Norwood v. Norwood

| S.C. | May 2, 1892

The opinion of the court was delivered by

Mr. Justice Pope.

The issues in the action originally begun on the 17 January, 1820, in the Court of Common Pleas for Marlboro County, have been reduced to a contention between the two defendants, George A. Norwood & Co. on the one side, and E. H. Frost & Co. on the other side, as to the priority of mortgages held by them respectively. Judge Hudson, who heard the cause on the Circuit, decided that E. H. Frost & Co. had prior lien and decreed accordingly. From that decree the defendants, George A. Norwood & Co. appeal to this court on fourteen grounds of appeal, as follows :

1. Because his honor, the presiding judge, erred in holding that the mortgage of defendants, E. II. Frost & Co., is entitled out of the proceeds of sale of the mortgaged premises to priority in payment to the mortgage of G. A. Norwood & Co.

2. Because his honor erred in. holding that the mortgage of G. A. Norwood & Co. was in fact paid on the 13th day of January, 1885, the date of the first renewal of the same by C. N. Rogers and N. S. Rogers.

3. Because his honor erred in holding that the renewal of the bond and mortgage by C. N. Rogers and N. S. Rogers to G. A. Norwood & Co. was a secret agreement, and could not affect the rights of the defendants, E. H. Frost & Co., who were junior mortgagees.

4. Because his honor erred in not holding that the mortgage of the defendants, G. A. Norwood & Co., being prior in date and unpaid, should be preferred in its payment to the bond and mortgage of E. H. Frost & Co.

5. Because his honor erred in not holding that the renewal of the bond and mortgage to G. A. Norwood & Co. was valid and binding upon the junior mortgagees, E. H. Frost & Co., as the. said renewed mortgage was of record and uncancelled.

6. Because his honor erred in not holding that it was incumbent on said junior mortgagees, E. H. Frost & Co., to give actual notice to the senior mortgagees, G. A. Norwood & Co., of the existence of said junior mortgage after its execution, in order to give the latter priority over the former.

7. Because his honor erred in not holding that the senior mortgage of G. A. Norwood & Co. was not such a mortgage as could be affected by actual notice of a subsequent mortgage, as G. A. Norwood & Co. were compelled to make the advances specified in the said renewed bond.

8. Because his honor erred in not holding that the renewal of said bond and mortgage of G. A. Norwood & Co. was a revivor of the same, and was valid as against the subsequent mortgage of defendants, E. H. Frost & Co. ■

9. Because his honor erred in not holding that the account of G. A. Norwood & Co. against C. N. Rogers, was a running account and had not been closed, and that the bond and mortgage given to secure the same was to secure an eventual balance which had not been paid at-the date of the mortgage to E. EL Frost & Co., nor at any time afterwards.

10. That his honor should have held that the question involved was one of the application of payments by G. A. Norwood & Co. to their account against C. N. Rogers; that there had been no direction of such application by C. N. Rogers, and that the same had been applied to the open account, which was in excess of the security given, thus leaving the balance on account secured by the bond given by 0. N. Rogers and the mortgage given to secure the same.

11. Because his honor erred in not bolding that G. A. Nor-wood & Co. were at least entitled to priority under their mortgage over E. H. Frost & Co. to the extent of ail amounts due them on account of C. N. Rogers on the 23rd day of February,-1885, the day the mortgage of E. II. Frost & Co. was executed.

12. That his honor erred in not decreeing the sum of $669.96, with interest from the date of the advancement of the items composing that amount, on the account of C. N. Rogers, due tó G. A. Norwood & Co., at ten per cent, per annum, till the date of the decree herein.

13.. Because his honor erred in holding that a recital by C. N. and N. S. Rogers in the mortgage to E. H. Frost & Co., to the effect that there was no other encumbrance on the mortgaged premises than the Munnerlyn mortgage, could affect the rights of G. A. Norwood & Co., the senior mortgagees, who knew nothing of such recital.

14. Because his honor erred in holding that there was a settlement between C. N. Rogers and G. A. Norwood & Co., on the 13th January, 1885, on which day there was a balance due said C. N. Rogers of three or four hundred dollars.

The facts in this case are undisputed, and are about as follows: C. N. Rogers, in February, 1884, agreed with G. A. Norwood & Co. to borrow $1,000, to be paid on or before 1 January, 1885, and that he would ship said firm seventy-five bales of cotton, to be sold by them as factors during the year 1884; and in order to secure such factors he, with his father, N. S. Rogers, executed their bond to them in the penalty of $2,000, conditioned for the payment of $1,000 and interest, &c.; and that on the 1 January, 1885, G. A. Norwood & Co. held claims against C. N.Rogers for $2,360.34, and held to O. N. Rogers’s credit, $2,442.-58, in money, and six bales of cotton worth $277.69. On 13 January, 1885, Norwood & Co. owed C. N. Rogers $2,720.27, and he owed them $2,376.59, a difference in Rogers’s favor of $359.-. 93. These two results, to wit: the state of their accounts on 1 January, 1885, and also on 13 January, 1885, included the bond secured by mortgage. On the 'l3th January, 1885, C. N. Rogers made an agreement with G. A. Norwood & Co., -which was entered on the bond executed 23rd February, 1884, by which it was agreed between them that the arrangement for 1884 should be continued for the year 1885. This agreement was not entered on the record of the mortgage or made known. In other words,1 while entirely fair and business like between the parties to the same, it was not made public.

On March, 1st day, 1884, Elizabeth Munnerlyn obtained a mortgage upon the lands in controversy here, for $2,000 and interest. This is admitted on all hands as the first and preferred lien, On 23rd February, 1885, Charles N. Rogers executed a mortgage on these lands to secure an antecedent indebtedness of $3,000 to E. H. Frost & Co., representing in the body thereof that there was no lien thereon except that by mortgage to Elizabeth Munnerlyn. It is admitted that E. H. Frost & Co. had no actual notice of the mortgage of George A. Norwood & Co., or of any continuance thereof.

At the hearing Charles N. Rogers, who was the witness of George A. Norwood & Co., testified that all indebtedness between him and said firm of George A. Norwood & Co. -was paid on the 13th January, 1885, and no testimony or admissions of parties appears to negative such testimony.

Judge Hudson decreed that the lands should be sold and the proceeds applied, 1st, to the payment of the mortgage of Elizabeth Munnerlyn ; 2nd, to the payment of the mortgage of E. H. Frost & Co.; 3rd, to the payment of the mortgage of George A. Norwood & Co.

From the view we take of this ease, it will only be necessary for us to consider the first exception; it includes all the rest.

1 Before proceeding regularly to respond to the inquiry made of us by the appellants, it is proper that we should notice so much of the appellants’ argument as suggests that inasmuch as the defendants, E. H. Frost & Co., did net in their answer set up their defence of purchasers for valuable consideration without notice, that they are not entitled to such equitable defence. It may be .well to state just here that this exception is not urged by the plaintiff as such, but by the defendants, George A. Norwood & Co.' The cause of action set up by the plaintiff was the Munnerlyn mortgage. The defendants, E. H. Frost & Co. and George A. Norwood & Co., were only proper parties to his action for the foreclosure of his mortgage, because they held junior encumbrances on the same property. When the defendants, Frost & Co., answered the complaint, denying its allegations touching the relative rank of Frost & Co.’s mortgage and that of Norwood & Co., that was all that was necessary, so far as the plaintiff was concerned. We must not be understood as denying the right of co-defendants to have their equities as between themselves tried in this action. That right has been repeatedly recognized by this court. Quattlebaum v. Black, 24 S. C., 55; Motte v. Schult, 1 Hill Ch., 115.

2 The plaintiff in the case at bar sued as assignee and mortgagee, and did not include .his membership of the firm of Nor-wood & Co. in his character as plaintiff; his name in that latter relation appears here as a defendant. It is defective pleading for one and the same person to appear as both plaintiff and defendant in the same action. Correct pleading requires that a plaintiff or defendant, as the case may be, should unite in himself as such plaintiff or defendant, as the case may be, all the characters he may bear to the subject-matter. Thus, if an individual has rights as an individual, and also rights as a trustee (in one of its many forms), or as partner in a firm in one subject-matter, he should be so described. We make these observations here because this is the second instance¹ during the present term of this court in which we have noticed this departure from the rules for pleading, and all the more readily in this ease because of the admirable manner in which, in every other respect, the papers have been prepared.

After a careful consideration of the appeal, the writer of this opinion has reached the conclusion that the decree below must be modified, for he was satisfied that Norwood & Co. were entitled to a priority in so far as the amount advanced to C. N. Rogers, beginning on the 13th day of January and ending on the 23d February, 1885, being the sum of six hundred and eighty-six 21-100 dollars, is concerned. This result arises from these considerations : The Circuit Judge found as a fact, and as a conclusion of law, that the written agreement endorsed on the bond and mortgage between Norwood & Co. and C. N. Rogers “was equivalent to the execution of a new bond and mortgage by him to them, and he is bound thereby,” on the 13th January, 1885. This finding of the judge has not been appealed from, and is, therefore, the law of this case. He also finds that C. N. Rogers executed his mortgage to Frost & Co. on the 23d February, 1885, and the same was recorded on that day. This is admitted to be true. It also appears that Norwood & Co. advanced to Rogers $<386.21 between the 13th January, 1885, and the 23d February, 1885.

It is not material, in the writer’s view of the rights of these parties, that the consideration of the mortgage of Frost & Co. was an antecedent indebtedness. It was lawful to make such mortgage, and, under the registry laws of this State, having been duly recorded on that date, it was notice to all the world of their lien on the land from the date of the execution of the mortgage. It is also the law of this State that a mortgage is entitled to the advantage of the doctrine of equity of purchaser for a valuable consideration without notice. Haynsworth v. Bischoff, 6 S. C., 165, and cases there cited.

It must be apparent, therefore, that on the 23d day of February, 1885, these co-defendants — Frost & Co. and Norwood & Co. — stood in this attitude to each other, growing out of their transactions with C. N. Rogers : Norwood & Co. had a mortgage entitling them to advance from time to time to Rogers not more than $1,000, and of this sum they had advanced $686 21. On this day Frost & Co., upon an antecedent debt of C. N. Rogers of $3,000, obtained bona fide a mortgage froip Rogers upon the same land covered by the lien of Norwood & Co. What is the rule equity adopts in such a case ? It treats the parties in this way: It asks, has Frost & Co. 'parted with any consideration to Rogers previously or on the 23d February, 1885, either by the surrender to him of any security or the payment of any money, or divesting themselves of any right by which such firm have been placed in any worse situation than they would have been in if they had received notice of Norwood & Co.’s mortgage? Their answer, under the proofs here, would be No. Then equity supplies relief to Norwood & Co. in this way. It says: You have not complied with the law by recording your mortgage, but by an honest dealing with Rogers you have obtained a-right that he created by contract to hold his land as a pledge to secure so much money or property, to wit, $686.21, as you advanced to him prior to the day the law made you take notice of the rights of Frost & Co., and this we give you, because, to that extent, you area purchaser for valuable consideration without notice. Zorn v. C. & S. R. R. Co., 5 S. C., 97, and other cases there cited.

3 But after a very careful examination of the decisions of our courts, and after an interchange of views by the different members of this court, I am directed to announce as its unanimous decision that no such priority exists as to the debt of $686.21 in Norwood & Co. over the mortgage of E. H. Frost & Co. The very object of the act of 1843, regulating the registry of mortgages, was to uproot secret liens, and the provisions of that act have been extended to apply to the registry of deeds of conveyance, as will be seen by reference to section 1776 of our General Statutes. It is true,-that in both acts reference is to validity of- record as to “subsequent creditors and purchasers for valuable consideration without notice.” But this court, in Piester v. Piester, 22 S. C., 143, uses this language: “We do not mean to say that the mortgages, having been recorded (although out of time), may not have a valid lien on the land embraced, as to such creditors as do not come within the category of subsequent creditors without notice,” thus strongly intimating what its judgment would be when a ease should be made as between a creditor whose mortgage, unrecorded, was created’ prior to a mortgage duly recorded. We cannot say that this precise question has been directly passed upon by our courts, but the dieta in our decisions plainly point to the decision when the question shall be presented. This court, therefore, now aiP\ nounces that a secret mortgage, or a mortgage not recorded, is \ displaced in lien by a mortgage subsequently delivered and duly recorded, even if the debt secured by the recorded mortgage is ,.' an antecedent indebtedness.

4 So far as any advances made to Rogers by Norwood & Co. after the 23d February, 1885, they were made at their peril, for the registry laws of this State made the record of Frost & Oo.’s mortgage on that day notice, so that it was impossible for them (Norwood & Co.) to avail themselves of the doctrine of purchasers for a valuable consideration, or subsequent creditors without notice. For this court to hold otherwise would be to nullify the registry laws of this State. The provisions of those law’s are beneficent as well as wise. Nor, again, can we accept the views suggested by the appellants as to the effect of the agreement of 0. N. Rogers with Norwood & Co., made on the 13 January, 1885, thus enabling Norwood & Co. to continue their advances beyond the 23d of February, 1885, when Frost & Co. obtained their mortgage, for to do so would be at variance with the decisions of this court in the cases of Walker v. Arthur, 9 Rich. Eq., 397; National Bank of Chester v. Gunhouse, 17 S. C., 494, and other cases. We cannot hold that Norwood & Co. were bound to continue advances to Rogers after 23d February, 1885, for, by the execution of the mortgage to Frost & Co. at that date, he had deprived himself by his own act of any right to such advances.

5 We could not reverse the findings of the Circuit Judge referred to in the 2d, 4th, 9th, 10th, and 14th exceptions. They relate to findings of fact. Instead of being without any testimony to support them, or being manifestly against the weight of testimony, we find abundant testimony in the case to support them.

It is the judgment of this court, that the judgment of the Circuit Court be affirmed.

1 See McFall v. McFall, 35 S. C., 559.