Court Opinion

ID: 6675888
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:15:51.59651+00
Date Added: 2024-06-11T16:00:42.165741
License: Public Domain

Mr. Justice McIver,
dissenting. I am unable to concur in the construction given to the-act of 1876, and, on the contrary, agree with the view taken by the master and adopted by the Circuit Judge. The question is so fully and satisfactorily discussed by master Hanckel in his able and elaborate report that it would be a work of supererogation to go at large into the argument. I propose simply to indicate some of the points which, to my mind, are conclusive.
The language of the statute to be construed, so far as it relates to the particular question with which we are concerned, is as follows : “All mortgages, or instruments in writing in the nature of a mortgage, 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 *574forty days from the time of such delivery or execution. * * * 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.” The question to be determined is, whether the Doar mortgage, which was not recorded within forty days from its execution, takes precedence of the general creditors whose claims were incurred between the time of the execution of that mortgage and the time when it was recorded.
The turning point of the inquiry, as it seems to me, is whether the words “subsequent creditors and purchasers” in the proviso to the act mean persons whose claims arose subsequent to the date of the mortgage, whose validity is in question, or subsequent to the record of such mortgage. I think they refer to the latter, and and not to the former period. There can be no doubt, and I understand it to be conceded, that if the body of the act stood alone, without the proviso, the result would be that a mortgage not recorded until after the time allowed for that purpose would have no validity as against the claims of creditors or purchasers subsequent to the date of such mortgagefor the language of the act of 1876, that a mortgage shall be valid so as to affect the rights of subsequent creditors and purchasers without notice, only when recorded within forty days, is in effect the same as that used in the act of 1843, which substantially declared that no mortgage should be valid so as to affect the rights of subsequent creditors and purchasers without notice, unless it shall be recorded within sixty days. To say that a mortgage shall be valid only when recorded, is tantamount to saying that no mortgage shall be valid unless it is recorded, &c.
The language of the act of 1843 has been construed by the courts of this State in several cases to mean that a mortgage not recorded within time has no validity as against subsequent creditors or purchasers without notice, and this, therefore, would be the proper construction of the act of 1876, without the proviso. McKnight v. Gordon, 13 Rich. Eq., 222; Williams v. Beard, 1 S. C., 309; and Piester v. Piester, 22 S. C., 139. The *575inquiry, then, is as to the effect of the proviso. Was its purpose anything more than to relieve a mortgagee who had neglected to record his mortgage within time from the extreme penalty, which under the body of the act he would incur, of having his mortgage declared of no validity as against the claims, not only of creditors or purchasers subsequent to the execution of the mortgage, but also of those subsequent to the recording of such mortgage, by declaring that as to this latter class his mortgage should have validity from the time it was actually recorded, inasmuch as from that time forward the public would have notice of his lien, and therefore any one who dealt with the mortgagor subsequent to that time must be affected by such lien ?
The object of the proviso was simply to qualify the very general terms used in the body of the act and to confine the protection afforded by them to the class of creditors and purchasers who needed and deserved protection, viz., those who had dealt •with the mortgagor without knowing, or having the means of knowing, of the mortgage, and to deprive another class of creditors and purchasers of that protection to which they would not be entitled, though under the general terms of the act, unqualified by the proviso, they could claim it, viz., those who dealt with the mortgagor after they had the means of knowing of the existence of the lien by the recording of the mortgage, and who chose subsequently to that time to deal' with the mortgagor.
This, it seems to me, is the proper construction of the act. The other view would lead to the very singular result of giving superior efficacy to constructive over actual notice, and this certainly was not the intention of the act. For if the Doar mortgage had never been recorded, and the simple contract creditors had received actual notice of it after their claims were contracted, this would not give the mortgage any validity as against such claims, and yet it is contended that mere constructive notice, arising from the record of the mortgage after the claims of the simple contract creditors were contracted, and after the time allowed by law for recording the mortgage, will give the mortgage a validity against these claims, which actual notice would not do.
Again, the construction contended for involves the necessity *576of interpolating words into the statute, for which I find no warrant ; for, practically, by that construction the word “creditors” must be read “judgment or other lien creditors.” The act, in express terms, declares that creditors, not judgment or lien creditors, subsequent to the execution of a mortgage, shall not be affected by it, unless it is recorded within forty days; and yet it is contended, practically, that a creditor who has acquired no lien prior to the recording of a mortgage, will be affected by such a mortgage, even though it be not recorded until after the lapse of forty days. This, it seems to me, is extending protection to that class of creditors who do not need it — lien creditors — and withholding it from that class — unsecured creditors — who do need it, and defeats the main object of the registry law, which is notice — not notice to the creditor after, but before, his debt is contracted.
Again, it will be observed that the word “subsequent” qualifies the word “purchasers” as well as the word “creditors,” and therefore we may legitimately test the construction by reading the act as if purchasers were the only class intended to be protected. So reading the act it seems clear that the words “subsequent creditors and purchasers” in the proviso mean persons whose claims arose subsequent to the recording, and not the date, of the mortgage. For it must be, and is, conceded that a mortgage recorded out of time cannot affect the rights of a purchaser who has bought the property subsequent to the date, but prior to the recording, of such mortgage, and as the same protection is extended in the same language to a creditor, it is difficult to understand why a creditor, whose debt was contracted subsequent to the date, but prior to the recording, of the mortgage, should not receive the same protection against the mortgage, as it is admitted a purchaser could claim.
It is a mistake to suppose that if the word “subsequent” in the proviso has relation to the time of recording of the mortgage, and not to its date, that then there would have been no necessity for the provision contained in the proviso. Such a view proceeds upon the erroneous assumption that the recording of a mortgage after the time limited for that purpose, would operate as constructive notice, and therefore that all persons who became cred*577itors or purchasers after that time, having constructive notice of the mortgage, would be bound by it. But prior to the act of 1876 the recording of a mortgage out of time did not operate even as constructive notice, and hence, according to my view, the principal object of the proviso was to enable it so to operate; and therefore the legislature very properly declared that such a mortgage should be valid as against subsequent creditors and purchasers without notice “only from the date of such record,” meaning that from that time it should operate as notice to all who might subsequently thereto become creditors of, or purchasers from, the mortgagor. Otherwise the anomaly would be presented of having a creditor or purchaser affected by notice after the debt was contracted or the purchase made, when it would be difficult to understand what good the notice would do.
It seems to me, therefore, that the judgment of the Circuit. Court should be affirmed.
Judgment modified.
In this ease a. petition for rehearing was filed by the unsecured creditors upon the ground that their counsel were absent at the-hearing, because they had not expected the case to be reached as. soon as it was; that they then applied for the appointment of a time when they might be heard orally, which the court declined, but gave them leave to file printed arguments.
December 2, 1885. The following order was passed—
Per Curiam.
It is not claimed that any material fact or principle was overlooked by this court in rendering its recent judgment in this case, the only ground stated in the petition for rehearing being that the petitioners had no opportunity for oral argument when the appeal was heard. It will be observed from the correspondence submitted with the petition that the court did not decline to hear oral argument in the case, but declined to fix a time for such hearing out of order, of which the petitioner had notice. The failure to hear oral argument, therefore, was not the fault of the court. Hence there is no ground for a rehearing. The petition is dismissed.