Formerly it was held by our courts of equity that notice of a prior unregistered mortgage or deed in trust might be given by parol, and would give relief against a subsequent deed first registered. The consequence was that many deeds were withheld from the registry and were only used when the parties wished to do so.
It was found that many abuses and ills arose from this practice, and to obviate them the Legislature passed the Act of 1820, requiring all mortgages and deeds of trust to be registered within six months from their execution. But it was ascertain that the act only partially relieved the evil, and the Act of 1829 was then passed, which provided that "no deed of trust or mortgage for real or personal estate shall be valid at law to pass any property, as against creditors or purchasers for a valuable consideration from the bargainor or mortgagor, but from the registration," etc., and when a mortgage or deed of trust is registered upon a proper probate, it is held to have the effect of notice to all the world and attaches itself to the legal estate, and is notice to a subsequent purchaser from the mortgagor. Fleming v. Burgin, 37 N.C. 584; Leggett v.Bullock, 44 N.C. 283; Robinson v. Willoughby, 70 N.C. 358.
But it is insisted that the registration of the mortgage which (362) the plaintiff seeks to foreclose was a deed of mortgage from W. B. Jones to R. M. Austin and not to the plaintiff, and that when the purchaser came to examine the register's books he found no mortgage from W. B. Jones to the plaintiff, and the registration of the deed from Jones to Austin was no notice to him of any equity in the plaintiff. But the deed on its face showed for what purpose it was given. It clearly stated that Jones, in consideration of the fact that Austin had signed his note *Page 316 to the plaintiff as security, executed the deed to secure the said Austin against loss or liability as such. It was notice to the world that Jones had conveyed the property in question to Austin as an indemnity to him as surety on his note payable to the plaintiff. If the registration is notice of the existence of the deed, it is notice also of its contents, and of the nature and extent of the charge. 1 Jones on Mortgages, sec. 593. For whatever is sufficient to put a party on inquiry, he is presumed to have notice of every fact and circumstance which a proper inquiry would enable him to find out. I Story's Jurisp., sec. 400; Blackwood v. Jones,57 N.C. 54.
Assuming, then, that the defendant is affected with notice of the mortgage, the question arises, Did the mortgage inure to the benefit of the plaintiff Ijames?
The principle is so well settled, as not at this day to admit of controversy, that when a mortgage is given by a principal debtor to his surety to indemnify him as such surety, the creditor has an equitable claim to the securities, and upon the insolvency of both principal and surety may have the security subjected to the satisfaction of his debt, and this is so not only when the condition is that the mortgagor shall pay the debt, but also when it merely stipulates that he shall indemnify the surety., Jones on Mortgages, sec. 387. In deeds of this character it is held that the debt of the creditor supplies the consideration to support it, and consequently the creditor is considered the primary object of the trust, and the indemnity of the surety is secondary, to follow as an incident the payment of the debt to the creditor out of the (363) funds which his debtor has provided." Wiswall v. Potts, 58 N.C. 184. To the same effect is Matthews v. Joyce,85 N.C. 258.
The principle is one founded in the clearest justice. The assignment of the security by the principal debtor to his surety is an implied appropriation of the property or funds to the payment of the debt. For it makes no difference whether the surety appropriates the funds at once to payment of the debt or advances out of his own pocket the money, he would still hold it for his indemnity so, quacumque via data, the security is ultimately applied to the payment of the debt. We think it clearly to be gathered from the authorities that as soon as such a deed of indemnity is given, the equitable right of the creditor attaches to it, and it is not in the power of the surety to put it beyond the reach of the creditor. If this were not so, the principal debtor, by collusion with the surety or by providing against the contingency of his having the debt to pay, which might never happen, the creditor might be hindered and defrauded out of the collection of the debt. *Page 317
The same doctrine is maintained in Vermont. In Merrill v. Merrill,53 Vt. 74, it was held that "when an assignment of securities is made by the principal to the surety for indemnity merely, an implied trust is raised in favor of the creditor, which he may enforce on the maturity of the debt, whether the surety has been damnified or not, and whether the principal or surety, either or both, are insolvent," and numerous cases are cited by the court in support of the proposition.
The fact that the action upon the note in question is barred, after three years, as against Austin, the surety thereto, cannot affect the plaintiff's remedy upon the mortgage, for the limitation provided by statute for the enforcement of liens by mortgage is ten years; and although the remedy upon the note may be taken away by the lapse of time, "the debt itself, which the mortgage is given to secure, remains unsatisfied, and the enforcement of the security to coerce the payment of the debt is permitted upon equitable rules." Capehart v. Dettrick, 91 N.C. 344, and cases there cited, and in Jones on Mortgages, sec. 387, (364) the same doctrine is announced, with appropriate application to the facts of this case. There the author, after laying down the broad proposition that when the principal maker of a promissory note gives a mortgage to his surety on the note to save him harmless, it creates a trust and an equitable lien for the holder of the note, adds, "and even after the surety's liability to the holder of the note is barred by the statute of limitations, he hold the property subject to such trusts and liens."
Our opinion is there was no error in the judgment of the court below. This must therefore be certified to the Superior Court of Davie County, that the case may be proceeded with in conformity with this opinion.
No error. Affirmed.
Cited: Cooper v. Middleton, 94 N.C. 94; Branch v. Griffin, 99 N.C. 181;Harper v. Edwards, 115 N.C. 248; Holden v. Strickland, 116 N.C. 191;Sherrod v. Dixon, 120 N.C. 67; White v. Fox, 125 N.C. 547; Blantonv. Bostic, 126 N.C. 421; Whitted v. Fuquay, 127 N.C. 73; Menzel v.Hinton, 132 N.C. 663; Hill v. R. R., 143 N.C. 566; Lumber Co. v.Trading Co., 163 N.C. 317; Wynne v. Grant, 166 N.C. 45; Barber v.Absher Co., 175 N.C. 606; Pritchard v. Williams, 178 N.C. 446; Boyd v.Typewriter Co., 190 N.C. 799; Whitehurst v. Garrett, 196 N.C. 157;Mills v. Kemp, 196 N.C. 314. *Page 318