Franks v. Moore

William A. and Mary C. Moore, plaintiffs below, commenced an action against the receiver of the Summit Estates Co. and the receiver of the Abstract Title-Guarantee Trust Co., on a note and a mortgage covering certain real estate to secure the same, given by said estates company to said abstract company and transferred and assigned by it to the plaintiffs. The holders of six other notes and mortgages covering said real estate were made parties defendant and filed their separate answers and cross-petitions, setting up their respective claims.

The only controversy in this case is as to the priority, if any there is, as between the owners and holders of the respective seven mortgages. The material, uncontradicted facts in this case are substantially as follows:

The Summit Estates Co., the Abstract Title-Guarantee Trust Co., and the Guarantee Title Trust Co., all occupied and did business in the same offices. The same man was president and the same man secretary of both the Summit Estates Co. and the Abstract Title-Guarantee Trust Co.

On December 27, 1929, the Summit Estates Co. was the legal owner of certain real estate in Akron, Ohio, and on that day it executed and delivered its seven first mortgage notes to said abstract company, there being three for $2800 each, three for $3000 each, and one for $5000; each note being secured by a separate mortgage of even date for a like amount, executed and delivered at the same time by said estates company to said abstract company. There was printed across the face of each note in large type the words "First Mortgage Note."

It was agreed between said mortgagor and mortgagee that each of said mortgages was to be a first mortgage and that all were to be of equal priority; and the mortgages were what the officers of said mortgagor and mortgagee designated as "split mortgages" — that is, instead of making one mortgage for the whole amount, securing the several notes, the mortgagor made a separate mortgage to secure each note, under an oral agreement between the mortgagor and mortgagee that the several notes and mortgages were to be of equal priority and the mortgages were all to be filed for record at the same time; the idea being that each purchaser of said notes would be better satisfied to have his own first mortgage to secure his note than to have one of seven notes secured by the same mortgage, and that the notes with mortgages would be more easily disposed of in the market as first mortgage investments.

Each of these seven notes and mortgages was sold as a first mortgage by the secretary of said abstract company, who was also secretary of said estates company, to one of the seven persons who were plaintiffs or defendants below, before any of the mortgages were recorded. Said seven persons continued to own the respective notes and mortgages which they purchased, and are all properly before this court.

None of the mortgages contain any reference to any other mortgage, and each contains a warranty that the premises are free of encumbrance. Each of said purchasers of said seven notes and mortgages left his mortgage with the abstract company, which agreed to have it recorded and to send it to him, and this the abstract company did. None of said purchasers relied upon the record of any of said mortgages, as none of them were filed at the time of purchase of any of them, and none of said purchasers are to be regarded, in that particular, as innocent purchasers as against the others.

These seven mortgages were all turned over to the Guarantee Title Trust Co. for record and search of the title, and were delivered by an employee of the latter company to the recorder at the same time in one package for record. The recorder, without any instruction as to time of filing, gave each of said seven mortgages a consecutive serial number, beginning with 279907, as provided by Section 2758, General Code, and also indorsed on each of them consecutive filing minutes, one minute apart, beginning at 9:15 a.m. on the mortgage having the lowest serial number, and ending with 9:21 a.m. on the one having the highest number.

Only two of the parties testified at the trial below, and each testified that he believed, from what the secretary of the abstract company told him, that he was getting a first mortgage which was the only first mortgage on the premises in question. However, the secretary of the abstract company, who sold these mortgages, testified that he thought he told all of said purchasers that the mortgages were "split first mortgages."

The only issue before the court below, and before this court, is whether or not the mortgages take priority in the order in which they were numbered and marked filed, or are of equal priority and should prorate.

It is contended by plaintiff in error, who has the mortgage bearing the lowest serial number, and which was marked filed at the earliest minute, that the mortgages take priority according to the serial numbers, beginning with the lowest, and according to the time they were marked filed, beginning with the earliest minute. Those having the mortgages with the higher serial numbers and later filing times contend that the mortgages should be of equal priority and that they should prorate.

Plaintiff in error, Emanuel Franks, bases his contention entirely upon the provisions of Sections 8542 and 2758, General Code. Section 8542, General Code, reads:

"All mortgages, executed agreeably to the provisions of this chapter, shall be recorded in the office of the recorder of the county in which the mortgaged premises are situated, and takeeffect from the time they are delivered to the recorder of theproper county for record. If two or more mortgages are presented for record on the same day, they shall take effect from the order of presentation for record. The first presented must be the first recorded, and the first recorded shall have preference." (Italics ours.)

The provisions of Section 2758, General Code, material in this case, read as follows:

"Upon the presentation of a deed or other instrument of writing for record, the county recorder shall indorse thereon the date and the precise time of day of its presentation, and a file number. Such file numbering shall be consecutive and in the order in which the instrument of writing is received for record * * *. Until recorded each instrument shall be kept on file in the same numerical order for easy reference * * *."

The determination of the claims of the several parties depends upon the answer to two questions: 1. Is the priority of the liens, of instruments delivered to the recorder at the same time for record, determined by the serial numbers placed on them by the recorder, as required by said Section 2758, General Code? 2. Is the certificate of the recorder, placed on the back of the mortgage, stating the time it was delivered to him for record, conclusive as to time, or may it be rebutted by parol evidence?

It will be noted that said Section 8542, which is in Chapter 1 of Title VIII of Part Second of the General Code, which pertains to "conveyances and incumbrances" of real property, provides for the recording of deeds and mortgages, specifies the effect thereof, and fixes the priority of the instruments filed, while said Section 2758, which is in Chapter 5 of Division II of Title X of Part First, which pertains to the office of "county recorder", provides for the election of such an officer, prescribes his duties and what he shall do with deeds, mortgages and other instruments of writing, and specifies the indorsements he shall put on them when delivered to him in order to carry out the provisions of said Chapter 5.

While these two chapters seem somewhat related, it is apparent that the one has to do merely with the duties of the recorder in carrying out the provisions of the other, which prescribes the effect and fixes the priority of the lien or rights of parties as shown by the instrument delivered to the recording officer. Moreover, from the language used in said Section 2758 it is apparent that the consecutive numbering of instruments filed, as required by this section, is primarily for the convenience of any one seeking information concerning a particular instrument until it has been recorded, and is not intended to fix the priority or time of taking effect of such instrument.

The state of Illinois has recording statutes very similar to the above two mentioned sections, Sections 2758 and 8542, and the Supreme Court of that state, in the case of Schaeppi v. Glade,195 Ill. 62, 62 N.E. 874, had these Illinois statutes under consideration. The third paragraph of the syllabus of that case reads:

"3. If the recorder's certificates upon two or more instruments show that they were filed simultaneously, neither instrument can be given the advantage of prior recording upon the ground that in giving them consecutive numbers one received a lower number than the other."

The judge who wrote the opinion in that case said concerning those statutes:

"The certificate on the instrument is expressly made evidence of the facts stated in it, and in this case the numbers on the instruments are not inconsistent with the certificate that they were filed at the same time. The fact that they did not receive the same number would not tend to show that they were not filed at the same time, since they could not receive the same number. If instruments are received by mail in the same envelope, or delivered in the same parcel, or handed to the recorder together, the numbers must necessarily be different. It is proper, and sometimes desirable, to file different instruments at the same time, and it could not be the intent of the statute that they could not be filed simultaneously and that there must be a priority to be determined by the numbers. It cannot be that a recorder can have any power to affect the rights of parties by numbering the instruments, or that priorities should be fixed by the mere chance of numbering instruments received at the same instant of time."

We are in full accord with these views and the holding in that case, and therefore hold that the priority of mortgages is not determined by the file numbers placed upon them by the recorder, as required by Section 2758, General Code.

Second. We find that the great weight of authority in this and other states is to the effect that the certificate of the recording officer showing the exact time of filing and a consecutive number in the order in which the instrument was filed, placed upon the instrument as required by statute, is not conclusive as to the accuracy of such representations, but that such certificate is to be considered only as evidence which may be rebutted or contradicted; and in some states the statute itself provides that the certificate shall be considered evidence, or only prima facie evidence.

The following authorities tend to support this position:

H.B. Clafflin Co. v. Evans, 55 Ohio St. 183, 45 N.E. 3, 60 Am. St. Rep., 686, 36 W.L.B., 271; King v. Penn, 43 Ohio St. 57,1 N.E. 84; Kalb, Assignee, v. Wise, 5 O.D. (N.P.), 533, 5 N.P., 5; Bardshar, Admx., v. Holtzman, 4 C.D., 174, 18 C.C., 668; Licker v. Green, 32 C.D., 4, 17 C.C. (N.S.), 49; Chatten v. Knoxville Trust Co., 154 Tenn. 345,289 S.W. 536, 50 A.L.R., 537; Schaeppi v. Glade, 195 Ill. 62,62 N.E. 874; 41 Corpus Juris, 513, Section 450; 1 Jones on Mortgages (8th ed.), 882, Section 626.

Although the case of H.B. Clafflin Co. v. Evans, supra, pertains to the filing of a deed of assignment with the probate judge, the statute fixing the time at which a deed of assignment took effect was at that time, and still is (Section 11093, General Code), quite similar to the statute fixing the time at which a mortgage takes effect; hence, the principle involved in that case is substantially the same as in the instant case. At the time the Clafflin Co. Case was decided the statute providing when a deed of assignment should take effect read in part:

"Any such assignment shall take effect only from the time of its delivery to the probate judge, and the exact time of such delivery shall be endorsed thereon by the probate judge, who shall immediately note the filing on the journal of the court." (Sec. 6335, R.S.)

The third paragraph of the syllabus of that case is as follows:

"3. While the presumption is that the officer performed his duty and the endorsement speaks the truth, that presumption is not conclusive, but the true time of the delivery of the assignment may be shown by the parties whose interests are affected."

The judge writing the opinion said concerning this provision that "The endorsement, however, is but prima facie evidence of the time of the filing, and the true date of the delivery of the instrument may be shown."

We are therefore of the opinion, both upon principle and authority, that, while the time of filing indorsed by the recorder upon a mortgage is presumptive and perhaps strong evidence of its truth and the time of its delivery to him, it may be contradicted and the true time of delivery shown. We are also of the opinion that, to successfully show that the recorder's certificate is untrue, such untruthfulness and some other time of delivery to the recorder must be shown by clear and convincing evidence.

In the instant case it is shown, not only by clear and convincing evidence but beyond all reasonable doubt, that said seven mortgages were handed to the recorder in one package; that the mortgagor and mortgagee had agreed that they were to be of equal priority; that all of the present owners of said seven mortgages purchased them direct from the mortgagee before any of them were filed for record; that all of said purchasers are parties to this proceeding in error and were parties below; and that there are no innocent third persons involved who relied upon said filing record.

Under this state of facts, we are unanimously of the opinion that these seven mortgages are of equal priority and should prorate, and that the judgment should be affirmed.

Judgment affirmed.

POLLOCK and STEVENS, JJ., concur.

POLLOCK, J., of the Seventh Appellate District, sitting by designation in the Ninth Appellate District.