Opinion
37787.
DECIDED SEPTEMBER 9, 1959.
Declaratory judgment. Spalding Superior Court. Before Judge McGehee. April 20, 1959.
Cumming Cumming, for plaintiff in error.
Beck, Goddard Smalley, Christopher Futral, contra.
Where a grantee of a bill of sale to secure debt properly recorded his instrument, and where thereafter the grantor executed another conveyance of the same property to a third party who took the latter instrument within seven years of the former and recorded it, the priorities between the two instruments was fixed at the time the junior grantee recorded the junior conveyance with constructive notice of the outstanding senior conveyance, and the subsequent failure of the senior grantee to file the affidavit to renew the record of his conveyance under the provisions of the act of 1937 (Ga. L. 1937, p. 760) did not affect those respective priorities.
DECIDED SEPTEMBER 9, 1959.
This case was tried by the Judge of the Superior Court of Spalding County upon a stipulation and agreement of the facts, the material portion of which is essentially as follows: On March 12, 1951, H. O. Kelley executed and delivered to C. R. Dorsey a bill of sale to secure debt in the principal amount of $1,200, conveying to the said Dorsey as security for said indebtedness a stock of goods, wares and merchandise in the said Kelley's store, and, also certain motor vehicles. The bill of sale to secure debt was regularly recorded on March 12, 1951, in the records of the Clerk of the Superior Court of Spalding County, Georgia. On January 28, 1958, Kelley executed and delivered to City Wholesale Company another bill of sale to secure debt in the principal amount of $3,048.61 conveying to City Wholesale Company as security for this indebtedness the same stock of goods, wares and merchandise in his store, and also certain fixtures. This latter bill of sale was regularly recorded on January 29, 1958, in the records of the Clerk of the Superior Court of Spalding County. At the time of his death, Kelley was indebted to Dorsey in the principal amount of $1,200, together with interest amounting to $718, and was indebted to City Wholesale Company in the principal amount of $2,599.61. Since that time, City Wholesale Company has received the sum of $650, the proceeds from the sale of the fixtures included in its bill of sale, but not included in the bill of sale to Dorsey. The balance due City Wholesale Company is $1,949.61. The motor vehicles described in the bill of sale to Dorsey were either worn out or otherwise disposed of by Kelley prior to his death, and the remaining property described in the bill of sale from Kelley to Dorsey is the same property as that described in the bill of sale to secure debt from Kelley to City Wholesale Company, except for the fixtures heretofore referred to. With the agreement and consent of City Wholesale Company and of Howard Dorsey, administrator of the estate of C. R. Dorsey, the said stock of goods, wares and merchandise was sold by E. G. Harper, as administrator of the estate of H. O. Kelley, for the sum of $1,800, and by agreement, said amount is now held by the said Harper subject to determination by the court of the relative priority of the respective bills of sale to secure debt held by City Wholesale Company and by Howard Dorsey, as administrator of the estate of C. R. Dorsey.
It was further stipulated and agreed that on January 28, 1958, City Wholesale Company had no actual notice or knowledge of the bill of sale to secure debt from Kelley to Dorsey or of the indebtedness secured thereby, such notice or knowledge as City Wholesale Company did have, being only the notice afforded as a matter of law by the recording of the said instrument; that no affidavit of extension or renewal of said bill of sale to secure debt has ever been filed in the office of the Clerk of the Superior Court of Spalding County in accordance with the provisions of the act approved March 31, 1937 (Ga. L. 1937, p. 760) as amended by the act approved March 9, 1945 (Ga. L. 1945, p. 389); and, that since January 28, 1958, City Wholesale Company has not loaned to Kelley any additional sums of money, nor has it granted him any extensions or renewals of his indebtedness, nor has it otherwise acted to its detriment with respect to the indebtedness of Kelley. It was further stipulated that Harper, as the administrator of the estate of Kelley was, insofar as the $1,800 realized on the sale of the incumbered property, merely a stake holder who had no interest in the said $1,800, but stood ready to pay the said amount over to the proper party under direction of the court. The trial judge entered a judgment in favor of Dorsey and against the City Wholesale Company and that judgment is excepted to in this court.
(After stating the foregoing facts). A decision of the question which was presented to the trial judge under the foregoing stipulations of fact, and which is presented to this court by the exception to his judgment, requires, as was said by the trial judge, an interpretation and construction of the act of 1937 (Ga. L. 1937, p. 760). The pertinent provisions of this act are sections 1 and 2, which read as follows:
"Section 1. That the notice given to third persons by the filing for record of any mortgage, bill of sale to secure debt, retention of title contract or other security instrument creating a lien on, retaining title to, or conveying an interest in, personal property, shall expire at the end of seven years from the date of the filing thereof for record.
"Section 2. The effect as to third persons of the filing of any such instrument for record, may, in all respects, including the preservation of priority thereof, be extended for successive additional periods, each not exceeding five years from the date of the filing in the office of the clerk of the Superior Court, wherein any such instrument is recorded, upon the filing by the owner or holder thereof, of an affidavit identifying such instrument, stating his interest and the nature and amount unpaid on the obligation still secured thereby."
In interpreting this act, the court should look diligently to the intention of the General Assembly, keeping in view at all times the old laws, the evil and the remedy. Code (Ann.) § 102-102 (9). Let us then look to the condition of the law with respect to the recordation of deeds and bills of sale to secure debt, prior to the enactment of the 1937 act, especially with relation to the effect of such recordation as respects third parties. In reading the law, it may readily be seen that there is nothing mandatory in the law which requires that the grantee of a deed or a bill of sale to secure debt have it recorded. It is purely a permissive matter whether the grantee shall record his instrument or not, notwithstanding that the acts state that such instrument "shall be recorded." The word "shall" as there used is merely directory as to the place where such instruments may be recorded, if at all. The effect or recordation of conveyances to secure debt is by the law relating thereto made the same as the effect of the recordation of deeds of bargain and sale. Code § 67-1305. In Code § 29-401, the effect of recording deeds of bargain and sale is stated negatively, in that it provides that, "the record may be made at any time but such deed loses its priority over a subsequent recorded deed from the same vendor taken without notice of the existence of the first." From this wording and from the various interpretations and applications thereof by the courts, it may be safely deduced that the sole purpose and effect of recordation of both deeds of bargain and sale and of deeds and bills of sale to secure debt insofar as third parties are concerned, is to afford such third parties constructive notice of the existence of such deed. Cammon v. State, 20 Ga. App. 175 (1) ( 92 S.E. 957). Insofar as priority between deeds or bills of sale to the same property from the same grantor are concerned, constructive notice as afforded by its proper recordation is sufficient. McElwaney v. MacDiarmid, 131 Ga. 97 (3) ( 62 S.E. 20). Likewise, as affects the priority between such instruments, if actual notice on the part of the junior grantee be shown, the senior instrument is prior, notwithstanding it may not have been recorded. Gardner v. Grannis, 57 Ga. 539 (10).
From these and other decisions, we may readily perceive that the scheme of the law is and has always been that the older instrument is prior to the later one, and that the only way such priority may be lost is by a showing that the later instrument was taken without notice, either actual or constructive of the existence of the earlier instrument. Again, as a corollary proportion, it necessarily follows that insofar as this priority is concerned, the sole effect of recordation of deeds of bargain and sale and of conveyances to secure debt is to afford to the junior grantee the constructive notice above referred to at the time such junior grantee takes or contemplates taking the conveyance from the common grantor. Once the junior grantee has been afforded this notice, the record of the senior conveyance serves no other purpose insofar as he is concerned. At the time he takes his conveyance, in the face of such outstanding recorded conveyance the respective priorities between the two conveyances are fixed, and no subsequent event can change that relation. Prior to the Act of 1937, once a mortgage, bill of sale to secure debt, retention-of-title contract or other security instrument creating a lien on, or retaining title to, or conveying an interest in, personal property was filed for record, such filing and entry on the records by the clerk of the court constituted notice to all subsequent grantees, regardless of the length of time that had elapsed after such filing and recordation.
Such being the state of the law prior to the questioned act, what was the effect of section 1 of the Act, insofar as it affected the existing law? This section merely provided that such notice would expire at the end of seven years from the date of the filing of such instruments for record. Standing alone, this section merely took from the law the provision that such filing would be notice after the expiration of seven years — nothing more. It did not, in any sense, purport to alter the law as outlined above with respect to the fact that once such notice had been afforded, the respective priorities of the junior and senior instruments were fixed. This section merely had for its purpose the relieving of the party taking the junior conveyance of the necessity of searching the records more than seven years back. After this section was enacted if a junior grantee made a proper search of the records for the preceding seven years and found nothing, and if he had no actual notice of an outstanding conveyance and accepted his conveyance and promptly put it on record, he would be protected insofar as the priority of his conveyance was concerned with respect to the senior conveyance. Section 2 of that act then proceeds to afford to the senior grantee the means whereby he might preserve or restore his priority, and the effect of the record of his instrument as notice to subsequent grantees by filing with the clerk an affidavit setting forth therein the matters specified in that section.
The evil of the old law which the General Assembly sought to remedy by the enactment of this law was aptly stated by the trial judge, as follows: "It is a matter of common knowledge, certainly among lawyers and court officials, that rarely were liens upon personal property, once recorded, ever cancelled of record, and that the recording records in the counties of this State had become filled with such liens which had been upon the records for many years. In many instances title to such personality had passed, by delivery, into the hands of several owners and it had become almost impossible for a careful creditor, who anticipated taking a lien, to determine which liens had been satisfied and which were still valid." It is manifest that the intention of the legislature was to change the law only so as to eliminate the evil of having outstanding on the lien records of the various counties mortgages and bills of sale to secure debt and other conveyances to secure debt which, in effect, were dead and no longer outstanding, and to provide for their automatic cancellation of record at the end of seven years, unless appropriate action was taken by the holder of such instrument to preserve its effect as a conveyance of record.
Under the foregoing interpretation of the law, the respective priorities of the bills of sale to secure debt executed by Kelley first to Dorsey and almost seven years later to City Wholesale Company was fixed at the time that City Wholesale Company took its instrument. At that time, City Wholesale Company had constructive notice of the existence of Dorsey's bill of sale, and the subsequent failure of Dorsey to file the affidavit as provided for by Section 2 of the act, could have had no effect on the established priority between the two instruments. It follows that the ruling and judgment of the trial court, declaring that the bill of sale to Dorsey was prior to that held by City Wholesale Company and in ordering and decreeing that the $1,800 be paid over to Dorsey as administrator of the estate of C. R. Dorsey was correct.
Judgment affirmed. Gardner, P. J., and Townsend, J., concur.