Sims v. Jones

• Decision Date: 10 June 1924
• Docket Number: 3988.
• Citation: 123 S.E. 614,158 Ga. 384
• Parties: SIMS v. JONES ET AL.
• Court: Georgia Supreme Court

123 S.E. 614

158 Ga. 384

SIMS v. JONES ET AL.

No. 3988.

Supreme Court of Georgia

June 10, 1924

Syllabus by the Court.

Where an instrument is executed and payable in the state of North Carolina by parties all residing in that state, purporting to convey certain standing timber in this state to one of the parties to the contract, the law of the place where the property is situated (the lex loci rei sitæ) controls, in order to determine the character of the instrument, whether it is a deed to secure a debt, as in the present case, or whether it is a mortgage.

Where an instrument is executed and made payable in the state of North Carolina between citizens of that state, which is in the form of a deed conveying standing timber in this state to secure a debt, but which has a defeasance clause declaring the instrument null and void on the payment by the debtor of the sum due, such instrument, under the law of Georgia, is a mortgage, and not a deed, and does not convey the title to the timber, but creates a lien thereon.

Under the law of Georgia the equity of redemption to timber mortgaged and standing on land is subject to levy and sale in favor of the plaintiff in a common-law fi. fa. against one of the mortgagors who is a defendant in such fi. fa.

The court erred in granting the injunction.

Error from Superior Court, Lincoln County; E. T. Shurley, Judge.

Action by M. H. Jones and others against A. C. Sims and others. Judgment for plaintiffs, and defendant named brings error. Reversed.

Hamilton Phinizy, of Augusta, for plaintiff in error.

O. Lee White, of Augusta, and C.J. Perryman, of Lincolnton, for defendants in error.

HILL J. (after stating the facts as above).

1. On the trial it was admitted that the instrument described in plaintiff's petition was dated November 7, 1917, was signed by M. H. Jones, D. C. Johnson, Eula M. Jones, and Sudie Johnson, to Walter F. Peterson, as trustee of the Bank of Sampson, and that it was executed in the state of North Carolina, and that Exhibit A attached to the petition, which is in the form of a warranty deed with a defeasance clause conveying the timber in question, is a true copy of the original instrument, and that all the parties to the instrument at the time of the execution were residents of the state of North Carolina. It was further admitted that the note secured by the instrument was executed and made payable in North Carolina, and that the makers and payee were residents of North Carolina at the time of the execution of the note; that the common-law rule that a mortgage passed the title to the property mortgaged, and did not merely create a lien thereon, at the time of the execution of the instrument was still of force in the state of North Carolina.

The controlling question in the case is whether the instrument the substance of which is set out in the statement of facts, is to be construed according to the laws of North Carolina or according to the laws of Georgia. It was pleaded and proved, as well as admitted, by both parties, that the law of North Carolina provides that mortgages pass title to the mortgagee, and do not merely create a lien on the property mortgaged or conveyed. So, for the purposes of this case, we will not pursue that question further. The court below evidently took the view that the law of North Carolina controlled, and granted the injunction.

The defendant in error relies on the Civil Code 1910, § 8, which provides that--

"The validity, form, and effect of all writings or contracts are determined by the laws of the place where executed. When such writing or contract is intended to have effect in this state, it must be executed in conformity to the laws of this state, excepting wills of * * * persons domiciled in another state or country."

It is insisted that the cardinal rule of construction and interpretation of contracts is to ascertain the intention of the parties to the contract, and that that rule applies to the contract under review here. In support of their contention the defendants in error cite 2 Elliott on Contracts, § 1113, which declares that--

"As a rule, the law of the place where the contract is made is, without any express assent or agreement of the parties, incorporated into and forms a part of the contract, and the rule that contracts are to be construed according to the law of the place of their execution, and that the law, including city ordinances, in force upon any subject that is made the subject-matter of any contract enters into the same, has been held to apply just as if the law were actually and expressly made a part of the agreement between the contracting parties."

And see section 1110 of the same author.

Civil Code, § 8, supra, seems to be broad and sweeping in its effect. It provides that--

"The validity, form, and effect of all writings or contracts [italics ours] are determined by the laws of the place where executed," etc.

There is no statute, so far as we are aware, on which this section was based. It has, however, all the binding force of an act of the Legislature, because of the adoption by the Legislature of the Codes wherein it appears. Wilensky v. Central Ry. Co., 136 Ga. 889, 891, 72 S.E. 418, 419. It was said in that case that--

"It has been several times held by this court that a section of the Code, not of original statutory origin, would be construed merely as a codification of the existing law, unless there be words in the section which manifestly demand a construction which would change the rule in force at the time the Code was adopted."

The section of the Code referred to was not intended to change the rule in Georgia so as to require our courts to apply the law of lex loci as to the construction of contracts where the title to real estate in this state is involved, unless the words used manifestly demand a different construction. We are of the opinion that the words used in the statute do not demand the construction contended for.

Coming to the real question in the case, we are of the opinion the lex loci rei sitæ controls as to the effect that all instruments executed out of the state have on real estate located in this state. The outside authorities seem to sustain this position. We cite a few of them:

"Every nation, having authority to prescribe rules for the disposition and arrangement of all property within its own territory, may impress on it any character which it may choose; and therefore the law of the place where property is situated, the lex loci rei sitæ, must be resorted to determine whether it be 'real' or 'personal'; and when a sovereignty prescribes that a certain class of property shall be deemed movable, or shall be deemed immovable, or shall have that character, no other state may impugn the classification." 5 R.C.L. 924.

In 12 C.J. 456, the rule is thus laid down:

"The lex situs, lex loci rei sitæ, or the law of the place where the thing is situated, is universally regarded as furnishing the rules governing the transfer, incumbrance, or devolution of real or immovable property. * * *"

Again:

"Under these rules the lex situs governs as to the transfer of land, covenants running with the land, conversion of property from realty into personalty, construction and operation of contracts for the sale of land, and in general as to the construction of deeds, the validity, construction and effect of mortgages of real estate." 12 C.J. 480; 27 Cyc. 975.

"The validity of a mortgage of real estate and its construction and effect are controlled by the law of the state where the mortgaged property is situated, although the mortgage is executed and the parties reside in another state." "From the general principles heretofore stated it naturally follows that all instruments affecting the title to real estate, no matter what their nature, must be governed, as to their execution, construction, and legal sufficiency, exclusively by the laws of the state in which the real estate is situated." 5 R.C.L. 952.

"So omnipotent is the lex loci rei sitæ that it even governs in regard to the capacity of the person making the instrument, no matter what its nature, and also as to the capacity of the person who is to take." 5 R.C.L. 953.

There is authority for the proposition that the lex situs determines whether the security creates a lien or passes the absolute title to property, whilst the lex loci contractus controls the contract, the performance of which is thus secured. Thus, in 5 R.C.L. 927, it is stated that--

"It seems to be universally recognized that the lex loci rei sitæ determines the nature of an instrument, whether it shall be given effect as a mortgage or as an absolute conveyance."

In Simpson v. Hillis, Ann.Cas. 1913C, 230 note, it is said that--

"The validity of the lien is governed by the law of the place where the land is located. Bramblet v. Commonwealth Land, etc., Co., 83 S.W. 599, 26 Ky. Law Rep. 1176. Such

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