Armstrong v. Carwile

The opinion oí the Court was delivered by Mr. Chief Justice McIver. This action was brought for Hire foreclosure of a mortgage on real estate, executed by the defendant, Carwile, to the assignors of the plaintiff’s 'intestate. The complaint was in the usual form, and the defendant, Geo. H. Taylor, was made a party as claiming some interest in the mortgaged premises, arising subsequent to the date of plaintiff’s mortgage. The defendant, Carwile, seems to''have made default, but the defendant, Taylor, answered, setting up a claim' of title in fee to' the mortgaged premises, arising from a purchase 'by him at sheriff’s sale, under a judgment recovered by one Withers against the mortgagor, Carwile; arid he, therefore, Claims that he is a purchaser for valuable consideration without notice. All the issues of law and fact were referred to» the master, who *469 made bis report, finding 'Certain facts, which will be hereinafter stated, and finding as matter of law that the title of the • defendant, Taylor, is superior to t'he lien' of the plaintiff’s mortgage, and -recommending that the complaint be dismissed. To- this report the plaintiff seems to have filed sundry exceptions (though they are not set out in the “Case,” and only appear in the exceptions filed by appellant to the decree of the Circuit Judge), and the case was heard by his Honor, Judge Gage, upon the master’s report and the exceptions thereto. The Circuit Judge filed his decree, overruling the report*of the master and rendering judgment for foreclosure. From this judgment the defendant, Taylor, appeals upon the several exceptions set out in the record, and the plaintiff, in accordance with the proper practice, gave notice that he would ask this Court to sustain the decree below on certain additional grounds set out in the record. The decree of the Circuit Judge, together with the exceptions of appellant and the additional grounds of the plaintiff, should be incorporated by the Reporter in the report of this case. The facts upon Which this controversy turns db not seem to be disputed, and may be substantially stated as follows: The mortgage upon which plaintiff’s action is based, was executed on the 5th July, 1892, but it was not recorded until the iot'h of December, 1892 — more than forty days after its date. This mortgage was given to secure the payment of certain bonds, bearing even date with the mortgage, but there is no* other evidence tending to show When the debt evidenced by these bonds was contracted. The judgment, under which appellant claims, was entered in Abbeville County on the 17th of February, 1893, and was duly tran-scripted to> Greenwood County, which is now the county in which the land in question lies. This judgment was recovered in an action commenced on the 6th of December, 1892, for the purpose of recovering the amount due on a note bearing date the 5Ü1 of December, 1892, given by the defendant, Carwile, to Clara L. Withers, which was payable on demand. Immediately after this action was commenced, the plaintiff *470 procured a warrant of attachment, which was levied on the said land on the 7th December, 1892, and a copy of said warrant was duly filed in the proper office 'by the sheriff of Abbe-ville County. There is nothing on the record of this judgment to show when the, debt sued for was contracted, other than the date of the note. Under an execution issued to in-force this judgment, the mortgaged premises were levied upon, and after due advertisement the same were offered for sale by the sheriff of Greenwood County on- saleday in November, 1897, at Which sale the appellant, Taylor, became the purchaser, and having complied with the terms of sale, received the sheriff’s deed for the land. No notice was given, at the sale when Taylor purchased, of tire mortgage, and Taylor, in fact, had no actual notice of such mortgage at the time; whether he had constructive notice, is one of the points of contention in the case. Testimony was received, though objected to by the appellant, tending to> show, and which the Circuit Judge found d'id show, that the debt for which the action was brought by Withers against Carwile, though then evidenced by a note bearing date 5 th December, 1892, was in fact a subsisting debt at the time of the execution of the mortgage, the said note having been given as a renewal of pre-existing obligations; and one of the questions made by this appeal is Whether such testimony was admissible. 1 This case depends largely upon the proper construction of sec. 1776 of the Gen. Stat. of 1882, now incorporated in the Rev. Stat. of 1893 as sec. 1968, viewed in the light of the facts of this case without reference to' the important amendments introduced into such section by the act of 1898, 22 Stat., 746, as that act in express terms applies only to mortgages executed since the 1st day of March, 1898. This section has been construed by this Court in two cases, King v. Fraser, 23 S. C., 543, and Carraway v. Carraway, 27 S. C., 576. In the former, it was held by the majority of the Court, that a mortgage, which has not been recorded until after the expiration of the forty days allowed *471 for that purpose, will take precedence, so far as the mortgaged premises are concerned, over general debts not secured by liens, including such as were contracted' without notice to the creditor between the date of the mortgage and the date of its record — in other words, the majority of the Court there held that the phrase, “subsequent creditors or purchasers,” as used in the section, meant creditors whose debts were contracted subsequent to the date of the mortgage, and not those whose debts had been contracted subsequent to the date of the record of the mortgage. An'd in. the case of Carraway v. Carraway, the majority of the Court held, that under that section, an unrecorded mortgage was 'entitled to priority over judgments recovered, upon debts contracted prior to the execution of the mortgage, but entered thereafter, because the creditors holding' such debts were existing and not subsequent creditors. Under these two' decisions, it is apparent that if the debt upon which the Withers judgment was recovered was contracted prior to the date of the plaintiff’s mortgage, and there were nothing else in the case, then the mortgage would be entitled to priority over such judgment, because in that evént the judgment creditor could not claim the protection accorded to a subsequent creditor, nor could the appellant who' claims under that judgment be in any better position, unless he can show that he was a purchaser for valuable consideration without notice of the mortgage — a question which will be presently considered. This renders it absolutely 2 necessary to determine the question, of the admissibility of the testimony tending to show that the debt upon which the Withers judgment was recovered was, in fact, contracted prior to t'he execution of the mortgage. The master rejected the testimony offered'to show when the debt was contracted upon two- grounds : ist, because it was parol testimony to change the terms of an unambiguous written instrument; 2d, because it was a collateral attack upon a judgment having no jurisdictional infirmities, We agree with the Circuit Judge, that neither of these *472 grounds are tenable, for the reason that the testimony' was not offered for the purpose of 'Changing the terms of an unambiguous written instrument, nor did it have any such effect. The note upon which the action was founded did not constitute the debt, the non-payment of which constituted the cause of action. It has been frequently held in this State that the note is mere evidence of the debt, the" most recent case to' that effect being Williamson v. Eastern B. & L. Association, 54 S. C., at pages 596-7. The testimony offered did not change, or even purport to' change, any of the terms of the note upon which the action was based, but was only designed 'to1 show when the debt, of which the note was the mere evidence, originated, and for this purpose it was clearly competent. Certainly the testimony in question cannot be regarded as any attack upon the judgment, and was not offered for any such purpose. There was, therefore, no error on the part of the Circuit Judge in receiving this testimony, by which it is conclusively shown that the debt upon which the Withers judgment Was recovered was a subsisting debt at the time the plaintiff’s mortgage was executed, and hence neither she nor those who> claim under her judgment can claim the protection accorded to' subsequent creditors by section 1776 of the Gen. Stat. of 1882, as construed in the case of King v. Fraser, supra. 3 The next inquiry is whether the appellant.can claim to be a purchaser for valuable consideration without notice of plaintiff’s mortgage by his purchase at sheriff’s sale. The undisputed fact is that he had no' actual notice of the mortgage at the time of such purchase, and the only question is whether he had constructive notice arising from the record of plaintiff’s mortgage. The undisputed facts are that plaintiff’s mortgage was recorded on the 10th December, 1892, nearly five years before the sheriff’s sale in November, 1897, when appellant became the purchaser of the mortgaged premises. If, therefore, he had examined the records before he made his purchase, as he should have done, he would have ascertained that the land *473 which he proposed to buy was cowered by a mortgage anterior in date to the judgment under which he proposed, to* buy, for the judgment was not entered until the 17th of February, 1893, and the mortgage bears date 5th July, 1892. This is not, as appellants seem to* think, a case in which the doctrine that a purchaser is not bound to* look down the 'line for any subsequent encumbrance, for, so* far as the record before us shows, the appellant never acquired any interest of any kind' in the subject matter of this suit until his purchase at sheriff’s sale, and that was long after plaintiff’s mortgage had been executed and recorded. So that, if there was nothing else in the case, the appellant could not maintain his defense. 4 But there is another pregnant fact in the case which does not seem to have received' due consideration, which, however, must be considered by us; and that is the fact that the warrant of attachment obtained in the case of Withers v. Car-wile was levied on the land on the 7th of December, 1892, three days before the plaintiff’s mortgage was recorded, and a lien was thereby fixed upon the land at that date, which, it is conceded, had the effect of giving the judgment recovered in that case, not, merely a lien from the date of the entry of the judgment, but also from the 7th of December, 1892, when a lien was fixed--upon the land by the levy of the attachment thereon. So* that this fact presents the question whether the plaintiff’s mortgage had a lien from the date of its execution, and not merely from the date of its record, as against this judgment, which, as we have seen, was founded upon a subsisting debt at the time of the execution of the mortgage, and not upon a debt contracted after execution of the mortgage. This question has been conclusively determined by the case of Caraway v. Caraway, supra, where it was held that an unrecorded mortgage is not only good, as a lien, between the parties, but also* as against all others except subsequent creditors or purchasers for valuable consideration without notice — meaning thereby creditors whose debts were contracted, or purchasers' who* bought *474 subsequent to the execution of the mortgage. In that case the mortgage was executed on the 20th of March, 1885, and was never recorded, and the judgments were recovered at various dates between and including the 14th of May, 1885, and the 20th of November, 1885, which, of course, had liens from the dates of their entry, and the mortgage was held to have priority over these judgments, because the lien of the mortgage was postponed to the date of its record only as to subsequent creditors and purchasers, but as to all others was a valid lien from the date of its execution; and as it was shown, in that case, that the debts upon which the judgments were recovered were subsisting debts at the time of the execution of the mortgage, it had a superior lien to these judgments. It must, therefore, be held, unless something else appears, that the plaintiff’s mortgage, which was executed on the 5th of July, 1892, though not recorded until the 10th of December, 1892, has a superior lien to the judgment under which the appellant claim's, because the debt upon which such judgment was recovered was a subsisting debt at the time of the execution of the mortgage; and hence neither the plaintiff in that judgment nor the appellant, who claims under such judgment, can claim the right of priority, accorded only to a subsequent creditor under sec. 1968 of the Rev. Stat. It is quite true that some of the language used by Mr. Justice McGowan, arguendo, in delivering the opinion of the majority of the Court in King v. Fraser, supra, would seem to 'be in conflict with the view just taken; for such language evidently implies that a mortgage, unless recorded within forty days, constituted no lien against any one until it is recorded. But this language was a mere obiter dictum, for the controversy in that case was not as to the priority of liens, as the only party who could pretend to claim a lien was the mortgagee, the other parties being unsecured creditors, claiming no liens. It is likewise true that the language of Mr. Justice McGowan above referred to was quoted in Turpin v. Sudduth, 53 S. C., at page 310, with what, at first glance, would seem to be approval; but it is *475 very manifest from a careful consideration of that case, that such language was quoted solely for the purpose of showing that a purchaser for valuable consideration without notice, who had acquired his title after the execution of the mortgage, but prior to its record, wbuld be protected as a subsequent purchaser against the lien of the mortgage, by virtue of the provisions of sec. 1968 of Rev. Stat. This is made still more manifest by the following language used in Turpin v. Sudduth, on page 311, where it is said: “Upon this point the Court was unanimous (see page 576), though there was a dissent upon another point”' — showing very clearly that the point referred tO' was as to the rights of subsequent purchasers, and not creditors, as the rights of creditors were not involved in Turpin v. Sudduth. 5 There is, however, another matter in the case which we propose to1 consider, and that is the effect of the filing of the notice of Us pendens, as it is called, in Withers v. Carwile. Waiving for the purposes o>f this inquiry the question presented by the plaintiff as to whether this matter is properly before us, which the Circuit Judge seems 'also to1 have thought was not properly before him, and yet proceeded to- its adjudication, and while finding as matter of fact that the notice of lis pendens in the case of Withers v. Carwile was filed on the 7th of December, 1892, three days previous to the recording of plaintiff’s mortgage, he held that the case of Withers v. Carwile, being an ordinary action, not affecting the title to real estate, was not such an action as warranted the filing of a notice of lis penderis, and hence the appellant acquired no rights by the fact that such a paper had been filed in that case. This is a material inquiry in this case, for the language used in sec. 153 of the Code: “From the time of filing only shall the pendency of the action be constructive notice to a purchaser or incum-brancer of the property affected thereby; and every person whose conveyance or incumbrance is subsequently executed or subsequently recorded (italics ours), shall be deemed a subsequent purchaser or incumbrancer,” &c. Now, if the *476 case of Withers v. Carwile was such a case as would be proper for the filing of a notice of Us pendens, with all its incidents, then it might be well contended, under the language just quoted, that the plaintiff’s mortgage was a subsequent incumbrance to- the lien of the judgment, which, as we have seen, had relation back tO' the da.te of the levy of the attachment; for the Circuit Judge finds as a fact that the notice of lis pendens was filed on the 7th of December, 1892, three days before the plaintiff’s mortgage was recorded. But was the case of Withers v. Carwile such an action as that a notice of lis pendens could be filed in ? The Circuit Judge finds as matter of fact, and the records before us confirm this finding, that the action was an'ordinary action on a money demand, and did not in any way affect the title to- real estate, and the answer of the defendant therein, a copy of which is set out in the “Case” herein, does not set up any affirmative cause of action “intended to affect real estate,” nor, in fact, any affirmative cause of action Whatever. We agree, therefore, with the Circuit Judge, that such action was not an action in which the filing of a notice of Us pen-dens, with the incidents thereto-, is authorized by sec. 153 of the Code of Procedure, relied on for that purpose, and hence the filing of such notice avails the appellant nothing in this case. The judgment of this Court is, that the judgment of the Circuit Court be affirmed.