First National Bank v. State Mutual Life Insurance

Atkinson, J\ In this case the rivalry is between a security deed executed under the provisions of the Civil Code (1910), § 3306 et seq., by McGowan, purporting to convey described land located in Bartow County to the State Mutual Life Insurance Company as security for a loan made by that company to McGowan, actually recorded in the clerk’s office of the superior court of Bartow County, and a lien of a subsequent common-law judgment obtained by the First National Bank of Cartersville against McGowan, obtained in the city court of Cartersville, upon which execution was duly issued and entered upon the general execution docket of the county. The First National Bank of Cartersville insists that its lien is superior to the rights of the insurance company as holder of the security deed, because the security deed, although senior to the judgment, was recorded on insufficient proof for record, .in that the official witness attesting the signature of the grantor was a policyholder in the grantee corporation which was a mutual life insurance company without capital stock, doing business upon a legal-reserve basis, and the said official witness, being a member of the insurance company in virtue of holding the policy of insurance, was so pecuniarily interested in'the transaction and in the business and prop — 721 — erty of the insurance company as disqualified him from attesting the security deed, and therefore that the record of the security deed on such attestation was void, and the land described in the security deed was subject to the plaintiff's junior judgment. The effect of the security deed was to convey the legal title of the property to the grantee, thus leaving no leviable interest in the land in the grantor. Civil Code (1910), § 3306. It was provided, however, by the act approved September 30,- 1885 (Acts 1884-5, p. 124) : “All deeds to realty . . given as security for debt shall be recorded within thirty days from their date. Every such deed shall be recorded in the county where the land conveyed lies. . . Such deeds . . not recorded within the time required remain valid against the persons executing them, but are postponed to all liens created or obtained, or purchases made, prior to the actual record of the deed. The foregoing provisions of the act are now substantially embodied in the Civil Code (1910), § 3307. By the same act it was provided: “In order to admit such deeds . . to record, they shall be attested or proved in the manner now prescribed bylaw for mortgages.” Civil Code (1910), § 3308. This law was amended by the act approved August 17, 1918 (Acts 1918, p. 209), in a manner not material to be here stated. It is provided that in order to admit a mortgage to record, “it must be executed in the presence of, and attested by, or proved before, a notary public or justice- of any court in this State, or a clerk of the superior court (and in case of real property by one other witness.)” Civil Code (1910), § 3257. It is also provided: “Mortgages not recorded within the time required remain valid as against the mortgagor, but are postponed to all other liens created or obtained, or purchases made, prior to the actual record of the mortgage. If, however, the younger lien is created by contract, and the party receiving it has notice of the prior unrecorded mortgage, or the purchaser has the like notice, then the lien of the older mortgage shall be held good against them.” § 3260. It is also provided: “A mortgage recorded in an improper office, or without due attestation or probate, or so defectively recorded as not to give notice to a prudent' inquirer, shall not be held notice to subsequent bona fide purchasers or younger liens. A mere formal mistake in the record shall not vitiate itl” § 3262. Construing all of the foregoing statutes together and especially construing — 722 — § 3262 with § 3307, a defective record of a security deed will be equivalent to no record, and, in the language of the § 3307, it will “remain valid against the persons éxecuting” it, but will be “postponed to all liens created or obtained, or purchases made, prior to” a legal record of the security deed. The statute is not the same as the provisions of the registry act of 1889 (Acts 1889, p. 106); and the case differs from Donovan v. Simmons, 96 Ga. 340 (22 S. E. 966), holding that the act of 1889 did not create a new competition between deeds of bargain and sale and the liens of judgments. So this leads to the question as to whether the notary, in the circumstances of this case as set out in the statement of facts, was disqualified on account of interest to attest the security deed as the official witness relied on to authorize admission of the deed to record. In Southern Iron & Equipment Co. v. Voyles, 138 Ga. 258 (75 S. E. 248, 41 L. R. A. (N. S.) 375, Ann. Cas. 1913D, 369), it was held: “A notary public' is disqualified from attesting á deed or bill of sale, so as to entitle it to record, if he is pecuniarily or beneficially interested in the transaction.” Having announced this principle in the first division, the principle was thus applied in the second division: “A stockholder of a corporation bears such financial relation to it that he is disqualified, on account of interest, from attesting as a notary a deed or bill of sale to which the corporation is a party.” The foregoing application of the rule was adverted to approvingly, but, not extended, in Peagler v. Davis, 143 Ga. 11 (3) (84 S. E. 59, Ann. Cas. 1917A, 232), holding that a stockholder in a banking corporation was qualified to attest as a non-official witness a mortgage to the corporation. It was said, in the opinion: “It appeared from the evidence that the non-official witness was a stockholder of the mortgagee corporation; and it is insisted that he is incompetent on that account to be an attesting witness. This court held, in Southern Iron & Equipment Co. v. Voyles [supra], that a stockholder of a corporation bears such financial relation to it that he is disqualified from attesting, as a notary, a mortgage to which the corporation is a party. The rule was said to be founded on a sound public policy, which forbade an official from taking an acknowledgment of an instrument in which he had a beneficial interest, though he may not in strict law be a party to it. The statute permits recordation of a mortgage only — 723 — on the attestation or acknowledgment of certain officials, or upon the affidavit of a non-official witness. All officials authorized by law to attest a mortgage so as to entitle it to registration act under their oath of office, and a wise public policy requires that such officials should be disinterested and entirely impartial as between the parties. Impartiality of conduct is best secured by denying an interested official the power to act where he is, or may be, pecuniarily benefited by the transaction. It does not follow, however, that a stockholder, though incompetent to take an acknowledgment of the corporation’s deed, is likewise incompetent as an attesting witness.” See also Exchange National Bank of Fitzgerald v. Pearsons-Taft Co., 159 Ga. 168 (135 S. E. 377). In Harvard v. Davis, 145 Ga. 580 (89 S. E. 740), this court refused to extend the foregoing rule so far as to render disqualified, as an official witness to a security deed, a notary public who was also an attorney at law and member of a firm who would receive a fee for negotiating a loan. In the opinion it was said: “It appeared that the firm of which the attorney was a member received, as compensation for negotiating the loan, $300, of which the attorney received one half. It was contended that this gave the attorney such a pecuniary interest as, under the ruling in Southern Iron & Equipment Co. v. Voyles [supra], would disqualify him from acting as the official attesting witness to the security deed, and that the record of the deed based on such attestation was void. In the case cited the question was whether a stockholder in a corporation, who was also an officer authorized to attest deeds, was disqualified, by reason of his relation to the corporation, to officially attest a bill of sale executed by another person to the corporation. On the basis that a person could not attest a deed to himself, and that whatever would affect the property and business of the corporation would also affect the stockholder, it was held, independently of statute, and as a matter of public policy, that the stockholder was so interested as to disqualify him from acting as an official attesting witness. But the facts of' that case were different from those now under consideration. In the instant case the attorney was not interested either as grantee or as grantor in the deed. The witness did not have an interest in the property, but was merely to participate in fees to be paid his firm as compensation for services in negotiating the loan; and the case falls — 724 — within the principle of Austin v. Southern Home B. & L. Asso., 112 Ga. 439 (6), 448 (50 S. E. 382); Jones v. Howard, 99 Ga. 451 (4), 457 (27 S. E. 765, 59 Am. St. R. 231); Sloss v. Southern Mutual B. & L. Asso., 97 Ga. 401 (23 S. E. 849). In the Austin case it was held: ‘ One who is an agent and attorney at law of a lender of money, who represents such lender in negotiations for a particular loan, and who is also a notary public, may in the latter capacity lawfully attest a security deed given to secure the loan negotiated by him/” In Citizens Trust Co. v. Butler, 153 Ga. 80 (108 S. E. 468), it was held that: “In this State a secretary of a banking corporation who is not a stockholder therein, or otherwise beneficially or pecuniarily interested in the transaction, is not disqualified from attesting, as an official witness, a deed of conveyance in which the corporation is the grantee; there being no express statute forbidding such officer to act.” In Farmers Warehouse Co. v. First National Bank, 152 Ga. 262 (109 S. E. 900), it was held that a person who was secretary and treasurer and general manager of a corporation and also a notary public was not incompetent to attest as an official witness a bill of sale to the corporation. -So it is not every possible pecuniary gain or relation that would disqualify an officer to attest a paper as an official witness. The ruling in Southern Iron & Equipment Co. v. Voyles, supra, had reference to a stockholder in an ordinary commercial or industrial corporation in which the interest of the stockholder, whether the legal interest in the enterprise or the equitable interest in its assets, was absolute, and unconditionally vested. That differs from the interest of the policyholder in the State Mutual Life Insurance Company as involved in this case, where the membership of the policyholder and the validity of the contractual obligations to the insured are conditioned upon the continued payment of annual premiums. Among the contractual obligations are certain “guaranteed dividend coupons” redeemable annually, which are less than the annual premiums; but these are upon condition that the annual premiums be paid. So also are the contractual obligations whereby a policyholder may participate in any fund which has been accumulated in the mortuary and reserve departments for payment of losses, should the corporation at any time cease to do business or be dissolved; but these are conditional upon the policy being in force at the time of the corporation’s ceasing to do business or — 725 — being dissolved. The statutes of this State do not declare that a holder of a policy of insurance in a company of this character, who is also a public officer, shall be disqualified to officially attest a deed to which the insurance company is a party, nor is there any sound public policy which requires such disqualification. There are usually so many persons who are policyholders in an insurance company, qualified to be public officers, and so many officers and agents in different departments of the business of the company, and results would be so far reaching, that it would be a dangerous policy to disqualify all holders of insurance contracts with the company, who might also be public officers, from officially attesting a contract to which the company was a party. It happens in the instant case that certain of the officers of the insurance company saw and examined the loan deed after it was officially attested by the policyholder and before the transaction was concluded, from which fact it might be inferred that the company had notice that the instrument was attested by an officer holding a policy in the company; but that would not affect the question of public policy. The rule announced and applied in Southern Iron & Equipment Co. v. Voyles, supra, should not be extended to this ease. Judgment affirmed. All the Justices concur.