Isaac Parsons devised a farm known as "Mount Pleasant" to Harry B. Parsons, Gracie N. Parsons, William G. Parsons, Louis B. Parsons and Mary E. Morris, wife of J. Elwood Morris. The testator directed that his real estate be charged with any deficiency in his personal estate necessary to pay his debts, and as Gracie N., William G. and Louis B. Parsons were then minors, a proceeding was instituted in the Circuit Court for Kent County, wherein Harry B. Parsons was authorized on behalf of the infants, to unite with the adults in the execution of a mortgage for the sum of $1,522.35, that *Page 244 being the amount chargeable on the farm, together with interest thereon, and costs that were incurred.
On January 2d 1894, a mortgage was given for said sum to Thomas W. Eliason, Jr., by Harry B. Parsons, in his own right and as trustee for the three minors, and by Mr. and Mrs. Morris. It contained a power of sale and covenants by Harry B. Parsons, trustee, for the three infants, that they would pay one-half, by said Parsons individually that he would pay one-third, and by Mr. and Mrs. Morris that they would pay one-sixth of the mortgage debt and interest as stipulated. No interest was paid on the mortgage and on the 18th of June, 1901, $1,500 of it was assigned to John D. Urie, committee, and the remainder ($357.89) to him, individually. Before this controversy, Gracie N. Parsons and William G. Parsons had become of age. The former had married John F. Clark and Mrs. Morris had died leaving surviving her an infant child, E. Romie Morris, and her husband, J. Elwood Morris. On December 17th, 1901, W.W. Beck and Richard D. Hynson purchased the one-third interest of Harry B. Parsons in the farm, under an execution issued on a judgment against him and his father.
The interest not being paid, Mr. Urie advertised the property for sale on February 1st, 1902, under the power contained in the mortgage. Efforts were made to induce him to assign the mortgage on payment of the amount due, including accrued costs, but he declined to do so. On the day of sale Mr. Clark, representing his wife, Harry B. and William G. Parsons, together with several friends, called upon Mr. Urie and tendered him $2,025, the amount he claimed to be due. He asked if they wanted the mortgage released and one of them said, "No, they wanted it assigned," to which Mr. Urie replied that he would not do that, and declined to receive the money. They reported what had occurred to Mr. Barroll, the attorney who represented the mortgagors, and he instructed them to again tender the money without asking for an assignment or anything else. They did so, and Mr. Urie testified about that interview as follows: that shortly before *Page 245 the hour of sale, J.R. Usilton, accompanied by Harry B. Parsons, and others, again made him a tender of the $2,025, "saying that he did not want any release or any assignment of the mortgage, that he simply wanted me to take the money and make no sale of the farm." He asked for a few minutes to consider the matter and said he then saw Messrs. Hynson and Beck, who were anxious to have the property sold in order to realize on their interest, as the "property was going down under the management of the Parsons and the interest on the mortgage steadily accumulating. They notified me they had arranged to take up this mortgage under legal process unless I proceeded with the sale. I determined to go on with the sale unless the Parsons should agree to have the mortgage released."
When the sale was about to take place at the court house door, Mr. Barroll went there with his clients and tendered the money. There is some conflict between the witnesses as to what then occurred. Mr. Urie testified that he told Mr. Barroll that he would sell the property unless they agreed that the mortgage should be released, that Mr. Barroll replied "you can release it or burn it up. I don't care what becomes of it, here is your money." He said he repeated once or twice that it was understood that he was to release the mortgage, to which Mr. Barroll assented and he (Urie) called the clerk and released the mortgage in Mr. Barroll's presence. Mr. Barroll testified that he tendered the money to Mr. Urie, told him he must not sell the property and that he asked for no assignment or anything else; that Mr. Urie said he would release the mortgage, and "I replied with some emphasis that I did not care what he did, that whatever he did would have no effect, but there was his money." Others present at the court house gave their versions of what took place, and while there is some difference in their recollections, there can be no doubt Mr. Barroll never gave his consent to any action by Mr. Urie that would have the effect of permanently relieving the property from the lien of this mortgage. Mr. Urie had emphatically refused to accept the money unless he released the mortgage, *Page 246 as he testified himself, and when Mr. Barroll tendered him the money, he, in effect, made the same statement to him. The sale was about to take place and although the money was then tendered Mr. Urie he again refused to accept it unless the mortgage was released. It is true he did release it in the presence of Barroll, but it cannot be properly said that he gave his consent to that — on the contrary Barroll warned him it would have no effect.
The money paid to Mr. Urie had been borrowed by Harry B. Parsons, William G. Parsons and Mrs. Clark from or through Mr. Barroll, and subsequently a judgment was given to the Second National Bank of Chestertown for the amount, which it still holds. Harry B. Parsons, Mr. and Mrs. Clark, William G. Parsons and Harry B. Parsons, trustee, filed this bill against John D. Urie and Louis B. Parsons, who was still a minor, and subsequently Mr. Morris and his infant child were made defendants. The prayers of the bill are: (1) That a decree be passed for the sale of the real estate; (2) That an order be passed annulling and vacating the release of the mortgage; (3) That a decree be passed for said sale under the terms and conditions named in the mortgage, and that the amount due under the mortgage be paid to the plaintiffs to reimburse them for the amount they paid Urie; (4) That the proceeds of sale be distributed among the parties entitled thereto, according to their respective rights and interests, and (5) For general relief. The lower Court decreed that the release be annulled, vacated and revoked as to the undivided one-sixth of Louis B. Parsons and also as to the one undivided sixth formerly owned by Mrs. Morris, but as to the other mortgagors that the release was operative and effective; that Harry B. and William G. Parsons and Mrs. Clark be subrogated and substituted for each of said one-sixths, which the decree fixed at $337.50 with interest from February 1st, 1902. The decree then required each of those sums to be paid by March 15th, together with one-half of the costs of this suit, and in default thereof authorized the sale in the usual form. From that decree this appeal was taken by the plaintiffs. *Page 247
1. Messrs. Hynson and Beck, who now own the undivided third in the property which formerly belonged to Harry B. Parsons, were not made parties to the bill. They were, however, consulted by Mr. Urie before he declined to accept the money, and he unquestionably adopted the course he did for their supposed benefit, as his testimony shows, and they appeared as solicitors for him in the Court below, as well as in this Court. They filed a demurrer in the name of Urie which was overruled, and then a disclaimer was filed by Mr. Hynson for Mr. Urie. Both of them were witnesses in the case and they were unquestionably the real defendants, although not parties to the bill. They not only had a full and thorough opportunity presented for making all the defenses at their command but they did in fact, as solicitors, conduct and control the defense. They will, therefore, be bound by the decree in this case as fully as if they were formal parties to the bill, as it has long since been held by this Court that the term "parties" "includes those who are directly interested in the subject-matter of the suit, knew of its pendency, and had the right to control and direct or defend it."McKinzie v. B. O.R.R. Co., 28 Md. 174. The subject has been further considered by this Court in Parr v. State,71 Md. 235; Albert v. Hamilton, 76 Md. 304; Fetterhoff v.Sheridan, 94 Md. 454, and other cases but in none of them did the parties held to be bound take such active parts throughout the controversies as these gentlemen did. The failure to make them formal parties cannot therefore in any way interfere with our determining the questions involved — although they be affected by our decision.
2. We will next determine whether under the circumstances disclosed by the record the plaintiffs are entitled to have the release annulled and vacated and to be subrogated to the rights of the mortgagee. As indicated above, there can in our opinion be no doubt that neither the plaintiffs nor their attorney, Mr. Barroll, were willing to have the mortgage released, or that they or any of them ever gave their consent to such release. Nor have we the slightest doubt that it was Mr. *Page 248 Urie's duty to accept the money tendered him, without imposing the condition that the mortgage be released. Conceding that he could not be required to assign it, when the money was tendered him upon the understanding that he do nothing but accept it, it is difficult to understand upon what principle he could refuse it. If his acceptance of it would have worked an extinguishment of the mortgage lien Messrs. Hynson and Beck would have received the benefit of that, and if it would not have had that effect it would have remained in statu quo, with the rights of all parties unaffected. It was therefore unquestionably the fair and proper course to pursue, to accept the money without insisting upon releasing the mortgage. It is impossible to see how Mr. Urie could in any way have been injured by pursuing that course, and Messrs. Hynson and Beck whom he seemed desirous of protecting, could not thereby have sustained the loss of anything they were entitled to. The property was ample. Mr. Urie testified that it was understood between him and Messrs. Hynson and Beck that it must bring $4,500.00, if sold the day it was to be offered. That would have realized over $700.00 for Messrs. Hynson and Beck for the third interest, for which they paid $255.00 at the Sheriff's sale a few weeks before. If the mortgage lien is extinguished, they, by the conduct of Mr. Urie will receive $675.00 more than they could possibly have contemplated when they purchased the third interest, or are entitled to, and those who paid the money may lose that much or more. Is a Court of equity so helpless that it cannot prevent such manifestly unjust results? We think not, and authorities are abundant to sustain the contrary view.
It must be conceded that the general principle is that the payment of an incumbrance by one whose duty is to pay extinguishes it, although there are exceptions to the general rule which are as well settled as the rule itself. As we have seen, the equity of Harry B. Parsons in the property had been sold, and there is ample testimony to show that it was purchased subject to the mortgage. Mr. Hynson testified that they so purchased it, and he and Mr. Beck said they tendered *Page 249 $1,925.00 for the mortgage debt, interest and costs the day of the sale to them. There can be no doubt that if Harry had been compelled by Mr. Urie to pay the one-third of the mortgage debt, in accordance with his covenant, he could have been subrogated to the rights of Mr. Urie to that extent. Many authorities are collected in the note in 27 Am. and Eng. Ency. of Law, 246, to the effect that where a mortgagor conveys premises subject to the lien of the mortgage, the amount of the mortgage debt being deducted from the purchase price, the premises remain a primaryfund for the payment of the debt, and if the mortgagor is compelled to pay the debt he may be subrogated to the rights of the mortgagee. And if the mortgaged property be sold at a judicial sale, subject to the mortgage, there can be no possible reason why the same principle should not be applied. The purchase-price is lessened by the amount of the mortgage and the purchaser will not be permitted in a Court of equity to thus take advantage of the mortgagor. In Baker v. Terrell, 8 Minn. 195, which is a leading case on the subject, the question is discussed at length, and after saying the mortgagor may even voluntarily pay the debt which the mortgage secures, without prejudice, the Court goes on to say, "It is objected that in such cases the mortgagor, if he pays, is only cancelling a debt of his own. This is true in one sense, but yet the debt is one of which, as between him and a grantee who takes subject to the mortgage, the land is pledged to the payment before calling upon the mortgagor; and besides, it may with equal truth be said that the mortgagor but pays his own debt, whether he pays the incumbrance voluntarily or at the end of an execution. But it does not follow in either case that the grantee should receive any benefit from such payment, or that the land in his hands is thereby relieved of the incumbrance." In Barker v. Parker, 4 Pick. 505, a property was sold by the Sheriff subject to a mortgage. After that sale, the mortgagee entered upon the premises and then sold and released all his right to the mortgagor. The purchaser at the Sheriff's sale contended that by virtue of the conveyance from the mortgagee *Page 250 to the mortgagor the mortgage was by law extinguished. The Court said that "Such undoubtedly would have been the legal operation of the conveyance if Barker (the mortgagor) had at the time been seized of the equity; but if he had parted with his right in equity, the conveyance operated as an assignment of the mortgage. The only question, therefore, to be considered is, whether the sale of the equity by the Sheriff is equivalent to an absolute sale by the mortgagor; and so far as it relates to the point in question, we are of opinion that it is. The sale by the Sheriff conveyed all the mortgagor's estate in the premises." Other cases might be quoted from, but we do not deem it necessary. An examination of the authorities cited in the volume of the Ency.of Law above referred to will show that it is well settled that payment of a mortgage by a mortgagor, after he has sold hisequity of redemption, subject to the mortgage, does not, in the absence of such intention, extinguish the mortgage, as betweenhim and the grantee, and both reason and authority make this principle as applicable to a sale by a sheriff as to one made by the mortgagor himself. We are not aware of any decision in this State upon this precise question, but this Court has applied in a number of cases the doctrine of subrogation or substitution, as it is also termed, and in some of them even when third persons were affected. See Orem v. Wrightson, 51 Md. 43;Millholland v. Tiffany, 64 Md. 455; Robertson v. Mowell,66 Md. 538; Cone v. Cross, 72 Md. 102; Williams v.Harlan, 88 Md. 5; Reimler v. Pfingsten, unreported case referred to in 78th Md. xiv, which can be found in 28 Atl.Rep., 24.
It may be well to observe that Harry B. Parsons cannot be treated as a volunteer, stranger or intermeddler, for he was not only a party to this mortgage in his individual capacity, and covenanted to pay one-third of it, but he was a party as a trustee for the three infants — one of whom was still a minor when the bill was filed. He as trustee had covenanted that they would pay the one-half of the mortgage debt, and without stopping to consider how far he could be held liable on such a covenant, he certainly had such an interest in that half *Page 251 — especially as to the two undivided sixths owned by his minor brother and infant niece — as would relieve him of the charge of being a stranger, volunteer or intermeddler. It was his right, if not his duty, to protect the interest of those infants and prevent a forced sale of the property, which frequently results in a sacrifice. It would, therefore, seem clear that the one-third interest of Harry was not discharged from the mortgage by the payment to Urie, and every principle of justice demands that it be kept in force against Messrs. Hynson and Beck, who purchased that interest subject to the mortgage. As was said inArnold v. Green, 116 N.Y. 571, "The remedy of subrogation is no longer limited to sureties and quasi sureties, but includes so wide a range of subjects that it has been called the mode which equity adopts to compel the ultimate payment of a debt by one who in justice, equity and good conscience ought to pay it."
3. But there is another reason which seems to have been lost sight of by the learned Judge who decided this case below, which applies to the interests of all these appellants. It is well settled that if one tenant in common pay a mortgage debt, he can "keep the mortgage on foot until reimbursed the moiety paid for the other tenant in common." Stebbens v. Willard, 53 Vt. 665;Look v. Horn, 97 Me. 283. It is manifest that Mr. Urie would not have not received payment of less than the whole mortgage and the appellants borrowed the whole amount and confessed judgment for it. Each of them is therefore responsible for the whole sum, and as testified to by Mr. Barroll, they became so with the understanding that the release of the mortgage was under the circumstances a nullity; that the mortgage would be enforced and out of the proceeds of sale those who had given the judgment would be indemnified. If Mrs. Clark, for example, was required to pay the whole judgment or more than her share she would undoubtedly be entitled to be subrogated against the interests of Harry and William, as well as against those of the two infants. She only had a one-sixth interest in the property, but there is no proof that she only paid one-sixth of the *Page 252 mortgage — on the contrary she became responsible for the whole, and if the mortgage should be held to be released, she may be required to pay the entire amount, or at least as much of it as can be made out of her property. So with each of the others. It cannot now be determined how much either of them would have to pay if the mortgage lien is held to be extinguished, and why can they not be subrogated for all the mortgage they are responsible for? If one pays more than his share, he will certainly be as much entitled to be subrogated against the other adults for what he pays for them as he would be against the infants' shares, which the decree of the lower Court allowed. The only possible way to protect them from loss is to restore the entire mortgage lien. It must be remembered that third persons will not be affected excepting in case of Messrs. Hynson and Beck, who as shown above will get all they paid for and all they are entitled to. All of the Parsons family are now of age, excepting young Morris and the adults, including Louis B. Parsons who became of age after the bill was filed, are in Court asking that the release of the mortgage be vacated and the property sold by a trustee to be appointed by the Court. Under all these circumstances it is difficult to imagine a case which calls for the interposition of a Court of equity more strongly than the present one, and we have no doubt about the right of the plaintiffs to the relief sought.
We are of the opinion that the appellants are entitled to a decree, annulling and vacating the release as to the entire mortgage, and not simply as to the two undivided interests mentioned in the decree below, and that a trustee should be appointed to sell the whole property, or so much thereof as may be necessary, if part is sufficient to pay the mortgage in full and can be sold to advantage. Inasmuch as the action of John D. Urie subjected the appellants to the costs incurred by them, he must pay the costs, above and below.
Decree reversed and cause remanded in order that a decree bepassed by the lower Court in accordance with this opinion — JohnD. Urie to pay the costs, above and below. *Page 253