Lowery v. . Wilson

ClabKSON, J. We think the judgment of nonsuit should be reversed. The first question for consideration: A mortgagor makes and executes a mortgage on certain land, which was intended to secure a note of $1500.00, but it only secured $15.00, and the mortgage was duly recorded. Thereafter Garland C. Norris Company and The American Agricultural Chemical Company obtained judgments against the mortgagor. How are the liens adjusted ? Answer: The judgment creditors have a lien on the land subject to the $15.00 and interest. The owner of the $1500.00 note has the right to credit the payments made by the makers of the note and mortgage on the amount not secured by the mortgage as against the judgment creditors herein. In Baker v. Sharpe, 205 N. C., 196 (197-8), it is said: “The principle of law is thus stated in Stone v. Rich, 160 N. C., 161 (163-4) : ‘There is no rule in the law better settled than the one in regard to the applica *804 tion of payments: (1) A debtor owing two or more debts to tbe same creditor and making a payment, may, at tbe time, direct its application to any one of tbe debts. Tbe right is lost if tbe particular application is not directed at the time of tbe payment. (2) If the debtor fails to make tbe application at tbe time of the payment, tbe right to apply it belongs to the creditor. (3) If neither debtor nor creditor makes it, tbe law will apply it to tbe unsecured debt or tbe one for which tbe creditor’s security is most precarious, or, as sometimes expressed, according to its own view of the intrinsic justice and equity of tbe case,’ citing numerous authorities. Supply Co. v. Plumbing Co., 195 N. C., 629.” N. O. Code, 1935 (Micbie), sec. 3311, in part, is as follows: “No deed of trust or mortgage for real or personal estate shall be valid at- law to pass any property as against creditors or purchasers for a valuable consideration from tbe donor, bargainor or mortgagor, but from tbe registration of such deed of trust or mortgage in tbe county where tbe land lies.” As regards deeds, etc., see sec. 3309, supra,. In Whitehurst v. Garrett, 196 N. C., 154 (157), we find: “It is said in Door Co. v. Joyner, 182 N. C., at p. 521: ‘In tbe construction of our registration laws this Court has very insistently held that no notice, however full and formal, will supply tbe place of registration. Dye v. Morrison, 181 N. C., 309; Fertilizer Co. v. Lane, 173 N. C., 184; Quinnerly v. Quinnerly, 114 N. C., 145. ... In this jurisdiction, under C. S., 3311, the registration of deeds of trust and mortgages on real and personal property have been held of prime importance. Boyd v. Typewriter Co., supra (190 N. C., at p. 799). It gives stability to business. When properly probated and registered, they are constructive notice to all tbe world. Creditors or purchasers for a valuable consideration from tbe donor, bargainor or mortgagor, obtain no title as against a properly probated and registered conveyance, sufficiently describing tbe property.” Mills v. Kemp, 196 N. C., 309; Ellington v. Supply Co., 196 N. C., 784 (789). No distinction is made in the statute or in tbe opinions of the court, construing and applying the statute, between creditors and purchasers for value. No conveyance of land is valid to pass any property from tbe donor or grantor, as against either creditors or purchasers for value, but from tbe registration thereof. As to a purchaser for value, who has recorded bis deed, it has been held that a prior deed from tbe same grantor, unregistered, does not exist, as a conveyance or as color of title. Tbe same is true as against tbe creditors. Eaton v. Doub, 190 N. C., 14 (19). Tbe registration act does not apply to parol trusts. Roberts v. Massey, 185 N. C., 164; Spence v. Pottery Co., 185 N. C., 218. *805 In Crossett v. McQueen, 205 N. C., 48 (51), speaking to tbe subject, it is said: “Tbe judgment overruling tbe demurrers of tbe appellants is affirmed on tbe authority of Spence v. Pottery Co., 185 N. C., 218, 117 S. E., 32. Tbe instant case cannot be distinguished from that case, except that in tbe instant ease tbe declaration of trust is evidenced by writing, while in that case, tbe trust vested in parol. Tbe declaration of trust is not a conveyance, or contract to convey, or lease of land, requiring registration as against creditors, by virtue of tbe provisions of C. S., 3309. Tbe fact that it was not registered prior to tbe docketing of tbe judgment is immaterial.” Tbe second question for decision: Can tbe mortgage be reformed and tbe record of tbe mortgage corrected so as to impair or affect tbe rights of tbe creditors, Garland C. Norris Company and tbe American Chemical Company, under their judgments? We think not. Our statutes, supra, have been construed strictly to aid and encourage registration. Creditors and purchasers for a valuable consideration can rely on the record of tbe instrument as written and recorded. In Wixon v. Wixon, 75 Colo. Rep., p. 392 (232 Pac. Rep., 665), it is held: A recorded mortgage on real estate which contains an erroneous description of tbe land conveyed, has tbe effect only of an unrecorded mortgage, as to third persons. A mortgage containing an erroneous description may be reformed as to tbe mortgagor and mortgagee. A judgment lien on real estate is superior to that of a mortgage which does not properly describe tbe land affected. A purchase money mortgage containing a defective description of tbe land conveyed has no effect as to third persons so far as tbe property involved is concerned, until corrected, and is then effective only as^ of tbe time of correction. Tbe lien of a judgment creditor stands upon thé same footing as that of a purchaser in good faith, as against a mortgage containing an incorrect description. ... A mortgage defectively describing tbe land included may be reformed as to tbe mortgagor, but not as to tbe bolder of a judgment lien accruing against mortgagor subsequent to date of mortgage. Tbe lien of a judgment, transcript of which is duly filed, is superior to tbe claim of a mortgagee, whose mortgage erroneously fails to describe tbe mortgaged land. Correction of a mortgage to make it correctly describe tbe land intended to be mortgaged cannot effect priority of a judgment lien acquired subsequent to execution of mortgage, but prior to tbe correction. Tbe lien of a judgment creditor stands upon tbe precise footing as that of a purchaser in good faith, as against mortgage with incorrect description. As between tbe parties we see no reason why tbe mortgage could not be reformed. Tbe Statute of Limitations, C. S., 441, sub-sec. 9, is as follows: “For relief on tbe ground of fraud or mistake; tbe cause of *806 action shall not be deemed to have accrued until the discovery by the aggrieved party of the facts constituting the fraud or mistake.” The action is barred witbin three years from the discovery of the facts or from the time when they should have been discovered by the exercise of due care. We think the evidence in this case on this aspect makes it a question for the jury. Some of the defendants have filed no answer. In the judgment of the court below is the following: “It is, therefore, further considered, adjudged and decreed that the liens of the judgments against L. T. Wilson set forth in the amended complaint herein are unaffected by the alleged cause of action of the plaintiffs for the reformation of the said mortgage deed and constitute liens upon the lands described in the amended complaint superior to any rights of the plaintiffs based upon said cause of action for the reformation of said mortgage deed.” We think the judgment above set forth is correct, as herein modified, viz.: the $15.00 secured by the mortgage and interest on same, which was properly recorded and notice to the creditors, will be and constitute a first lien and be paid before the creditors. For the reasons given, the judgment of the court below is Reversed.