Pike v. Armstead, 16 N.C. 110, 1 Dev. Eq. 110 (1827)

Dec. 1827 · Supreme Court of North Carolina

16 N.C. 110, 1 Dev. Eq. 110

Robert Pike v. Starkey Armstead & Thomas Turner.

From Washington.

A subsequent mortgagee, whose deed is duly registered, is bound by a prior unregistered one, of which he had notice.

If a mortgagee, for the purpose of keeping up the mortgagor’s credit, suffers his deed to remain unregistered, it seems not to bo fraudulent per se,- but its character depends upon the intent. It is not fraudulent as to one who knows the whole transaction.

The papers in this canse were very voluminous; an abstract of the whole of them is unnecessary, as it is thought that the following statement is sufficient to place the points decided by the Court, before the profession. The Plaintiff alleged, that at the request of one Joel Thorp, he lent him 700 dollars, to secure which he took a mortgage at six months upon sundry negroes. Tiiat Thorp urged the Plaintiff to keep the mortgage secret, and not to have it registered within the six months for which the loan was made, as he would certainly repay it within that time — and as its publicity would injure his credit, and cause his creditors to press him immediately. That the Plaintiff, believing Thorp to be solvent, as he was in possession of a largo visible property, and confiding in his promise of payment, had not procured the mortgage deed to be registered. That the Defendants had direct notice of its existence, being conusant of the whole transaction; notwithstanding which, they had procured a deed of trust for their benefit from Thorp, in which the negroes mortgaged to the Plaintiff were included. That they had caused this deed to bo registered before that to the Plaintiff, and had brought an action at law against the Plaintiff for the negroes mortgaged to him, which lie had taken into his possession soon after the expiration of the six months for which the loan was made. The prayer of the bill was for an injunction, and [satisfaction to the Plaintiff’s mortgage from the property conveyed to secure the Defendants.

The Defendants, in their answers, admitted express I notice of the Plaintiff’s mortgage — they denied that Thorp was generally esteemed to be solvent at the time lie gave the mortgage to the Plaintiff, but alleged that he was then, and before that time, had been greatly discredited, and that many executions were hanging over him; that the Defendants fearing they might sustain a loss by him, had made up an estimate of his debts and effects, the result of which being unfavorable, the Defendant Turner had waited upon him and communicated it to him, and had asked for and obtained a conveyance for their security. They insisted that the Plaintiff had fraudulently concealed his mortgage,with the view of giving Thorp a false credit, and enabling him to delay his creditors in the collection of their debts, and that they had obtained a fair priority over the Plaintiff, which they submitted they were justified in holding.

The cause was heard upon bill and answer, hy his honor Judge Nash, on the Spring Circuit of 1826, who dissolved an injunction previously obtained, and dismissed the bill — from which decree the Plaintiff appealed.

The cause was shortly argued in this Court, by Badger, for the Plaintiff, and Gaston & Hogg, for the Defendants.

Taylor, Chief-Justice.

From the facts and admissions in this ease, my opinion is, that the Complainant is entitled to relief. The first question arises on the act of 1715, (Rev. ch, 7) relative to mortgages. A mortgage between the parties is valid, although no registration be made, as well from the words of the act, as the uniform construction of it. Its professed design was to prevent frauds by double mortgages, which design is accomplished by giving priority to a subsequent mortgage, if registered before a prior one, unless the latter be regís-tered within fifty days so that a person about to secure a debt, or to loan money, may by inspecting the register’s books, ascertain whether there he a prior incum-France uPon the Property, and if there he none, or none registered within fifty days, he may proceed to act,without fear of secret liens of which ho knows nothing. The law was designed to give notice to persons so situated but if it be clearly established in pooof, that a subsequent mortgagee had notice of a prior mortgage, although not registered, he shall in Equity be bound by it, although he had obtained a priority at law; for having this notice, he may protect himself from harm by forbearing to proceed. The words of the English Registry act are stronger than those of the act of 1715, viz : “ and that every such deed or conveyance, that shall at any time after, &c. be made and executed, shall be adjudged fraudulent, and void against any subsequent purchaser or mortgagee for a valuable consideration, unless such memorial thereof be registered, &c.” According to the preamble of that act, it was intended to secure subsequent purchasers, against prior secret conveyances, and fraudulent incumbrances, corresponding in this respect to the act of 1715. The British act received a construction soon after its passage, which has continued since, without any diversity of opinion ; that where a person had no notice of a prior conveyance, there the registering of the subsequent conveyance shall make or prevail against the prior one; but if he had notice of the prior one, then it was not a secret conveyance, by which he could possibly be prejudiced. By this construction, the deed is made void against the subsequent purchaser or mortgagee» whereby they gain the legal estate, but they are still left open to any Equity, which a prior purchaser or incum-brancer may have against them. That the Defendants had notice, before taking the deed of trust, is distinctly admitted ; and the remaining question is, whether the purpose for which the mortgage to Pike was outitied to Ik: registered, is such a fraud, as to deprive him of his equitable right St appears to mo that the suspicion of fraud,is repelled by the ignorance both of Thorp and Tike, that the farmer was insolvent; lie was in possession of considerable properly, which appears to have been thought by the parties equal to the payment of his debts; his eyes do not appeal' to have been opened to iiis true situation, until Turner waited upon him, after having made an estimate of his debts and his property. Being engaged in trade, it was of importance that his creditors should not come upon him all at once, which they probably would have done, when they saw he was making liens on his property. Whereas the maintenance of his credit for a while might have enabled h'un to pay all his debts, it seems to me to be a rigorous construction to impute fraud to the omission of an act, which the law did not require ; hat if it were so, it is void against those only whom it was intended to deceive. It was impossible that the Defendants could be injured, since they were apprised of the transaction. I therefore think that this act for the prevention of fraud, would have the effect of promoting it, if the consciences of the Defendants could not be affected by the notice ; for the object of the registry being to give notice, the necessity of it is superseded, as to those who have notice without.

Hall, Judge.

The object of the law in requiring the registration of deeds of trust and mortgage, is to prevent fraud, by giving notice of such deeds to subsequent purchasers and mortgagees, but when they have notice of them in any other way, the object of the law is answered as much as if they were registered ; and they have no equitable ground to complain for the want of registration. This if: a plain principle of .Equity, long acted upon, and easily understood. The authorities on the subject arc collected together by ¡Sugden in his treatise on the law of vendors, (2 American, from the 5th London edition, 511 u.)

To apply this principle to the present case, it will ibl-low, that the Defendants having notice of the Plaintiff’s lien, have no Equity to avail themselves of its want of registration. I therefore think that the decree below , ,, , , should be reversed.

Per Curiam.

— Let the decree below be reversed, and decree for the Plaintiff, with costs both at Law and i» Equity.

Qjp The Reporter, in making the following extract from a late Worlt-of high reputation, does not wish to be understood as impeaching the decision of the Court in the above ease; his sole object is to render the Work it is Ms duty to superintend, both useful and agreeable to the profession.

“ Upon the enrolment act of Hen. VIT, and the docketing and re~ “ gistering statutes, Equity has introduced, under the name of notice, “a totally different construction, which has been nearly subversive “ of these descriptions of acts, and has raised a complicated system, “ much more grievous than any of the individual hardships meant to-f‘ be redressed.

“ They have determined, on the one hand, that a person buying. “ an estate, with notice, of a prior incumbrance, not registered, shall, “ in equity, be bound by it, although he has duly registered his own. * conveyance. On the other hand, they have held, that a person “ having the legal estate as mortgagee, and advancing more money, “ without notice, of a second mortgage duly registered, shall hold, in “ respect of it, against the second mortgagee. In the former case, an “ unregistered deed is preferred to a registered one. In the latter, re«gistration, even coupled with priority of time, is of no avail. It is *• indeed, urged, that the first mortgagee possesses that fiction termed, “the legal estate, and that both mortgagees are in pari delicto.— “But, (passing the technical advantage,) if there he blame in the “want of search, the second mortgagee affects only himself by “ it, whereas, the first mortgagee affects also the second. In analogy “to. the foregoing resolutions, it is held in equity, that, although, “ a judgment be not docketed, yet if a purchaser have notice “ of it before he completes, he shall he bound by it. He already “ possesses, it is said, that information which the statute intended to “ furnish him,- but to this it might be replied, that he also knows an- “ undocketed judgment is rendered void against himself; and that “ the judgment creditor might not have intended to rely upon the “ land contracted for. Humphrey’s on Meal Property, (1 London Ed. 154, 155.”)

I shall close with observing, that Courts of Equity have not thought “ fit to urge their doctrines upon notice, in opposition to decisions^ at •’law, that voluntary conveyances, are void under the statute of 27 '* JSliz. to prevent fraudulent conveyances, against subsequent purcha- *' sers even -with notice, although the argument, that what the purcha“ser knew could never bo a fraud upon him, is equally strong hero as “ upon the registry and docketing acts. Neither have they interfered “ with the two successive acts for memorializing life annuities sold for " money. Whatever may be the policy of these different acts, it does not “ appear that either the justice or the simplicity of the decisions upon “ them would have been improved by the introduction of the equitable doctrine of notice. Hid. 160, 161. ”