138 S.E. 297 | S.C. | 1927
Lead Opinion
May 19, 1927. The opinion of the Court was delivered by This is an action for foreclosure of a mortgage on a lot of land situated in the City of Sumter. The circumstances giving rise to the action and the issues therein are as follows:
On November 5, 1917, McCallum Realty Company, a corporation, the owner of said lot, on which was a small dwelling house, entered into a written contract with the defendant, Lizzie Rogers, a colored woman, whereby it contracted to sell, and she to purchase, the said lot upon the terms therein stated. The contract was not recorded. Pursuant to the contract, Lizzie Rogers went into possession of the lot in the early part of 1918, and she and her children have since been in possession. On March 25, 1921, McCallum Realty Company mortgaged said lot to the Woodmen of the World to secure a loan that day made; the Woodmen of the World having no actual notice of the aforesaid contract. Thereafter the mortgage was assigned to plaintiffs as trustees for certain members of Hollywood Camp No. 19, Woodmen of the World, who commenced this action on September 20, 1924. Notice having been previously given that Lizzie Rogers claimed some interest in the lot, she was made a party defendant. The McCallum Realty Company having been adjudged bankrupt, W.L. Marshall, trustee of said bankrupt, was also made a party defendant. All defendants defaulted, except Lizzie Rogers, who answered, setting up her contract, and claiming that she was entitled to the premises for the reason that her rights were superior to those of plaintiffs. The case was referred to the master for Sumter County, who filed his report, sustaining her contention. The plaintiffs excepted to the master's report, and the case was heard before his Honor, Judge John S. Wilson, who filed his decree, overruling the exceptions and confirming said report. From this decree and the judgment thereon plaintiffs duly appealed to *496 this Court. Let the master's report, the decree of Judge Wilson, and the exceptions thereto be reported.
The exceptions will not be taken up seriatim, but the questions they raise will be considered. The main question presented thereby for our determination is: Was the executory contract entered into between McCallum Realty Company and Lizzie Rogers such a written instrument as is required by Section 5312, 3 Code 1922, to be recorded? Appellants contend that it is such an instrument, while respondent contends that it is not. If it be not such an instrument, then respondent further contends that possession by her of the lot described in the contract operated as constructive notice of said contract. It is to the determination of this question that we first direct our attention.
At common law deeds of conveyance and other instruments affecting real estate were not required to be recorded. The rule then obtaining was as follows: "At common law, the title of a purchaser ordinarily depends, first upon the title of his vendor; second, upon whether the vendor has transferred his title to the purchaser. If the vendor had not title, or if his title was defective, it was not material that the purchaser paid the full value of the property, and supposed he was acquiring a perfect title." Tiffany, Real Property (2d Ed.), § 2169, and authorities cited.
Under the rule stated, the first purchaser to acquire the legal title prevailed. A subsequent purchaser from the same vendor, though paying the full value of the property, and thinking he was acquiring a good title, acquired no title under such second conveyance, for the reason that the vendor, having parted with his title, had nothing which he could convey.
The common-law rule has been changed by the recording acts in this and other states by requiring that, if the instrument under which rights are claimed be not recorded within a specified time, a subsequent creditor, or purchaser for value without actual notice, will not be affected thereby. *497
As early as 1698 (2 St. at Large, p. 137), and from time to time thereafter, acts were passed in this state requiring certain instruments therein named to be recorded within the times and at the places therein provided, and providing that, if not so recorded, subsequent conveyances, incumbrances, etc., should be held and deemed valid as against such unrecorded instruments. In 1876 the General Assembly passed an Act (16 St. at Large, p. 92), entitled, "An Act to provide an uniform registry law for all deeds and other instruments in writing required to be recorded." This Act, with certain minor changes with which we are not here concerned, is now incorporated as Section 5312, 3 Code 1922. So much thereof as here needs be considered is as follows:
"All deeds of conveyances of land, tenements or hereditaments, either in fee simple or for life, all deeds of trust or instruments in writing, conveying either real or personal estate, and creating a trust or trusts in regard to such property, or charging or incumbering the same; all mortgages or instruments in writing in the nature of a mortgage of any property, real or personal; * * * shall be valid, so as to affect from the time of such delivery or execution the rights of subsequent creditors (whether lien creditors or simple contract creditors) of purchasers for valuable consideration without notice, only when recorded within ten days [forty days in the original act] from the time of such delivery or execution in the office of mesne conveyance or clerk of court of the county where the property affected is situated, in the case of real estate.' (Note: — The amendments of 1925 [34 St. at Large, p. 85] are not here involved.)
As between the parties thereto, it is not necessary to the validity of any instrument contemplated by said Act that it be recorded. Recording becomes material only when there are double conveyances, etc., by the same person. Martin v. Quattlebam, 3 McCord, 205. Summersv. Brice,
While intending to protect subsequent creditors and purchasers for value without notice, it is manifest that the recording acts invest the grantor or incumbrancer with power to defeat a previous conveyance or incumbrance, if not recorded as provided, by a subsequent conveyance or incumbrance to one who has no actual notice of such previous conveyance or incumbrance. The holder of such previous conveyance or incumbrance, by complying with the recording acts, may wholly disarm the grantor or incumbrancer of such power, and thereby protect himself.
There are two kinds of notice, actual and constructive, that will prevent the plea of bona fide purchaser for value without notice. The recordation of instruments contemplated by Section 5312, within the time and at the place required thereby and by amendments thereto, will operate as constructive notice of such instruments, so as to effect from the delivery or execution thereof the rights of subsequent creditors or purchasers for valuable consideration without actual notice thereof. And, conversely, the recordation of instruments not contemplated by said Section will not operate as constructive notice of such instruments so as to affect the rights of subsequent creditors or purchasers for valuable consideration without actual notice, and therefore cannot take the place of actual notice. So much is clear. We proceed then to inquire whether or not possession will operate as constructive notice, and thus take the place of recordation.
The purpose of the recording Act was to protect subsequent creditors and purchasers for value without notice.
In Sheorn v. Robinson,
"The ruling of the Circuit Judge in its full meaning is that possession of land by a vendee under a contract of purchase operates as notice to a subsequent purchaser or incumbrancer, although such possession as matter of fact is unknown to such subsequent purchaser at the time of said purchase. The possession in such case stands in the place of a record of the deed where the vendee had purchased with a conveyance regularly executed and delivered, and as the record of a prior deed is notice, whether it is actually known or not, so possession, whether known or not, is also sufficient notice."
"The ground upon which the recording of a deed operates as notice, whether the fact of record be known or not, is that it is always in the power of the subsequent purchaser, by searching the records, to ascertain whether or not there has been a previous conveyance; and if he fails to make the necessary examination, it is his own fault, and his rights must be determined by the facts of the record within his reach on the subject. So, too, it is an easy matter for a purchaser of land to ascertain at the time of his purchase whether his vendor or some one else is in possession, and if he fails to do so, he should take the consequences. * * * There are two kinds of notice, actual and constructive. Either is sufficient to prevent the plea of bona fide purchase without notice. It is not necessary to discuss actual notice. That is well understood, and such notice is not claimed here. The case turns on constructive notice. An illustration of constructive notice is found in the recording of deeds. As we have said, recording amounts to notice, whether known or unknown, because the means of information are at hand. We think this principle should apply where at the time of the sale the *500 vendor is out of the possession and a third party is in. It is the business of one who buys land, or attempts to secure a lien on land, to know the surroundings. In justice to his own interests, and certainly in justice to the interests of a party who has contracted to buy in advance of his purchase, and who is notoriously in possession, claiming it and using it as his own, he should examine into and ascertain the facts. One in possession under an equitable title has nothing that he can record; and possession, open and unconcealed, is the only mode by which he can give notice to the world of his rights; and when this notice is given in the only way in which it could be given, he should be protected. We think, upon authority and principle, the ruling of the Circuit Judge was correct."
The doctrine laid down in Sheorn v. Robinson was confirmed in Biemann v. White,
"No possession of real property described in any instrument of writing required by law to be recorded shall operate as notice of such instrument; and actual notice shall be deemed and held sufficient to supply the place of registration only when such notice is of the instrument itself or of its nature and purport."
In the case of Foster v. Bailey,
"This Statute, approved December 24, 1888, changed the rule declared in Sheorn v. Robinson,
It is manifest, therefore, that, if the contract between McCallum Realty Company and Lizzie Rogers was such an instrument as Section 5312 required to be recorded, possession by her was not notice to the mortgagee.
"A written contract for the sale of land, of which specific performance would be decreed, is ordinarily regarded as within the recording acts, sometimes by reason of its express mention." Tiffany, Real Property (2d Ed.), p. 2183, citing authorities from many states, among which is Kirvenv. Wilds,
The case of Kirven v. Wilds, supra, was an action for foreclosure of two mortgages on certain real estate. The facts were: On January 3, 1903, Ralph Wilds and Robert Wilds bought of A. Nachman 80 acres of land, and gave him a mortgage thereon to secure the unpaid purchase money. Nachman assigned the mortgage to Hennig. On December 31, 1910, Elliott Wilds, Dave Wilds, and James Wilds paid Hennig $50 on said mortgage, and agreed to pay $425.42 on it, within twelve months, with interest at 8 per cent., and, in consideration thereof, Ralph Wilds agreed, "If said amount is paid by said parties within said time," to convey to them 40 acres of land, "at that half of my land on which the house is located. This one-half of the tract conveyed to me by A. Nachman." This agreement was duly recorded. Thereafter Hennig assigned the mortgage to plaintiff. On January 2, 1912, Ralph Wilds gave plaintiff another mortgage of his undivided interest in said land to secure the payment of $789. The Circuit Court decreed foreclosure on both mortgages, from which the defendants Elliott Wilds, Dave Wilds, and James Wilds appealed to this Court. In delivering the opinion of the Court, Mr. Justice Hydrick said:
"But the Circuit Court was in error in holding that the defendants Elliott, David and James, had no right, under their agreement with Ralph, which the Court should protect. By virtue of that agreement, they are entitled to specific performance on the part of Ralph. Moreover, the plaintiff's *502 mortgage of January 2, 1912, was taken after that agreement was made and recorded, and is, therefore, subject to it, that is, as to that mortgage, the defendants, Elliott, David and James, have priority in the portion of the land."
There is nothing in that case to show that the plaintiff had actual notice of the agreement between Ralph and the defendants Elliott, David, and James. If he had notice thereof, then he must have obtained notice by virtue of its record. Although not expressly decided, it was thus assumed that the executory contract of sale was such an instrument as Section 5312 required to be recorded, otherwise its recordation could not have operated to give notice, since the record of a paper not required to be recorded will not operate as constructive notice. Bossard v. White, 9 Rich. Eq. (30 S.C. Eq.), 483.Villard v. Robert, 1 Strob. Eq. (20 S.C. Eq.), 393. Harperv. Barsh, 10 Rich. Eq. (31 S.C. Eq.), 149. Williamsv. Paysinger,
In Doscher v. Merritt,
Respondent relies on Oliver v. McWhirter,
In respondent's brief we find the following:
"Appellants admit, however, that in case of an unwritten contract of sale the authorities cited from our state govern, and possession may be notice, but they contend that the statute law referred to (that is, the Act of 1888), renders such authorities inapplicable to a written contract."
We do not apprehend that the law makes any such distinction between a written and unwritten executory agreement for the sale of land, nor do we understand that counsel for appellants seek to draw such a distinction. Their citation of the language of Mr. Justice Woods in Folk v. Brooks,
The statute of frauds requires that an executory contract for the sale of land, or any interest therein, be in writing and signed by the vendor, or his agent thereunto lawfully authorized by writing. Under a parol *505 contract for the sale of land, one may, by such part performance as will take the case out of the Statute of Frauds, be entitled to specific performance as between himself and his vendor. But if, after such parol agreement is entered into, the vendor conveys or mortgages the land covered by such parol agreement to a third party who has no actual notice of such parol agreement, possession by the vendee under such oral agreement would not operate as constructive notice so as to preclude the grantee or mortgagee from claiming the protection of the plea of purchaser for valuable consideration without notice. Section 5312 must be construed in connection with Section 5515. An enforceable agreement is required by Section 5515 to be in writing. Section 5312 could relate to enforceable agreements only.
The master based his conclusions of law "that the contract in question in this case is not such an instrument of writing as is required by law to be recorded, in order to charge subsequent grantees or encumbrancers with notice," upon the premise that "a written contract of sale" is not a conveyance, which is defined in Bouvier's Law Dictionary as "the transfer of the title to land by one or more persons to another or others." Reference to the Statute will show that it is not confined to deeds of conveyance. The Statute specifically enumerates: (1) Deeds of conveyances, in fee simple or for life; (2) deeds of trust; (3) instruments in writing, conveying either real or personal estate, and (a) creating a trust or trusts in regard to such property, (b) or charging, (c) or incumbering the same; (4) (a) mortgages, (b) or instruments in writing in the nature of a mortgage, of any property, real or personal.
It is manifest that the Statute contemplated an instrument which conveyed real estate, and yet which was not a deed of conveyance; which created a trust or trusts, and yet was not a deed of trust; which charged or incumbered the same, and yet was not a mortgage, or an instrument in the nature of a mortgage. *506
Such an instrument we conceive an executory contract for the sale of land to be. It most assuredly conveys, or transfers, an interest in real estate which may be mortgaged by the vendee (Whitmire v. Boyd,
In 39 Cyc., 147, we find this language:
"Where a valid contract for the sale and purchase of land is entered into, and the relation of vendor and purchaser is constituted, the vendor, before conveyance, becomes a resulting trustee for the purchaser, particularly after the latter has paid the purchase price, or a part thereof, and given binding obligation for the balance."
In Landrum v. Hatcher, supra, the Court, citing Story, Eq. Jur., 1212, states the rules thus:
"Where a contract is made for the sale of land, the vendor is in equity immediately deemed a trustee for the vendee of the real estate, and the vendee is deemed a trustee for the vendor of the purchase money. Under such circumstances, the vendee is treated as the owner of the land and it is devisable and descendible as his real estate."
See, also, Roddy v. Elam, 12 Rich. Eq., (33 S.C. Eq.), 343.
The foregoing authorities show that Lizzie Rogers was the equitable owner of the land described in the written contract entered into by her and McCallum Realty Company. That equitable interest was transferred to her under the said contract. The contract created a trust in regard to such land. As between her and McCallum Realty Company, she was entitled to specific performance. Her contract not being recorded, McCallum Realty Company had the power, by force of Section 5312, to defeat her rights in and to said lot, unless *507 said Section was not applicable, for the reason that such contract was not by said Section required to be recorded.
In our investigation of the questions involved in this cause, we have found one case, not cited by either the appellants or the respondent, which seems to our minds to bear strongly upon the main question involved here, and perhaps is absolutely conclusive thereon. We refer to Blackwell v. MortgageCompany,
"Now, it is understood and agreed by Josephine Blackwell and L.T. Harmon that, when the said Josephine Blackwell shall pay or cause to be paid to L.T. Harmon or his legal heirs or representatives one-third (1/3) of the amount borrowed, then the said L.T. Harmon hereby binds his heirs, executors and administrators to convey unto Josephine Blackwell the above-described one-half interest in said land."
This agreement was not recorded, but an exact copy thereof, signed by the original parties, and witnessed by the original witnesses, and duly probated, was recorded, and referred to in the case as Exhibit K. Thereafter L.T. Harmon conveyed his original one-half interest in said tract of land to his wife, Mollie Harmon, and later he and his said wife conveyed the land to the mortgage company in liquidation of the mortgage debt. The mortgage company gave the Twin City Power Company an option to purchase said land, which company had no actual notice of the agreement between L.T. Harmon and Josephine Blackwell. The action was for the purpose of having the deed from Mrs. Blackwell to L.T. Harmon declared a mortgage. After deciding that actual notice of such agreement to the attorney who procured *508 the loan (he being held to be the agent of both the borrower and lender) was notice to the mortgage company, Mr. Justice Gary said:
"There is another reason why it must be construed that the Twin City Power Company, as well as the British American Mortgage Company, had notice of the agreement between Harmon and Mrs. Blackwell. * * * `Exhibit K' is such a writing as is contemplated in the recording acts, and although not recorded within the time required by law, nevertheless, from the date of its record, it operated as notice to those subsequently thereto becoming purchasers of the property therein described."
Had Lizzie Rogers paid the entire purchase money and received a deed of conveyance in fee simple, instead of the contract of sale, and failed to have the same recorded, possession under such unrecorded deed would not have been notice to the mortgagee herein. Foster v. Bailey,
Respondent contends that, since the Legislature, in 1925 (34 St. at Large, p. 85; § 2), amended Section 5312 by expressly including "contracts for the purchase and sale of real property," such contracts were not, prior to such amendment, comprehended by said Section. When it is remembered that this case arose in 1924, at which time the question was raised whether or not such a contract was embraced in Section 5312, it is more reasonable to suppose that the Legislature merely sought, by said amendment, to make certain and clear what the bench and bar had for almost half a century understood the law to be. Be that as it may, it is not the function of the legislative branch of the government to place the final construction upon a statute. It is the opinion of this Court that an executory contract for the sale of real estate is, independent of the amendment *509 of 1925, such an instrument as Section 5312 required to be recorded.
We further conclude that, if any instrument contemplated by Section 5312 be not recorded as required therein and by amendment thereto, possession of real estate described in such an unrecorded paper will not operate as constructive notice so as to affect the rights of subsequent creditors or purchasers for valuable consideration without actual notice. Such is the express language of Section 5313 of the 1922 Code. An executory contract for the purchase and sale of land, or of any interest therein, being within the contemplation of Section 5312, must be recorded as in said Section provided, and, if not so recorded, possession will not operate as constructive notice thereof.
For the foregoing reasons, exceptions 2, 3, 5, and 6 are sustained.
"It is a familiar doctrine that one who goes into possession of land under a contract to purchase it, and has not paid the whole of the purchase money, cannot acquire title against the vendor by the Statute of Limitations."Blackwell v. Ryan,
It follows that the lien of plaintiffs' mortgage is the first and prior lien on said lot, and that they are entitled to a decree for foreclosure as to the entire amount due on said mortgage indebtedness. Exceptions 4 and 7 are sustained. *510
Even if Lizzie Rogers has no superior right to the plaintiffs in the premises, and even if she did not make any claim thereto, it was necessary anyway, for the plaintiffs to institute their suit for foreclosure. For these reasons, we do not think she should be required to pay all the costs of this action. In our judgment each side should pay its own costs; therefore the eighth exception is overruled.
We regret the hardship to this old negro woman who has labored for years to secure a little home for herself and her children, but we see no way to avoid it without working a hardship upon an innocent mortgagee. The mortgagee herein had a right to rely, and did rely, upon the records of Sumter County for information as to the title to this lot. Those records disclosed that McCallum Realty Company owned the legal title thereto, and failed to disclose that Lizzie owned any interest in or right to the same. Had she complied with the recording Statute, she would have been protected. She had the power to protect herself, and failed to exercise the same. By not doing so, she made it possible for McCallum Realty Company to defeat her rights, and induced an innocent, unsuspecting third party to lend money on the lot, believing it to be unincumbered. That McCallum Realty Company perpetrated a wrong there can be no doubt, but this Court has recently held that, where one of two innocent parties must suffer, it must be he who has placed it within the power of the malefactor to perpetrate the wrong. Davis v. Bland,
To adopt the view contended for by appellant, and expressed by Mr. Justice Cothran in his dissenting opinion, would be to make it incumbent upon the prospective grantee or mortgagee to not only examine the records in the clerk of court's office, but to ascertain the character of the possession of any and every one who happened to be in possession of the property, or any part thereof, intended to be conveyed or mortgaged. Such a rule would not only be harsh and exacting upon the grantee or mortgagee, but might operate to *511 embarrass the owner of such property. It is easy to imagine an instance where the owner desired to sell the land, and the tenant, being unwilling for him to make the sale, could represent to the intending purchaser that he was in possession under a contract to purchase. If such a claim was asserted by the one in possession, the prospective purchaser or mortgagee would have no way to determine whether or not such a claim was well founded. The owner might deny it to be true, but, if insisted upon by the tenant, only a Court could judicially determine the question. Rather than "buy a lawsuit," the intending purchaser or mortgagee would refuse to treat with the owner thereabout.
There is nothing in the record showing, or in the remotest degree suggesting, that the mortgage of plaintiffs covers any land other than the lot in question, or that plaintiffs have any other security for their debt. If there was anything of that kind on which the respondent could base a claim for application of the "two-fund" doctrine, we must assume that her attorneys would have so alleged. Hence the suggestion that the case should be left open for a determination of any such question does not seem to us to bear merit.
The judgment of this Court is that the decree of the lower Court be reversed, and that the cause be remanded to that Court for the purpose of carrying into effect the views herein expressed.
MR. CHIEF JUSTICE WATTS and MR. JUSTICE STABLER and MR. ACTING ASSOCIATE JUSTICE RAMAGE concur.
Dissenting Opinion
The sole question in this case is whether a written contract for the sale and purchase of real estate comes within any of the classes of instruments of writing described in Section 512 (Civ. Code 1922). The only class that it could possibly come within is:
"Deeds of trusts or instruments in writing, conveying either real or personal estate, and creating a trust or trusts in regard to such property, or charging or incumbering the same." *512
It is certainly not a deed at all, and therefore as certainly not a deed of trust; it is as certainly not an instrument in writing conveying real estate; and, although it may be considered as creating a constructive trust, technically, in the vendor for the benefit of the vendee and vice versa, under the Act it must not only have that express effect, but must be a conveyance of real estate, for the Act describes a paper which does both.
I am inclined to this strict construction of the Act of 1888 (now Civ. Code 1922, § 5313), for several reasons: The rule which generally obtained before that Act was passed, as explained in the case of Sheorn v. Robinson,
It seems to me that where, as in this case, both parties are relying upon the principles of equity, the equity of the case is overwhelmingly with the old darkey. It should at least be ascertained whether the plaintiffs have other security to which they may have recourse in relief of the defendant. *513