Fender v. Hodges

Gilbert, J. The defendant in error filed a motion to dismiss the writ of certiorari. The motion consists of two grounds. (1) The petition does not present any question of great public concern or any matter of gravity and importance. (2) The petition violates the rule of the Supreme Court, “in that it does not plainly specify the decision complained of and the alleged errors, and does — 731 — not plainly and specifically set forth the errors alleged to have been committed by the Court of Appeals.” The motion is denied. The question presented is of public concern, and is important. The petition plainly specifies as error the judgment of the Court of Appeals in holding the lien of one who holds an unrecorded bond for title by transfer thereof to be superior to the lien of one holding by transfer a note together with a deed securing the same, who took bona fide for value without notice of any kind of the existence of the bond. From a careful reading of the opinion of the Court of Appeals and the carefully prepared briefs of counsel on both sides, it is apparent that the question at issue rests in some confusion and doubt. It is of general public concern that the law should, if possible, be clarified and settled. Under the agreed facts Fender and Carter, transferees of the security deeds executed by Roberts to Harry L. Winter Inc., are entitled to priority over the claim of Mrs. Hodges, transferee of the bond for title executed by Lovejoy and Baskins to Roberts. “Bonds for title to land or any interest therein shall, when executed with the formality now prescribed for the execution of deeds to land, be admissible to record in the county where the property therein described is located.” Civil Code (1910), § 4213. The bond for title held by Mrs. Hodges was executed with the formality required for the execution of deeds to land. It was therefore admissible to record. With reference to the Code section quoted, this court has said: “The rule in equity is applicable in the construction of the act of 1900 (Acts 1900, p. 68; Civil Code 1910, § 4213 et seq.), providing for the registry of bonds for title. The primary intent and purpose of the act was to give notice to all persons dealing with the obligor, from the date of the filing of the bond, ‘ of the interest and equity of the holder of such bond in the property therein described,’ so that any one acquiring a lien on or title to the property after the filing of the bond would take the property subject to the interest and equity of the obligee in the bond.” Gleaton v. Wright, 149 Ga. 220 (100 S. E. 72). The act approved August 12, 1921 (Ga. Laws 1921, p. 157), made further provision for recording bonds for title. It supplemented the language of Code section 4213, and made' plainer its meaning. Winter completed the loan to Roberts, and filed the security deed for record February 14, 1922. Mrs. Hodges had held her bond since its transfer to her in 1920, — 732 — and from the approval of the act of 1921 on August 12 to February 14, 1922, unrecorded. Therefore when Harry L. Winter Inc. took its deed, both acts were in force; the latter had been for six months, and yet the record gave no notice. Why did the General Assembly deem it necessary to protect by statute “the interest and equity of the holder of such bond” as against any one subsequently acquiring a lien on or title to the property ? The conclusion seems to be that without the statute the holder of the bond for title was without protection as against persons subsequently acquiring liens where there was no actual notice, because there was no means of effecting constructive notice. For that reason the statute was enacted, and after its approval constructive notice was obtainable and from such notice the holder is protected. In our opinion the contention that Mrs. Hodges is entitled to priority is based upon a mistaken premise. It is stated in the opinion of the Court of Appeals, and repeated several times in the brief of counsel, that at the time Roberts executed and delivered his security deed to Harry L. Winter Inc., Roberts held no title to the land; that the legal title was at that time in Forman by virtue of the security deed from Lovejoy and Baskins; and that Roberts had previously transferred and assigned to Mrs. Hodges as security for a loan his bond for title from Lovejoy and Baskins. It is thus reasoned that Roberts had no title of any kind. This conclusion is reached from a consideration of Wood v. Dozier, 142 Ga. 538 (83 S. E. 133). As we construe the facts in that case, they are entirely different from those of the present case. The contention in behalf of Mrs. Hodges is based upon the idea that Lovejoy and Baskins had assigned to Roberts their equity in the property, and upon the further view of the situation as it existed on the day named in the Roberts deed to Winter, whereas the entire transaction between Roberts and Winter should be considered in order to determine the rights of the parties. On the day named in the Roberts deed, Forman held legal title, and Mrs. Hodges held, not the Forman bond, but the Lovejoy and Baskins bond for title to Roberts, as security, and Roberts was in possession; but the transaction was not concluded on that day. It was concluded on February 14 (two weeks later than the day named in the deed) by payment of $5000 to Roberts by Winter and delivery of the security deed for record. On the previous day Roberts received from Lovejoy and Baskins q, war — 733 — ranty deed which conveyed all of the grantors’ right, title, and interest in the land, subject to the Forman loan deed. Therefore, on February 13, the day before Roberts’ deed to Winter was delivered for record and the money was paid, Roberts had the paper title, and he had the acknowledged and rightful possession of the land. Lovejoy and Baskins had not previously parted with their interest in the land. They had an equity subject to the Forman debt. They did not transfer this equity. Had they done so they would have been without title. Wood v. Dozier, supra. They contracted to do so in future upon conditions; they made a bond to convey title to Roberts. And that is exactly what they did; they made title to Roberts. It is true that Mrs. Hodges held the transferred bond for title of Lovejoy and Baskins as security for a loan to Roberts, but neither the bond for title nor the transfer had ever been recorded. It is important to remember at this point that the transferred bond-for title did not purport to, and did not in fact, extend the lien of the Forman security deed to Mrs. Hodges’ loan. It is also agreed that neither Winter nor any of the subsequent transferees of the Winter security deed had any “personal or direct knowledge of the existence of the bond for title” of Mrs. Hodges or of the transfer of the same, or of any claim of Mrs. Hodges against the land. It is further agreed that Winter, at the time of the acceptance of the Roberts security deed, had no constructive knowledge of the existence of said bond for title, and that none of the transferees of that deed at the time of the respective transfers had any actual or constructive knowledge of the existence of the bond for title, or of the transfer or assignment of the same, or of any kind of claim of Mrs. Hodges to a lien on the land. On the other hand it is agreed that the Winter security deed and all transfers and assignments have been properly executed, witnessed and recorded, and also that Winter and all transferees and assignees, including Fender and Carter, paid for the Winter note and security deed the full face value thereof. So it follows that Winter obtained from Roberts, who held the warranty deed of Lovejoy and Baskins, the full title as security, subject only to the Forman loan. The obligation of Roberts to Mrs. Hodges by reason of the transfer and assignment of his bond for title is of course unaffected by dhe transactions with Winter. Roberts is in no wise relieved. Moreover, Mrs. Hodges was never in possession — 734 — of the land. If she had been, her possession would have put them on inquiry, and Winter would have taken a lien subject to Mrs. Hodges’ lien, notwithstanding her failure to record her papers. The permissive statute (Civil Code, § 4213) was enacted for the benefit of holders of such bonds for title who were not in possession and who needed some means of notice to the world by which their interests could be protected. Eoberts was in possession; and when he acquired his warranty deed from Lovejoy and Baskins, purchasers from him were entitled to presume that, if he had held a bond for title from his vendors, the same had been surrendered to the latter in exchange for the deed. Certainly this presumption was fully authorized when Fender and Carter inquired of Eoberts whether there was any claim other than Forman’s, and were informed by him that there was none. Whát other inquiry or diligence could be expected, when the public, records disclosed no counter-claim. The failure of Mrs. Hodges to record her bond and transfer placed it in the power of Eoberts to deceive and defraud some other person by misrepresenting the facts, and that is what occurred. “When one of two innocent persons must suffer by the act of a third person, he who put it in the power of the third person to inflict the injury must bear the loss.” Civil Code (1910), § 4537. Mortgage Guarantee Co. v. Atlanta Commercial Bank, 166 Ga. 412 (143 S. E. 562). It is argued that Fender and Carter acquired the notes and the security deed under which they claim after maturity of the notes, and that this fact should have placed them upon inquiry, and that due diligence on their part would have led to a discovery of the claim of Mrs. Hodges. We do not think that the fact that Fender and Carter obtained the notes after maturity can affect the result. The principle insisted upon is not applicable to the facts of this case. The purchase of notes after maturity will let in any defense that the maker has, but the maker in this case has offered no defense. In fact the validity and legality of the notes are not in any wise attacked. Counsel for Mrs. Hodges argues that the payment of the amount due by Eoberts to Lovejoy and Baskins did not operate to put the title in Eoberts, for the reason that Eoberts had transferred his bond for title to Mrs. Hodges. That argument is sound, but one fact is overlooked. That is, Eoberts obtained his warranty deed from Lovejoy and Baskins. This fact entirely alters the conclu — 735 — sion. That put the legal title in Eoberts. Mrs. Hodges still held unrecorded her bond for title as security for the loan to Eoberts; but she was sleeping on her rights. She could have preserved her lien, but failed to do so. Forman had duly recorded his lien, and his priority had been conceded. McClure v. Smith, 115 Ga. 709 (42 S. E. 53), is cited as authority for the ruling made by the Court of Appeals. With due respect for that court, we can not. agree that it affords such authority. Our reason for differing is that the facts of the two cases are altogether different and lead to different conclusions. In the McGlure case the security deed was the lien depended upon, and was held superior to a common-law judgment. It was there contended that while the deed was superior as a lien in regard'to the original debt, such was not the case as to two loans subsequently made between the same parties. There the lien' of the security deed was sought to be extended to the subsequent loan by a written agreement entered on the bond for title. The common-law judgment was obtained after the execution and record of the security deed, and after the two later loans were made with agreements extending the security to the later loans. The two extended agreements were never rcorded. It should be observed that the prevailing superior lien was the security deed, not the bond for title. The security of the deed was extended by the entries on the bond for title. The lien extension of security might just as well have been written on separate pieces of paper as on the bonds for title. Placing such agreements on the bonds for title and returning them to the obligor merely placed the bonds within the control of the obligor. The grantee in the security deed obtained judgments against the grantor for each of the three loans, and each of the judgments was made a special lien on the land in virtue of the security deed. In the present case there is no contention that the assignment of the bond for title to Mrs. Hodges was intended to have or did have the effect of extending the provisions of the security deed held by Forman, for the loan made by Mrs. Hodges to Eoberts. A careful reading of the McGlure case shows that the court was dealing with an entirely different set of facts, and that the rulings there are not applicable to the present case. The case of Guaranty &c. Co. v. Athens Eng. Co., 152 Ga. 596 (110 S. E. 873), is also cited in behalf of Mrs. Hodges. It also differs in its facts from the present case. There two loans were — 736 — made between the same parties and at practically the same time. A security deed was executed by the borrower, and the bond for title was executed by the lender. The borrower immediately transferred the bond for title back to the lender as security for the second loan. The bond for title was never recorded. The borrower was in possession, and was causing a residence to be erected on _the land. Liens were obtained by the contractor and materialmen. The lender who made the security deed and a transfer bond for title was held to possess prior liens on the property as to both loans, but a careful reading of the case will show that the failure to record the bond for title had little, if any, bearing on the case. The decision turned on the fact that the contractor and material-men failed to allege and prove that the material was furnished and work begun prior to the time the security deed and transfer of the bond were made. Citing Wood v. Dozier, supra, and Kirkman v. Ashford, 145 Ga. 452 (89 S. E. 411), it was held that “Where an owner conveys realty as security for a debt and receives a bond for title conditioned to reconvey the property on payment of the debt under the provisions of the Civil Code, §§ 3306 et seq., and after such conveyance transfers the bond for title as security for another debt, such transfer operates to assign the equity of the owner in the land subject to the loan deed.” The facts in this case differ from the facts of the other cases above dealt with, in that the present case contains the additional fact-that Eoberts obtained a warranty deed from Lovejoy and Baskins, which placed in him the legal title. This fact did not exist in either of the cases above cited. It is an important difference, and it led to the conclusion in the Athens case, as it did in other cases, that liens do not attach because the debtor, prior to the recording of the lien, had entirely parted with his title to the land. In the present case the loan of Mrs. Hodges was not an additional loan made by a grantee in a security deed to the same grantor. On February 14, when Eoberts concluded his transaction with Winter, having on the previous day obtained a warranty deed to the land, Mrs. Hodges held the transferred bond of Lovejoy and Baskins to convey to Eoberts. That gave her a claim on Lovejoy and Baskins and also on Eoberts. As to Eoberts, Mrs. Hodges stood at most as a purchaser with full purchase price paid and holding a bond for title — a secret equity as to Winter and assignees. — 737 — In that situation the principle ruled in Arnold v. Bennett, 90 Ga. 334 (17 S. E. 91), is applicable, viz.: Where a purchaser takes only a bond for title from his vendor and leaves the latter in possession, a subsequent bona fide purchaser for value from the same vendor, who takes a conveyance without any notice of the previous bond for title or of any right or equity in the first purchaser, acquires the title paramount. Harry L. Winter Inc. and subsequent assignees occupied the position of purchasers for value. Williams v. Oconee County Bank, 162 Ga. 615 (134 S. E. 478.); First Nat. Bank v. Pounds, 163 Ga. 551 (136 S. E. 528), and cit. To discuss all of the cases cited on collateral points would extend the opinion beyond reasonable or helpful bounds. It is deemed sufficient to say that all cited authorities have been examined, and those not mentioned are not considered in point. Most of them state well-recognized principles of law which do not conflict .with the ruling here made. Judgment reversed. All the Justices concur.