Roop Grocery Co. v. Gentry

1. The plaintiff, as the holder of a security deed and a note secured thereby, instituted an action against the grantor and his wife, seeking a judgment against the defendant husband and a special lien on realty conveyed by the security deed, superior to a claim of title by the wife based on a previous deed from her husband. Held, that under the pleadings and the evidence the jury would have been authorized to find for the plaintiff on the theory that the deed by the husband to the wife was a voluntary conveyance, of which the plaintiff had no actual notice at the time it took its security deed and extended credit on the faith thereof, and that the security deed was therefore good as against the wife's claim.

2. A verdict for the plaintiff would also have been authorized upon its contention that even if the deed to the wife was based on a valuable consideration and the plaintiff had record or constructive notice of it, the wife should be estopped on the ground that she witnessed the security deed with knowledge of its contents, when the plaintiff was ignorant of the true title and relied upon such security deed and extended credit thereon.

(a) Even if the deed to the wife may have been based on a valuable consideration and duly recorded, these facts would not necessarily prevent an estoppel in such case.

(b) Under the rulings expressed in the preceding notes, the court erred in directing a verdict against the plaintiff and in favor of the defendant wife on the issue as to title.

3. The petition as amended alleged sufficient facts to show an estoppel; and there is no merit in the contention that the plaintiff's motion for a new trial was properly refused, because the petition did not allege a cause of action. Under the preceding rulings, the court erred in overruling the motion for new trial.

No. 14439. APRIL 15, 1943. Roop Grocery Company filed a suit in the superior court of Haralson County, against C. A. Gentry and Mrs. C. A. Gentry. The petition as amended alleged: C. A. Gentry is indebted to petitioner in the sum of $1115.16, besides interest, on a mortgage note covering a certain stock of goods, which merchandise was sold by the bankruptcy court and the money awarded to the holder of a mortgage of older date than petitioner's. Petitioner's mortgage was given to secure any indebtedness that C. A. Gentry might contract with petitioner, and for further advances.

At the time said mortgage was executed, C. A. Gentry executed to petitioner a security deed to certain property, including a described "store building," located in the town of Tallapoosa. Said deed was given to secure $1000 of the credit to be extended, and was dated July 31, 1939, and recorded August 3, 1939. In consideration of this security deed, petitioner furnished C. A. Gentry certain merchandise, and he is now indebted to petitioner in the sum of $1115.16. Mrs. C. A. Gentry was present at the time said agreement was made, and was working in the store for her husband, and signed said security deed as one of the witnesses. On May 12, 1938, C. A. Gentry executed to Mrs. C. A. Gentry, for a purported consideration of $1 and other valuable considerations, a warranty deed to the store building above described, which deed is recorded in the clerk's office of the superior court of Haralson County.

9. "Petitioner would not have extended to C. A. Gentry the credit and sold to him the merchandise that it did, if it had known that Mrs. Gentry held a purported deed of older date to the land described."

10. "The conduct of Mrs. C. A. Gentry in allowing C. A. Gentry to execute to petitioner a deed to secure the indebtedness, and witnessing the deed for him, and permitting C. A. Gentry to purchase merchandise from petitioner, amounted to a fraud upon petitioner, and she is now estopped from claiming a prior lien or prior title to property in dispute, and her deed should be declared inferior to the deed and lien of petitioner. Said Mrs. C. A. Gentry was present and stood by and saw her husband execute the deed in question to plaintiff, and did not at the time disclose that she held a deed to said property, and her silence amounted to a fraud, and she is therefore estopped from setting up her title as against plaintiff; that the plaintiff did not know of her claim to said property, this plaintiff having sold said property to C. A. Gentry and put him in possession; that the said Mrs. C. A. Gentry knew the property was being deeded to plaintiff by C. A. Gentry, and that she did not disclose her title, but permitted the said C. A. Gentry to execute a deed to said property and obtain credit from plaintiff on the faith of said security deed; and she is therefore estopped." "The deed hereinbefore referred to, that is, the deed from C. A. Gentry to Mrs. C. A. Gentry, was and is without a valuable consideration, and is a voluntary conveyance, or gift from husband to wife."

Petitioner prayed (1) for judgment against C. A. Gentry for "its principal and interest;" (2) that said judgment be declared to be a special lien upon the property described in the petition; and (3) that the lien on and title to said property of petitioner be decreed to be superior to that of Mrs. C. A. Gentry, and that her claim or title to said property be decreed to be null and void as to petitioner. Copies of the mortgage note, warranty deed, and security deed referred to in the petition were attached as exhibits.

The defendants filed separate answers. C. A. Gentry in his answer denied the allegation of the petition "that Mrs. C. A. Gentry was present at the time said agreement was made, and knew about the contract, and was working in the store for her husband, and witnessed the deed in question as one of the witnesses," and averred: "Mrs. C. A. Gentry, the wife of the defendant, was called from her work in the store, as defendant's employee, and asked by plaintiff's agent, E. H. Rainwater, to attest the signature of the defendant, and her attention was not called to the terms of the deed which she witnessed, and there was nothing said to call her attention to it. Defendant frequently signed papers in the store, and on this occasion she signed the deed in the course of business."

In the answer of Mrs. Gentry, she admitted attesting the security deed executed by C. A. Gentry to the plaintiff, but alleged that "she did not know and did not inquire as to what the character of the paper was." "Defendant denies the truth of the 9th paragraph of plaintiff's petition. When defendant C. A. Gentry contemplated going into the grocery business at Tallapoosa, he consulted Will (W. C.) Roop, president and general manager of Roop Grocery Co., about securing credit from said company, . . and said Will Roop was fully apprised of the financial standing of C. A. Gentry, and that he then owned the store building described in . . plaintiff's petition, and said Will Roop advised said C. A. Gentry to convey said property to this defendant, Mrs. C. A. Gentry, and declined to extend credit to said C. A. Gentry by which he could start business. Defendant denies the allegations of the 10th paragraph of the petition, and says that if any fraud was committed in the execution of the deed set out, it was on the part of the plaintiff's agent in attempting to defeat the rights of the defendant under her deed."

At the close of the evidence, the court directed a verdict in favor of the plaintiff, Roop Grocery Company, against Gentry for the amount of the note, and in favor of Mrs. Gentry on the issue as to title. The plaintiff moved for a new trial on the general grounds, and by an amendment assigned error also on the direction of the verdict against the plaintiff and in favor of Mrs. Gentry on the issue as to title, contending that as to that phase of the case there were questions of fact that should have been submitted to the jury. The motion for new trial was overruled, and the plaintiff excepted.

E. H. Rainwater testified that he was a salesman for Roop Grocery Company and "made this transaction. . . Mrs. Gentry was present when he gave me the description of this property. They gave me the description to put in the deed. She was present at that time, yes, I suppose so. She was in the store, yes. . . All three of us were present when we discussed how much credit they were to get from Roop Grocery Co., and I started selling them. I took this security . . before I sold the stuff on credit. . . This deed I fixed for $1000 was signed by Claud Gentry and witnessed by Mrs. C. A. Gentry and E. H. Rainwater, J. P. ex -off. is the deed I took to secure Roop Grocery Co. for the amount I was to sell them in the future. After that time I sold them on up until they went into bankruptcy. After they had given me this security deed I sold them . . stuff on credit at the time, because of the fact that I had security. . . At the time I took this deed to secure the future indebtedness that I was to extend to them, I did not know that anybody else had title to this property other than C. A. Gentry. When I was writing the description of the deed, Mrs. Gentry did not tell me she had title to the property. . . This is the first time that I knew she claimed title to it. As to whether they owed Roop Grocery Co. anything at the time the deed was signed, I don't know about that; they gave me the deed to secure future indebtedness." Q. "You had not been selling them until after this deed was executed?" A. "No, I don't remember that I did; after that I did sell them. Mrs. Gentry would make up a list of the stuff they wanted to buy and give it to me."

W. C. Roop testified: "I am a member of the partnership of Roop Grocery Company. . . I am the general manager. . . In July, 1939, when this deed was given and after that time we did sell to C. A. Gentry or Gentry Grocery Company, of Tallapoosa, goods. . . They owed us the amount set out in this suit. . . Who got the money for the stock of goods from the bankrupt court? The wholesale grocery company of Anniston, Chastain Roberts, got that; they had a mortgage of older date than our note. . . We furnished him a credit from Roop Grocery Company and furnished him goods on the faith of this deed and note. I am the sole credit manager. I approved this credit extension on this security when it was brought to us by Mr. Rainwater, and sold him the goods. . . At the time we extended this credit we did not know or have any knowledge of anybody else having a deed to this property. . . I did not tell her [Mrs. Gentry] she had better get Claud to deed her this property before they went back in business. When they went out of business the other time I might have told her she had better get anything she could, because it was going fast. . . As to whether I knew that the proper way to find out where the title of this property was, was to go and search the records, yes, if I had any doubt about it I would. If I had checked the record I would have found out all about it, yes, but I knew Mr. Gentry had a deed to the building. I didn't know he had deeded it away. If I had checked the record I would have found out all about it; and as to whether I would have saved all this trouble, yes, I would not have taken it, of course. Yes, if I had checked the record, I would have prevented all this."

C. A. Gentry testified: "When I sought to start business in Tallapoosa, I just went and asked him [Mr. Roop] did he want to put me back in business, and he said no; he said he would if my wife would sign a note with me, and Mrs. Tumlin; that is all he said. . . As to how he knew about my having had a deed to this Tallapoosa property, he told me to put it in my wife's name. At that time I had deeded it to my wife. . . I didn't succeed in getting credit from him, no sir, I told him I didn't want to get Mrs. Tumlin to sign the note. . . As to how later on I come to get credit from Mr. Roop, well, the salesman kept coming, and I owed him $1000, and Mr. Rainwater come up there and says, ``We have got to pacify Will's [W. C. Roop's] mind.' I says, ``What can we do?" He says, ``Oh, we'll fix up a little paper of something,' and I told my wife to hand me a little green box that I kept my papers in, and I handed the box to him, and he opened it and got the paper out, and my wife was around on the other side. . So he says, ``Call your wife in here a minute,' and I did, and he says, ``You know your husband's signature, don't you?' She said yes. He says, ``Witness this paper.' That's all that was said. I owed Will the money then. Her attention was not called to the fact that I was giving a deed to this particular property that they are now seeking to condemn, and Will knew that Chastain Roberts had a deed to this property then. . . As to how he knew about it, I told him, I told Mr. Rainwater that Chastain Roberts had a deed to it. As to how I come to give another deed to it, I didn't know I was giving a deed to it. . . As to why I didn't know, I just didn't look at the papers he got out of that box there. . . I say I made this deed to my wife to this particular storehouse purely on the suggestion of W. T. Roop. As to it having been made for any other purpose, well, I don't know about that. As to my not having made it until Mr. Roop told me to make it, I generally done what he told me to; and when he told me that, I came on up here and made a deed to my wife and put it on record the same day. As to her having paid me any money for it, well, I owed her some. How much I owed her, I don't know. I owed her for working. She worked there in the store, and she worked there in Atlanta while I was there. . . As to when she went to work for a salary, I don't remember about that. As to what was her salary, she never did draw no certain salary. . . I was in Atlanta when he [W. C. Roop] came down there and told me I had better put that property in my wife's name, or give it to my wife. . . I came right on then and made it out and put it on record. . . He advised me to put this property to my wife, before I ever started business down there, the last time."

Referring to the ten-cent business previously sold by him to one Lanier, an interest in which Mrs. Gentry claimed was consideration for the deed made to her, he testified: "As to whether she had any interest in my business when I sold out to Lanier and moved to Atlanta, I don't remember about that, I don't think she did; that was my business, and I sold it and went to Atlanta and went in the produce business. . . I say I don't think my wife had any interest in the business at the time I sold out. As to when she did go out of my place, I don't remember about that. As to how much interest she had at any time, I think she was half interest, when I first started. . . As to how many years before I sold out to Lanier when my wife got out of business, she was out then; how many years before that was she out, I don't remember about that. As to it being a year or two, two or three years, I just don't remember. How did she get out, I guess I bought her out, I don't remember. What I paid her, I don't remember about that. I don't know what the consideration was. As to whether I did pay her, I don't remember whether I did or not. I do not know that when I sold out to Lanier she had no interest in it."

As to her attestation of the security deed executed by C. A. Gentry to Roop Grocery Company, Mrs. Gentry testified: "When I was in the store when this man Rainwater came and wanted additional credit, what I was doing in the store, I was waiting on a customer or working there, or something. . . As to how I came to witness this deed, Squire asked me to. I was in the store waiting on a customer, and he called me and I went to where he was. . . He says, ``Do you know your husband's signature?' I says, ``yes.' He says, ``Witness this,' and I witnessed it. Claud had already signed it. I did not know at that time he was deeding my property away. As to whether I inquired into what the deed was about, no, I didn't think it was necessary."

As to the consideration for the deed made to her by her husband, she testified: "As to whether, when I went out of the ten-cent business, he was owing me something, well, we were together, Mrs. Tumlin and Claud and I, until 1935, and we bought Mrs. Tumlin out and we went in business together, and after that we moved to Atlanta, and when we moved to Atlanta he bought that produce business up there, and then I got the store building for my part. . . When Mr. Roop was in Bowdon and I was there, Mrs. Tumlin was with me. Claud was not along that day. As to what Mr. Roop said to me about the property, he told me Claud wanted to sell him that building, or borrow some money on it, and he told me Claud was drinking and had gone wild and was going to lose everything, and if I wanted anything out of it I had better get that building in my name. . . As to that being the reason I got it, I went back to Tallapoosa, and Claud was there; he was drinking, gentlemen, and later I told him to just give me the building for my part of the ten-cent store that we went in together with. Before he made me this deed he owed me something on account of the ten-cent business, what I had when I went in there with him. How much that was I don't remember. Approximately how much my interest was in the business that he got. I imagine five or six hundred dollars. We paid five hundred and something for the building, if I am not mistaken. . . As to whether I acted on Mr. Roop's suggestion, I thought it was a good suggestion."

She testified further: "At the time my husband made me a deed in 1938, when we came back in September, 1938, and opened up this new store, . . they put up the store in the same building. He did not stay in that building operating the store until he was closed out in bankruptcy. I don't know what time he moved out. . . I can not give you the date we moved to Mrs. Tumlin's building . . just a short while. And no one occupied the building after we moved out until he went into bankruptcy, except that he had his feed and stuff there. . . He was in possession of the building to put stuff into if he wanted to."

Mrs. Tumlin, a witness for the defendants, testified: "As to what I went down there for, I and Mrs. Gentry, as I remember, went down there; she went to see him [W. C. Roop] about starting in business again, I just went to be with her. We saw Mr. Roop on that occasion; . . we didn't get out, and she spoke to him about the matter that she came to see him about, and he said, ``I'll tell you, Mrs. Gentry, everything is going, and the thing for you to do is to get a deed to that property,' the store building, the property in question in this case."

The plaintiff introduced in evidence the mortgage note, warranty deed and security deed referred to in the petition, and other documentary evidence. The plaintiff made two contentions: First, that the deed by the husband to his wife was a voluntary conveyance of which the plaintiff had no actual notice at the time it took its security deed and extended credit on the faith thereof; and that although such deed to the wife was then recorded, the record did not constitute notice to the plaintiff as a subsequent purchaser for value, and its title is therefore superior. Second, that even if the deed to the wife was based on a valuable consideration and the plaintiff thus had record or constructive notice of it, yet the wife witnessed the security deed to the plaintiff with knowledge of its contents, and in view of this fact and the other circumstances she is estopped to assert title as against the plaintiff. These were substantially the issues that were presented in the trial court; and it is insisted here that a verdict for the plaintiff would have been authorized upon each and both of these issues, thus rendering it erroneous to direct a verdict in favor of the defendant wife. The two contentions, however, are separate and distinct, it being insisted that if a verdict for the plaintiff would have been authorized upon either of the issues stated, the case should have been submitted to the jury.

1. "Every voluntary deed or conveyance made by any person shall be void as against subsequent bona fide purchasers for value without notice of such voluntary conveyance." Code, § 96-205. "To sustain a voluntary conveyance against a subsequent bona fide purchaser for a valuable consideration, notice to the purchaser must be actual." Waters v. Wells, 155 Ga. 439 (9) (117 S.E. 322); Jordan v. Pollock, 14 Ga. 145 (4); Fleming v.Townsend, 6 Ga. 103 (50 Am. D. 318); Finch v. Woods,113 Ga. 996 (39 S.E. 418); Moore v. Prudential Insurance Co.,176 Ga. 489 (168 S.E. 48); Waters v. Scottish AmericanMortgage Co., 180 Ga. 594 (180 S.E. 121). "The consideration of a deed may always be inquired into when the principles of justice require it." Code, § 29-101. "Although a deed purports to be for a valuable consideration, it may be shown to be in reality voluntary only." King v. Mobley, 150 Ga. 256 (2) (103 S.E. 237); Martin v. White, 115 Ga. 866 (42 S.E. 279). A grantee in a security deed who acts in good faith stands in the attitude of a bona fide purchaser, and is entitled to the same protection. Moore v. Prudential Insurance Co., supra; King v. Mobley, supra; Parker v. Barnesville Savings Bank,107 Ga. 650, 657 (34 S.E. 356).

Under the foregoing principles as applied to the evidence, the jury would have been authorized to find in favor of the plaintiff upon the theory that the deed from the husband to the wife was a mere voluntary conveyance, and that as to the property so conveyed the plaintiff was in the position of a subsequent purchaser for value without actual notice of such deed. As related to the first contention, therefore, it was error to direct the verdict against the plaintiff and in favor of the defendant wife. We are not here concerned with the act approved February 16, 1943 (Ga. L. 1943, p. 400), amending the Code, § 96-205, supra, relating to voluntary conveyances; since the transactions here under consideration all occurred before the passage of such amendment.

2. "A fraud may be committed by acts as well as words; and one who silently stands by and permits another to purchase his property without disclosing his title is guilty of such a fraud as estops him from subsequently setting up such title against the purchaser." Code, § 105-304. "Where the estoppel relates to the title to real estate, the party claiming to have been influenced by the other's acts or declarations must not only be ignorant of the true title, but also of any convenient means of acquiring such knowledge. Where both parties have equal knowledge or equal means of obtaining the truth, there shall be no estoppel." § 38-115. "In order for an equitable estoppel to arise, there must generally be some intended deception in the conduct or declarations of the party to be estopped or such gross negligence as to amount to constructive fraud, by which another has been misled to his injury." § 38-116. The fact that the deed under which the wife claimed title may have been based upon a valuable consideration and duly recorded would not necessarily prevent the purchaser in such case from relying upon the principle of estoppel, if he was in fact ignorant of the true title. Markham v. O'Connor, 52 Ga. 183 (21 Am. R. 249); Lane v. Newton,140 Ga. 415 (4 a) (78 S.E. 1082). The principle stated in the Code, § 105-304, does not depend for its operation upon the existence or absence of mere constructive notice, nor will such record necessarily constitute "convenient means of acquiring such knowledge," within the meaning of § 38-115. This latter section appears to have been codified from the decision in Wilkins v.McGehee, 86 Ga. 764 (13 S.E. 84), long after the codification of the other section, and should be construed in harmony therewith. Code of 1863, § 2908; Markham v. O'Connor,52 Ga. 183 (supra); Calhoun v. Little, 106 Ga. 336 (3) (32 S.E. 86, 43 L.R.A. 630, 71 Am. St. R. 254); Lamar v.McLaren, 107 Ga. 591 (34 S.E. 116). The decision inWilkins v. McGehee, supra, fully recognized the principle declared in the former section, and ruled nothing contrary to our present interpretation.

In Groover v. Simmons, 163 Ga. 778 (137 S.E. 237), the plaintiff who claimed the estoppel had actual knowledge of the title of the defendant, the very matter having been discussed between them; and the decision did not turn on any question as to constructive notice by record. It is true, the court quoted a statement made by a reputable treatise, in which reference was made to "constructive notice by registration." The statement, however, was not applicable to the facts then before the court for adjudication, and must be treated as obiter in so far as it constituted a part of the opinion. Moreover, the decision in that case was not concurred in by all the Justices, nor does the statement that was quoted harmonize with the earlier decision inMarkham v. O'Connor, 52 Ga. 183, and Lane v. Newton,140 Ga. 416 (supra), in each of which the entire court concurred. It follows that the statement in the Groover case as to constructive notice can not be approved as a correct principle as applied to the instant case.

In American Freehold c. Co. v. Walker, 119 Ga. 341 (2), 343 (46 S.E. 426), it was said: "Where one attests a deed there is a presumption that he knows of its contents; and unless this presumption is removed, he is estopped from asserting, against the grantee therein, an interest based on any right then outstanding in himself." See also Butt v. Maddox, 7 Ga. 504 (4); Fleming v. Ray, 86 Ga. 533 (12 S.E. 944); Sikes v.Seckinger, 164 Ga. 96 (2 a), (137 S.E. 833). Whether this statement is sound or unsound in principle, yet under the evidence in the instant case the jury would have been authorized to find that even if the deed from the husband to the wife was based upon a valuable consideration, so that its record constituted constructive notice, she nevertheless witnessed the deed to the plaintiff with knowledge of its contents; and that the plaintiff, in ignorance of the true title, relied upon such security deed as conveying a good title from the grantor, and extended credit on the faith thereof. It was therefore error also to direct a verdict against the plaintiff upon its second contention.

3. It is contended by the defendant in error, however, that the petition as amended did not state a cause of action, in that it did not allege sufficient facts to show an estoppel, and for this reason the refusal of the plaintiff's motion for a new trial should be affirmed. There is no merit in this contention. It is apparently based on the decision in Groover v. Simmons,163 Ga. 778 (supra), and the Code, § 38-115, supra, as codified from the decision in Wilkins v. McGehee, 86 Ga. 774 (supra), all of which have been discussed in the preceding division. It is insisted that under these authorities the record of the wife's deed constituted equal means of knowledge, and that the petition therefore did not show basis for estoppel.

In view of what has been said, the petition was not deficient as insisted. Accordingly, even assuming that the defendant in error may urge affirmance on that ground, the judgment must still be held erroneous for the reasons indicated in the preceding divisions. On the question of practice, see Kelly v. Strouse,116 Ga. 872 (6) (43 S.E. 280); Moody v. Moody, 193 Ga. 699 (19 S.E.2d 504); Twilley v. Twilley, 195 Ga. 291 (24 S.E.2d 41).

Judgment reversed. All the Justices concur.