McSween v. Windham

July 17, 1916. The opinion of the Court was delivered by This is an action to foreclose two mortgages. The facts are fully stated in the report of the master, which was confirmed by his Honor, the Circuit Judge, and will be reported. The master in his report states that the issues between the parties are as follows: What estate was conveyed to R.J. Windham by the deed of the said Mary Windham? Are the mortgage debts barred by the statute of limitations? Are the mortgage debts paid? The master held that the deed of Mary Windham to R.J. Windham conveyed to him a fee simple estate. There was no appeal from this ruling, and that question is eliminated from further consideration.

He also reported that neither the note nor the mortgage, executed on the 5th of January, 1886, nor the note bearing date the 7th of November, 1884, was barred by the statute of limitations. But he also held that the lien of the mortgage, dated the 7th of November, 1884, was discharged by reason of the plaintiff's failure to comply with the requirements of section 3535 of the Code of Laws 1912. His rulings in these respects were properly sustained by his Honor, the Circuit Judge, for the reasons stated in the report.

This brings us to the consideration of the question whether the mortgage debts were paid.

On the 11th of January, 1887, R.J. Windham executed the following instrument of writing:

"The State of South Carolina, Darlington County. Whereas, I am indebted to John McSween by mortgage in the sum of $1.250, and am desirous of making some arrangement by which to pay him: Now, in consideration of the premises, I hereby deliver to the said McSween possession of my tract of land, situate in Darlington county, upon which I now reside, and upon which he holds a mortgage, containing 116 acres, more or less, to hold for his own use and behoof until the rents and profits thereof, after deducting of all expenses, shall have paid in full the said mortgage debt. Witness my hand and seal this 11th day of January, 1887. R.J. Windham (L.S.). In the presence of: A.B. McKenzie, W.C. Garner."

The sum mentioned in the note and mortgage, executed on the 7th of November, 1884, was $750, and the amount of the note and mortgage, dated the 5th of January, 1886, was $377.61. The intention of the instrument of writing, dated the 11th of January, 1887, was to deliver possession of the mortgaged property, and to subject the rents and profits to the payment in full of the indebtedness secured by both mortgages. This is shown by the fact that the mortgagor stated that he was indebted to the mortgagee in the sum of $1,250 by mortgage, which sum included the amounts due on both mortgages.

When property is covered by a lien, and the property itself, or the proceeds arising therefrom, are received by the party holding the lien, the law makes the application. Hunter v. Wardlaw, 6 S.C. 74; Thatcher v. Massey,20 S.C. 542; Wilden v. Pearce, 27 S.C. 44,2 S.E. 709; Ellis v. Mason, 32 S.C. 277, 10 S.E. 1069;Montague v. Stelts, 37 S.C. 200, 15 S.E. 968, 34 Am. St. Rep. 736; Barfield v. Coker, 73 S.C. 181, 53 S.E. 170;Summer v. Kelly, 38 S.C. 507, 17 S.E. 364. In the last mentioned case, the Court said:

"This Court has never failed to hold that the proceeds of mortgaged property, whether such sale is made by mortgagor or mortgagee, when such proceeds reach the hands of the mortgagee, must be applied by him to the satisfaction in whole or in part, according to the amount of the payment, of the debt or liability secured by the mortgage."

When the mortgage is given to secure the payment of more than one debt, the proceeds arising therefrom must be applied pro rata. This is the general rule when the application is made by the Court. Jones v. Kilgore, 19 S.C. Eq. (2 Rich. Eq.) 63; Bachman v. Sulzbacher,5 S.C. 58; State etc. v. R.R., 8 S.C. 129. For a stronger reason, this rule should prevail when the application is made by law, as there must necessarily be a fixed and defined rule, and this is the most equitable.

The master erred in not ruling that the payments were applied by law to the two debts, and in proportion to the amounts due under the respective mortgages.

It is the judgment of this Court that the judgment of the Circuit Court be modified, and that the case be remanded to that Court for such further proceedings as may be necessary to carry into effect the conclusions herein announced.

Modified.

MESSRS. JUSTICES HYDRICK, WATTS and GAGE, concur in the opinion of the Court.