[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 410
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 411 July 6, 1922. The opinion of the Court was delivered by These two actions were tried together. The first is an action to enjoin the enforcement of certain executions issued upon judgments recovered against D.H. Counts and levied upon certain real estate conveyed by Counts to Mrs. M.A. Owings. The second is an action to foreclose certain mortgages executed by Counts and claimed by M.J. Owings as assignee.
The cases were referred to a special referee to take the testimony, and were heard by his Honor, Judge Frank B. Gary, who filed a decree dismissing the first action and finding against the plaintiff in the second action. From his decree practically all of the parties appeal.
The cases are exceedingly complicated, and it will be necessary to cover the facts in an extended statement:
In the year 1909 D.H. Counts was the owner of a tract of land near the city of Laurens containing some 313 acres. He was a dealer in stock and vehicles and a farmer upon quite a large scale, running two farms, the Coleman place above described and another known as the Shaw place.
Owings Owings was a mercantile firm doing business in Laurens, composed of M.J. Owings and his aunt, Mrs. M.A. Owings, he having practically the sole management of the business, and she but slightly informed of its details.
Counts and the laborers on his farms, for whose accounts he was responsible, were being furnished supplies by Owings Owings, the arrangement running over a number of years, continuously from 1909 through the year 1914; Owings Owings each year taking chattel mortgages for the advances made and to be made. Counts and a man named Brown were also in 1914 running a farm as partners in Chesterfield County. At the end of 1914 the books of Owings Owings showed a balance due by Counts of $13,137.83 *Page 440 and by Counts Brown of $7,033.79, a total of more than $20,000.
Prior to the year 1914 Counts had executed two mortgages upon the Coleman place:
(1) The Lucas mortgage: This mortgage was a first lien upon the Coleman place. It was given by Counts to secure a note to the estate of W.E. Lucas, deceased, dated November 15, 1909, for $5,000, payable November 15, 1914, with interest from date at 8 per cent. per annum, payable annually, and 10 per cent. attorney's fees. The interest upon the note was paid by Counts up to November 15, 1914, after which he paid nothing. On November 1, 1917, the executors of Lucas assigned the note and mortgage to M.J. Owings he having paid the amount due thereon at that date.
(2) The Enterprise Bank mortgage: This mortgage was a second lien upon the Coleman place. It was given by Counts to secure two notes, one for $1,712.20, dated January, 5, 1911, due November 1, 1911, with interest after maturity at 8 per cent. per annum and 10 per cent. attorney's fees, and the other for $4,287.80, the date, maturity, and interest same as other note. The two notes aggregated $6,000. On November 1, 1912, the amount due on the first note was $1,712.20, and on the other $3,787.80, total, $5,500.00. On November 5, 1912, both notes and the mortgage were assigned by the bank to M.J. Owings.
In 1912, 1913, and 1914 the following judgments were entered against Counts:
1912.In March, 1914, the judgment creditors numbered 1, 2, 3, and 4, above, had issued executions upon their judgments and lodged them with the sheriff. Counts claimed homestead. The appraisers appraised the Coleman place at $7,500, and a house and lot in Laurens at $9,500. No exceptions were filed to the return and no further steps at that time were taken to enforce the executions, presumably for the reason that the mortgages exceeded the appraised value of the property. The house and lot were sold in 1915, but did not bring enough to pay the mortgage debt.(1) May. Nashville Saddlery Co. ______________$ 1,131.64 (2) Apr. Parker Mfg. Co. _____________________ 286.15 (3) Aug. Montgomery-Moore Co. ________________ 91.23 (4) Sept. Hughes Buggy Co. ___________________ 510.00 *Page 441 1913. (5) May. Lummus Gin Co. ______________________ 1,616.10 (6) Oct. Georgia Chemical Co. ________________ 354.35 1914. (7) Mar. Mitchell-Lewis Co. __________________ 1,447.47 (8) C.H. Russell Son __________________ 2,412.82 (9) Franklin Buggy Co. __________________ 319.46 (10) Navassa Guano Co. ___________________ 1,777.03 (11) May. B.T. Crump Co. ______________________ 188.37 (12) Shadburn Bros. ______________________ 480.00 (13) Brand Shoe Co. ______________________ 456.30 (14) A.A. Chemical Co. ___________________ 6,881.21 (15) A. Wrenn Sons _____________________ 405.50 (16) F.A. Ames Co. _______________________ 1,572.51 (17) Ratterman Luth ____________________ 1,256.65 (18) American Carriage Co. _______________ 578.80 (19) James Mayer Co. ___________________ 372.28 __________ Total (exclusive of costs) _________$21,137.77
It appears that in the Fall of 1914 Counts was "down and out" financially. He surrendered his lease of the Shaw place and leased the Coleman place to one C.W. Long, with the intention of discontinuing farming operations in Laurens County. *Page 442
On January 9, 1915, Counts and Owings Owings entered into a written agreement prepared and advised by Counts' attorneys, Messrs. Richey Richey, reputable members of the Laurens bar. This agreement, after reciting the fact that Counts, Counts Brown, and Brown were considerably indebted to Owings Owings for advances, secured by a mortgage of personality and crops, and that Counts Brown desired to continue farming operations in Chesterfield County and desired Owings Owings to carry over until the Fall of 1915 a part of said indebtedness and to furnish them with a certain quantity of corn, fodder, cotton seed, and fertilizers to enable them to make the crop of 1915, contained the following stipulations:
(1) That, if they continued farming operations in 1915, Counts Brown should keep 2,000 bushels of corn and 15,000 bundles of fodder then on the plantation raised in 1914 and covered by mortgage to Owings Owings, and that Owings Owings should furnish Counts Brown 50 tons of fertilizers and allow them to keep the mules and farming implements also covered by mortgage to Owings Owings to make the crop of 1915.
(2) That Counts Brown should immediately deliver to Owings Owings all crops then on the plantation, except the corn and fodder above named, to be credited at the market price on the indebtedness referred to.
(3) That Counts Brown should give to Owings Owings a first mortgage on all crops of 1915, and also all mules, farming implements, and lease then covered by mortgages to Owings Owings as security for the aforesaid indebtedness and the 50 tons of fertilizers.
(4) That D.H. Counts should turn over to Owings Owings all personal property over which they then had a mortgage, including a lot of cotton seed then at the Coleman place and to Farmers' Bank the mules over which it had a mortgage. *Page 443
(5) That D.H. Counts should convey to Mrs. M.A. Owings his interest in the Coleman place, together with the cotton gins, press, engine, and boiler and all cotton machinery then on the Coleman place and give immediate possession of the Coleman place to Mrs. M.A. Owings.
This instrument was executed in duplicate, dated January 9, 1915, signed "Owings Owings, by M.J. Owings," and witnessed by R.E. Babb and W.R. Richey, both attorneys of the Laurens bar, Mr. Richey being the attorney of Counts.
Accordingly, at the time that the agreement was consummated by execution, Counts executed a deed conveying the Coleman place to Mrs. M.A. Owings, in consideration of $5. The general warranty contained this exception:
"Except as against the mortgage given to E.R. Lucas et al., trustees, for $5,000.00, and the mortgage given to the Enterprise Bank for $6,000.00, on which a part has been paid."
It is dated January 9, 1915, probated before W.R. Richey, notary public, dower renounced January 13, 1915, and recorded January 23, 1915. M.J. Owings testified:
"The understanding with reference to the mortgages was that I was to take up the mortgages on the land."
Mrs. M.A. Owings states in her answer:
"That she assumed the payment of the mortgages as a part of the consideration for the purchase of the land."
The Coleman place then being under lease to Long under contract with Counts, possession could not be delivered to Mrs. M.A. Owings, but it seems that Long attorned to her, and that she (or M.J. Owings for her) collected the rents during the following years, in the amounts stated:
1915 — $1,350.00, less taxes $43.50 _________$1,306.50
1916 — 2,190.00, less taxes 18.10 _________ 2,171.90
1917 — 3,360.00, less taxes 60.53 _________ 3,299.47
*Page 444
1918 — 3,600.00, less taxes 67.00 _________ 3,533.00
1919 — 4,440.00, less taxes 80.51 _________ 4,359.49
__________ _______ __________
$14,940.00 $269.64 $14,670.36
A disagreement ensued early in January, 1915, between Counts and Brown with reference to certain money claimed by Brown to be due to him by Counts, and Brown refused to continue the farming operations with Counts in Chesterfield County, and consequently Owings Owings did not comply with their stipulations to furnish certain advances to the firm of Counts Brown, the agreement to do so being dependent upon their continuing farming operations for the year 1915.
In September, 1915, Counts left Laurens and went to Florence, where he resided until he returned to Laurens in September, 1917, for the purpose of re-entering into business. He then conceived the idea of buying up the oldest of the judgments against himself, and first suggested it to his friend and kinsman, the defendant H.M. Graham. Both testify that it was to be done solely for the benefit of Graham, he taking over the claims and holding Counts for nothing, intending to give him no benefit in the transactions. Immediately Counts began to take up with the various judgment creditors the acquisition of the judgments. The negotiations, which will be considered in detail later, resulted in the assignments of the following judgments to Graham and the defendant, M.W. Dendy.
The following statement shows the judgments claimed to have been assigned to H.M. Graham with the amounts paid therefor by him:
No. 1. Nashville Saddlery Company $1,131.64 $114.00
No. 2. Parker Mfg. Company ______ 286.15 75.00
No. 3. Montgomery-Moore Company 91.23 20.00
No. 4. Hughes Buggy Company _____ 518.00 98.90
No. 6. Georgia Chemical Company 354.35 35.00
*Page 445
No. 7. Mitchell-Lewis Company ____ 1,447.47 185.24
No. 9. Franklin Buggy Company ____ 319.46 50.00
No. 10. Navassa Guano Company 1,777.03 178.19
_________ _______
$5,925.33 $756.33
And the same to M.W. Dendy:No. 8. C.H. Russell Son ________ $2,412.82 241.77On March 5, 1918, H.M. Graham, claiming to be the owner and assignee of the judgments numbered 1, 2, 3, 4, and 6, lodged executions with the sheriff and caused the same to be levied upon the Coleman tract of land, which, as before stated, had been conveyed by Counts to Mrs. M. A. Owings pursuant to the agreement of January 9, 1915, The land was advertised for sale by the sheriff. Thereupon Mrs. M. A: Owings commenced the action first stated in the title hereof against Graham and the sheriff for the purpose of enjoining the sale, alleging that the judgments had in fact been paid off by Counts, and that the assignments to Graham were pretensive. Upon the complaint in this action Judge Shipp granted an injunction pendentelite. Thereafter the defendant M.W. Dendy, claiming to be the owner of the judgment numbered 8 above, lodged an execution with the sheriff and caused the same to be levied upon the Coleman place and had the same advertised for sale in June, 1918. Thereupon M.J. Owings, claiming to be the assignee of the Lucas and Enterprise Bank mortgages, commenced the other action stated in the title hereof against Mrs. M.A. Owings, D.H. Counts, H.M. Graham, and the judgment creditors of D.H. Counts for foreclosure of said mortgages and for injunction against the sale. Upon this complaint Judge Sease granted an injunction pendente lite. Let the complaint and the answers be reported, with the Circuit decree.
The questions apparently arising upon the exceptions and discussed in the arguments will be taken up in what appears to us their logical order. *Page 446
Does the grantee, Mrs. M.A. Owings, in the conveyance from D.H. Counts of the Coleman place, really hold the title for the firm of Owings Owings? The agreement from which the conveyance resulted was negotiated by M.J. Owings, the active partner in the firm. The consideration was furnished by the partnership. The obligations assumed were those of the partnership. As D.H. Counts in his answer alleges: "The deed to the mortgaged premises was made to Mrs. M.A. Owings and the mortgages were assigned to M.J. Owings for the purpose of preventing the mortgages from being merged into the title," an allegation which is sustained by the evidence. We conclude, therefore, that the title is in Mrs. M.A. Owings as a trustee for the partnership.
Does the assignee, M.J. Owings, in the assignment of the Enterprise Bank mortgage, really hold the title for the firm of Owings Owings? This assignment was executed on November 5, 1912, more than two years prior to the execution of the agreement of January 9, 1915. There is no evidence tending to show that this was other than an individual transaction. The debt was secured by two notes, one for $1,712.20 and the other for $4,287.80, total, $6,000.00. Treating the two notes as one note for $6,000.00, the obligation was dated January 5, 1911, due November 1, 1911. It was not paid at maturity, and was allowed to run on until July 12, 1912; various small credits having been entered in the meantime. The balance due on July 1, 1912, was $5,211.15; that is, $6,000 less the intermediate credits of $788.85. On July 12, 1912, a new note was given by Counts for $5,509.80, due November 1, 1912, which represented the balance of the $6,000 unpaid, $5,211.15, and the interest charged to November 4, 1912. A few days after the maturity of this new note for $5,509.80, Owings made a settlement of it with the bank by paying $2,000 cash and giving his note for the balance ($3,509.80 plus $97 discount), $3,606.80, payable *Page 447 March 4, 1913. Thereupon the bank assigned the notes and mortgage to M.J. Owings. The note for $3,606.80 due March 4, 1913, was paid by a cashier's check given by Palmetto Bank to Enterprise Bank, the proceeds of a loan made at that time by Palmetto Bank to Counts and Owings. This loan was evidenced by three notes signed by Counts, payable to and indorsed by Owings, each dated March 10, 1913, (1) $1,200, due November 15, 1913, (2) $1,200, due December 1, 1913, (3) $1,412, due December 15, 1913, total, $3,842, less discount $230.40, $3,611.60, which was sufficient to pay off the Enterprise Bank not of $3,606.80 plus the interest $4.70, the note being overdue six days. None of these notes were paid at their maturities, and on January 16, 1915, M.J. Owings made a note to the Palmetto Bank for $3,842 and paid the interest, $298.85. As the cashier testified, "Mr. Owings gave his personal note and Mr. Counts dropped out," which he afterwards paid.
Does the assignee, M.J. Owings, in the assignment of the Lucas mortgage, really hold the title — for the firm of Owings Owings? This assignment was executed on November 1, 1917, nearly three years after the execution of the agreement of January 9, 1915. D.M. Counts alleges and testifies that the assumption of this mortgage was a part of the consideration of the conveyance. Mrs. M.A. Owings so alleges in her answer, and M.J. Owings so testifies. The conclusion that this was virtually an assignment to Owings Owings follows naturally from these facts and from the conclusion above that Mrs. M.A. Owings holds the title to the land for the partnership.
If M.J. Owings, assignee of the Enterprise Bank mortgage, really holds the title for the firm of Owings Owings, and Mrs. M.A. Owings, the grantee in the conveyance, holds the title to the land for said firm, does the doctrine of merger apply, extinguishing the Enterprise *Page 448 Bank mortgage? Our conclusion that M.J. Owings holds the assignment of this mortgage individually precludes the necessity for any further discussion of this question.
5. If M.J. Owings, assignee of the Lucas mortgage, really holds the title for the firm of Owings Owings, and Mrs. M.A. Owings, the grantee in the conveyance, holds the title to the land for said firm does the doctrine of merger apply, extinguishing the Lucas mortgage?
The judgment of this Court in the case of McCreary v.Coggeshall, 74 S.C. 42, 53 S.E. 978, 7 L.R.A. (N.S.) 433, 7 Ann. Cas. 693, sustained by the masterful opinion of Mr. Justice Woods, now United States Circuit Judge, renders an extended discussion of this question unnecessary. The principle there announced, reaffirmed in Gainey v.Anderson, 87 S.C. 47, 68 S.E. 888, 31 L.R.A. (N.S.) 323, is that merger will not take place if opposed to the intention of the parties, affirmatively proved, or to be implied from the fact that merger would be opposed to the interest of the person in whom different estates or interests became invested. This is in harmony with text-writers and decisions everywhere.
"There is generally an advantage to the mortgagee in preserving his mortgage title; and where there is, no merger takes place. It is a general rule, therefore, that the mortgagee's acquisition of the equity of redemption does not merge his legal estate as mortgagee so as to prevent his setting up his mortgage to defeat an intermediate title, such as a second mortgage or a subsequent lien, unless such appears to have been the intention of the parties and justice requires it; and such intention will not be presumed where the mortgagee's interest requires that the mortgage should remain in force." 1 Jones, Mtg. (6th Ed.) § 870.
"It may therefore be deduced from the authorities as a general rule that, when the mortgagee acquires the equity *Page 449 of redemption, in whatever way, and whatever he does with his mortgage, he will be regarded as holding the legal and equitable titles separately, if his interest requires this severance. The law presumes the intention to be in accordance with his real interest, whatever he may at the time have seemed to intend." 1 Jones, Mtg. (6th Ed.), p. 917.
The direct evidence is ample that a merger was not intended, and the implication is to the same effect from the apparent interest of the parties that there should be no merger. A strong reason for sustaining this position is the absence of any inequity to the judgment creditors whose condition would not be injuriously affected thereby.
6. Is the Enterprise Bank mortgage subject to a credit of $2,000 claimed to have been paid thereon by D.H. Counts? The defendant Counts and the judgment creditors contend that a part ( $2,000) of the payment made by Owings to the Bank in November, 1912, was of funds belonging to Counts, and for that reason it should be charged up to Owings, reducing the balance due thereon pro tanto.
The testimony as to who actually supplied the $2,000.00 which was paid to the Enterprise Bank is inconclusive. Counts swears that Owings paid it out of money to his credit on the store account. Owings swears that he paid it out of his own funds. The note bears a memorandum that the payment was made by Owings. The cashier swears that Owings personally made the payment. Counts has no receipt or other written evidence to sustain his statement, and the reason he gave for the payment by Owings out of his (Count's) money, that the mortgage should not show upon its face that it had been reduced, indicates a purpose to deceive some one and to gain a benefit to himself thereby, and does not commend it at all to a support of his contention. The action of the Circuit Judge in allowing *Page 450 interest upon the mortgage balance from November 5, 1912, is at the least a failure to sustain the contention of Counts. The ledger account of Owings Owings does not show a charge against Counts of $2,000 at that time, which would naturally have appeared if Owings had paid this sum for Counts out of money then in his (Owings') hands.
In view of the admitted fact that Owings personally made the payment, that the bank books and the memoranda on the notes show that Owings paid it, the burden was upon Counts to overcome this presumption, which he has hardly sustained by the explanation disclosing a questionable purpose.
Counts is evidently mistaken in his statement that he paid the first discount on the three notes given to Palmetto Bank to raise the $3,611.60 balance due the Enterprise Bank, for the books of the Palmetto Bank show that the amount of these notes was $3,842, from which was deducted the discount, $234.40, and the balance, $3,611.60, paid by cashier's check to the Enterprise Bank.
Was the agreement of January 9, 1915, tantamount to a preferential assignment under the assignment law and void? It is contended also by Counts and the judgment creditors that the transaction whereby Counts conveyed the Coleman place to Mrs. M.A. Owings and all of his property to Owings Owings amounted to an illegal preference under the assignment law and is void.
Counts, in his answer, makes no such contention. He certainly could not be heard, at any rate, to attack the validity of his own deed upon his own alleged complicity in an unlawful act. If it be void or voidable, the invalidity must be urged by the creditors of Counts, not by him. As to the creditors, it appears that they are, without exception, judgment creditors, with liens antedating the conveyance, which of course did not displace those liens. If the prior mortgages are valid, the judgments *Page 451 are liens still, but in subordination to them; if they are invalid, the judgment liens rank first. It is a matter of no possible moment therefore to the judgment creditors to attempt to declare the conveyance void under the assignment law.
So far as the personal property is concerned, it appears that it was covered to the extent of more than its value by chattel mortgages held by Owings Owings, and that there was nothing in it for the creditors. The exceptions raising the question of error in the Circuit Judge's holding that the agreement of January 9, 1915, consummated by the deeds to the Coleman place and the transfers of personal property, was void under the assignment law, are sustained.
In 14 A. E. 255, it is declared:
"The third requisite of a fraudulent conveyance is that the subject-matter of it should be something out of which the creditor could otherwise have realized all or a portion of his claim. The law takes no cognizance of fraudulent practices that injure no one, and so, no matter how covinous the intent, unless the thing upon which it operates be something which the law would appropriate to the payment of the debt, the conveyance cannot be fraudulent. A deed cannot be fraudulent against creditors who are not injured by its execution and who would not be benefited if it were declared void."
In a note it is said:
"Unless a creditor is placed in a worse position by a conveyance than he would otherwise have been he cannot successfully complain of it (Howell Bros. Shoe Co. v. Mars,82 Tex. 493, 17 S.W. 370)" — in our opinion a reasonable and correct conclusion.
9. Was the agreement of January 9, 1915, obtained by fraudulent misrepresentations, and therefore void? The basis of this attack is that there was a connivance between Owings and Brown that Brown should *Page 452 terminate the partnership in the Chesterfield farming operations, and that under the terms of the agreement relieve Owings from a large part of the obligations assumed by him thereunder. The facts do not justify this conclusion. Counts had his remedy against Brown if he acted unjustifiably in discontinuing the operations. He made no effort to do so or complain and made no demand upon Owings, but appears to have willingly acquiesced in the discontinuance. Counts testified that he received a letter from Brown to the effect that the partnership was dissolved; that he then went to Chesterfield to see Brown, but could not induce him to change his determination. He made no further attempt against either Brown or Owings and appears to have lapsed into a state of satisfaction that Owings was to relieve him of all his farming indebtedness. We find no evidence sufficient, hardly tending, to sustain the contention of Counts and certain judgment creditors in this respect.
10. Was the agreement of January 9, 1915, avoided by a breach of its conditions, invalidating the conveyance from D.H. Counts to Mrs. M.A. Owings? In the first place, the obligation on the part of Owings Owings to furnish certain supplies to Counts Brown was expressly conditioned upon their continuing farming operations in Chesterfield. They did not do so, and this relieved the obligation unless Owings by connivance with Brown induced his breach of the agreement, of which there is not sufficient evidence. But, even if Owings had breached his contract with Counts, he had his remedy at law. It was not a ground for annulling the conveyance.
Are H.M. Graham and M.W. Dendy bona fide assignees of the judgments assigned to them and entitled to a lien for the full amounts of the same? The transactions resulting in the acquisition by Graham and Dendy of certain judgments are explained in detail as follows:
(1) Judgment of Nashville Saddery Company, May *Page 453 3, 1912, $1,131.64: The manager of the company testified, "D.H. Counts requested the transfer of our judgment;" that it was to be made in blank. On November 17, 1917, Counts wrote to the company:
"I must remove the judgments against me and have made arrangements to borrow enough money to pay you 10 per cent. of the amount of your claim and renew the balance by note. * * * Should I get six of these judgments, I can buy all the goods I need in my line and thereby be on my feet again."
On December 5, 1917, Counts writes to the company:
"I am inclosing check for $114.00 [which was 10 per cent. of the judgment] as per our agreement and note for balance of the judgment. The reason I did not send check by return mail was that I was trying to settle some of the other judgments against me which I hope to complete the next few days. * * * Please transfer the judgment in blank, as I am getting another party to make these payments for me."
Accordingly the judgment was returned to Counts, assigned in blank, and so continued until after March 18, 1918, at which time (soon after Graham had endeavored to enforce collection of the execution and the injunction suit had been commenced on March 15, 1918) his attorneys returned the assignment to the company, notifying them that they had inserted the name of Graham in the blank asking that it be witnessed.
(2) Judgment of Parker Manufacturing Company, April 27, 1912, $286.15: The manager of the company testified that D.H. Counts requested a compromise of their judgment; that the assignment came from Counts and was returned to him after execution; that they received $75 for the assignment by check of Counts Wolf, a firm of which D.H. Counts was a member; that the check came by mail directly from Counts; that the assignment was made upon the representations of Counts that he was totally *Page 454 insolvent and that a friend was putting up the money for him so that he could go in business again in his own name. On December 21, 1917, Counts wrote the company:
"I am trying to get back on my feet again to get control of the judgments against me in order that I may do business in my name. * * * The Nashville Saddlery Company at Nashville, Tenn., held the oldest judgment (No. 1 in the above list), which I bought at 10 cents on the dollar, and gave them my note for balance, which I am to pay from time to time as I can. Won't you be kind enough to do the same thing for me?"
On December 24, 1917, the company replied, asking what Counts would be willing to pay in full settlement of the judgment. On December 26, 1917, Counts replied, saying:
"But for the kindness of a friend, I could make no offer at all; but, if you prefer to make a final settlement, I will give you 15 cents on the dollar for your judgment. This is the best I can do, and I am doing it on borrowed money. * * * I am going to settle or quit trying."
On December 29, 1917, the company replied:
"We would like to settle same with you, so as to put you on your feet again if possible, and will say, if you will give us $75.00 cash, we will credit you in full and have the judgment cancelled."
On December 31, 1917, Counts inclosed check to them for $75 with a transfer of the judgment saying:
"I am having to transfer these judgments to a friend of mine, as I have absolutely no property or money."
The name of Graham was inserted upon return of the assignment to Counts.
(3) Judgment of Montgomery-Moore Company, August ____, 1912, $91.23: Negotiations for the purchase of this judgment were opened by Richey Richey. They stated that the Nashville Saddlery Company (No 1.) had accepted a similar proposition and offered the company $20, *Page 455 which they accepted and executed an assignment, as per direction of the attorneys named, to Graham on January 7, 1918. The name of the assignee was left blank, and the assignment was sent to D.H. Counts, who was to insert the name of the proposed assignee.
(4) Judgment of Hughes Buggy Company, September 20, 1912, $510: It was in the hands of a Greenville lawyer, In January, 1918, he received an offer from D.H. Counts to settle the judgment on a basis of 10 per cent. He replied on January 26, 1918, that the amount then due on the judgment was $738, and that his clients would accept $73.80 in full settlement and mark the judgment satisfied if in addition Counts would pay the costs and attorney's fee of $25. On February 1, 1918, Counts forwarded to the attorney check for $98.90 "in full payment of judgment" and fee which the attorney acknowledged on February 2, 1918, stating that he had forwarded assignment to his clients for execution. The assignment was executed in blank, returned to Counts, and the name of Graham was inserted.
(5) Judgment of Lummus Gin Company, May ____, 1913, $1,616.10: This judgment was not assigned to either Graham or Dendy. It was taken up by M.J. Owings and assigned to him. In the settlement of January 9, 1915, between Counts and Owings this debt was canceled.
(6) Judgment of Georgia Chemical Company, October 25, 1913, $354.35: The company received a letter from Counts stating that he had no property, but was willing to pay $35.00 for the judgment. The letter was forwarded to H.S. Blackwell, Esq., attorney for the company, with instructions to act. Counts wrote on December 29, 1917, requesting that the judgment be assigned. The assignment was forwarded to the company by Richey Richey. The money was paid to the salesman on January 4, 1918, and the assignment to Graham was executed and dated January 14, 1918. The secretary of the company testified *Page 456 that the company were under the impression, when the settlement was made, that they were not selling the judgment, but making a compromise settlement with Counts presumably in order to assist him. In the letter of Counts dated December 29, 1917, he says, "I am not worth anything in land or personal property (not one dollar), but, in order to get matters adjusted, I can get you $35.00 for your judgment," inclosing a blank transfer. In remitting the $35, Putnam, the salesman to whom it was paid, wrote the company, inclosing check, "settlement in full of the Counts-Taylor note." The assignment was executed and returned to Counts. Graham's name appears as assignee.
(7) Judgment of Mitchell-Lewis Motor Company, March 20, 1914, $1,447.47: The secretary of the company testified that the proposition from Counts was a compromise of the judgment at 10 cents on the dollar. The request came from Counts, who offered to compromise at that figure upon the representation that he was insolvent and that a friend of his was furnishing the money for him to buy the judgment at 10 cents on the dollar; that no one else made any representations. On February 6, 1918, Counts wrote to the company:
"I have a friend who is furnishing me the money to buy up the judgment against me. I have succeeded in getting all of the judgments older than yours, namely, [naming the creditors in judgments 1, 2, 3, 4, and 6 as mentioned above]. All of these judgments were sold at ten cents on the dollar and I am writing to know if you will take that. That's all the money this party will advance. I have not a cent of my own, real or personal."
On March 1, 1918, the company replied, accepting the proposition made by Counts. On March 4, 1918, Counts remitted check for amount of settlement $136.81, inclosing a transfer for the company to sign. On March 9, 1918, the company acknowledged receipt of the check, demanding *Page 457 $8.43 more, and promising to mail transfer upon receipt of the additional amount. On March 13, 1918, Counts remitted the $8.43. On March 16, 1918, the company returned to Counts the assignment which he had inclosed, the name of Graham having been inserted. On May 11, 1918, Richey Richey, as attorneys for Graham, returned the assignment to the company with the request that it be dated and witnessed. Not hearing from the company, Richey Richey wrote them on June 8, 1918, for a return of the assignment. On June 11, 1918, the company replied, declining to return the assignment until further advised by their attorneys, who they claimed had given information not agreeing with that obtained from Richey of the assignment. On July 6, 1918, the company replied giving very full details of the situation with Counts. Not having a reply thereto, Richey Richey again wrote the company on July 2, 1918, asking for a reply and a return of the assignment. On July 6, 1918, the company replied curtly without sending the assignment and returning the 13 cents postage inclosed by Richey Richey. The assignment was not returned, and has been in the possession of the company ever since.
(8) Judgment of C.H. Russell Sons, March 20, 1914, $2,412.82: Negotiations for the purchase of this judgment were opened on March 8, 1918, by Richey Richey, attorneys in that particular matter of H.M. Graham. They give a full statement of the affairs of Counts and make an offer for their client of 10 cents on the dollar for the judgment. Several letters passed which are not material. On March 26, 1918, Richey Richey wrote, advising the creditors that, if they would take 10 cents on the dollar, to make draft on their client, H.M. Graham, for $241.77, attaching executed assignment to Graham inclosed. The creditor drew on Graham as directed, and the draft was returned unpaid. On April 27, 1918, M.W. Dendy wrote plaintiffs, offering the same bid and directing *Page 458 draft on himself if accepted, and requesting execution of an assignment similar to the one which had been forwarded with Graham's name as assignee. On May 2, 1918, Dendy writes to plaintiffs:
"For various reasons please copy this transfer and send it to People's Loan Exchange Bank," etc.
On April 29, 1918, plaintiffs executed the assignment and attached it to draft on M.W. Dendy. The draft was paid and the assignment delivered to Dendy.
(9) Judgment of Franklin Buggy Company, March 20, 1914, $319.41: The observations in reference to No. 8 are applicable to this judgment; so far as the opening of negotiations is concerned. The proposition to accept 10 cents on the dollar was accepted and assignment executed as per directions of the attorneys to Graham on March 14, 1918, for which there was paid $50, more than 10 per cent.
(10) Judgment of Navassa Guano Company, March 20, 1914, $1,777.03; Negotiations for the purchase of this judgment were opened on March 8, 1918, by Richey Richey, attorneys in that particular matter as of H.M. Graham, though they have always been and are still on the record of his appeal attorneys for Counts. They give a full settlement of the affairs of Counts and make an offer for their client of 10 cents on the dollar for the judgment. On March 11, 1918, the company replied, offering to take 25 cents on the dollar. On March 13, 1918, Richey Richey replied, going further into details and expressing the opinion that creditors in their class would get nothing. On March 14, 1918, the company replied, accepting the proposition of 10 cents. On March 16, 1918, Richey Richey forwarded check for $198.19 and inclosed an assignment of the judgment to Graham. The assignment dated March 13, 1918, was signed and returned by the company. *Page 459
We are satisfied that after the inflation of values caused by the war took place, in the winter of 1917 and early part of 1918, the idea was conceived by D.H. Counts to buy up the judgments against himself for a song, and, knowing that they were liens upon the land which he had conveyed and warranted to Mrs. M.A. Owings, recoup a part of his losses out of the very land he had so conveyed. As pertinently observed by his attorneys in their letter to Mitchell Motor Company, June 14, 1918:
"If there had been no war and no high price of cotton and no enhancement in the value of that land, the litigation that is now being had over the land would have never been heard of."
That it was the intention of Counts to buy up these judgments for himself is perfectly apparent from his own statements, many of which have been reproduced above. It was he who opened negotiations for their acquisition, using the tempting, sympathetic argument of a broken merchant anxious to get on his feet again and start with a clean slate. He writes:
"I must remove judgments against me." "Have made arrangements to borrow enough money to pay you 10 per cent." "Should I get six of these judgments I can buy all the goods I need in my line and thereby be on my feet again." "Trying to settle some of the other judgments against me." "I am getting another party to make these payments for me." "A friend is putting up the money for me so that I can go in business again." "I am trying to get back on my feet again to get control of the judgments against me in order that I may do business in my own name." "The Nashville Saddlery Company at Nashville, Tenn, held the oldest judgment, which I bought at 10 cents on the dollar." "But for the kindness of a friend I could make no offer at all." "I will give you 15 cents on the dollar for your judgment." "I am doing this on borrowed *Page 460 money." "I am going to settle or quit." "I am having to transfer this judgment to a friend of mine." "In order to get matters adjusted I can get you $35.00 for your judgment." "I have a friend who is furnishing me the money to buy up the judgments against me." "I have succeeded in getting all of the judgments older than yours." "That is all the money this party will advance."
If Counts had started out with the intention of simply assisting Graham in the purchase of these judgments against himself, for the benefit of Graham, it is impossible to think that he would so generally and unreservedly expressed his purpose to acquire them for himself, to settle them, to wipe them off of the record, so that his crippled credit should be restored. It would not have accomplished that result for Graham to hold the judgments acquired at a great discount, for his own benefit, for the full amounts. His statements that he had arranged with a friend to advance him the money is entirely consistent with what evidently either was his original purpose. If that was not his purpose, so alluringly expressed to those who hoped to recoup their losses out of future business with one whom they had helped to "get on his feet" again, his acquisition of the judgments was obtained by a deception most reprehensible, in appealing to the generous and hopeful instincts of his former trade. After the acquisition of the judgments by him (he writes to Mitchell-Lewis Company, who held a judgment for $1,447.47 recovered in March, 1914, "I have succeeded in getting all of the judgments older than yours," naming 1, 2, 3, 4, and 6), he evidently changed his mind, and now declares that he never intended to buy them for himself, that Graham was the owner of them, and that he has no interest whatever in them.
We cannot accept this statement, and conclude that Graham and Dendy hold the judgments assigned to them respectively as security only for the amounts advanced to *Page 461 Counts by them, with interest at 7 per cent. from the dates of the several advances.
As to the balances unpaid upon these judgments — that is the differences between the amounts due thereon and the advances by the assignees — they cannot belong to Counts, for the debt was his, and he is estopped from setting them up against his grantee of the land under a general warranty.
12. What are the rights of the judgment creditors whose judgments were assigned to Graham and Dendy? Of these judgment creditors, numbered 1, 2, 3, 4, 6, 7, 8, 9, and 10, although all of them were made parties to this action, only No. 7, Mitchell-Lewis Motor Company, answered and has any status upon this appeal, and they are in no position to reap any benefit from the holding that the assignments were pretensive. The facts in reference to the Mitchell-Lewis Motor Company's assignment are set forth above. From them it is clear that it was executed under the impression created by Counts that he was attempting to get rid of the judgments so that he could re-enter business; but, not having tendered back the consideration of the assignment, they are not now in a position to claim the benefit of the pretensive assignment.Levister v. Railroad Co., 56 S.C. 508;35 S.E. 207.
The payment of these judgments was not assumed in the agreement of January 9, 1915, by Owings Owings. They remained obligations of D.H. Counts; and, when he obtained assignments of them to his friends, for his own benefit, they must be regarded as extinguished, except to the extent of the funds advanced for that purpose by Graham and Dendy.
13. Is Mrs. M.A. Owings (for the firm of Owings Owings) liable to account for the rents of the Coleman place since January 9, 1915, the date of the *Page 462 conveyance? Upon the conclusion that the deed was void under both the assignment law and the Statute of Elizabeth, the Circuit Judge decreed that Owings Owings were mortgagees in possession, and therefore accountable for rents. A reversal of that conclusion necessarily involves a denial of accountability for rents. The moment the title passed out of Counts to Mrs. M.A. Owings (for Owings Owings, as we have held), she, as the legal owner, became entitled to the rents.
It has been suggested that the assignees of the mortgages should not be allowed interest upon the notes after the date of the deed and be held unaccountable for rents also, upon the suggested inequity of allowing them both. The right to rents flows from the legal title; and, if the mortgages are to be kept alive for the protection of the legal title, they cannot be half alive and half dead. The accumulation of interest is due to the inaction of the judgment creditors. The day the title passed from Counts to Mrs. M.A. Owings, or as the creditors contend, to Owings Owings, the judgment creditors had the right to issue execution and sell the land subject to the mortgages. They did not choose to do so, evidently for the reason that they did not think it would bring more than enough to pay the mortgages. As shown by the testimony, if they had done so, they would have realized nothing. The title to the land carried the right to the rents. If the creditors chose to wait all these years, throwing upon Owings the burden and risk of farming operations, until land has greatly appreciated in value, it is as much as they can ask that they be allowed to come in now for the difference between the prior liens and what the land may bring. The assignees of the Lucas and Enterprise Bank mortgages, entitled to the shield of these mortgages to the full extent of principal and interest.
14. Is D.H. Counts entitled to a homestead in the Coleman place or in the proceeds of sale thereof? In like manner *Page 463 as in the preceding subdivision, the conclusion that the deed was void both under the assignment law and the Statute of Elizabeth, the Circuit Judge decreed that D.H. Counts was entitled to a homestead of $1,000.00 in the proceeds of the sale. A reversal of that conclusion is likewise a denial of the right to homestead.
The conclusion of the matter is that M.J. Owings, the assignee of the Lucas and Enterprise Bank mortgages, holds them for the protection of the title of Mrs. M.A. Owings (for Owings Owings) to the Coleman place; that he is not entitled to foreclose them against Mrs. M. A. Owings or Owings Owings; that H.M. Graham and M.W. Dendy are entitled to enforce by sale the executions issued upon the judgments assigned to them respectively, subject to the amounts called for by the Lucas and Enterprise Bank mortgages with interest to day of sale, for the amounts paid by Graham and Dendy respectively in the acquisition of the judgments, with interest from dates of payments to day of sale; that the owners of the judgments numbered 11 to 19, inclusive, are entitled to enforce by sale the executions issued upon their several judgments, subject to the amounts called for by the Lucas and Enterprise Bank mortgages with interest to day of sale, for the amounts of said judgments with interest and costs; that said judgments shall rank according to their several priorities; that Mrs. M.A. Owings (for Owings Owings) shall be entitled to an additional protection of $1,000 against said judgments, that being the amount of the homestead to which D.H. Counts was entitled to and which was conveyed by his deed and upon which said judgments were not liens; that Mrs. M.A. Owings (for Owings Owings) shall be entitled to an additional protection of $1,000, that being a reasonable attorney's fee secured by said mortgages.
A majority of the Court, however, agree with the conclusions of Mr. Justice Osborne in reference to the judgments numbered 3, 8, 9, and 10, and to that extent the foregoing opinion is modified. *Page 464
The judgment of Lummus Gin Company is decreed to have been satisfied by the agreement of January 9, 1915.
The judgment of this Court is that the judgment of the Circuit Court be affirmed so far as a dismissal of the first case, that of M.A. Owings against H.M. Graham and others, is concerned, and reversed as to the second case, and that the case be remanded to that Court for such further proceedings as may be necessary to carry into effect the conclusions herein announced.
MR. JUSTICE FRASER concurs.
MR. CHIEF JUSTICE GARY and MR. JUSTICE WATTS: For the reasons assigned by his Honor Judge Frank B. Gary, we think the exceptions should be overruled, and judgment of Circuit Court affirmed.