Craig v. Osborn

Ethridge, J., delivered the opinion of the court. — 329 — The appellants filed a bill in the chancery court, alleging that S. I. Osborn, as substituted trustee, foreclosed a deed of trust executed by one Harry Hosmer to secure an indebtedness due to L. G. Malone, which deed of trust embraced two hundred acres of land and was duly recorded, and at the said sale the land sold for four sand two hundred fifty dollars cash. It further alleged that, subsequent to the execution of the aforementioned deed of trust, the said Hosmer executed two deeds of trust on the said land — one to G. P. Elliott on the 10th day of January, 1918, to secure a note for four thousand dollars, which remains unpaid, and which deed of trust was withheld from the record from the 10th day of January, 1918, until the 9th day of June, 1919, and until seven days after the complainant had paid out the sum of one thousand five hundred dollars to the said Hosmer and had taken a deed of trust on the said land to secure the same. It was alleged that the complainant was without any knowledge whatever of the outstanding unrecorded deed in favor of Elliott, and that the complainant recorded his deed of trust on the 13th day of June, 1919. The complainant alleged that the amount due Malone under his deed of trust was two thousand seven hundred thirty-nine dollars and ten cents, and that there remained in the hands of Osborn, trustee, the sum of one thousand five hundred ten dollars and ninety cents from the proceeds of the said sale of land. It further alleged that on the 2d day of June, 1919, the said Osborn conveyed all his interest in the said tract of land by a deed of trust duly executed, etc., and that the complainant was a bona-fide incumbrancer for value without notice, either actual or constructive of the outstanding claim of Elliott, and that he is entitled to the said proceeds in the hands of the said trustee to first satisfy complainant in trust; but that the said trustee refuses to pay the complainant or to recognize his — 330 — prior right, and prays for a decree directing the said trustee to turn over to the complainants sufficient money to satisfy the complainant’s incumbrances. The bill was demurred to, and the demurrer sustained, and an appeal taken, which appeal presents for decision the questions of priority between Craig, the appellant, and Elliott, the appellee. The decision turns upon the construction of sections 2288, 2291, and 2292, Hemingway’s Code (sections 2784, 2787, and 2788, Code 1906), which read as follows: “2288. A conveyanve of land shall not be good against a purchaser for a valuable consideration without notice, or any creditor, unless it be acknowledged by the party who executed it, or be proved by one or more of the subscribing witnesses to it that such party signed and delivered the same as his or her voluntary act before some officer authorized to take such acknowledgment or proof; and a certificate of such acknowledgment or proof shall be written upon or under the conveyance, and be signed by the officer before whom it was made, and be lodged with the clerk of the chancery court of the county in which the lands are situated, to be there recorded. ’ ’ “2291. All bargains and sales, and all other conveyances whatsoever of lands, whether made for passing an estate of freehold or inheritance, or for a term of years; and all instruments of settlement upon marriage wherein land, money, or other personalty should be settled or covenanted to be left or paid at the death of the party, or otherwise; and all deeds of trust and mortgages whatsoever, shall be void as to all creditors and subsequent purchasers for a valuable consideration without notice, unless they be acknowledged or proved and lodged with the clerk of the chancery court of the proper county, to be recorded in the same manner that other conveyances are required to be acknowledged or proved and recorded; but the same as between the parties and their heirs, and as to all subsequent purchasers with notice or without — 331 — valuable consideration, shall nevertheless be valid and binding. “2292. Every conveyance, covenant, agreement, bond, mortgage, and deed of trust shall take effect, as to all subsequent purchasers for a valuable consideration without notice, a-nd as to all creditors^ only from the time when delivered to the clerk to be recorded.” By the terms of section 2288, Hemingway’s Code (section 2784, Code 1906), a conveyance shall not be good against a purchaser for valuable consideration without notice,’ or any creditor, unless it is acknowledged or proven, as provided in the act, and be lodged with the clerk of the chancery court of the county in which the lands are situated to be there recorded. It seems plain that the act makes the conveyance void as to a deed or lien secured between the execution of the deed and the date it is filed for record. Nothing is said in the section about any duty of the subsequent bona-fide purchaser or incumbrancer filing his deed for record. A deed is void only as to the persons named therein, who acquire their rights subsequent to the execution of the deed in good faith for value without notice and the date that such deed is filed for record. As to such parties the deed under such circumstances is void. By section 2292, Hemingway’s Code (section 2788, Code 1906), above set out, the instrument takes effect as to subsequent purchasers for value without notice and to creditors only from the time when delivered to the clerk to be recorded. Under this section as'to such persons the deed or mortgage or other lien has no legal existence until it is filed for record. It is contended by the appellee, and so held by the court below, that the statute meant that it would not be good against a subsequent purchaser or incumbrancer or creditor who had filed his deed or lien for record, and that the subsequent purchaser intended by the statute was one who had his conveyance first recorded. To so — 332 — interpret the statute in our opinion would be to write into it words and terms which the legislature has not written. And it seems plain to us that the thing that the legislature intended to accomplish was the protection of the person buying or securing a lien in good faith without notice. It would have been an easy matter to have drawn the statute simply to provide that priorities would be governed by the date of the recording or filing of the several instruments. This question has not been precisely decided in this state and there is some conflict in the decisions of other states. But in our view the line of decisions holding as above indicated are the sounder and better view, and better serves the general purpose of the recording acts. In Coster’s Ex’rs v. Bank of Georgia et al., 24 Ala. 37 et seq., the Alabama court reached a similar conclusion upon a similar statute. At page 61 of the report, “the court said: “The question then arises, What is the effect of our acts of registration upon the two instruments by which Hope & Co. and the Bank of Georgia claim and how do the said acts affect the one in reference to the other? ■ “If we apply to them the act of 1823 (Clay’s Digest 154, section 18), we shall see that the penalty of nullity is pronounced upon the mortgage of the bank, so far as respects Hope & Co. and Carl Heine. The language of the act is that, as against ‘a subsequent bona-fide purchaser, or a mortgagee for a valuable consideration, not having notice thereof,’ such deed or conveyance shall be void and of no effect. That Hope & Co. are mortgagees, is undoubted. Their claim is based upon the technical bond and mortgage. This act of 1823 makes no requirement of the subsequent mortgagee, that he must record his mortgage, or stand in the same.predicament as the first mortgagee with his unregistered mortgage. The act simply declares the first unrecorded deed void, as against the subsequent mortgagee, bona fide, and upon — 333 — valuable consideration, where such mortgage is contracted without notice of the prior incumbrance. Suppose, then, the case of two mortgages of real estate, both regular upon their face, but neither recorded, and that the last has been contracted in ignorance of the existence of the first. Can there be any doubt that the last mortgage would override the first? We consider it plain that it would. The second mortgagee, in not recording his mortgage, runs the risk simply of being overridden by some subsequent mortgagee or incumbrancer, and in that case the statute would declare the nullity of his mortgage, and prefer the subsequent one, as it prefers his to the previous one. A different rule would prevail, if the statute gave the preference to the mortgage first recorded; but that is not so, nor does the act require the second mortgage to be recorded at all, but it pronounces the second mortgage, on its execution and delivery, if executed and received in ignorance of the first mortgage, its superior. And we apprehend the result will be the same, if we apply to these instruments the act of 1828, which speaks of deeds of trust of personal property to secure debts. Under this act, a deed not recorded for thirty days, if of personal property, and for sixty days if of real estate, is pronounced void, as against creditors and subsequent purchasers without notice. Applying this act to the two deeds under which the parties claim, we cannot perceive any difference in the result. Hope & Co., it is conceived, are, under their mortgages, creditors, if not subsequent purchasers; and the nullity of the bank mortgage, as to them, is as distinctly declared under this act as under the act of 1823, where we are disposed to think the deeds legitimately fall. The vice of the argument of the counsel in favor of the Bank of Georgia, consists in supposing that, the latter mortgage remaining unrecorded, the mortgages in that respect stand on the same level. Whereas the truth is that the act itself, whether we apply to them the act of 1823 or — 334 — the act of 1828, mahes the first mortgage null and void so far as the second is concerned, and neither act imposes upon the second mortgage the necessity of being registered in order to give it priority over the first.” In the subsequent case of Steiner v. Clisby, 95 Ala. 91, 10 So. 240, and on suggestion of error at 11 So. 294, the court construing the latter statute reached substantially the same conclusion. In that case it was held that, as between subsequent mortgagees, where the senior mortgage was not recorded at the time the junior mortgage was executed, the junior was entitled to priority if a bona-fide purchaser, though both mortgages were filed at the same time. The court said: “The fact that both mortgages were filed for record at the same time does not change the effect of the statute of registration. It does not require the second mortgage to be recorded before the first is recorded, in order to preserve its preference. It simply declares the unrecorded prior mortgage inoperative and void as against the subsequent mortgagees, when their mortgage is executed and received without notice of the first. ’ ’ In Feinberg v. Stearns, 56 Fla. 279, 47 So. 797, 131 Am. St. 119, the Florida court held in accordance with the above views. At page 279 of 56 Fla. at page 798 of 47 So. (131 Am. St. Rep. 119) the court said: ‘ ‘ The law is well settled that under our recording laws subsequent purchasers and creditors acquiring subsequent liens by judgment or otherwise without notice of a prior unrecorded deed will be protected against such unrecorded conveyance, unless the party claiming thereunder can show that such subsequent purchaser or creditor acquired his title or lien with notice of such unrecorded conveyance, and the burden of showing such notice is upon the party claiming under such unrecorded conveyance. All of the presumptions in such a case are in favor of the bona fides of such subsequent purchaser or lien creditor, and that they acquired their'subsequent — 335 — title or lien in good faith, and without notice of the prior unrecorded conveyance, and the burden is on the party who has neglected to record his prior title to show that the subsequent purchaser or lien creditor has acted in fraud of his rights by purchasing or acquiring his lien with notice of his unrecorded prior conveyance.” The instruments considered by the Florida court in this case were as follows: On the 6th day of November, 1902, one R. H. Plant recovered a judgment against J. W. Mitchell, who was then, so far as the public records showed, the owner of the lots in dispute. Under the execution issued for the enforcement of this judgment, the two lots in dispute were levied upon by the sheriff and sold at public sale on the 7th day of December, 1903, and Feinberg became the purchaser thereof at said sale and took a deed from the sheriff to the said lots. He had, prior to the sale, become the assignee of the judgment for a valuable consideration. The defendant Stearns claimed title under a deed from the judgment defendant Mitchell, dated the 17th day of September, 1902, It will be noted that his deed was given prior to the rendition of the judgment, but it wag not put of record until the 4th day of November, 1903. This case is directly in point. A similar announcement was made in the subsequent case of West Coast Lbr. Co. v. Griffin, 56 Fla. 878, 48 So. 36. In an early case from Indiana a statute of that state was construed which provided: “Every conveyance or mortgage of lands, or of any interest therein, and every lease for more than three years, shall be recorded in the recorder’s office of the county where such lands shall be situated; and every such conveyance or lease not so recorded within ninety days from the execution thereof, shall be fraudulent and mid as against any subsequent purchaser 'or mortgagee in good faith for a valuable consideration.” 1 Rev. St. 1852, p. 234, section 16. — 336 — • It was held in Schaffer v. Fithian, 17 Ind. 463, a junior conveyance took precedence over a seniqr one and that it was immaterial whether the junior conveyance was ever recorded or not. In Missouri the statute provided that conveyances, etc., be recorded, and that no such instrument — “shall be valid, except between the parties thereto, and such as have actual notice thereof, until the same shall be deposited with the recorder.” Rev. St. 1889, section 2420. In Miller v. Merine (C. C.), 43 Fed. 261, it was held that, as between two unrecorded conveyances, the junior grantee, if a bona-fide purchaser, was entitled to priority, under this statute, and that it was immaterial that after his purchase the prior conveyance was first recorded. In Texas a statute (Paschal’s Dig. art. 4988) provided in general terms that conveyances shall be void as to subsequent bona-fide purchasers unless they shall be filed for record as required by the statute. Under this statute it was held that the title of a subsequent bona-fide purchaser is superior to that of the senior grantee, whose conveyance is unrecorded at the time the junior conveyance is executed, though the senior conveyance is thereafter first recorded. Ranney v. Hogan, 1 Posey, Unrep. Cas. 253. In the state of Washington the statute provides: “All deeds, mortgages and assignments of mortgages, shall be recorded in the office of the county auditor of the county where the land is situated, and shall be valid as against bona-fide purchasers from the date of their filing for record in said office; and when so filed shall be notice to all the world.” Ballinger’s Ann. Codes & St. section 4535. Construing this statute, the courts of that state held that it is not necessary that the subsequent conveyance be first recorded in order to gain priority. Swanstron v. Washington Trust Co., 41 Wash. 561, 83 Pac. 1112. — 337 — The appellee relies upon cases from Illinois (West Chicago St. Ry. Co. v. Morrison, 160 Ill. 288, 43 N. E. 393; Stevens v. Shannahan, 160 Ill. 330, 43 N. E. 350), construing the Illinois statute, which reads: “All deeds, mortgages and other instruments of writing which are authorized to be recorded, shall take effect and be in force from and after the time of filing the same for record, and not before, as to all creditors and subsequent purchasers, without notice; and all such deeds and title papers shall be adjudged void as to all such creditors and subsequent purchasers, without notice, until the same shall be filed for record.” Hurd’s Rev. St. 1893, chapter 30, section 30. The court in the above cases construing this statute held that, when the prior mortgage was recorded subsequent to the execution of the second, it would take precedence unless the second was recorded first. It is contended that this statute is practically the same as our own. But we think the last clause above quoted, “until the same shall be filed for record,” taken with the context of the statute, is different from our own, which provides that it “shall take effect only from the filing of the record.” The words, “until the same shall be filed for record,” carries with it the idea that when it is filed for record it takes precedence over all intermediate conveyances not filed for record. Appellee also relies on the case of Copeland v. Bennet, 10 Yerg. (Tenn.) 355; and Whiteside v. Watkins (Tenn. Ch. App.), 58 S. W. 1107; Penrose v. Doherty, 70 Ark. 256, 67 S. W. 398; Murray v. Satterfield, 125 Ark. 85, 187 S. W. 928; and McHan v. Dorsey, 173 N. C. 694, 92 S. E. 598; and Collins v. Aaron, 162 Pa. 539, 29 Atl. 724. The Tennessee and Pennsylvania cases sustain the contention of the appellee. In Arkansas the court seems to have held two ways: In Brown v. Nelms, 86 Ark. 368, 112 S. W. 373, the court held that, where a mortgage was not recorded until — 338 — after a deed of the same premises had been executed, the deed took precedence over the mortgage, although the latter was first executed. In Penrose v. Doherty, 70 Ark. 256, 67 S. W. 398, the two deeds filed for record in that case were filed the same day, and the court held that the first in time under that condition would prevail. And the court held, under the same conditions, where both deeds were filed the same day, the one first given would take priority, in Glassock v. Mallory, 139 Ark. 83, 213 S. W. 8. In the case of McHan v. Dorsey, 173 N. C. 694, 92 S. E. 598, the statute was, different in its language from our' statute, in that it provided that such conveyance would not be valid unless registered, but provided priority from registration. The Tennessee statute (Shannon’s Code, section 3749) is slightly different in that it uses the words “as to other persons.” A summary of the different holdings of the different states and of the substance of their statutes will be found in case note to McGregor v. Putney, Ann. Cas. 1912A, p. 194. After a caréful consideration of our statutes on registration and their purpose and all the authorities referred to us, we have reached the conclusion stated in the beginning of this opinion, and the judgment will be reversed, the demurrer overruled, and the cause remanded, with leave to plead or answer within thirty days from date of mandate to the court below. Reversed and remanded. Sykes and Cook, JJ., dissent.