Weil v. . Herring

BeogdeN, J. Can the owner of cotton which is covered by an unrecorded crop lien or chattel mortgage sell the same to a creditor then in possession thereof, in partial payment of a preexisting debt held by such creditor and due by such owner, free of the lien of such unregistered instrument ? The head note in McArthur v. Mathis, 133 N. C., 142, declares the applicable principle of law as follows: “Where the owner of lumber authorizes a creditor in possession thereof to sell it and pay himself, such trans *9 action constitutes a present sale of the lumber and passes title, freed from the lien of an unregistered mortgage.” This head note is fully supported by the opinion. The defendants, however, assert that Weil was not a purchaser “for a valuable consideration” within the purview of C. S., 3311, North Carolina Code of 1931, by reason of the fact that the proceeds from the sale of the cotton were credited or applied to a preexisting indebtedness of W. B. Herring, the owner of the cotton, and rely upon Small v. Small, 74 N. C., 16; Day v. Day, 84 N. C., 408; Southerland v. Fremont, 107 N. C., 565. The principle of law so relied upon by the defendants is stated in Small, Admr., v. Small, supra, as follows: “Counsel of the appellants did not refer to any case or give any reason in support of the position that a creditor who takes a deed of trust conveying a tract of land, to secure an existing debt, stands in a better condition than the debtor in regard to an equity which has attached to the land in the hands of the debtor. The creditor who takes a deed of trust is not out of pocket one cent, so he stands in the shoes of the debtor and takes subject to any equity binding the land in the hands of the debtor.” Eelying upon the principle so declared, the defendants assert that, as a chattel mortgage is good between the parties without registration, the cotton in -the hands of W. B. Herring was subject to the equity of the unregistered lien of E. A. Herring, and consequently Weil received the cotton subject to such equity. But what equity has E. A. Herring by virtue of his unregistered lien ? Manifestly, an unregistered lien cannot in itself create an equity. Indeed, this Court, in Wallace v. Cohen, 111 N. C., 103, 15 S. E., 892, commenting upon Brem v. Lockhart, 93 N. C., 191; Potts v. Blackwell, 56 N. C., 449, and Southerland v. Fremont, supra, said: “The true ground for the decision seems to be that although the assignee, Lockhart, was a purchaser for value, and notwithstanding he took the property subject to the rights and equities attaching to it in the hands of the debtor, there was, in fact, no such right of equity which, under the policy of the registration laws, could be recognized or enforced in favor of anyone.” Such policy of the registration law was discussed in Bank v. Cox, 171 N. C., 76, 87 S. E., 967. The Court declared: “They contend that plaintiff was not a purchaser for value within the meaning of the registration laws, because its mortgage was made to secure an antecedent debt; but we have decided otherwise in numerous cases. . . . It is next contended that plaintiff had actual knowledge of the Whedbee deed of trust when it took the mortgage from E. L. Grumpier. It is thoroughly well settled that ‘no notice, however full or formal, will supply the want of registration.’ ” See, also, Sykes v. Everett, 167 N. C., 600, 83 S. E., 585; Fowls v. McLean, 168 N. C., 537, 84 S. E., 852. *10 The jury found that the debtor, W. B. Herring, disposed of tbe cotton without specifying the application of the proceeds. Consequently, the creditor had the right to apply the money according to his own judgment. Baker v. Sharpe, 205 N. C., 196, 170 S. E., 657. The point is made that the cotton was grown upon the land of Betty Herring, the wife of the debtor, and that her husband, W. B. Herring, had no right to sell the same to the plaintiff Weil. An examination of the record discloses that the cause was not tried upon that theory, and the law does not permit parties to swap horses between courts in order to get a better mount in the Supreme Court. No Error. Scheitok, J., took no part in the consideration or decision of this case.