King v. Fraser

| S.C. | Nov 27, 1885

Lead Opinion

The opinion of the court was delivered by

Mr. Justice McGowan.

The pleadings and earlier proceedings are not in the “Case,” but from the very full report of master Hanckel, it appears that prior to 1876 there had been a partnership between the plaintiff, S. B. King, and the defendant, S. S. Fraser, under the style of “S. B. King & Co.,” in carrying on the business of a turpentine farm and store called “Six Mile store,” in Georgetown County; that this copartnership was not successful, and in 1876 was dissolved, its available assets realized, and all the debts paid, mostly by S. S. Fraser, to whom the other partner, S. B. King, was largely indebted.

Under these circumstances a new arrangement was made by the parties, which, as the master reports, was substantially as follows: “It was agreed that S. S. Fraser should purchase in his own name and with his own funds two tracts of land in the County of Charleston (now Berkeley), known as ‘Jack’s Bluff’ and ‘Elmwood,’ for the purpose of carrying on the business of a turpentine farm, and that in some sort of connection therewith (not very clearly shown by the evidence) he should establish at South Santee Ferry a general store called ‘Romney,’ the entire business of both places to be carried on in the name of S. S. Fraser, and one to be designated as ‘Elmwood,’ and the other as ‘Romney.’ * * * The plaintiff, King, was to have immediate charge of the active operations of the farm and store, while Fraser was to direct and control these operations and to have the entire management of the finances; and that, for his services, King was to receive as compensation one-half of the net profits after paying all expenses,” &c.

In putting on foot this new arrangement, S. S. Fraser purchased “Jack’s Bluff” and “Elmwood” from the executors of Doar, took titles in his own name, and had them regularly recorded February 1, 1877 ; and at the same time he executed a mortgage of the premises to secure the credit portion of the purchase money; but the executors of Doar neglected to record this mortgage until January 7, 1879. The business was not a success, and after the date of the aforesaid mortgage to the executors of Doar, other debts were contracted, which need not be specifically mentioned, except the following: First. To R. E. Fraser, part by promissory note for $1,297.46; secured by mortgage of Jack’s Bluff and Elmwood, and also by an account for advances, $610.11, which was secured by a bill of sale of certain naval stores, and also covered by the aforesaid mortgage. The aggregate amount of this debt was about $1,917.57, secured by the mortgage aforesaid December 17, 1878, which was regularly recorded within the time prescribed by law. Second. To Thomas R. Sessions, for $761.22, secured by mortgage of “one still and fixtures, two mules, one horse, and two wagons,” &c., on the place of S. S. Fraser, on Wambaw Creek, &c. This mortgage wa,s executed December 10, 1878, and it seems was regularly recorded. Third. General unsecured creditors of S. S. Fraser. All these debts were contracted after the mortgage was executed to the executors of Doar, and without notice of it, except that of R. E. Fraser, which was contracted after the execution of said mortgage, but it was admitted that at the time he took his mortgage he had actual notice of the then unrecorded mortgage to ,the executors of Doar.

R. E. Fraser, by virtue of his bill of sale of naval stores, and T. R. Sessions, under his mortgage, commenced actions for the claim and delivery of the property covered by them respectively, as the property of their debtor, S. S. Fraser. To this S. B. King, who was in possession, objected, and claiming that he was a copartner in the business, and entitled to an interest in the property, instituted these proceedings for an account, injunction, &c. The moving creditors were enjoined, and all being called in, the master made a full and exhaustive report, finding as follows: First. That the plaintiff, King, was not the partner of S. S. Fraser in the legal commercial sense of the word, either in the business of the turpentine farm at “Elmwood,” or that of the store at “Romney;” that all the real and personal property employed in the busirfess belonged to S. S. Fraser, and he alone had the right to encumber it. Second. That the mortgage and bill of sale of R. E. Fraser, and the mortgage of Sessions, are all good securities for valuable consideration, and must rank as liens, except as they may be affected by the failure of the executors of Doar to-record their mortgage within, the time prescribed by law; and upon that subject he held that the Doar mortgage, which was not recorded within time, was not a valid lien as against creditors of the mortgagor, Avhose debts Avere contracted betAveen the date and the registry thereof, except that of R. E. Fraser, who had actual notice of the execution and existence thereof; and,, finally, that in this peculiar state of facts, the proceeds of the sale of the said premises should be distributed as folloAVs: 1. R. E. Fraser, after exhausting the personal property covered by his bill of sale, to be paid the amount due on his mortgage, less the amount due on the Doar mortgage. 2. The general creditors to be paid the balance, if any, -which would remain if the Fraser mortgage were paid in full; and, 3. The executors of Doar to be paid the difference between what the creditors receive, if any, and the whole amount of their mortgage, &e.

To this report exceptions were filed, and the cause coming on to be heard by Judge Hudson, he overruled the exceptions and confirmed the report. From this decree the plaintiff, King, appeals : I. Because the court should have decided that there was a partnership between S. B. King and S. S. Fraser subsequently to December 31, 1876. II. Because the court should have decided that the mortgages of S. S. Fraser to R. E. Fraser and to T. R. Sessions were respectively illegal and void so far as the creditors and the plaintiff are concerned. III. Because the court should had decided that the bill of sale from S. S. Fraser to R. E. Fraser, not having been recorded, and not being a mortgage, was invalid as against the creditors and the plaintiff. IV. Because the court should have decided that R. E. Fraser must first exhaust the proceeds of the personalty covered by the bill of sale, and that out of the proceeds of the sale of the lands he was only entitled to receive the balance so remaining unpaid, and that Fraser having admitted notice of the mortgage to the executors of Doar, such mortgage being void as against subsequent creditors to the extent of the amount due on such mortgage, the general subsequent creditors are entitled to the proceeds of the sale of the lands, and that the executors of Doar are simply general unsecured creditors.

The executors of Doar appeal: I. Because the presiding judge erred in holding that because the mortgage from S. S. Fraser to' the executors of Doar was not recorded until after the expiration of forty days from the date of its execution, it is not a valid lien as against creditors of the mortgagor, whose debts were contracted between the date of its delivery and that of its record. II. Because his honor should have held that when the mortgage was recorded the mortgagees acquired a valid lien upon the mortgaged premises as of the date of its record; and in the distribution of the sale of said premises, said mortgagees are entitled to rank as lien creditors, as of the date of the record of the mortgage, against all the creditors, alike those contracted prior to the execution of the mortgage, and those contracted between the date of the mortgage and that of its registry, and also those contracted subsequent to the record.

Whether there was such a partnership between the plaintiff, King, and S. S. Fraser, as gave to King an interest in property purchased and paid for by Fraser and conveyed to him alone, was a question of fact as to which both the master and the Circuit Judge found that no such partnership existed. Under these circumstances this court will not disturb the finding, unless it is manifestly against the weight of the evidence. We have looked carefully through all the evidence in the case, which, it is admitted, is somewhat conflicting, but, taking it as a whole, we are unable to say that the finding is unsustained. The exceptions making this point are overruled.

This brings us to the most important question in the case, viz., whether the omission on the part of the executors of Doar to put their mortgage on record within forty days after its execution, although recorded afterwards and before the commencement of this suit, made it absolutely invalid as to all debts of the mortgagor contracted between its execution and registry; that is to say, whether a mortgage recorded after the time prescribed by law has a lien, as of that date, with the ordinary incidents of a lien- as to all debts which at that time are unsecured or shorn of these incidents, as to-that class of debts which were contracted between the execution and delivery thereof. This is a new question in this State, the precise point, so far as we know, never having arisen before ; and it is certainly one not free from difficulty, arising principally from the terms of the general registration act of 1876, which it is now necessary to consider.

It has been truly said that there is no subject upon which our law has been more confused and obscure than that of registry, both as to the effect of omission to record, and of recording within as well as after the time prescribed by law. The act of 1843 (11 Stat., 256) embraced only mortgages, and as to them it made no provision for recording after the time prescribed, but left unqualified the general provision “that no mortgage of real estate shall be valid so as to affect the rights of subsequent creditors or purchasers, &c., unless the same shall be recorded in the office of the register of mesne conveyances,” &c. As this act did not touch absolute conveyances, the confusion as to them still continued until 1847, when the old Court of Errors, after repeated argument in the case of Steele v. Mansell (6 Rich., 438), decided that an absolute conveyance of land never recorded was not thereby absolutely void, but as between the parties was still good; that-if recorded within time the deed took effect from its date, and that if recorded after the time it did not have reference back to the date of the deed, but took effect and was notice to all the world from the date of its actual registry.

Thus the rule as to the effect of registry was not the same as to mortgages and absolute conveyances, and this discrepancy continued down to 1876, when the legislature (probably with the view of harmonizing this difference, and establishing one uniform system upon the subject) passed the general registration act (16 Stat, 92, re-enacted as section 1776 of the General Statutes), which repealed all former latvs “inconsistent with it,” and dealing with the registry of both mortgages and absolute conveyances, made as to both precisely the same regulations, which, as might have been expected, were the compound result of adding to the mortgage act (1843) the principles which had been declared in Steele v. Mansell as to the legality and effect of recording a deed after the time prescribed by law.

Possibly from this cause has arisen the obscurity of the act which, so far as relates to the point in question, is as follows: “And generally all instruments in writing now required by law to be recorded in the office of register of mesne conveyance, or in the office of the secretary of the State, delivered or executed after the first day of January, 1877, shall be valid so as to affect, from the time of such delivery or execution, the rights of subsequent creditors or purchasers for valuable consideration without notice, only when recorded within forty days from the time of such delivery or execution in the office of the register of mesne conveyance of the county where the property affected thereby is situated, &c. Provided, nevertheless, that the above mentioned deeds or instruments in writing, if recorded subsequent to the expiration of said period of forty days, shall be valid to affect the rights of subsequent creditors and purchasers for valuable consideration without notice, only from the date of such record,” &c.

If this section were to be considered without reference to the proviso, there would be little difficulty. Ignoring the proviso, it is clear that the body of the section declares that, without recording, none of the instruments referred to would be valid as to any debts “without notice,” whether contracted before or after the date of the instrument in question; but it goes on to provide that if recorded within the time prescribed, said instrument shall be valid even as to all “subsequent creditors without notice,” reaching back to the time of the delivery of the instrument. Without the proviso the section ivould be substantially the same as the act of 1843 in reference to mortgages, which was several times before this court, notably in the case of Williams v. Beard, 1 S. C., 309, and McKnight v. Gordon, 13 Rich. Eq., 223, which are not, however, applicable to the general act now under consideration ; and see Herring & Co. v. Cannon, 21 S. C., 212, as to an entire failure to record.

But the addition of the proviso in the act of 1876 makes a very material change in the law, applying to the registry of mortgages substantially the same rules which -were declared as to the registry of absolute conveyances in the case of Steele v. Mansell, supra; and the question now presented is as to the effect of a mortgage recorded out of time upon the general unsecured debts contracted by the mortgagor between the time of the execution and registry of the mortgage. This makes it necessary to construe the proviso, the important words of which are: “shall be valid to affect the rights of subsequent creditors and purchasers for valuable consideration without notice, only from the date of such record,” &c. There cannot be the least doubt that'this provision was intended to give to a mortgage, though recorded out of time, some “effect” upon the-class of creditors indicated; not, however, to reach back to the date of the mortgage, as in the case of one recorded within time, but only from the time of recording.

It is obvious that this postponement of the lien must seriously affect the -rights of the mortgagee, especially in respect to liens, which, in the mean time, may have been acquired by others. While the lien of a mortgage not recorded in time is in abeyance for the lack of registry, other creditors of the mortgagor may come in and acquire liens upon his property, which will take precedence over the mortgage without regard to its date. This, is not expressly declared, but results necessarily from the postponement of the lien of the mortgage and the general nature of liens as to which time is the essential thing. So'- far, therefore, as there may be conflict between liens, there is no obscurity, for as to them it is only necessary to inquire which is the first in the order of time. We may also say in passing that if the property is actually purchased before the mortgage is recorded, and without actual notice, the innocent purchaser will undoubtedly take it unaffected by the dormant lien of the unrecorded mortgage.

So far, then, there is no difficulty, but the matter is not so plain as to what is the effect of a mortgage recorded after the time upon general debts contracted after its execution without notice, and which are found in the condition of unsecured debts at the time the mortgage is recorded and its lien attaches. It is certainly the general rule that a bona fide lien, no matter when entered, from that time forth has priority over all debts which are then unsecured, without the least regard to their date. This is involved in the very nature of a lien as against general unsecured debts. For example, we suppose that as soon as the Doar. mortgage was recorded, the lien then taking effect, at once gave it priority even over debts (if any) contracted before the mortgage was executed.

It is, however, earnestly contended that the terms of the proviso make an exception in favor of such debts as were contracted between the execution and registry of the mortgage, for the reason that during that time the mortgage not being recorded, they were without notice ; and, further, that this immunity, this shield from the lien of the mortgage, still remains over and protects this class of creditors from the mortgage, even after it is recorded and has become an effective lien as to all other persons, and for all other purposes. This view seems to proceed upon the ground that the exemption from the lien of the mortgage having existed during the time it was not recorded, may be said to have then attached as a charge, incumbrance, or a lien, which continues even after the mortgage is recorded, and acquires alien, of which they have notice; in other words, that their exemption arising from want of notice continues even after they have notice.

For several reasons we hesitate to accept this view. In order to reach a satisfactory conclusion on the point, it is necessary first to settle clearly who are the persons meant by “subsequent creditors and purchasers without notice.” The exact phrase occurs twice in the seetion, once in the body, and once in the proviso. Where it occurs in the first connection, it is plain that the creditors meant to be described are those whose debts were contracted between the execution and registry of the mortgage, “subsequent” having reference to the execution ; and Ave see no reason to suppose that the very same phrase, Avhen used in the proviso, has reference to a different class of creditors, and is-limited to those whose debts Avere contracted “subsequent” to the recording instead of the execution of the mortgage. Besides those becoming creditors after the recording could not, with any propriety, be referred to as “Avithout notice.”

This being clearly settled, it Avould seem that the terms of the proviso itself negative the idea that a mortgage registered out of time is absolutely null and void as to all debts contracted between the execution and registry thereof, for it declares in express terms that such mortgage so registered “shall be valid to affect the rights of subsequent creditors,” &c. It seems to us that there never could have been a doubt upon the subject, but for the last clause in the proviso, which makes the ambiguous declaration that such effect shall be “only from the date of such record,” which, it is contended, limits the lien of the mortgage after registry to future debts, leaving the rights of the class of prior creditors before described entirely unaffected as they existed before registry.

There are insuperable difficulties in the way of this being taken to be the true construction. In the first place it would be inconsistent Avith the very sentence in Avhich the phrase occurs, for that expressly declares that such mortgage so registered “shall be valid to affect the rights of subsequent creditors without notice,” &c.; and, as we have seen, all these being prior to the recording, it is plain that the vitality given to the mortgage by registry was not intended to be limited to future debts counting forward “from the date of the record.” Besides, it is not denied that the lien of the mortgage thus recorded is valid as to all debts contracted before the execution of the instrument, and therefore not falling within the category of those styled “subsequent.”

It is not perfectly clear, but we suppose that upon this point some confusion may have arisen from interpreting the word “from” in a sense which was really not intended. Considering the subject matter and the context, we cannot doubt that the phrase “from the date of such record” was intended, not to fix that^ as the point from which the lien of the mortgage was to operate forwards, but simply to indicate the time at which it received vitality y or, in other words, that the registry fixed the time at which the mortgage becomes a lien, but not the date of the debts which, as such, it might affect, according to the condition, as to being secured or unsecured, in which they were found at that time. Unless some effect upon this class of creditors was intended, why was the phrase inserted at all? The sense would have been more clear by omitting it entirely, leaving the provision as if it read, “shall not be valid to affect subsequent creditors, whose debts were contracted without notice.”

If, then, the registry from its date gave the mortgage vitality to affect, in some way, the class of creditors indicated, as well as others, what was intended by the words, “valid to affect their rights,” &c. ? To say that a mortgage shall be valid, means, of course, valid as a mortgage, that is to say, a lien upon specific , property, with the ordinary incidents of such lien, one of which, is priority as to that particular property over all other debts of the mortgagor, which have not prior to that time ripened into a lien. “To affect their rights.” What rights and how? All creditors in common have certain rights, as the right to be paid, to sue to judgment, and to pursue the debtor in all the various modes allowed by law. But there are certain other rights which some possess and others do not; some have liens, and some have none, and some may and some may not protect themselves by-the equitable defence of being “subsequent creditors” without notice, &c. The whole tenor of the registry act shows that the “rights” therein spoken of, were those peculiar rights which appertained to the class indicated as subsequent creditors without notice of the mortgage; that is to say, the shield which protected them from the lien of the mortgage while it lay unrecorded and unknown. .This was the only “right” in question or which could be “affected” by recording.

We can conceive of no effect of recording other than the putting an end to the exemption which arose from want of notice,, and continued until notice was given by that recording, that the registry giving them notice at the same moment gives vitality to the mortgage as a lien with priority, as if the old mortgage had never existed and a new one had been executed and recorded on that day, the exemption arising from want of notice ceasing to exist as soon as notice is given. Gessante ratione legis, eessat ipsa lex. That this is what was meant by the phrase, “shall be valid to affect the rights of subsequent creditors,” &c., conclusively appears by reference to the body of the section, where, in providing for the case of a mortgage recorded within time, the identical phrase is used to give priority to the mortgage over creditors whose debts were contracted subsequent to the execution of the instrument and without notice of it.

It seems clear to us that the principal object of the registry act was to require notice, and that it proceeds on the theory that recording is notice, whether made in or out of time. As foreshadowed by Judge Wardlaw in Steele v. Mansell: “Being without registration good as to the party who made it, the deed might? as to all other persons, be considered as if it had been executed on the day it was registered; in other words, as if it had been executed or acknowledged on that. day. By delaying beyond a prescribed time, the- grantee in a deed (or a mortgage) has lost the right to insist that the tardy registration shall have relation to the date of the deed so as to provide against intervening claims; but why should he lose the benefit of registration from the day it was made?”

It is, however, urged against this construction, that it must operate as a hardship to the creditor who trusts the mortgagor without knowing that there was in existence a mortgage not recorded. We have considered and reconsidered this suggestion, and we confess we are unable to see the alleged hardship, beyond that which every creditor encounters when he trusts another upon faith in his ability to pay and his honesty and fair dealing. It is very true that our law properly denounces all manner of secret liens, that is, liens having an existence on property, without its being known; but this can hardly be said to extend to the case of a mere possibility of becoming a lien. Every debtor has the right to give a bona fide preference to one creditor over others, and this right is beyond the control of those others, who must be presumed to be aware of it and to extend credit subject to that risk. There is no obligation on the part of the creditor to whom a mortgage may be given, to record his debt, and as to the mortgage, he may omit to record or record it out of time, suffering therefor only the penalties imposed by the law. An unrecorded mortgage is in no sense a secret lien, nor, indeed, any lien at all until it is recorded. Up to that time it is precisely as if it had no existence, invalid and unknown to the creditor. It is difficult to understand how it could mislead or operate as a fraud upon him. It is true that as soon as the mortgage is recorded iff becomes a lien, not, however, reaching back over the period in which the debts were contracted, but only from the date of record; the very act which makes it a lien also gives notice to the world. So far as other creditors are concerned, it would seem to be the same in effect as the giving a new mortgage or changing the date of the old one on that day. /

Nor can we concur in the view suggested, that the object of registration is for the protection of the mortgagor, in order, as claimed, to secure him from the temptation of dealing with property as unencumbered which he has himself encumbered. The creditor may be ignorant of the existence of the unrecorded mortgage, and on that account he is protected until it is recorded, giving him notice; but the mortgagor certainly has knowledge of it in its inchoate state; and while the omission of the mortgagee to record may be his fault or misfortune, that surely can afford no excuse for the mortgagor to disregard what he knows to be the condition of the property as to encumbrances. As we understand it, the object of the registration act was to give notice to the public, especially to creditors and purchasers, and not for the benefit of the mortgagor, who is bound by all the mortgages executed by him, whether they are recorded or not.

It must not be overlooked that the act of 1843 is no longer the law in relation. to the recording of mortgages, but has been absorbed and superseded by that of 1876, which makes precisely the same provisions as to the registry of “all instruments in writing now required by law to be recorded,” including mortgages and absolute conveyances; and, as to all, legalizes recording out of time, on the simple condition that the paper so recorded shall be valid only from the date of such record. This is a great advance as to systematizing our perplexed registry law, and in order to sustain and promote this effort at symmetry, it seems to us that it is incumbent on this court to make its decisions in regard to the registry of different kinds of, instruments in the same spirit of consistency and uniformity.

The act of 1876 has not been before this court for construction, except in the single case of McNamee & Co. v. Huckabee, 20 S. C., 190. That case was in reference to the registry of absolute conveyances, and involved the question as to the effect of the registry of two deeds of the same land, each of which was recorded out of time, and it was held that deeds, under the registry act of 1876, not recorded within forty days, are valid as against subsequent creditors and purchasers without notice, only from the date of record; execution of the second deed before the registry of the first, and recording out of time, being equivalent to execution after the first and recording within time, as in Steele v. Mansell, supra.

In Piester v. Piester (22 S. C., 139), this court held that the mortgage in that case, recorded out of time, was void as to creditors whose debts were contracted after the execution and before its registry. But that case was not decided under the act of 1876. The question arose in the settlement of the estate of David B. Piester, who died in 1869, and, of course, both the mortgage and the debt of -Wright, the “subsequent creditor,” were executed before the passage of the act of 1876, and necessarily fell under the operation of the act of 1843. The case was decided right under the provisions of that act, which, as has been stated, did not recognize in any way the legality of registry out of time. It was, so far as the subsequent creditor, Wright, was concerned, precisely the same as if the mortgage to the probate judge had never been recorded at all. The court say: “It cannot be necessary to do more than to refer to the express terms of the act of 1843, which declares mortgages invalid as against subsequent creditors for valuable consideration, unless the same shall be recorded in the office of the register of mesne conveyance within sixty days from the execution thereof, which was not done,” &c.

The case of Cameron, Hull Co. v. Marvin (26 Kans., 622), cited at the bar, involved, as we think, a point very analogous to that under consideration. The law of Kansas required that every conveyance intended to operate as a mortgage of personal property not actually delivered, “shall be absolutely void as against the creditors of the mortgagor and as against subsequent purchasers and mortgagees in good faith, unless the mortgage or a true copy shall be forthwith deposited in the office of the register of deeds, in the county where the property shall then be situated,” &c. One Patterson executed mortgages of personal property, and among them one or more (March 2, 1880) to Cameron, Hull & Co., w'ho failed to record them. Afterwards Patterson contracted a debt to Goodnow & Co. On June 3, 1880, Cameron, Hull & Oo. took possession of the property under their mortgages which had not been recorded. On June 11, eight days after, the subsequent creditors commenced action by attachment, and under this process the sheriff seized the property. The holders of the unrecorded mortgages; Cameron, Hull & Co., brought an action of replevin against the sheriff, and the question was, whether they, as mortgagees, or “the subsequent creditors,” Goodnow & Co., were entitled to the property; and it was held that the mortgages, from the time the mortgagees took possession, must be considered as valid, and the plaintiffs had a verdict.

In delivering the judgment of the court, Judge Valentine said: “We will assume that the mortgages were void as against Good-now & Co. and all the subsequent creditors up to the time when the plaintiffs took possession of the property, and will simply discuss the question whether they continued to be void after that time. Did the mortgages become valid when the plaintiffs took possession of the property under them ? We think we must answer this question in the affirmative. [Citing many authorities.] Mr. Jones, in his work on chattel mortgages, says that if a mortgagee takes possession of the property before any other right or lien attaches, his title under the mortgage is good against everybody, although it be not acknowledged and recorded. Counsel for the defendant in error seem to contend that when a chattel mortgage is not recorded immediately after its execution, and the property is not immediately delivered, it is absolutely void as to all creditors whose debts have been created subsequent to the execution of the mortgage and prior to its being recorded. * ifi *

“Of course a chattel mortgage not recorded of personal property not delivered is void as to all creditors who have no notice of the mortgage; but they have no right to, nor interest in, any ■specific property until they have obtained this right or interest by some legal process. They have no more right to the property than the mortgagee has, whose mortgage is void. They all have an equal right to the property — that is, they all have a right to procure a lien upon it, and the one who first acts will obtain the prior right. The mortgagor has a continuing right to mortgage his property. He has the right to prefer one creditor over another. And if the mortgagee, whose mortgage is not recorded, and who does not have possession of the property, records his mortgage with the consent of the mortgagor, &c., his mortgage then has the force and effect of a mortgage executed on the day on which it is filed for record, or on which the property is delivered. It is the same thing as though a new mortgage had been executed by the parties and recorded. The old mortgage is then given life and force and effect by the joint action of both parties, and hence must be held to be valid from that time on as against all persons,” &c. Our act recognizes registry, not only within the time, but afterwards. It is the right of the mortgagee to record, which he may or may not exercise in or out of time with or without the consent of the mortgagor;

If, as Mr. Dwarris states, considerations of inconvenience are allowable in construing a doubtful statute, it seems to us that the construction contended for, giving to a particular class of general creditors an anomalous character, yielding to some liens and overriding others — would in practice be fruitful of untold “complications, inconveniences, hardships, and embarrassments,” creating indeed in this case what the learned master so aptly styled “a curious puzzle.” Under what we conceive to be the proper construction of the act, no such complication' can arise. The Doa.r mortgage, although recorded out of time, from that date became valid as a lien, and as such had priority over all the general debts of the mortgagor which had not then become liens, regardless of the time they were contracted as prior or subsequent; and as to the mortgage of Eraser, who had actual notice, it (the Doar mortgage) was, according to its date, the first lien, and from the proceeds of the mortgaged premises must be first paid, and the mortgage of Eraser second.

It is the judgment of this court that the judgment of the Circuit Court be modified so as to conform to the conclusions herein announced, and in all other respects be affirmed.

Mr. Chibe Justice Simpson concurred.

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Dissenting Opinion

Mr. Justice McIver,

dissenting. I am unable to concur in the construction given to the-act of 1876, and, on the contrary, agree with the view taken by the master and adopted by the Circuit Judge. The question is so fully and satisfactorily discussed by master Hanckel in his able and elaborate report that it would be a work of supererogation to go at large into the argument. I propose simply to indicate some of the points which, to my mind, are conclusive.

The language of the statute to be construed, so far as it relates to the particular question with which we are concerned, is as follows : “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 or purchasers for valuable consideration without notice, only when recorded within forty days from the time of such delivery or execution. * * * Provided, nevertheless, that the above mentioned deeds, or instruments in writing, if recorded subsequent to the expiration of said period of forty days, shall be valid to affect the rights of subsequent creditors and purchasers for valuable consideration without notice only from the date of such record.” The question to be determined is, whether the Doar mortgage, which was not recorded within forty days from its execution, takes precedence of the general creditors whose claims were incurred between the time of the execution of that mortgage and the time when it was recorded.

The turning point of the inquiry, as it seems to me, is whether the words “subsequent creditors and purchasers” in the proviso to the act mean persons whose claims arose subsequent to the date of the mortgage, whose validity is in question, or subsequent to the record of such mortgage. I think they refer to the latter, and and not to the former period. There can be no doubt, and I understand it to be conceded, that if the body of the act stood alone, without the proviso, the result would be that a mortgage not recorded until after the time allowed for that purpose would have no validity as against the claims of creditors or purchasers subsequent to the date of such mortgagefor the language of the act of 1876, that a mortgage shall be valid so as to affect the rights of subsequent creditors and purchasers without notice, only when recorded within forty days, is in effect the same as that used in the act of 1843, which substantially declared that no mortgage should be valid so as to affect the rights of subsequent creditors and purchasers without notice, unless it shall be recorded within sixty days. To say that a mortgage shall be valid only when recorded, is tantamount to saying that no mortgage shall be valid unless it is recorded, &c.

The language of the act of 1843 has been construed by the courts of this State in several cases to mean that a mortgage not recorded within time has no validity as against subsequent creditors or purchasers without notice, and this, therefore, would be the proper construction of the act of 1876, without the proviso. McKnight v. Gordon, 13 Rich. Eq., 222; Williams v. Beard, 1 S. C., 309; and Piester v. Piester, 22 S. C., 139. The inquiry, then, is as to the effect of the proviso. Was its purpose anything more than to relieve a mortgagee who had neglected to record his mortgage within time from the extreme penalty, which under the body of the act he would incur, of having his mortgage declared of no validity as against the claims, not only of creditors or purchasers subsequent to the execution of the mortgage, but also of those subsequent to the recording of such mortgage, by declaring that as to this latter class his mortgage should have validity from the time it was actually recorded, inasmuch as from that time forward the public would have notice of his lien, and therefore any one who dealt with the mortgagor subsequent to that time must be affected by such lien ?

The object of the proviso was simply to qualify the very general terms used in the body of the act and to confine the protection afforded by them to the class of creditors and purchasers who needed and deserved protection, viz., those who had dealt •with the mortgagor without knowing, or having the means of knowing, of the mortgage, and to deprive another class of creditors and purchasers of that protection to which they would not be entitled, though under the general terms of the act, unqualified by the proviso, they could claim it, viz., those who dealt with the mortgagor after they had the means of knowing of the existence of the lien by the recording of the mortgage, and who chose subsequently to that time to deal' with the mortgagor.

This, it seems to me, is the proper construction of the act. The other view would lead to the very singular result of giving superior efficacy to constructive over actual notice, and this certainly was not the intention of the act. For if the Doar mortgage had never been recorded, and the simple contract creditors had received actual notice of it after their claims were contracted, this would not give the mortgage any validity as against such claims, and yet it is contended that mere constructive notice, arising from the record of the mortgage after the claims of the simple contract creditors were contracted, and after the time allowed by law for recording the mortgage, will give the mortgage a validity against these claims, which actual notice would not do.

Again, the construction contended for involves the necessity of interpolating words into the statute, for which I find no warrant ; for, practically, by that construction the word “creditors” must be read “judgment or other lien creditors.” The act, in express terms, declares that creditors, not judgment or lien creditors, subsequent to the execution of a mortgage, shall not be affected by it, unless it is recorded within forty days; and yet it is contended, practically, that a creditor who has acquired no lien prior to the recording of a mortgage, will be affected by such a mortgage, even though it be not recorded until after the lapse of forty days. This, it seems to me, is extending protection to that class of creditors who do not need it — lien creditors — and withholding it from that class — unsecured creditors — who do need it, and defeats the main object of the registry law, which is notice — not notice to the creditor after, but before, his debt is contracted.

Again, it will be observed that the word “subsequent” qualifies the word “purchasers” as well as the word “creditors,” and therefore we may legitimately test the construction by reading the act as if purchasers were the only class intended to be protected. So reading the act it seems clear that the words “subsequent creditors and purchasers” in the proviso mean persons whose claims arose subsequent to the recording, and not the date, of the mortgage. For it must be, and is, conceded that a mortgage recorded out of time cannot affect the rights of a purchaser who has bought the property subsequent to the date, but prior to the recording, of such mortgage, and as the same protection is extended in the same language to a creditor, it is difficult to understand why a creditor, whose debt was contracted subsequent to the date, but prior to the recording, of the mortgage, should not receive the same protection against the mortgage, as it is admitted a purchaser could claim.

It is a mistake to suppose that if the word “subsequent” in the proviso has relation to the time of recording of the mortgage, and not to its date, that then there would have been no necessity for the provision contained in the proviso. Such a view proceeds upon the erroneous assumption that the recording of a mortgage after the time limited for that purpose, would operate as constructive notice, and therefore that all persons who became creditors or purchasers after that time, having constructive notice of the mortgage, would be bound by it. But prior to the act of 1876 the recording of a mortgage out of time did not operate even as constructive notice, and hence, according to my view, the principal object of the proviso was to enable it so to operate; and therefore the legislature very properly declared that such a mortgage should be valid as against subsequent creditors and purchasers without notice “only from the date of such record,” meaning that from that time it should operate as notice to all who might subsequently thereto become creditors of, or purchasers from, the mortgagor. Otherwise the anomaly would be presented of having a creditor or purchaser affected by notice after the debt was contracted or the purchase made, when it would be difficult to understand what good the notice would do.

It seems to me, therefore, that the judgment of the Circuit. Court should be affirmed.

Judgment modified.

In this ease a. petition for rehearing was filed by the unsecured creditors upon the ground that their counsel were absent at the-hearing, because they had not expected the case to be reached as. soon as it was; that they then applied for the appointment of a time when they might be heard orally, which the court declined, but gave them leave to file printed arguments.

December 2, 1885. The following order was passed—

Per Curiam.

It is not claimed that any material fact or principle was overlooked by this court in rendering its recent judgment in this case, the only ground stated in the petition for rehearing being that the petitioners had no opportunity for oral argument when the appeal was heard. It will be observed from the correspondence submitted with the petition that the court did not decline to hear oral argument in the case, but declined to fix a time for such hearing out of order, of which the petitioner had notice. The failure to hear oral argument, therefore, was not the fault of the court. Hence there is no ground for a rehearing. The petition is dismissed.