Ga. Realty Co v. Bank Of Covington

• Decision Date: 01 February 1917
• Docket Number: (No. 7680.)
• Citation: 19 Ga.App. 219,91 S.E. 267
• Parties: GEORGIA REALTY CO. v. BANK OF COVINGTON et al.
• Court: Georgia Court of Appeals

91 S.E. 267

(19 Ga.App. 219)

GEORGIA REALTY CO.

v.BANK OF COVINGTON et al.

(No. 7680.)

Court of Appeals of Georgia,

Division No. 1.

Feb. 1, 1917.

(Syllabus by the Court.)

Error from City Court of Atlanta; H. M. Reid, Judge.

Suit by E. V. Carter, guardian, against J. S. C. Callaway and another, in which the Georgia Realty Company and the Bank of Covington intervene. From a judgment in favor of the Bank of Covington, the Georgia Realty Company brings error. Reversed.

Smith, Hammond & Smith, of Atlanta, for plaintiff in error.

R. W. Milner, of Covington, and Dorsey, Shelton & Dorsey, of Atlanta, for defendant in error.

GEORGE, J. S. C. and T. M. Callaway held title to land. On July 2, 1912, they conveyed this land by deed to E. V. Carter, guardian, to secure a loan of $8,000. All legal title was thereby conveyed. On September 30, 1912, the Callaways made a deed conveying this land to the Southern Finance Corporation, now the Southern Trust Company, subject to the said loan; title being still in E. V. Carter, guardian, as security for the loan. On September 1, 1914, the Southern Trust Company executed its bona for title to the said land to J. T. Daves, subject to the said loan; title being still in E. V. Carter, guardian, as security for the loan. Daves assumed payment of the loan, made a cash payment upon the land, and executed four notes, of $3,000 each, maturing September 1, 1915, 1916, 1917, and 1918, respectively, for the balance of the purchase money. On October 27, 1914, the Southern Trust Company sold the two notes maturing September 1, 1915 and 1916, to the Bank of Covington; the bank buying bona fide, for value, and before maturity. On December 16, 1914, the Southern Trust Company sold the two remaining purchase-money notes, maturing September 1, 1917 and 1918, to the Georgia Realty Company, which also bought bona fide, for value, before maturity. The Southern Trust Company made a deed to the Georgia Realty Company as additional security, conveying its equity in the said land and containing the following recital:

"This deed is made to secure payment of two purchase-money notes for $3,000, each dated September 1, 1914, and maturing September 1, 1917, and September 1, 1918, respectively, and being Nos. 3 and 4, respectively, said notes having been given by said Joel T. Daves as part purchase money for above-described property under bond for title above mentioned, notes 1 and 2 of the series having previously been sold to the Bank of Covington. An escrow deed in compliance with the aforesaid bond has this day been executed and deposited with the notes this day sold to the grantee. Wherefore, upon payment of the notes this day sold to the grantee herein and the production of notes Nos. 1 and 2 (sold to the Bank of Covington as afore-said) marked 'Paid, ' the escrow deed aforesaid shall be delivered to Joel T. Daves, or his assignee, whereupon this deed shall be void and of no further force or effect."

On February 9, 1915, the deed from the Southern Trust Company to the Georgia Realty Company was duly recorded. In January, 1916, in the city court of Atlanta, judgment was rendered in the suit of the Bank of Covington against J. T. Daves (no other party defendant) for the amounts due on the two notes owned by it, and declaring a special lien on the land. In March, 1916, in the city court of Atlanta, judgment was rendered in the suit of E. V. Carter, guardian, against S. C. and T. M. Callaway, for $8,000 principal, etc., secured by the fee-simple title to the land, and superior to all claims. The sheriff of the city court of Atlanta, under the Carter fi. fa., sold the entire legal title to the land for $10,000. Out of this fund the Carter fi. fa. was satisfied in full, and the sheriff retained the sum of $356.29. The Georgia Realty Company filed a petition for a rule against the sheriff, in the city court of Atlanta, claiming half of the fund. The Bank of Covington intervened, claiming the entire fund. The judge of the city court, by agreement, considered the case on the facts herein stated, and awarded the whole sum ill the hands of the sheriff to the Bank of Covington; and to this judgment the Georgia Realty Company excepted.

1. The intervener, the defendant in error, insists that it had obtained priority by its judgment against Daves, with a special lien upon the land. We do not think so. Its judgment gives the bank no added security whatever. This judgment was not a judgment against the Callaways, the defendants in fi. fa. from the sale of whose property the funds in court for distribution was derived. Moreover, the judgment is in no way binding on the plaintiff in error, because the plaintiff in error was not a party to the suit in which the judgment was rendered. Strickland et al. v. Bank of Cartersville, 141 Ga. 565, 81 S. E. 886; Marshall v. Charland, Adm'x, 109 Ga. 306, 34 S. E. 671; Sims et al. v. Albea et al., 72 Ga. 751.

2. The recital in the deed from the Southern Trust Company to the Georgia Realty Company does not, within itself, create any priority in favor of the intervener against the Georgia Realty Company. Manifestly this deed was given as security. It discloses that an escrow deed was deposited with the Georgia" Realty Company, at the same time. While it may have been unnecessary, it was certainly proper, to provide that the escrow deed should not be delivered until, not only the two notes owned by the Georgia Realty Company were paid, but also until the notes assigned to the Bank of Covington, were produced and marked "Satisfied." It very clearly appears that this recital contained in the deed from the Southern Trust Company to the Georgia Realty Com pany was to accomplish nothing more than what the Southern Trust Company had, by its assignment of the notes to the contesting parties in this case, already done.

3. The proceeding to distribute money in the hands of the sheriff by a rule against the sheriff is essentially an equitable proceeding. Resort to a court of equity need not be had. Rucker v. Tabor & Almand et al., 133 Ga. 720, 66 S. E. 917; National Bank of Athens v. Exchange Bank of Athens, 110 Ga. 692, 36 S. E. 265; Berrie, Sheriff, v. Smith, 97 Ga. 782, 25 S. E. 757; Field v. Armstrong, 69 Ga. 179. The fact that the petition for the rule was filed in the city court of Atlanta does not alter the principle. Wright et al. v. Brown, Sheriff, 7 Ga. App. 389, 66 S. E. 1034. The fact that the Georgia Realty Company had not sued its notes to judgment cannot alter the principle. Smith et al. v. Bowne et al., 60 Ga. 485.

4. Since the judge of the city court of Atlanta in this proceeding had the authority to determine the respective rights of the parties to the funds remaining in the hands of the sheriff after the payment of the Carter judgment, and since no priority in favor of either party against the other was created or obtained by the deed from the Southern Trust Company to the Georgia Realty Company, or by the judgment of the Bank of Covington against Daves, the judgment awarding the fund to the bank can be sustained only upon the theory that, the security being insufficient to pay all the notes, the assignment to the bank of the notes first maturing being first made, the bank was entitled to priority over the subsequent assignee of the remaining purchase-money notes. This question is one of primary importance. Mortgages are daily executed and delivered, securing a series of notes. Lands are daily conveyed as security for debt evidenced by more than one note, and both personal and real property are sold, reserving title, or creating a lien, for the purpose of securing the purchase money, evidenced by many notes. These notes find their way into the channels of commerce. It is assumed for the purposes of this case, that the priority of notes secured by the same mortgage, or the purchase-money notes given for land, title to which as retained by the vendor, may be made the subject of contract between the parties interested, and that a general rule fixing such priority, in a case where the security is insufficient to pay the whole debt, applies only in the absence of contract.

There are three general rules, any one of which may govern the priority of notes secured by the same mortgage and in the possession of different holders: (1) The notes may have no priority, and share pro rata the insufficient proceeds of the mortgaged property. (2) The notes may have priority in the order in which they fall due, without regard to the date of assignment. (3) The notes may have priority in the order inwhich they have been assigned, without regard to the date of maturity. In 27 Cyc. 1304 (c), these rules are referred to:

"The rule as laid down in many cases is that, in the absence of an agreement or special equities to the contrary, the assignees and holders of the several separate notes of debts secured by a mortgage are entitled to share pro rata and without any preferences in the proceeds of the mortgage, when insufficient to satisfy them all; and it makes no difference that some of the debts matured earlier than the others or that the assignments were made at different times.

"Priority of Assignment.—According to a few cases the rule is that the holders of the notes, in such a case, are to be paid in the order in which their assignments were made, unless the mortgage or deed of trust which is the common security expressly prescribes a different order; but if all are assigned concurrently, all will share pro rata."

"Distribution According to Order of Maturity. —And there are still other cases holding that the assignment of one of such notes is an equitable transfer of the mortgage pro tanto, and the proceeds of a foreclosure, if not sufficient to pay all the obligations, should be applied to the notes in the order of their maturity, the holder of the note first falling due being entitled to satisfaction in full and then the others in their order."

The intimation here is that the pro rata rule is...