintiff been a surety for the payment of the mortgage debt, then the right of subrogation would follow. Wilton v. Mayberry, supra; Hughes v. Thomas, 131 Wis. 315 , 111 N. W. 474 ; Downer v. Miller, supra; Poluckie v. Wegenke, 137 Wis. 433 , 119 N. W. 188 . The doctrine of the cases cited is not shaken by Carey v. Boyle, 53 Wis. 574 , 11 N. W. 47 , which involved the existence of a purchase-money lien rather than a right of subrogation, nor by Hughes v. Thomas, supra, where there was an agreement to give security.

4. The point is made that the plaintiff in good faith believed .when he indorsed the note that he was to receive security, and under the doctrine of Stewart v. Stewart, 90 Wis. 516 , 63 N. W. 886 , he was entitled to subrogation for this reason. The facts in the two cases are entirely dissimilar. *572 In Stewart v. Stewart the mortgage was paid in good faith, the payors believing that they owned the title to the mortgaged property, and it was held that as against the true owners, who received the benefit of the payment, such payors should be subrogated to the rights of the mortgagee whose mortgage they paid. Here there is no element of mistake. The 'court found on sufficient evidence that there was no agreement to give security, and, accepting this finding as a verity, there is no ground for applying the rule of the Stewart Case.

By the Court. — Judgment affirmed.