83 W. Va. 292 | W. Va. | 1919
Abney-Barnes Company, a corporation, and others, who sue on behalf of themselves and all other lien creditors of Davy-Pocahontas Coal Company, obtained the decree from which Davy-Pocahontas Coal Company and W. L. Taylor have appealed. The decree ascertained the corporate property of the defendant coal company and the amount and priority of the liens chargeable thereto, and directed it to be sold to satisfy and discharge the liens reported by the commissioner to whom the cause was twice referred. The property consists of about 4,000 acres of valuable coal land in McDowell County with two well-equipped and active coal mining operations.
The object of the suit instituted in the circuit court of McDowell County July 10, 1915, is to enforce certain judgment liens against the defendants, Davy-Pocahontas Coal Company, W. L. Taylor and James A. Strother, in favor of' 'plaintiffs, Abney-Barnes Company and others. The bill also names as defendants the trustees in two mortgages or deeds of trust, promptly recorded, in which the Davy-Pocahontas Coal Company is grantor, and which convey its real and personal property, the first being to the Mercantile Trust & Deposit Company of Baltimore, dated July 1, 1910, to secure a bond issue of $300,000, all of which, except bonds aggregating $3,000, paid off and retired, is outstanding, the other to the Munsey Trust Company (now Equitable Trust Cqmpany), dated June 1, .1913, to secure a note issue o£ $125,000, of which $80,000 issued and sold is outstanding, the remainder, issued but not sold, being pledged as collateral security for debts of the corporation. On October 9, 1915, this case was, consolidated with the case of A. G-. Russell. Jr., against the defendant, W. L. Taylor, and the con
While the suit was pending, the Mercantile Trust & Deposit Company, one of the trustees, instituted a suit in the federal court for the southern district of West Virginia ■against the Davy-Pocahontas Coal Company to obtain the foreclosure of the mortgage in which it was trustee. This relief was refused, but the court ordered the ease retained on its docket while this suit remained rmdetermined. . Later ■other creditors filed a petition in involuntary bankruptcy in the same court against defendant coal company, which petition also is still pending.
On September 12, 1916, commissioner Counts filed his report, to which certain exceptions were filed by Davy-Poca--hontas Coal Company and W. L. Taylor, those of the latter, however, being later withdrawn. At the June, 1917, term of the circuit court the Mercantile Trust & Deposit Company and the Equitable Trust Company filed their answers in the cause, set up their deeds of trust, alleged certain defaults thereunder by the Davy-Pocahontas Coal Company and asked that the foreclosure rights under the deeds of trust be protected, and to that end prayed that the receivers be discharged and the trustees permitted to proceed to foreclose, or that the court compel the receivers to sell the property covered by the deeds of trust; to which answers general replications were filed by W. L. Taylor.
On June 29, 1917, on motion of the trustees, the court again referred the cause to commissioner Counts to state specifiealfy certain facts respecting the liens of the trus
On November 5, 1917, the circuit court pronounced the decree here complained of on appeal, directing the receivers to sell the property of the Davy-Pocahontas Coal Company at private sale on or before December 15, 1917, provided they are able to obtain therefor an offer of $500,000, and if such sale should not be effected by that date they were directed to advertise the property for sale and to sell the same at public auction on or before February 1, 1918, the notice, time, terms and place thereof to be given by publication in the McDowell Recorder for four successive weeks. The Davy-Pocahontas Coal Company,- W. L. Taylor and others objected to a sale of the property at that time, and moved the court to require the receivers out of the funds in their bands, totaling about $95,000, to pay off the taxes on the property and thé interest then due on the bonds and interest coupons secured by the deeds of trust, which objection and motion were overruled, but the court further decreed that if before the time fixed for said sale the Davy-Pocahontas Coal Company or anyone for it should pay off the amount of the indebtedness of said coal company as set out in the decree, the receivers should not proceed to sell the property.
Of the ten assignments of error, only those deemed material, relevant and necessary to a just decision will be considered in passing upon the merits of the cause, so far as they are now involved.
The failure of the holders of the notes or bonds secured by the deeds executed to the Mercantile Trust & Deposit Company and the Equitable Trust Company, respectively, to produce, prove and file them while the cause was before
The two trust companies file separate answers to the bill setting forth briefly the due execution and objects of the trusts, the dates thereof, the amount of the notes and bonds secured and negotiated. The answer of the former alleges that of the $300,000 of bonds secured by the deed in which it is named trustee $3,000 have been retired as paid and discharged, that the residue remain outstanding and subsisting valid liens against the trust subject,, and that the interest coupons due and payable thereon January 1 and July 1, 1915, and 1916, and January 1, 1917, were not paid at the time the answer was filed; and further says that the number of the holders of the bonds authorized by the deed so to do have demanded .that it, as the trustee, proceed to foreclose the lien by a sale of the trust property. The answer of the latter details the same facts as to the notes secured by the trust executed to it,' and alleges the! default of the grantor in the payment of interest as of the dates mentioned in the answer of the Mercantile Trust & Deposit Company.
Notwithstanding the facts alleged in the bill and in the answers of the respondent trustees as to the bonds and notes and the deeds of trust, the Davy-Pocahontas Coal Company does not answer or deny the allegations; it did not appear for any purpose, and the bill was taken as confessed as to it. Nor does the appellant Taylor’, though president, creditor and owner of a large block of the capital stock of the Davy-Pocahontas Coal Company, in Ms answer or in the petition hereinafter referred to, or in any other manner than by exceptions to the reports of commissioner Counts, directly or indirectly question the allegations of the bill with respect to the integrity or validity of the bond issues; and only by a general replication does he deny the allegations of the answers filed by his codefendants, the trustees.
It is true that as a general rule the notes or bonds secured must be produced, or a sufficient reason given for their non-production. Armstrong, C. & D. Co. v. Painter, 75 W. Va. 394, 399; 3 Jones on Mortgages (7th Ed.), §1469a, and cases cited. But where a bill or answer to foreclose mortgage liens against real estate gives' a detailed description of the liens, and the mortgagor does not deny the facts alleged and the liens to be as set forth, it will be taken as true and the bonds treated as valid and outstanding obligations of the debtor; nor in such cases is it necessary to show in whose hands they are or to require their production before the entry of the decree of foreclosure. Dickerman v. Northern Trust Co., 176 U. S. 181, 193; Anderson v. Culver, 127 N. Y. 377; 3 Jones on Mortgages (7th. Ed.), § 1469a.
The general replication of W. L. Taylor to the answers of the trustees is the only denial of any of the allegations relating to the bonds and notes, and that cannot avail as a denial by the Davy-P.ocahontas Coal Company, the mortgagor, who made no denial of either the bill or answers. And, further, it is the general rule in cases involving deeds of trust
There arises the next question, whether before decreeing a sale of the trust property it was the duty of the court to ascertain by reference to a commissioner or by an express finding of its own based upon the pleadings and the facts disclosed whether the rents and profits mil be sufficient to pay and discharge the lien indebtedness within five years. Such
While the primary object of the bill in this case is to secure a decree to sell the property of the coal company and appropriate the fund derived therefrom to the payment and discharge of the lien of a judgment recovered by the plaintiff, Abney-Barnes Company, the ultimate object is to enforce the prior trust or mortgage liens created by the judgment debtor, and the plaintiff, to effectuate the attainment of the object he seeks, specifically alleged the probable" insufficiency of the rents and profits to discharge all liens within five years. This broad declaration of the pleading is not denied. The statement in the answer of W. L. Taylor that he neither admits nor denies these allegations is not such a denial as section 36; ch. 125, Code, contemplates. To avail, the denial must be specific and positive. Grant v. Cumberland Valley Cement Co., 58 W. Va. 162, 172; Shurtleff v. Right, 66 W. Va. 582; Ihrig v. Ihrig, 78 W. Va. 360. The mere statement in answer that the respondent neither admits nor denies a material fact alleged in the bill does not amount to a denial of the existence of that fact.
And further, in a suit to enforce liens created by trust
The creditors’ suit in the circuit court ' of McDowell County, it is contended, should have been stayed by the judge of that court until the termination of the bankruptcy proceedings against the Davy-Pocahontas Coal Company instituted January 13, 1916, in the federal court for the southern district of West Virginia. It must be observed, however, that this proceeding was begun more than six months after the institution of the creditors’ suit in the state court, and under the decisions of the United States Supreme Court and other federal courts the rule recognized is that the court which first obtains rightful jurisdiction over the subject matter in a proceeding in rem to enforce prior liens will not be interfered with by any other court, including a court of bankruptcy. Pickens v. Roy, 187 U. S. 177; Metcalf v. Barker, 187 U. S. 165; In re Pilcher & Son, 228 Fed. 139, 142; In re Schmidt, 224 Fed. 814; Blair v. Brailey, 221 Fed. 1; Collier on Bankruptcy (11th Ed.), pp. 293,, 294, notes 57 and 59;
The sixth, seventh and eighth assignments relate to and comprehend the same general subject, namely, the refusal to allow the motion of the defendants, now appellants, to apply the $95,000 under the control of the court to the payment of the overdue and unpaid interest coupons attached to the bonds and notes, and thereby remove the default relied on by the defendant trustees acting for and on behalf of the holders and owners of the bonds and notes. This fund was accumulated through the administration and management of the coal mining operations on the trust estate or property by receivers appointed by the court upon the petition and motion of the appellant Taylor.
The third and final report of the receivers, the only report appearing in the record, shows $95,000 as the net receipts for the first six months of the year 1917 from all sources after deducting disbursements, which include taxes on the property, administration expenses, insurance, repairs and compensation to the receivers. Except for the intervention of some unusual or extraordinary 'cause or circumstance, a property from which is produced during six months the net sum realized may not improperly be assumed to be valuable and profitable, a property likely to produce under the same or an improved management- a return upon the investment such as will speedily absolve it from encumbrances, and, when so disencumbered, yield a profit to its owners. But
An owner who is about to be deprived of his property to satisfy liens, however created, has the clear right to know within a reasonable degree of certainty its status as to the charges for which it is to be sold. The fund in the treasury of the court and under its control arose out of the trust property and is a part of it, and as such is subject to the payment of the liens binding it. Though predicated upon facts somewhat different, the principle enunciated in Strayer v. Long, 83 Va. 715, pt. 2, syl., is not inapplicable, though appellees deny its applicability. That is, that all sums in the hands of receivers realized from property of the debtor should, before subjecting it to sale, be applied as credits on his indebtedness, that he may know to what extent it remains a charge against his land. Such a requirement conforms to principles governing courts of equity. To hold this fund in reserve for purposes merely conjectural and that may not occur is not consonant with justice and equity. The statement of the proposition shows its harshness. The receivers continue to manage the property; the court refuses to discharge them upon appellees’ motion; the fund in their hands when the decree was entered the receivers doubtless have since increased at the same rate, perhaps more than quadrupled it, and to that extent exhausted the property, while interest has proportionately augumented the indebtedness without the equivalent compensatory reduction of the trust liens. Because of the receivership, the debtor does not have access to the property. He cannot control it; cannot deal with it, sell or encumber it to relieve it from encumbrances,, and the court and the receivers are converting it into liquid assets without applying the returas to his relief. His request for their appointment does not meet the situation or prejudice his rights.
Moreover, the application of the fund so produced from the property to the payment of the overdue interest coupons would have partially, perhaps totally, absolved it from that default. Such, it is true, was within the sound discretion of
This application reasonably falls within the rule requiring certainty in the ascertainment of liens for which the encumbered land is liable before decreeing it to be sold for their satisfaction. Payne v. Webb, 23 W. Va. 558; Carter v. Carter, 83 W. Va. 312, 98 S. E. 296, contemporaneously decided. Such" course is to be commended because of the probability of discouraging bidding by creditors as they probably would bid if the amounts of the liens were fixed definitely by the decree. The same principle or necessity- is recognized and the rule enforced in Golden v. O’Connell, 69 W. Va. 374, where some of the lienors agreed to a sale of part of the tract sribject to their lien to be divided into lots and sold, the proceeds to be applied to discharge the liens; and the court held it necessary to make such an application before decreeing the sale of the other part of the land.
The failure to give a day to redeem before sale is the next assignment to be noted. As a general rule, according to many decisions of this court, a decree to sell land for debt without giving the debtor reasonable time for payment before sale is cause for reversal. King v. Burdett, 44 W. Va. 561; 8 Enc. Dig. Va. & W. Va. Rep. 693. The giving of time for advertising the sale is not the equivalent of a specific day to redeem. Rose v. Brown, 11 W. Va. 122. Though somewhat archaic, the rule is too well established in this state to be disturbed or ignored in some circumstances. However, it is held not to apply to decrees directing a trustee to sell land conveyed to him to secure the payment of the grantor’s debts, where the deed fixes the terms and conditions of the sale. Watterson v. Miller, 42 W. Va. 108. See also Stafford v. Jones, 73 W. Va. 299, 303-4. In the former case Judge Brannon says: “That is a technical rule which requires a court to give a day to redeem before sale, in addition to the time required for notice of sale. It ought not to be applied to sales under trust deeds, as a trust deed is essentially a
Finally, appellants complain of the advertisement directed by the court in the decree of sale, in that the direction failed to follow' the requirement of the trust deeds, which, we think, should have been done as part of the contract of the parties. For this reason, and because of the failure to appfy the funds in the hands of the, receivers to the partial relief of the debtors and exoneration of their property from encumbrance, and the lack of a definite ascertainment of the exact amount due on the total indebtedness binding the property, we are of opinion to reverse the decree, award costs to appellants, and. remand the cause for further proceedings.
Reversed and remanded.