Interstate Bldg. & Loan Ass'n v. Mccartha

• Decision Date: 12 January 1895
• Citation: 20 S.E. 807,43 S.C. 72
• Court: South Carolina Supreme Court
• Parties: INTERSTATE BLDG. & LOAN ASS'N. v. McCARTHA et al.

20 S.E. 807

43 S.C. 72

INTERSTATE BLDG. & LOAN ASS'N.

v.McCARTHA et al.

Supreme Court of South Carolina.

Jan. 12, 1895.

Sale of Mortgaged Property—Constructive Notice.

Mortgaged land in the hands of a bona fide purchaser, without notice of a stipulation in the mortgage bond to pay attorney's fees in case of suit, is not liable for those fees, where the stipulation of the bond was not mentioned in the recorded mortgage, although the bond was "referred to" in, and "made a part" of, the mortgage.

Appeal from common pleas circuit court of Richland county; T. B. Fraser, Judge.

Suit, by the Interstate Building & Loan Association against J. P. McCartha and the Loan & Exchange Bank of South Carolina to foreclose a mortgage. From a decree adjudging the land not subject, in the hands of the defendant bank, to the payment of counsel fees for foreclosure of the mortgage, plaintiff appeals. Affirmed.

Robertson, Moore & Thomson, for appellant.

Allen J. Green, for respondents.

McIVER, C. J. This was an action to foreclose a mortgage of real estate given by the defendant McCartha to the plaintiff to secure the payment of a bond, to which the defendant bank has been made a party, as a purchaser of the mortgaged premises subsequent to the execution of the mortgage. Copies of the bond and mortgage are set out in the "case, " and should be incorporated in the report of the case. It is sufficient to say here that, among numerous other stipulations in the bond, it contains, in the last paragraph thereof, the following provision: "I waive, relinquish, and renounce, for myself and family, all claim, right, and benefit of any homestead or exemption under the laws of the United States or of this state in any property which I now or may hereafter own, in favor of the payment of this obligation, and for such an amount as may be found to be due under the same; and I further agree to pay the additional sum of ten per cent on the amount due, as counsel fees, should this bond be collected by suit." The mortgage recites the date, the penalty, and the condition of the bond, and invests the mortgagee with power to sell the mortgaged premises upon default in the performance of the conditions and stipulations contained in the bond, "which is hereby referred to and made a part hereof, " and, out of the proceeds "of such sale, pay all expenses of the same, including all attorney's fees, then whatever sum may be due said association, and the balance, if any, pay over to me." But the mortgage did not contain any stipulation for the payment of 10 per cent. counsel fees in case the bond should be collected by suit. This mortgage having been duly recorded, the defendant bank very properly conceded the liability of the mortgaged premises for the amount due and collectible under the terms of the mortgage, but denied that the 10 per cent. counsel fees for foreclosure by proceedings in court constituted any proper charge on the mortgaged premises in its hands as a subsequent purchaser for valuable consideration, without notice of any such charge. It was conceded that the defendant bank had no notice of this alleged claim or charge upon the mortgaged premises for 10 per cent. counsel fees, except that which it is claimed arose from the record of the mortgage. So that the only question presented to the circuit judge was whether the land covered by plaintiff's mortgage was liable, in the hands of the defendant bank, as a subsequent, bona fide purchaser, for these counsel fees; and, he having held that it was not, the plaintiff appeals upon the several grounds set out in the record, which need not be repeated here, as they substantially make the single question whether the circuit judge erred in holding that the mortgaged premises, in the hands of the defendant bank, were not liable for the 10 per cent. counsel fees.

It seems to us that the object of the registry laws was to afford persons proposing to purchase real estate a ready and easy means of ascertaining whether the property proposed to be purchased is incumbered, or is subject to some claim superior to that of the proposed vendor. Hence, it has long been well settled that, whether these means thus provided by law for the purpose indicated are resorted to or not, the record of a deed or mortgage shall operate as constructive notice to all the world of everything contained in such record. In this case, however, it is insisted that the record of the mortgage operated as constructive notice, not only of what was contained in the mortgage, as it was spread upon the record, but also of what was contained in the bond, which was not spread upon the record. In other words, the proposition is that the doctrine of constructive notice, arising from the record of a paper required to be recorded, must be so extended as to affect a purchaser with notice of whatever would appear in any paper referred to in the registry of the recorded instrument; thus making it obligatory upon the inquirer, in addition to searching the records of the proper office, also to extend his inquiries into the contents of papers not to be found in the place appointed by the law as the source of information. Such an extension of the doctrine of constructive notice would materially hamper the transfer of property, and work material injury to the business interests of the country. It not unfrequently happens that a single mortgage is given to secure the payment of several bonds or notes, instances of which may be found in our own judicial records. Lynch v. Hancock, 14 S. C. 66, and Anderson v. Pilgram, 30 S. C. 499, 9 S. E. 587. And where these bonds or notes have passed into the hands of several different persons, as often is the case, if a purchaser, who, though he has examined the record of the mortgage, should be compelled to examine into the terms contained in each one of the several bonds and notes, before he could safely buy, it would very seriously interfere with the ready transfer of property. Take this very case as an illustration. Here the purchaser, upon examining the record of the mortgage, found that it was given to secure the performance of an obligation, the terms and conditions of which were set out with unusual minuteness and particularity, among which was a provision for the payment of counsel fees in an event which did not occur, but which contained no hint that the mortgaged premises were to be subject to the payment of 10 per cent. counsel fees in the...