Montsinger v. White

82 S.E.2d 362 (1954)

240 N.C. 441

MONTSINGER v. WHITE.

No. 749.

Supreme Court of North Carolina.

June 4, 1954.

*364 Albert W. Kennon, Durham, for plaintiff appellee.

White & White, Daniel M. Williams, Jr., Durham, for defendant appellant.

DENNY, Justice.

The question to be determined on this appeal is simply this: Did the plaintiff, who neither assumed nor agreed to pay the note secured by the deed of trust on the property held by her and her deceased husband, as tenants by the entirety, but whose deceased husband did assume and agree to pay the note, have the right to pay the balance due thereon at his death and to file a claim against his estate for the amount paid?

The fact that the plaintiff became the owner of the property as the surviving tenant in an estate by the entirety, did not thereby release the estate of her husband from liability for the debt. In re Kershaw's Estate, 352 Pa. 205, 42 A.2d 538; In re Black's Estate, 341 Pa. 264, 19 A.2d 130; Pieretti v. Seigling, 134 N.J.Eq. 105, 34 A.2d 286. Moreover, the character of the estate held by the plaintiff and her husband prior to his death, had no significance in respect to the liability of the parties on the note secured by the deed of trust thereon. Wachovia Bank & Trust Co. v. Black, 198 N.C. 219, 151 S.E. 269. But in this jurisdiction when husband and wife execute a note jointly and severally, promising to pay for money loaned to them, or for the purchase of property, and such indebtedness is secured by property held by them as tenants by the entirety, each is primarily liable, jointly and severally, and upon the death of either, his or her estate becomes liable for one-half of the unpaid balance of the secured debt at the time of his or her death even though the decedent's estate gets no part of the property pledged for the debt. Underwood v. Ward, 239 N.C. 513, 80 S.E.2d 267; Wachovia Bank & Trust Co. v. Black, supra; In re Dowler's Estate, 368 Pa. 519, 84 A.2d 209; In re Kershaw's Estate, supra.

Furthermore, in receiverships and assignments for the benefit of creditors, a secured creditor may prove his claim for the whole amount before exhausting his collateral security. Rierson v. Hanson, 211 N.C. 203, 189 S.E. 502; North Carolina Corporation Commission v. Central Bank & Trust Co., 200 N.C. 808, 158 S.E. 925; Central Bank & Trust Co. v. Jarrett, 195 N.C. 798, 143 S.E. 827; Boney & Harper Milling Co. v. J. C. Stevenson Co., 161 N.C. 510, 77 S.E. 676; Winston v. Biggs, 117 N.C. 206, 23 S.E. 316; Merrill v. National Bank, 173 U.S. 131, 19 S. Ct. 360, 43 L. Ed. 640. Cf. United States Fidelity & Guaranty Co. v. Hood, 206 N.C. 639, 175 S.E. 135. The foregoing decisions, however, do not apply generally to secured claims held at the time of the death of a debtor. When a debtor dies, the administration laws, G.S. § 28-105, step in and determine the settlement of his estate. In such case, the holder of a note executed or assumed by the deceased, and secured by a deed of trust or mortgage, must first exhaust the security and apply the same on the debt, and may then file a claim against the estate for the balance due, if any. But the holder of such note may not file claim and receive pro rata dividend on the basis of the full claim. Rierson v. Hanson, supra; Virginia-Carolina Chemical Co. v. Walston, 187 N.C. 817, 123 S.E. 196; Moore v. Dunn, 92 N.C. 63; Creecy v. Pearce, 69 N.C. 67.

Therefore, in the instant case, the Home Building and Loan Association would not have been permitted, under our decisions, to prove a claim against the estate of Homer E. Montsinger, Jr., until it first exhausted its security, and then only for the balance that might have remained unpaid after applying as a credit on the indebtedness the net proceeds realized from the foreclosure sale.

The plaintiff was under no legal obligation to pay the note held by the Home Building and Loan Association, and it could not have obtained a personal judgment *365 against her on the note. But when she paid off the note for the purpose of exonerating her own estate from the outstanding lien, she obtained no better position in relation to the debt as against the estate of her husband, than the Building and Loan Association had prior thereto. Even so, by making such payment she became subrogated to its rights. The applicable law governing subrogation in respect to mortgage liens is succinctly stated in 50 Am. Jur., Subrogation, section 124, page 763, as follows: "A subrogee to a mortgage lien, like other subrogees, is generally entitled to be placed in the precise position of the one to whose rights he is subrogated, and is entitled to all the rights and securities and to the benefit of all the remedies which were available to such person for payment of the debt. But one subrogated to a mortgage lien has no right and no claim beyond those possessed by the creditor. If the creditor acquires by the mortgage only the right to look to the mortgaged property for payment, such right only is acquired or transmitted by subrogation, and the subrogee cannot assert a personal claim or recover a personal judgment against the original mortgagor." Dowdy v. Southern Ry. Co. (Bobby Burns, Inc., v. Southern Ry. Co.), 237 N.C. 519, 75 S.E.2d 639; Parsons v. Leak, 204 N.C. 92, 167 S.E. 567; Martin v. Hickenlooper, 90 Utah 150, 59 P.2d 1139, 107 A.L.R. 762, and cited cases. See also AnnotationSubrogationExtent, 107 A.L.R. 785 et seq.

Consequently, since there is no contention that the property now held by the plaintiff, exonerated from the lien, is worth less than the amount she paid to discharge the lien, she has no claim she can assert against her husband's estate. The note was not paid for the benefit of his estate, but to release her own property from the lien which was primarily liable for the payment of the debt secured thereby. Hence, the judgment of the court below is

Reversed.

ERVIN, JOHNSON and BOBBITT, JJ., dissent.