Dawson v. McCarty

The opinion of the court was delivered by

Reavis, J.

Appellant brought suit to foreclose a mortgage on certain lands in Whatcom county. The mortgage was executed by the defendants Morris McCarty and wife to the Columbia Rational Bank of Mew Whatcom, of which the appellant is receiver. Respondent (defendant) School District Mo. 1 of Whatcom county, has a judgment against defendants McCarty and wife, which is a lien upon the mortgaged premises. On the 16th of September, 1893, the bank was in the custody of a receiver appointed by the comptroller of the currency. At that time the defendant Morris McCarty was indebted to the bank in the sum of $25,490.08, exclusive of interest. The indebtedness was in the form of promissory notes and overdrafts made prior to June 23, 1893. The greater portion of the indebtedness was due September 18, 1893. On the 16th of September, 1893, the defendants McCarty and wife, for the purpose of securing the payment on October 1, 1894, of all said indebtedness, executed their mortgage upon the real estate in controversy. The mortgage specifically extended the time of payment of all indebtedness to October 1, 1894. On the day of its execution the mortgage was delivered to the attorney of the receiver, to be held by him in escrow until it could be submitted to, and the terms approved by, the comptroller of the currency, and thereupon be delivered to the receiver of the bank. On the 27th of September, 1893, the comptroller of the currency duly authorized and approved the acceptance of the mortgage by the receiver, and the mortgage was thereafter delivered by the attorney to the receiver about the 5th of January, 1894. The mortgage was not filed for record nntil March 8, 1894. On the 2d of August, 1892, the defendant school district instituted an action in the superior court against defendant Morris McCarty, and on the 6th day of February, 1894, recovered judgment against him for the sum of $1,831.39, exclusive of interest. At the time of the entry of the judgment the school district had no notice of the existence of appellant’s mortgage. By a mistake a portion of the property covered by the mortgage was incorrectly described as the west half of a certain quarter section, when it should have been described as the east half of the same quarter section. The superior court corrected this error and reformed the mortgage. That court also adjudged the mortgage inferior to the judgment lien of the school district-. To this portion of the decree the plaintiff (appellant) excepted.

1. Respondent moves to dismiss the appeal on the ground that no proper notice of appeal was given or served and that no valid bond has been given or filed in the cause, because no revenue stamp is attached to the certificate of the qualification of the sureties to the bond. The notice of appeal is clear, and conveyed fully to the adverse parties the fact of the appeal. And the objection to the bond is not well taken. The certificate to the qualification of the sureties is part of the proper execution of the bond on appeal. The federal revenue law exempts bonds used in legal proceedings. Section 25, Schedule A, War Revenue Law of 1898. And again, it is elementary constitutional law that the federal government cannot impose any burden upon procedure in state courts. The Collector v. Day, 11 Wall. 113; Cooley, Taxation, pp. 82-86, and authorities cited.

2. The controversy upon the merits is, which is the prior lien, the mortgage or judgment? At common law the uniform rule seems to have been that a prior unrecorded deed or mortgage conveyed good title as against a subsequent judgment. The rule is thus stated in 2 Freeman on Judgments, § 366:

“ Wherever, under the law, a deed or mortgage is valid without being recorded, a subsequently attaching judgment lien against the grantor or mortgagor will not be of any benefit to the lien-holder as against the deed or mortgage. Under the principle already referred to, that the lien of a judgment attaches to the debtor’s real rather than •to his apparent interest, such lien is subordinate to any unrecorded conveyance or encumbrance executed prior to the rendition of the judgment, unless the statutes of the state give to judgment creditors the same protection against unrecorded instruments which they give to bona fide purchasers without notice.”

Mr. Pomeroy, in his work on Equity Jurisprudence, § 721, under the caption, “Prior Unrecorded Mortgage Superior to Subsequent Docketed Judgment,” observes:

“ The most important question under this head which has come before the American courts relates to the respective claims arising from a prior specific and a subsequent general lien. The doctrine is certainly established as part of the equity jurisprudence, and rests upon the solid basis of principle, that prior equitable interests in rem, including equitable liens upon specific parcels of land, have priority of right over the general statutory lien of subsequent docketed judgments, although the latter is legal in its nature. Judgment creditors are not ‘purchasers’ within the meaning of the recording acts, and unless expressly put upon the same footing, they do not obtain the benefit which a subsequent purchaser does by a prior record. The equitable doctrine is, that a judgment and the legal lien of its docket binds only the actual interest of the judgment debtor, and is subject to all existing equities which are valid as against such debtor.”

Mr. Pomeroy also further says, in § 722, that:

“A very different rule prevails in many states, in which it is settled that the lien of a subsequent docketed judgment prevails over that of a prior unrecorded mortgage or other prior equitable interest or lien not recorded, of which the judgment creditor had no notice at the time of recovering' and docketing his judgment. This result is reached, in some of the states, from express provisions of the statutes; in others, from what was deemed to be the necessary interpretation of the statutory language; and in a few, as it would seem, from an intentional rejection of the equitable doctrine which lies at the basis of the whole subject.”

Our statute is as follows:

“All deeds, mortgages, and assignments of mortgages, shall be recorded in the office of the county auditor of the county where the land is situated, and shall be valid as against bona fide purchasers from the date of their filing for record in said office; and when so filed shall be notice to all the world.” Bal. Code, § 4535.

From an examination of the authorities submitted by counsel for respondent it would seem that, in the states of Illinois, Texas, West Virgina, Alabama, South Carolina and Georgia, the recording statute extends the protection to subsequent creditors. The decided weight of authority seems to be that the term “bona fide purchasers” in the recording act does not include a judgment creditor. 20 Am. & Eng. Enc. Law, 577; Seevers v. Delashmutt, 11 Iowa, 174 (77 Am. Dec. 139) ; Vaughn v. Schmalsle, 10 Mont. 186 (25 Pac. 102) ; Plant v. Smythe, 45 Cal. 161; Shirk v. Thomas, 121 Ind. 147 (22 N. E. 976, 16 Am. St. Rep. 381) ; Webb, Record of Title, § 192; Davis v. Owenby, 14 Mo. 170 (55 Am. Dec. 105) ; Holden v. Garrett, 23 Kan. 98.

It appears that it is immaterial whether the mortgagee is strictly a bona fide purchaser, within the meaning of the statute. The question is whether the judgment creditor is a bona fide purchaser, and thus within the protection of the statute. Greenleaf v. Edes, 2 Minn. 265; Martin v. Nixon, 92 Mo. 26 (4 S. W. 503) ; Rodgers’ Lessee v. Gibson, 4 Yeates, 111.

The lien of the judgment, as already observed, binds only the interest that the judgment debtor actually has in the real estate. Laws 1893, p. 65, § 1; Voorhies v. Hennessy, 7 Wash. 243 (34 Pac. 931) ; Book v. Willey, 8 Wash. 267 (35 Pac. 1098).

The case of Goetzinger v. Rosenfeld, 16 Wash. 393 (47 Pac. 882), has been relied upon by counsel for respondent to sustain the priority of its judgment lien. But a careful consideration of that case shows that the precise question involved here was not raised or discussed there. In that case the judgment was rendered and the mortgage executed on the same day, and both were entered of record on the same day; and the court declined to inquire by oral testimony into the fraction of a day, to determine whether the judgment or the mortgage was first filed of record, and merely left them upon the record as it appeared on the face thereof.

The judgment must be reversed, with direction to adjudge the lien of the mortgage prior to that of the judgment.

Gordon, O. J., and Anders and Bullerton, JL, concur.