Petitioners Brief — Scott v. Paisley
Supreme Court brief1926
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INDEX OF SUBJECTS
BRIEF OF ARGUMENT:
Page
BIATEMENT OF THE CASE.............00c00c05. 1
ASSIGNMENT OF ERRORS....................... 4
The Statute Defining the Substantive Rights under
the Security Deed Statute of Georgia is merely De-
clamatory of the Common Law.................. 7
Section 6037 is not a Substantive Law, does not enter
into the Contract of the Parties, and Plaintiff in
Error is not Estopped to Attack same............ )
The Interest in Property remaining in the grantor
after the Execution of a Security Deed under the
Law of Georgia, Constitutes Property............ ll
Said Property may be sold and the Purchaser acquires
all the interest, and is subrogated to all the Rights
I Rs PRP ie ee 12
Plaintiff in Error was Divested of her Property
through the Operation of Section 6037, contrary to
Settled Usages and Modes of Procedure, and in
Derogation of the Common Law and Equity...... 13
Plaintiff in Error was not Properly Privy to Said
er AS inne ev ea 15
The JIndicial Proceeding Prescribed by Section 6037,
did not Accord Plaintiff in Error Due Process of
RR aia ashi ra engi ta Ais a hk OW Wea 4 Woe 16
(a) Because she was not a party to same.
(b) Because she did not have proper notice of same.
(c) Because she had no opportunity to be heard in
the course of same.
Levy and Sale Prescribed by Section 6037 does not of
itself Constitute a Proper Summary Proceeding to
Deprive Plaintiff in Error of Her Equity........ 19
Such Taking as Authorized in Section 6037 cannot
be Justified as an exercise of Police Power........ 22
IERIE TE EA SATHANA Ee tee a sane Ree ae
a
INDEX TO AUTHORITIES CITED
Pages of
Brief
Akin vs. Kingsbury, 151 SEER ORE AS — 10
Allen vs. Frost, 62 Ga., 659...................... 7
BY Archuleta vs. Archuleta, 123 P.821............._. 17
: Artope vs. Barker, 72 SSO eae 18
Bartero vs. Real Estate Savings Bank, 10 Mo.
3 si de Brees ROPE CPT OP ESO, ee 14
a Benedict vs. Gammon Theological Seminary, 122
a scp cy OE OS ge STD A A, RE a 1
i Biggers vs. Bird, 55 Ga., 650...................... 7- 8
4 Bodega vs. Perkerson, 60 | CPR AL PPA een 20
i Braswell vs. Suber, 61 Ga., 398................... 7-11
- Broach vs. Barfield, 57 Ga., 601................... 7
a Brooks vs. Lowry National Bank, 141 Ga., 206..... 17-18
4 Burdick vs. People, 36 N. E., 948................. 23
% Carsten vs. Pilsbury, 158 P.,218.................. 17
q Carswell vs. Hartridge, 55 Ga., 412................ 7
Central of Ga. Ry. Co. vs. Wright, 124 Ga., 630.... 12
Central of Ga. Ry. Co. vs. Wright, 166 Fed., 153.... 12-13
$ City of Atlanta vs. S. A. L. Ry. Co., 137 Ga., 805... 18
3 Coe vs. Armour Fertilizer Works, 237 U,
4 1 ca dle OES PRE OES Ds epee 10-17-18-19
4 Coleman vs. Slade, 75 Ga., 61..................... 14
2 let: oonadfoterring. Do. o.e YEE TE ee 22
5 erty sh--aynciiest uo, kg NOSED Soa Poe ane er 17
Z Sie SN, MONI tine oS kp aise a's cca bad ea 23
3 Dulin vs. McCaw, 39 W. Va.,721.................. 14
‘ Edenfield vs. Bank of Millen, 7 Ga. App., 645....... 14
| Ford vs. Nesmith, 117 Ga., 211................... 21
a Freeman vs. Alderson, 119 U.S.,185.............. 14
P Gassert vs. Strong, 98 P.. 497.................... 14
Chowne Tames, BOVE 6 ooo ok occ dace 8
P Guarantee Bk. & Tr. Co. vs. American National Bank,
2 WWE MC MEM Ey oreo ok a hiweni ct even cu. 22
; Gillespie vs. Hunt, 145 Ga., 490................... 14
: Groesbeck vs. Seeley, 18 Mich.. 329................ 2]
a
Gunter vs. Smith, 113 Ga., 18..................... 9-12
Harris vs. Powers, 129 Ga., 82................... 9-12
Johnson vs. Griffin Banking Co., 55 Ga., 691........ 7
Jones vs. Smith, 120 Ga., 642..................... 18
Lackey vs. Bostwick, 54 aes ne Ge eae 7
Lawton vs. Steele, 152 U.S., 138.................. 22
Loftis vs. Alexander, 137 Ga., 65................. 17-18
Loftis vs. Alexander, 139 Ga., 346................. 13
Marshall vs. Charland, 106 Ga., 42................ 16
Martin vs. White, 100 Pa., 293.................... 21
Mattlage vs. Mulherrin, 106 Ria MR & ac wood 14-15-16-19
Merchants Bank vs. Haiman, 62 Me Mo cece 18
Morris vs. Murphy, 95 Ga., 307................... 16
McLellan vs. Graham, 106 Ga., 211............... 20
Ochoa va. Hernandez y Morales, 230 U. S. (57 L. Ed.,
sop crt, ae EO TEE EET ELITE ND Ee 23
Parrott vs. Baker, 82 Ga., 364.................... 8
Parsons vs. Russell, 11 Mich. 113................. 21
People vs. Weiner, 110 N. E., 870................. 22
Pennoyer vs. Neff, 96 U.S., 714.................. 17-18
Phinizy vs. Clarke, 62 Ga., 628................... 8
Polhill vs. Brown, 84 Ga., 388.................... 9-12
Reese vs. Watertown, 19 Wall, 107................ 18
Riverside Cotton Mills vs. Menefee, 237 U. S., 189... 19
Rucker vs. Womack, 55 Ga., 399.................. 16
NUTS os xia ee ahs cb Pi ee es 23
Sears vs. Bagwell, 69 Ga., 429.................... 20
Sloss vs. Mutual B. & L. Association, 97 Ga., 401.... 9
Smith vs. Board of Medical Examiners, 140 Iowa, 66 3
Standefer vs. Wilson, 92 Tex., 232................ 9
State vs. Guilbert, 47 N. E., 551.................. 17
State vs. Holtcamp, 151 S. W., 157................ 11
Stewart vs. Palmer, 74 N. Y., 183................. 18
Stroupper vs. McCauley, 45 Ga., 74............... 14
Sturges vs Crowninshield, 4 Wheat, 122............ 10
Walker vs. Equitable Mortgage Co., 112 Ga., 645.... 18
Webster vs. Reed, 11 Howard, 459................ 15-18
Wells vs. Savannah, 87 Ga., 399................... 12
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West vs. Bennett, 55 Ga., 507
Williams vs. Foy Mfg. Co., 111 Ga,, 857.......... 11-12-13
Williams vs. Terrell, 54 Ga., 462.................. 15-17
Wilson vs. Stanidefer, 184 U. S., 399.............. 9-10
Windson vs. McVeigh, 93 U. S., 274............. 17-18-19
re TE, Te, BO VEE, og io eck iccnces cas 14
‘
’
SUPREME COURT OF THE
UNITED STATES
OCTOBER TERM, 1925
No. 253.
DOROTHY SCOTT, Petitioner,
Us.
J. A. PAISLEY, Mrs. FANNIE PAISLEY,
CLAUD BRACKETT AND J. I. Lowry,
SHERIFF, Respondents.
WRIT OF ERROR TO REVIEW A JUDGMENT OF THE SUPREME
COURT OF GEORGIA.
(158 Georgia 876)
BRIEF IN BEHALF OF DOROTHY Scott, PETITIONER.
STATEMENT OF THE CASE
On the 9th day of January, 1917, Mrs. Fannie Paisley
owned a certain tract of land in the City of Atlanta, Geor-
gia. On said date, Mrs. Paisley, to secure the payment of a
note executed by her to Miss Pauline Schoenthal for $550,
the maturity cate of which was the 9th day of January,
1920, conveyed said property by security deed to the said
Miss Pauline Schoenthal. Subsequently, on the 30th day of
July, 1919, Mrs. Paisley conveyed the same property by
warranty deed to H. Calhoun Wilson, who, on October 2nd,
1
gle A
1919, conveyed the same by warranty deed to plaintiff in
error, both said conveyances being subject to the loan afore-
said.
Some time prior to the May Term, 1920, of the City Court
of Atlanta, Miss Schoenthal, through her attorneys, noti-
fied Mrs. Paisley of her intention to bring suit on the note
referred to above, returnable to the May Term, 1920, of
the City Court of Atlanta, and to ask that the judgment
rendered in said case include ten per cent. of principal and
accrued interest as attorney’s fees. Miss Schoenthal en-
tered suit on said note, returnable to the May Term, 1920,
of the City Court of Atlanta, a court of exclusively law
jurisdiction, and said suit was served upon Mrs. Paisley,
the defendant therein named. On the second day of the
said May Term, 1920, of the City Court of Atlanta, Mrs.
Paisley having failed to interpose any defense to the said
suit, the said case was entered in default. On the same day
Miss Schoenthal took a verdict against Mrs. Paisley for
the principal and interest due on said note, and for said
attorney’s fees, and finding in favor of a special lien for
said amounts, on the property described in the security
deed mentioned above; and judgment was entered in ac-
cordance with said verdict. Thereafter, Miss Schoenthal
executed to Mrs. Paisley as defendant in fi fa a quit claim
deed to said property for the purpose of levy and sale, filed
same in the office of the Clerk of the Superior Court of said
county, and had same recorded, whereupon James I. Lowry,
Sheriff of Fulton County, Georgia, levied the execution is-
suing upon said judgment upon the property whereon a
special lien was declared, as the property of said Mrs.
Paisley, and proceeded to advertise the same for sale on
the first Tuesday in June, 1920, as the property of said
Mrs. Paisley. At the time and place designated in said
advertisement, said property was exposed for sale by James
I. Lowry, Sheriff, and was bid in by J. A. Paisley, husband
2
—~y
~—
of Mrs. Fannie Paisley. James I. Lowry, Sheriff, executed
a sheriff’s deed, conveying said property to said J. A. Pais-
ley. J. A. Paisley, on or about August 15th, 1921, undertook
to convey said property to Claud Brackett, and said Brack-
ett went into possession of the property and remains in
possession of the same. Plaintiff in error was not a party
to the proceedings described above, had no notice of said
proceedings, and was afforded no opportunity to assert and
defend her right to the said property, during the course of
said proceeding.
On February 13th, 1923, plaintiff in error filed suit
against said J. A. Paisley, Mrs. Fannie Paisley, Claud
Brackett and James I. Lowry, Sheriff, alleging the facts
above set out, and praying relief against said defendants,
who were holding adversely to plaintiff in error. The peti-
tion was brought in two counts: the first was based upon
the proposition that the proceedings set out, did not under a
proper construction of the law of Georgia, divest plaintiff
in error of her interest in the land, and that they could not
constitutionally deprive her of said interest because they
did not accord her due process of law ; the second was based
upon the proposition that her interest was divested through
the operation of section 6037 of the Code, and that said sec-
tion in providing for. the divestiture of plaintiff in error’s
interest, is repugnant to the Fourteenth Amendment to the
Federal Constitution, in that it deprived plaintiff in error
of her property without due process of law, and denied her
the equal protection of the laws.
it paral
The petition as amended was dismissed upon demurrer
in the Superior Court, and plaintiff in error took the case
by bill of exceptions to the Supreme Court of Georgia, where
said dismissal was affirmed, and plaintiff in error’s interest
in said land held to have been divested, in the following
language: ‘Where property incumbered by a deed to se-
Dds oak el 2d iba Teche sae
3
7
cure a debt, under the provisions of the Civil Code, section
3306, was sold, subject to such security deed, by the grantor
to a third person, who paid all of the purchase price except
the secured debt which the purchaser assumed and agreed
to pay, and took a bond for title from the grantor, and
thereafter the grantee in the security deed sued his debtor,
the grantor, and obtained a judgment for the amount of the
indebtedness so secured, and a special lien upon the prop-
erty conveyed as security, even though the holder of the
bond for title was not made a party to the suit or otherwise
notified thereof, the equitable interest of the holder of the
bond for title was divested by a sale made in compliance
with the terms of section 6037 of the Code, under the fi fa
issued on said judgment. Such proceeding did not violate
the Fourteenth Amendment to the Constitution of the
United States, and the similar provision of our State Con-
stitution, which declares that ‘No person shall be deprived
of life, liberty or property, without due process of law.’”
ASSIGNMENT OF ERROR
Plaintiff in error submits that the said judgment of the
Supreme Court of Georgia was erroneous in the following
particulars, to-wit:
1. The Court erred in holding that the provisions of an
Act of the General Assembly of Georgia, approved August
27th, 1872, entitled “An act to amend an act entitled an act
to provide for the sale of property in this State to secure
loans and other debts,” as the same were enlarged and am-
plified by the provisions of the first section of an act of the
General Assembly of Georgia, approved December 17th,
1894, entitled “an act to provide for the levy and Sale of
property where the defendant has an interest therein, but
does not hold the legal title’—which said provisions are
embodied in, and constitute section 6037 of the Civil Code
ot Georgia of 1910—and said section 6037 of the Code, are
a Phan AC a a el le et
ch LS RI EIDE TAAL, te hea oii
4
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not in conflict with and in violation of the Fourteenth
Amendment to the Constitution of the United States, for
that the State of Georgia through said provisions of said
section, assumes and seeks:
(a) To deprive the plaintiff in error, and other citizens
of the United States, of property without due process of
law.
(b) To deny to the plaintiff in error and certain citizens
and persons within the jurisdiction of the State of Georgia,
the equal protection of the laws.
2. The Court erred in not holding that said provisions
of said statutes and of said Code section 6037 are in con-
flict with and in violation of the Fourteenth Amendment to
the Constitution of the United States on the grounds set
out in the preceding assignment of error.
3. The Court erred in holding that plaintiff in error is
not, by the provisions of said Statutes and by said Code sec-
tion, deprived of property without due process of law.
4. The Court erred in not holding that plaintiff in error
is, by said provisions of said statutes and of said Code sec-
tion, deprived of Property without due process of law.
5. The Court erred in holding that plaintiff in error, in
being deprived of her property under said provisions of
said statutes and under said Code section, was accorded due
process of law.
6. The Court erred in not holding that plaintiff in error
in being deprived of her property under said provisions of
said statutes and under said Code section, was not accorded
due process of law.
i ie
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7. The Court erred in holding that to divest plaintiff in
error of her property by a sale had pursuant to a judgment
rendered in a suit to which she was not a party, of which
she had no notice, and in the course of which she was af-
forded no opportunity to defend her rights in said prop.
erty, as authorized by said provisions of said statutes, and
by said Code section, was not to deprive plaintiff in error of
her property without due process of law.
8. The Court erred in not holding that to divest plaintiff
in error of her property by a sale had pursuant to a judg-
ment rendered in a suit to which she was not a party, of
which she had no notice, and in the course of which she was
afforded no opportunity to defend her rights in said prop-
erty, as authorized by said provisions of said statutes and
by said Code section, was to deprive plaintiff in error of her
property without due process of law.
9. The Court erred in holding that to divest plaintiff in
error of her property without any judicial proceedings to
which she was a party, as authorized by said previsions of
said statutes and by said Code section, was not to deprive
plaintiff in error of property without due process of law.
10. The Court erred in not holding that to divest plain-
tiff in error of her property without any judicial proceed-
ings to which she was a party, as authorized by said pro-
visions of said statutes and by said Code section, was to de-
prive plaintiff in error of property without due process of
law.
11. The Court erred in holding that said provisions of
said statutes and said Code section do not deny plaintiff in
error the equal protection of the laws.
6
a
a
12. The Court erred in not holding that the said pro-
visions of said statutes and of said Code section, do deny
plaintiff in error the equal protection of the laws.
1. The Statute Defining the Substantive Rights
under Security Deeds in Georgia, is merely De-
claratory of the Common Law.
The security deed statute of Georgia, sections 3306-
3310 inclusive, of the Code, provides that whenever any
person in this State conveyed any real property by deed to
secure any debt, and shall take a bond for title back to said
vendee, said conveyance shall pass the title to said property
to the vendee till the debt which said conveyance was made
to secure shall be fully paid, and shall be held by the courts
of this State to be an absolute conveyance with the right
reserved by the vendor to have the property re-conveyed
to him upon the payment of the debt intended to be secured,
and not a mortgage.
This statute is not the source of the right to convey the
legal title to property as security for a debt. Said right
existed at Common Law. Lackey vs. Bostwick, 54 Ga., 45;
West vs. Bennett, 59 Ga., 507. “That Act”—referring to
the security deed statute—“was not required for the mere
purpose of enabling a debtor to pass the legal title as se-
curity.” West vs. Bennett, 59 Ga., 509.
Nor are the rights of the parties to such a conveyance
different, whether the conveyance be made under or inde-
pendently of the statute. Compare the decisions in Cars-
well vs. Hartridge, 55 Ga., 412; Johnson vs. Griffin Bank,
55 Ga., 691; Broach vs. Barfield, 57 Ga., 601; and Allen vs.
Frost, 62 Ga., 659—wherein the Court dealt with deeds
executed under the statute—with the decisions in Biggers
vs. Bird, 55 Ga., 650; West vs. Bennett, 59 Ga., 507; Bras-
~2
RES ARS SR
Re ici BRATS
nth te
Pitts:
well vs. Suber, 61 Ga., 398; and Phinizy vs. Clarke, 62 Ga.,
623—wherein the deeds before the Court were without the
terms of the statute because the wife had failed to join in
their execution, as at that time required.
The statute as it was originally passed has two distinctive
features: one that the wife must joint in the execution of
the deed, and the other that if the debtor should fail sub.
stantially to comply with his contract, he should not there-
after have the right to redeem by payment of the secured
debt. Georgia laws 1871-1872, page 44. The latter of these
provisions was repealed within less than a year after its
passage, and the former in 1884, leaving the statute merely
declaring the legal effect of a transaction which had identi-
cally the same effect without reference to the statute. Big-
gers vs. Bird, 55 Ga., 650.
In providing that the rights of the grantor in a security
deed should not be adversely affected by liens which might
otherwise attach against the property by reason of the
title’s being in the grantee (Code section 3310) the statute
worked no change in the rule of law already existing. Note
the language of the Supreme Court in Parrot vs. Baker, 82
Ga., 364, where it is said on page 368: “The rule is that
the lien of a judgment against the holder of the legal title
binds the owner to the extent of the beneficial interest
which such owner has in the property.” Freeman on Judg-
ments, paragraphs 356 and 357; Ware vs. Jackson, 19 Ga.,
452; Corbally vs. Hughes, 59 Ga., 493. The Court there-
upon holds that where a judgment debtor holds the legal
title to property as security for a debt, it is immaterial
whether his acquisition of title occurred under or inde-
pendently of the security deed statute, since, in either event,
the property is bound by the judgment to the extent of the
debtor’s beneficial interest therein.
8
2. Section 6037 is not a Substantive Law, Does
not enter into the Contract of the Parties, and
Plaintiff in Error is not Estopped to Attack same.
Section 6037 reads as follows: “In cases where a contract
to purchase has been made, or bond for title made, or the
purchase money ,yhas been partly paid, or in cases where a
deed to secure a debt has been executed, and the purchase
money or secured debt has been reduced to judgment by the
payee, assignee or holder of said debt, the holder of the legal
title, or if dead, his executor or administrator, shall, with-
out order of any court, make and execute to said defendant
. in fi, fa., or, if he be dead, to his executor or administrator,
a quit claim deed to such real or personal property, and file
and have the same recorded in the clerk’s office; and there-
upon the same may be levied upon and sold as other pro-
perty of said defendant, and the proceeds shall be applied to
the payment of such judgment; or if there be conflicting
claims, then the same shall be applied as determined in
proceedings had for that purpose.
It is apparent that the section merely provides a remedy,
—that it is a purely adjective statute. And a statutory
remedy, even though embodied in the same statute which
defines the rights to be enforced, does not constitute a part
of the contract between the parties unless expressly so pro-
vided in the contract, or made exclusive by the statute.
Standifer vs Wilson, 93 Tex., 232; Wilson vs Standifer
184 U. S. 399. The remedy provided by section 6037 is
not exclusive, since an equitable mortgage foreclosure may
be substituted by the creditor ; Sloss vs Mutual Building and
Loan Association, 97 Ga., 401. or he may recover the pro-
perty in ejectment and realize his claim out of the rents and
profits. Polhill vs Brown, 84 Ga., 338; Gunter vs Smith,
113 Ga., 18; Harris vs Powers, 129 Ga., 82.
“In the proposition often stated in the decisions the
parties contract with reference to existing laws, and that
such laws become a part of the contract, the refereace is to
those laws which determine and fix the obligation of the
contract, the co-relative rights and duties springing from
it, and not to laws of mere procedure prescribing remedies.
With reference to these, there is ordinarily no obligation
arising, but the contract is made in contemplation of the
power of the Legislature to change them.” Aikins vs Kings-
bury, 151 P., 147; Wilson vs Standifer 184 U. S., 399.
“The distinction between the obligation of a contract,
and a remedy given by the Legislature to enforce that ob-
ligation, exists, in the nature of things, and without im-
paring the obligation of the contract, the remedy may
certainly be modified as the wisdom of the nation may di-
rect.” Chief Justice Marshall in Sturges vs Crowninshield,
4 Wheat, 122.
And since section 6037 did not enter into the contract
of the parties to the security deed transaction, its mere
existence at the time plaintiff in error purchased the pro-
perty in controversy, created no estoppel against her. If
it were otherwise, every remedy existing when a contract is
made, however unreasonable, arbitrary or oppressive, and
how flagrantly it violates the requirements of notice and
a hearing, would constitute due process of law in the en-
forcement of the contract.
With reference to the question of estoppel, discussed in
the paragraph immediately above, see Coe vs. Armour Fer-
tilizer Works 237 U. S. 418. In that case the Florida Su-
preme Court had held that a stockholder became such
charged with notice that under the statute then before the
Court an execution might be issued against him for the
amount of the unpaid subscription of the capital stock, un-
on the return of a nulla bona on an execution against the
10
PRENSA IE ek PONE SEAR AA NOOR ERATIONS SRE ME Sack. _
YS BS cof of
corporation, and that he was theré¢fore precluded from at-
tacking the statute, but must make his defense, if any, under
the provisions of the statute. The United States Supreme
Court reversed the Florida Court, sustained Coe’s right to
attack the statute and declared the statute unconstitutional.
3. The Interest in Property remaining in the
grantor after the Execution of a Security Deed
under the Law of Georgia, Constitutes Property.
“Our organic law ordains that no person shall be de-
prived of property without due process of law. No author-
ity need be cited to demonstrate that an equity in encum-
bred real estate is property, and therefore under the pro-
tection of the Constitution.” State vs Holtcamp, 151 S. W..
157. See also Williams vs Foy Mfg., Co., 111 Ga, 857.
The grantor in a security deed has the right to possession
of the property conveyed as security, until default in the
payment of the secured debt. This has never been ques-
tioned, but is so universally recognized as to be treated
by the courts as a premise rather than a conclusion. Thus
in Braswell vs Suber, 61 Ga., 398, the court in recognizing
the right of the grantee to recover the property in eject-
ment on the title derived from the security deed after the
debt is in default, says on page 401: “The debt was un-
paid, and if it was not due, or there was some agreement
to hinder the change of possession, this was matter of
defense.”
And after default there is no right in the grantee to oust
the grantor without judicial process. Benedict vs Gammon
Theological Seminary, 122 Ga., 415.
The grantee in a security deed who recovers the property
in ejectment after default in the payment of the debt, is
11
TER: TRL LE REY MEGS EA ELE REM IGN EA BIE
ste ni moe em a
not entitled to mesne profits except pending the action.
Polhill vs Brown, 84 Ga., 338-342,
After recovering the property in ejectment, the grantee
must apply rents and profits to the payment of the debt,
and when the profits are sufficient to discharge the debt,
must re-convey to the grantor. Polhill vs Brown, 84 Ga.,
338; Gunter vs Smith, 113 Ga., 18; Harris vs Powers,
129 Ga., 82.
“The value of property consists in its use, and he who
owns the use forever, though it be on condition subsequent,
is the true owner of the property for the time being.” Wells
vs Savannah, 87 Ga., 399. Where the legal title to property
has been conveyed to secure a debt, the law looks not to
the holder of the legal title, but to the beneficial owner
for the tax levied upon the property. Central of Georgia
Railroad Company vs Wright, 124 Ga., 630; Central of
Georgia Railway Company vs Wright, 166 Fed. 153.
“Where taxation is ad valorem, values are the ultimate
objects of taxation, and they to whom the values belong
should pay the tax.” Wells vs Savannah, 87 Ga., 399.
4. Said Property may be sold, and the Purchaser
acquires all the Interest, and is Subrogated to all
the Rights of the Grantor.
When land is conveyed under section 3306 et seq. to se-
cure a debt, the interest pertaining to such land which the
grantor thereafter possesses until the debt is paid, is the
right to redeem. This right to redeem is an equitable es-
tate in the land, and may be sold and conveyed, subject to
the paramount right of the original grantee to have all the
land appropriated to the payment of his debt. Williams vs
Foy Mfg., Co., 111 Ga., 857.
12
Where the grantor in a security deed to land subse-
quently sells the timber on the land to a third person, such
third person acquires the right to redeem the land for the
purpose of having the title to his timber unincumbered.
Williams vs Foy Mfg., Co., 111 Ga., 857. Where land is
purchased from the executor of the grantor in a security
deed, the purchaser has the right to tender the amount of
the secured debt, and the creditor cannot refuse the tender
on the ground that it is made by such purchaser, instead
of by his debtor’s executor. Loftis vs Alexander 139 Ga.,
346.
Central of Georgia Ry. Co. vs Wright, 166 Fed. 153, was
a case in which the Central Railroad and Banking Com-
pany had conveyed the legal title to certain stock as se-
curity for a debt, under the provisions of section 3306,
et seq., of the Code. Subsequently the same company sold
the stock, subject to the security deed, and by a succession
of conveyances the stock eventually came into the hands
of the Central of Georgia Ry. Company. The record dis-
closed no agreement between the successors in interest to
the Central Railroad and Banking Company, and the holder
of the legal title. The court in that case held, on page 158:
“So far as the records show, the same situation exists
as to voting stock, election of officers and control and col-
lection of dividends, that existed between the old Central
Railroad and Banking Company and the Central Trust
Company; and the status between the complainant com-
pany and the Central Trust Corporation, to my mind, is the
same as though the stock had been transferred by the pres.
ent company in the same manner and under the same terms
and conditions that it was transferred and pledged by the
old Central.”
5. Plaintiff in Error was Divested of her pro-
perty through the Operation of Section 6037, Con-
trary to Settled Usages and Modes of Procedure,
and in Derogation of the Common Law and Equity.
13
ARUN RESET NEAES i ae
A ie a Sa ahelen Geo sean ee ee
The case of Mattlage vs. Mublherrin, 106 Ga., 834, and the
present case, plainly hold that the rights of persons oc-
cupying the status of plaintiff in error, are divested by the
procedure outlined in section 6037. Mattlage vs Mulherrin
is the only case ever decided by the appellate courts of this
State, which explains how the procedure operates to divest
such interest. The Court in that case holds, (pages 838-839)
that the suit required under the foreclosure statute, section
6037, operates as a quasi proceeding in rem to bind the
defendant and all other persons claiming under the defen.
dant by conveyance executed subsequent to the record of
the security deed.
The proceeding could not, except for the statute, operate
as a proceeding quasi in rem. The suit is a plain action at
law on a note, the purpose of which is to reduce to judgment
a debt. Edenfield vs. Bank of Millen, 7 Ga., App., 645. And
it is not necessary that either the suit of the judgment
specify a special lien on the property. Coleman vs. Slade,
75 Ga., 61; Gillespie vs. Hunt, 145 Ga., 490.
And operating as a proceeding quasi in rem, the suit
and judgment could not, except for the statute, establish
a lien upon the property of any person except the parties
to the suit, or in any way bind third persons. Actions quasi
in rem differ, among other things, from actions which
are strictly in rem in that the interest of the defendant is
alone sought to be affected, that citation to him is required,
and that judgment therein is only conclusive between the
parties. Freeman vs. Alderson, 119 U. S., 185-188, see page
187; Stroupper vs. McCauley, 45 Ga., 74; Gassert vs Strong,
98 P., 497, see pages 500 and 501; Dulin vs. McCaw, 39
W. Va., 721, 726; see also Ba rtero vs. Real Estate Savings
Bank, 10 Mo. App., 76-79; Woodruff vs. Taylor, 20 Vt.,
65-76.
14
ARSON LR eT TR NTE ERLE a.
rr
== Gate oP Oh ae es = as
re
,
Mattlage vs. Mulherrin analogizes the operation of sec-
tion 6037 to the operation of the mortgage foreclosure sta-
tute (present Code, section 3276 et seq.). Concerning the ac-
tual operation of the latter Statute, the Supreme Court of
Georgia, says, in Williams vs. Terrell, 54 Ga., 463; “Can
it be possible that it was the intent of the law that one not
a party should be absolutely bound by a judgment against
a third person declaring his land to be subject to the
mortgage, fixing the amount of it, declaring it still to be
subsisting, etc., and that, too, when at the date of the pro-
ceeding, the mortgagor had parted with all his interest?”
Then, after reviewing the prior decisions of the Supreme
Court, the Court holds that a purchaser subsequent to the
mortgage but prior to the institution of foreclosure pro-
ceedings, is not bound by the mortgage foreclosure.
A fortiore, the suit could not operate as a proceeding in
rem, as distinguished from a proceeding quasi in rem. In
Webster vs. Reed, 11 Howard, 459, the Court holds as fol-
| lows: “No person is required to answer in a suit, on whom
process has not been served, or whose property has not been
attached. In this case, there was no personal service not at-
tachment or other proceeding against the land until after
judgment. The judgments, therefore, are nullities, and did
not authorize the executions on which the land was sold.”
EE NES RIL IELTS STEN, MATE BIL ONES OREN
Not only would the general law not have required plain-
tiff in evror to make defense in the suit provided by section
6037, but the section itself prohibits her doing so. Loftis
vs. Alexander, 137 Ga., 65.
6. Plaintiff in Error was not Properly Privy to
Said Judgment.
It is obvious from the decision in Mattlage vs. Mulherrin,
referred to above, that purchasers of the equitable interest
15
PERRIS: Go Ma Karin ep tie Se
in land, subsequent to the execution of a security deed, are,
in the proceeding prescribed by section 6037, dealt with
as privies to the foreclosure judgment, so as to have their
rights divested by a sale thereunder.
It is expressly held, however, in Marshall vs. Charland,
106 Ga., 42, that one who acquires an interest in property
covered by a security deed is not privy to a judgment of
foreclosure under section 6037, rendered in a suit com-
menced after his acquisition of title. It will be noted that
this case was decided prior to the case of Mattlage vs.
Mulherrin, and that it was not overruled.
Such so-called privity does not exist independently of
said foreclosure statute. “It is well understood, though not
usually stated in express terms, in works upon the subject,
that no one is a privy to a judgment, whose succession to
the rights of property thereby affected, occurred previously
to the institution of the suit.” Morris vs. Murphy, 95 Ga.,
307-310. “Where the doctrine of lis pendens applies, privies
are concluded by a final judgment on the merits in a case
pending when they purchased; but there is, perhaps, no
instance in the whole law where privies in estate are held
affected by the result of litigation in a suit commenced by
or against a predecessor in title after he has transmitted
all the title he ever had.” Rucker vs. Womack, 55 Ga., 399.
And that this rule is not changed in a case where the
judgment is rendered in a suit brought to enforce a lien
upon property which has been sold subject to the security
deed, see Williams vs. Terrell, 54 Ga., 462; Marshall vs.
Charland, 106 Ga., 42.
7. The Judicial Proceeding Prescribed by Sec-
tion 6037, did not Accord Plaintiff in Error Due
Process of Law.
16
Tr
ee
ss SS mt
~] p>» &
(a.) Because she was not a party to same.
It is a fundamental principle of due process of law that
the rights of a person may not be affected by judicial pro-
ceedings to which he is not a party. 12 Corpus Juris, 1227;
Carsten vs. Pilsbury, 158 P., 218; Archuleta vs. Archuleta,
123 P., 821; State vs. Guilbert, 47 N. E, 551.
Plaintiff in error was not a necessary party to the pro-
ceeding brought under section 6037 in the present case.
Brooks vs. Lowry National Bank, 141 Ga., 293. She was
not even a proper party to that proceeding. Loftis vs.
Alexander, 137 Ga., 65.
(b). Because she did not have proper Notice of
Same.
DEAT Se BERNIE SR TR EL eT
Notice to one whose rights are to be affected by judicial
proceedings, is an essential element of due process of law.
Coe vs. Armour Fertilizer Works, 237 U. S., 413; Pennoyer
vs. Neff, 95 U. S., 714; Windsor vs. McVeigh, 93 U. S., 274.
PRA gH OI
ery
And the statute authorizing the proceeding must affirm-
atively require notice, or it will be unconstitutional. Coe vs.
Armour Fertilizer Works, cited above; Stewart vs. Palmer,
74 N. Y., 183.
is So
Newt
The statute in question did not require, either expressly
or impliedly ,any notice to plaintiff in error of the proceed-
ing through which her property was to be divested. Loftis
vs. Alexander, 137 Ga., 65; Brooks vs Lowry Nationa!
Bank, 141 Ga.; 293; and the present case.
The levy after judgment is not sufficient to meet the re-
quirements of due process of law as to notice. See Pen-
noyer vs. Neff, 95 U. S., 714, in which it is held that notice
to a person whose rights are to be affected by judicial pro-
ceedings, is essential to give jurisdiction, and that a levy
17
me
upon his property after judgment is not the required no-
tice. See also, Webster vs. Reed, 11 Howard, 459.
(c) Because she had no Opportunity to be Heard
in the Course of Same.
To deprive a person of his property by or through ju-
dicial proceedings in the course of which he is afforded no
opportunity to be heard, constitutes a denial of due pro-
cess of law. Windsor vs. McVeigh, 93 U. S., 274; Coe vs.
Armour Fertilizer Works, 237 U. S., 413.
And the statute authorizing the proceeding must, to be
constitutional, provide for such hearing. Stewart vs. Pal-
mer, 74 N. Y., 183; Coe vs. Armour and Company, above
cited.
A hearing cannot be dispensed with on the assumption
that the party to be affected has no defense to offer, or
that if a hearing were allowed, the same result would be
reached. Coe vs. Armour Fertilizer Works, supra., Reese
vs. Watertown, 19 Wall, 107-123.
Plaintiff in error was not, by the provisions of section
6037, afforded any opportunity for a hearing in the fore-
closure proceedings through which she was deprived of her
property. Not being a party to the proceedings, nor al-
lowed to intervene therein, (Loftis vs. Alexander, 137 Ga.,
65) she could not defend as a party. And for the same rea-
son, motion in arrest of judgment, or to set aside the jadg-
ment, was not open to her. Code, section 5957: Merchants
Bank vs. Haiman, 62 Ga., 624-628; Jones vs. Smith, 120
Ga., 642. And for the same reason, an affidavit of ille
gality or motion to quash the execution on the ground that
she had not had her day in court, was not available. Code,
section 5305 Walker vs. Equitable Mortgage Company, 112
Ga., 645; Artope vs. Barker, 72 Ga., 186; City of Atlanta
vs. Seaboard Air Line Ry. Co., 137 Ga., 805.
18
a
8. Levy and Sale Prescribed by Section 6037 does
not of itself Constitute a Proper Summary Pro-
ceeding to Deprive Plaintiff in Error of her
Equity.
As has already been set out, the levy prescribed by sec-
tion 6037 has been held to be based upon the judgment in
the foreclosure suit required. Mattlage vs. Mulherrin, 106
Ga., 834. Plaintiff in error could not, therefore, be re-
quired to wait until her property was seized for sale, to
make her defense. Riverside Cotton Mills vs. Menefee, 347 237
U. S., 189.
Had the Supreme Court of Georgia and of the United
States not held as above set out, the levy and sale pre-
scribed by section 6037 could not be considered a summary
proceeding by which the rights of plaintiff in error were
divested.
In the case of Coe vs. Armour Fertilizer Works, 237 U.
S., 413, the question whether a levy and sale under a writ
of execution, can constitute a valid summary proceeding, is
presented and decided in the negative. The Court holds, in
that case, that the writ of execution cannot, of itself, be
treated as equivalent to a writ of attachment, establishing
a lien on the property levied upon, but going no further
until the owner has had an opportunity to show cause why
that property should not be subjected to the payment of the
execution. ‘“‘Not only is such a purpose wholly unexpressed
in the writ itself, buf such is not its normal function or
effect; no day in court is named, and there is no provision
for notice or monition by service, publication, mailing or
otherwise.” And there is no distinction between the effect
of the execution in that case, and an execution which is-
sues upon a judgment rendered under the provisions of
section 6037. See also, Windsor vs. McVeigh, 93 U. S., 274.
23 L. Ed., 914 (see page 916).
19
It is true that there are instances of summary proceed-
ings wherein, upon a seizure of his property under specially
provided process, the owner is required to make his defense
to the claim asserted against him before his property is dis-
posed of under such process, or forfeit his right to a hear-
ing. And it is also true that section 5157 et seq., of the Code
of Georgia, provide generally that whenever an execution
or other process is levied upon property, persons other than
the defendant in execution may interpose claims, and thus
present to the court the issue whether such property is sub-
ject to levy under such execution.
But the Supreme Court of Georgia has held that the claims
laws of this State are permissive and cumulative only, that
the true owner of property is not bound to interpose a claim
when his property is levied upon, and that a mere failure
to do so does not bar the true owner from subsequently
asserting his right to the property. Bodega vs. Perkerson,
60 Ga., 516; Sears vs. Bagwell, 69 Ga., 429; McLennan vs.
Graham, 106 Ga., 211. And it is submitted that such an
optional mode of defense, granted as a matter of favor or
privilege, is not a substantial substitute for the due process
of law which the United States Constitution, 14th Amend-
ment, requires. Coe vs. Armour Fertilizer Works, 237 U.
S.. 413.
If the levy and sale prescribed by section 6037 could be
treated as a summary proceeding, and the right to claim as
furnishing an opportunity for a hearing in said proceeding,
the remedy afforded by a statutory claim in Georgia, still
does not provide such a hearing as is required as an ele-
ment of due process of law. “Where a security deed is
given to secure a note, and after judgment is obtained on
the note, the land re-conveyed, and execution levied thereon,
a claim is filed by a third person, proof of possession of the
land by the grantor in the security deed at the time of the
20
execution of such deed is sufficient to make a prima facie
case against the claimant, in favor of the plaintiff in fi fa.”
Ford vs. Nesmith, 117 Ga., 211. The judgment, the rendi-
tion of which claimant had no opportunity to contest, is
presumed to have properly and correctly adjudicated every
other fact necessary to uphold the levy; and it is incum-
bent upon the claimant to defeat the taking, rather than
upon the plaintiff in execution to justify it. Ford vs. Ne-
smith, 117 Ga., supra. To afford plaintiff in error, and
others similarly situated, no other opportunity to be heard,
and require her to resort to such a proceeding on pain of
losing her rights, would be to convert an estate in possession
into a mere cause or right of action. Martin vs. White.
100 P., 293. The right of a person to prosecute a claim
to prevent the unlawful sale of his property, cannot be sub-
stituted for the hearing required by the constitution as a
condition precedent to the taking of such property, for “a
person who has the legal right, and is actually or construc-
tively in possession, can never be required to take active
steps against opposing claims.” Groesbeck vs. Seeley, 13
Mich., 329-342.
Section 5158 of the Code provides that in order to prose-
cute a statutory claim, the claimant must give bond upon
which, it is provided in section 5169, he is subject to a
judgment for such damages—not less than ten per cent.—
as the jury may assess against him on the trial of the claim
case.
Moreover, if the levy and sale provided by section 6037
had been held, or could be held, to operate as a summary
proceeding, it would be unconstitutional as set out in Par-
sons vs. Russell, 11 Mich. 113, which holds that a statute
which provides for the seizure and sale of property on a
Mere assertion of a debt or demand against it, without any
proof or affidavit to substantiate the claim, is unconstitu-
tional.
21
Bos OR he Rs Lt sa asd SS 9 PS han hiiaiea an “on ~~
9. Such Taking as is Authorized by Section 6037,
cannot be Justified as an Exercise of Police Power.
Although the Georgia Supreme Court did not in this case
base its decision upon police power, plaintiff in error offers
to show that if such had so based its decision the statute
could not thereby be justified.
To justify an interference with private rights, under the
police power, it must appear not only that such interference
has for its object the public good, as held in Lawton vs.
Steele, 152 U. S., 183, but also that the means employed
tend to the accomplishment of that object. 12 Corpus Juris,
930; People vs. Weiner, 110 N. E., 870.
No good flows to the public from the provisions of section
6037. On the contrary, great and manifest evil flows from
them. They constitute an open invitation to the perpetra.
tion of frauds upon true owners of property, in that they
enable a creditor to collude with a former owner in ef-
fecting a stealthy foreclosure Note the fact that it was
the husband of the defendant in foreclosure who purchased
the property at foreclosure sale in the present case. Para-
graphs 14 and 36 of Plaintiff’s amended petition, pages 9
and 12, respectively, of the Transcript of Record.
A judgment may be secured in a section of the state dis-
tant from the county in which the land lies, and in which
the true owner resides, and the effect of such judgment is
not only to authorize a sale of the property to satisfy an
alleged obligation, but to increase the burden of that obli-
gation by the addition of a per centage of principal and in-
terest as attorney’s fees. Guarantee Bank & Trust Company
vs. American National Bank, 15 Ga. App., 778. And all the
while, the owner of the property may be in search of an
illusive security deed holder. Such action is possible in the
face of the fact that under section 4252 of the Code, an
22
agreement to pay attorney’s fees in addition to principal
and interest, is unenforcible except in a suit brought on the
instrument containing such agreement, after notice to the
debtor; see said section; the right to recover attorney’s
fees at all being based upon the necessity of entering suit
ofter such notice.
But, it is respectfully submitted, the extent to which a
state may go in curtailing the rights of its citizens gener-
ally, is not involved in the present case. The right to notice
of, and an opportunity to be heard in, a judicial proceed-
ing through which rights are to be divested or affected, al-
though such proceeding be authorized pursuant to the
police power, cannot be taken away. 12 Corpus J uris, 1229;
Smith vs. Board of Medical Examiners, 140 Iowa, 66.
“Whatever else may be uncertain about the definition of
the term ‘due process of law’, all authorities agree that it
inhibits the taking of one man’s property and giving it to
another, contrary to the settled usages and modes of pro-
cedure, and without notice or an opportunity for a hearing.”
Ochoa vs. Hernandez y Morales, 230 U. S., 57 L. Ed., 1429-
1436.)
It has been shown that section 6037 as construed by the
Supreme Court of Georgia, operates to take from a person
occupying the status of plaintiff in error, his property and
give it to the purchaser at the sale held pursuant to said
section, contrary to the settled usages and modes of pro-
cedure, and without notice or an opportunity for a hearing.
And a statute which attempts to work such a change of own-
ership is a glaring violation of the constitution, and cannot
be defended as an exercise of the police power. 6 A Ta
436; Burdick vs. People, 36 N. E., 948.
Respectfully submitted,
HOOPER ALEXANDER,
PAUL DONEHOO,
N. T. ANDERSON, JR.
Attorneys for Petitioner, Dorothy Scott.
23
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INDEX TO SUBJECTS AND BRIEF OF THE
ARGUMENT
Page
Preliminary Propositions ....... 1
(a) As to adequate remedy at ROE ELS
(b) As to laches. " 1
(c) As to failure to tender redemption . 1-2
(d) Case a mere abstract proposition and cn
Argument and Authorities on Preliminary Propositions 2-7
Nature of the Security Deed provided for under §3306
and the remedy under §6037 of Georgia Code... 8-11
Main proposition 11
“The Statute contained in §3306 and §6037 of the Code
of Georgia are not repugnant to the due process
clause of the Constitution of the United States,
nor did they deny to plaintiff the equal protection
of the laws s 11
Argument and authorities on the main proposition........12-14
No Right of Redemption after sale... 14-16
Failure to make junior vendee a party to foreclosure,
not a denial of due process of law or of equal pro-
tection of laws... 4 16-20
Argument and authorities in reply to brief for plaintiff
in error .. 20-22
Term “Equity of Redemption” a misnomer applied toa
Security Deed given under Georgia Statutes... 23
Priority of judgment on secured debt over a transfer
of so called equity of redemption. 24-26
peers rents
a a ed oe es ee ee ee ee antes —™
INDEX TO AUTHORITIES CITED
Pages of
Brief
American Book Company vs. Kansas, 193 U. S., 49.00... = 7
Bank of Gutschlick, 14 Peters, 19, 29.0000 16
Barnitz vs. Beverly, 163 U. S., 118. ccceccsssseeenne 22
Bell Mining Company vs. Butte Bank, 156 U. S., 470...14-16 ,
Brewster vs. Wakefield, 22 Howard, 118, 129... 17
Brine vs. Insurance Company, 96 U. S., 627.000.0000... 12
Brooks vs. Lowry National Bank, 141 Ga., 493................ 16
Burkhalter vs. Planters Loan & Savings Co., 100 Ga.,
Beene > sairdenmalcleinabeiantlsthiatie 9 i
Carrington vs. Citizens Bank of Waynesboro, 144 Ga.,
|S RERESs ae mae inl 15
Clarke vs. Graham, 6 Wheaton, 577.0000. 12
Clark vs. Kansas City, 176 U. S., 114 cccccceeseee 7 §
Crawford vs. Pritchard, 81 Ga., 14 ian
Evans vs. Kahr, 60 Kan., 719... 15 «OF
Georgia Code SBB06 cece ccccsscsssnesneeesesemees-G-11-12-16
Georgia Code §3307 10 F
Georgia Code §3309 3 j
Georgia Code §4198 spiiainsibas 1
Georgia Code §6037 8-9-10-11-12-16-19-20-23 4
Georgia Laws of 1871-2, pp. 44-45 12 |
Georgia Laws of 1872, p. 47 12
Georgia Laws of 1884-5, p. 57 12
Georgia Laws of 1894, pp. 100-101 12
Giles vs. Little, 184 U. S., 645 +. 39
Grantley vs. Ewing, 3 Howard, 707... 21
YOO oe
Ste a
ee
i ae bil Pe
INDEX TO AUTHORITIES CITED—Continued
Page of
Brief
Henry vs. McAllister, 93 Ga., 667 a 24
Hinesley vs. Stewart, 139 Ga., 7.. ; 17
Hollins vs. Brierfield Coal & Iron Co., 150 U. S., 371,
© See teh Sat SN ae eG Oc .
Hooker vs. Burr, 194 U. S., 415... ESRD ROLE a,
Howard vs. Gresham, 27 Ga., 347... cegighddumaniciudion <a
Howard vs. Railway Company, 101 U. S., 837... me
ee 6. Tae, 10 ., 6 8
Lampasas vs. Bell, 180 U. S., 276.0... cccccccccscsccsssssessneensee 7
Loftis vs. Alexander, 1389 Ga., 346.0000 2
Louisiana vs. Jumel, 107 U. S., 750.000 ec 21
Louisiana, ex rel. Nelso vs. St. Martin’s Parish, 111 U
Ty Ne a ee ae ae 21
Louisiana, ex rel. Ranger vs. New Orleans, 102 U. S
CRS ae nak ieee,
Louisiana, vs. Pittsburg, 105 U. S., 302.00. 21
Ludeling vs. Chaffee, 143 U. S., 301.000 7
Maddox vs. Arthur, 122 Ga., 671. oa 24
Martin vs. Ward, 60 Ark., 210.......... 15
Marye vs. Parsons, 114 U. S., 325........... aod 7
Mills vs. Green, 159 U. S., 651...
Morice vs. Bishop of Durham, 10 Ves., 537.0000. = 9
Morsell vs. First National Bank, 91 U. S., 361.0000. 16
Mutual Loan & Bonding Co., vs. Haas, 100 Ga., 111...19-22
McAlpin vs. Bailey, 76 Ga., 687. cece 24
McCracken vs. Howard, 2 How., 608, 612................... 22
Osborne vs. Rice, 107 Ga., 281, 285 : 17-18
ce |
INDEX TO AUTHORITIES CITED—Continued
Page of
Brief
Pace vs. Canterbury, 14 Ves., 370. 9
Palmer vs. Young, 96 Ga., 246... i
Planters Bank vs. Sharp, 6 How., 301 21
Pritchard vs. Norton, 106 U. S., 182... ............... 22
Roberts vs. Atlanta Cemetery Ass’n., 146 Ga., 390,
aa es 16-17
Seibert vs. Lewis, 122 U. S., 284.0000. 21
Scoville vs. Calhoun, Ordinary, 76 Ga., 263.0000. 5
Shumate, Admr., vs. McLendon, 120 Ga., 396... 9-18
Singer Mfg. Co., vs. Wright, 141 U. S., 696.000 7
Stanbach vs. Thornton, 106 Ga., 81, 83.0000 19
Stoddard vs. Forbes, 16 Iowa, 296................ Se cangaseneienanauiiien 15
Suttles vs. Sewell, 105 Gar, UBB ciecccccccsssseccsccssssssnseeeee 14-16
pe i; NL, SO I Rs ee
pas OE OG. 2 Ge, Oe ne «68
po See ae ee 6
Tyler vs. Judges of Registration, 179 U. S., 405.0000. 7
United States, ex rel. Butz vs. Muscatine, 8 Wal., 575 19-21
Vestel vs. Edwards, 143 Ga., 368, 372 ; 5
Washington Exchange Bank vs. Holland, 121 Ga., 305 18
Weiner vs. Heintz, 17 Ill., 259... easton debsietaanaudanbiecieass 15
White vs. City of Atlanta, 134 Ga., 532.000 6
Williams vs. Hood, 98 U. S., 72 6
Williams vs. Terrell, 54 Ga., 462 17-18
Willis vs. McIntosh, Ga., Dec., 162 15
Woodwall vs. Jewell, 140 U. S., 247, 251 9
ERELLE EAL LONI HT NASI OIE TOMAS mph signees
“7
IN THE
SUPREME COURT OF THE
UNITED STATES
DOROTHY SCOTT,
Plaintiff in Error
v8.
NO. 253
J. A. PAISLEY, MRS. FANNIE / ocTOBER TERM 1995.
PAISLEY, CLAUD BRACK.
ETT, AND J. I. LOWRY,
Sheriff,
Defendants in Error
WRIT OF ERROR TO REVIEW A JUDGMENT OF THE
SUPREME COURT OF GEORGIA (158 GA. 876)
PRELIMINARY PROPOSITIONS
Without regard to the constitutional validity of the Stat-
ute raised by the bill of the plaintiff in error, her suit was
properly dismissed in the Court of original jurisdiction on
general demurrer, for want of equity,
FIRST: Because the action being a suit in equity, it
was not maintainable for the reason that the plaintiff had
an adequate remedy at law, and was guilty of inexcusable
laches in asserting her alleged rights.
SECOND: Because plaintiff was not in position to at-
tack the constitutionality of the Statute called in question,
for the reason that her suit failed to show that she had
1
ne hehe |
*
T ™~ PA AOA OL Ete EI aD newonaagy
g
}
|
ever made any offer to redeem the property, the right to
redeem which she prayed, or any reason why such offer of
redemption had not been made, nor did she in her suit make
any tender of redemption or allege a readiness, willingness
or ability to redeem.
FOURTH: Because, the plaintiff in error not having
come into actual collision with the Statute in question, her
suit in the Court of original jurisdiction, was the anticipa-
tory raising of an abstract question of the constitutional
validity of a law, and was a moot case in the Court of origi- ,
nal jurisdiction, and is a moot question upon her writ of
error in this Court, and her writ of error should be here
dismissed.
ARGUMENT AND AUTHORITIES ON THE FOREGOING
PROPOSITIONS
The suit of plaintiff in error shows that the real estate
in question was conveyed to her subject to the loan for the
satisfaction of which the property was sold and conveyed
by the Sheriff to the predecessor in title of the defendant
Brackett, and that she held the property from the 2nd day
of October, 1919, the date of the conveyance to her, until
the 13th day of February, 1923, the date of the filing of
her suit (R. 8, par. 4, 5). It further appears that the
property was sold by the Sheriff under execution for the
loan, which she had assumed, on the first Tuesday in June,
1920.
Under the laws of Georgia, the plaintiff in error at all
times from the time of the conveyance of the property to
her and until the sale by the Sheriff, had the right to re-
deem the property.
In the case of Loftis vs. Alexander, 139 Ga., 346, the Su-
preme Court of Georgia, holds, that—“In this State a deed
to secure a debt is not the same as a mortgage. Such a deed
nee
»
Pte 8 +
conveys title; a mortgage is only a lien. But a deed of that
character is in several particulars similar to a common law
mortgage; and one of them is as to the right of one who
buys the property from the maker of the deed and obtains
an equitable interest therein to protect his purchase by pay-
ing off the secured loan, especially where as part of the
contract of purchase, he agrees to make such payment.”
It is obvious, therefore, that any time prior to the first
Tuesday in June, 1920, under the law, as it existed in the
State of Georgia, the plaintiff in error could have tendered
the amount of the loan with interest and costs accrued and
demanded a reconveyance of the property to her, or a satis-
faction on the record of the loan deed, which under the law
of Georgia would have amounted to a reconveyance (Code
of Georgia, (1910) §3309. Printed in the margin) .*
Applying the rule that equity aids only the vigilant and
not those who slumber on their rights, plaintiff in error had
no standing in equity in the Court of original jurisdiction.
From the 2nd day of October, 1919, when the property in
question was conveyed to the plaintiff in error, by war-
ranty deed, subject to the outstanding loan (R. 8, par. 5),
by the very terms of the conveyance to her she had notice
of the loan; that the interest was payable semi-annually
and that said loan matured on the 9th day of January, 1920
(R. 7, par. 8). After securing a conveyance to herself of
the property, she went to sleep and slept on until after the
*GEORGIA CODE OF 1910 §3309.
In all cases where property is conveyed to secure a debt,
the surrender and cancellation of such deed in the same
manner that mortgages are now canceled, on payment of
such debt to any person legally authorized to receive the
same, shall operate to reconvey the title to said property to
the grantor, his heirs, executors, administrators, or assigns,
and such cancellation may be entered of record by the Clerk
of the Superior Court in the same manner that cancellations
of mortgages are now entered.
SHR y Kg: 7
PIE BL BPG LE MRA PR NOB RIE AP ON EI RN ME A
maturity of the note and until after suit was entered on
the note to the May Term, 1920, of the City Court of At-
lanta (R. 8, par. 8). She slumbered through the default
entered in the suit upon the note; through the rendition of
a verdict and judgment and the issue of an execution, the
levy of an execution, the filing and record in the office of
the Clerk of the Superior Court of Fulton County, Georgia,
of a quitclaim deed for the purpose of levy and sale; through
a levy; through all the time that the property was being ad-
vertised by the Sheriff for sale, and on past the sale which
was had on the first Tuesday in June, 1920, (R. 8, par. 8,
9, 10, 11, 12, 13) (R. 14), and continued to slumber on for
a period of three years after the sale, finally waking up on
the 13th day of February, 1923, without performing any
act for the redemption of the property, and then merely
submitting to the Court, in her suit, an abstract question
whether or not she had any right of redemption in the
property.
It is equally apparent that after the sale by the Sheriff,
if the plaintiff in error desired to redeem and to test the
validity of the Statute under which the Sheriff’s deed had
been made, she could have tendered the amount deemed by
her necessary to redeem to the holder of the title under the
Sheriff’s Deed. If the tender had been accepted, no resort
to the courts, either in law or in equity, would have been
mecessary. If the tender had been refused she could then
have made a continuing tender, demanded possession of the
premises, upon refusal of possession she could have sued in
ejectment for the land, and upon resistance upon the title
derived from the Sheriff she could have then raised the
question of the validity of the Statute under which the
Sheriff’s deed was made as a practical question, and not as
an abstract proposition, as the same was made in her suit
in equity.
Hence, the plaintiff was not only guilty of laches in as-
serting the right claimed by her but had an adequate rem-
4
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edy at law, and her suit was, consequently dismissed upon
general demurrer for want of equity in her petition.
Furthermore, when the suit of the plaintiff in error pre-
sented the question of the constitutional validity of the Stat-
utes involved, the court of original jurisdiction was con-
fronted with the decisions of the Supreme Court of Georgia,
binding as authority upon it, as to whether the petitioner
stood in such relation to the Statutes as to be able by her bill
to call in question the constitutional validity of such Stat-
utes. Plaintiff’s suit failing to show that she had ever made
any offer to redeem the property, the right to redeem which
she prayed, or any reason why such offer of redemption had
not been made, nor, in her suit, any tender of redemption,
or any allegation of a readiness, willingness or ability to re-
deem, said suit was properly dismissed on demurrer for
want of equity.
In the case of Vestel vs. Edwards, 143 Ga., 368, 372, the
plaintiff attacked a Statute of the State of Georgia as repug-
nant to the due process of law clause of the State of Georgia
and of the United States, and as denying the equal protec-
tion of the laws, on account of certain alleged duties and
powers conferred upon the State Tax Commissioner, but it
appearing from the record that the Tax Commissioner had
not exercised the duties imposed upon him so far as the
same related to the case at bar, the court held that any dis-
cussion or decision of the act relatively to the plaintiff would
be moot, adding—“Until that official has exercised the au-
thority conferred upon him by the act to the detriment of
the plaintiff, the latter cannot attack the act with respect to
the authority thus conferred.”
In the case of Scoville vs. Calhoun, Ordinary, 76 Ga. 263,
it was held—“When a law operates upon the private prop-
erty of an individual, and it is seized, destroyed or confis-
cated, or the individual is indicted for a violation of such
law, he may assail the portion thereof affecting his private
property or personal liberty as unconstitutional, and the
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courts will make such adjudication as will maintain the in-
tegrity of the law as a whole, if possible, and at the same
time, protect the citizen against any illegal portions of the
law, if there be such.” (Italics mine.) This case is cited
upon the proposition that the law must actually impinge
upon the rights of the person attacking it, before its con-
stitutionality will be passed upon by the Courts.
In the case of Tolbert vs. Long, 134 Ga., 292, it was held
that where a statute claimed to be unconstitutional was to
become operative only after ratified by a popular election,
an attack on it would not be sustained prior to the holding
of the election, and in the case of White vs. The City of At-
lanta, 134 Ga., 532, it was held that it was not necessary to
pass upon the constitutionality of a Statute until some per-
son affected by the Statute should seek appropriate relief
in regard thereto.
The decisions of this court are in accord with the decis-
ions of the Supreme Court of Georgia, that before a person
can have relief at the hands of the courts against an un-
constitutional law he must have actually suffered, or be ac-
tually threatened with an injury to his person or property
by the operation of the law, or that the law prevents him
from the exercise of some right which he has attempted to
exercise.
In the case of Turpin vs. Lemon, 187 U.S. 51, it is held
that “A plaintiff is bound to show that he has personally
suffered an injury by the application of a law before he can
institute a bill for relief to test its constitutionality.”
In the case of Williams vs. Hood, 98 U. S., 72, it is held
that “Where a bill shows no equity in the complainant and
contains no averment that he has been injured by certain
statutes of a State, this court will not pass upon an abstract
question the object of which is plainly to obtain a decision
touching their constitutionality, but will dismiss the bill
without prejudice.”
Baa ea ie
The same principle was applied in the following cases:
Tyler vs. Judges of Court of Registration, 179 U. S.
405;
Clark vs. Kansas City, 176 U. S. 114;
Lampasas vs. Bell, 180 U. S. 276;
Ludeling vs. Chaffee, 143 U. S. 301;
Giles vs. Little, 134 U. S. 645;
Hooker vs. Burr, 194 U.S. 415.
It is the duty of the court to give decisions in actual con-
troversies, and not to give opinion upon moot questions or
abstract propositions of law.
American Book Co. vs. Kansas, 193 U. S. 49;
Mills vs. Green, 159 U. S. 651;
Marye vs. Parsons, 114, U. S. 325.
Nor will the Court sustain a writ of error, where it ap-
pears that the plaintiff may have a right which he intends
to assert but which he has not yet asserted.
Singer Mfg. Company vs. Wright, 141 U. S. 696.
A fair interpretation of the suit of the plaintiff in error
is that it invokes a decision of the Court upon an abstract
question as to the existence of a right which she has never
attempted to exercise and which she is not bound to exer-
cise, and which she might never exercise, if the Court should
hold that she has such a right. The question is, therefore,
moot, and her writ of error should be dismissed.
7
NATURE OF THE SECURITY DEED PROVIDED FOR
UNDER §3306 AND THE REMEDY PROVIDED
FOR UNDER §6037 OF THE CODE OF GEOR-
GIA, (Printed in the margin) .*
The deed to secure a debt provided for under §3306 of
the Code of Georgia is analogous to and, in legal principle,
identical with a trust deed with a power of sale under
$6037. The making of a conveyance under §3306 invests
the lender with the legal title to the property to be held in
trust by the lender as security for the loan secured by the
deed, and in trust to reconvey the legal title to the bor-
rower, or to such person as the borrower may have con-
veyed the property to subject to the outstanding loan deed,
upon payment of the loan. The equitable title to the prop-
erty conveyed, for the want of a better term, usually de-
nominated the “equity of redemption,” with the right to
occupy the property and enjoy its rents, issues and profits
pending default by the borrower and the sale of the con-
veyed property remains in the borrower.
*GEORGIA CODE OF 1910 §3306.
Whenever any person in this State conveys any real prop-
erty by deed to secure any debt to any person loaning or ad-
vancing said vendor any money or to secure any other debt,
and shall take a bond for titles back to said vendor upon the
payment of such debt or debts, or shall in like manner con-
vey any personal property by bill of sale and take an obliga-
tion binding the person to whom said property is conveyed
to reconvey said property upon the payment of said debt or
debts, such conveyance of real or personal property shall
pass the title of said property to the vendee till the debt or
debts which said conveyance was made to secure shall be
fully paid, and shall be held by the Courts of this State to be
an absolute conveyance, with the right reserved by the ven-
dor to have said property reconveyed to him upon the pay-
ment of the debt or debts intended to be secured agreeably
to the terms of the contract, and not a mortgage.
8
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—
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—_— — :
A security deed under §3306 of the Code of Georgia, is
not a mortgage, but is an absolute conveyance of the legal
title.
Code of Georgia, §3306;
Burkhalter vs. Planters Loan & Savings Bank, 100 Ga.,
428;
Jewell vs. Walker, 109 Ga., 241;
Shumate, Executor, vs. McLendon, et al 120 Ga., 396;
Woodall vs. Jewell, 140 U. S. 247, 251.
While such a deed is not any where specifically called a
trust deed, it is such by its very nature. The author of
Perry on Trusts, (Fifth Edition, §150), says, upon the au-
thority of Morice versus Bishop of Durham, 10 Ves. 537,
and Pace vs. Canterbury, 14 Ves. 370, that—“A very com-
mon case of a resulting trust is where the owner of both
*GEORGIA CODE OF 1910 §6037.
In cases where a contract to purchase has been made, or
bond for title made, or the purchase money has been partly
paid, or in cases where a deed to secure a debt has been
executed, and the purchase money or secured debt has been
reduced to judgment by the payee, assignee, or holder of
said debt, the holder of the legal title, or, if dead, his execu-
tor or administrator, shall, without order of any court, make
and execute to said defendant in Fi. Fa., or, if he be dead,
to his executor or administrator, a quitclaim conveyance to
such real or personal property, and file and have the same
recorded in the clerk’s office; and thereupon the same may
be levied upon and sold as other property of said defendant,
and the proceeds shall be applied to the payment of such
judgment; or if there be conflicting claims, then the same
shall be applied as determined in proceedings had for that
purpose.
SERS RC ee |
EEE FRET LE MEL PSP DAE RPTL DIE AY cS BT HEELS VINNY IEA WRG PE AAO HN hE Rte ES
the legal and equitable estate conveys the legal title only,
without conveying the equitable interest.”
The remedy provided in §6037 is substantially a mere
power of sale under a trust deed to be exercised by the
holder of the loan deed in accordance with Statutory con-
ditions of extreme caution thrown around the exercise of
the power; that is, before the secured creditor can exercise
his power of sale, he must first file a suit upon the note given
for the loan in some Court of competent jurisdiction hav-
ing jurisdiction over the person of the original grantor un-
der the loan deed and, by competent proof, establish the
validity of the original conveyance, the amount of the in-
debtedness owing at the time of the filing of such suit and
the existence of a default on the part of the debtor, and
claim a special lien upon the land under the original secur-
ity deed. Having obtained such judgment the holder of the
legal title under the security deed, is then authorized to
proceed to sell the property for the satisfaction of the debt,
but he is required first to file and have recorded a deed to the
original grantor against whom judgment has been obtained
for the purpose of levy and sale. This deed so recorded is
*GEORGIA CODE OF 1910 §3307.
Every such deed shall be recorded in the county where the
Jand conveyed lies; every such bill of sale, in the county
where the maker resided at the time of its execution, if a
resident in this State. If a non-resident, then in the county
where the personalty conveyed is. Such deeds or bills of
sale not recorded remain valid against the persons execut-
ing them, but are postponed to all liens created or obtained,
or purchases made, prior to the actual record of the deed or
bill of sale. If, however, the younger lien is created by
contract, and the party receiving it has notice of the prior
unrecorded deed or bill of: sale, or if the purchaser has the
like notice, then the title conveyed by the older deed or bill
of sale shall be held good against them.
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; constructive notice to the world of the intention of the _
3 judgment creditor to have the property sold.* ;
Having re-invested the original grantor with the legal
title for the purpose of levy and sale the judgment creditor
is then permitted to have a levy made by the Sheriff of the
County where the land lies and a sale of the property made
for satisfaction of the secured debt. Instead of being al-
lowed to advertise and conduct this sale in some irregular
manner as is usually the case under the stipulations of an
ordinary trust deed, this sale can only be made after adver-
tisement by the Sheriff in the public gazette in which all
judicial sales by the Sheriff are advertised and the sale is
made at the time and place of holding the Sheriff’s sale and
such sale under such power destroys the so-called equity of
redemption of the borrower.
THE MAIN PROPOSITION
RSF PINE Ry ay
The Statute contained in §3306 and §6037 of the Code of
Georgia are not repugnant to the due process clause of the
Constitution of the United States, nor did they deny to the
plaintiff the equal protection of the laws, although the so-
called “equity of redemption” claimed by the plaintiff in
error was completely extinguished by the Sheriff’s Sale.
GENERAL STATUTE FOR RECORDING DEEDS.
*GEORGIA CODE OF 1910 §4198.
Every deed conveying lands shall be recorded in the office
of the Clerk of the Superior Court of the County where the
land lies. 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
t the first.
1l
a
ARGUMENT AND AUTHORITIES ON ABOVE
PROPOSITION
The law under which the loan deed in question in this
case was made and the remedy provided for the holder of
the secured debt upon default of the borrower, were in force
in their present form when the loan deed was executed and
plaintiff in error bought the land subject to all the rights
and remedies provided in the then existing law.
USE Ras ES
Section 3306 of the Code of Georgia, is a codification of
an Act of the General Assembly of Georgia, passed at the
Session of 1871-2, and approved on December 12th, 1872
(Georgia Laws 1871-2 pp. 44, 45), as amended by an Act j
approved August 27th, 1872, (Georgia Laws of 1872, p. 47),
and as further amended by an Act approved on October
16th, 1885 (Georgia Laws of 1884-85, p. 57). Section 6037
of the Georgia Code, is a codification of an Act approved
4
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£ December 17, 1894 (Georgia Laws of 1894, pp. 100, 101). .
4 As those portions of these acts now in force and material to
this case are contained in Code Sections 3306 and 6037, it is ,
not deemed necessary to reprint them herein. i
It was held by the Court in Clarke vs. Graham, 6 Whea- r
ton, 577, that—“A title to lands can only be acquired or lost
according to the laws of the State in which they are situ-
ated,” and in Brine vs. Insurance Company, 96 U. S., 627,
that—“The laws of the State in which land is situated con.
trol exclusively its descent, alienation, and transfer, and
the effect and construction of instruments intended to con- p
vey it. All such laws in existence when a contract in re- :
gard to real estate is made, including the contract or mort-
gage, enter into and become part of such contract.”
Under the rule stated in the case last cited the provisions
of §3306 and §6037 of the Code of Georgia were a part of
the original contract in the security deed given for the loan
as if they had been written into it in haec verbis.
PEP ee err IS He
ee
12
Biivione: MRAM.
——— neg CRI SE gl PGT
While the security deed and the remedy provided for its
enforcement under the Sections of the Code involved in this
case are peculiar to the State of Georgia, (Shumate, Admr.,
vs. McLendon, et al 120 Ga., 396), the only feature of the
law here attacked is the effect of a sale under the suit with-
out making a junior vendee of the land a party to the so
called “foreclosure suit,” as such failure may affect the right
of redemption of the junior vendee.
4
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The conveyance of property under §3306 and §6037 of
the Georgia Code to secure a debt conveys the legal estate to
the lender and allows the equitable estate to remain in the
borrower as an estate upon condition, the condition being
that, the borrower will pay the debt according to the terms @
of the note and the security deed given therefor. After the
making of such security deed the borrower holds the equit-
able estate subject to this condition, which is in the nature
of a covenant running with his estate. When he sells to a
junior vendee he can not sell any larger estate than is vested
inhim. Hence, the conveyance of the equitable estate is the
conveyance of an estate upon condition.
All such sales are subject to the outstanding loan deed,
and in this case was expressly so made. Upon condition i
broken, that is, upon default of the borrower, or of the per- @
son who has assumed payment of the secured debt, a de-
feasance of the equitable estate vesting the title to the equit- —
able estate back into the original borrower occurs so that, —
after judgment upon the debt, when a deed is made to the
original grantor in the security deed conveying the legal
estate to him for the purpose of levy and sale, both the legal
estate and the equitable estate are merged in the original
grantor in the security deed, against whom judgment has
been rendered, so that the levy of the execution issued upon
the judgment for the secured debt falls upon both the legal
and equitable estate. Upon default in payment by the orig-
inal maker of the security deed, or by the junior vendee,
and upon judgment obtained against the original maker of
the security deed, the equitable estate immedaitely reverts
13
[pee nerrmererces
PORT
pm * - LA GILAD MS EOE aR RE NTE AAR Eg PMB . .
‘
by operation of law in the judgment debtor as an escrow
deed for the purpose of levy and sale. The right of tender-
ing the debt and having the property conveyed to him per-
sists until the sale, although the estate held by him has
passed from him and lies in escrow for the benefit of the
remedy pursued by the judgment creditor under the terms
of the security deed.
NO RIGHT OF REDEMPTION AFTER SALE
In Georgia there is no right of redemption after judicial
sale in any case, except in cases of sales for taxes under
executions therefor. In Georgia, a mortgagor, even, in an
ordinary mortgage can not redeem after a sale has been
made under a foreclosure judgment. Suttles vs. Sewell, 105
Ga., p. 133, “When a creditor who had taken a deed from
his debtor to secure a debt, pursued the Statute, sued his
claim to judgment, filed a deed reconveying to his debtor
the land in question, had his execution levied thereon and
the property was sold at judicial sale to him; after he ob-
tained the sheriff’s deed his title, legal and equitable, be-
come complete and indefeasible.” Crawford, et al vs.
Pritchard, et al 81 Ga., p. 14.
In the case of Bell Mining Company vs. Butte Bank, 156,
U. S., 470, the Court held,—“That the power of sale in the
indent” -e, whether we call it a deed of trust or a mortgage,
does not change its character as an instrument for the se-
curity of the indebtedness designated, but it is an additional
authority to the grantee or mortgagee, and if he does not
choose to foreclose the mortgage by the ordinary methods
provided by law, he can proceed under the power added to
the sale of the property, to obtain payment of the indebted-
ness.
“The insertion of a power of sale does not affect the mort-
gagor’s right to redeem so long as the power remains un-
executed, and the mortgage is not, as it may be, foreclosed
14
in the ordinary manner, but when a sale is made of the
interest of the mortgagor his right is wholly divested, em-
pracing his equity of redemption.”
In the case of Carrington vs. Citizens Bank of Waynes-
boro, 144 Ga., page 52, it was held,—“After the property
had been sold at the second sale and purchased by the gran-
tee in the security deed, under permission contained in the
deed to become a purchaser at the sale, the bidder at the
first sale had no right, on tender of his bid several days
thereafter, to demand its acceptance, and a conveyance of
the land to him by the purchaser at the second sale, who was
the grantee in the security deed.
“A sale under power in a security deed divests the title
of the grantor, and he has no legal right several days there-
after, on tender of the amount of the debt secured by the
deed to the grantee, who is the purchaser at the sale, to
demand a conveyance of the land or a cancellation of the
security deed.”
“Where a sale of land is made under a power contained in
a security deed, and by permission of the grantor contained
in the deed the grantee purchases the land at such sale, the
grantor can not defeat the purchaser’s right to have the sale
fully consummated, by tender of the amount of his indebt-
edness to the grantee before the actual execution of the deed
pursuant to the terms of the sale.”
The author of Jones on Mortgages (Sixth Edition at p. 6,
§1047, states that—“The right of redemption is barred by a
foreclosure properly made, except when a further right is
given by Statute,” upon authority of the following cases,
to-wit :
Weiner vs. Heintz, 17th Ill., 259;
Willis vs. McIntosh, Ga., Dec., 162;
Stoddard vs. Forbes, 16 Ia., 296;
Evans vs. Kahr, 60th Kan., 719;
Martin vs. Ward, 60th Ark., 510.
15
It will be seen upon the authority of Suttles vs. Sewell,
supra, that no statutory right of redemption, after judicial
sale under a mortgage foreclosure, exists in Georgia.
Then if the right of redemption is to be determined ac-
cording to the law of Georgia relating to ordinary mortgage
foreclosures, such right of redemption does not exist, and
if the point is to be determined upon the theory that the
security deed was a trust deed with a power of sale, and
that the proceeding bringing the property to sale was an
exercise of a power, then the right of redemption is de-
stroyed under the law as decided by this Court in the case
of Bell Mining Co. vs. Butte Bank, supra, and the cases of
Bank of Gutschlick, 14 Peters, 19, 29, and Morsel vs. First
Nationai Bank, 91 U. S., 357, 361.
SECTIONS 3306 AND 6037 OF THE GEORGIA CODE
DO NOT DENY TO A JUNIOR VENDEE DUE PROCESS
OF LAW, OR DEPRIVE HIM OF EQUAL PROTECTION
OF THE LAW, NOTWITHSTANDING THEIR FAILURE
TO MAKE HIM A PARTY TO A FORECLOSURE SALE.
Although a junior vendee is not a necessary party to a
foreclosure under the Sections above named this does not
deprive him of due process of law, because the judgr ent is
not conclusive against him and he can assert any rights
which he may have in the Courts of Georgia.
“The statutory foreclosure of a mortgage on realty does
not contemplate that a third person may defend, and a jun-
jor encumbrancer or subsequent purchaser is not a neces-
sary party to a foreclosure suit.”
Roberts vs. Atl. Cemetery Ass’n., 146 Ga., 490, 496;
Brooks vs. Lowry Natl. Bank, 141 Ga., 493.
16
But “the foreclosure of the mortgage to which the sub-
sequent purchaser is not a party, does not affect the right
of such purchaser.”
Howard vs. Gresham, 27 Ga., 347;
Williams vs. Terrell, 54 Ga., 462;
Osborne vs. Rice, 107 Ga., 281, 285;
Swift vs. Deerick, 106 Ga., 35;
Hinesley vs. Stewart, 139 Ga., 7.
The rule of law obtaining in Georgia in such cases is thus
stated in the case of Osborne vs. Rice, supra, “A purchaser
prior to statutory foreclosure who is not a party, is not
bound by the judgment, and may when the Fi Fa is levied
go behind the judgment and set up that the mortgage could
not be legally enforced against him.” The rule applied by
the Courts of Georgia is in exact accord with the ruie ap-
plied by the Supreme Court of the United States. Howard
vs. Railway Co., 101 U. S., 837; Brewster vs. Wakefield, 22
Howard, 118, 129.
While the judgment rendered in a case of a “foreclosure”
at which proceeding a junior vendee of the land is not a
party is not conclusive on such vendee, it is valid as between
the holder of the mortgage and the mortgagor, and a pur-
chaser at the foreclosure sale acquires the legal estate of
the mortgagor, and where no illegality exists in the fore-
closure proceedings, the sheriff’s deed is superior to the
deed executed by the mortgagor after the date of the mort-
gage.
Roberts vs. Atlanta Cemetery Assn., et al, 146 Ga., 490,
496.
While the foreclosure of the mortgage in which a sub-
sequent purchaser is not a party does not affect the right of
such purchaser, his remedy is not the right to redeem after
17
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the sale by tender of the debt secured by the mortgage or
security deed in the absence of some valid attack upon the
judgment of foreclosure in which some illegality must be
shown in the proceedings by which the judgment of fore.
closure was rendered. In other words, the person attacking
the judgment must set up some reason which he could have
urged at the trial under which the judgment was rendered
legally sufficient to have prevented the rendition of such
judgment if he had been a party to the proceedings.
If such legally defensive facts existed and he was not a
party to the foreclosure proceedings, he can, upon the ten-
der of the mortgage debt and the filing of a bill to cancel
the mortgage, or in the case of an attempted eviction under
the Sheriff’s deed, if he was in possession, or in support of
an action to recover the land, or in any other proceeding
affecting his interest in the land, show that the mortgage
was barred by the Statutes of Limitation at the time of the
foreclosure suit was filed, (Williams & Company vs. Terrell,
54 Ga., 462), or he may go behind the judgment rendered
in favor of the plaintiff and show that the debt for the pur-
chase price had been discharged before the suit was begun
(Washington Exchange Bank vs. Holland, 121 Ga., 305-7),
or he may show that the original mortgage or security deed
was void for uncertainty (Osborne vs. Rice, 107 Ga., p.
281).
It will be seen from these citations that while the law of
Georgia cuts off the equity of redemption as relating to a
junior purchaser of property transferred by security deed,
it preserves all of his rights to show that the judgment of
foreclosure was not valid, but before redeeming, he must
attack the judgment and show it to have been invalid.
A junior vendee under a security deed who was not a
party to the foreclosure proceedings, desiring to set up
rights under his junior conveyance as against the judgment
rendered in the foreclosure suit, is in the position of a party
attempting to open a default, and who must set up, in his
18
4 arre
re MONA e AT ce an ek as
motion, matters which would have been good if they had
been pleaded before judgment was rendered, and tender
payment of the secured debt. Stanbach vs. Thornton, 106
Ga., 81, 83; Palmer vs. Young, 96 Ga., 246; Mutual Loan
Co. vs. Haas, 100 Ga., 111.
The contention of the plaintiff in error narrows itself
down to the proposition that although she had no defense
to the foreclosure which she could have pleaded had she
been a party to the foreclosure proceeding, and has none
now if the case were reopened and she were made a party,
still her right of redemption persists for the mere naked
reason that she has never been a party to any judicial pro-
ceeding of foreclosure. This position is untenable—(a) Be.
cause, there was no privity of contract between her and
the holder of the security deed; (b) Because, she bought
subject to a contract which provided a method of foreclos-
ure without making a junior vendee a party; (c) Because,
under the loan deed and under her purchase of the prop-
erty subject thereto, the burden was upon her to prevent
default and keep informed as to any proceeding to fore-
close, which she could neglect to do only at her peril; (d)
Because, the Statutory method of foreclosure provided that
before the property could be levied upon for the satisfac-
tion of the loan, the holder of the security deed was required
to file in the office of the Clerk of the Superior Court,—
the Registrar of Deeds under the law of Georgia,—a quit-
claim deed for levy and sale, the record of which was con-
structive notice to junior vendees and to all the world of
the seizure of the legal and equitable title for a sale to be
had which would bar the right of redemption.
While the purchaser of what plaintiff in error denomi-
nates the equity in redemption is not technically bound
by the suit, judgment and proceedings to sell because he
was not a party, he bought knowing that the law did not
require, or make provisions for his being made a party,
(Georgia Code §6037) ; that the method of foreclosure was
within the competency of ihe State of Georgia to enact; that
19
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the Section of the Code under which the security deed was
made expressly provided a method of foreclosure only by
a suit against the original mortgagor, and in his present
suit he sets up no facts which he could have pleaded in de-
fense of a foreclosure if he had been a party.
A junior vendee having bought after the execution of a
security deed under Georgia Code, $3306 and subject to it,
and to the remedy provided in $6037, is in the position of
a person who has acquired an interest in a mortgagee’s
property after the commencement of suit to foreclose and is
represented by mortgagor. Hollins vs. Brierfield Coal &
Tron Co., 150 U.S. 371, 286;
Whether the junior vendee is bound by the judgment or
not, he can not redeem without showing that the Statute
was not observed in the proceeding to se'l and merely be-
cause he was not a party. His case is exactly like that of
a purchaser of land from one against whom there is an or-
dinary common law judgment. Such purchaser would not be
bound or estopped by the judgment, but if he could not
show a failure to comply with the law in the obtaining of
the judgment, the sheriff's sale under the judgment, would
pass a good title to the purchaser at the sheriff’s sale and
the Sheriff’s Deed would be superior to the deed of the
purchaser of the land who purchased it subject to the out-
standing common law judgment.
The whole argument on this branch of the case resolves
itself to the simple proposition that a proceeding between
A and B cannot be a denial of due process of law as to C
when the judgment in the proceeding does not conclude the
rights of C and where the Courts are open to C to have his
rights adjudicated whenever it may be necessary to the as-
sertion or preservation of his right.
ARGUMENT AND AUTHORITIES IN REPLY TO BRIEF
FOR PLAINTIFF IN ERROR
The Remedy provided under $6037 of the Georgia Code
Is a Substantive Right Under a Deed Given under the Geor-
gia Statute.
- 20
The general rule that the right to a particular remedy is
not a vested right is subject to the exception of those cases
in which the remedy is part of the right itself.
This exception is the controlling principle upon which
State laws so affecting the remedy which existed when a
contract was made, which by a change of the remedy con-
tracted for, impair or lessen the value of the contract, are held
to be void as laws impairing the obligations of the contract.
Planters Bank vs. Sharp, 6 How. 301; Seibert vs. Lewis,
122 U. S., 284. The obligation of a contract is impaired
whenever legislation lessens the efficiency of the means
which, at the time of making a contract, the law provided
for its enforcement as by postponing or retarding such
enforcement. Louisiana ex rel. Ranger vs. New Orleans,
102 U. S., 203; Louisiana vs. Pittsburg, 105 U. S., 301;
Louisiana vs. Jumel, 107 U. S., 750. As a State can not en-
act a law acting directly upon the terms of a contract, so
it can not pass a law professing only to regulate the remedy
when in fact it impairs the obligation of the contract.
Grantly vs. Ewing, 3 How., 707.
If a State Statute impairs a means provided by law for
the enforcement of a contract, at the time of its making,
it is unconstitutional and void. Louisiana ex rel. Nelso vs.
St. Martin’s Parish, 111 U. S., 716. The remedy provided
by a State law when the contract is executed can not be im-
paired by subsequent decisions of Courts any more than by
subsequent Statutes. United States ex rel. Butz vs. Musca-
tine, Wallace, 575.
It follows necessarily that if a remedy is so much a part
of the contract as that neither the legislative power by sub-
sequent enactments, nor the judicial power by construction,
can affect the remedy without impairing the obligation of
the contract that such a remedy is a substantive part of the
contract. The remedy provided for the holder of a debt
secured by a security deed under the Georgia Statute in
question is such a substantive portion of the original con-
tract of security.
21
In Pritchard vs. Norton, 106 U. S., on page 182, this
Court held that “The principal that what is apparently
mere matter of remedy in some circumstances, in others,
where it touches the substance of the controversy, becomes
matter of right, is familiar in our Constitutional jurispru-
dence in the application of that provision of the Constitu-
tion which prohibits the passing by a State of any law im-
pairing the obligation of contracts. For it has been uni-
formly held that “any law which in its operation amounts
to a denial or obstruction of the rights accruing by a con-
tract, though professing to act only on the remedy, is di-
rectly obnoxious to the prohibition of the Constitution.”
Citing: McCracken vs. Howard, 2nd, Howard, 608, 612.
“Hence it is that a vested right of action is property in the
same sense in which tangible things are property, and is
equally protected against interference. Whether it springs
from contract or from the principles of common law, it is
not competent for the legislature to take it away.”
A familiar example of such void laws are laws either ex-
tending or shortening the time for the redemption of lands
sold under executions or mortgage foreclosures.
Barnitz vs. Beverly, 163 U. S., 118.
In the case of Mutual Loan & Bonding Company vs. Haas,
et al, 100 Ga., p. 111, it was held that—“Where a debtor ex-
ecuted to a creditor a mortgage upon realty to secure a debt
and therein gave to the creditor a power of sale to be exer-
cised on default of payment, the sale to be had at public out-
cry before the Court House door, and after advertisement,
such power became a part of the security, and being con-
ferred for the purpose of effectuating the same, was not
revocable, either by the mortgagor or by the rendition of a
judgment against him in favor of another creditor. Where
on default of payment the mortgagee exercised the power by
selling the land this was equivalent to a sale under fore-
closure of the mortgage by a court of competent jurisdic-
tion, and a bona fide purchaser at the sale obtained title
22
free from the lien of judgments junior to the mortgage
though rendered before the exercise of the power.”
No better example of a vested substantial right created
by contract can be imagined than the right contracted for
in the case that upon default of the borrower the lender
shall find the entire estate, legal and equitable, in the hands
of the original borrower capable of being subjected to the
satisfaction of the debt and sold under the power given
under §6037 of the Georgia Code without subjecting the
borrower to the additional expense of searching for junior
vendees to whom the property may have been transferred
without notice to him, possibly on the very eve of foreclos-
ure, and who may be beyond the jurisdiction of the Court
having venue to entertain a suit against the borrower,
which junior vendees may in turn have transferred to oth-
ers, and thus set the lender upon an interminable, and per-
haps impossible, pursuit of elusive vendees.
THE TERM “EQUITY OF REDEMPTION” A MISNOMER
APPLIED TO A SECURITY DEED GIVEN
UNDER THE GEORGIA STATUTES
The term “Equity of Redemption” arose out of the prac-
tice of the Courts of Equity under the common law where
the law allowed no right of redemption and equity created
a right of redemption. The right being one created by
equity, it was properly denominated an “equity” of redemp-
tion and for the existence and nature of the rights the prac-
tice of the Courts of equity are to be looked to. In the case
of a security deed made under the Georgia Statutes, the
right to redeem is not an equitable right of redemption, but
is a “legal right of redemption,” and, in determining the
exik iature and extent of the right the creative stat-
ue is to be looked to. Hence, the decisions cited by
counsel for plaintiff in error in his brief on the subject of
the “equity of redemption” are of little relevancy.
28
PRIORITY OF JUDGMENT ON SECURED DEBT OVER
A TRANSFER OF SO CALLED EQUITY OF
REDEMPTION
Upon the rendition of a judgment upon a debt secured
by a security deed such judgment is a general, that is a per-
sonal judgment, against the defendant from the date of its
rendition, and upon the filing of a reconveyance for levy
and sale such judgment becomes a special lien upon the
land conveyed as security and takes precedence of an older
judgment rendered after the conveyance to secure the debt
was made.
McAlpin vs. Bailey, 76 Ga., 687,
Henry vs. McAllister, 93 Ga., 667,
Maddox vs. Arthur, 122 Ga., 671.
It is in accordance with long established legal principles
that a judgment may take effect as of a date prior to its
actual rendition. At common law, all judgments rendered
at a term of court took effect as of the first day of the term
and any one who purchased from the defendant in execu-
tion after the term of court opened, but before the judgment
was rendered, took subject to the lien of the judgment. The
Georgia Statute has simply adopted this common law prin-
ciple and has provided that a judgment on a note secured
by a loan deed shall take effect, not from the date of its
rendition, but from the date the loan deed was recorded.
This principle of law protects every one who may under-
take to deal with the borrower after the loan deed has been
recorded. The record puts him on express notice that should
judgment be rendered it will date back to the date of the
recording of the security conveyance. Such a judgment is
in no sense a lien against the transferee of the so called
equity of redemption. It does not bind any of his rights
but it does bind the property of the original borrower as
of the date the loan deed was recorded. This right of hav-
24
SOS HONE REIN sete ea PBL CAPITA AA RSA? ERENCE TY NEI N56 NS AEN NS ODES
ing the lien of his judgment date back is an essential part
of the lender’s security in the same way that a power of
sale is a part of the security.
It is not the judgment that divests the statutory right of
redemption, that right is not extinguished until the sale is
actually consummated and it is extinguished not by the
judgment, but by the sale. A sale upon a judgment of this
character necessarily cuts out the right of redemption of a
junior vendee. Until default in the security debt and until
the holder of the security debt has obtained his ‘udgment,
and thus obtained a special lien dat ng back to tre date of
the record of his security deed he olds the tit e pledged
to him as security immune from judgn:ents render d against
the debtor after the execution of his security deed and
against vendees of the borrower acquiring title to the equit-
able estate after the record of the security deed. After the
holder of the security deed has had his special lien so dat-
ing back to the record of his security deed, established as
a judgment of the court he can then safely transfer the
legal title to the maker of the security deed for the purpose
of levy and sale, because his prior special lien judgment is
superior to intervening judgments or transfers of the title,
and when the sale is made it destroys all rights under judg-
ments or transfers made after the record of the security
deed in the same way a sale under an older common law
judgment destroys the lien of subsequent judgments or
transfers.
Even after the sale the right of a junior vendee is not
necessarily extinguished because if the property at the sale
brings more than the amount of the judgment under which
the sale is made, the excess is payable to such junior ven-
dee. In other words, the Statute does not undertake to di-
vest the rights of the junior vendee, but merely to trans-
fer him to the fund produced by the Sheriff’s sale. The
prior lien on the fund being in the holder of the judgment
under the security deed, and if any excess remains the same
25
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is applicable to junior judgments or junior vendees. The
principle involved is that of a sale under a senior lien divest-
ing a junior lien or transfer.
CONCLUSION
The method of conveying property as security for a debt,
provided in §3306 of the Code has been the settled public
policy of Georgia for more than fifty years. The method of
foreclosure has existed for more than a generation. It con.
stitutes a basic law concerning the tenure and alienation of
lands in the State of Georgia, which the State had a right
to adopt, and for the protection of junior vendees and all
other persons interested in lands conveyed and sold under
these Sections of the Code the practice in Georgia gives
ample opportunity to every person having a right in such
lands to have his right adjudicated in the Courts of Georgia.
There is, therefore, no denial of due process of law, or any
failure to afford an equal protection of the laws.
Respectfully submitted,
WALTER McELREATH,
Attorney for Defendants in Error.
26
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.