National Bank of Newberry v. Livingston

• Decision Date: 13 March 1930
• Docket Number: 12854.
• Citation: 152 S.E. 410,155 S.C. 264
• Parties: NATIONAL BANK OF NEWBERRY v. LIVINGSTON et al.
• Court: South Carolina Supreme Court

152 S.E. 410

155 S.C. 264

NATIONAL BANK OF NEWBERRY v. LIVINGSTON et al.

No. 12854.

Supreme Court of South Carolina

March 13, 1930

Appeal from Common Pleas Circuit Court of Newberry County; C. C Featherstone, Judge.

Action by the National Bank of Newberry against Mills M. Livingston and others. From the decree rendered, defendants J. P. Icard and another appeal.

Modified and remanded.

The decree of Circuit Judge Featherstone is as follows:

The appellant, J. P. Icard, excepted to the report of the Clerk of Court and the matter was heard by Judge C. C Featherstone at chambers and his decree is as follows:

This is an action by the National Bank of Newberry, hereinafter spoken of as the Bank, against Mills M. Livingston mortgagor, J. P. Icard, The First Carolinas Joint Stock Land Bank, hereinafter referred to as the Joint Stock Land Bank et al. The object of the action is to foreclose a mortgage on three tracts of land executed by the defendant, Mills M Livingston, to the plaintiff.

The Joint Stock Land Bank is made a party because it holds a mortgage on the same lands.

J. P. Icard is made a party for the reason that he claims timber rights in timber growing on the lands described in the said mortgages under an unrecorded deed, antedating both of said mortgages.

The cause was referred to the Clerk of Court for Newberry County to hear and determine all issues. He made his report, holding that the defendant, Icard, has no right to enforce the timber contract against the mortgages, for the reason that the mortgagees are subsequent creditors for value without notice of the Icard timber deed.

The case is before me upon exceptions to the report of the Clerk of Court.

The facts, briefly stated, are these: On the 6th day of March, 1925, the defendant, Mills M. Livingston, executed and delivered to his co-defendant, J. P. Icard, a timber deed, thereby conveying certain timber, hereinafter described, growing on portions of the three tracts covered by the mortgages of the Bank and the Joint Stock Bank. On the 6th day of May, 1925, the said Mills M. Livingston executed and delivered to Mrs. Lenora C. Wheeler a mortgage covering one of the tracts of land described in the mortgages of the Bank and the Joint Stock Bank, containing 1174/5 acres, and hereinafter designated as the Cooley place. This mortgage contained the following recital at the end of the description of said tract of land, to-wit: "And being the same land on which I recently sold to J. P. Icard the standing timber and this mortgage is junior to said timber deed."

This mortgage was duly recorded and remained open on the record until the 19th day of March, 1926, or the day after the recordation of the mortgages of the Bank and the Joint Stock Bank and was paid from the proceeds of the loans.

On March 15, 1926, the defendant, Mills M. Livingston, executed a mortgage to Joint Stock Bank for $7,000.00. The abstract of title prepared by the attorneys for said Joint Stock Bank contained a copy of the Wheeler mortgage containing the recital above quoted. This mortgage was recorded March 18, 1926.

When the Land Bank Inspector came to inspect the lands of the defendant, Mills M. Livingston, for Joint Stock Bank with the view to making the loan, his attention was called by said Livingston to the fact that certain timber had been sold to Icard, and pointed out the blazed lines, while the inspector replied that he was not concerned with this, as it was a matter for the Joint Stock Bank's attorneys. He made no report to the Joint Stock Bank or to its attorneys of said disclosures as to the sale of timber to Icard.

On March 18th, 1926, the defendant, Mills M. Livingston, executed to the plaintiff a mortgage on the same lands covered by the mortgage to Joint Stock Bank for $5,806.54, $4,416.54 thereof being new money advanced, and the balance of said loan representing old debts. This mortgage was recorded on March 18, 1926.

The mortgage of plaintiff recites that it is junior and second to the lien of the mortgage of Joint Stock Bank.

The questions to be decided are: (1) Did Joint Stock Bank have notice, actual or constructive, of the Icard contract, or of such facts as would have led to knowledge thereof? (2) Did the plaintiff have such notice? (3) Or to put the question in a different form, are the two mortgagees subsequent creditors for value without notice of the Icard timber deed?

As to the Joint Stock Bank, it is not necessary to discuss the question of constructive notice. Its attorneys found the record of the Wheeler mortgage containing the above quoted recital, and copied the same into the abstract submitted to it. This recital was actual notice to Joint Stock Bank that the timber on the tract of land covered by the Wheeler mortgage had been sold to Icard. There is nothing in this recital that would indicate to Joint Stock Bank, or its attorneys, that timber on other lands belonging to Livingston had been sold to Icard. The other lands of Livingston were mortgaged, and the mortgages were open upon the records in Newberry County, and there were no releases of record of any timber from said mortgages.

The facts obtained by the Land Bank Inspector from Livingston, at the time of the inspection of his lands with the view of making a loan by Joint Stock Bank, as to Icard's timber rights must be imputed to his principal, the Joint Stock Bank. He was on the premises as an agent of said Joint Stock Bank for the purpose of finding out whether or not the security was good. He was told of Icard's rights in the timber. It was his duty to communicate said facts to his principal. It is common knowledge that such inspectors acting for loan companies report such items as cultivatable land, timber land, etc., so as to give the facts from which the value of the security can be determined. Suppose the inspector had, in valuing the improvements, known that other persons had the right to remove the houses on the premises, can it be doubted that it would have been his duty to impart such information to his principal?

Whether the Land Bank inspector did, or did not, communicate these facts to his principal, the law imputes his knowledge to the principal when it was obtained by him in the course of his agency. This principle of law is so universal as to not need citation of authority.

I conclude, therefore, that Joint Stock Bank not only had actual notice by reason of the fact that it had a copy of the Wheeler mortgage containing the recital that the timber had been sold on the 117 acre tract, but that it had such notice through its inspector of such facts, which, if followed up, would have led to knowledge of Icard's timber deed not only on this 117 acre tract, but as to the other tracts as well.

The question as to the notice on the part of the plaintiff is more difficult.

It is contended by the defendant, Icard, that the plaintiff had actual notice of his rights, or notice of such facts if diligently pursued would have led to knowledge thereof. These facts are as follows:

About a year before the execution of plaintiff's mortgage, the defendant, Mills M. Livingston, exhibited to T. K. Johnstone, vice-president of the plaintiff, a check given by Icard, and stated at that time to Mr. Johnstone that the check was for the sale of timber, without disclosing what timber, or upon what lands said timber was growing. Such information was imputed to Mr. Johnstone in a casual way not connected with the loan by the plaintiff to Mr. Livingston, or with the execution of the mortgage securing indebtedness to plaintiff, and, therefore cannot be imputed to the plaintiff.

It is next contended by the defendant, Icard, that plaintiff had constructive notice from the recital in the Wheeler mortgage, which was of record in the office of the Clerk of Court for Newberry County.

I confess that this question has given me much concern. At first I was inclined to sustain that view, but upon reflection I have decided otherwise.

There is no doubt of the general rule that a purchaser is bound to take notice of any and all recitals appearing in his chain of title. Such is the universal rule, and it is a very salutary one--one which in its last analysis is found upon the doctrine of estoppel; but I have not been able to find any case which applies it to mortgages executed by the grantor to the purchaser.

Of course, he must take notice of a mortgage as a lien upon the property. Its record, in so far as the lien is concerned is notice to all the world, but is it notice as to a recital contained therein, which does not relate to the mortgage, but only to a matter concerning the rights of others in the property?

To hold that such recital in a mortgage is constructive notice would be going very far, and would stretch the doctrine beyond its legitimate purpose.

Of course, the recital bound the mortgagee, Lenora Wheeler, and her rights were subservient to Icard's rights. In like manner would an assignee of Mrs. Wheeler been bound by this recital, since it appeared in his chain of title. But the plaintiff did not claim under the Wheeler mortgage, and such mortgage does not constitute a link in its title.

An instrument contemplated by section 5312 of the Civil Code of 1922, properly probated as required by section 2176 of the same Code, when placed upon record, in the proper county becomes constructive notice to the world, that is, all persons are charged with notice thereof. To hold that a reference made in one paper that is properly recorded to an unrecorded paper is constructive notice of such unrecorded paper, would be to hold that constructive notice may be given of an instrument without recording it. It is true that where such a reference is made in the record of a paper which...