¶1
On Petition oB Peopee’s Bank bor Rehearing
Per Curiam.
¶2
Upon consideration of the same it is ordered that the opinion heretofore filed be modified by adding therto the following:
¶3 *284
Exception 2 of the defendant Bank is sustained to the following extent: The judgment in favor of Mrs. Barr for such deficiency of her mortgage debt, as may result from the foreclosure sale, for which she is authorized to enter judgment against the People’s Bank, is limited to the amount which is directed to be paid to the plaintiff, Wilson, upon the mortgage foreclosed in this action, together with all costs that may be awarded to him. Stay revoked.
Download
Copy
Embed on your site
iframe Markdown Preview card Button Hover to preview · click to copy the code
Case posture Posture Before MEMMINGER, J., Bamberg, January, 1923. Affirmed.Action by George W. Wilson against Martha Brabham, Alma B. Barr, and the People's Bank. Judgment for plaintiff, and defendants appeal.
The Master's report is as follows:
This is an action started by the complaint of the plaintiff for the foreclosure of a real estate mortgage executed by the defendant, Martha Brabham, to the defendant, People's Bank, dated January 12, 1918, payable October 15, 1918, given to secure her bond of even date, and assigned October 13, 1918, by the said People's Bank to this plaintiff. In the beginning the defendant, People's Bank, was not made a party. The defendant, Mrs. Alma B. Barr, was made a party on account of two mortgages over the same piece of property described in the plaintiff's mortgages, said two mortgages hoving been given to secure bonds of the same respective dates, and executed by the said defendant, Martha Brabham, to the said defendant, Mrs. Alma B. Barr, the one bearing date December 23, 1919, and the other March 8, 1920. Later for good cause shown as will be recited hereafter this Special Master issued an order making the said defendant, People's Bank, a party; due process was then obtained upon said Bank, which has come in and pleaded its cause, first by a demurrer, which was overruled by this Court, later by its answer and testimony
offered in its behalf. The defendant, Martha Brabham, is in default.
From the evidence and testimony I find the following facts: The plaintiff's mortgage was executed on the date set out above, and properly assigned to this plaintiff for full value on the date set out above. The assignment is executed on the mortgage itself and has never been recorded. More than a year later, or in December, 1919, the defendant, Martha Brabham, applied to the defendant, Mrs. Alma B. Barr, for a loan on the place, and represented that the said mortgage had been paid. Mrs. Barr's attorney requested the original paper from Martha Brabham, who claimed that it was at home, but could not be found after a search by her at the attorney's instigation. A complete satisfaction of the said mortgage was then prepared on a separate sheet of paper, and executed by the People's Bank as the original mortgagee, dated December 5, 1919, and was recorded on the face of the record of the mortgage before Mrs. Barr took either of her mortgages. The People's Bank was, therefore, made a party, because both the plaintiff and the defendant, Mrs. Barr, maintained that it had committed a wrong injurious to their rights in satisfying a mortgage which it neither owned nor held at the time, but had previously assigned, and was, accordingly, liable to the junior mortgagee, for any deficiency between the amount the property might bring at sale and the amount due the said junior mortgagee, after paying the taxes, costs, and amount due senior mortgagee. The bank offered a defense of no liability. The evidence is clear and uncontradicted that the plaintiff's mortgage is still outstanding, and that the president of the People's Bank made a mistake when he executed the satisfaction in question. Mrs. Barr's contention, however, is that her mortgages should be held first and second, and plaintiff's third, because she relied upon the recorded satisfaction, and plaintiff put it in the power of the bank or made it possible for the bank to execute
the satisfaction by not recording his transfer. The only questions at issue then are: Which mortgage is a prior lien on the property? and should the People's Bank be held liable to the junior mortgagee for any deficiency in case the proceeds from the sale of the property are insufficient to pay all mortgages in full?
After comprehensive arguments by counsel for all parties concerned, careful consideration of the facts and the case as a whole, including a thorough review in my own mind of the authorities cited, I am unable to sustain the contention of Mrs. Barr, and am convinced that all decisions of our Supreme Court bearing at all on this question tend under such circumstances to place her mortgages second and third to that of the plaintiff herein, and that the greater weight of authority is to the effect that Wilson's mortgage is entitled to priority as a first lien over the property in question, and Mrs. Barr's mortgages rank second and third in accordance with their respective dates of December 23, 1919, and March 8, 1920, and I so hold.
It is an elementary principle which has been repeatedly determined by our Courts, and is agreed upon in this case that an assignment of a mortgage is not required by law to be recorded. Mrs. Barr, however, contends upon the equally well-settled doctrine that, where one of two innocent parties must suffer by wrong of another, equity places that burden upon the one who makes it possible for the wrong to be committed. I cannot agree, however, that Wilson's failure to record his assignment was sufficient negligence in itself to preclude his rights. The mortgagor testified that her husband transacted her business, and Wilson took up his mortgage for him; certainly it was not incumbent upon Wilson to further notify her of his ownership of the papers. And I am not prepared to say that Wilson was bound to assume that the very party who assigned the mortgage to him might later execute its so-called satisfaction. In view of our laws and equity principles, it
appears to be dangerous business to accept a mortgage satisfaction without the production of the mortgage itself. This is exactly what Mrs. Barr did. And, in my opinion, she relied too much upon the word of the mortgagor. There is no testimony that anybody ever approached the People's Bank for an investigation of the whereabouts of the first mortgage. Mrs. Barr could have done this, but she simply allowed Martha Brabham herself to present a satisfaction on a separate sheet of paper, which the bank obligingly executed for her without question, seeing from its books that it was not further interested. Of course, this was clearly an innocent mistake on the bank's part with no intentional wrong to any one, and was, in this instance, signed in good faith beyond a shadow of a doubt. But I can conceive of instances where gross fraud could be perpetrated by an unscrupulous mortgagor and banker or other original mortgagee, under similar circumstances, if it were held in this case that Wilson's mortgage be now relegated to the background. Mrs. Barr could have gone further; she could have advertised for the purpose of ascertaining the correct facts as to this outstanding mortgage, and, along with the other usual expenses, the mortgagor would have been obliged to stand for this. In the absence of these additional precautions she could have declined the loan, but, unfortunately, she failed to follow either course, and acted simply upon the statement of the negress, Martha Brabham, mortgagor, that the debt was paid, and the paper at home or lost, and upon the alleged satisfaction of the bank which she allowed Martha Brabham to procure without any investigation by Mrs. Barr or her attorney. No blame whatever can be attached to Mrs. Barr's attorney, who advised her in the transaction, because he did just what other reputable lawyers are doing daily, and this unfortunate situation would hardly arise once in a thousand cases.
But, nevertheless, it remains true that, in my opinion, in view of our statutes relating to the satisfaction of mortgages
of record and the decisions of the Courts of last resort, Mrs. Barr is not entitled to a priority, and, to my mind, the case of Williams Company against Paysinger , reported in 15 S.C. page 171, is conclusive of the question, and the astute counsel for Mrs. Barr failed even to offer any distinction, and I think could not offer any, between that case and the one at bar. In the case of Cook against the Bank , 110 S.C. 99 , the Court, it seems to me, followed the precedent laid down in Williams Co. v. Paysinger , fully, but counsel attempts to make a distinction in the Cook Case from the present case by arguing that because Mrs. Barr called upon Martha Brabham for the original mortgage, and required her to search for same, that was all that could be expected of her in that respect. I do not adher to that contention, and I fail to understand how she could expect anything else from Martha Brabham, if the said Martha Brabham was practicing a fraud upon her, and I believe, as a matter of fact, that Martha Brabham knew all along that the Wilson mortgage was outstanding against her.
Now, with this much settled upon, it remains a certainty that, if the property when sold does not bring enough to pay all three mortgages in full, then the defendant, People's Bank, has unquestionably caused Mrs. Barr a loss, because the testimony shows that had Mrs. Barr known of the outstanding mortgage her loans would not have been made. There is also no question that the said bank was negligent and committed a gross wrong, and that wrong resulted in the injury to Mrs. Barr. To my mind, it matters not whether the bank had the right legally and equitably to satisfy a paper then beyond its control or not. Its wrongful acts were sufficient to justify Mrs. Barr in the belief that it had the right to satisfy the mortgage in question; she quite naturally acted upon the same, and to her detriment, if the property does not bring enough to pay her, and she is entitled to the relief against the bank for
which she asks. And my findings and holdings are accordingly.
I, therefore, recommend that the plaintiff have judgment against the defendant, Martha Brabham, for the sum of $207.50, and costs; that the defendant, Mrs. Alma B. Barr, have judgment against the defendant, Martha Brabham, for the total amount above found due on her two mortgages, the sum of $583.57, and costs; that if the proceeds of the sale of the said property be insufficient after paying all taxes on same, the costs and expenses of this action and the plaintiff's judgment, to pay Mrs. Barr's judgment in full, then the said Mrs. Alma B. Barr, defendant, should have leave to enter up judgment against the said People's Bank, defendant, for the balance so due to her. I further recommend that said mortgages be foreclosed, and the property covered in same be sold by the Acting Master for Bamberg County, the proceeds of the sale to be applied to the payment of any taxes which may be due on said property, to the costs and expenses of this action, and the payment first of the mortgage debt and judgment of the plaintiff, George W. Wilson, including the attorney's fees as aforesaid, and next to the payment and satisfaction of said judgment and two mortgage debts due to the said defendant, Mrs. Alma B. Barr, including the attorney's fees as aforesaid; and the balance, if any there should be, to be paid to the defendant, Martha Brabham, as her interest may appear.
The decree of Circuit Judge R.W. Memminger follows:
I heard this case at Bamberg upon exceptions to Acting Master Brabham's report. I have had the papers with me for some time, my attention, in the meanwhile, being called to other pressing matters.
I have now had an opportunity of reading all of the testimony and other papers and going carefully over the Master's report. His findings of fact seem to me well founded in the testimony and his conclusions of law inevitable.
The gross negligence of the bank in giving a satisfaction of a mortgage which it was neither the owner nor holder of, but had sold to another person, was the proximate cause of the loss, which thereby must come to the one or the other of two innocent persons, and the true test as to which must be the loser is as to which was the most negligent. The plaintiff purchaser was not required by law to record the assignment to him. The borrower, afterwards finding an open mortgage to the bank, was not complying with the law in taking a satisfaction on a separate sheet of paper and without proof that the bank was the proper one from whom to get a satisfaction; because the law requires that the satisfaction must be from the holder and owner of the instrument.
The Acting Master has gone more specifically into these matters. His report will be considered as incorporated herein. The report is, therefore, confirmed; and it is so ordered.
Exceptions of People's Bank are as follows:
1. That his Honor, the presiding Judge, erred in overruling the demurrer of the People's Bank to the answer of the defendant, Mrs. Alma B. Barr. It being respectfully submitted that the grounds of the demurrer were well taken, and that the demurrer should have been sustained and the action dismissed as to the People's Bank.
2. That his Honor, the presiding Judge, erred, it is respectfully submitted, in affirming the Master's report, wherein the Master held that, if the proceeds derived from the sale of the mortgaged property be insufficient, after paying all taxes on the same, the costs and expenses of the action and the plaintiff's judgment, to pay the judgment of the defendant, Mrs. Alma B. Barr, then the said Mrs. Alma B. Barr should have judgment against the People's Bank for the balance so due her. It being respectfully submitted that under the facts in the case the People's Bank is not liable for any amount, and in no event could the
People's Bank be held for a greater amount than the amount owing on the plaintiff's mortgage. Source: CourtListener
