Summary
applying Enterprise Bank and quoting: One satisfying a lien note at the request of the property owner, upon the understanding that he is to have new security upon the property released, acting in ignorance of a second mortgage lien upon the property, although it is on record, is entitled to subrogation to the rights of the first lien holder?
Summary of this case from Matrix Financial Services Corp. v. FrazerOpinion
12629
April 4, 1929.
Before JOHNSON, J., Clarendon, October, 1927. Affirmed.
Action by J.E. James against Norman Martin and others. Judgment for defendants and plaintiff appeals.
The report of Special Referee J. Ingram Wilson is as follows:
"After holding a reference in this cause on May 24, 1927, for the purpose of hearing testimony, a report of which testimony is hereto attached, with exhibits and pleadings, as a part of this report, I did, at request of all counsel, hold the record open for a period of ten days in order for them to file with me written arguments and their briefs of authorities upon which they relied to sustain their respective contentions.
"Plaintiff alleges that the defendant Norman Martin gave him a note secured by a chattel mortgage on September 10, 1920, that the amount of indebtedness was reduced by certain payments, and that judgment for the balance was obtained on March 27, 1926, as will appear from judgment roll 6416, the amount being $362.82; that on January 23, 1926, Norman Martin conveyed all of his real estate to his mother, Lillie R. Martin; that said conveyance was without valid consideration and made while Norman Martin was indebted to plaintiff and while Lillie R. Martin knew of said indebtedness; that said conveyance was fraudulent and was knowingly made for the purpose of preventing the collection of plaintiff's claim against Norman Martin; that the other two named defendants claimed some interest in the land conveyed. Plaintiff asks the Court to declare the conveyance to be null and void, and cancel it of record; that the interest of the said Norman Martin be sold to satisfy his indebtedness to plaintiff.
"The defendants Norman Martin and Lillie R. Martin, in their answer, admit that Norman Martin, with some of his brothers and sisters, did, on or about January 23, 1927, convey to Lillie R. Martin, their mother, their interests in certain lands; that said conveyance was not made without valid consideration, and was not made with fraudulent intent; that Frank O. Martin died about March 20, 1925. intestate, possessed in fee of the lands described in the complaint, leaving as his heirs at law his widow, Lillie R. Martin, and his nine children, including the defendant Norman Martin; that at his death Ida Levi held a mortgage on the land, on which was due $11,483, with interest at 8 per cent. from January 15, 1925; that subsequent to the death of the intestate the mortgagee demanded payment; that the defendant Lillie R. Martin had qualified as administratrix of the intestate estate, and found that nothing could be derived from the personal estate to pay on the mortgage debt, as the proceeds were not sufficient to take care of current debts of the intestate; that, in consideration of love and affection, and in order to prevent a foreclosure of the mortgage set out above, Norman Martin and his eight brothers and sisters conveyed to their mother all their interests in the lands described, so that she could refinance the loan, Lillie R. Martin assuming and agreeing to pay the debt owing to Ida Levi; that Lillie R. Martin did obtain from the Federal Land Bank a loan of $12,000, the proceeds of which were applied to the Levi debt, but were insufficient to pay the same; that Lillie R. Martin did, in order to discharge the lien of the Levi mortgage upon the lands in question, execute to the mortgagee a chattel mortgage securing the unpaid balance of the mortgage debt, amounting to $600, as an additional defense that Norman Martin owes no real estate, and owned no other at the time of conveyance than his interest in his father's estate lands; that he is a man with a dependent family, and entitled to homestead exemption, and that the interest that he had conveyed to his mother was less than the exemption he was entitled to under the law; and that, regardless of the intent or purpose of either party to the conveyance attacked, the plaintiff has not been defrauded or in any wise wronged or damaged by said conveyance.
"The defendant the Federal Land Bank of Columbia, answering, alleges: For a first defense, that it owns a mortgage on the lands in question, said mortgage recorded in Book 12, p. 225, office Clerk of Court for Clarendon County. For a second defense, that the conveyance of Norman Martin to his mother was for a valid consideration, and that plaintiff cannot maintain his action until he has exhausted all legal remedies against debtor, which plaintiff has not done. For a third defense, that Norman Martin is entitled to homestead, which amounts to more than his interest in the lands is worth. For a fourth defense that the answering defendant is holder, as purchaser for value without notice, of a $12,000 mortgage upon the land in question, given by Lillie R. Martin, the owner of the legal title to the lands, in consideration of a loan in the amount of $12,000 made to her. For a fifth defense, that the answering defendant is subrogated to the rights of Ida Levi, having loaned Lillie R. Martin $12,000 for the purpose of retiring the Levi mortgage.
"There is filed herewith a demurrer of plaintiff to defendant's answer, with an order thereon. I hardly deem it necessary to report on said demurrer, inasmuch as my findings of fact and conclusions of law on the issues arising out of the pleadings do, in effect, dispose of the demurrer.
"The plaintiff, J.E. James, testified that the judgment referred to in the complaint was based upon the balance due him on a purchase of an Overland automobile, said purchase price being secured by a chattel mortgage on the said Overland car; that he had made no effort to collect the judgment; and that he did not know if execution had been issued to the sheriff.
"The Judge of Probate of Clarendon County, J.F. Dickson, Esq., was sworn as a witness for the defense, and had with him certain records of his office, which records were placed in evidence. He stated that the records showed that Lillie R. Martin, as administratrix, had reported a receipt and disbursement in connection with the estate of F.O. Martin of $5,873.43, and that her reports to his Court showed that of that amount she had contributed $725.67.
"Mrs. Lillie R. Martin testified that the amount appearing in her report as having been paid by her was from her personal money; that it was necessary for her to use her own funds, and give a chattel mortgage in order to pay interest charges on the Levi mortgage, pay the debts of the estate other than that, and secure to Mrs. Levi a balance still unpaid even after devoting the proceeds of the Land Bank loan to retire the Levi mortgage; that, when advised to apply to the Land Bank for the loan, she found it necessary to have a conveyance to her of all the undivided interests of her children; that she did procure such conveyance, one daughter who was in China having a deed forwarded to her for execution; that the Land Bank loan was for the purpose of paying Ida Levi; that all of the proceeds were devoted to that purpose; and that she (Lillie R. Martin) had given a chattel mortgage for $600, which chattel mortgage she has since paid.
"The defendant Norman Martin testified that his conveyance of his interest in the lands was made so that his mother could refinance the loan which Ida Levi was calling; that he is now and was at the time of his conveyance the head of the family of dependents; that he had no intent to defraud plaintiff; that plaintiff had made no effort to take the automobile covered by the chattel mortgage; that the land of his father's estate was worth about $40 per acre.
"Mr. A.J. Plowden was called as a witness by Fred Lesesne, Esq., counsel for Norman Martin and Lillie R. Martin. Before testifying, J.J. Cantey, Esq., attorney for plaintiff, objected to any evidence on the question of homestead exemption, 'for the reason that the testimony and the records show that judgment in this case is founded on a debt which was contracted previous to the death of F.O. Martin, and that if the defendant, Norman Martin, has any homestead interest in the land at all he could not plead it as a matter of law against a debt which he contracted previous to his acquiring his land or homestead interest.' This objection, I respectfully report is not sustained. In the brief of authorities which Mr. Cantey has filed with me, and which is hereto attached, he sets out citations on this point, which I deem unnecessary to discuss in this report. Mr. Plowden then testified that he knew the lands in question, and that they were worth $50 an acre.
"Mr. C.N. Sprott testified that he knew the Martin lands, and that, in his opinion, Mr. Plowden's estimate of the value was correct.
"Moses H. Levi, Esq., testified that he attended to the business affairs of his mother, Mrs. Ida Levi, and that he had, according to the books he kept, received a payment of $11,293.20 from Mrs. Martin on October 4, 1926; that this money came from the Land Bank loan, he understood, as he had seen the check from the Land Bank; that this lacked $600 of settling the amount due on Mrs. Levi's mortgage, but the mortgagee had accepted a note for the $600, secured by cotton of Mrs. Martin, and had then satisfied the mortgage and delivered the canceled instrument to Mrs. Martin.
"Fred Lesesne, Esq., testified that he acted as Mrs. Martin's attorney in securing the loan from the Federal Land Bank; that the loan was procured for the purpose of retiring Mrs. Ida Levi's mortgage; that he made the abstract of title for the Land Bank, and that the only judgment he found of record against Norman Martin was one amounting to about $173, that Mrs. Martin paid this judgment against her son out of the proceeds of the Land Bank loan, and the rest of the proceeds she paid over to Mrs. Ida Levi; that he made the final certificate to Land Bank showing that all incumbrances on the land securing the Land Bank mortgage had been paid.
"At this point it was admitted by all parties to the action that the Federal Land Bank, at the time of the payment to the borrower of the proceeds of the loan, had no actual notice of the plaintiff's judgment against Norman Martin, nor notice of any equity or claim of plaintiff against the lands mortgaged, unless notice to Fred Lesesne, attorney, was notice to the Federal Land Bank; and it is further admitted that, under the law creating it, the Federal Land Bank can accept as security for loans only first mortgages of real estate.
"Mr. Lesesne calls attention to the fact that the deed of Norman Martin and several of the other children was made on January 23, 1926, and recorded February 1, 1926, more than two months before the judgment of plaintiff against Norman Martin. He further admits that, before recording the mortgage of Mrs. Lillie R. Martin to the Federal Land Bank, he negotiated with Mr. Cantey in an effort to settle two judgments against Norman Martin that were of record after the deed of Norman Martin to his mother; that this negotiation, however, was for Norman Martin, and not the Land Bank.
"In the written memorandum filed by Mr. Cantey is a statement of the contentions he makes and the authorities upon which he relies to sustain the respective points he raises. I shall here briefly outline his arguments.
"In asking that the deed of Norman Martin to his mother be set aside as void because of fraud, the deed being from son to mother, while the son was in debt to plaintiff, and not being made for a present consideration, Mr. Cantey cites Farmers' Bank v. Bradham et al., 129 S.C. 270, 123 S.E., 835, Miller v. Erwin et al., 129 S.C. 415, 125 S.E., 36.
"The Bradham case hold that 'a deed from judgment debtor to his wife made to prevent a creditor bank from collecting its expected deficiency judgment will be set aside in a proceeding by bank after it had secured such a judgment and a return of nulla bona had been made.' The Referee in that case, Mr. Hemingway, of Kingstree, S.C. most exhaustively and learnedly discusses the decisions of our State Supreme Court bearing on the fraudulence of certain kinds of conveyances. He cites the Rule as laid down in 14 Am. St. Rep., 739, at page 743: 'The term "creditors" as employed in the statutes and decisions concerning fraudulent and voluntary conveyances, is not used in any narrow or technical signification, but includes all persons whose interests might be defrauded by the transfer.' In the Bradham case, the defendant Bradham owed the bank $3,000, giving two notes for the amount, securing them with bank stock valued at $1,000 and a mortgage of 61 acres of land. After defaulting one of his notes, he conveyed his 'home place' to his wife. He admitted that he saw no way of raising the money to pay the bank, but asserts that he thought the bank amply secured. As a matter of fact, the bank stock and mortgaged land were sold and proceeds applied to the debt, but left a deficiency of about $1,200.
"In Miller v. Erwin, the defendant grantor claims to have conveyed certain lands to his daughter, bona fide, in consideration of a loan by her of $6,800, but the conveyance was four years after the date of the alleged loan, during which time he was holding himself out to the world as the owner of the land in question, and engaged in speculation. The Court found that the conveyance was voluntary, and for the purposes of defeating his creditors in obligations contracted while holding himself out as the owner of the land. In the discussion by the Court of fraudulent conveyances, we find the case of Lenhardt v. Ponder, 64 S.C. 364, 42 S.E., 172, quoted: 'The rule is thus stated in Magovern v. Richard, 27 S.C. 286, 3 S.E., 340: "Was the mortgage void under the Statute of Frauds? To be void under said statute or at common law, it should be made to appear that it was either without consideration or that it was mala fide, one or both. In other words, for a paper of the kind to be invulnerable, it should be based upon a valuable consideration and be a bona fide transaction. * * * What is a mala fide? It must be an intent not simply to assert one's own rights, but, in addition thereto, to defeat the rights of another, participated in, as we have said, by both parties to the instrument." The last mentioned case [referring to Magovern v. Richard] is cited with approval in the recent case of McElwee v. Kennedy, 56 S.C. 154, 34 S.E., 86, in which the Court also uses this language: "To annul for fraud a deed based upon a valuable consideration, it must not only be shown that the grantor intended thereby to hinder, delay or defraud creditors, but it must also appear that the grantee participated in such fraudulent purpose. Even if we were to assume that there is evidence of mala fides in the grantor, yet if the sole purpose of the grantee was to secure her claims, having no intent to hinder, delay or defeat other creditors, her title cannot be affected by the mala fides of the grantor."' The Court, in Braffman v. Glover, 35 S.C. 431, 14 S.E., 935, said, 'The Court will require the fullest, clearest, and most satisfactory evidence of good faith on the part of the parties, whenever the bona fides of the transaction is called in question.' And again: 'A deed made and received with the intent to defeat, delay, and hinder creditors of the grantor, is fraudulent and void as to creditors, even if based upon a valuable consideration.' And again, in Jackson v. Lewis, 34 S.C. 1, 12 S.E., 560: 'The law will not permit one who is indebted at the time to give his property away, provided such gift proves prejudicial to the interest of existing creditors. The motive which prompts the donor to make the gift is wholly immaterial. If the donor is indebted at the time, and the event proves that it is necessary to resort to the property attempted to be conveyed away by a voluntary deed for the purpose of paying such indebtedness, the voluntary conveyance will be set aside and the property subjected to the payment of such indebtedness, upon the ground that it would otherwise operate as a legal fraud upon the rights of creditors, even though it might be perfectly clear that the transaction was free from any trace of moral fraud.' In Greig v. Rice, 66 S.C. 171, 44 S.E., 729: The intention to defraud may be shown by surrounding circumstances, and from the acts of the parties, and need not be proven as an independent fact. Under Braffman v. Glover, 35 S.C. 431, 14 S.E., 935, the burden is undoubtedly on the defendant in a case of this kind to explain away and rebut the badge of fraud the testimony shows, and it can be done only by the most positive and clear testimony.
"In contending that the Federal Land Bank had constructive notice of the alleged fraud connected with the making of the deed of Norman Martin to his mother, Mr. Cantey cites Norris v. Ry Co., 111 S.C. 322, 97 S.E., 848, and Wheeler v. Corley, 106 S.C. 319, 91 S.E., 307. In the first cited case, the part relied upon by counsel is clearly stated in the words of the syllabus: 'When a person has notice of such facts as are sufficient to put him upon inquiry, which, if pursued with due diligence, would lead to the knowledge of other facts, he must be presumed to have knowledge of the undisclosed facts.'
"In the second case cited on this last point, I assume that Mr. Cantey refers particularly to knowledge of counsel being imputed to client.
"The third contention of Mr. Cantey is that the Federal Land Bank had constructive notice of the judgment of plaintiff against Norman Martin, even though said judgment was out of the line of the Lillie R. Martin title. To sustain this contention, he cites Younts v. Starnes, 42 S.C. 22, 19 S.E., 1011; Van Diviere v. Mitchell, 45 S.C. 127, 22 S.E., 759; Armstrong v. Carwile, 56 S.C. 463, 35 S.E., 196.
"In Younts v. Starnes, first cited, we find Annely v. De Saussure, 12 S.C. 488, quoted: 'Mortgagees of land are not bound to give to purchasers from the mortgagor any further notice of their claim than that which the record of the mortgage gives.'
"In the Van Diviere case, one Mitchell sold certain land to one Carwile, the grantee giving Mitchell a purchase-money mortgage. The mortgage was recorded, but the deed never was. The notes and mortgage were, before maturity, transferred for value to Mrs. Van Diviere, the plaintiff in this action. In the meanwhile Carwile and Mitchell agreed to, and did, rescind the sale, and it is assumed that Carwile reconveyed the land to Mitchell. Mitchell then, on the same day, conveyed the land to one Jaynes. This deed was never recorded. Two years later Jaynes conveyed to one Cox. This deed was never recorded. Six months later Cox conveyed to one Elizabeth Albritton. This deed was never recorded. On the same day Elizabeth Albritton gave a purchase-money note and mortgage to Cox. This mortgage was recorded. Cox sold the note and mortgage to Peden and Anderson. The defendant Elizabeth Albritton and Anderson, and all the persons through whom they claim, except the defendant Mitchell who was the original grantor and mortgagee, acted in good faith, paying full value, and without notice of the plaintiff's claim or mortgage, except such constructive notice as the recording of plaintiff's mortgage may give, and also the plaintiff was without notice of the various transactions, conveyances, etc., set up by defendants, except such constructive notice as may be given by the record of the Albritton mortgage to Cox. The Court held, on the authority of the Younts case, that the record of the first purchase-money mortgage was notice to all subsequent purchasers or mortgages.
"In Armstrong v. Carwile, counsel for plaintiff evidently relies upon the holding that 'A purchaser under a judgment entered after the record of a mortgage, not recorded in time, is not a purchaser without constructive notice of such encumbrance.'
"The plaintiff's fourth contention is that the Federal Land Bank, through its attorney, Fred Lesesne, Esq., had actual notice of the judgment of the plaintiff as evidenced by the letter of Fred Lesesne to J.J. Cantey, attorney for plaintiff.
"In plaintiff's further contention, against the claim of homestead, Mr. Cantey takes the position that, since Norman Martin contracted the debt with plaintiff before acquiring an interest in the lands, Martin and his grantees cannot claim a homestead in the lands against plaintiff's judgment, as this would be applying the homestead statute 'retroactively,' and he cites Cochran v. Darcy, 5 S.C. 125; Bull v. Rowe, 13 S.C. 355; Withers v. Jenkins, 21 S.C. 365; Fowler v. Smith, 31 S.C. 398, 10 S.E., 93, 5 L.R.A., 721.
"In Cochran v. Darcy, Chief Justice Moses holds that a judgment on a contract entered into in 1867 cannot be defeated by the homestead exemptions of the 1868 Constitution.
"In Bull v. Rowe, Justice McGowan holds, in the light of Cochran v. Darcy, the law to be 'that so much of our Constitution and laws as purport to allow a homestead against a debt older than the Constitution, are in violation of the Constitution of the United States and void.'
"In Withers v. Jenkins, Mr. Chief Justice Simpson follows, in reaffirmation, the Rule laid down in the last above quoted decisions: 'The obligation arising prior to the Constitution of 1868, the claim of homestead could not be allowed as against judgment on said obligation.'
"In Fowler v. Smith, Justice McGowan holds that 'the assignment of the homestead, as against judgment rendered on debts older than the Constitution of 1868, was absolutely void.'
"In his contention against the defendant's plea of subrogation, Mr. Cantey cites Aetna Life Ins. Co. v. Middleport, 124 U.S. 534, 8 S.Ct., 625, 31 L.Ed., 537; Gunter v. Addy, 58 S.C. 179, 36 S.E., 553; Jeffries v. Allen, 29 S.C. 501, 7 S.E., 828; Southern Trust Co. v. Wilkins, 101 S.C. 458, 86 S.E., 26; Ex parte Cockfield, 118 S.C. 240, 110 S.E., 393.
"The first case last above cited is that of Aetna Life Insurance Company v. Middleport, an 18-page Supreme Court decision affirming the Circuit Court (31 F., 874) in a case arising from Illinois. In this case the Court goes exhaustively into the general law of subrogation, as laid down in various jurisdictions. In view of the fact that my conclusion on this point will be based upon a most recent decision of the South Carolina Supreme Court, I deem it unnecessary to state the facts and findings in this case and the other cases cited by counsel on the question of subrogation.
"Mr. Lesesne, for Norman Martin and his mother, cites, on the homestead question, Swandale v. Swandale, 25 S.C. 389, contending that, if the Martin lands had been sold for partition Norman Martin would have been entitled to homestead in his share of the proceeds of the sale; and cites Nance v. Hill, 26 S.C. 227, 1 S.E., 897, holding that the Court may restrain sale of an undivided interest in lands until a partition is made, in order for homestead to be awarded, Bradford v. Buchanan, 39 S.C. 237, 17 S.E., 503, and Calmes v. McCracken, 8 S.C. 100, in which homestead was allowed in proceeds of land sold.
"Mr. Stukes, for defendant, the Federal Land Bank, contending that plaintiff had no right to bring the action, cites National Bank v. Kinard, 28 S.C. 110, 5 S.E., 464, and Verner v. Downs, 13 S.C. 451, holding that, in order to have a cause of action inequity to vacate a voluntary deed, it is necessary to exhaust all legal remedies and to have a nulla bona return by a judgment creditor on his execution issued on said judgment; that then, and not until then, does his right of action in equity accrue; and that, as there is no proof in the case at bar of direct, intended, and positive fraud, there must be proof of a nulla bona return on execution on plaintiff's judgment, citing Compton v. Paterson, 28 S.C. 152, 5 S.E., 470.
"Mr. Stukes further contends,
"(1) That the defendant Federal Land Bank is a bona fide purchaser for value, without notice, of the premises affected.
"(2) That the defendant Federal Land Bank is subrogated to the rights of Mrs. Ida Levi, whose mortgage lien was paid off with the moneys advanced by this defendant.
"(3) That the interest of Norman Martin in the land could not have been subjected to the lien of plaintiff's judgment, even had said judgment been obtained before the conveyance of Norman Martin to Lillie R. Martin.
"On the question of the jurisdiction of this Court to decide the litigant's right to homestead. Mr. Stukes cites a strong, conclusive line of authorities. As I do not regard the question of this Court's jurisdiction as being involved in this case, it is unnecessary for me to discuss these authorities.
"Upon the question of subrogation, Mr. Stukes relies entirely upon the case of Enterprise Bank v. Federal Land Bank, 139 S.C. 397, 138 S.E., 146, filed May 12, 1927, and Tilghman Lumber Co. v. Matheson, 88 S.C. 432, 70 S.E., 1033.
"I shall now, as briefly as I can, report to the Court my findings and conclusions, based upon an earnest study of the facts and law extending over two months.
"The undisputed testimony establishes a valuation of $50 per acre for the 315-acre tract of land involved in this case, making a total value of $15,750. The amount of the mortgage due to Mrs. Ida Levi was $11,893.20. The equity in the land above the mortgage would thus be seen to be $3,856.80. From this deduct the one-third of Mrs. Lillie R. Martin, the widow, and the balance to be divided equally among the nine children is $2,571.20. The one-ninth interest of Norman Martin will then be seen to be $285.69. There is no question of the debt to the plaintiff having been contracted several years ago. There is no question of Norman Martin being the head of a dependent family.
"Now, was there fraud in the conveyance of Norman Martin to his mother of his two twenty-sevenths interest in the $15,750 tract of land, over which tract there was a mortgage of $11,893? It is shown that the mortgagee was demanding payment, and that the only way of paying the debt was by securing a loan from the Federal Land Bank. In order to do this, the title had to be in the name of Mrs. Martin or some other one person, for the Court may, I am convinced, take cognizance of the fact that, under the conditions existing in this section of the State for the past several years, the Federal Land Bank has been the only 'very present help' upon which a farmer could rely in the matter of farm loan flotation, and also the fact that the Federal Land Bank would not loan $12,000 upon the 315 acre tract unless the title were vested in one responsible applicant. There was no way for Mrs. Martin to save the land except by this loan, and certainly no way for any one of the ten heirs to save his or her respective interest without protection of the outstanding debt of nearly $12,000. The assumption of the payment of this debt was a sufficiently valuable consideration. Had Norman Martin been the sole owner of a tract of land, and conveyed that to his mother while owing the debt to plaintiff, there would have been no question as to the invalidity of the transfer. No proof of direct, intended fraud would have been necessary, as fraud could be inferred from the very surrounding circumstances. In this case, however, the facts are that Norman Martin was only one of the nine children who agreed to convey to their mother their respective undivided interests in a heavily in cumbered estate in an effort to prevent the loss of all by foreclosure of Mrs. Levi's mortgage. It clearly appears that Norman Martin's interest was, until separated and saved, worth nothing. And it is not to be supposed that these other eight children all conspired with Norman to defraud Mr. James of his claim. And it is unreasonable to conclude that Mrs. Lillie R. Martin went to all the trouble that she did, advancing her own funds in part, for the sole intention of defrauding Mr. James of his money.
"I hold that there was no intent to defraud, and no ground for setting aside the conveyance.
"The testimony shows that Mr. James had a chattel mortgage on the automobile he sold to Norman Martin, and that he made no effort to realize on that security. The testimony further, does not show that any nulla bona return was made to the execution issued on the judgment against Norman Martin, and therefore I conclude that Mr. Cantey has not come within the rule laid down in the cases stated in the foregoing parts of this report, and has no right to bring this action in equity, until he has shown a nulla bona return to execution.
"I find from the testimony, that Fred Lesesne, Esq., was the attorney of Mrs. Lillie R. Martin, and of Norman Martin, in the negotiations with Mr. Cantey, evidenced by the letter exhibited by Mr. Cantey, and that the Federal Land Bank is not chargeable with notice.
"I find that Norman Martin is the head of a family, in the class of those entitled to homestead, and that he is entitled to homestead as against the lien of plaintiff's judgment.
"I find that the exemption to which Norman Martin is entitled is much more than the value of his undivided interest in the lands of his father's estate.
"I find that the proceeds of the Land Bank loan were applied to the payment of the Levi mortgage, that the purpose, intent, and understanding of the borrower and lender was that the money so loaned should be devoted to such purpose, and that the Federal Land Bank was not a mere volunteer, but is subrogated to all the rights of the first mortgagee, so that the Federal Land Bank mortgage is a first lien upon the property in question.
"My conclusion upon this last point is at variance with the general rule of subrogation as laid down in some other jurisdictions, but is based upon the late case cited, Enterprise Bank v. Federal Land Bank et al., which has not yet been issued in the bound reports. This case is conclusive of the question. It is too long for me to quote in full, but the excerpt here given is in line with the holding: 'One satisfying a lien note at the request of the property owner, upon the understanding that he is to have new security upon the property released, acting in ignorance of a second mortgage lien upon the property, although it is on record, is entitled to subrogation to the rights of the first lien holder.'
"In brief resume. I respectfully report to the Court:
"I find, as matters of fact:
"(1) That there was no intent to defraud.
"(2) That plaintiff has not exhausted all legal remedies before bringing this action.
"(3) That Fred Lesesne, Esq., was the attorney of Lillie R. Martin and Norman R. Martin.
"(5) That Norman Martin is the head of a dependent family.
"(6) That the value of Norman Martin's interest in his father's estate lands is $285.69.
"(7) That the loan from the Federal Land Bank was procured with the understanding between the borrower and lender that the proceeds of said loan were for the paying of Mrs. Levi.
"(8) That the net proceeds of said loan were all applied to payment of the Levi lien.
"I find, as conclusions of law:
"(1) There was no fraud in the conveyance sought to be set aside.
"(2) That plaintiff has no right to bring this action.
"(3) That the Federal Land Bank is not chargeable with notice.
"(4) That Norman Martin is entitled to homestead exemption as against plaintiff's judgment.
"(5) That the Federal Land Bank is subrogated to all the rights of Mrs. Ida Levi as first mortgagee, to the extent that their money was applied to the payment of Mrs. Levi."
The decree of Circuit Judge Johnson here follows:
"The above-stated action comes on to be heard by me in open Court upon the report of the Special Referee and the exceptions thereto by the plaintiff, which exceptions are styled 'Notice and Grounds of Appeal.' Upon hearing argument of plaintiff's attorney and the attorneys for the defendant, it is ordered, adjudged, and decreed that the said exceptions are without merit and are therefore overruled, and the report of the Special Referee is hereby affirmed and made the judgment of this Court, and the complaint of the plaintiff is dismissed, with costs to the defendants, including a reasonable fee of $10 for the Special Referee."
Mr. J.J. Cantey, for appellant, cites: Court seeks to do substantial justice, not adhering strictly to legal rule: 92 S.C. 362; 108 S.C. 171; 114 S.E., 39; Id., 162; Id., 320; Id., 338; Id., 496; 116 S.C. 210; 117 S.C. 27; 118 S.C. 38; Id., 77; 119 S.C. 2; 121 S.C. 327; 122 S.C. 142; Id., 360; 125 S.C. 172; Id., 314; 131 S.C. 306; 126 S.C. 498; 133 S.C. 95; 129 S.C. 40; 138 S.C. 354. As to priority of liens: 120 S. 1C., 483. Volunteer is not bona fide purchaser: 124 U.S. 534; 106 S.C. 319; 111 S.C. 322. As to subrogation: 139 S.C. 400. "Bona fide purchaser": 129 S.C. 270; Id., 415. Fraud: 84 S.C. 222. Estopped from setting up homestead: 51 S.C. 101; 65 S.C. 237; 12 R.C.L., 65. Conveyance of inchoate right to homestead before it has ripened into homestead forfeits such right: 73 S.C. 326; 64 S.C. 82; 55 S.C. 199; 133 S.C. 104.
Mr. Fred Lesesne, for respondents, cites: An equity of redemption will support a homestead right: 24 S.C. 36; 64 S.C. 82; Ar. 3, Sec. 28, Const.; 51 S.C. 97; 25 S.C. 389; 26 S.C. 227.
Messrs. Dinkins Stukes, also for respondents, cite: Findings of fact by Master concurred in by Circuit Judge sustained unless against preponderance of evidence: 11 S.C. 29; 103 S.C. 307. As to right of equity accruing: 28 S.C. 110; 13 S.C. 451; 28 S.C. 152. As to subrogation here: 139 S.C. 597; 88 S.C. 432. Judgment is not a lien upon property of judgment debtor exempt from attachment: Sec. 610 Code Proc. Homestead exemption: Ar. 3, Sec. 28, Const.; Sec. 5490 Code. Property exempt from debts by statute cannot be reached by creditors on ground that it has been fraudulently conveyed: 12 R.C. L., 505.
April 4, 1929. The opinion of the Court was delivered by
This Court is entirely satisfied with the report of the Referee confirmed by the Circuit Judge.
Decree affirmed.
MR. CHIEF JUSTICE WATTS and MESSRS. JUSTICES BLEASE, STABLER and CARTER concur.