Bank of Lexington v. Cooper

| Miss. | Oct 15, 1917

Lead Opinion

Stevens, J.,

delivered the opinion of the conrt.

(After stating the facts as above). Appellant contends that it had the absolute right to rely upon the recitals appearing on the face of the recorded instruments, and accordingly that the court, in disposing of the conflicting claims of the parties hereto, must regard: First, the true maturity of the first note given the Bank of Durant as January 1, 1904; and secondly, must regard the true date of the renewal trust deed executed to the Bank of Durant as October 11, 1911. These are the two mistakes which the undisputed proof shows to appear on the records in the chancery clerk’s office. If these contentions prevail and appellee is bound by the mistake of the clerk in recording, then, appellant submits, that the statute of limitations barred the first note on January 1, 1910, and no renewal was entered of record within six months thereafter. Appellant relies upon section 2796, Code of 1906, which reads as follows:

“Where the remedy to enforce any mortgage, deed of trust, or other lien on real or personal property which is recorded, appears on the face of the record to be barred by the statute of limitation, the lien shall cease and have no effect as to creditors and subsequent purchasers for a valuable consideration without notice, unless within six months after such remedy is so barred the fact that such mortgage, deed of trust, or lien has been renewed or extended be entered on the margin of the record thereof, by the creditor, debtor, or trustee, attested by the clerk, or a new mortgage, deed of trust, or lien, noting the fact of renewal or extension, be duly filed for record within such time. And where a suit shall have been brought to keep a judgment alive within seven years from the rendition of such judgment, the general lien of such judgment shall expire as to creditors and subsequent purchasers for a valuable consideration without notice, at the end of seven years from the rendition of such judgment, notwithstanding such suit to keep alive the judgment, unless a notation to keep alive such judgment shall be made on the judgment roll within six months after the expiration of seven years from the time of the rendition of such judgment.”

Counsel' stress and rely upon the words “on the face of the record.” Section 2788 of the Code expressly provides that a deed of trust and other instruments “shall take effect, as to all subsequent purchasers for a valuable consideration without notice, and as to all creditors, only from the time when delivered to the clerk to be recorded.” Section 2787 requires deeds of trust and mortgages to be recorded, and declares that they “shall be void as to all creditors . . . unless they be aeknowl edged 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.” Our court construed sections 2787 and 2788 in the case of Mangold v. Barlow, 61 Miss. 593" court="Miss." date_filed="1884-04-15" href="https://app.midpage.ai/document/mangold-v-barlow-7986051?utm_source=webapp" opinion_id="7986051">61 Miss. 593, 48 Am. Rep. 84, and in strong terms .aligned this court with those authorities which hold that a grantee has done all required of him when he deposits his deed or deed of trust with the proper officer for record and is not bound by' a mistake of the clerk in recording. Our court, speaking’ through Campbell, -C. J., says:

“Does the grantee acquit himself fully of all duty when he delivers the deed to the proper officer for record, or is it his duty to see that the instrument is properly recorded? And if a mistake is made in recording by which a subsequent grantee is misled and injured, whose claim shall prevail, that of the first grantee, who relied on the officer to do his duty, or of the second grantee, who, in the faith that the record is true, acts upon it? Shall the deed prevail or the record of it? There is greát contrariety of opinion on this subject in other states. . . . After the most careful consideration we range ourselves with the minority, and hold that a grantee fully acquits himself of all duty imposed by law when he lodges the instrument with the proper officer for record, and from 'that time it is notice to subsequent purchasers and creditors of what it contains, and not of what the recording officers may make it to show on the record. The clerk is not the agent of the grantee, and he is not responsible for his blunders. He has as much right to rely on the fidelity of the officer as has a subsequent purchaser. '. . . The first grantee, having done all that he is required to do to give notice of the instrument, may safely repose on the presumption that the recording officer has done his duty, and if subsequent purchasers or creditors suffer injury from official negligence' or misconduct, they must seek redress from the party at fault, and cannot visit the loss on him who has done no wrong. . . . It is not for his benefit that the recording is to be done, but for others. The state has undertaken to have the recording done, and if one suffers from the negligence of the officer he must seek redress from the officer.”

At the time this opinion was rendered the authorities were in conflict, many cases holding at that time that the clerk is the agent of the grantee, and the mistakes of the clerk must be looked upon as the mistakes of the party who seeks recordation of his instrument. Our. court repudiated the' reasoning of the opinions which declare that- where one of two innocent persons must suffer in a case of this kind, the loss must fall upon the person who lodges with the clerk the instrument to be recorded, on the theory that the clerk acts for the beneficiary or grantee and is under his control. Our court adopted the view that the clerk is a public officer employed to serve the public generally, and that a party offering a document for record in due form and properly acknowledged or proved has a right to presume that the clerk will perform his duty. Mr. Jones in his work on Mortgages, in discussing the two views, says:

“The other view prevails under statutes which make the deed operative as a record from the time it is filed for record, and the apparent weight of authority is that any error in transcribing the deed, as, for instance, in the date of the deed or of the acknowledgment, or in the sum secured by a mortgage, does not prejudice the grantee or mortgagee. The mortgagee is regarded as having discharged his entire duty when he has delivered his mortgage, properly executed and acknowledged, to the recording officer, and as being in the same attitude as if the deed were at that moment correctly spread upon the record book, so that no error in'transcription can deprive the deed of its operation as a recorded instrument, and subsequent purchasers are charged with constructive notice, notwithstanding the officer does not properly record the instrument. . .

“The grantee is under no obligation to supervise the work of the recorder, and see that he spreads the deed upon record, or that he puts it upon the index. If, however, the record is such that it suggests a probable mistake in recording, it puts purchasers upon inquiry and charges them with notice of what the deed contains. In discussing a case where a purchaser was put upon inquiry by examination of a defective record showing his sources of title, which disclosed intervening equities, the United States Court of Appeals [The W. B. Cole, 59 F. 182" court="6th Cir." date_filed="1893-11-06" href="https://app.midpage.ai/document/oconnell-v-pate-8848472?utm_source=webapp" opinion_id="8848472">59 Fed. 182, 8 C. C. A. 78], per Judge Taet, said: “The proper construction of the recording acts charges every person tailing title with all conveyances or mortgages made by any one in the chain of title while he holds title, whether the recording of such conveyances occur then or not. If, upon the record, a prior conveyance seems to be defeated by a subsequent one through delay in recording, then the person taking title must inquire as to the facts which might defeat the statutory effect of such prior record. ... A purchaser is charged with notice of his chain of title, whether the grantees therein are bona fide purchasers or not.’ ” Jones on Mortgages (7 Ed.)., par. 517.

But we are asked to enforce a different rule and to apply a different interpretation to section 2796, declaring that when a lien appears on the face of the record to be barred, it ceases unless renewed within six months. In our opinion counsel play upon the words, “on the face of the record.” If the record- in the present case spoke the truth, there would, of course, be no controversy. This statute did not contemplate a false or fraudulent record. There is - no more reason for holding the beneficiary of a deed of trust bound by a mistake in' the record under this statute than there is to bind the grantee or beneficiary under sections 2787 -and 2788. Under either statute the grantee or beneficiary discharges his duty when he files his instrument for record. The express obligation of section 2796 under review is that the beneficiary must either have the renewal or extension entered on the margin of the record, or to have a new deed of trust “duly filed for record.” In the present case appellee Bank of Durant took a renewal deed of trust in due form, properly acknowledged, and had it “duly filed for record.” There is no difference between the phrase “appears on the 'face of the record” and the phrase “appears by the record.” We have often heard the expression that the holder of a deed is charged with notice of all recitals appearing on the face of his title deeds. The face of the record is nothing more than the recitals of the record and it is always contemplated that these recitals are the true transcripts from the original and not false recitals. It is suggested' that the legislature, when it in 1896 first enacted the statute appearing as section 2462, Code of 1892 (2796, Code of 1906), intended to change the holding announced in the Mangold-Barlow Case, supra. But there is no real basis for such inference. Our court was construing what was then section 1213, Code of 1880, and this section was brought forward in the Code of 1892 and again incorporated in the Code of 1906, and has neither been repealed nor amended. The legislature was evidently content with the construction which our court had placed upon that statute, and, following the judicial construction, re-enacted the law and thereby approved the construction which the court had seen fit to place upon the statute. The only change was the enactment by the legislature in 1896 of the statute now appearing as 2796 of the Code, and in construing this new statute we are governed by the same principles announced by the court in the Mangold-Barlow Case. The opinion in that case announces in language most emphatic that the clerk is not the agent of the party who offers a document for record, and that the holder of the instrument, whether deed or deed of trust, is not obliged to oversee the work of the recorder or to follow up the clerk to ascertain whether he has discharged his official duty. The legislature has not changed the construction, and the principles which controlled the court in the Mangold Case should control in the present case. There can be no difference in the legal principles governing both cases.

But let us examine a little further and a little deeper the real defense, of appellant Bank of Lexington. "Was appellant misled by the mistake of the clerk in reciting the maturity of the first note as January 1, 1904? The recorded trust deed was dated April 14, 1904, and described the promissory note which it secured as “bearing even date herewith.” • The instrument then as recorded shows upon its face that it secured a promissory note dated April 14, 1904. A promissory note of that date could not possibly be made to mature at the earlier date of January 1, 1904, several months prior to its execution. The record, then, discloses a patent ambiguity, and put the Bank of Lexington upon inquiry as to the true facts. The recorded instrument does not recite that it is given to secure an indebtedness which matured January 1, 1904, some months prior to the date of. its execution, but .expressly recites that it is given to secure a promissory note. The debt then is evidenced by commercial paper, and the recitals as to the description of this commercial paper are material and pertinent. Mr. Jones in paragraph 524 declares that the record is notice, not only of the contents of the mortgage, but of all matters suggested thereby. He says:

“Although the debt or the property be not fully described, the record is notice of all that is said about it, and a purchaser is bound by the statement made, and by «the information he is put upon the inquiry to find out. . . . It is notice not only to purchasers, but to the subsequent creditors as well. . . . The record imparts notice of all the facts which could have been ascertained by an actual examination thereof, including not only those recited in the record, but also material matters suggested thereby, which might be disclosed by reasonable inquiry.”

And in speaking about the description of the debt secured and the necessity to make inquiry, Mr. Jones, in paragraph 579, says:

“A general description of the debt is sufficient to put all parties interested upon inquiry, and to charge them with notice of all facts that could be obtained by the exercise of ordinary diligence and the prosecution of the inquiry in the right direction. A party willfully closing his eyes against the lights to which his attention has been directed, and which, if followed, would lead to a knowledge of all the facts, is chargeable with notice of every fact that he could have obtained by the exercise of reasonable diligence.”

In the case at bar, if the Bank of Lexington had pursued this inquiry, they would have at once ascertained that a mistake had been made by the recorder. There was no mistake in the promissory note, and either this note or the original trust deed in the hands of the Bank of Durant would have disclosed the truth. As a matter of fact and of law the note was not outlawed until January 1, 1911. Prior to this time, and on October 11, 1910, a renewal was executed and at once filed for record. This indebtedness was never paid, constituted a prior lien, and justified the final decree rendered in this cause. There is no merit whatever in the argument that the Bank of Durant is .bound by the mistake of the scrivener in reciting the date of the renewal trust deed as October 11, 1911. The mistake is patent upon the face of the record, and any reasonably prudent man would at once detect the mistake by. an inspection of the record. This mistake is shown: First, by the acknowledgment; secondly, by the date the instrument was filed with the clerk for record; and, thirdly, by the recitals or description of the indebtedness contained in the instrument, itself. On the trial of the case the mistake is further shown by the testimony of Mr. Cooper.

There is another view of this case about which a few remarks would be proper. The first deed of trust in favor of the appellant Bank of Lexington was January 15, 1908. At that time admittedly appellee held a live lien, unaffected by any mistake of the clerk in recording. At the time the Bank of Lexington took its first lien, it at least had constructive notice of the prior lien in favor of the Bank of Durant. The advances which the Bank of Lexington then made to Mr. McDonald were never paid, but were carried forward into renewal trust deeds here claimed to be priorities. Under any view of this case, then, the original consideration advanced under the. first deed of trust was and has always been a second lien. There is no showing whatever that appellant was actually misled by any of the recitals of record. Appellant showed by its own witnesses that its offices did not search the records and are affected only by constructive notice. The case, then, would appear within the principle announced in Klaus v. Moore, 77 Miss. 701" court="Miss." date_filed="1900-03-15" href="https://app.midpage.ai/document/klaus-v-moore-7988381?utm_source=webapp" opinion_id="7988381">77 Miss. 701, 27 So. 612, where our court through Calhoon, J., said:

“But section 2462 was enacted to protect creditors and purchasers who parted with something on the appearance of the record, and cannot ,be availed of by Klaus. He took his junior trust conveyance before there was the appearance of any bar on the record, and is neither creditor nor subsequent purchaser within the meaning of this statute.”

There is no controversy about appellee enlarging its debt. The indebtedness here decreed to be a first lien has been a legal indebtedness since April 14, 1904, and was outstanding many years before the Bank of Lexington ever advanced a cent. Equity and the law are with the appellee in this case, and we see no good reason why the decree of the learned chancery court should be disturbed.

Affirmed.

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Dissenting Opinion

Ethridge, J.

(dissenting).

I cannot accept the construction the majority places upon section 2796 of the Code of 1906. This section reads as follows:

“Where the remedy to enforce any mortgage, deed of trust, or other lien on real or personal property which is recorded, appears on the face of the record to be barred by the statute of limitation, the lien shall cease and have no effect as to creditors and subsequent purchasers for a valuable consideration without notice, unless within six months after such remedy is so barred the fact that such mortgage, deed of trust, or lien has been renewed or extended be entered on the margin of the record thereof, by the creditor, debtor, or trustee, attested by the clerk, or a new mortgage, deed of trust, or lien, noting the fact of renewal or extension, be duly filed for record within such time. And where a suit shall have been brought to keep a judgment alive within seven years from the rendition of such judgment, the general lien of such judgment shall expire as to creditors and subsequent purchasers for a valuable consideration without notice, at the end of seven years from the rendition of such judgment, notwithstanding such suit to keep alive the judgment, unless a notation to keep alive such judgment shall be made on the judgment roll within six months after the expiration of seven years from the time of the rendition of such judgment. ’ ’

The deed of trust in suit for the appellee, as taken, made the debt mature on January 1, 1905, but by mistake in the recording, the record recited that the note matured January 1, 1904. As the statute begins to run on a debt from the date when a suit can first be brought, it would be the date the note was due and payment refused. The statute would begin to run, if-the record governed, January 1, 1904, and the right as well as the remedy would become barred January 1, 1910, and this appears of record to be the fact. If the statute means what it says, “appears on the face of the record to be barred by the statute of limitation,” then in March, 1910, when the appellant took its second deed of trust, the lien of the appellee appeared to be barred by the record and it was not renewed, nor was any entry made on the marginal record, showing renewal within six months from the date which it appears of record to have been barred. This statute (section 2796) first appeared in our law with the adoption of the Code of 1892, being section 2462 of the Code of 1892, which was long after the decision in Mangold v. Barlow, 61 Miss. 593" court="Miss." date_filed="1884-04-15" href="https://app.midpage.ai/document/mangold-v-barlow-7986051?utm_source=webapp" opinion_id="7986051">61 Miss. 593, 48 Am. Rep. 84. At the time that decision was rendered there was no such statute as section 2796 of the Code. In delivering the opinion of the court in the Mangold v. Barlow Case, the court frankly conceded that the decision then rendered was against the decided weight of authority, the court saying:

“The decided weight of authority seems to be in favor of the view that the record may be relied on by a subsequent purchaser, and that he cannot be affected by a deed not truly recorded (citing numerous authorities). After the most careful consideration we range ourselves with the minority, and hold that a grantee fully acquits himself of all duty imposed by law when he lodges the instrument with the proper officer for record, and from that time it is notice to subsequent purchasers and creditors of what it contains, and not of what the recording officers make it show on the record.”

Manifestly, the present section of the Code was enacted for the purpose of placing this state in line with the majority of the states of the Union upon this proposition. It seems to me that there could he no doubt of the wisdom of the present statute, for how can a person dealing with property be expected to hunt up all incumbrances that may appear on record whose actual security may not be within' the limits of the state or within reach of any reasonable inquiry? The section as construed by the court puts the onerous burden upon the person either buying or becoming a creditor to actually look up recorded conveyances and compare them with the record of the conveyance, an undertaking that manifestly is impractical and cannot be carried out in practice. The construction placed upon the section by the májority absolutely makes section 2796 a legislative farce, because if the rule is to remain the same, and if what appears on the face of the record is not to govern as against the actual instrument'given, it would be foolish to put a statute of this kind on the book.

In regard to the proposition advanced in the majority opinion that the face of the record showed or recited that the note secured by the mortgage was of even date and tenor as the instrument, the deed of trust, which deed of trust was dated subsequent to January 1, 1904, and that this would charge subsequent purchasers and incumbrancers with the duty of •making inquiry, I think it sufficient to say that the date of the indebtedness secured is not material. It has no effect whatever in disclosing whether or not the remedy would be barred by the statute of limitation. The statute of limitation does not run from the date of an instrument, but runs from its maturity, and the record showed that the deed of trust would be barred by the statute' of limitation on January 1, 1910, and therefore the second deed of trust taken by the appellant would be protected. The usual printed forms used in this state have printed, “of even tenor and date,” when referring to the note, and does not usually describe the note as to date by day of month and year.

In regard to the proposition that the first deed of trust taken by the appellant was taken on June 15, 1908, during the period when the appellee’s deed of trust appeared to be in full force of record, I think that this contention is answered by the fact that in March, 1910, after the deed of trust of the appellee appeared from the record to be barred, that the appellant took a new deed of trust, advancing additional moneys, and extending the time for the payment of the indebtedness in 1908, under which contract it could not bring suit until the maturity of the paper then taken. I think this, is sustained by the authority of Schumpert v. Dillard, etc., Co., 55 Miss. 348" court="Miss." date_filed="1877-10-15" href="https://app.midpage.ai/document/schumpert-v-dillard-pinson--co-7985058?utm_source=webapp" opinion_id="7985058">55 Miss. 348. I quote the second syllabus of this case as follows:

“A mortgage given for a pre-existing debt is not invalid for want of valuable consideration, as against a prior unrecorded mortgage, where the time of payment of the debt is extended by a note taken four days before the execution of the mortgage, if it appears that the giving of the note and the execution of the mortgage formed one transaction.”

Inasmuch as the appellee did not renew its security within six months from the date that it appeared to be barred, it became absolutely barred as to appellant, and could have no further effect upon the rights of the appellant. The appellant could rightfully treat it as being at an end, and could either foreclose his debt due or take a new security relying for protection upon "the record. It is much easier for a mortgagee or a lien-holder to see that the instrument is correctly recorded than it is for the general public to make such comparison, for the reason that the paper to be compared with the record is in the hands of the mortgagee, while another person can only secure the mortgage by permission of the holder, and manifestly no sensible business man would surrender his mortgage or deed of trust to every person, or to any person for that matter, for the purpose of carrying it to the county records and making a personal comparison. If the clerk makes a mistake in recording he is responsible to the .holder of the paper, and such holder may maintain an action upon the clerk’s bond for an losses sustained- by him on account of such mistake.

The majority refer to the case of Klaus v. Moore, 77 Miss. 701, 27 So. 612, where the court, speaking through Judge Calhoon, said that the statute applied only where a person had parted with something on the face of the record, or who had been misled to his injury by the record. If we treat the appellant as being charged with notice of the record and treat him as having knowledge of the record, then when he took his security without actual knowledge of the appellee’s rights, he has parted with something, and has been injured by the record, and that case should be authority for the appellant rather than the appellee. In that case the controversy, however, was different from the one here. It has but slight bearing upon this proposition. I think in addition to this that the holder of a deed of trust or mortgage should see that the debt which the mortgage secures is properly described in the mortgage, and, if it is not, that he suffers the consequences of such carelessness rather than an innocent purchaser for value or a creditor. For these rea-' sons I am of the opinion that the judgment should be reversed and the appellant’s claim in 1910 should be preferred over the appellee, but the claim of-the appellant taken in 1912 should be subordinated to the appellee.