97 Va. 227 | Va. | 1899
delivered the opinion of the court.
For the purposes of this decision, it may be conceded, as claimed by counsel for the appellee, that the money secured by
Clay not having obtained a deed to the lots at the time Kelly was considering the propriety of accepting them, along with other lots in the city of Richmond, in satisfaction of his judgment against Clay, Kelly was put upon inquiry as to the state of Clay’s right to the lots. It was incumbent upon him to ascertain from the Land Company what was necessary to be done or paid in order to obtain a clear title. If he omitted to make due inquiry, he could only acquire the lots subject to any encumbrance or burden upon them in favor of the company.
Recognizing this obligation, the counsel of Kelly applied to the company for information as to the state of Clay’s right to the lots, and was informed by its secretary and general manager that Clay had not completed the payment for the lots, but that there was about fourteen hundred dollars’ worth of grading still to be done before the lots would be fully paid for. The contract between the company and Clay with respect to the purchase of the lots, and the payment therefor in grading was shown to the counsel, at his request, and examined by him, but the deed of trust was not shown to him, nor was he then told of it.
The secretary deposed that he discussed the deed of trust on divers occasions with the counsel, but could not recollect whether it was before or after Kelly had accepted the conveyance of the lots. It is made very clear, however, by the testimony of the counsel that he first learned about the deed of trust from the secretary, but that the latter did not inform him of its existence until several months after Kelly had agreed to accept the Fair-mount lots and the Richmond lots in satisfaction of his judgment,
It was further testified by the secretary, on his direct examination, that Kelly, before consummating the transaction as to the lots, talked with him about the state of Olay’s right to them, and that they conversed about the deed of trust, of the existence of which Kelly seemed to be fully informed. Kelly denied positively that the deed of trust was mentioned or that he had any knowledge of it, and deposed that he first learned from his counsel, and with much surprise, of its existence. The testimony of the secretary upon this point is greatly impaired by the statement made on his cross-examination, when being pressed as to the knowledge of Kelly as to the deed of trust, that “ Kelly may not have known of the existence of this trust deed.” His testimony shows that knowledge of the deed of trust imputed by him to Kelly was rather an inference by the secretary from the fact that Kelly told him that Olay had promised to repay out of money he was getting from the company an amount Kelly had lent to Clay. It does not appear, however, that Kelly knew, or that the secretary informed him, upon what terms, or upon what security if any the company was letting Clay have money.
Clay testified that Kelly was aware of the deed of trust, but it is apparent, upon considering his whole testimony, that he made no distinction between a knowledge by Kelly of a simple indebtedness of Clay to the company, and a loan to him by it secured by a deed of trust on the lots. ILis testimony is entitled to very little weight in the effort to fasten upon Kelly actual notice of the deed of trust, and all mention of it to him by Clay was denied by Kelly.
Mr. Bryant, to whom Clay, on his failure, made an assignment, was informed of the deed of trust, and testified that he went, into a calculation with Kelly when the latter was considering the question whether he would accept-the lots in Rairmount and Richmond in satisfaction of his judgment against Olay, to
"While it was the duty of Kelly, as Clay had no recorded title to the lots, to inquire of the Land Company what was necessary to be done or paid in order to obtain a clear title, or he would take them at his peril, it was no less the duty of the' company, when inquired of, to make a full and frank disclosure. Honesty and fair dealing required that this be done. When Collins, as counsel for Kelly, asked to see the contract between the company and Clay in regard to the lots, and it was shown to him by the secretary, and he inquired what was the balance of work to be done in order to complete the contract on the part of Clay, the deed of. trust not being a part of the original agreement, nor referred to in the contract, it was plainly the duty of the company, through its secretary, to inform him of it. Where a purchaser has knowledge of any fact or circumstance sufficient to put him upon inquiry as to the existence of some riv-ht or title.
In the case at bar due inquiry' appears to have been made, but the evidence is far from satisfactory that the unrecorded deed of trust, the existence of which should have been frankly-disclosed, was made known to Kelly or his counsel, or that either of them knew of it. Upon a consideration of all the testimony, our conclusion is to 'the contrary. The effect of want of notice of the deed of trust was to mislead Kelly and his counsel. It induced him to -accept property in discharge of his debt-, which he testified that he would not have thought of doing under any circumstances, if he had known of the deed of trust, and which his counsel testified no less positively that he could have never thought of advising. If the company were now allowed to enforce the deed of trust, then Kelly accepted property for valuable consideration, which is wholly without value to him. Under the circumstances shown by the testimony, it would be inequitable to allow the deed of trust to be enforced. The loss must be borne by the company, to whose conduct and omission of duty it is due.
The lots in Fail-mount, though valued at $4,160 when Clay contracted with the Land Company for them, were worth when Kelly took them, according to the great preponderance of the testimony, scarcely over, if at all, half that amount; so that although Kelly completed the grading for $1,200, the cost of the lots would greatly exceed their value, if, in addition to the completion of the grading, he- had also to discharge the deed of trust for $1,855. In such case, the interest of Clay in the lots was of no value whatever, and there could have been no possible
The decree appealed from must be reversed, and this court will enter such decree as the lower court ought to have entered.
Reversed.