Cottrell & Sons v. Merchants & Mechanics Bank , 89 Ga. 508 ( 1892 )

Simmons, Justice.

1. The vital point of the controversy was, which of1 the parties was entitled to priority. The plaintiffs in their contract of sale reserved title to the press until the-purchase money should be fully paid, and the defendant bank was a subsequent moi'tgagee thereof without notice, as the jury found, of the reservation of title. The plaintiffs’ contract, being attested by one unofficial witness, was capable of being probated so as to prepare it for record, but was not recorded as required by the statute; the defendant’s mortgage was likewise not recorded within thirty days as the statute requires. The substance of the plaintiffs’ contention, as embodied in their requests to charge, involves two propositions: first, that they occupy as good a position as prior mortgagees with an unrecorded mortgage; second, that the defendant, by failing to record its mortgage in time, lost priority over the title reserved i-n the contract of sale. The defendant replies that plaintiffs do not stand on the same ground as first mortgagees, and that their contract, being not fully prepared for record and not recorded at all, is not valid as against third parties without notice. Now do the plaintiffs stand on equal footing with first mortgagees ? Certainly they have as much natural right to protection. They kept hold of title, the property was theirs, While the mortgagee has no title but only a lien on the property. In some cases, claims for purchase money are higher than those of mere mortgagees. A valid claim for purchase money will subject a homestead, where an ordinary mortgage would be unavailing. Judgment for the purchase money of land held under bond for titles is superior to all other liens and encumbrances. Code, §3654. And the anomalous right of stoppage in transitu exists for the special protection of unpaid vendors. So it is no strain to say that, in equity at least, a vendor reserving title is on as high a plane as a mortgagee advancing money on faith' of the property. But how does he stand in regard to the registry statutes ? The statute touching conditional sales is as follows: “ Whenever personal property is sold and delivered with the condition affixed to the sale, that the title thereto is to remain in vender of such personal property until the purchase price thereof shall have been paid, every such conditional sale,- in order for the reservation of title to be valid as against third parties, shall be evidenced in writing, and not otherwise. And the written contract of every such conditional sale shall be executed and attested in the same manner as is now provided by existing laws for the execution and attestation of mortgages on personal property: Provided, nevertheless, that, as between the parties themselves, the contract as made by them shall be valid, and may be enforced whether evidenced in writing or not. The existing statutes and laws of this State in relation to the registration and record of mortgages on personal property shall apply to and affect all conditional sales of personal property as defined in this section.” Code, §1955(a). The language of the last sentence quoted plainly involves or implies that the effect of failure to record the contract is the same as in failing to record a chattel mortgage. Morton v. The Frick Co., 87 Ga. 232. It follows that the junior mortgagee, to retain priority, must have recorded his mortgage in time. Myers v. Picquet, 61 Ga. 260. From the report of that case it does not appear whether the mortgaged property was real or personal; but there is no difference between the two in the statute or in principle, so far as failing to record is concerned. It may be said that the object of record is to notify subsequent purchasers or creditors ot the prior claim, and thus save them from being misled by the appearance of ownership resulting from possession ; that the plaintiffs, by failing to record, put it in the power of the party in possession to effect a fraud, and therefore they ought to bear the loss. This reasoning applies as well to mortgagees, who in Georgia usually leave the mortgagor in possession, as to vendors by conditional sale. According to the decision last cited, the -protection of the later mortgagee is conditioned upon his recording in time. His protection is absolute and unquestionable upon complying with that condition. The justice of requiring it is apparent. The first mortgagee has the best natural right; but by neglecting to record, hé becomes liable to lose the advantage of priority in time. The second mortgagee then gets the advantage of being without notice, but by neglecting to record in time, he becomes liable to lose his advantage as against all earlier liens. Where both parties fail to record, both are lacking in the diligence required by law as a condition for their protection. Neither can claim a better right because the other neglected to record. The law puts them on precisely equal terms in this respect. Neither having complied with the requirement to register, they are left where they would have stood regardless of the registry statutes. Consequently the first in time must prevail. The same considerations in justice apply to the case of a vendor reserving title; and it suffices to say that the statute manifestly intends to put him' on the same ground as a mortgagee of personalty.

In Steen v. Harris, 81 Ga. 681, a piano had been sold conditionally and the contract not l’ecorded. It was levied on under an attachment by a creditor whose debt was made after the conditional sale had been rescinded by agreement, and not on the faith of the property. 'The rescission was executed in part at least before the levy, though possession remained in the vendee. Thus the rescission terminated the relation of conditional vendor and vendee before the attaching creditor levied on the property. It was held that a verdict finding the property not subject was warranted by the evidence, and the court erred in granting a new trial. It was also held that the conditional element of the sale would count for nothing as against the attaching creditor, because the contract was not recorded. Likewise, in Gartrell v. Clay, 81 Ga. 827, it was held, where pi’operty was sold conditionally, without recording the contract, to a tenant, and, being kept upon the rented premises, was levied on and sold under distress warrant for the rent, that a verdict against the vendor, in an action of trover by him against the landlord, was demanded by the evidence. These decisions do not conflict with our ruling in the present case. In cases like 'that of an attaching creditor or a landlord, he would have a full and prevailing lien upon performing the essential requisites therefor. By regularly pursuing his remedy to the last step, he would defeat the conditional vendor who had failed to record his reservation of title. On the attaching creditor or the landlord there is no duty to record. The levy would be notice enough, if any be necessary, to the whole woi'ld. But here the case is very different. The mortgagee has neglected one vital step in his progress towards a successful assertion of his lien as against the vendor reserving title. The mandate of the statute requiring record has been disregarded by both parties. The contest is between two secret liens, of which the earlier in time is the stronger in right. Another important distinction lies in the different origin of the liens. The attaching creditor, and the landlord, each has a lien arising by operation of law, but the mortgagee’s lien arises by contract. The code, §1957, provides : “ Mortgages not recorded within the time required remain valid as against the mortgagor, but are postponed to all other liens created or obtained, or purchases made prior to the actual record of the mortgage. If, however, the younger lien is created by contract, and the party receiving it has notice of the prior unrecorded mortgage, or the purchaser has the like notice, then the lien of the older mortgage shall be held good against them.” Under this section it has been held that the lien of a mortgage rests on the contract, and not on the foreclosure, and an unrecorded mortgage, senior in date to a judgment lien, will be postponed thereto, although the judgment creditor have actual notice of the mortgage and the mortgage be foreclosed before the judgment was obtained. Andrews v. Mathews, 59 Ga. 466; Richards v. Myers, 63 Ga. 762; New England Co. v. Ober, 84 Ga. 294. The doctrine established by these cases is, that a junior lien by operation of law will take precedence of an older unrecorded mortgage lien, though actual notice of the latter be had by the holder of the junior lien. Consequently the attaching creditor, or the landlord, would take priority over the conditional vendor who failed to record, the latter having a lien by contract and being placed by the statute on the same footing as a mortgagee with respect to the matter of record. But where both liens rest on contract, as in this case, actual notice would defeat the later lien whether recorded or not. And by the ruling in Myers v. Picquet, supra, failure by the second mortgagee to record is as fatal to his claim of priority as actual notice. The section of the code last cited provides or implies that, if the younger contract lien was taken without notice, it would prevail over a prior unrecorded mortgage. But the generality of this is qualified by the requirement that mortgages shall be recorded, and by Myers v. Picquet, to the effect that if the younger contract lien is itself an unrecorded mortgage, it must yield to the elder mortgage.

The court erred in not charging the written requests set out in the 9th and 10th grounds of the motion, or something of substantially the same import.

It appears from what has just been said that the charge complained of in the 12th ground of the motion was incorrect. In substance the jury were instructed that, if the plaintiffs’ contract was not attested and recorded as the law requires, their reservation of title, although good as between the parties themselves, would not be good as to third persons, unless those third persons had actual knowledge that the title remained in the plaintiffs. So far as attestation is concerned, there could be no doubt that the contract was capable of being made recordable, by proving it by the subscribing witness before one of the officers named in the statute. Code, §1955 ; Nichols v. Hampton, 46 Ga. 253. But apart from the question of attestation, the charge complained of made the recording of the contract an indispensable condition of its validity against third persons who had no notice. This plainly conflicts with the provisions of law already discussed, the conclusion being that the later mortgagee, though without notice of the prior claim, by failing to record in time, suffered the advantage of want of notice to slip away, thus losing the security which diligence in recording would have made secure even against the plaintiffs’ title.

2. The substance of the contract between the plaintiffs and the publishing company is correctly stated in the official report preceding this opinion. The plaintiffs requested the court to construe it as a contract of bailment; but the court would not, and pronounced it a contract of conditional sale. Exceptions were taken to these rulings, which are set out in the 4th and 11th grounds of the motion for new trial. That the court construed the contract correctly- is not debatable, the same question having been decided in Hays v. Jordan, 85 Ga. 741. That case, in connection with the second head-note in this, will fully show the law here applicable.

3. Under the charge touching the effect of the notice given at the foreclosure sale just before the defendant bought in the property, it seems the jury ought to have found for the plaintiffs. There was a clear admission, and no denial, by the defendant of notice at that sale. The evidence was all one way to the effect that such notice was given. Perhaps the plaintiffs might well object that this charge opened up a question not raised in the evidence. But in view of the controlling principle of priority, the question of this notice was immaterial. The defendant, in buying at its own sale, could get no better standing against the plaintiffs than it had before. Therefore, under the facts and law of this case, the charge complained of, though wholly inappropriate, may be treated as of no considerable materiality.

Having determined that the plaintiffs’ title, on the uncontested facts of the case, must prevail over the defendant’s mortgage,it is manifestly unnecessary to discuss the other questions made in the record.

Judgment reversed.