Dillon v. Kauffman & Runge , 58 Tex. 696 ( 1883 )

Willie, Chief Justice.

The claim of Kauffman & Bunge to be subrogated to the lien of Marx & Kempner upon the property of Dillon is a iust and proper one. Dillon having dissolved partnership with Hall, was anxious to have him released from liability upon the firm note for $6,000, and to substitute his individual note in the place of it. He had agreed with his partner in their final settlement that Hall should convey to him his half interest in the Kosse property, and Hall would not carry out this agreement until he was freed from liability on the firm note. Dillon also wished to continue business for himself, and to that end to establish a line of credit with Kauffman & Bunge, who it seems were willing to extend it to him upon his placing collaterals with 'them to secure future indebtedness. As a part of this arrangement Kauffman & Bunge took up the $6,000 note, Marx & Kempner transferring it to them by indorsement without recourse, and delivering to them also the deed of trust given to secure it. Then followed the execution of a new note signed by Dillon alone, made payable to Kauffman & Bunge, for the same amount and bearing the same rate of interest as the firm note, and the execution also of a new deed of trust upon precisely the same property that was included in the old one, Which was released about the same time by the trustees named in it.

The only reason urged by appellant why this should not amount to a subrogation of Kauffman & Bunge to Marx & Kempner’s rights as mortgagees is that they were mere volunteers, officiously intermeddling in the matter, and having no interest in the payment of the debt and the extinction of the original lien or its transfer to them. Admitting that they were not under obligation for the payment of the debt, and that they had no interest in the incumbered property to be protected by purchasing in Marx & Kempner’s security, and that they paid their money for the $6,000 note voluntarily, still the evidence shows conclusively that the payment and discharge of the old note and mortgage and the execution of the subsequent instruments were the result of an arrangement to that effect between all the parties to the transaction.

It clearly appears that it was their understanding that Kauffman & Bunge should become entitled to the security or its substitute, and the arrangements made between them were intended to have precisely the effect which appellees claim should be given them. It was a conventional subrogation, and it would be a fraud upon the appellees if Dillon could now insist that the security was discharged by the payment and release of the note and mortgage.

The substitution of one note for another, or the cancellation of the former mortgage and supplying its place with a new one, does not affect the subrogation, but the claim may be enforced against the property incumbered by the original lien, no matter what changes may have occurred in the form of the instruments.

Taking additional personal security, or the individual note of one of the original signers, or embracing additional property in the deed of trust, does not affect the lien upon such property as was originally included in the security. As the lien of the subrogated party reaches back to the date of the original mortgage, and holds its grasp upon the incumbered property from that time continuously through the various changes in the character of the securities till the debt is fully satisfied or effectually released, it follows that no intervening equity of third parties can affect it, but they must all yield to its superior claim.

Even the homestead right which may accrue in the incumbered property can' receive no more protection against this subrogated lien than against any one of the same kind which is allowed to prevail over it when no subrogation has taken place. These doctrines have been so frequently established in the courts of the country, including those of our own state, that it is useless further to discuss them. The only case in which the contrary ivas held, after having been frequently attacked, was finally overruled in the case of Ilicks v. Morris, lately decided at Tyler.

In the present case one piece of property covered by the deed of trust became the homestead of Dillon and family a few weeks before the subrogation took place. So far as the deed of trust of Kauffman & Kunge is concerned, no homestead right was acquired in these premises, and, like any supervening equity or incumbrance, it cannot prevail against the subrogated lien of Kauffman & Kunge, and was subject to be sold for the satisfaction in the same manner as if no appropriation of it as a homestead had ever taken place.

This leads us to the consideration of the only other point of any importance upon which a reversal of the judgment is sought, viz., the alleged error of the court in allowing an appropriation of the money realized from sale of the goods embraced in the deed of trust to a debt due by Dillon to Kauffman & Kunge on open account.

The evidence is very clear that this took place by consent of Dillon. There can be no doubt but that the lien creditor may agree with his debtor that any one article of property included in the lien may be discharged from the lien; that it may be sold and the proceeds applied to any purpose agreed upon between the parties. This is, of course, subject to the rights of sureties, incumbrancers or other parties interested in the debt or the property to have their interests protected.

It is claimed that the wife’s homestead right having attached to the premises, subject to the payment of the lien upon them, creates such an interest in them that she can compel a sale of the remaining incumbered property to pay off the mortgage debt before the homestead property can be touched for that purpose; that as a consequence, when the goods were sold, her homestead rights demanded that their proceeds should have gone towards the satisfaction of the mortgage and not to the open account; that judgment should have been enforced only for the balance of the debt after deducting the net proceeds of the sale, as well as those of the sale of the Montgomery lands which were deducted by the court.

We do not think this position tenable. The premises as to Kauffman & Bunge’s lien were not a homestead, and were not to be treated as such in enforcing that lien. They stood upon no higher footing than any other lots bound by a deed of trust. Whilst as between Dillon and his wife and other parties, the constitution protected them from forced sale, from mortgage, or from sale without consent of the wife, that instrument did not shield them from sale, conveyance, or other disposition for the purpose of satisfying a lien fastened upon them before becoming the home of the family. As to such, they possess no greater dignity than they had when the lien first attached. In reference to such incumbrances, the husband has been held by this court authorized to make what arrangements he may choose, or even to renounce lands thus burthe ned, or to sell them, without any question on the part of his wife. Shepperd v. White, 16 Tex., 163; Clements v. Lacy, 51 Tex., 150.

The principles thus decided not only tend to show how utterly powerless the homestead right is when thus incumbered, as against the lien holder, but they show the authority held by Dillon in this case to make the arrangement he did as to the sale and appropriation of the goods. As there was no law to prevent him from making such disposition of the money had the lots never become the homestead of Dillon’s family, there was none that could prevent him from so doing in reference to a lien against which Dillon had no homestead right in the property. We are referred to a case from Wisconsin.

That case is essentially different from the present. There the personalty sold was the primary security, and the homestead merely collateral to it, and hence there might be some reason why its proceeds should first be sold to satisfy the lien. The effect of the arrangement between the parties was, that this personal property should be first exhausted before its collateral, the homestead, should be encroached upon. This placed the wife, in her claim upon the homestead, somewhat in the position of a surety, and upon that analogy the case was decided. Again, it was a case where the homestead right had attached long prior to the mortgage. The wife had joined in incumbering it for the debts of her husband. She was in fact a surety for him to the extent of putting up a sufficient interest in her homestead to satisfy $1,000 of his indebtedness. Her rights were strictissimi juris. Here she has no right whatever against the creditor more than she would have as to any other community property of herself and husband which had been mortgaged by him.

[Opinion delivered February 20, 1883.]

We think there is nothing in the manner in which the proceeds of the goods were appropriated, nor in the subrogation allowed by the court, that will vitiate the judgment, and it is affirmed.

Affirmed.