Opinion
13072
February 20, 1931.
Before JOHNSON, J., Hampton, July, 1929. Affirmed.
Proceedings on the petition by B.T. DeLoach, Clerk of Court for Hampton County, for advice as to disposition of money paid to him in conformity with the order of the Court on execution of a deed in the case of Lena May Lawton against Walter Theus and J.T. Theus and others. From an order of distribution, J.T. Theus, Jr., appeals.
Affirmed.
The decree of Circuit Judge Johnson, requested to be reported, follows:
This matter comes before the Court on petition of B.T. DeLoach, Esq., as Clerk of Court for Hampton County, S.C. asking to be advised as to what disposition should be made of the sum of $4,975 paid to him in conformity with a certain order of Court on the execution of a deed by the said Clerk of Court, J.T. Theus, Jr., of a tract of land in Hampton County, S.C.
The matter is considerably involved, and for a full understanding of the same, it will be necessary to review the entire history as presented to this Court. A petition and the rule to show cause was issued by this Court on the 22d day of June, 1929, directed to all parties now having any interest in the matters herein involved, requiring them to show cause why the Clerk of Court of Hampton County should not be required to pay over to the Sheriff of Hampton County a sufficient amount of the said funds in his hands to satisfy the judgment now held by J.T. Theus, Jr., with the interest and costs thereon. This matter comes before the Court in equity, and a comprehensive history of the same is as follows:
In 1917, E.B. Lawton, now deceased, being the owner in fee-simple of a tract of land in Hampton County containing 294 acres, conveyed the same to F.M. Lykes. F.M. Lykes immediately executed to E.B. Lawton a purchase-money mortgage over the same premises, which mortgage, when foreclosed at a later date, had due upon it approximately $8,560 the said amount being the amount of taxes due at the time of foreclosure, together with the costs and expenses adjudged in this action, together with the balance due upon principal and interest on the mortgage indebtedness.
That at a later date, to wit, on the 2d day of December, 1921, the said F.M. Lykes made, executed, and delivered to J.W. Mayfield a second mortgage over the said premises, which amounted at the date of foreclosure to the sum of $9,500.
It appears, and I so find, that the following judgments were rendered on the dates mentioned and in the amounts set forth below:
Commercial Bank, dated 8-17-22, $3,014.70.
Savannah Guano Company, dated 10-18-22, $525.09.
Savannah Guano Company, dated 10-18-22, $2,384.15.
Seacoast Fertilizer Company, dated 10-18-22, $1,675.19.
Southern States Phosphate Fertilizer Company, dated 10-18-22, $1,070.65.
Bowden Company, dated 5-10-23, $87.11.
M. Citron, dated 2-11-24, $153.42.
Atlantic Wholesale Company, dated 2-11-24, $115.
It then appears, and particular attention is given to this statement because of its importance in the decision of this case, that National Loan Exchange Bank, on the 12th day of May, 1924, obtained a judgment against the said F.M. Lykes in the sum of $2,276.90.
While not material, it does appear that the Bank of Hampton, on the 26th day of February, 1925, obtained a judgment against the said F.M. Lykes in the sum of $343.52.
All of these judgments bear interest from the dates thereof at the rate of 7 per cent. per annum.
The second mortgagee, and each of the persons and concerns holding the judgments mentioned, were joined as parties to the foreclosure of the purchase-money mortgage held originally by E.B. Lawton, except the judgment of National Loan Exchange Bank.
It appears, and I so find, that E.B. Lawton died testate, and Mrs. Lena May Lawton, who is a party to this proceeding, succeeded to his rights in regard to the said purchase money mortgage.
It is set forth in the return of the respondent Jim T. Theus, Jr., that Mrs. Lena May Lawton, being the owner and holder of the purchase-money mortgage, purely for purposes of collection, assigned the same to Walter Theus, who, in the collection of the same, instituted the foreclosure proceeding above mentioned. It also appears by the return of Mrs. Lena May Lawton that this said Walter Theus was a close personal and confidential advisor of Mrs. Lena May Lawton, a woman of more than seventy years of age and not versed in business matters, and that Mr. Theus had taken charge of all of the renting and of numerous other of the business affairs of the said Mrs. Lawton. The foreclosure proceeding instituted by Walter Theus for Mrs. Lawton against Lykes resulted in a sale at public outcry of the said premises at Hampton, on which sale the property brought the sum of $1,000, which sum was applied to the payment of the costs of the foreclosure, the taxes due on the property, and a small amount to the plaintiff in that action, leaving a deficiency of the sum of approximately $7,560. The total of said mortgage debt and costs was more than $8,600.
Approximately six months later, Mrs. Lawton executed and delivered to Walter Theus and his assigns an option to purchase the said property for the sum of $5,000, to be paid $25 on the execution of the option, and $4,975 on the execution of a deed; the option, among other things, reciting as follows: "At her own proper cost and expense execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, to the said party of the second part, or to his assigns, a proper deed containing a general warranty and the usual full covenants for the conveying and assuring to him the fee-simple of the said premises, free from all encumbrances."
It appears that Mrs. Lawton, after the execution of the said option to Walter Theus, was offered $8,500 for the said property by another person, and that she instituted an action against Walter Theus to set aside the said option for fraud and undue influence. The question of fraud was adjudicated in that action, and it was held that there was no fraud perpetrated upon Mrs. Lawton by Theus. This issue of fraud was submitted to a jury, and the Hon. Wm. H. Grimball passed an order directing that upon payment of the sum of $4,975, she execute the deed as called for by the option. Judge Grimball, by his order, allowed the holder of the option a period of three months after the actual expiration thereof within which to make the payment, and also provided that on failure of Mrs. Lawton to execute the deed upon such payment to her, that the Clerk of Court for Hampton County, on payment to said Clerk of the sum of $4,975, do execute to the holder of the said option a good and sufficient deed.
Walter Theus transferred the said option to Jim T. Theus, Jr.
Another complication arises by reason of the fact that on the 27th day of September, 1927, prior to the decision of the Court in the case just mentioned whereby it was sought to set aside the said option for fraud, J.T. Theus, Jr., obtained from National Loan Exchange Bank of Columbia, S.C. on payment to it of the sum of $500, a transfer of the said bank's judgment against F.M. Lykes amounting to $2,276.90 as of date May 12, 1924. It also appears that the said Jim T. Theus, Jr., is a brother of the said Walter Theus, was a witness to the option given by Mrs. Lawton to Walter Theus, as well as the assignee thereof, and also was the grantee of the Clerk of Court in the deed by which the lands in question were transferred to him.
In addition thereto, it also appears that at the time of the payment of $4,975 into the hands of the Clerk of Court by the said Jim T. Theus, Jr., he noticed the Clerk of Court that he would contend that there was no merger of the judgment held by him with the title that he was obtaining from the Clerk of Court.
This Court thinks that the value of the land at the time of the foreclosure is a pertinent inquiry, and from the record in the case as presented finds that the property sold at public outcry in the foreclosure action for the sum of $1,000; that six months later a purchase price at private sale as between Walter Theus and Mrs. Lena May Lawton of $5,000 was obtained, and that while Mrs. Lawton contended in the action whereby she sought to set aside the option for fraud and undue influence that she had been offered the sum of $8,500, this Court is of the opinion that the value of the said property at the time of the foreclosure, at the time of the option, and now, in no event could exceed the amount of the mortgage indebtedness and costs, which was in excess of $8,500, and the Court finds as a fact that the actual value of the said property at the time of the foreclosure was, now is, and at all intervening times was, certainly less than the amount of the purchase money mortgage which was foreclosed.
In addition thereto, the parties to the foreclosure action held claims which amount in the aggregate to more than $30,000, including the first mortgage, the second mortgage, and the judgments hereinbefore mentioned by the Court, all of which, except the Bank of Hampton judgment for $342.52, were prior judgments to the judgment of National Loan Exchange Bank under which Jim T. Theus, Jr., now claims approximately $3,000 of the funds now in the hands of the Clerk of Court for Hampton County.
This Court holds that National Loan Exchange Bank was a proper party, but not a necessary party to the action in foreclosure.
This case is equitable in its nature, and I have given very careful consideration to its various phases.
It appears to me that upon consideration of all of the equities involved resulting from my finding, no doubt exists that Mrs. Lawton, under all of the facts and circumstances, should be adjudged entitled to the funds now in the hands of B.T. DeLoach, Esq., as the Clerk of Court.
It was admitted to me in argument, and established by the verified pleadings, that F.M. Lykes was a married man, a resident of South Carolina, the head of a family, and entitled to a homestead exemption, which, under the Constitution and laws, would entitle him to a homestead exemption as against all judgments which are hereinbefore set forth.
It is so ordered, adjudged, and decreed.
It is further ordered that B.T. DeLoach, Esq., as Clerk of Court, forthwith pay to the said Mrs. Lena May Lawton, or her attorneys, George Warren, Esq., and Randolph Murdaugh, Esq., the sum of $4,975.
It is further ordered that Jim T. Theus and Jim Theus, or J.T. Theus, Jr., as mentioned in this proceeding, be adjudged to have no interest whatsoever in the said funds now in the hands of B.T. DeLoach, Esq., as Clerk of Court, and
It is further ordered that C.V. Thomas, as Sheriff, upon the service upon him of a certified copy of this order, be, and he is hereby, restrained and enjoined from proceeding in any further efforts to enforce said judgment in so far as, and only in so far as, the said sum of $4,975 is concerned.
Let the original of all papers in connection with this matter be filed with the Clerk of Court for Hampton County, S.C.
Mr. Hugh O. Hanna, for appellant, cites: Stipulation to prevent merger valid: 68 S.C. 102, 46 S.E., 455. Action to set aside option and for specific performance is in equity: 1 Hill Eq., 288, 139 S.C. 156, 137 S.E., 439. Action to collect judgment is at law: 15 R.C.L., 794, 799. Courts will enforce equitable rights necessarily involved in decision of legal issues: 74 S.C. 42. No greater relief should be allowed than could be obtained at law: 10 R.C.L., 350, 351. Party will not be relieved from contract because it is improvident: 10 R.C.L., 352. Equity will not secure a right contrary to agreement: 93 S.C. 229, 76 S.E., 698. Nor relieve one from his own folly or neglect: McMul. Eq., 81. Equity follows law: 1 McCord Eq., 333, 10 R.C.L., 381, 2 Hill Eq., 611, 80 S.C. 151, 61 S.E., 423. Early decisions held that mortgage would be extinguished by conveyance of the equity to the mortgagee: 20 S.C. 555, 17 S.C. 499, 27 S.C. Eq., 343, 8 S.C. Eq., 334. Unless there is covenant in the deed to the contrary: 27 S.C. 462, 4 S.E., 233, 26 S.C. 424, 2 S.E., 319, 26 S.C. 401, 2 S.E., 307 24, S.C., 18. Later it was held intention not to merge could be made by oral contract: 68 S.C. 102, 46 S.E., 555. Decisions reviewed and clarified: 74 S.C. 42, 53 S.E., 978, 120 S.C. 408, 114 S.E., 279. General warranty includes covenants that land is free from encumbrances: 9 Rich. Law, 374, 60 S.C. 211, 45 S.E., 184. If mortgagee convey land proves merger: 41 C.J., 778. Burden upon party alleging no merger: 41 C.J., 777, 87 S.C. 47, 68 S.E., 888. Judgment is a lien upon all of debtor's real estate except homestead exemption: 147 S.C. 259, 145 S.E., 113. Purchaser takes subject to right of encumbrancers not parties to suit: 7 S.C. 329, 9 S.C. 196, 84 S.C. 505, 66 S.E., 124. Option was for benefit of holder and inured to benefit of any third party who had rights thereunder: 152 S.E., 878. Policy of law to sustain liens: 17 R.C.L., 599. Judgment though not a lien is an encumbrance: 26 S.C. 1, 11 S.E., 1099, 2 Speers, 652.
Messrs. George Warren and Randolph Murdaugh, for respondent, cite: Case controlled by 141 S.C. 152, 139 S.E., 405.
February 20, 1931. The opinion of the Court was delivered by
The decree of his Honor, Circuit Judge Johnson, in this cause, is fully sustained by the recent case of Peeples v. Snyder, 141 S.C. 152, 139 S.E., 405.
The order appealed from is affirmed.
MESSRS. JUSTICES BLEASE, STABLER and CARTER concur.
MR. JUSTICE COTHRAN concurs in result.
I concur in the result of the opinion of Mr. Justice Cosgrove affirming the decree of his Honor Judge Johnson upon the grounds which I shall hereinafter state.
This is a case sui generis: I have never heard of anything like it before.
It appears that in 1917 E.B. Lawton conveyed a tract of 294 acres to F.M. Lykes, upon certain terms which are not set forth in the record, but which involved the execution by Lykes to Lawton of a purchase-money mortgage; later, on December 2, 1921, Lykes gave a second mortgage on the premises to J.W. Mayfield; later, between August 17, 1922, and February 11, 1924, several judgments, at different dates during that period, by various creditors, and in various amounts, aggregating approximately $9,000, were entered up against Lykes, each judgment bearing interest from its date, as set forth in the circuit decree; junior to these mortgages and judgments, on May 12, 1924, the National Loan Exchange Bank of Columbia entered up a judgment against Lykes for $2,276.90; later, on February 26, 1925, the Bank of Hampton entered up judgment against Lykes for $343.50.
The first mortgagee, Lawton, died some time later, leaving a will under which his wife, Mrs. Lena Lawton, became the owner of the first mortgage.
Prior to the commencement of the present action, the nature of which will be later explained, Mrs. Lawton, the holder of the first mortgage, assigned the note and mortgage to one Walter Theus, as her assignee, for the purpose of collecting the same or of foreclosing the mortgage if necessary. Walter Theus as assignee then commenced an action in foreclosure about September 27, 1926. The mortgagor Lykes, and the second mortgagee Mayfield, were made parties defendant to that suit, as also were the judgment creditors above referred to, with the exception of the National Loan Exchange Bank.
The amount due upon the first mortgage at the time of the institution of the foreclosure proceeding referred to, including interest and attorney's fees, was approximately $8,560; upon the second mortgage approximately $9,500; and upon the judgments about the sum of $12,000; as stated, the National Loan Exchange Bank was not made a party to the foreclosure proceeding; its judgment amounted to $2,276.90, with interest from April 3, 1924. The other judgment creditors (including, I assume, the judgment of the Hampton bank) were made parties; their liens were prior to that of the judgment in favor of the National Loan Exchange Bank.
The foreclosure proceedings resulted in a judgment of foreclosure and sale; the property was sold on November 9, 1929, and bid in by Mrs. Lawton, to whom the Clerk of Court made title, the date of the deed being December 6, 1926.
On June 28, 1927, Mrs. Lawton executed to Walter Theus an option to purchase the 294 acres which she had bought at foreclosure sale, for the sum of $5,000, $25 in cash and balance within the time stated in the option; she bound herself to convey to Walter Theus, or his assigns, a fee-simple title to the premises free from all incumbrances, upon his compliance with the terms of the option.
On September 9, 1927, Mrs. Lawton brought an action against Walter Theus, alleging that the option which she had given to him was fraudulently obtained and should be canceled of record. The case was tried at October term, 1928, before his Honor Judge Grimball and a jury. The issue was submitted to the jury whether or not the option was secured by fraud. The jury found a verdict in favor of Theus, and thereupon his Honor Judge Grimball issued a decree and order holding the option valid, and directing Mrs. Lawton to execute her deed to Walter Theus or his assigns, in conformity with the option, upon the tender or payment to her of $4,975, and if she failed to convey, clear of all incumbrances, directing the Clerk of Court, upon payment to him by Walter Theus or his assigns of the sum of $4,975, to make title to him; the said funds to be subject to the same liens and incumbrances that might exist upon the premises; the said purchase money to take the place of the land, and the clerk to hold the funds subject to the further order of the Court.
Pending the suit above referred to by Mrs. Lawton to set aside the option which she had executed to Walter Theus, J.T. Theus, Jr., a brother of Walter Theus, procured an assignment to him from the National Loan Exchange Bank of its judgment against F.M. Lykes, and after the decree of his Honor Judge Grimball holding the option valid, J.T. Theus, Jr., secured from Walter Theus an assignment of the option which Mrs. Lawton had executed to him (Walter Theus). J.T. Theus, Jr., then made a tender of the amount due upon the option to Mrs. Lawton, demanding, however, that she pay off in full the judgment in favor of the National Loan Exchange Bank which he claimed to be an incumbrance upon the premises. Mrs. Lawton refused to do this, and J.T. Theus, Jr., then filed a written notice with the Clerk of Court, accompanying the payment by him of $4,975, the balance due upon the option giving notice that in paying the money over to the clerk of the Court and taking title to the premises from him, he claimed to hold open the lien of the judgment which he had procured from the National Loan Exchange Bank, and that he intended no merger of that judgment with the deed which he proposed to take from the Clerk of the Court. The Clerk of the Court then executed a deed to J.T. Theus, Jr., of the premises in conformity with the order of his Honor Judge Grimball, setting out therein the notice which J.T. Theus, Jr., had filed with him, above referred to.
Later an execution was issued on the judgment of the National Loan Exchange Bank against F.M. Lykes; a copy of it was delivered by the sheriff to the Clerk of Court, and payment of the judgment demanded out of the $4,975 in the hands of the Clerk which had been paid in by J.T. Theus, Jr.
The Clerk of the Court then by ex parte petition in the cause of Lena May Lawton and Walter Theus and others, this case, set up these facts and asked to be advised to whom the money should be paid. The rule to show cause was issued upon all of the parties interested to show cause why the clerk should not pay over to the sheriff from said funds a sufficient amount to satisfy the same. The sheriff made return claiming payment of the judgment; Mrs. Lawton made return claiming that she was entitled to all of the money free and discharged of all claims or liens.
The matter came up before his Honor Judge Johnson on July 6, 1929, upon the rule to show cause and the return. He filed an order, dated September 11, 1929, directing the clerk to pay over all of the deposited money to Mrs. Lawton or her attorneys. It was accordingly so paid. From this order J.T. Theus, Jr., has appealed. The question is whether the judgment of the National Loan Exchange Bank, then owned by J.T. Theus, Jr., was a lien upon the funds paid in to the Clerk of the Court, and whether the same should be satisfied from said funds.
The appellant J.T. Theus, Jr., as assignee of the judgment of the National Loan Exchange Bank, can of course have acquired no other rights than his assignor, the bank, had at the time of its assignment to him. It is important therefore to consider what those rights were.
The bank was a lienee junior in rank to the mortgage which Lykes had given to Mr. Lawton, which was a purchase-money mortgage and a first lien upon the property; it was also junior to the second mortgage which had been given to Mayfield and to all of the judgments set out in the decree of his Honor Judge Johnson, with exception of the judgment of the Hamption Bank which being the lowest in rank of all of the liens may be disregarded.
In the foreclosure proceedings it appears that all of these lien creditors were made parties, except the bank. It appears also that at the sale Mrs. Lawton, the holder of the first mortgage, became the purchaser of the land. So that the inquiry is presented what were the rights of the bank, a junior judgment lienee which had not been made a party to the foreclosure proceedings, under the circumstance of the assignee of the first mortgage becoming the purchaser of the premises mortgaged.
I think that the appeal is to be determined by an application of the following principles:
(1) A junior lienee, whether by mortgage or judgment, is a proper but not a necessary party to an action by the senior mortgagee for the foreclosure of his mortgage. Douthit v. Hipp, 23 S.C. 205.
(2) A junior lienee by mortgage, who has not been made a party defendant to the action by the senior mortgagee, has the right, after the sale of the property under foreclosure proceedings, in the exercise of his right of redemption by payment in full of all prior liens, to maintain an action of foreclosure. 2 Jones on Mortg. (6th Ed.), § 1368 et seq.; Peeples v. Snyder, 141 S.C. 152, 139 S.E., 405.
(3) A junior lienee, by judgment, who has not been made a party defendant to the action by the senior mortgagee, has the right, after the sale of the property under foreclosure proceedings, in the exercise of his right of redemption by payment in full of all prior liens, to force a sale of the mortgaged premises under an execution issued upon his judgment, and have the proceeds applied to the payment of the liens acquired by him.
(4) If the property shall have been bid off at the foreclosure sale by some one other than the senior mortgagee, the junior lienee, whether by mortgage or judgment, is not entitled to enforce his lien without exercising his right of redemption by payment in full of all prior liens.
(5) If the property shall have been bid off at the foreclosure sale by the senior mortgagee, to whom title shall have been made, the junior lienee, whether by mortgage or judgment, has the right to enforce his lien without being obliged to exercise his right of redemption. 2 Jones, Mortg. (6th Ed.), § 1395.
(6) If the senior mortgage shall have been executed to secure payment of the purchase money of the property mortgaged, a sale under foreclosure of the senior mortgage and a purchase of the property at such sale by the senior mortgagee or a third person will divest the lien of a junior lienee whether by mortgage or judgment and will convey to the purchaser full title, free from incumbrances, whether the junior lienee may have been made a party to the proceedings or not. De Saussure v. Bollmann, 7 S.C. 329.
In the case at bar the appellant, claiming as assignee of the judgment of the National Loan Exchange Bank against the mortgagor Lykes, is necessarily limited to the rights of the bank; it was not a necessary party to the foreclosure suit instituted by the assignee of the senior purchase-money mortgage, and the rights of the bank are measured by the principles above announced, and as under the orders of the Court which were passed in the proceeding to which the appellant was a party and after he had acquired by assignment the bank judgment, the funds in the hands of the Clerk of Court are directed to be treated as the property itself, the appellant has waived his right to a sale of the property under execution upon the bank's judgment; and regardless of this conclusion the title of the purchaser at foreclosure sale under the purchase-money mortgage is paramount to any interest which he has.
For these reasons I concur in the result of the decree of his Honor Judge Johnson.