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PRUDENTIAL INS. CO. v. WADFORD

April 7, 1958

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, PLAINTIFF,
v.
WILFORD E. WADFORD ET AL., DEFENDANTS. SAMUEL LEVY, D. B. A. MOORE & COMPANY, A DEFENDANT, IS APPELLANT, AND THE CALHOUN TRADING COMPANY, A DEFENDANT, IS RESPONDENT.



The opinion of the court was delivered by: Legge, Justice.

April 7, 1958.

In an action for foreclosure of a mortgage of real estate respondent, as holder of a junior mortgage, and appellant, as a judgment creditor of the mortgagor, were made parties defendant. The proceeds of the foreclosure were insufficient to pay all liens; and the sole issue involved in this appeal is that of priority between the lien of respondent's mortgage and that of appellant's judgment.

Respondent's mortgage was executed on May 21, 1954, as security for the mortgagor's obligation of the same date. It was recorded on June 21, 1954.

Appellant's judgment was entered of record on May 24, 1954. It was obtained in an action against the mortgagor on an account for merchandise purchased prior to May 21, 1954.

The Special Referee held that the lien of the judgment, having arisen subsequent to the mortgage transaction and prior to the recording of the mortgage, was entitled to priority. The Circuit Judge reversed, upon the authority of Carraway v. Carraway, 27 S.C. 576, 5 S.E. 157, 159, and the judgment creditor has appealed.

The identical issue was presented in the Carraway case. There the controversy was as to priority between an unrecorded mortgage and certain judgments obtained after, on debts that had been contracted before, its execution, the judgment creditors having had no notice of the mortgage until after their judgments had been entered. The court, discussing the contention that the judgment creditors were "subsequent creditors" within the meaning of the recording act, said:

The Carraway case was decided in 1888 by a divided court of three justices. The majority opinion, written by Chief Justice Simpson, was concurred in by Justice McIver. In a vigorous dissent, Justice McGowan urged that a judgment is, for most purposes, to be regarded as a new debt, not affected by the character of the old one; that it is itself a thing of record, having a lien from the date of its entry (Act of Nov. 25, 1873, XV Stat. at L. p. 498, now Section 10-1561 of the 1952 Code); and that, if entered subsequent to an unrecorded mortgage of which the judgment creditor had no notice, its holder should be regarded as a subsequent creditor within the meaning of the recording act of 1876.

King v. Fraser, 23 S.C. 543, was concerned with the question of priority as between a mortgage, recorded after the time allowed by the act, and unsecured debts of the mortgagor contracted between the date of the execution of the mortgage and the date of its record. The issue was thus different from that now before us; but it is interesting to note that in that case (where Chief Justice Simpson concurred in Justice McGowan's opinion, and Justice McIver dissented) the majority opinion implied, by way of dictum, that under the recording act as it then stood the mortgage lien would have been subordinate to that of a judgment entered subsequent to its execution and prior to its recording, without regard to the date of the obligation upon which the judgment was founded. To quote from the opinion:

It is to be noted, too, that in Blohme v. Lynch, 26 S.C. 300, 2 S.E. 136, where Chief Justice Simpson authored the unanimous opinion, it was held, without mention of the date of the obligation that gave rise to the judgment, that a judgment by confession entered in October, 1866, had priority of lien over a mortgage given in September, 1866, but not recorded until January, 1867.

But whatever may have been the view of the court prior to Carraway v. Carraway, supra, the decision in that case appears to have settled the point. It declared, in effect, that the recording statute was intended to protect, against the lien of an unrecorded mortgage, persons who, without notice of it, subsequent to its execution might reasonably have extended credit to the mortgagor, or purchased the mortgaged property, in reliance upon his apparently unencumbered ownership, Carroll v. Cash Mills, 125 S.C. 332, 118 S.E. 290; and that a creditor who between the date of the execution of the mortgage and the date of its record entered judgment against the mortgagor on an obligation that had been created prior to the date of the mortgage was not within the protection of the statute because his extension of credit to the mortgagor was antecedent, not subsequent, to the execution of the mortgage.

The precise issue which we are now concerned does not appear to have been involved in any of our later decisions; but the Carraway case has been cited and the rule there ...


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