Zorn v. Railroad Co.

5 S.C. 90 | S.C. | 1874

The opinion of the Court was delivered by

Willard, A. J.

The mortgage of plaintiff was not recorded in due time, and is accordingly void as to subsequent creditors and purchasers for a valuable consideration without notice.—Williams vs. Beard, 1 S. C., 309.

The only question is, whether the defendants are included in the class of persons entitled under the registration Acts to take advantage óf a want of due registration. This question is still further narrowed down to an inquiry whether the defendants have paid a valuable consideration for the lands covered by plaintiff’s mortgage. The question of notice has been determined by the Circuit Court as a question of fact, and no ground appears to disturb its conclusion.

The title set up by defendants to the lands in question was derived through a sale made under a decree of foreclosure upon a mortgage made by the Charleston and Savannah Railroad Company to trustees to secure the payment of bonds, prior to the purchase by that company of the lands of the plaintiff, and to the execution of the mortgage in suit. The purshasers under such decree of foreclosure were a portion of the whole number of original bondholders, whose bonds were secured by such mortgage. The only statement of the consideration paid by the bondholders thus purchasing is set forth in the answer in the following language: “ and this defendant avers that the consideration aforesaid, for the purchase aforesaid, at the sale aforesaid, has been duly paid by this defendant, and the said Charleston and Savannah Railroad Company fully satisfied therefor, prior to the notice of the claim of the said plaintiff to defendant, by receipts in due form to the said Charleston and Savannah Railroad Company for the amounts thereof on the bonds of the said Charleston and Savannah Railroad Company, due to the members of this corporation.”

The proper conclusion from this language is, that whatever may have been the amount bid on such foreclosure sale by the bondholders whose interest is now held by defendants, it was endorsed as so much money paid on the bonds held by the purchasers. The amount for which the road was purchased is not stated, and we cannot ascertain whether that amount was a nominal or a substantial consideration. It is difficult to understand by what means the purchasing bondhoders acquired the right to apply the whole purchase money to their particular bonds to the exclusion of the other bondholders'equally entitled under the decree of foreclosue, but who did not become purchasers under the decree; but it is not important to the plaintiff’s rights that this obscure transaction should be resolved, for the burden of showing a clear claim as purchasers for a valuable consideration is imposed by the law upon the defendants, and failing in this respect they cannot obtain the benefit of the registration Acts.

The case, as it stands, is, then, that of an antecedent creditor purchasing the land bound by an unrecorded mortgage at a judicial sale, upon the sole consideration of extinguishing so much of his original indebtedness as equals the sum at which the property was bid off by him.

Although this point does not appear to have been conclusively adjudicated by the Courts of this State, yet authority of abundant weight is afforded by our decisions denying the right of a purchaser under such circumstances to take advantage of the want of registry.—Williams vs. Hollingsworth, 1 Strob. Eq., 113, per Dunkin, Ch.; Dillard vs. Kirby, Speers Eq., 27; Bush vs. Bush, 3 Strob. Eq., 131.

The true rule on this subject is laid down by Chancellor Walworth in Dickerson vs. Tillinghast, 4 Paige N. Y., 215. Chancellor Walworth states the point so clearly, and exhibits the ground on which the construction of the Acts of registration rests, so far as it regards the requisites to constitute a valuable consideration under those Acts, that a better presentation cannot be made than that afforded by his language in the case just cited. It will be observed that what he says in regard to the construction of the registry laws of New York, is directly applicable to our own Acts. ITe says: “The English registry Acts made the unregistered deed or incumbrance at law wholly inoperative and void, as against a subsequent grantee or incumbrancer. But the Court of Chancery, in accordance with the manifest spirit and intention of the statute, at an early day adopted the principle of considering the prior deed or incumbrance as an equitable title or lien. It, therefore, applied to such cases, the equitable principles which had previously been adopted by that Court in relation to other contests between the holder of an equitable title or lien and a subsequent grantee or mortgagee of the legal title. In accordance with these principles, if the subsequent purchaser or mortgagee was a bona fide purchaser, that is, if he had actually parted with his property on the credit of the estate, so as to give him an equitable claim or specific lien thereon, without notice of the prior equity, and had also clothed that equitable lien with the legal title by taking a deed or mortgage, the Court would not divest him of that legal title or lien in favor of the prior equity. But if he had notice of the prior equity at any time before he had parted with his property on the credit of the estate, and before he had united the subsequent equity with the legal title, he was not considered as entitled to protection against the prior equity as a bona fide purchaser.

“ The words bona fide purchaser, therefore, when introduced into our recording and registry Acts, were intended to be' used in conformity with this established meaning thereof, and they must, in the present case, receive the same construction which they had previously received in the Court of Chancery in reference to that principle of equity. If a person has an equitable title to, or an equitable lien upon, real estate, a subsequent purchaser who obtains a conveyance of the legal estate, with notice of that equity, cannot, in conscience, retain such legal title, as he has no equity united with it. So if he merely takes the legal estate in payment of or as security for a previous debt, without giving up any security, or divesting himself of any right, or placing himself in a worse situation than he would have been if he had received notice of the prior equitable title or lien previous to his purchase, this Court will not permit him to retain the legal title he has thus obtained to the injury of another.”

This case was directly sanctioned by the Court of Appeals of New York, in Van Heuson vs. Radcliffe, (17 N. Y., 589), where the same principle Vas applied to an assignee for the benefit of creditors.

The defendants acquired their legal title from the purchasers under the trust mortgage sale through a transaction, the object of which was to enable such purchasers to get the full benefit of their purchase through the instrumentality of a new corporation to embrace themselves and such others as they might see fit to admit to it.

The title of defendants is no better than that of the purchasers at such sale. Those purchasers paid no real value, but took the property and rights covered by the mortgage in satisfaction of so much of the bonded debt as would equal a sum named by themselves for that purpose, and advanced by way of a bid for the property.

As antecedent creditors, they could not take advantage of the want of registration. In order to acquire, as purchasers, a right not enjoyed as creditors, it was necessary that some new consideration should be paid other than that which was the basis of their claim, as creditors. No such consideration appears, and, accordingly, it must be held that they are not entitled to set up the want of registration.

The conclusion above stated disposes of the only question raised by the defendant’s appeal.

The appeal should be dismissed and the judgment affirmed.

Moses, C. J., and Wright, A. J., concurred.