Baum v. Trantham

¶1The opinion of the Court was delivered by

¶2*3011*300This cause comes before us on the appeal of the plaintiffs in the above entitled action, which was heard in the Court of Common Pleas for Kershaw County, in this State, by his Honor, Judge Aldrich, at the summer, 1894, term of said Court, and who filed his decree some time in July, 1894. The facts are few and uncontradicted, and may be summarized as follows: The defendant, W. D. Trantham, became indebted to the firm of Patterson, Renshaw & Co., who sued their claim to judgment on the 20th day of December, 1891; but prior to this, said Trantham, being indebted to B. F. Creighton & Son, in February, 1888, was sued to judgment by said firm; and also the said Trantham, being indebted to Herman Baum, on the 28th day of April, 1888, executed'to him a mortgage on a certain tract of land. There was no' execution lodged with the *301sheriff in the cuse of Creighton & Son v. W. D. Trantham, but Patterson, Renshaw & Co. issued execution on their judgment against Trantham, on the 12th day of December, 1892, and on that day the sheriff thereunder levied upon the tract of land that Trantham had mortgaged to Herman Baum, who had assigned his said mortgage to Baum Bros. This Baum mortgage had been recorded in the office of the register of mesne conveyánce of Kershaw County, within the forty days after its execution. The plaintiffs, on the 13th day of December, 1892, began their action to foreclose the mortgage executed by Trantham, and to this suit made all persons, holding encumbrances junior to that held by the plaintiffs, parties to their action. Amongst others thus made parties were Patterson, Renshaw & Co.; and on the same day, the 13th day of December, 1892, the plaintiffs filed the usual notice of lis pendens. However, Patterson, Renshaw & Co. persisted in their effort to sell this tract of land now in controversy, and it was sold on salesday in January, 1893, by the coroner for Kershaw County (the sheriff being disqualified to act in the premises), the said J. T. Hay being the purchaser at said sale, and he was made a party to the present action as a subsequent purchaser. In his answer he contended that plaintiffs could not foreclose their mortgage so as to defeat his rights as owner of said lands, because, he alleged, the plaintiffs’ mortgage had been discharged as a lien upon the land through its sale by the coroner — the proceeds of the sale having been applied to the older lien of the judgment held by Creighton & Son. In a very carefully prepared decree,'Judge Aldrich sustained the defense of Hay, and adjudged that plaintiffs’ action be dismissed, and, as we before remarked, the plaintiffs now appeal from that decree. Let this decree and plaintiffs’ exceptions thereto appear in the report of the case. We confess that this question, as presented, is interesting of itself, and has been made more so by the circuit decree and the argument of counsel. It seems to us that the defendant, J. T. Hay, was very properly made a party *302to this action. Not only does the provision of our Code of Civil Procedure — sec. 143 — fully sustain such a position, but also the judgment of this Court in Ex parte Mobley, in re McAfee v. McAfee, 19 S. C., 337.

¶32 But this is not the question in this cause. There are a line of our decisions that go very far in the direction,' that a purchaser at a sheriff’s sale, where land is sold under the execution of a judgment junior in lien to a mortgage thereon, may yet refer for the security of his title to any judgment against the judgment debtor, which was senior in lien to the mortgage, whether there was any execution issued under such senior lien or not. Reference is made to the cases of Ex parte Mobley, supra; Henderson v. Trimmier, 32 S. C., 270; Garvin v. Garvin, 34 S. C., 398; Woodward v. Woodward et al., 39 S. C., 259, as authority for this position. A review of these cases, in order'that we may understand the extent of the doctrines therein established, is necessary. As to Ex parte Mobley, supra, the contention arose as follows: Mobley had signed as surety the bond of McAfee, as administrator of some estate; this administrator, when brought to account before the judge of probate, was decreed to pay some $2,000; failing to pay this money, an execution was issued against McAfee’s property, which was being proceeded with in its enforcement by a sale; but it seems that after this levy upon McAfee’s property, the holders of mortgages, who were his near relatives, began their actions to foreclose the two mortgages thereon, and filed a notice of lis pende7is in each action; the property was sold after these notices of lis pendens had been filed, and at such sale Mobley, to protect himself as surety of the administrator, purchased the property. And after his purchase, exhibited his petition to be made a party to each of said actions for foreclosure of mortgage, alleging that each of said mortgages were fraudulent and pretensive. The Circuit Judge denied Mobley’s right to be made a party, and when Mobley appealed to this Court, it was adjudged that he had the right of being made a party, and *303contesting the legality of such mortgages. In the reasoning of the Court, considerable comment was indulged in as to the effect of the notice of lis pendens, and also reference was made to the principles of law underlying the protection of a purchaser at a sheriff’s sale. As to this last, position was taken that a purchaser at a sheriff’s sale had the right to invoke in his protection, not only the levy, but the judgment itself. It must be apparent, therefore, that the principles of that case are not the same as those here involved. The judgment debtor, under whose judgment McAfee’s property was sold, was not a party to the actions of foreclosure. While in the case at bar he is, and has been all the time, a party to the action. Again, the question before the Court in Ex parte Mobley, was alone as to his (Mobley’s) right of being made a party to the action. It would seem that the solution of that question — and we admit that such judgment was correctly made — did not necessarily involve the reasoning employed to enforce it. The writer of this opinion may be allowed to drop the plural, and say that, so far as I am concerned, I am prepared to justify the judgment of the Court in Ex parte Mobley, upon what seems to me a plainer ground than that adopted by the majority of the Court in establishing such judgment; for it seems to me that Mobley had an equity which entitled him to be made a party, which equity might have been jeopardized by staying his hands and allowing a judgment in foreclosure to be made, and a sale thereunder take place, while he remained silent. Besides, the section of the Code of Civil Procedure— section 143 — fully justified the judgment of this Court, in allowing him to be made a party to the contest over the validity of a mortgage upon land to which he had acquired title since the suit of McAfee v. McAfee in foreclosure had been begun.

¶4Net us next examine the case of Henderson v. Trimmier, supra. It seems that in this case, while there was still a balance due upon a judgment to one Cooley from Henderson, P. M. Trimmier, in 1876, loaned to said Henderson *304the sum of $300, which debt Henderson secured to.Trimmier by the execution of a mortgage upon a tract of land upon which the Cooley judgment was a prior lien. In. 1880, one Mathis obtained a judgment against Henderson, and an execution was issued upon this last judgment, levied upon the land in question, and it was sold to a Mrs. Henderson, the proceeds of sale being applied to the payment of the oldest judgment, and the balance of such proceeds were paid to Trimmier, who had purchased the Mathis judgment. Trimmier had ordered the sale under the Mathis judgment, and was the next highest bidder to the purchaser, Mrs. Henderson. After Mrs. Henderson had gone into possession of the land, Trimmier proceeded to sell the land, under the power to sell contained in his mortgage. Then it was that Mrs. Henderson brought her action against Trimmier, the mortgagee, to enjoin the sale under his mortgage, upon the ground that the sale of the land by the sheriff had divested the lien of Trimmier’s mortgage. The Court held the plaintiff, Mrs Henderson, was entitled to a perpetual injunction against the mortgage of Trimmier. It is very evident that there was no notice of Us pendens involved in this action; but it was purely a question whether a judgment existed as a lien prior to the mortgage attempted to be foreclosed by Trimmier.

¶5Next, as to Garvin v. Garvin, supra. Without attempting to set out the facts underlying this controversy, it will be sufficient to say that the propriety of a nonsuit granted by Judge Hudson was the question submitted to this Court; this question turned upon the existence of a valid judgment prior to the deed executed to the plaintiff by the defendant in execution, and this Court decided that' there was such prior judgment, and reversed the judgment below granting the nonsuit.

¶6. Lastly, the case of Woodward v. Woodward, supra, will be found not to involve any principle like that which centres about the notice of lis pendens, but the real question submitted in that case for the decision of this Court, was *305whether a deed of conveyance, made during the interval when a judgment was not an enforcible lien, and a subsequent period when by renewal it was made an enforcible lien, would pass the land freed from lien of the older judgment. This Court held that the sale having been made during that interval, the judgment was not a prior lien upon the land, and allowed the grantee, under the deed, to hold his land freed from any lien of the judgment.

¶7Thus it is apparent that the effect of the notice of Us pendens was not involved in any of these cases except that of Ex parte Mobley, supra, and that as to the last case such effect of the notice of. Us pendens was virtually left a res integra. This being so, it will become necessary for us to consider this question very closely. What is the notice of lis pendens? Our Code of Civil Procedure, at section 153, thus states it: “In an action affecting the title to real property, the plaintiff, at the time of filing the complaint, or at any time afterwards, or whenever a warrant of attachment, under chapter 4, title 7, part 2, of this Code of Procedure, shall be issued, or at any time afterwards, the plaintiff, or a defendant when he sets up an affirmative cause of action in his answer and demands substantive relief at the time of filing his answer, or at any time afterwards, if the same be intended to affect real estate, may file with the clerk of each county in which the property is situated a notice of the pendency of the action, containing the names of the parties, the object of the action, and the description of the property in that county affected thereby, and if the action be'for the foreclosure of a mortgage, such notice must be filed twentj' days before judgment, and must contain the date of the mortgage, the parties thereto, and the time and place of recording the same. Prom the time of filing only shall the pendency of the action be constructive notice to a purchaser or encumbrancer of the property affected thereby, and every person whose conveyance or encumbrance is subsequently executed or subseqiiently recorded shall be deemed a subsequent purchaser or encumbrancer, and shall be bound *306by all proceedings taken after the filing of such notice to the same extent as if he were made a party to the action. For the purposes of this section an action shall be deemed to be pending from the time of filing such notice, but such notice shall be of no avail unless it shall be followed by the first publication of the summons, or an order therefor, or by the personal service thereof on a defendant within sixty days after such filing. And the Court in which the said action was commenced may, in its discretion, at any time after the action shall be settled, discontinued or abated, as is provided in section 142, on application of any person aggrieved, and on good cause shown, and on such notice as shall be directed or approved by the Court, order the notice authorized by this section to be cancelled of record by the clerk of any county in whose office the same may have been filed or recorded; and such cancellation shall be made by an endorsement to that effect on .the margin of the record which shall refer to the order, and for which the clerk shall be entitled to a fee of twenty-five cents.”

¶8The effect of this provision of the Code of Procedure seems to be, that after the notice of lis pendens is filed, any one who purchases the land affected by such lis pendens shall be treated as one who had notice of the lien of the mortgage. In this particular case, would not such purchaser, Hay, be bound by notice of the fact that the plaintiff in execution, Patterson, Renshaw & Co., were proceeding to sell the land in contention under a judgment junior to the mortgage of Baum Bros.? Would not the lis pendens prove, if a contrary view should prevail, a delusion and a snare to such plaintiffs as Baum Bros.? We admit that our Courts have gone to great lengths in giving relief to an innocent purchaser of property sold under execution by the officers of law, on whom is the duty of making sales of a judgment debtor’s property, by referring such sales to executions older than that under which the property was actually sold, or, even allowing the existence of a judgment upon which no execution had been issued, to protect such purchaser. But *307were not those decisions of our Courts made to protect the innocent? There is no allegation here that Hay was any such innocent purchaser. Under our statutes, constructive notice, at least, was given to him by the notice of lis pendens, that the judgment of Patterson, Renshaw & Co. was junior in lien to Baum Bros.’ mortgage, and that' Patterson, Renshaw & Co., as the holders of such junior lien, were parties to the action of Baum Bros, to foreclose their prior mortgage.

¶9Under our views, this is the first instance in which this precise qnestion has been presented to our Court for solution, and in the action we feel it to be our duty to take, it is proper to state that these views do not necessitate the reversal of any prior decisions of our Courts. We think the Circuit Judge failed to grasp the true questions at issue, to wit: the effect of the notice of lis 'pendens upon a purchaser of land sold under a judgment and execution junior in lien to the mortgage sought to be foreclosed in the action in which the notice of Us pendens was filed, and to which action the holders, Patterson, Renshaw & Co., of the judgment and execution, under which the land was sold, were parties defendant, and that Hay, the purchaser, thereby became fully notified of those vices in such sale.

¶10The Circuit Court decree should be reversed.

¶11It is the judgment of this Court, that the judgment of the Circuit Court be reversed, and the action remanded to that Court for such further proceedings as may be necessary to afford the plaintiffs full relief.

¶12dissenting. Being unable to concur in the views taken of this case by Mr. Justice Pope, I propose to state, as briefly as practicable, what I understand to be the correct view. For a proper understanding of the questions presented by this appeal, it will be necessary to state substantially the facts out of which these questions arise, as to which there seems to be no dispute. The land which is the subject of the action, belonging "to the defendant, Trantham, was covered by sundry liens, having priority according to date as follows: 1st. A judgment in favor of Creighton & Son, entered in February, 1888. 2d. A mortgage held by plaintiffs, dated 24th April, 1888. 3d. A judgment in favor of Patterson, Renshaw & Co., entered 20th February, 1891. Under an execution issued upon this last mentioned judgment the land was levied upon on the 12th of December, 1892, and on the next day, 13th December, 1892, the same was advertised for sale, on the first Monday of January, 1893. On the same day, to wit: 13th December, 1892, the present action was commenced to foreclose the mortgage above mentioned, and notice of lis ftendeus was then filed. To this action Patterson, Renshaw & Co. were made parties defendants, but Creighton & Son were not made parties. On the first Monday in January, 1893, the land was sold, under the levy above mentioned, by the coroner of the county (the sheriff being disqualified), and bid off by J. T. Hay, who complied with the terms of sale and received titles for the land. Thereupon the plaintiffs amended their complaint by making the said J. T. Hay a party defendant, and he filed his answer, setting up title in himself superior to the lien of plaintiff’s mortgage. „

¶13It is not, and cannot be, denied, since the cases of Vance v. Red, 2 Speer, 90; Agnew v. Adams, 17 S. C., 364; Henderson v. Trimmier, 32 S. C., 269, and Garvin v. Garvin, *30934 S. C., 388, that where land is sold under an execution to enforce a judgment junior to a mortgage, if there is, at the time of the sale, a judgment having a lien on the land senior to that of the mortgage, the title of the purchaser will be protected by such senior judgment, and the lien of the mortgage will be divested by such sale. That was precisely the case in Henderson v. Trimmier, supra, and is so in the case now under consideration, except that here an action had been commenced before the sale, and notice of lis pendens had been filed, and this circumstance is relied upon to take this case out of the operation of the general rule. So that the only question presented by this appeal is, whether the fact that the plaintiffs had commenced their action, and filed notice of lis pendens before the sale under which Hay claims, is sufficient to take this case out of the operation of the admitted general rule.

¶14It certainly cannot be contended, with any show of propriety, that the effect of filing the notice of Us pendens is to extinguish or defeat the prior lien of the senior judgment; for that would put it in the power of one who holds a mortgage on land to supersede the lien of a judgment superior in rank to’ that of the mortgage, by simply commencing an action to foreclose his mortgage, and at the same time filing his notice of Us pendens; and surely no court would sanction such a doctrine as that. But that, as I understood it, is not what appellants contend for in this case. Their contention is that, so far as their rights are concerned, the sale under which Hay claims should be treated as a nullity, and that the Court should proceed to grant a judgment of foreclosure and sale under their mortgage; and that the proceeds of such sale should be applied to the extinguishment of the liens upon the land in the order of their rank as they stood at the commencement of the action — that is to say, first to the payment of the Creighton judgment, next to the payment of the plaintiffs’ mortgage, and next to the payment of the judgment in favor of Patterson, Renshaw & Co. This would, of course, *310involve the necessity of setting aside the sale tinder which the defendant, Hay, claims; and it is difficult to perceive upon what ground this could be done, especially in view of the fact that Creighton & Son, to whose judgment the sale must be referred, are not parties to the action. No fraud is alleged, and certainly none has been proved, in making such sale, and, so far as I can perceive, no illegality of any kind is, or could be, imputed to that sale. It was made under a valid execution, so far as appears, having a lien on the land, and the proceeds of such sale have been applied to the oldest lien on the land; so that the language of Judge Fraser, in Henderson v. Trimmier, supra, and quoted with approval by this Court in Garvin v. Garvin, supra, “the sale being for the benefit of the older judgment lien, the title under such is necessarily sustained by such older lien,” seems eminently applicable to the case. Besides, suppose the proceeds of the sale under which Hay claims had been sufficient to satisfy the judgment in favor of Creighton & Son, then there would be no senior judgment to which the proceeds of the foreclosure sale could be first applied, and the plaintiffs, as holders of the junior lien, would get rid of the senior lien and become first entitled to the proceeds of the foreclosure sale, although, in the case supposed as a test of the doctrine contended for, such senior lien had been extinguished by the money of the purchaser at the sheriff’s sale, who had a right to suppose that he was buying a title referable to such senior lien. It seems to me that to maintain such a doctrine as that contended for, it would be necessary to attribute a force and effect to a notice of lis pendeits which, so far as I can learn, has never been attributed to it before, and which is altogether unnecessary to its true purposes. The real object of such a notice is to prevent the necessity of constant amendments, bringing in purchasers from parties to a pending action as parties to such action; for, as said by Sir William Grant, master of the rolls, in The Bishop of Winchester v. Paine, 11 Ves., at page 196: “Otherwise suits would be indeter*311minable; or, which would be the same in effect, it would be in the pleasure of one party at what period the suit should be determined.” But it never was designed to operate as an injunction, or to stay the enforcement of process of the Court. This very case affords an illustration of the impropriety of giving to a notice of lis pendens the force and effect contended for. The conceded fact is, that the execution under which the land was sold was levied before the action was commenced, and, of course, before any notice of lis pendens was filed; and while counsel for appellants, in their argument here, repudiate the idea that such a notice operates as an injunction, yet it seems to me that the logical and necessary effect of the position for which they contend is to make such notice operate as an injunction restraining the disposition of such levy. For if no valid sale under such levy could be made, the practical effect would be to enjoin the disposition of such levy — not by the order of any court, but by the mere act of the parties. Surely this is not allowable. But, in addition to this, it seems to me that the case of Ex parte Mobley, 19 S. C., 337, recognized and applied in the recent case of Bank v. McMahon, 37 S. C., 309, is absolutely conclusive. In that case, as in this, very soon after the mortgaged premises had been levied on under execution, and before such levy could be disposed of by a sale, by reason of the time required by law for advertising such sale, the mortgagees commenced their action to foreclose, and at the same time filed notice of lis pendens, and the sale under which Mobley claimed was made on the first saleday after the íevy at which it could have been made. So that both in that case and in this the levy was made before, but the sale after, lis pendens was filed. The Court held, in Mobley’s case, that his title would relate back at least to the date of the levy, and hence he was a purchaser before notice of lis pendens. So here Hay’s title can relate back to the date of the levy, and hence he can be regarded as a purchaser before lis *312pendens filed; and, if so, then clearly the doctine contended for, even if otherwise maintainable, cannot apply.

¶15I desire to avail myself of this occasion to remove what seems to be a misapprehension of the opinion of the Court in the case of Ex parte Mobley, above referred to. In that case the Court considered the position of Mobley in both aspects, first, as a purchaser after notice of lis pendens, and, second, as a purchaser before notice of lis pendens, the latter of which was his real position. Hence the language quoted by counsel from page 340 must be regarded as applying only to the hypothesis that Mobley was a purchaser after lis pendens filed., while that found on pages 341-2 applies to the other hypothesis, to wit: that he was really a purchaser before lis pendens filed. This is evident from the use of the word “again,” in opening the first paragraph on page 341. In other words, the Court, after holding that, under the circumstances of that case, Mobley was entitled to be made a party, even should he be regarded as a purchaser after notice of lis pendens, in order to enable him to litigate the question of fraud in the mortgages, which could not otherwise be done, proceeded to show that such was not his true position; for, under the authorities cited, Mobley’s purchase could have relation back to the levy, which was made before the commencement of the action, and, of course, before lis pendens filed, and, for that reason, he was clearly entitled to be made a party to the action.

¶16It seems to me, therefore, that, in ■ any view of the case, the Circuit Judge was right in the conclusion which he reached, and his judgment should be affirmed.