148 Va. 528 | Va. | 1927
delivered the opinion of the court.
This suit was instituted in the Circuit Court of Wise county by the Richmond Trust Company, a corporation, and E. Randolph Williams, trustee, against Dungannon Lumber .Company, Incorporated, with its principal office at Big Stone Gap, Wise county, Virginia, and others, the main objects of the suit being to have the court appoint receivers for the defendant company which was then in a hopelessly insolvent condition; to take an account of the claims and liens against the lumber company, to liquidate and convert its unliquidated property into cash, and distribute it among its creditors in order of their priority, and to establish the claim of the complainants as a first lien upon the property of the defendant company mentioned and
(1) The question of priority of lien, as between the Richmond Trust Company on the one hand and what is referred to in the record as the “Baltimore Trust,” upon certain steel rail, logging engine, logging cars, etc., described in the “Richmond Trust.”
(2) The question of priority of lien as between the “Baltimore Trust” and what are described in the record as the “Dunn Trust” and the “Pennington Trust” on the one hand, and the “Coleman Trust” on the other, upon certain lumber and certain steel rail, being the same rail referred to in the “Richmond Trust.”
The trial court decided the first question in controversy in favor of the contention of the “Richmond Trust.” Upon the second question the court held that the “Baltimore Trust” was a superior lien to the “Coleman Trust” on seventy per cent of the lumber or its proceeds, and that the “Dunn” and “Pennington Trusts” were superior to the “Coleman Trust” on the steel rail.
(1) The facts out of which the first proposition in controversy grew are • necessarily preliminary to the second controversy, as will be seen later, and are fairly stated in the brief of the Richmond Trust Company, in substance, as follows:
By deed dated June 7, 1909, Patrick Hagan and wife conveyed to A. Kyle Morison the timber and timber rights on a large boundary of land in Scott and Wise counties, Virginia. It appears from the recitals in the deed, dated November 7, 1913, from Charles F. Hagan, trustee, to Clinehland Timber Corporation, that Mori
By deed of trust from Clinchfield Timber Corporation to the Safe Deposit and Trust Company of Baltimore, Maryland, trustee (referred to hereinafter as the “Baltimore Trust”), the Clinchfield Timber Corporation conveyed to the trustee the timber rights which it acquired under the deed of November 7, 1913, from Hagan, trustee. This deed of trust secured an issue of $250,000.00 of bonds of the timber corporation and the phase of the case with which the Richmond Trust Company is concerned is between Hagan, trustee, as the owner of bonds issued under this deed of trust, on the one hand, and the Richmond Trust Company, as holder of an unpaid note secured by the deed of trust to E. Randolph Williams, trustee (the “Richmond Trust”), heretofore mentioned, on the other.
By an agreement dated October 25, 1913, between the Clinchland Timber Corporation and the Dungannon Lumber Company, the timber corporation sold to the Dungannon Lumber Company a part of the timber and timber rights which Hagan, trustee, conveyed to the Clinchland Timber Corporation by his deed of November 7, 1913, which part so conveyed was located in Scott county, Virginia. After describing the timber conveyed, that agreement provided:
“* * * the said party of the second part takes the same subject to all the terms, conditions and agreements made in the aforesaid deeds to said party of the first part, and subject also to the terms and conditions of a certain deed of trust or mortgage from the said party of the first part to the Safe Deposit and Trust Company of Baltimore, State of Maryland, likewise bearing date of July 1, 1913, and of record in the Scott county clerk’s office.”
At the time the Clinchland Timber Corporation executed the Baltimore deed of trust, and at the time it entered into the agreement of sale with the Dungannon Lumber Company, it owned no property except the timber and timber rights acquired by the deed from Hagan, trustee, dated November 7, 1913. The Clinch-land Timber Corporation never owned the lumber mill or equipment or any logging roads, engines, rail or track, or any personal property of any kind ór description. The plant and equipment and the logging engines and cars and the steel rail in the logging tracks were acquired by the Dungannon Lumber Company from other parties. In fact, the mill and equipment and about one-third of- all the steel rail in -the- logging track were located on land leased or otherwise acquired from other parties, while about two-thirds of the-rail were laid on the land upon- which the boundary of timber conveyed by Hagan, trustee, to the Clinchland Timber Corporation stood, and no part of the logging track had been constructed or the steel rail laid when the “Baltimore Trust” was given.
In 1918 the Dungannon Lumber Company required funds for use in its business and it negotiated a loan of $25,000.00 from the Richmond Trust and Savings Company, whose name was subsequently changed to Rich
It seems important to set out more specifically the contents of the deeds heretofore briefly referred to, in order to clarify the contentions of the parties upon this issue.
(1) The deed from Hagan, trustee (November 7, 1913), conveyed to the Clinchland Timber Corporation (a) all merchantable trees sixty inches or more in circumference, on certain described boundaries of land in Scott and Wise counties, containing 23,152.21 acres, more or less, (b) The easements of necessary rights of way, and the privilege of selecting and using any and all lines, routes and locations for construction of drag roads and steam roads, wagon roads, etc., for cutting, logging and transporting the timber, with the right to use so much of the surface of the land as is necessary for lumber yards and sawmill sites. All rights and privileges to last as long as is necessary to remove the timber conveyed, not to exceed, however, forty years. It is then provided that when any watershed has been cut over it shall not be cut over again but is released to the grantor, except as to rights of way necessary to remove other timber. The party of the first part retains a lien upon all the properties conveyed by the deed to secure the payment of all sums to become due. The grantee also released to Hagan, trustee, all rights under the Morison deed,- supra, different from those contained in this deed.
(2) The deed of trust from the Clinchland Timber Corporation to the Safe Deposit and Trust Company of Baltimore, Md. (July 1, 1913), provided for the issue of $250,000.00 of coupon bonds, part of which, at least, was for the payment of the purchase price of the property conveyed by deed No. 1, and mortgaged all the property conveyed by that deed to pay the bonds, as they came due, and the interest. A sinking fund for this purpose was provided for by requiring the timber company to pay to the trustee $3.50 per thousand feet of timber cut and removed from the properties, payable on the 15th of every April, July, October and January in each year.
It is provided that any successor to the timber corporation shall be bound by all the provisions of the trust and shall have all the rights of the timber corporation. The deed provides for foreclosure of the trust in case of default, upon notice of fifty-one per cent of the bondholders, and it provides also that in case of default the trustee may take possession of the premises and properties and operate them.
It is then provided that the personal property and chattels conveyed shall be taken to be real estate for the purposes of this indenture- and be held as fixtures and appurtenances of the real estate and part thereof and to be sold therewith.
There is a provision that the obligations under the trust are solely corporate and not individual.
Another section of the trxist deed gives the timber'
It is also provided that all stipulations shall bind the successors of the timber corporation as well as the grantee.
(3) On October 25, 1913, the Clinchland Timber Corporation entered into an agreement with the Dungannon Lumber Company by which it sold a part of the timber and timber rights acquired by the former from Hagan, trustee, Irvine and wife and Morison, that is the timber on the watersheds of Little Stony creek, Dry creek and Magee creek, and all the rights, privileges, etc., acquired by the timber company to the timber and timbering rights which had been vested in the timber company by those deeds, and the Dungannon Lumber Company took the timber and rights pertaining thereto subject to the terms and conditions of the deed from Hagan, trustee, to the timber company, supra, and subject also to the terms and conditions of the “Baltimore Trust,” supra. The lumber company did not, however, assume the “Baltimore Trust,” but took the property conveyed subject to it, and agreed to pay for the timber and timbering rights $4.50 per thousand feet for log measure of the timber at the mill. The lumber company agreed to install a complete sawmill outfit or outfits on or near (italics supplied) the boundary of land.
It is'Well to remark here that the Dungannon Lumber Company, as shown by the record, did, after this date, install a large sawmill outfit near the boundary of land, but not on it, and built railroad tracks from the mill into the boundary of land where the timber was located, using, in the construction of the. railroad, steel rail which it purchased from the Carnegie Steel Corporation. One-third of the steel rail was laid on land which the
(4) . Under these circumstances the Dungannon Lumber Company, on February 12, 1918, executed a deed of trust to E. Randolph Williams, Trustee, to secure to the Richmond Trust Company the payment of five $5,000.00 notes (“Richmond Trust,” supra) and conveyed to the trustee for this purpose all the steel rail owned by the lumber company, consisting of six or seven miles of rail aggregating 350 tons of thirty-pound steel rail laid on the mill yard and log roads of the Dungannon Lumber Company, together with locomotive, logging ears, etc., describing them.
The first controversy which we will have to determine upon this appeal grows out of the contention upon the part of Hagan, Trustee, that the steel rail conveyed in the “Richmond Trust” is subject to the alleged prior lien in his favor under the “Baltimore Trust.” His contention is, not that the steel rail were in terms included in the “Baltimore Trust,” but that by agreement of the parties all property acquired by the Clinch-land Timber Corporation was to be treated as realty, and that the parties contemplated a complete sawmill outfit which would be attached to real estate and when attached would become a part thereof and subject to the deed of trust (“Baltimore Trust”) to secure the original purchase price, and that therefore appellant is entitled to priority in the proceeds of the property subject to the “Richmond Trust” over the Richmond Trust Company.
The contention of appellant rests upon four propositions.
1. That all the property rights owned by the Clinch-land Timber Corporation were made realty by agreement of the parties.
3. That the Dungannon Lumber Company purchased the property subject to the “Baltimore Trust,” and attached the steel rail and, in effect, its entire plant to the real estate.
4. That the steel rail and sawmill outfit when attached to the realty became realty and subject to the “Baltimore Trust.”
Propositions 1, 2 and 3 may be admitted as true, although in purchasing subject to the lien and conditions of the “Baltimore Trust” the lumber company did not assume payment or performance of the obligations of that trust, and it is essential that the fourth proposition also be true. Indeed, it was admitted in the oral argument and is admitted in the brief that if the rail which formed part of the log roads and of the rights of way did not become real estate when attached thereto, then the contention of appellant fails and the “Richmond Trust” has priority over the “Baltimore Trust” so far as the property conveyed by the “Richmond Trust” is concerned.
To sustain the contention of appellant that the steel rail became realty and subject to the lien of the “Baltimore Trust” when they were laid on the rights of way which the timber company acquired from appellant, we are cited to Green v. Phillips, 26 Gratt. (67 Va.) 752, 21 Am. Rep. 323, and Shelton v. Ficklen, Trustee, 32 Gratt. (73 Va.) 727. These cases involve fixtures and equipment in connection .with manufacturing plants, one a sash, door and blind factory, and the other a flour mill, and are in accord with the general rule touching fixtures or property attached to real estate.
But the general rule referred to by Judge Burks is always subject, among other tests, to the test of intention of the parties to make the article annexed a permanent accession to the freehold—and intention in this respect is gathered as well from the circumstances and purposes of the annexation as from the expressed intention of the parties. See 11 R. C. L., page 1059, section 3, et seq.; 26 C. J., page 654, section 2, and cases cited.
It is not necessary to recite in full here the evidence which supports this conclusion. It abundantly appears from the elaborate statement of facts heretofore made. Suffice it to say that the “Baltimore Trust” did not, by its terms, embrace steel rail, logging engines or logging cars, and the plant had not been located at the time of the execution of the “Baltimore Trust,” and never was located on the Hagan land, nor did the Clinchland Timber Corporation ever own any steel rail, and could not have given, much less intended to give, a lien upon them. All these things have a tendency to negative any idea that there was any intention that equipment used in removing the timber should remain on the premises after the operation closed. This conclusion as to intention is further strengthened by the fact that Hagan accepted subsequent liens (“Dunn and Pennington Trusts”) upon the identical rail, logging cars, etc., covered by the “Richmond Trust,” in one of which, at least, it was expressly declared that the rail were subject to the prior lien of the “Richmond Trust.”
We hold, therefore, that there was no error in that part of the decree declaring the “Richmond Trust,” after payment of the Carnegie Steel Company’s claim, a first lien on the steel rail mentioned in that trust.
(2) By deed of trust bearing date October 1, 1918, the Dungannon Lumber Company conveyed its sawmill outfit and all equipment to James S. Dunn,
On December 26, 1921, the Dungannon Lumber Company conveyed to Robert L. Pennington, trustee, all the timber purchased from the Clinchland Timber Corporation on Little Stony creek, McGhee creek and Dry creek, in Scott county, sawmill and entire sawmill outfit, thirteen miles of thirty pound steel rail (585 tons), its easements and rights, to secure to Charles F. Hagan, trustee, the payment of $20,000.00.
This deed of trust contains the following clauses:
“The said Dungannon Lumber Company, for itself, its successors and assigns, doth hereby further covenant and agree with the said trustee and the holders of said notes that it will pay over to the said trustee, for the benefit of the holders of said notes, the sum of five ($5.00) dollars per thousand for every thousand feet of lumber shipped, sold or disposed of from the Dungannon Lumber Company’s yards, two ($2.00) dollars of which shall be applied upon the said $20,000.00 herein secured as long as the same, or any part thereof, remains unpaid, and three ($3.00) dollars of said sum to be applied on other. notes and obligations due the •said Charles F. Hagan, trustee, and secured in part by deeds of trust on a portion of the property herein conveyed, and in part by other collateral, which last named debt and notes are set out in a separate memorandum, copies of which are held by the Dungannon Lumber Company, Robert L. Pennington, trustee, and Charles F. Hagan, trustee.
On June 20, 1923, the Dungannon Lumber Company-conveyed to S. W. Coleman, trustee, all the lumber now on its mill yard located at Dungannon, Virginia, and leased the yard by written lease to S. W. Coleman.
It also conveyed by this deed of trust its mill and mill equipment, including logging locomotives and all its steel rail located at the mill or connected with its logging operations.
This conveyance was made to secure the holders of six certain notes for $5,000.00 each.
Then follows the provision for sale in case of default.
In addition to the deed of trust and the lease referred to there was an agreement entered into between the parties that if payment of the $30,000.00 was made as agreed to, the title to the lumber should revert to the Dungannon Lumber Company. This agreement concluded with this clause: “It is understood and agreed, however, that unless and until default is made in the payment of the said notes, the party of the first part may from time to time, in the due course of business, ship lumber from said mill yard to market and shall at the same time substitute other lumber for the lumber so shipped, and shall at all times keep on said yard not less than one and one-half million feet of lumber; and if default be made in the payment of said notes in accordance with the terms of the aforesaid trust deed, then the party of the first part shall cease to ship lumber from the said yard and the party, of the second part take possession of the said yard.”
It will thus be seen that Hagan, trustee, subject to the rights of the beneficiary.under the “Richmond Trust” as to the property thereby conveyed, had the following liens on the Dungannon Lumber Company
Under the “Baltimore Trust” on all property as heretofore enumerated, conveyed by the Clinchland Timber Corporation to the Dungannon Lumber Company.
Under the “Dunn Trust” all the property as heretofore enumerated, conveyed by the Dungannon Lumber Company to Dunn, trustee.
Under the “Pennington Trust” all the property as. heretofore enumerated, conveyed by the Dungannon Lumber Company to Pennington, trustee.
There is no question as to the priority in time of the three foregoing deeds of trust over the “Coleman Trust.” Coleman, however, claims priority over these trusts as to the property described in his deed for several reasons hereinafter enumerated. The trial court held, in the decree complained of, that the “Baltimore Trust” was a lien in favor of Hagan, trustee, on all the timber on the boundaries of land described in that deed, and lumber sawed therefrom, and the proceeds therefrom which came into the hands of the receivers, and that the deed of trust was not per se fraudulent; that the “Dunn and Pennington Trusts” were liens on all the property in those deeds described (subject to the prior lien of the “Richmond Trust” when the same properties were involved), and that the “Pennington Trust” deed was not per se fraudulent; that of the lumber which came into possession of the receivers, thirty per cent thereof was not cut from timber which the Dungannon Lumber Company owned, on land described in the deed from Hagan, trustee, to the Clinchland Timber Corporation, and in the con
The effect of the court’s holding, summarized is, that the “Coleman Trust” is not per se fraudulent, and that it is a first lien on thirty per cent of the lumber which came into the hands of the receiver and upon such property of the Dungannon Lumber Company conveyed thereby and described therein, as was not subject to the three deeds of trust, prior thereto in date, in which Hagan, trustee, was beneficiary, 'and this property (subject to the “Coleman Trust”), the court designates as “certain logging cars which sold for $207.00.” Coleman,” trustee, assigns three errors with respect to the above findings of the court:
1. That the court erred in holding that the “Baltimore Trust” constituted a superior lien to that of the “Coleman Trust” on seventy per cent of the timber or its proceeds. With respect to this assignment it is contended that, as the “Baltimore Trust” contained a clause giving the Clinchland Timber Corporation, its successors, etc., the unrestricted right to retain actual possession of all property thereby conveyed, to cut, manufacture, carry away, consume, sell and dispose of all timber taken from the timber thereby conveyed; that as any sale made by the Dungannon Lumber Company of lumber passed a good title to the purchaser, and that, as S. W. Coleman, trustee, was a purchaser within the meaning of this clause, therefore the “Baltimore Trust” is not a first lien on any part of the lumber conveyed by the “Coleman Trust,” but that all of it is subject to the “Coleman Trust” as a first lien.
2. It is charged that the court erred in holding that the “Coleman Trust” constituted a lien on thirty per cent of the proceeds of the lumber which went into the hands of receivers. If the “Coleman Trust” is not per se fraudulent (a question which will be later disposed of), for reasons given with reference to assignment of error No. 1, there is no error in the finding of the trial court. The evidence as to the quantity of lumber manufactured by the lumber company from the Hagan tract, and as to the quantity manufactured from other lands by the Dungannon Lumber Company, while not entirely clear, seems to sufficiently support the finding of the court. There is no merit in this assignment.
3. It is charged that.the court erred in holding that Hagan, trustee, had a lien under the “Dunn and Pennington Trusts” on all the steel rail, superior to the
4. It is contended that the “Coleman Trust” is a first lien upon the property thereby conveyed except as to property covered by the “Richmond Trust,” because the “Baltimore Trust” and the “Pennington Trust” are per se fraudulent and void, for the reason, as to the “Baltimore Trust,” that the provisions of that trust reserved to the grantor not only possession, but the complete right to carry away, consume, sell and dispose of the timber and lumber subject to the trust. In other words, the contention is, that it reserved to the grantor powers inconsistent with the objects of the deed, and that it is void under section 5184 of the Code. The provision referred to is as follows:
' “Section 1. Until some default shall have been made in the due and punctual payment of the principal of the bonds hereby secured, or in the due and punctual performance and observance of some covenant or condition hereof, obligatory upon the timber corporation, and until such default shall have been continued beyond the period of grace, the timber corporation, its successors and assigns, shall be suffered and permitted ■ to retain actual possession of all the property conveyed, mortgaged or assigned to the trustee, and to manage, operate and use the same and every part thereof, with
We are referred to the following decisions as sustaining this contention. Consolidated Tramway Company v. Germania Bank, 121 Va. 331, 93 S. E. 572; Gray, Assignee v. Atlantic Trust & Deposit Co., 113 Va. 580, 75 S. E. 226; Hughes, Effinger & Co. v. Epling, 93 Va. 424, 25 S. E. 105; Catt v. Knabe, etc., Mfg. Co., 93 Va. 736, 26 S. E. 246; Saunders v. Waggoner, 82 Va. 316; Wray v. Davenport, 79 Va. 19; McCormick v. Atkinson, 78 Va. 8; Perry v. Shenandoah National Bank, 27 Gratt. (68 Va.) 755; Quarles v. Kerr, 14 Gratt. (55 Va.) 48; Addington v. Etheridge, 12 Gratt. (53 Va.) 436; Sheppard v. Turpin, 3 Gratt. (44 Va.) 373; Long v. Lee, 3 Randolph (24 Va.) 410.
There is no claim, however, that the debt secured is not a bona fide debt, and the deed provides for the payment, at stated intervals, of interest on the bonds secured, at the rate of six per cent per annum. It further provides for the creation of a sinking fund for the benefit of the bondholders, by paying to the trustee on the 15th of each month the sum of $3.50 per thousand feet of timber cut and removed from the premises, and it provides for a strict accounting to the trustee every three .months of all timber cut and removed during the preceding three months. There is a provision empowering the trustee to take possession of the entire works of the .timber corporation or its successors, in event that these provisions are not complied with, and there are other provisions, not necessary to enumerate, in view of the foregoing, for the protection of the grantee. In view of these provisions, it is only neees
With respect to the “Pennington Trust” quotations heretofore made therefrom demonstrate that it was given to secure the payment of a bona fide indebtedness; that it provides for a strict accounting of all lumber manufactured by the Dungannon Lumber Company, and payment to the trustee of “the sum of $5.00 per thousand for every thousand feet of lumber sold or disposed of from the Dungannon Lumber Company’s yards, two dollars of which shall be applied upon the $20,000.00 herein secured as long as the same, or any part thereof, remains unpaid, and three dollars of said sum to be applied to other notes and obligations due the said Charles P. Hagan, trustee.” Mathews v. Bond, supra, is controlling so far as the “Pennington Trust” is concerned also. In that case, Judge Campbell, speaking for the court, said: “In construing the deed of trust, the provision under attack must be read in connection with all the other provisions of the instrument. In reading the deed it is to be observed that the debt secured was payable two years after date, unless the grantor defaulted in the payments, failed to insure the property,- or failed to pay taxes thereon. It also provided for an accounting each month of the proceeds derived from the sale of lumber and ties, and in the event of a failure upon the part of the grantor so to do, then the entire debt should become due and payable. No power of revocation was reserved by the grantor.
“Upon the happening of any of the contingencies mentioned the trustee was empowered to take charge of all the lumber and ties and make sale of the same.
“A noticeable feature of the trust deed, which distinguishes it from most cases, is that the grantor had
“The deed of trust is, in strict legal terminology, an operating mortgage. By its execution the grantor was afforded a source of credit, while the beneficiary was afforded a security for his debt. No harm was done to subsequent creditors as they necessarily extended credit to the grantor only on the value of the equity of redemption and not upon the corpus of the estate. The law afforded them a means by which they could enforce their debts, subject only to the terms of sale contained in the trust deed.”
All that is there so well said is applicable to the trust deeds here being considered, and we conclude that they are not void under section 5184 of the Code and that the court did not err in holding them valid and in establishing them as liens upon the property of the Dungannon Lumber Company described therein, as set out in the final decree and as heretofore indicated.
Hagan, trustee, attacks the “Coleman Trust” as per se fraudulent under section 5184 of the Code, but as Hagan’s rights have been held superior to the “Coleman Trust” on all property of the Dungannon Lumber Com-r pany on which he has a lien by virtue of the “Baltimore,” “Dunn” and “Pennington Trusts,” it is not necessary to decide whether the “Coleman Trust” is invalid, as alleged, or not, as no other creditor is here complaining of the “Coleman Trust,” and Hagan,
One other question arises, which merits attention. It is alleged as error that the trial court erred in directing any part of the funds under its control to be paid to officers for costs in the former case. (A suit having practically the same objects as the instant suit and involving the same parties was instituted by Charles F. Hagan, trustee, against Dungannon Lumber Company, and a demurrer to the bill filed therein was, upon appeal to this court, sustained and the cause remanded to the circuit court for settlement of the accounts of the receivers and for such decree as was proper. Hagan v. Dungannon, 145 Va. 568, 134 S. E. 570.) It was for payment of the costs of officers in this cause that complaint is now made.
Upon this proposition it seems only necessary to say that there is no argument of the question in the briefs and no reference to any evidence which will enable us to pass upon the merits of the assignment.
The trial court, however, in its final decree, held that the two causes could be disposed of equitably and to the best advantage by hearing them together; that is, settling the old receivers’ account, in the instant suit, and after reciting what had been done by the receivers in the first cause, and directing the fees of the receivers to be paid out of funds in hand, in both eases, the court adds: “And it also appearing to the court that, by agreement, the parties to the second mentioned cause have had and received the benefit of the work and
In view of this finding and action of the court, and in the absence of anything in the record to show error therein, we must assume that there was no error, and that the court did not abuse the discretion vested in it in such matters.
Upon the whole case we are of opinion to affirm the decree of the circuit court.
Affirmed.