South Carolina Loan & Trust Co. v. McPherson
| Decision Date | 19 April 1887 |
| Citation | 2 S.E. 267,26 S.C. 431 |
| Parties | SOUTH CAROLINA LOAN & TRUST CO. v. McPHERSON and another, Partners, and others. |
| Court | South Carolina Supreme Court |
Appeal from circuit court, Charleston county.
John Wingate, for appellant and plaintiff.
Hayne & Ficken, A. G. Magrath & Son, and Buist & Buist, for respondent.
The case prepared for this appeal and the accompanying papers including the evidence reported, etc., are voluminous and elaborate, and give a full history of the proceeding below but much of it is outside of the questions presented for our adjudication. It will not be necessary, therefore, to make a statement here of all the facts of the case. The questions really involved are few, and nothing more of the facts need be detailed than such as said questions may require. They are, briefly, as follows:
The defendants McPherson and Kinloch were mercantile partners under the name of D. McPherson & Co. The firm seems to have been considerably in debt, as was also D. McPherson individually, and on the twenty-seventh day of March, 1878, a mortgage was found recorded in the proper office for Charleston county, and also on ___ day ___, A. D. 1878, in Georgetown county, purporting to have been executed by the defendant D. McPherson to the defendant Frances I. Pelzer to secure the payment of a bond in the penal sum of $22,000 said mortgage covering certain real estate located in the city of Charleston, in Georgetown county, a plantation on the south side of Wadmolaw creek, and also a plantation in Colleton county. On the twenty-seventh day of September, 1883, there was recorded in the office of the register for Charleston county a mortgage dated fifteenth of February, 1882, made by D. McPherson to the defendant Julia C. Kinloch to secure a bond in the penal sum of $25,000, conditioned to pay $12,500, etc., covering the real estate in Charleston, and also the Julian Hill plantation in Georgetown county. On the twenty-ninth of September, 1883, the said David McPherson, for himself and also for his firm, executed and delivered to the defendant Archibald S. Johnston an assignment purporting to convey all the real estate and personal property of the said David McPherson and of his firm to said Johnston, for the benefit of the creditors of the said David, and of the firm. This assignment embraced the real estate described in the mortgages above, and also other real estate and personal property, the assigned property being declared therein to be subject to said mortgages. Mr. Johnson accepted the trust, and soon thereafter a meeting of the creditors was called, at which meeting the defendant John B. Steele was appointed agent, October 9, 1883. On November 3, 1883, the plaintiff, claiming to be a large creditor of D. McPherson & Co. and also of David McPherson, instituted the action below, alleging that it became a creditor of David McPherson, and of his firm, for money lent between the fifteenth day of February, 1882, the date of the mortgage to Julia C. Kinloch, and the time when said mortgage was recorded, September 27, 1883, without notice of said mortgage; that the defendant David, by subjecting the assignment to the mortgages, endeavored to give a preference to the defendant Julia C. Kinloch over the other creditors. Wherefore the plaintiff demanded, among other demands, judgment on its own behalf, and on behalf of the other creditors of both David McPherson and of David McPherson & Co.; that the debt of the defendant Pelzer be ascertained; that certain real estate embraced in the mortgage to him, claimed by the plaintiff to belong to David McPherson individually, be sold, and the proceeds thereof be applied to the debt of the said Pelzer; that, so far as Pelzer's mortgage embraced partnership property, it be decreed void and of none effect; that the mortgage to Julia C. Kinloch be decreed void and of none effect; that creditors be called in, the property be sold, the proceeds of the individual property of David McPherson, after paying the mortgage of defendant Pelzer, with the proceeds of the partnership property, be marshaled and applied pro rata, after costs and expenses, to the claims of the creditors of the said defendant David McPherson, and of David McPherson & Co.
After answers put in, the case was referred to the master; the real matter of contest in its further progress being the mortgage of Julia C. Kinloch, which was assailed before the master as not being bona fide, as in violation of sections 2015 and 2014 of the General Statutes, (assignment act,) and as void to the plaintiff under the recording law, said mortgage not having been recorded within the legal time, and the debt of the plaintiff having been recorded within the legal time, and the debt of the plaintiff having been contracted before it was recorded, and without notice of its execution. The master established the debt of Mrs. Kinloch against the firm at $10,175.38, and that the bond and mortgage of David McPherson in question had been given as collateral security of secure the said debt of said firm. He, however, held, as matter of law, that said mortgage did not take rank with a valid lien against the plaintiff from the date of its record; but that plaintiff's claim, having been contracted between the date of execution and the recording, which was not within the legal time for recording, had priority, or rather that said mortgage was void as to the plaintiff.
His honor, Judge WALLACE, heard this report, and modified it by reversing the master's conclusions on the "matters of law," to which Mrs. Kinloch had excepted, holding, under the case of King v. Fraser, 23 S.C. 543, which had just been announced, that Mrs. Kinloch's mortgage took rank with a valid lien from the day of its record, to-wit, September 27, 1883, and that the bond secured thereby should be paid out of the funds derived from the sale of said premises in preference to the claims of the other creditors of D. McPherson & Co., who had not, at the date of the recording of said mortgage, any lien on said premises; and he confirmed the report, as thus modified, taking occasion to say, in regard to the suggestion of fraud in connection with the mortgage of Mrs. Kinloch, that "the whole transaction was marked with perfect honesty, and that the money lent by her was used for the business purposes of the copartnership of which her son was a member, and that the security given for its repayment was that to which she was entitled."
The appeal claims that the mortgage of Mrs. Kinloch should have been held void as to the plaintiff, upon three grounds: (1) The debt of Mrs. Kinloch was a secret debt, and that the mortgage was purposely not recorded, and was kept secret, to sustain which would operate as a fraud on the plaintiff; (2) that it being recorded out of time, and after plaintiff's claim had been contracted, it could not be enforced to his prejudice; and (3) the execution of the assignment on the twenty-ninth of September, 1883, in which the property therein described was conveyed to the assignee subject to the mortgages, was an attempt to give a preference to Mrs. Kinloch, in violation of section 2014 of General Statutes.
The first ground involves largely a question of fact, to-wit, the bona fides of the claim and mortgage of Mrs. Kinloch. Upon this question the master and the circuit judge concurred in finding that said claim and mortgage were free from suspicion, even. At least, the master established the claim without an intimation of wrong. And the circuit judge used the strong language quoted above that, instead of there being fraud, "the whole transaction was marked by perfect honesty," "and the money claimed had been fairly lent, and used by the copartnership." We have not found anything in the testimony which would warrant us to disturb this finding in the least.
As to the second ground, we think the case of King v. Fraser is conclusive. That case decided the very question here, to-wit, that a mortgage recorded after the time prescribed by the act has lien from the date of recording, and consequently takes priority over the claims of all creditors who have not before that time established a lien. This was a clear and distinct proposition of law held by the court upon the construction of the proviso to the act of 1876, which allowed mortgages to be recorded after the 40 days. It was held after mature deliberation, the question having been fully and elaborately discussed by the counsel engaged in the...
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