Allendale County Bank v. Cadle

• Decision Date: 17 December 2001
• Docket Number: No. 3422.,3422.
• Citation: 348 S.C. 367,559 S.E.2d 342
• Court: South Carolina Court of Appeals
• Parties: ALLENDALE COUNTY BANK, Respondent, v. George W. CADLE, Peerless Group, Inc., JEJ Construction, Inc., Red Earth Environmental, Inc., Steffen Robertson and Kirsten (U.S.), Inc., E & J Landscaping, Inc. and Wastemasters of South Carolina, Inc., Defendants, Of whom Steffen Robertson and Kirsten (U.S.), Inc. and E & J Landscaping, Inc. are, Appellants.

348 S.C. 367

559 S.E.2d 342

ALLENDALE COUNTY BANK, Respondent, v. George W. CADLE, Peerless Group, Inc., JEJ Construction, Inc., Red Earth Environmental, Inc., Steffen Robertson and Kirsten (U.S.), Inc., E & J Landscaping, Inc. and Wastemasters of South Carolina, Inc., Defendants, Of whom Steffen Robertson and Kirsten (U.S.), Inc. and E & J Landscaping, Inc. are, Appellants.

No. 3422.

Court of Appeals of South Carolina.

Heard November 6, 2001.

Decided December 17, 2001.

Rehearing Denied February 20, 2002.

Gary H. Smith, III, of Braithwaite, Smith, Massey & Brodie, of Aiken; and Ladson H. Beach, Jr., of Orangeburg, for appellants.

Walter H. Sanders, Jr., of Fairfax, for respondent.

CURE TON, J.:

Allendale County Bank ("Bank") brought this action to establish the priority of its mortgage on real estate located in Allendale County after it mistakenly filed a satisfaction of the mortgage. The special referee cancelled the mortgage satisfaction and concluded Bank had a first lien on the property, with priority over Steffen Robertson and Kirsten (U.S.), Inc. ("SRK") and E & J Landscaping, Inc. ("E & J"). Both SRK and E & J (collectively, "Appellants") appeal. We affirm.

FACTS

This action arises out of a dispute regarding the priority of lienholders on real estate owned by George W. Cadle. The property consisted of approximately five tracts of land with a total of more than 340 acres in Allendale County. Cadle operated the Appleton Sanitary Landfill on a portion of the land that is now known as the Wastemasters of South Carolina, Inc. Landfill.

Cadle had been doing business with Bank for a number of years. He executed three mortgages on his property in favor of Bank in 1982, 1987, and 1989.

In 1993, Cadle executed a fourth mortgage on his property in favor of Bank and a 10-year promissory note for $390,000. The mortgage, dated September 17, 1993, was recorded in the Office of the Clerk of Court for Allendale County at Book 82, Page 535. According to the parties, the fourth mortgage was actually a consolidation of the three prior mortgages.

In 1996, Cadle contracted to sell to Wastemasters of South Carolina, Inc. approximately 306 acres comprising what was formerly the Appleton Sanitary Landfill.

As part of the ongoing arrangements in the sale to Wastemasters, Cadle wished to extinguish the first three mortgages on the property executed in 1982, 1987, and 1989. However, Cadle's attorney prepared four Satisfactions of Mortgage for execution by Bank. On June 10, 1996, three separate Satisfactions of Mortgage were filed in the Allendale County Clerk's Office for the mortgages executed in 1982, 1987, and 1989. In addition, however, a fourth Satisfaction of Mortgage was recorded purporting to satisfy a mortgage from Cadle to Bank dated September 17, 1983 and was recorded in Mortgage Book 82, Page 535. As a result, the 1993 mortgage was marked as satisfied of record despite the fact that the Satisfaction of Mortgage form contained a typographical error stating the mortgage date was September 17, 1983 instead of 1993.

In 1997, Appellants filed mechanics' liens in the Allendale County Clerk's Office, claiming nonpayment for materials and/or services they had provided to Wastemasters for improvements to the real property (landfill) owned by Cadle.¹ SRK filed an amended mechanic's lien with the clerk's office seeking the sum of $135,822.07 on June 25, 1997. E & J filed its mechanic's lien against the property for the amount of $341,243.60 on May 12, 1997.

The problem in this case arose when Bank realized it had mistakenly marked the fourth mortgage, executed in 1993, as satisfied when only the first three mortgages should have been satisfied. After Bank realized its mistake, Cadle executed a new mortgage in favor of Bank on the same property described in the original mortgages. It was recorded in the clerk's office on December 23, 1997.

In October 1998, Bank filed this mortgage foreclosure action, asserting Cadle had executed a note with an unpaid balance due of $277,741.15, plus interest, attorney's fees, and costs, which was secured by a 1993 mortgage that was "rerecorded" in 1997.² Bank asked that its mortgage be foreclosed and declared a first lien on the property, with the liens of the Appellants designated junior to its mortgage.

Appellants SRK and E & J each answered and asserted their liens were superior to Bank's. In November 1999, the matter was referred to a special referee to enter a final order with direct appeal to this court.

The referee found Bank's 1993 mortgage was satisfied by mistake and that neither of the Appellants had relied on Bank's satisfaction of the mortgage in providing improvements to the property. The referee concluded that, as a matter of equity, Bank's mortgage should be reinstated as a first lien on the property with Appellants' mechanics' Kens being junior in priority to Bank's lien. Appellants appeal, asserting Bank's mortgage was not entitled to priority over their mechanics' liens.³

STANDARD OF REVIEW

An action to foreclose a real estate mortgage and for cancellation of a mortgage satisfaction on the basis of mistake lies in equity. First Palmetto Sav. Bank v. Patel, 344 S.C. 179, 183, 543 S.E.2d 241, 243 (Ct.App.2001). Thus, this Court has jurisdiction to determine the facts in accordance with our own view of the preponderance of the evidence. Id.; see also Dockside Ass'n v. Detyens, 294 S.C. 86, 88, 362 S.E.2d 874, 875 (1987) ("An action to foreclose a real estate mortgage is one in equity. In equity cases, we may find facts in accordance with our own view of the evidence.").

LAW/ANALYSIS

I. Priority of Bank's Mortgage

Appellants first contend the referee erred in ruling they were not entitled to priority as they were first to file their hens pursuant to Section 30-7-10 of the South Carolina Code. We find no error.

Section 30-7-10 provides in relevant part as follows:

All deeds of conveyance of lands, ... all mortgages ... of any real property, ... all statutory liens on buildings and lands for materials or labor furnished on them, ... are valid so as to affect the rights of subsequent creditors (whether lien creditors or simple contract creditors), or purchasers for valuable consideration without notice, only from the day and hour when they are recorded in the office of the register of deeds or clerk of court of the county in which the real property is situated. In the case of a subsequent purchaser of real estate, or in the case of a subsequent lien creditor on real estate for valuable consideration without notice, the instrument evidencing the subsequent conveyance or subsequent lien must be filed for record in order for its holder to claim under this section as a subsequent creditor or purchaser for value without notice, and the priority is determined by the time of filing for record.

S.C.Code Ann. § 30-7-10 (Supp.2000).

Section 30-7-10 sets forth the general rule for priority under the law. However, Bank is asserting equitable grounds for relief from strict application of the general rule. Accordingly, we agree with the referee that section 30-7-10 is not determinative of the parties' rights in this instance.

As this Court recently reiterated: "Equitable principles may be applied to cancel a mortgage satisfaction." First Palmetto Sav. Bank, 344 S.C. at 183, 543 S.E.2d at 243. This rule has long been recognized in South Carolina:

The principle which underlies all of the reported decisions in this class of cases is, when the legal rights of the parties have been changed by mistake, equity restores them to their former condition, when it can be done without interfering with any new rights acquired on the faith and strength of the altered condition of the legal rights and without doing injustice to other parties.

Young v. Pitts, 155 S.C. 414, 420, 152 S.E. 640, 642 (1930) (quoting Lumber Exch. Bank v. Miller, 18 Misc. 127, 40 N.Y.S. 1073 (N.Y.Sup.Ct.1896)). "Thus, a mortgage that has been mistakenly satisfied may be reinstated only where there is no third party who, without notice of the mistake, subsequently and in good faith acquires an interest in the property." First Palmetto Sav. Bank, 344 S.C. at 184,543 S.E.2d at 243; see also Young, 155 S.C. at 420, 152 S.E. at 642 ("[A] satisfaction entered through mistake does not destroy the priority of the mortgage unless others are misled and injured thereby.").

At the hearing in the case before us, John Harter, president of Bank, testified he understood Cadle's property was being purchased and that the buyer had requested Cadle to satisfy all old mortgages of record. Harter testified the September 17, 1993 mortgage was a consolidation of the prior mortgages and that he was not authorized, nor did he intend, to satisfy the September 17, 1993 mortgage, as the note securing this mortgage had not been paid. Harter further stated Cadle's attorney prepared and presented to him four Satisfaction of Mortgage forms purporting to satisfy mortgages from 1982, 1983, 1987, and 1989. After examining the satisfaction forms and finding none of them purported to satisfy a mortgage from the 1990s, Harter executed the forms which were then recorded by Cadle's attorney.

Harter stated if any of the mortgage satisfaction forms had been dated 1993, he never would have signed them. Harter acknowledged he did not personally check Bank's vault to see how many old mortgages Bank held, but he knew the most recent mortgage was exectued in the 1990s when he started working at Bank, and that all of the satisfaction forms he was signing were for mortgages dated in the 1980s.

The only witness to testify for the Appellants, Ed Salisbury, president of E & J, stated that his firm started working for Wastemasters on the landfill on Cadle's property around August or September of 1995. Further, Salisbury expressly acknowledged the presence or absence of a mortgage would not have affected his work on the property.

We agree with the special...