Opinion
13637
May 11, 1933.
Before SEASE, J., Spartanburg, September, 1931. Decree modified, and case remanded.
Action by the Mutual Benefit Life Insurance Company against the estate of Daniel Yarborough, deceased, and others, consolidated with action by the Woodruff Oil and Fertilizer Company and others, against the estate of Daniel Yarborough, deceased, and others. From the decree, defendants Yarborough alone appeal.
The decree of the Circuit Court follows:
Daniel Yarborough, resident in this county, died in July, 1913, seized and possessed in fee of about 1,900 acres of land in Spartanburg and Laurens Counties on Enoree River, located, for the most part, in Cross Anchor and Trinity School Districts in Cross Anchor Township, Spartanburg County, and bounded by lands now or formerly of Smed Lynch, Bobo DeShields, Bluford DeShields, T.V. Cox, R.C. Burnett, John Tom Watson, W.Y. Dillard, Walker Webb, John Taylor, Mrs. Wilson, Paul Ezell, Abner Stone, Hicks Stone, Charles Stone, Barney Gossett, General Gossett, S.Q. Watson and others, and by Enoree River, crossing over said river into Laurens County at or near Yarborough's Mill and including a tract in that county on the southwest side of said river containing about 11 acres, together with certain water rights upon and adjacent to the river.
His sole surviving heirs were his widow, Mrs. E.R. Yarborough, and his children, Calvin, John, Hiram, Charles D., Lafayette, Lewis E., and Lily. He left a will which has been duly admitted to probate and of which his five sons, John, Lafayette, Charles D., Hiram and Lewis E. were appointed and qualified as executors. After providing for a home and support for his widow (who is long since dead), his scheme was to devise his lands to his executors for a period of fifty years during which they were to manage it, annually dividing the profits equally among his children, the shares of any dying without children to go to the testator's surviving children, and the shares of any dying leaving children to go to such children per stirpes. At the end of the fifty years, he directed that it go in equal shares to his then living children and then living "sets" of grandchildren whose Yarborough parent had meantime died. He intended to prescribe the unpredicable course of mortality among his direct descendants during the half century following his death as the sole basis for determining who and how many would ultimately take his land, his inferential purpose being to secure the benefits of its use to his children and grandchildren and place the land itself beyond the reach of their creditors — a contingent remainder not being subject to sale under execution.
In partial aid of this scheme, he provided: "In case my executors should need funds for the payment of debts as for carrying out my will in other respects. I hereby empower them to mortgage two tracts of land lying east of the public road leading from Cross Anchor to Musgrove Mills and the tract known as the London Waters place also."
Calvin died in 1914, unmarried, childless and intestate, and John is his duly appointed and qualified administrator. Lewis E. died in 1928, childless and intestate, leaving a widow, Mrs. Pearl Yarborough, who is his administratrix.
On May 5th, 1913, Daniel Yarborough borrowed $11,000.00 from the Mutual Benefit Life Insurance Company, giving it his note due five years thereafter, providing for six per cent, interest and attorney's fees of not less than ten per cent. and secured it by a mortgage of the "two tracts of land lying east of the public road leading from Cross Anchor to Musgrove Mills" referred to in the testamentary provision conferring power to mortgage on the executors.
On April 9th, 1921, the executors, in presumed pursuance of the testamentary power to mortgage, made notes to the American Agricultural Chemical Company aggregating $15,280.41, due the following October and November, and secured them by a mortgage of the same land the testator had mortgaged to the Insurance Company and the "London Waters tract," recorded April 13th, 1921.
Commencing in the latter part of the same month, numerous judgments were recorded and entered against his children and devisees, some of them upon the joint indebtedness of all and some upon the joint obligations of two or more. These, by March, 1924, amounted to some Seventy-five or Eighty Thousand Dollars.
In March, 1924, Woodruff Oil Fertilizer Company, in association with numerous other creditors, brought an action in behalf of themselves and all other creditors, of the estate of Daniel Yarborough or of his devisees and beneficiaries, or any of them, against his executors, heirs and devisees, in the nature of a creditors bill, to marshal the assets of the estate, determine the extent and priority of all claimed liens, for the sale of the realty in aid of assets and the appointment of a receiver to take charge of and manage the property in the interest of the creditors. In that action, in addition to all the executors, heirs, devisees and living direct descendants of Daniel Yarborough, the Life Insurance Company and the Chemical Company were made defendants because of their apparent mortgage claims. It becoming obvious in the progress of that case that the construction of Daniel Yarborough's will would settle or eliminate various perplexing questions, the attorneys of record for all parties joined in a stipulation containing the essential facts upon which the construction depended for the purpose of presenting that single issue to the Court for decision, reserving "all questions as to the amounts, dates, nature of the various claims presented against the estate of Daniel Yarborough for future determination, except as to the mortgage of Mutual Benefit Life Insurance Company and this mortgage constitutes a first lien on the lands described in it, and if the proceeds of sale of the said lands should be insufficient to pay the said debt, that the estate of Daniel Yarborough shall be liable for the deficiency."
Upon the stipulation, the will was construed by the Supreme Court in its opinion reported in Woodruff Oil Fertilizer Co. v. Yarborough's Estate, 144 S.C. 18, 142 S.E., 50, 53. The effort of all parties, except the Yarboroughs and one judgment creditor and the Chemical Company, was to have the provisions of the will postponing the vesting of title for fifty years adjudged void, and to have it determined that Daniel Yarborough's lands descended at his death to his heirs as intestate property. The Insurance Company, being assured by the stipulation that its claim could not be affected, took no part in that contest, and merely alleged its mortgage and asked that its rights be protected. The Court held that the provision attempting to postpone vesting for fifty years was void as offending the rule against perpetuities insofar as the terms exceeded twenty-one years from the testator's death, saying: "The ulterior provision, and so much of the primary provision as exceeds 21 years from testator's death, being alike void for remoteness, and there being no residuary clause in the will, the lands passed upon the death of testator to his heirs as intestate property, burdened with the trust term of 21 years from date of testator's death."
The effect of this decision being to secure management, control and enjoyment to the executors and beneficiaries under Daniel Yarborough's will until July, 1934, all parties to the Woodruff Oil Fertilizer suit remained inactive, awaiting the expiration of that portion of the trust term upheld by the Court.
In August, 1931, the Life Insurance Company brought its action to foreclose its mortgage, bringing in as defendants all who were parties in the Woodruff Oil Fertilizer case (except Lewis E. Yarborough, who had since died and whose administrator is a party in his stead), and also numerous additional judgment creditors of the Yarboroughs whose judgments were entered subsequent to the commencement of that action. The action affirmatively shows perfected service on all defendants with the required statutory notice to minor defendants to procure the appointment of guardian ad litem. The minors answered by guardians ad litem appointed on proper petition. Over the objection of the Yarborough defendants, the case was, on duly noticed motion, referred to the Master, who has filed his report with the evidence received. At the reference, on motion of the Chemical Company, previously noticed, he consolidated the Woodruff Oil Fertilizer case with the foreclosure suit on the ground that all issues could be thereby finally disposed of with one trial. The cases are before me upon exceptions to the report by the Yarborough defendants, the Chemical Company and the Palmetto Bank. Only legal issues are presented.
The Master holds:
1. As to the Insurance Company's mortgage:
That it is a valid first lien on the lands embraced and the holder is entitled to foreclosure and to collect any deficiency out of the remaining estate lands (it being the only unpaid debt of Daniel Yarborough), and to judgment against the estate, executors and heirs of Daniel Yarborough and the personal representatives of such as are dead, for $14,512.52, the amount due as of January 6th, 1932, which includes an allowance of ten per cent. as fees to its attorneys.
2. As to the Chemical Company's mortgage:
That it is a mortgage of the individual undivided five-sixths interest of the five makers, and, after the payment of the Insurance Company's debt, is a first lien on that interest in the London Waters tract and is second to the Insurance Company's mortgage on the lands included in it; that, being recorded before any judgments were entered against the Yarborough heirs, it is superior in lien to those judgments: that it is not a debt of Daniel Yarborough's estate and any deficiency judgment obtained in this action must rank after judgments already of record; that it is entitled to judgment against the makers and endorsers for $28,847.07, which includes five per cent. attorney's fees.
3. As to the Palmetto Bank judgment:
That, being, on its face, based on a note made subsequent to the death of Daniel Yarborough to evidence a debt then created and not in a manner authorized by his will, its only legal effect is that of a judgment against the individual makers and endorsers, ranking as of its date of entry.
By twenty-two exceptions, counsel for the Yarboroughs imputes error to the Master in brief substance as follows: (1) In consolidating the cases and refusing their proposed amendment pleading the pendency of the Woodruff Oil case in bar of the foreclosure; (2) in not holding that Daniel Yarborough's note to the Insurance Company was void for material unauthorized alterations; (3) in not holding that it had been paid by novation operative to pay the debt and destroy the mortgage lien and release the estate from liability; (4) in allowing ten per cent. attorney's fees to its counsel; (5) in not holding that the notes and mortgage of the Chemical Company are wholly void as to all parties to them; (6) in allowing five per cent. attorney's fees on that debt; and (7) in not holding that, under the Supreme Court's construction of Daniel Yarborough's will, there can be no sale of any of his property and no interference with the use and possession of it until after he has been dead twenty-one years.
Upon the first maturity of the Insurance Company's note and mortgage, the executors and heirs of Daniel Yarborough, joined in an application for a five-year extension and a reduction of the interest rate to five and one-half per cent. This was granted and the executors and heirs, officially and individually, executed a formal "extension agreement" and bound themselves to pay the debt. At the expiration of that extension a similar application was made and granted and evidenced by a similar "extension agreement." The original note and mortgage were never surrendered. Notations of the agreed extensions and of the reduction in the interest rate were entered on the back. This is obviously a simple and commendable method adopted by the Insurance Company in aid of the accuracy and completeness of its records of its numerous loans — doubtless worked out with painstaking care after a long experience in such matters and designed to prevent and foreclose any questions or doubts regarding its securities. There is nothing irregular or sinister to be inferred from these circumstances. It would be unjust and unwise to invest the formality of extending time for the payment of debts with technical hazards which, against the obvious intent and understanding of all parties, would result in destroying the creditor's right because of the creditor's indulgence. The facts fail completely to establish or suggest either a material alteration of the note or its payment by novation. Cases cited by counsel on these points, being completely differentiated by their essential facts, have no application. They were cases where the interest rate was changed or the time of payment, or the place of payment, without the knowledge or consent of the maker or endorser (as the case might be), invoking the change. In urging the contentions that the note here is void for alteration or paid by novation, the Yarboroughs, in effect, assert their want of bona fides at the time they solicited the indulgences granted. Moreover, in the Woodruff Oil case, by their verified pleading, they asserted the existence and validity of this debt as a debt of Daniel Yarborough's estate. Their counsel in open Court joined in a stipulation which has been the basis of the construction of Daniel Yarborough's will, agreeing that the mortgage debt is a debt of the estate, a first lien on the lands included in it and a first claim on the other estate lands for any deficiency.
The labor and responsibility incident to bringing and maintaining this suit, the unusual intricacies and complexities with which the case is infected by no fault of the Insurance Company and the sustained alertness necessary to meet the various and vigorously urged contentions of the Yarborough defendants convince me that the fees allowed by the Master to counsel for the Insurance Company are reasonable.
The action of the Master in refusing to permit the Yarborough defendants to plead the pendency of the Woodruff Oil case as a bar to the foreclosure and in consolidating the two causes is plainly promotive of the simplified and more complete disposition of all issues. Had he allowed the plea, it would have been unavailing because, in the Woodruff Oil case, the parties are not the same nor the subject of the action.
None of the other defendants having excepted to the Master's disposition of the Insurance Company's claim and the exceptions of the Yarborough defendants being untenable, the Master's report is confirmed in this respect.
The Chemical Company challenges the holding of the Master that its claimed mortgage amounts to no more than a mortgage of the individual interests of the five who executed it, and that any deficiency judgment awarded here can rank only as of date of entry. It contends, in brief, that, under the power to mortgage given in Daniel Yarborough's will, and under the decision of the Supreme Court partially sustaining the trust provisions, it has a valid mortgage of the property included in it; further than this, that being an obligation made in pursuance of valid testamentary authority, if the proceeds of the mortgaged land are insufficient to pay the debt, it steps up as to all other estate lands as next in rank to the Life Insurance Company's debt. Its final exception invokes the two-fund doctrine in favor of its debt as against the Life Insurance Company in the event the Court should hold that its deficiency judgment cannot take precedence of the various judgments already entered against the heirs.
It is to be regretted that the question here made was not in precise terms presented to the Supreme Court in the Woodruff Oil case. The portion of the decision hereinabove quoted is all that has any bearing on it. From that, the directly conflicting contentions arise, — the Yarboroughs claiming that the whole of Item 6 of Daniel Yarborough's will was held invalid, including the power to mortgage therein attempted to be conferred, and the Chemical Company that only so much of it as attempted to postpone the vesting of title fails.
Very full and careful briefs were filed by counsel for the Chemical Company, as well as by counsel for the Yarboroughs and by counsel for the intervening judgment creditors. I have given them extended study and consideration and have reached the conclusion that the Chemical Company's mortgage is a valid mortgage of the whole title to the land embraced in it under a valid testamentary power to mortgage. It is, of course, subordinate to the Life Insurance Company's debt because that is a debt of the testator and he could not by any testamentary provision authorize the creation of debts after his death which would take rank with debts he owed when he died. But it will be noticed that the power to mortgage is limited by the will to specified tracts. The necessary implication is that the testator thereby meant to deny, and did deny, to the executors any power to mortgage or encumber or subject any other part of his estate to the payment of obligations created under the power to mortgage. One lending on that security must have done so with the full knowledge that only that security would be available for the payment of his debt. To hold otherwise, would be to put it in the power of the executors to borrow on the basis of the whole value of the estate, mortgaging only the specified tracts. They could then defeat the entire testamentary scheme, — not only the twenty-one year period upheld by the Supreme Court by the fifty-year period if it had been valid, and by making such a mortgage, allowing it to mature in a short period, and then defaulting, bring about a foreclosure which would involve the sale of the whole estate, thereby defeating the rights and claims of all others under the will. It is easily conceivable that the limitation over after the period of twenty-one years might have been to persons whose interests were wholly opposed to the interests of the mortgaging executors. In the manner above suggested, the executors could completely destroy their rights and wholly defeat the testamentary intention.
It follows from what has been said that the Master's report must be modified as to the Chemical Company's claim in accordance with the conclusion reached, — that is, to the extent of holding that its mortgage is a valid mortgage of the whole title to the lands included in it. The Master's holding with respect to any deficiency judgment is sustained. Of course the Chemical Company is entitled to judgment against the individual endorsers of its note and that judgment must rank only as of the date of its entry. The other exceptions are overruled but the point made by the Chemical Company's final exception will be given effect hereinafter by the application of the two-fund doctrine. It is not properly an exception to the report, for the record shows that the suggestion was not presented to the Master.
The Master's holding with reference to the Palmetto Bank's judgment is confirmed, as it is in all other respects not inconsistent with this decree.
It is, therefore, ordered, that Mutual Benefit Life Insurance Co. have judgment against the estate of Daniel Yarborough and against the defendants, John Yarborough, Hiram Yarborough, Lafayette Yarborough and Charles D. Yarborough, individually and as executors of the estate of Daniel Yarborough, Lily Yarborough, Pearl Yarborough as administratrix of the estate of Lewis E. Yarborough, and John Yarborough, as administrator of the estate of Calvin Yarborough, for the sum of Fourteen Thousand Five Hundred Twelve and 52-100 ($14,512.52) Dollars found due by the Master with interest thereon at seven per cent. from January 6th, 1932. It is further ordered, adjudged and decreed that this is a debt of the estate of Daniel Yarborough and the only unpaid debt of that estate, and all of the lands of the estate are subject to its payment and to the payment of the costs of this action and all past due and unpaid taxes. The said Mutual Benefit Life Insurance Company is entitled to the foreclosure of its mortgage of the lands described in it, and to an order for the sale thereof and the application of the proceeds to its debt and its right in these respects shall be, and are, hereby saved and preserved to it to be accorded in this action in the event such shall become necessary under the further provisions of this decree and the result of the sale hereinafter ordered made. There being a valid mortgage in favor of the American Agricultural Chemical Company, and it being limited to the proceeds of the sale of the lands included in that mortgage for the payment of its debt, and the lands included in it being the same included in the mortgage to the Mutual Benefit Life Insurance Company with the exception of one tract of 110 acres, and that mortgagee being a party hereto and having invoked what is known as the two-fund doctrine for the benefit of its mortgage, asserting that the Insurance Company has all the other lands of the estate which it may subject to the payment of its debt while the Chemical Company has only the lands included in its mortgage, and contending that the Insurance Company should therefore be required to first sell the other lands for the satisfaction of its debt leaving the property mortgaged to the Chemical Company for application on its debt, it is proper and just and equitable that this equitable doctrine be applied as invoked — especially in view of the scope of the consolidated actions which includes the marshaling of the assets of the estate of Daniel Yarborough and the adjustment of equities as between all parties. The estate and the heirs of Daniel Yarborough have been the sole beneficiaries of all the debts involved in this action, and since it is clear that the Life Insurance Company must be paid in full before the heirs or their creditors have any interest whatever, it is necessary, in order to do complete justice in accordance with the principles of equity, to direct the sale of the unmortgaged lands of the estate of Daniel Yarborough for the payment of the mortgage debt of the Mutual Benefit Life Insurance Company, even before the property mortgaged to it is sold for that purpose. Its claim is superior to the claim of American Agricultural Chemical Company even as to land included in its mortgage and not included in the Insurance Company's mortgage. Therefore, it is proper to provide for the foreclosure of the Insurance Company's mortgage in case sale of such other lands shall not bring sufficient to discharge its debt, and for the discharge of the lien of that mortgage if and when the sales of unmortgaged lands produce a sum sufficient to pay all costs, taxes, interest and the mortgage debt.
It is, therefore, further ordered, adjudged and decreed that so much of the lands of the estate of Daniel Yarborough as are not included in the mortgages to the Mutual Benefit Life Insurance Company and the American Agricultural Chemical Company, as shall be necessary to pay the costs of these actions, any past due and unpaid taxes and the full amount of the debt of the Mutual Benefit Life Insurance Company including interest to the day of sale, be sold by the Master for Spartanburg County on Salesday in October, 1932, or some subsequent salesday thereafter after due advertisement according to law and the custom of this Court during the legal hours of sale at Spartanburg courthouse at public outcry to the highest bidder for cash, purchaser to pay for stamps and papers; that, upon compliance, the Master shall execute and deliver to the purchaser a good and sufficient fee simple deed of conveyance of the property purchased and that, upon production of such deed, the Sheriff shall let the purchaser into possession of the land described in it. In case any purchaser should fail to comply, the Master shall re-sell on the same or some subsequent salesday on the same terms at the risk of the defaulting bidder without further order from this Court, and shall so continue as often as may be necessary to secure a bid which shall be complied with. At such sale, the Mutual Benefit Life Insurance Company or any other party to this action, or any other person, may become a purchaser at the sale, but the Master shall not award a bid to any bidder other than the Mutual Benefit Life Insurance Company until the successful bidder shall have deposited with the Master in cash or by certified or cashier's check the sum of Two Hundred ($200.00) Dollars as evidence of good faith and as security for compliance with his bid in the event it is accepted. Compliance shall be completed within ten days from the day of sale, and the deposits of all bidders who shall fail to complete compliance within that time shall be forfeited and be distributable as the proceeds of sale are hereinafter ordered to be distributed, and the property re-sold at the risk of the defaulting bidder as hereinabove provided. Provided, however, that, as to the tract containing the principal residence, the deposit required shall be Seven Hundred and Fifty ($750.00) Dollars.
It is further ordered, adjudged and decreed that all parties to these actions, and each of them, and all persons claiming by, through or under them, or any of them, be, and they are, hereby forever barred and foreclosed of all right, title, interest, lien and equity of redemption of, in and to the lands to be so sold, and all rights and claims of every nature are transferred to the funds arising from the sales with the rank, priority, precedence and right to participation defined in this decree and the Master's report as modified by this decree.
For the purposes of the sale, the Master shall appoint a competent and experienced surveyor to subdivide the lands into suitable parcels or subdivisions, having regard for road frontage, buildings, acreage, natural boundaries and all other proper and reasonable considerations that may tend to an advantage sale thereof, and to make surveys and plats showing the several subdivisions, roads, buildings and other informative data, including the acreage of each tract, and file the plat or plats with a sufficient number of blue prints for use at the sale with the Master on or before September 1st, next. The surveyor shall also make a similar plat of the property included in the mortgage to the Mutual Benefit Life Insurance Company and of the tract known as the London Waters Tract included in the mortgage to the Chemical Company. The Master's appointment shall be a sufficient authority to the designated surveyor with, such assistants and equipment as may be reasonably necessary to enter upon the lands for the purpose of making the said surveys and plats at such times as may be reasonably necessary therefor.
The sale shall be by the subdivision so made and in such order as the Master, in his discretion, may direct. In advertising the sale, the Master may describe the property to be sold by substantially the general description contained in the first paragraph of this decree with the further statement that it has been divided into the number of tracts shown by the survey and plats filed with him by the surveyor, and will be sold in such subdivisions, in accordance with the plats, and it shall be necessary for the purposes of the advertisement that it include courses and distances.
From the proceeds of the sale of the unmortgaged lands, the Master shall pay all past due and unpaid taxes on all of the property of Daniel Yarborough's estate, including the taxes for 1932. He shall then pay to the costs of these consolidated actions. He shall then pay to The Mutual Benefit Life Insurance Company or its attorneys, the amount of its debt, if the funds arising from such sale be sufficient therefor, then its mortgage lien shall thereupon be discharged as to the lands embraced in the mortgage of Daniel Yarborough to it. If the funds arising from such sales are more than sufficient to pay the costs and taxes and the debt of The Mutual Benefit Life Insurance Company, the Master shall hold the surplus to be disposed of under the further orders of this Court. If the funds so arising are insufficient to discharge in full the mortgage debt of the Life Insurance Company, after paying costs and taxes, then, in that event, the mortgage of The Mutual Benefit Life Insurance Company is hereby ordered foreclosed and the property included in it sold next after the unmortgaged properties have been sold, the equity of redemption barred, and the rights, claims and liens of all parties to this action and all claiming by, under or through them forever barred, and the proceeds of such sales paid first to The Mutual Benefit Life Insurance Company, or its attorneys, to the extent of any balance due on its debt, and then applied to the debt of the American Agricultural Chemical Company; and if the proceeds of sales of the aforesaid lands should still be insufficient to pay in full the mortgage debt of The Mutual Benefit Life Insurance Company then the Master shall sell the land known as the London Waters tract, containing one hundred ten and thirty-eight hundredths (110.38) acres, more or less, and more fully described in the mortgage of American Agricultural Chemical Company, and apply the proceeds thereof, or so much thereof as may be necessary, to the payment of the balance due on the mortgage debt of said Life Insurance Company, and apply any balance remaining to the mortgage debt of American Agricultural Chemical Company. It is obvious that there will be no surplus.
It is further ordered, adjudged and decreed that American Agricultural Chemical Company have judgment against John Yarborough, C.D. Yarborough, H. Yarborough, L. Yarborough, Lily Yarborough and Mrs. Pearl Yarborough, as Administratrix of L.E. Yarborough, deceased, for the sum of Twenty-eight Thousand, Eight Hundred, Forty-seven and 07-100 ($28,847.07) Dollars with interest thereon at eight per cent. from October 1, 1931, to this date, and interest from the date of this decree at seven per cent. It is further ordered, adjudged and decreed that its mortgage be foreclosed and the property included in it sold by the Master on the same salesday (or such subsequent salesday as the other property herein ordered may be sold) on the same terms and with the same deposit requirements, except such portion thereof, if any, as shall have been sold in accordance with former provisions of this order, and the Master shall hold the proceeds of the sale of such lands, or such portion as may be sold, under this provision, pending the payment in full of the mortgage debt of The Mutual Benefit Life Insurance Company, and if for any reason the proceeds of sales of the unmortgaged lands should prove insufficient to pay in full the amount of the mortgage debt of The Mutual Benefit Life Insurance Company, as may have been anticipated at the time of the sale thereof, then the proceeds of the sale of the land made by the Master under this provision, or so much as may be necessary, shall be applied to the payment of the mortgage indebtedness of said Life Insurance Company, and any balance thereof applied to the mortgage debt of American Agricultural Chemical Company.
The following is a brief description of the land mortgaged to The Mutual Benefit Life Insurance Company:
All that tract of land in Cross Anchor Township, Spartanburg County, S.C. (except one acre thereof which lies in Union County) containing 335 1/4 acres, more or less, adjoining lands of W.T. Dillard, estate of H. Hill, Elisha's Creek, Church lot, land of John Cunningham and lands of the estate of Lewis Yarborough; known as Tracts Nos. 1 and 2 as conveyed by T.R. Trimmier, Clerk, to Daniel Yarborough by deeds dated December 3, 1888, and recorded in R.M.C. office in Book BBB, page 99 and 102 respectively.
The mortgage to the Chemical Company contains the land above described and also the following:
That tract of land in Spartanburg County, S.C. known as lot No. 3 of the estate of London Waters, containing 110.38 acres, more or less, more particularly described in Deed Book TT at page 144, R.M.C. Office for said County, which see.
The Master shall instruct the surveyor to show clearly on his plat with appropriate legend or notation that the above lands are mortgaged respectively as above indicated. As hereinbefore directed, there is no reason for a separate advertisement, the general advertisement being sufficient for all the purposes of the sale, but, in order that the Master may easily follow the order of sale prescribed in this decree, it will be convenient that these tracts be labeled as indicated so that the sale of them last may be easily arranged and confusion avoided.
While the mortgage debts (and the other claims disclosed by the record) are long past due and of long standing, and although the present foreclosure has been vigorously pressed since its commencement in August, 1931, conditions are such that I deem it unwise to order an immediate sale of the property. The time for pitching crops has almost arrived and the body of farm land involved is unusually large. A sale now would not have the advantage which might reasonably be expected to attend a sale in the coming fall when prospective purchasers would know that they could obtain possession of the land in time for sowing fall grain and preparing for the next year's operations.
Since the sale must be delayed, the creditors are clearly entitled to the appointment of a receiver either to operate the farm for this year to such advantage as they may be able, or to receive the rents and profits or the value of the use of the land. It is therefore,
Ordered that any of the interested parties may apply to me for the appointment of such receiver. The Court would suggest that they take measures to agree upon some competent person who may be satisfactory to them to be nominated as such receiver. Four days notice of such nomination shall be given to the counsel for the Yarborough defendants. I will fix the bond and the other details when the appointment is made.
Mr. R.B. Paslay, for Yarborough, appellants, cites: Cause of action permitted to be united to a single cause of action must be consistent with each other: 136 S.C. 231; 157 S.C. 106; 97 S.C. 21; 144 S.C. 18; 110 S.C. 534. As to alteration of negotiable instrument: Sec. 6875. Code 1922; 41 S.C. 217; 50 S.C. 16; 32 S.C. 238; 69 S.C. 65; 91 S.C. 135. Court in its discretion might grant personal judgment at time of judgment in foreclosure: Sec. 487, Code 1932; Sec. 8712, Code 1932; 128 S.C. 409; 121 S.C. 418; 40 S.C. 193; 108 S.C. 116; 52 S.C. 120. As to marshaling assets: 74 S.C. 398; 24 S.C. 526; 155 S.C. 462; 26 Cyc., 938; 14 Rich. Eq., 132; 128 S.C. 130; 139 S.C. 66; 111 S.C. 281; 54 S.C. 208.
Messrs. Blackwell, Sullivan Wilson, for Yarborough, appellants, cite: As to two-fund doctrine: 160 S.C. 28; 26 S.C. 41; 11 S.E., 1096.
Messrs. Hood Hood, Lyles Daniel, for respondent Mutual Benefit Life Insurance Co., cite: Consolidation of cases: 132 S.C. 418; 64 S.C. 497. Novation defined: 2 C.J., 1213; 28 S.C. 406; 160 S.C. 441. Claim of homestead must be set up at proceeding to sell land: 126 S.C. 249; 54 S.C. 88; 125 S.C. 39; 116 S.E., 25; 105 S.C. 151; 87 S.C. 133; 70 S.C. 409; 65 S.C. 318; 82 S.C. 97.
Mr. J.B. Atkinson, for respondent American Agricultural Chemical Co., cites: Trustees may mortgage if power given in will: 40 S.C. 529; 21 S.C. 1; 56 S.C. 78; 39 Cyc., 333; 35 N.Y., 340. Intention of testator rules: 113 S.C. 532; 113 S.C. 416; 113 S.C. 227; 118 S.C. 510; 104 S.C. 441; 100 S.E., 360. As to attorneys' fees: 143 S.C. 127; 143 S.C. 275; 106 S.C. 261; 108 S.C. 515; 27 Cyc., 1131.
May 11, 1933. The opinion of the Court was delivered by
As the Circuit decree, which will be reported, contains a full statement of the facts out of which the two actions — consolidated by the master — arose, we will not repeat them here. The Yarboroughs alone appeal, and by twenty exceptions challenge the correctness of the conclusions reached by the Court below. Some of these exceptions are not argued and are, therefore, assumed to be abandoned, while others are too general for consideration. The questions, however, which the appeal properly presents, with the exception of the matter of the two-fund doctrine, are correctly disposed of, we conclude without hesitation, by the order of Judge Sease, and will not be referred to again except, perhaps, incidentally. The question of homestead, raised here for the first time, if raised at all, will also be noticed.
Daniel Yarborough in his lifetime mortgaged to the Benefit Insurance Company 335 acres of his lands; after his death the executors of his will, under a valid testamentary power, gave to the American Agricultural Chemical Company a mortgage of the 335 acres already mortgaged to the insurance company and of an additional tract of 110 acres. The Circuit Judge concluded, giving to the chemical company's final exception to the Master's report a liberal construction, that as all the lands of the Yarborough estate, incumbered and unincumbered, could be subjected to the payment of the debt owing the insurance company, it was only just and equitable that the two-fund doctrine should be invoked for the benefit of the chemical company, which could resort only to the lands included in its mortgage for the payment of its claim. He, therefore, in order to give effect to his views, directed that the unincumbered lands of the testator, about 1,400 acres, be first sold and the proceeds thereof, after the payment of costs and of the expenses of the actions, be applied to the payment of the debt owing the insurance company, and that the mortgage held by that company should be foreclosed only in case the proceeds derived from the sale of the unincumbered lands should have proved insufficient to pay its claim.
The appellants argue that the chemical company is not entitled to the benefit of the two-fund doctrine, for the reasons: (1) that the question was not raised by its pleading or by any exception to the Master's report; (2) that there is no common debtor of the two claimants; (3) that as it has no rights in the unincumbered property superior to those of judgment creditors of the Yarborough heirs, it would be to the detriment of these creditors to allow it to invoke the doctrine; (4) that to apply the doctrine would tend to destroy the homestead right of those entitled to homestead in the Yarborough estate, which is a paramount right.
It is conceded that the chemical company did not plead the benefit of the two-fund doctrine. However, its counsel contends that the action brought in 1924 for marshaling the assets — which was afterwards consolidated with the one brought by the insurance company in 1931 for the foreclosure of its mortgage — was such an equitable proceeding as would require the application of the doctrine in the consideration of claims filed, even though it was not pleaded. While this contention is not without support of respectable authority, it appears that the majority and better rule is that "the issue of marshaling assets must be raised by the pleadings," and that one claiming the benefit of the two-fund doctrine must "allege such facts as entitle him thereto." 38 C.J., 1382. Nor do we think that the exception of the chemical company to the Master's report raises the question, as broadly applied by the Circuit decree. This exception reads as follows: "That he (the Master) should have held that any deficiency judgment in favor of plaintiff (insurance company) could not affect the lien of defendant (chemical company) until all of the rest of testator's lands had been exhausted." It is evident that the point made by this exception was that, upon foreclosure of the plaintiff's mortgage and the sale of the lands covered by it, if the proceeds were insufficient to pay the insurance company's claim, any deficiency judgment in its favor should be paid out of funds derived from the sale of the unincumbered lands before that company should be allowed to go upon the 110 acres on which the chemical company alone held a mortgage. It appears that the question was not properly brought before the Circuit Judge; but even if it had been, the chemical company was not entitled to the relief granted, as we shall show.
One of the requirements for the application of the doctrine is that "before a Court of Equity will marshal assets or securities between two persons it must appear that they are creditors of the same debtor." 38 C.J., 1367. The Master found that the insurance company's claim was the "only unpaid debt of Daniel Yarborough." The Circuit Judge held that the insurance company's claim "is a debt of the estate of Daniel Yarborough and the only unpaid debt of that estate." While counsel for the chemical company, in support of his position, necessarily urges that "the common debtor * * * is the estate of Daniel Yarborough," this position is directly opposed to the holding of the Circuit Judge, from which there is no appeal.
The Master also found, and the Circuit Judge held, that any deficiency judgment on the claim of the chemical company should rank "after all previously entered judgments against the heirs or any of them, after the mortgaged property is exhausted." It would seem, therefore, that the third contention of the appellants is not without merit. However, as the judgment creditors of the heirs are not here complaining, this contention is resolved in favor of the chemical company.
With regard to the question of homestead, there is grave doubt whether it is properly raised here at this time. Furthermore, there is nothing in the record that indicates who, if any one, is entitled to a homestead in the testator's estate. In any event, only one homestead, of the value of $1,000.00, could be set aside to those who might be entitled thereto. If this suit had gone to final settlement and the case closed, no party to this proceeding, who might have a claim of homestead in the testator's estate but fails to assert it herein, could later raise the question in a separate action. However, as these proceedings have not been finally determined, we resolve the doubt in favor of any such possible claimants, and upon the remand to the Court below, any party or parties, if so advised, may apply to that Court in this case for a determination of that question, any such homestead to be assigned out of the unincumbered lands before they are subjected to the payment of any deficiency judgment in favor of the insurance company.
In addition to what we have said, it appears to us that the application of the doctrine would, in effect, defeat the testator's intention, in creating the power to mortgage, namely, to limit the property of his estate to which recourse might be had, directly or indirectly, for the payment of debts created thereunder. It may be, too, that the Circuit Judge extended the doctrine beyond its prescribed limits in applying it under the peculiar facts of this case. But as that question is not raised, we express no opinion with reference thereto.
It follows, from the conclusions reached, that the sale of the real estate must be in the following order: (1) The 335 acres covered by the mortgage of the insurance company, (2) the unincumbered lands, and (3) the 110-acre tract on which the chemical company alone has a mortgage.
The decree is modified as herein indicated, and the case is remanded to the Circuit Court for further proceedings consistent with this opinion.
MR. CHIEF JUSTICE BLEASE and MR. JUSTICE BONHAM concur.
MR. CIRCUIT JUDGE C.C. FEATHERSTONE ACTING ASSOCIATE JUSTICE, concurs in result.