120 Va. 12 | Va. | 1916
Lead Opinion
delivered the opinion of the court.
This suit was brought by trustees hereinafter named to obtain the decision and direction of the court upon the relative rights of sundry' parties claiming liens upon certain real estate held by them.
On the first day of July, 1908, J. T. Black, J. Lacy Black and Patsy C. Black, his wife, executed a deed of trust to
“In distributing the purchase money the trustee shall pay: (1) The cost of executing this trust. (2) Any unpaid taxes on the lands. (3) The amount of said debt; and the residue of the purchase money he will pay over to the said parties of the first and second parts as their interest in the said lands and the price derived for the same may entitle them.
“In enforcing said deed, said trustee will sell first the lands conveyed by said J. T. Black, and if a sufficient amount is derived to pay the debt and costs, will not make further sale under this deed.”
In May, 1909, J. T. Black sold 157 acres of his land embraced in the deed of trust, and realized thereon $11,790, out of which he paid, before maturity, one-half of the Bowling debt, applying the residue of the purchase money to his own use. This was done by and with the consent of Andrew Bowling and J. Lacy Black.
On the 20th of August, 1912, J. Lacy Black and wife executed a second deed of trust on their 127 acres above mentioned, to secure Andrew Bowling in the further sum of $7,000; and on December 17, 1914, they executed still another deed of trust on the 127 acres and on certain other real estate and personal property, to secure, first, the debts theretofore secured by prior deeds of trust, “in the order of their legal priority,” and, second, the general creditors of the grantors, among whom were the appellants here.
This suit, for advice and direction, was brought by Pratt and Kerr, trustees under the last-named trust deed. The controversy in the case arises between the general credi
The cause was referred to a commissioner for a report on the properties involved and the liens thereon in the order of their priority. Pending this reference, the trustees under the last named deed of trust sold the 127 acres of land owned by J. L. Black and wife at a private sale for $20,000. This was done by consent of all parties interested, and with the approval of the court, and the proceeds were brought into the cause “to stand exactly in the same position as the lands,” and subject to exactly the same liens and equities.
It was, of course, conceded that the second Bowling deed of trust for $7,000 would, in any event, have to be satisfied from the proceeds of the 127 acres before the general creditors of J. L. Black and wife would have any valid claim thereon, and accordingly that deed of trust was paid off and discharged by the trustees pursuant to a consent decree in the cause.
The report filed by the commissioner seems to proceed upon the theory that as between J. T. and J. L. Black the former was only bound for one-half of the original Bowl
To this report J. T. Black excepted. The court sustained the exception, and its action in doing so is the subject of this appeal.
The essential portion of the very comprehensive decree entered by the court was as follows:
“Upon consideration whereof, the court doth sustain the exceptions of J. T. Black to the report of Master Commissioner Nelson as hereinafter set out; the court is of the opinion that the balance due upon the bonds dated July 1, 1908, executed by J. T. Black and J. Lacy Black to Andrew Bowling and secured by deed of trust dated July 1, 1908,
“And it is further adjudged, ordered and decreed, that this cause be and the same is recommitted to Master Commissioner Nelson, who shall make and state an account showing what is a fair division of the purchase price of $20,000.00 paid for the land of J. Lacy Black and the land of Patsy Black as between said J. Lacy Black and said Patsv Black.”
In the view entertained by us, the question which is decisive of the controversy in hand is whether J. T. Black was, as he appears upon the face of the Bowling bonds to be, a joint maker with J. L. Black, or was, as would seem probable from the last clause in the deed of trust if that clause stood alone, the principal debtor upon the entire Bowling debt of $20,000 with J. L. Black as his surety. The circuit court held that J. T. and J. L. Black were joint makers of the bonds, each of them being bound as principal for one-half and as surety for the other half thereof. In this holding there was, in our opinion, no error.
The loan of $20,000 from Bowling was obtained to meet pressing obligations owing to sundry banks by the firm of H. A. Black and Brother. This firm was composed of H. A. and J. L. Black, both sons of J. T. Black. The latter
In the course of his written opinion in this case, the learned judge of the circuit court made the following statements, which are, in all substantial respects, fully supported by the record and which we may well adopt in this connection:
“The money ($20,000 from Bowling) was paid directly to Lacy. Not a dollar of it went into the hands of the father. It was used to pay an indebtedness, $3,000 of which was primarily the father’s; $17,000, the residue thereof, to pay debts, a part of which was the primary indebtedness of H. A. Black and a part the primary indebtedness of H. A. Black & Brother. All of this indebtedness, however, by renewals, etc., had become the indebtedness of H. A. Black & Brother. These facts, standing alone, lead us to the conclusion that the Bowling loan was negotiated primarily to benefit Black & Brother, and not J. T. Black. Certainly this would seem to be so to the extent of $17,000.”
Further on in the opinion it is said: “It would not be just to treat J. T. Black as an accommodation endorser for the entire amount; $3,000 of this money went to pay a debt for which the father was primarily liable. In 1909, one year after this money was borrowed, J. T. Black sold to outsiders about 150 acres of his land for $11,790. $10,000, part thereof, he paid to Bowling. A part of this he paid on bonds not yet due. In other words, before any
A careful consideration of the entire evidence, which is. somewhat lengthy, fully satisfies us that the court could not have properly reached a conclusion thereon less favorable-to J. T. Black than that indicated in the foregoing extracts, from the opinion. Such is the clear result from the testimony of J. T. Black and his two sons, J. L. and R. B. Black, showing without any serious conflict or contradiction the-origin and development of the indebtedness to which the Bowling money was applied. It is true that certain statements of J. Lacy Black, if isolated from their setting and removed from the influence of his testimony as a whole,, would tend strongly to prove that the entire Bowling debt, was primarily owing by J. T. Black. And it is likewise true that if certain statements alleged to have been made by J.. Lacy Black, not in the presence of J. T. Black and the-evidence of which was objected to by J. T. Black, as to the-primary liability of the latter, could be regarded as evidence against him, these statements would have a like tendency. So, too, as to the evidence given by the witness, Cohron, who made the direct statement that the original loan was obtained from Bowling to pay debts of H.'A. and •J. T. Black, and that on his advice J. L. Black was brought into the transaction for better security. This testimony, however, was in the main essentially hearsay and was duly objected to on that ground; it is utterly inconsistent with the relationship which the uncontradicted evidence shows. J. L. Black bore to much of the indebtedness; and, moreover, the witness giving the testimony was shown to be hostile to J. T. Black. The circuit court was fully justified’ in attaching, as it did, small weight to this evidence.
Without extending further the discussion of this branch of the case, we have no hesitancy in saying that the clear weight of the evidence supports the finding of the circuit court as to the respective liabilities of J. T. and J. L. Black upon the Bowling bonds.
But it is contended by the appellants that even if J. T. Black is primarily liable for only one-hálf, and is the surety of J. L. Black as to the other half of the Bowling debt, the conditions have not yet arisen to entitle J. T. Black to be subrogated to the rights of Andrew Bowling because as
other jurisdiction has the doctrine been more firmly adhered to or more liberally expounded and applied, to meet the exigencies of particular cases, than in Virginia.” Sands v. Durham, 99 Va. 267, 38 S. E. 145, 54 L. R. A. 614, 86 Am. St. Rep. 884.
In this case, as we have seen, J. T. Black, with the proceeds of a part of his land, has paid one-half of the Bowling debt, being all that he was bound for as principal. The lands of J. L. Black and wife have been sold for more than enough to pay the balance of the debt, and the proceeds are now in this cause subject to the order of the court. It would be a vain thing for the court to require the balance of J. T. Black’s land to be sold, use the proceeds to pay the balance of the Bowling debt, and then reimburse J. T. Black from the proceeds realized on the sale of the lands of J. L. Black and wife. The circuit court, therefore, was entirely right in its decree, directing Bowling to be paid the balance of the debt from the funds in hand, and making proper
Having decided that the direction to the trustees to sell the J. T. Black land first and to stop there if enough money was realized to pay the Bowling debt, was a matter over which the grantors in the deed had control and in which the secured creditor could have no voice if his debt was paid, it becomes unnecessary to consider the appellants’ further contention that if the entire debt had been paid by a sale, as directed in the deed, of the J. T. Black land, such sale would have exhausted the function of the deed of trust and defeated any claim to subrogation on the part of J. T. Black. This contention, and the authorities cited to sustain it, could only avail the appellants in case they could maintain their original proposition that J. T. Black was the principal debtor as to the whole debt. If he was in fact merely the surety as to the unpaid half of the Bowling debt, and his land had been sold therefor, the mere fact that the deed of trust directed his land to be sold first would not have prevented him from, showing the actual relationship of himself and J. L. Black to the indebtedness, and that fact being shown, his right of subrogation would have followed as a matter of substantial equity and right. The debt, in that event, would be paid and satisfied, but equity would keep the lien alive for the benefit of J. T. Black. Leake v. Ferguson, 2 Gratt. (43 Va.) 433; Gatewood v. Gatewood, 75 Va. 407; 37 Cyc. 411.
Finally, it is claimed by the appellants that, conceding J. T. Black to have been primarily obligated as to only one-half of the Bowling debt, he is estopped by the terms of the deed of trust from setting up that fact as against the subsequent creditors of J. Lacy Black. It was upon this point alone, as we understand the commissioner’s report,
As an original proposition, the court was plainly correct in saying, in the opinion already cited, that “a stream cannot rise higher than its source. The rights of Lacy Black’s creditors are the rights of Lacy Blackand the mere fact that one clause in the deed of trust tended to show that J. T. Black was the principal debtor, and that none of the lands of J. L. Black and wife would be subjected to the Bowling lien if the J. T. Black land was sufficient to pay it, did not give the creditors any higher rights than they would have had if the deed had been silent on the subject. It is true that two of the general creditors introduced proof to the effect that they extended credit to J. Lacy Black on account of the provisions of the deed of trust, but there is nothing whatever in the record to connect J. T. Black in any way with this action on their part, or to show that he ever had any intimation that they were being influenced by what they claim to have believed was his relationship to the Bowling debt. As to the majority of the creditors, there is no evidence at all that they so much as had actual knowledge of the existence of the deed of trust or of its contents, and, of course, therefore, none that they were influenced thereby to extend credit to J. L. Black. Not a single one of them ever made any inquiry of J. T. Black, as they might easily have done if they intended to rely upon
There was no error in the decree complained of, and it must be affirmed.
Affirmed.
Dissenting Opinion
dissenting:
I concur in the above opinion in so far as it holds that as between themselves J. T. Black and J. Lacy Black were each bound as principal debtor for one-half of the Bowling $20,000 deed of trust debt and as surety for each other respectively for one-half of such debt; but I cannot concur in the view that, as against the appellants, lien creditors of J. Lacy Black and wife, J. T. Black is entitled to any preferred lien on the property of J. Lacy Black and wife,
This conclusion I feel necessarily results from a consideration of the rights of the respective parties as fixed by the deeds of trust executed by J. T. Black and J. Lacy Black and wife, which fixed the lien rights of the appellants.
When J. T. Black paid the half of said Bowling debt for which he was bound as principal debtor, the remaining half of such debt was the debt of J. Lacy Black as principal and of J. T. Black as his surety. By the last deed of trust above mentioned J. Lacy Black and wife gave a lien on the real and personal property conveyed thereby to secure, along with the general debts therein mentioned, among which were the debts of appellants, “any and all other debts which may be asserted against the parties of the first part” (J. Lacy Black and wife) “although they may not be herein specifically set out.” The said indebtedness of J. Lacy Black as principal for said unpaid half of said Bowling debt was therefore thereby secured as a- lien upon the property thereby conveyed in the same class and of the same dignity as to priority as the debts of appellants. Under this deed of trust J. T. Black was given, indeed, directly no lien, but the said unpaid half of the said Bowling debt was given a lien of the same dignity as the lien of the debts of appellants, which in equity J. T. Black has the right to have enforced to his exoneration as surety and to his relief upon his liability as surety to the extent that the said unpaid half of said Bowling debt may be paid off and discharged as the result of enforcing such lien.
No other lien was, at any time, expressly given to him by J. Lacy Black and wife; and after the last deed of trust from them was executed and recorded, it was beyond their power to do anything to give J. T. Black any lien in preference to the lien given by such deed of trust to appellants.
The claim of J. T. Black, however, is that he is entitled in equity, by subrogation, to have the lien of the first deed of trust, mentioned in the above opinion, to the extent that it secures the payment of the unpaid half of said Bowling debt, enforced against the property of J. Lacy Black and wife conveyed thereby, to his exoneration as surety on such part of such debt. Let us see how this will work out upon well settled principles.
If we disregard the objection that J. T. Black would not have any right of subrogation until he in fact paid out money as surety and treat him as if he were in the position of having paid the whole of said Bowling debt, what right would he have to ask that the property of the latter conveyed by said first deed of trust be subjected to satisfy the half of such'1 Bowling debt for which J. Lacy Black was the principal debtor? His rights must stand or fall under the provisions of such deed of trust as they existed at the time of the execution of the last deed of trust, as against appellants who were given rights as lien creditors by the last deed of trust.
If, then, we treat J. T. Black as having paid the whole of said Bowling debt, what would be his rights under said first deed of trust? Why, plainly he could be subrogated only to the rights of said Bowling debt to the extent of the •unpaid half of it for which he was surety.
By the express terms of the first deed of trust, “In enforcing said deed, said trustee will sell first the lands con
A court of equity could give to J. T. Black only the right of subrogation to such rights as the first deed of trust would have given said unpaid half of the Bowling debt had it remained in the hands of Bowling. These rights were subject to and could not escape the effect of the provision next above quoted.
The provision above quoted should not be ignored by the court. It was embodied in the deed of trust by the parties thereto, and there could be no sale except in accordance therewith. 3 Jones on Mort., sec. 1778.
That is to say, by such subrogation J. T. Black could have acquired no right to enforce such first deed of trust against the lands of J. Lacy Black and wife, save only in the event that the lands of himself conveyed by such trust deed were insufficient to pay the whole Bowling debt and costs. As it is conceded in the case that J. T. Black’s lands were amply sufficient to do this, J. T. Black by such subrogation could acquire no right whatever to subject, or have subjected, the property of J. Lacy Black and wife conveyed by such first deed of trust; hence, the subrogation he asks would be barren of any beneficial result to J. T. Black— could give him no lien, nor the benefit of any lien, on the lands of J. Lacy Black and wife.
With respect to the position that the debtors, J. T. Black and J. Lacy Black and wife, might have changed “the order of sale by direction to the trustee at any time after the deed was made,” I do not feel that this could be done so as to abrogate such a provision as that embodied in the deed of trust under consideration, after the lien rights of appellants had attached. I think that such provision, in effect, withheld any power of sale being given by the trust deed of the property of J. Lacy Black and wife conveyed thereby,
This is a different case from that of a deed of trust with the usual provisions unlimited by such a provision as we find here. In the case of a trust deed with only the usual provisions, there is nothing which prevents any of the property conveyed thereby from being liable to be subjected by sale, subject to the discretion of the trustee as to the order of sale. The trustee is left by the deed of trust in such a case free to exercise such discretion. In the case before us the trust deed did not leave the trustee free to exercise such discretion, but in express terms withheld from him such discretion, by providing, in effect, that the property of J. Lacy Black and wife should not be sold by him at all save only upon a certain single specified condition, which condition could not be ignored or changed by the trustee, or indeed by the parties themselves to the deed of trust, to the injury of appellants after the rights of the latter as subsequent lien creditors attached to such property.
