Opinion
05-10-1883
BAILEY (M. C.), WHO SUES BY, & C., v. HILL AND ALS. BAILEY (J. M., JR.), v. PIZZINI AND ALS.
Sands, Leake & Carter, and Jos. Christian, for the appellants. A. M. Keiley, for the appellees.
Appeal from decree of chancery court of city of Richmond, rendered November 4th, 1880, in two suits pending therein, entitled--the one, Bailey (M. C. ), who sues for, & c. v. Hill and others, and the other, Bailey (J. M., Jr. ), v. Pizzini and als.
M. C. Bailey held, by her husband, A. M. Bailey, as trustee, a house and lot in Richmond, occupied by them, and inherited from her brother. The trust terms were: The trustee to hold and manage the property for the sole and separate use and disposal of said Mary C. Bailey, free from the debts, control and marital rights of her said husband, and to pay and transfer unto her, or to such person, and at such time and in such proportions, manner and form as she may request by her order in writing, attested by two or more credible witnesses, all rents, issues and profits of said property, and the produce thereof; and all said property and produce thereof to be had, taken, held and enjoyed by such person, and for such use as she shall at any time hereafter during her life limit, devise, order or dispose of the same, or any part thereof, either by her last will, or by any writing signed by her in the presence of two or more witnesses; and upon further trust, whenever required by her in writing, signed by her in the presence of two or more credible witnesses, the trustee will convert the property, in whole or in part, into money, and invest the same in real or other property; and on further trust, that if she shall, during her life, fail to limit, devise, order, or dispose of the property, then the trustee will hold the same for the benefit of her children who may survive her, share and share alike, and will deliver the same to them at her death, or as soon thereafter as practicable; provided such delivery be not made until each of them attain the age of twenty-one years.
The husband and trustee made two notes, one for $500, the other for $3,850, dated 18th April, 1877, both payable to his order at twelve months, and endorsed by him; and to secure the same executed deeds of trust on said house and lot, and induced the wife and cestui que trust to unite in the execution thereof, and to request their execution by writing signed by her in the presence of two witnesses. These notes were then sold by brokers to third persons at a rate of interest greater than the legal rate, under circumstances indicating that all the persons dealing with them were aware that the object of the transactions was a loan to the trustee, effected, as the appellants contend, at a burden to the trust property of $1,397.80, including charges for examinations of titles, preparing deeds, etc., etc. These notes were not paid when due. The property was sold on July 15th, 1878, to pay them, and conveyed by the trustees to L. W. Pizzini, the purchaser. Mrs. Mary C. Bailey, the cestui que trust, brought this suit to annul the trust deeds and also the conveyance to Pizzini, the purchaser. In her bill she alleged that at the time of his execution of those deeds and notes the trustee, A. M. Bailey, her husband, was non compos mentis; that under the settlement that trust deed was not binding on her, and that the transaction was usurious and unconscionable.
Later, James M. Bailey and Mrs. Emma Laughton, children of the cestui que trust, Mrs. Mary C. Bailey, filed their bill in the said chancery court, setting up their interest in the said trust property, contingent upon the failure of their mother in her lifetime to dispose of the same by will or otherwise, and making similar allegations as grounds for annulling the said trust deeds and the said sale under them, to Pizzini. The cause was referred to a commissioner to enquire as to the alleged insanity of the trustee; as to his power under the settlement, to execute trust deeds to secure those notes; and as to the alleged usury in the transactions. Numerous witnesses deposed as to the mental capacity of A. M. Bailey in April, 1877. The testimony, though variant and conflicting, preponderated strongly to the conclusion that he was then incapable of transacting that business. But the commissioner thought differently and reported that A. M. Bailey was then competent to contract; that the trust deeds were binding on Mrs. Bailey and her children; and that the transaction was not usurious. The plaintiffs excepted to this report. The chancellor overruled the exceptions, and Mrs. Bailey, and her children, also, appealed from his decree.
Sands, Leake & Carter, and Jos. Christian, for the appellants.
A. M. Keiley, for the appellees.
OPINION
LACY, J.
Under the post nuptial settlement of January 31st, 1866, the real estate is to be held by the wife during her life, under its provisions, the trustee to reinvest if the same shall be sold. The trustee pending the transactions, the subject of litigation here, was the husband of the appellant, Mary C. Bailey. The wife and the trustee made a trust deed, conveying the property to secure a debt of $3,800, and these suits are brought by Mrs. Bailey and her children respectively, to prevent the sale of the said property under the deed.
The chancery court dissolved the injunction by decree of that date on the 4th of November, 1880, and appointed commissioners to make sale of the said land, unless the debt was paid in sixty days. From this decree Mrs. Bailey appealed to this court.
The cause came up in the said chancery court on exceptions to the commissioner's report, among which were
First. That the commissioner had reported that the trustee and husband of this married woman was competent to contract at the time of the execution of the trust deed in question, dated April 18th, 1877.
Second. That the commissioner had reported the trust deed binding on Mrs. Bailey and her children.
Third. That the commissioner reported that the debt was not usurious.
This is a case upon the facts of peculiar and severe hardship. The evidence shows that the trustee and husband was an imbecile, if not an actual lunatic. Under the guise of selling notes, the money was borrowed by him at a rate of interest in excess of the rate allowed by law, and the whole was finally secured by a trust deed, which was made to conform as near as possible to the terms of alienation prescribed in the deed of settlement. It is a fundamental rule, that to make a deed valid, the parties must be competent to contract. The trustee and husband in this case was incompetent, and for that reason the deed is not binding and valid on any of the beneficiaries in the deed of settlement of January 31st, 1866, and the chancery court erred in overruling this exception.
The second exception as to right of alienation under the deed of settlement aforesaid, should have been sustained. This case, upon that point, is controlled by the case of the Bank of Greensboro v. Chambers, in 30 Gratt. We may say here, as in that case, that it is conceded that this is a separate estate, belonging to Mrs. Bailey under the deed of settlement. A married woman is the owner of her separate estate, and of the right of disposal of the same subject to such limitations as are contained in the instrument. " In the construction of every instrument, the paramount rule is to construe it so as, if possible, to give effect to every part of it, and in order to discover the intention of the parties, we look not only to the terms of the instrument, but to the subject matter and the surrounding circumstances."
Looking to the deed of settlement, we see that the leading intent was to provide and to secure a home, maintenance and support, not for the wife only, but for the children. It was the clear and plain intention of this settlement to provide for the wife, to give her the use of the profits, and the right to alienate is limited by the command therein to reinvest the proceeds. Under the transactions in this case, the wife has been induced to enter into a deed which results in the absolute alienation of the trust subject. We are of opinion that under the terms of the deed of settlement of January 30, 1866, the wife could use and dispose of only the annual rents, issues and profits, and by and with the consent and concurrence of the trustee, in due form, to alienate, in order to reinvest the proceeds of the corpus. These speculative, and indeed questionable transactions, result in a complete alienation of the corpus of the trust subject, and that, too, without the concurrence of the trustee, because an insane trustee cannot contract, cannot consent, can do no valid and binding act either alone or in conjunction with any other person; and the supposed trust deed of April 18, 1877, is invalid and not binding, and the court should have sustained the second exception upon that ground and held the deed invalid. These two exceptions having been sustained, the third ceases to be of very great importance; but that also should have been sustained. The transactions were plainly usurious; the usury is transparent throughout. The case of Whitworth and Adams, and subsequent cases affirming the same, including Gimmi v. Cullen, 20 Gratt., proceed upon the principle that the purchaser did not know that the note was sold for the benefit of the maker, and he was protected as an innocent purchaser. Those cases have no application to a case like this; the maker of the note was the endorser, and borrowed money on the note at usurious rates of interest, and the usury is stamped upon the whole transaction. The proceedings and the very proofs in the case treat and describe the transaction as a loan to the trustee, and all the persons dealing with this note appear to be, and doubtless were, entirely familiar with all the attendant circumstances; the usury was not only transparent and exorbitant, but the whole transaction seems to be unconscionable, and not such as a court of equity should enforce.
The court below erred in overruling these exceptions to the commissioner's report, and the decree of the said chancery court must be reversed and annulled.
The said court should have sustained the said exceptions and entered an order perpetuating the injunction against the defendants, Hill and Pizzini, setting aside as invalid the deed of April 18th, 1877.
HINTON, J., thought the cestui que trust should be charged with such part of the fund as was expended for her support and maintenance.
The decree is as follows:
This day came the parties, by their counsel, and the court having maturely considered the transcript of the record of the decree aforesaid, and the argument of counsel, is of opinion for reasons stated in writing and filed in the record, that the deed of April 18th, 1877, is not valid and binding on the appellant, Mary C. Bailey, and that the decree complained of, of November 4, 1880, is absolutely erroneous. Therefore it is decreed and ordered that the said decree appealed from be reversed and annulled, and that the appellees pay to the appellants their costs by them expended in prosecution of their appeal aforesaid here. And this court proceeding to enter such decree as the said chancery court of the city of Richmond should have entered, it is decreed and ordered that the appellees be perpetually enjoined from enforcing the said trust deed of April 18th, 1877, and that the appellees pay to the appellants their costs in the said chancery court.
Which is ordered to be certified to the said chancery court of the city of Richmond.
DECREE REVERSED.