Carraway v. Carraway , 27 S.C. 576 ( 1888 )

The opinion of the court was delivered by

Mr. Chief Justice Simpson.

The action below was primarily for the partition of the real estate of one McG. Carraway, late of Georgetown County, among his heirs at law. The case was referred to a special referee, under an order requiring him, among other things, to report what liens existed upon the lands, with their character and priority. Quite a number of liens were .established against his heirs at law, one or more, to wit:

1. A mortgage of James F. Carraway, Sidney F. Carraway, McG. Carraway, and Elizabeth Green, to M. J. Hirsch, March 20, 1885, to secure their bond for $900. This mortgage was never recorded.

2. A judgment in favor of one Mills against James F. Carraway and John G. Carraway, as Carraway & Bro., for $378.27, dated May 14, 1885.

3. Judgment in favor of Congdon, Hazard & Co. against James F. Carraway, jr., and John G. Carraway, as Carraway & Bro., for $2,340.16, dated November 20, 1885.

4. A judgment of H. Kaminski & Co. against James F. Carraway, John G. Carraway, McG. Carraway, S. F. Carraway, and Elizabeth Green, for $2,114.10, dated November 20, 1885.

5. A judgment of Congdon, Hazard & Co. against James F. Carraway, jr., and John G. Carraway, as Carraway & Bro., for $430.70, dated November 20, 1885.

6. A judgment of Congdon, Hazard & Co. against McG. Carraway for $168.70, dated November 20, 1885.

7. A judgment of Congdon, Hazard & Co. against McG. Carraway, jr., for $940.05, dated November 20, 1885.

All of these judgments were obtained, as reported by the referee, upon debts contracted before the execution of the mortgage of Hirsch, of which mortgage, however, none of the creditors had notice until June, 1886. The referee held that said judgments were entitled to priority over the ITirsch mortgage. This holding by the referee was affirmed by his honor, Judge Wallace, who heard the case upon exceptions to the referee’s' report. From this decree Hirsch now appeals upon the following exceptions : “I. Because his honor erred in holding that creditors whose debts were contracted before the execution of the Hirsch mortgage and reduced to judgment after its execution, were subsequent creditors within the meaning of the registry acts. II. Because his honor erred in holding that an unrecorded mortgage of real estate is postponed under the registry acts to a debt contracted before the execution of the mortgage and reduced to judgment after its execution without notice. III. Because his honor erred in holding that the judgments were liens upon the respective interests of the judgment debtors in said real estate prior to that of the mortgage of M. J. Hirsch,” &c.

It will be observed that these exceptions, though three in number, and separately stated, raise substantially the same legal question, which is the only question in the case, to wit: whether a judgment obtained on a debt contracted before the execution of an unrecorded mortgage, obtained after the mortgage, and without notice thereof, is entitled to priority over said mortgage.

Inasmuch as this question must be determined by the registry act of 1876, now embodied in section 1776 of the General Statutes, in which the act of 1843 was substantially re-enacted, we do not conceive it to be necessary to consider very fully the numerous decisions of our court under the registration laws of force prior to 1843. There is some apparent conflict in these decisions which it might be difficult to reconcile, and some dissatisfaction expressed with the principle established, but we do not find that it has been at any time held in this State, that an unrecorded mortgage is void as between the parties thereto. On the contrary, a mortgage properly executed has been always held valid as between the parties and all others having knowledge of its execution, whether recorded or not. And in several cases the very question involved here, to wit: whether a subsequently entered judgment should take priority over an unrecorded mortgage was adjudged adversely to the judgment. See Ash v. Ash, 1 Bay, 306; Smith & Ravenel v. Smith, 1 McCord Ch., 148; Barnwell v. Porteus, 2 Hill Ch., 221; Steele v. Mansell, 6 Rich., 442 ; Ashe v. Livingston, 2 Bay, 80.

A mortgage, then, being valid between the pai'ties, and having a lien upon the land embraced therein, capable of being enforced even against a subsequently entered judgment, whether recorded or not, up to the act of 1843 (now section 1776 of General Statutes), the question arises, has any change been made in this respect by said subsequent acts, 1843, and section 1776 of General Statutes? Section 1776 of General Statutes is substantially, as we have said, a re-enactment of the act of 1848, with some amendment. We need, then, go no further back than this section. It provides: “That all deeds of conveyance of land, all deeds of trust, &c., all mortgages or instruments in writing in the nature of mortgages 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 and execution,” &c.

Now, what is the meaning and intent of this section ? This does not seem to us to be at all doubtful or uncertain. It means precisely what the language in which it is couched indicates and declares. And it declares that the instruments mentioned, if unrecorded within forty days after delivery or execution, shall be void as to subsequent creditors and purchasers. To this extent it goes, and no further. It does not require them to be recorded to make them valid generally, but it impliedly admits their general validity, with the exception that as to certain parties, to wit, subsequent creditors and purchasers without notice, they shall be invalid unless recorded within the prescribed time. In other words, that all such papers are valid and binding, having all the effect which they purport to have, with the proviso, that they shall not have such effect as to subsequent creditors and purchasers without notice, unless recorded as required by the act.

This, then, being the only interpretation of which the act seems to be susceptible, the matter before us is resolved into the question, whether or not the judgment creditors herein are subsequent creditors. It is admitted that the debts upon which the judgments were obtained were, each and all, contracted before the execution of the Hirsch mortgage. It cannot be said, then,’] that they were subsequent creditor’s, unless the entry of the! judgments made them creditors, which will hardly be claimed.] A judgment is the determination of one’s rights upon a cause of action which existed before the adjudication, and although obtained after the cause of action arose, it reflects back and estab-j lishes the right as of the date of its inception, and having estab-i¹ lished such right, it affords the means of enforcing redress for! the violation thereof. A judgment, therefore, obtained after the] execution of a mortgage upon a debt contracted before its execu- ’i tion, cannot be said to be a subsequent debt, in the sense of the]/ language of the act.

Does it come within the intent or spirit of the act ? The plain purpose of the act of 1843, as was said by Chancellor Carroll in Williams v. Beard (1 S. C., 313), Circuit decision, “was to guard against loss and injury to subsequent creditors and purchasers from their dealing with the mortgagor, under the delusion that he retained the absolute and unencumbered ownership of the property mortgaged.” This purpose had no reference to existing creditors, nor did the act intend to interfere in any way with the right of a debtor to lawfully incumber his property for the payment of his debts, or with the view to raise money as against existing creditors. All of the judgment creditors here were existing creditors at the time the Hirsch mortgage was executed and delivered, and we cannot see how that mortgage can be defeated, unless it is vulnerable upon grounds other than that it was not recorded within the forty days prescribed by the act. The judgment creditors here not being subsequent creditors, either in the sense of the terms used in the act, or in its purpose or intent, we think it was error on the pavt of the Circuit Judge to give priority to the judgments in question.

It may be true that it would be promotive of the interests of commerce, and of the safe and uncomplicated sale and transfer of property, that all liens and transfers should be spread upon some public record, or else to be absolutely void, but we do not think that it is within the province of the judiciary to enact such a law. On the contrary, we must follow the law as established and enacted by the legislative department of the State. We think the recent registry act of 1876, General Statutes, section 1776, is the act which governs the question involved here, and from our interpretation, given above, we think the conclusion is inevitable, that the failure to record a mortgage affects its validity only as to subsequent creditors and purchasers, such being in the terms of the act the only class that can invoke the penalty for non-record imposed therein. It would have been very easy for the general assembly, if it had intended to place subsisting creditors upon the same plane with subsequent ones, to have said so. A very slight alteration of the phraseology of the act would have accomplished this end. This, however, was not done; on the contrary, a special class ivas mentioned, to whom, it seems, the benefit of the act was confined. Fxpressio unius, exclusio altering.

The case of King v. Fraser (23 S. C., 543), has no application to the case here. In that case the mortgage had been recorded out of time, and certain debts had been contracted by the mortgagor after the execution of the mortgage and before it had been recorded, and the question before the court was, whether the mortgage took precedence to these debts, which had not been reduced to judgment. This question depended upon the construction of the proviso to the act of 1876, General Statutes, section 1776, which enacted as follows: “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.” The court held that the mortgage having been recorded, although out of time, yet under this proviso which authorized the record, it took rank from the date of the recording, and being the oldest, and in fact the only, lien upon the land, the creditors not having in the mean time reduced their claims to judgment, it necessarily had priority. Otherwise the anomaly would have been presented, of unsecured claims, having no lien whatever, defeating a lien which the proviso had declared should exist and become valid from date of recording. This proviso, however, is not involved in the case before the court. Tbis case turns upon the body of the act, in which subsequent creditors and purchasers for a valuable consideration without notice are given priority over an unrecorded mortgage, and a mortgage not recorded within the forty days. And the sole question, as it seems to us, is, are the creditors here subsequent creditors for a valuable consideration without notice ? We have seen that they are not such subsequent creditors, and therefore are not entitled to priority.

Nor does Piester v. Piester (22 S. C., 144), affect this case. There Mr. Justice Mclver drew the proper distinction when he said: “The necessary effect of this declaration is, that an unrecorded mortgage is void, is in fact not a mortgage, wherever the effect of so regarding it would be to affect the rights of a subsequent creditor without notice” — thus limiting its invalidity to the claims of subsequent creditors, but sustaining it as to all others.

Prior to the act of 1843 the registry laws of the State, both as to deeds of conveyance and mortgages, were found in the acts of 1698 and 1785. While these acts were the only acts of force on this subject, the cases of Ash v. Ash, 1 Bay, 306; Smith v. Smith, 1 McCord, 148, and Barnwell v. Porteus, 2 Hill Ch., 221, supra, were heard and determined, in which the principle that an unrecorded mortgage had priority over a subsequently entered judgment was established and recognized; and this, too, as it seems, whether the judgment was founded upon a subsequently contracted debt or not. This doctrine, although established and adhered to, seems not to have been entirely satisfactory, and no doubt the act of 1843, which has reference to mortgages alone, was enacted in part to remove this dissatisfaction, by relieving subsequent creditors and purchasers from the difficulties surrounding them in consequence of these decisions. The act of 1843 thus made plain the registry law as to mortgages. Deeds and absolute conveyances of land were, however, left under the operation of the acts of 1698 and 1785, under which the old Court of Errors had decided in Steele v. Mansell (6 Rich., 438), that an absolute deed never recorded was not void, but was still good between the parties, and if recorded, though after the time, it was notice to the world from the date of the registry — thus establishing a different rule from that applied to mortgages.

Subsequent to this, and no doubt with the view to harmonize the registry laws including conveyances and mortgages and all instruments in writing requiring recording, the act of 1876 was passed, with the proviso referred to above; which declares that all instruments in writing required to be recorded, shall be valid so as to affect subsequent creditors or purchasers only when recorded within forty days. Provided, nevertheless, that said mentioned deeds or instruments, if recorded subsequent to the expiration of the said forty days, shall be valid only from the date of the record — thus legalizing the recording of all papers required to be recorded, even after the forty days specified, and giving them rank from the date of the record as to all parties, including subsequent creditors and purchasers. This act of 1876, General Statutes, section 1776, now furnishes the registration law of this State, and while it clearly declares void all unrecorded conveyances and mortgages, as to subsequent creditors and purchasers for a valuable consideration without notice, yet there is nothing in it which declares such papers void as between the parties or as to subsisting creditors, like those contesting the validity of the mortgage herein.

It is the judgment of this court, that the judgment of the Circuit Court be reversed, and that the case be remanded to be adjudged and determined in accordance with the principles above announced, giving the Hirsch mortgage priority over the judgments mentioned.

Mr. Justioe McIver concurred.

1 This completes the cases of April Term, 1887. — Reporter.