FARMERS FERTILIZER CO. v. J. R. WATKINS CO

Suit by J. R. Watkins Company against Farmers Fertilizer Company for the appointment of a commissioner to sell land purchased by the defendant at public sale under a power of sale contained in a second security deed, and to apply the proceeds to the payment of the petitioner's judgment against the maker of the security deed, and by an amendment praying that, if at the sale under the second security deed the land brought more than the claim of the grantee therein and this excess was paid to the widow of the grantor in the security deed under her year's support, from the proceeds of the sale by the commissioner, the defendant be reimbursed for this amount.

On the previous appearance of this case in this court ( J. R. Watkins Co. v. Farmers Fertilizer Co., 195 Ga. 455, 24 S.E.2d 660), it was held that the petition was not subject to general demurrer. By agreement the case was submitted to the trial judge without the intervention of a jury, and the exception here is to the judgment in favor of the petitioner. The case was submitted on an agreed statement of facts, which in substance was as follows: On March 7, 1939, in the superior court of Grady County, Georgia, the petitioner obtained a judgment against Julian McKown and F. B. McKown for the principal sum of $252.57, plus $48.52 interest, and 7 per cent. interest per annum on the principal thereafter, and costs of $24.25. On March 16, 1939, a fi. fa. was issued on such judgment and was duly entered on the general execution docket of Grady County. Julian McKown was insolvent, and was insolvent when the present suit was filed, and no part of the execution can be collected from him. F. B. McKown died intestate on March 21, 1941, leaving no property except an equity in the real estate described and involved in this suit. There has been no administration on his estate. On December 20, 1939, F. B. McKown executed to Cairo Banking Company a deed described in the petition, which was a deed to secure debt. Mrs. F. B. McKown, in the name of Mrs. Lou McKown, filed her application for a year's support, and, at the May term of the court of ordinary of Grady County, that court duly approved and ordered to record as the judgment of the court the return of the appraisers setting aside to the widow on her application the land described in the petition, subject to a first security deed to Federal Land Bank and a second security deed to Cairo Banking Company. The indebtedness owing to Cairo Banking Company matured, and in the exercise of the power of sale contained in its deed Cairo Banking Company duly advertised the land described therein for sale, and did, on January 17, 1941, during the legal hours of sale before the courthouse door expose the land for sale, when the same was knocked off to the defendant, it being the highest and best bidder, for $610, and the Cairo Banking Company executed to Farmers Fertilizer Company a proper deed of conveyance.

The property at a fair sale would bring enough to pay the lien of the Federal Land Bank, and to refund to the defendant the amount in excess of Cairo Banking Company's debt, which the defendant as purchaser at that sale paid to the widow to apply on her year's support, and also to pay the petitioner's fi. fa. It was further agreed that at the Cairo Banking Company's sale the property brought $277.73 over and beyond the amount due the bank at the time of the sale, which was paid on the year's support. It was further agreed, subject to any objection that the petitioner might urge as to its relevancy, that about December 17, 1940, the defendant verbally agreed to purchase from the widow the described land and a small amount of personal property for $2000, the defendant to pay the secured debts owing Federal Land Bank and Cairo Banking Company and certain taxes and to pay the balance to Mrs. McKown. The defendant did, on December 24, 1940, pay to Mrs. McKown $20 on this purchase-price. The defendant offered to pay Cairo Banking Company its principal and interest, but refused the bank's demand that it pay the cost of advertising the land for sale under the security deed. The defendant's representative was at the Cairo Banking Company sale, and the bank bid an amount sufficient to cover its claim. A Mr. Sellers raised this bid, and the defendant's representative bid $100 above Sellers's bid, when Mr. Sellers stated that he was not bidding further as the defendant had bought the land and would bid more than anything he could bid. No further bids were made, and the property was knocked off to the defendant. On January 8, 1941, a deed was made by Mrs. F. B. Mckown to the defendant, as shown by the amended answer, which deed conveyed the lands involved in this suit.

DUCKWORTH, Justice. (After stating the foregoing facts.)

Under the Code, § 113-1508, prescribing the order in which claims against the estate of a decedent shall rank, a year's support for the family ranks first, and thus holds priority over all other claims, while judgments obtained against the decedent during his lifetime rank sixth in priority. In every case where these two claims are in competition, the plain provisions of this statute clearly establish priority of the year's support over the judgment. It is only where, as in the present case, additional claims in varying priorities under the statute are in competition with the year's support and judgment, that extreme difficulty is encountered in judicially fixing the respective priorities. Numerous decisions of this court where some such claims were in competition and the priorities thereof determined do not constitute clear and explicit answers to the questions raised by the record here. This court has held that, where the year's support was made subject to a deed to secure debt, and a sale under the deed produced an amount insufficient to satisfy the secured debt, leaving nothing for the year's support, the year's support was thereby eliminated from a contest between the other lien holders, since there was never any equity in the property upon which the year's support could operate, and in that case the other liens were allowed their respective priorities as fixed by the law. Beaton v. Ware County, 171 Ga. 798 ( 156 S.E. 672). This rule was applied on the former appearance of the present case in this court where the sufficiency of the petition to withstand a general demurrer was brought in question. J. R. Watkins Co. v. Farmers Fertilizer Co., supra. It was there held that, since it appeared that the proceeds from the sale under the bank's deed were insufficient to satisfy the secured debt, and hence no excess was left for the year's support, the present petition, seeking to subject the land in question while in the hands of the purchaser at the foreclosure sale to the judgment lien, was not subject to general demurrer. But upon the trial, as shown by the present record, the agreed statement of facts showed that there was in fact an excess of $277.73 after satisfying the secured debt and the costs of sale, which excess was paid to the beneficiary of the year's support. In Real Estate Loan Co. v. Union City, 177 Ga. 55 ( 169 S.E. 301), it was held that the tax claim there was entitled to payment in preference to the year's support because it appeared that, by the terms of the purchase of the property involved, the taxes were expressly made a part of the purchase-money. In Minchew v. Juniata College, 188 Ga. 517 ( 4 S.E.2d 212), the contest did not involve the title of the purchaser of the property at the sale, but rather the respective claims to the funds arising from the sale of the property; and, while this court held that the year's-support share of such funds could not be diminished by the tax claim, it was held that, as between the secured debt and the taxes apportionable to the property embraced in the deed, the taxes must be satisfied at the expense of the holder of the security deed, and could in no wise be chargeable to the year's support. It is apparent that none of the decisions just referred to is exactly applicable here, for here the beneficiary of the year's support is not even a party to the suit, not is the Cairo Banking Company, the holder of the second security deed under which the property was sold, a party to the suit. It is simply an attempt to assert the judgment lien against the property in the hands of the purchaser at the foreclosure sale, which was admittedly legal in every respect. In such a contest is it legally possible to eliminate from consideration the law applicable to the year's support? If the petitioner succeeds in this action, it must do so at the expense of the owner of the equity which is the purchaser at the sale but which was the beneficiary of the year's support prior to the sale. The Cairo Banking Company has already been paid in full, and we do not have here a contest between its claim and the judgment. If the judgment is satisfied by a sale of the property, the bank will not thereby sustain a loss. In Wood v. Dozier, 142 Ga. 538 ( 83 S.E. 133), the competing claims to the property were a debt secured by a deed to secure debt, another debt secured by a mortgage, and a third debt secured by a second security deed and a transfer of a bond for title executed by the grantee in the first security deed, and finally a year's support. There the title to the property held by the purchaser at the sale was not brought in question, but the contest was over the respective ranks of the claims made to the proceeds from a sale of the property free from liens; and it was held that the first security-deed claim should be satisfied in full first, the debt secured by the second security deed and transfer of bond for title should be satisfied second, and the remainder should be applied to the year's support, thus excluding entirely from participation the mortgage claim which held the position in that contest that the judgment here holds. That decision would be clearly controlling here but for the existence of the transferred bond for title. Referring to that decision, this court in Citizens Bank v. Taylor, 155 Ga. 416 (6) ( 117 S.E. 247), expressed the view that the bond-for-title transfer was a material factor in fixing the rights of the claims to the fund there involved. It was reasoned that, under the terms of the bond for title, the grantee in the first security deed would, upon satisfaction of its debt, be required to convey the property to the transferee of the bond for title, and, therefore, there could be no revesting of title in the original grantor and mortgagor, and, consequently, the mortgagor would have no title inuring to the benefit of the mortgagee. It is provided by statute (Code, § 67-1306) that, upon the payment of the debt secured by a deed to secure debt, title automatically revests in the grantor. Both the security deed and the transfer of bond for title conveyed the debtor's full equitable estate in the property for the purpose of securing the debt. Therefore, whether the decision in Wood v. Dozier, supra, was controlled or influenced by the transfer of the bond for title or not, it is sustainable upon the second security deed irrespective of the bond for title. The cited statute establishing the priorities of claims manifests clearly a fixed legislative intent that, wherever brought into competition with each other, a year's support must have priority over a previous judgment against the deceased. This unchangeable fact must be kept in mind whenever and wherever these two claims come into competition, regardless of how many other claims might be involved in the same contest. Giving effect to the statute means that the judgment claim may not be asserted in whole or in part so long as the interest of the year's support is involved. This means that no part of the property embraced in the year's support can be lawfully applied to the satisfaction of the judgment. Is there a reason in law why such a judgment, though clearly barred before a sale of the property, may nevertheless be asserted against the property after a sale lawfully held while in the hands of the purchaser, who has paid the full amount of his bid? Keeping in mind the unyielding rule of law that the judgment must stand aside and allow the year's support to receive all the property, undiminished by the judgment claim, it must be held that the judgment is thus barred from challenging the right of Farmers Fertilizer Company, the purchaser at a lawful sale. It would constitute a legal contradiction to shut off the judgment claim prior to the sale and allow it to be fully asserted, as here sought to be done, after the sale. The law bars it in the first instance in order that the year's support may receive all the land less the amount of the debts represented by the security deeds. This means that in no circumstances can the amount chargeable against the property before the year's support can receive it be increased by the property before the judgment. But if the judgment creditor is authorized by law to subject the property in the hands of the purchaser to the satisfaction of its judgment, it thereby nullifies and defeats the plain purpose of the statute. If, after such a sale, the law will tolerate an assertion of a judgment against the property in the hands of the purchaser, it is obvious that such a purchaser in making his bid will reduce such bid in an amount sufficient to satisfy the judgment. Any such reduction in the bid would constitute a definite reduction in the amount received by the beneficiaries of the year's support. Such a rule would reverse the order of priority as fixed by the law. It would permit a judgment inferior in rank to be satisfied in preference to a year's support superior in rank under the statute. What property did the purchaser acquire at the foreclosure sale? Clearly it acquired the equity in the land represented by the second security deed and the year's support. It thus occupies the position of a grantee of the beneficiary of the year's support, and is entitled to the same priority under the law as was held by its grantor. We do not have here a case involving simply a competition of respective claims over funds derived from a sale of the property. In such a case, title to the property acquired by the purchaser would not be involved, but here the only party called upon to stand the expense of satisfying the petitioner's judgment is the owner of the property acquired by purchase at the sale.

Any decision attempting to fix the respective priorities of the claims against the estate of the deceased that fails to give full effect to the priority of a year's support as fixed by the statute will be unsound. It is true that, as between the year's support and the security deed, the latter must take the property. In a contest between the security deed and the judgment, the latter would take the property; and, in a contest between the judgment and the year's support, the latter would take the property; thus creating an endless circle which can be broken only by a constant recognition of the statutory provision that the existence of a year's support in legal effect blots out the judgment claim in so far as the particular property involved is concerned, and this rule is applicable in every case where to satisfy the judgment the year's support will be correspondingly diminished. The agreed facts upon which this case was tried demand as a matter of law a judgment holding the property in question not subject to the claim of the petitioner under its judgment against the deceased. The trial court erred in awarding judgment in favor of the petitioner.

Judgment reversed. All the Justices concur.