Ex Parte Johnson

145 S.E. 113, 147 S.C. 259, 1928 S.C. LEXIS 154

• Court: Supreme Court of South Carolina
• Decided: October 10, 1928
• Docket: 12508
• Status: Published

Opinions

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] October 10, 1928. The opinion of the Court was delivered by The facts giving rise to this action are briefly these. Some time in 1892, C.A. Keel died seized and possessed of a tract of land situate in Aiken County, this State, containing some 400 acres, which tract of land is the land in question herein. By his will, which was duly probated, he gave all of his property, real and personal, to his wife for life or widowhood, and at her death to be equally divided among his seven children, naming them, except one, namely, Hattie Bates, who was to account for 41 acres before receiving anything more out of testator's estate. The wife of testator died in March, 1919. In September of the same year, a partition proceeding was instituted in the Court of Common Pleas for Aiken County, in which the children of the testator and his grandchildren, who represented deceased children, were made parties. Thereafter Bradford Keel, the only child of a deceased son of testator, executed a mortgage covering his undivided interest in said tract of land to P.K. Livingston, which mortgage was afterwards assigned to J.C. Johnson, but which assignment was not recorded. The partition proceeding resulted in a sale of the land to Bradford Keel and two of testator's sons, S.A. Keel and W.H. Keel, for the sum of $30,000.00. Said purchasers, at the time a deed was made to them and as part of the same transaction, executed a mortgage covering the entire tract of land to the Bank of Western Carolina for $15,000.00, which mortgage was thereafter transferred to Mary A. Swygert, the plaintiff in this action. The Livingston-Johnson mortgage was dated October 22, 1919, and the Bank-Swygert mortgage was executed January 21, 1920, and recorded February 17, 1920. This action was instituted for the foreclosure of the last mentioned mortgage without making either P.K. Livingston or J.C. Johnson a party thereto. Johnson made application to become a party so that he could set up his rights in the mortgage held by him, which was granted. The foreclosure proceeded to termination upon an agreement between the attorneys for the respective parties that $1,000.00 should be held by the Master until a decision of the Johnson-Swygert issues. The Circuit Judge held that Johnson was not entitled to have his mortgage paid out of the $1,000.00 so held by the Master, but that said proceeds belonged to the plaintiff. Whereupon, he appeals to this Court upon seven exceptions, which will be reported. The decree of the Circuit Judge, in which the facts are more fully stated, should also be incorporated in the report of this case.

It is deemed unnecessary to consider separately the several exceptions. The first question presented for our consideration is whether a partition proceeding, to which a mortgage of one of the tenants in common, whose mortgage is duly recorded, is not made a party, will divest the lien of said mortgage on said land, and the purchaser thereof take it free from said mortgage.

The Circuit Judge decided this question in the affirmative, and relies directly or indirectly upon the following cases in this jurisdiction: Rabb v. Aiken, 2 McCord Eq. (7 S.C. Eq.), 118; Keckeley v. Moore, 2 Strob. Eq. (21 S.C. Eq.), 21; Johnson v. Payne, 1 Hill, Law, 111; McQueen v.Fletcher, 4 Rich. Eq. (25 S.C. Eq.), 152; Burris v. Gooch, 5 Rich. (39 S.C.L.) 6; Garvin v. Garvin, 1 S.C. 62; Rileyv. Gaines, 14 S.C. 456; Ketchin v. Patrick, 32 S.C. 452,11 S.E., 301; Marion County Lumber Co. v. Lumber Co.,84 S.C. 505, 66 S.E., 124, 877; Ex parte Union Mfg. Co.,81 S.C. 270, 62 S.E., 259, 128 Am. St. Rep., 908. An examination of these cases will show that in each case it was held that the lien of a judgment upon the share of a joint tenant or tenant in common is subordinate to the right of his cotenants to have partition made, and in none of said cases was there a mortgage covering the undivided interest of a joint tenant.

In Marion County Lumber Co. v. Lumber Co., supra, it is said:

"It is also a familiar principle that, in order for the process of the Court to convey lands free from incumbrances, the incumbrancers must be parties to the proceedings; otherwise the purchaser takes subject to the right of the incumbrancers. DeSaussure v. Bollmann, 7 S.C. 329;Warren W. Co. v. Burton, 9 S.C. 197.

"The action of partition is an exception to this rule. In case of judgments against the interest of cotenants it is not necessary, as a rule, to make such lienholders parties, because, after partition in kind is made, the judgment by operation of law attaches to the allotted share of the judgment debtor as of its original lien, or, in case of sale, is transferred to his share in the fund. Ketchin v. Patrick, 32 S.C. 443,11 S.E., 301; Ex parte Mfg. Co., 81 S.C. 270,62 S.E., 259 [128 Am. St. Rep., 908]."

In Marion County Lumber Co. v. Lumber Co., supra, it was decided that in a suit other than for partition judgment creditors are necessary parties in order to divest the lien of their judgments.

In Ex parte Union Mfg. Co., 81 S.C. 265, 62 S.E., 259, 128 Am. St. Rep., 908, it was held that the grantee of one cotenant of an easement to overflow a portion of the common property is a necessary party to partition proceedings.

In the last-mentioned case is this language:

"In the case of incumbrances, such as judgments or mortgages against the interest of a cotenant, it may not be necessary, as a rule, to make such lienholders parties, because, after partition in kind, the lien will merely be transferred to the tenant's share in severalty, or, in case of sale, the tenant's share in the fund, and thus complete justice be effected."

It will be observed that no authority is cited for this statement, and as it was not a question before the Court for determination it is obiter dictum. No case has been cited, and we know of none in this jurisdiction, which holds that in case of mortgages over the interest of cotenants it is necessary to make such mortgagees parties to partition suits.

In Kennedy v. Boykin, 35 S.C. 61, 14 S.E., 809, 28 Am. St. Rep., 838, it was held that, where a tenant in common gave a mortgage on a specific part of the common property, the mortgagee had an equity to require partition, if practicable, without prejudice to other cotenants, so as to allot the specific portion covered by the mortgage as the share of the mortgagor, and thereby save the lien of the mortgage.

A judgment is a general lien upon all debtor's real estate, except homestead exemption (originally they were not liens upon real estate, but were made so by legislative enactment); while a mortgage is a conventional instrument between the parties, and is a specific lien on the property covered by it. Weatherly v. Medlin, 141 S.C. 290,139 S.E., 633; Dorn v. Stidham, 139 S.C. 66,137 S.E., 331, and cases therein cited.

Section 5292, Vol. 3, Code 1922, provides that no severance or partition shall be prejudicial or hurtful to any person or persons, their heirs or successors, other than such as are parties unto the partition suit, their executors, and assigns.

It is true that since the Act of 1791, 5 Statutes, 170 (Section 5223, Vol. 3, Code 1922), a mortgage does not convey any legal estate to the mortgagee, yet such mortgagee has an equitable interest which should be protected, and the only way such interest adequately can be protected is to bring him into the partition suit, and unless he is made a party to such suit, his lien is not prejudiced thereby, unless partition be an exception in the case of mortgages covering the undivided interest of cotenants just as in case of judgments against cotenants.

While under Section 5292, Vol. 3, Code 1922, joint tenants and tenants in common may be compelled to make partition, yet we know of no law that requires that such partition be made unless they, or some of them, so desire. It is true that distributees and devisees take estates which are liable to be defeated by sale to pay debts of the intestate or testator, yet, with this exception, they are not unlike tenants in common under a deed. That tenants in common may mortgage their undivided interests is too clear to require the citation of authority. To hold that a mortgagee of a tenant in common may have the lien of his mortgage divested by a partition proceeding to which he is not a party, and that he "must at his peril follow" the proceeds arising from the sale of the common property, would be to open wide the door for fraud upon the one hand and to render property held by tenants in common practically worthless as security on the other. To take a simple illustration, suppose A and B are tenants in common of Black Acre. A mortgages his undivided interest to C. Thereafter A and B, under partition, sell Black Acre without making C a party, and one-half of the proceeds of the sale are paid to A before C learns of the proceeding. To hold that C is not a necessary party in such a case to a full and complete adjudication of the rights of all parties in interest, and that his mortgage may thus be divested and his security dissipated by the mortgagor would be a dangerous doctrine. Whatever may be the holding of Courts of last resort in other jurisdictions, we are not inclined to sanction such a doctrine. It is true that the mortgagee in such a case holds subject to the paramount right of partition, yet it does not follow, for that reason, that he is not a necessary party to such a proceeding. Certainly, we think, the better and safer practice is to make all incumbrancers parties to partition proceedings. Such practice will not only prevent a multiplicity of suits, but will protect the rights of all such incumbrancers and preserve the value of undivided interests as security.

However, we do not deem it necessary to decide this point at this time, for from the statement of facts in the "case" we learn that the partition was commenced in September, 1919. No lis pendens was filed. Section 388, Vol. 1, Code 1922, does not make the filing of the lis pendens an indispensable prerequisite to a judgment in partition as it does for a judgment in foreclosure. The mortgage of the petitioner Johnson not having been executed until October 22, 1919, and not recorded until the 22d of January, 1920, he could not have been made a party at the time the action was commenced. He had the privilege of intervening by petition and setting up his mortgage. This he did not do.

The cases cited by the Circuit Judge conclusively show that upon the sale of land under partition proceeding, any prior lien against the undivided interest of any cotenant is transferred to the share of the proceeds of such tenant, as of its original lien, whether such incumbrancer is a party to the proceeding or not. It is clear, therefore, that upon the sale of the tract of land to the three Keels, the lien of the Johnson mortgage attached to the share of the proceeds belonging to Bradford Keel. It appears, however, that Bradford Keel and the other two purchasers of the land did not pay in to the executor the amount adjudged to be due them, but took the deed for their respective shares, and only paid in sufficient funds to pay off the other cotenants. The situation amounts to just this. Had Bradford Keel and the other two purchasers paid in the entire $30,000, the amount of the purchase of the land, they each would have been entitled to something over $3,000 under the order of the decree in partition. Had they paid in this amount, the Johnson mortgage would have attached to Bradford Keel's share. Such share, therefore, would have been a trust fund in the hands of the executor. Had the executor paid this fund over to Bradford Keel and he had invested the same in the purchase of this tract of land and taken title in himself, there can be no question but that there would have been a resulting trust in favor of Livingston, or his assignee, Johnson, for where trust funds are used in the purchase of property and title is taken in the name of the fiduciary, or in the name of a third person, a resulting trust immediately arises in that property in favor of the person or persons entitled to the funds with which the property is purchased.Kirton v. Howard, 137 S.C. 11, 134 S.E., 859, and cases therein cited. The case cannot be different where no money was actually paid in by Bradford Keel and received back by him in payment of his undivided interest in the tract of land.

The moment that Bradford Keel was divested of his undivided one-seventh interest in the tract of land, under the sale in partition, he was revested with a one-third undivided interest in the entire tract of land. At the moment he became seized in this one-third undivided interest, he became a trustee for the benefit of Johnson to the extent of his original undivided interest in said tract of land. Since neither the Johnson mortgage nor the bank mortgage was recorded within ten days after the execution thereof, each took effect as of the date of recordation thereof.King v. Fraser, 23 S.C. 543; Mowry v. Crocker, 33 S.C. 440,12 S.E., 3; Turpin v. Sudduth, 53 S.C. 295,31 S.E., 245, 306; Armstrong v. Carwile, 56 S.C. 463,35 S.E., 196; Brown v. Sartor, 87 S.C. 116, 69 S.E., 88 The Johnson mortgage had priority over the bank mortgage by virtue of the prior recordation thereof and was constructive notice to the bank at the time the bank's mortgage was recorded. In addition to this, Mr. Dibble, the president of the bank, who made the $15,000 loan and took the mortgage for the bank, had, actual notice of the existence of the Johnson mortgage, and that the Johnson mortgage was not being paid, since he promised to take up that mortgage and never did it. Bradford Keel held one-seventh of the legal title to the entire tract of land in trust for Johnson and as security for the amount due on his mortgage, which necessarily was prior to the lien of the mortgage held by the bank.

Nor can we agree with the Circuit Judge that Bradford Keel had no legal title in the tract of land, prior to the partition thereof, which he could mortgage. The will of C.A. Keel did not effect a conversion. It merely directed that the tract of land should be divided among his children. Had this direction been carried out, the tract of land would have been divided in kind, and the Johnson mortgage would have attached to the portion alloted to Bradford Keel. There is in the will not a word about selling the land and dividing proceeds. The direction that the land be divided was not an equitable conversion. In order to effect such a conversion there must be a clearly expressed intention that the land itself is not to be divided but the proceeds arising from the sale thereof are to be divided. 13 C.J., p. 852, et seq.; North v. Valk, Dud. Eq., 212; Cagle v. Schaefer, 115 S.C. 35,104 S.E., 321.

Upon the death of C.A. Keel, therefore, the legal title to the tract of land in question vested in his seven children as tenants in common. It matters not how title is derived, whether by descent, under will or deed, tenants in common owning the legal title have the right to partition the land at such time as they may desire, or if they do not choose to partition the same, they may hold it jointly during such time as it suits their pleasure. It is not reasonable to suppose that it would for a moment seriously be contended that, pending partition, such tenants in common have not the right to incumber their undivided interest in the common property. This case is clearly distinguishable from the cases cited by the Circuit Judge, for the reason that at the time the Livingston-Johnson mortgage was executed Bradford Keel was in point of fact seized in fee of something more than one-seventh undivided interest in the tract of land. Even if it should be held that the bank's mortgage was a purchase-money mortgage, which we do not think it was, under the authorities of this state, it cannot be held to have priority over the Johnson mortgage, for the reason, as above stated, the bank had both constructive and actual notice of its existence.

We think that the Johnson mortgage has priority over the bank mortgage, and that Johnson should receive out of the purchase money, to wit, $6,200, a sum equal to that which the $3,075 of Bradford Keel bore to the purchase price of $30,000.

It is the judgment of this Court that the decree of the Circuit Court be reversed, and the case remanded to the Circuit Court to carry out the views herein expressed.

MR. CHIEF JUSTICE WATTS and MESSRS. JUSTICES STABLER and CARTER concur.