Maxwell v. Epton

• Decision Date: 23 August 1935
• Docket Number: 14132.
• Citation: Maxwell v. Epton, 177 S.C. 184, 181 S.E. 16 (S.C. 1935)
• Parties: MAXWELL v. EPTON et al.
• Court: South Carolina Supreme Court

181 S.E. 16

177 S.C. 184

MAXWELL v. EPTON et al.

No. 14132.

Supreme Court of South Carolina

August 23, 1935

Appeal from Common Pleas Circuit Court of Spartanburg County; T. S Sease, Judge.

Action by James L. Maxwell against C.J. Epton, Nannie C. Bernhardt H. Bernhardt, and others. From the judgment, the plaintiff appeals; the defendants Nannie C. Bernhardt and H. Bernhardt being the respondents.

Affirmed.

Horace L. Bomar, of Spartanburg, for appellant.

C Yates Brown, of Spartanburg, for respondents.

STABLER Chief Justice.

On November 26, 1926, Mrs. C.J. Epton and P. M. Pearson, owners of a tract of land in Spartanburg county, gave a mortgage thereon to L. P. Epton and L. M. Pearson in the sum of $4,100. On November 27, Epton and Pearson assigned the mortgage to the defendant H. Bernhardt, the proceeds therefrom being used to pay the purchase price of the mortgaged property. It appears that this was a business investment by Epton and Bernhardt; that Epton was to handle the property, subdivide and sell it, while Bernhardt was to furnish the money; and that, after the loan, with interest, was repaid, Bernhardt was to get one-third of the profits. A small part of this tract of land was sold, and the proceeds of the sale were applied to the mortgage debt, reducing it to $2,700. Later, P. M. Pearson disposed of his interest in the property to Mrs. Louise E. Ross, one of the defendants in this case. On March 5, 1929, Mrs. Epton gave a mortgage to L. P. Epton and Mrs. Ross on lands owned by her in Union county-about which we are not here concerned-and on her one-half interest in the tract in Spartanburg county; this mortgage being given by her to secure the payment of a note for $700 executed in favor of the mortgagees. After describing the last-named tract containing 32 acres, more or less, the mortgage states that "it is given as second to a claim of H. Bernhardt for balance due, being one thousand and seventy-six ($1,076.00) dollars secured by a mortgage on said 32 acres." The mortgage for $700 was thereafter assigned by Epton and Ross to the plaintiff Maxwell as security for a loan. On August 19, 1929, Mrs. Epton and Mrs. Ross conveyed to Mrs. Nannie C. Bernhardt, wife of H. Bernhardt, a one-third interest in the property; and on August 20, these three gave to L. P. Epton and O. E. Ross a mortgage in the sum of $2,700 on the entire tract. This mortgage was assigned to H. Bernhardt, and he thereupon canceled the $4,100 mortgage, with the result that the mortgage held by the plaintiff then appeared of record as a first lien on a one-half interest in the premises. On January 12, 1931, the interests held by Mrs. Epton and Mrs. Ross in the lands were conveyed to Mrs. Bernhardt, the consideration therefor being the assumption by the grantee of the payment of the $2,700 mortgage. Upon delivery and recordation of the deed, that mortgage was canceled of record by the assignee, H. Bernhardt.

The plaintiff began this action for the foreclosure of his mortgage in May, 1933. L. P. Epton and Louise E. Ross were made defendants as indorsers of the note held by Maxwell, and judgment was asked against them for the amount due according to its terms. Nannie C. Bernhardt was made a party to the suit for the reason, as alleged, that she claimed some interest in the lands situated in Spartanburg county. All of the defendants were served except L. P. Epton, who died about the time the action was begun. Mrs. Bernhardt answered, alleging that she had paid for the one-third interest conveyed to her, thereby reducing the mortgage debt to $2,700 and that she had also paid that amount and accepted a deed from the other owners of the premises of their interests therein. She prayed that "she be subrogated to the rights of the mortgagee hereinabove set out."

Testimony was taken by the master of Spartanburg county, to whom the matter was referred, but before a report was filed, H. Bernhardt asked to be made a party defendant. Over the objection of the plaintiff, his petition was granted, and he then answered the complaint, alleging that he had furnished the money to pay for the premises in question; that the several deeds were made in the name of Mrs. Bernhardt for his convenience; and that he had been misled into the cancellation of the mortgages assigned to him; and asked that they be revived and reinstated. Another reference was held, and the master then filed his report denying the claim of Mrs. Bernhardt to subrogation; but he recommended that the $4,100 mortgage assigned to H. Bernhardt be restored to life and that the several deeds to the property, executed in favor of Mrs. Bernhardt, be canceled. He found, as a matter of fact, that Bernhardt had canceled his mortgage through mistake; and stated that it did not "seem altogether fair for Mr. Maxwell to profit by this mistake when his status has not been changed, his rights have not been detrimentally affected or prejudiced in any manner by the acts on the part of Mr. Bernhardt, when he cancelled his mortgage. If Mr. Maxwell had been misled to his harm in any way, I should not hesitate to deny Bernhardt the relief that he now seeks. That does not seem to me to be the case. These people are in a court of equity, and to allow the plaintiff to prevail would let him 'reap where he had not sown', and altogether at the expense of Mr. Bernhardt." He further found that Bernhardt had "not been as careful in the examination of the records as he should have been," but concluded that this alone was not a sufficient reason for denying the relief sought by him. Upon exceptions by the plaintiff to the master's findings and recommendations, Judge Sease affirmed the report, and ordered that the $4,100 mortgage be restored to its original status and that the deeds to Mrs. Nannie C. Bernhardt, above referred to, be canceled of record and declared to be null and void. Later, it was discovered that while the decree provided that H. Bernhardt should have a first lien on the property located in Spartanburg county, it directed that the proceeds derived from the sale of the lands, after payment of costs and taxes, should be applied first to the payment of the judgment given the plaintiff Maxwell. Judge Sease, therefore, on November 3, 1934, upon application of counsel of H. Bernhardt, passed a supplemental decree, over appellant's objection, correcting the final decree in that particular. The plaintiff appeals from both decrees, imputing error to the circuit judge (1) in allowing H. Bernhardt to be made a party defendant, (2) in the admission of certain testimony, (3) in holding that the cancellation of the mortgages and the acceptance of the deeds were mistakes such as a court of equity is justified in correcting, and (4) in issuing the supplemental decree.

First. In his petition to the court asking that he be made a party defendant, H. Bernhardt alleged that he had furnished all the money used in the purchase and development of the property involved, and that the deeds were made to the defendant Nannie C. Bernhardt as a convenience to the petitioner, and were accepted with the understanding that the only liens on the property were the mortgages held by him; and but for this belief he would not have received the deeds and canceled the mortgages. The undisputed testimony taken at the first reference, and which was before the master at the time the petition was filed, tended to establish these allegations. Under the showing made, the petition was properly allowed. See section 404 of the Code of 1932.

Second. When Bernhardt was on the stand, he was requested by his counsel to "give the Court the whole transaction in 1929," and in compliance therewith he stated that he thought "we accepted a new mortgage at that date, or about that date, for the balance due, at Mr. Epton's request. He asked us to do it." Counsel for plaintiff objected to this question and answer, and to all similar testimony, on the ground that Epton, who was an assignor of the plaintiff, was dead, and that Bernhardt had a legal or equitable interest in the property that might be affected by the event of the action, which made the testimony obnoxious to section 692 of the Code, as the question was directed to a transaction between the witness, as assignee, and Epton. The master tentatively allowed the answer, and his ruling was apparently approved by the circuit judge.

Counsel for the respondents does not argue that the testimony objected to was admissible, but contends that when all such evidence is excluded from the record, what remains shows that the cancellation of the two mortgages by Bernhardt and the acceptance of the two deeds in question were all done in complete ignorance on his part and without any actual knowledge of the existence of the mortgage held by the plaintiff, and that, therefore, references to L. P. Epton were not at all necessary to the establishment of the real facts in issue.

We are in agreement with this contention. While the...