Opinion
12-05-1878
WARWICK v. WARWICK & als.
D. Fultz, for the appellant. R. Whitehead and T. P. Fitzpatrick, for the appellees.
D. and J, in 1858, sold and conveyed to W a tract of land for $42,500, payable in fifteen years, with interest payable annually; and on the same day W conveyed the land and another tract called R, in trust to secure the payment of the debt, and it was provided in the deed that when $15,000 of the principal of the debt was paid, the lien on R should cease and be released. In 1862, W, having ascertained that J, the holder of his bond, would receive Confederate money in payment of his debt, sold land he held as trustee of his wife and children, and paid J $21,000. One payment of $2,900 was made by W on the 2d of May, 1863, on the principal of the debt, out of the trust fund of his wife and children. Between the recording of the deed of trust and said payment by W four judgments had been recovered against W--HELD:
1. For the payment of the principal of the debt made by W out of the trust fund of his wife and children, there is an implied trust in their favor on the tract called R.
2. This implied trust refers back to the date of the trust deed to secure the payment of the debt, and has priority over the judgment creditors, though the judgments were recovered before the money was paid.
3. The trust extends to the interest as well as the principal of the payment made out of the trust fund, and the interest commences from the time of the payment.
4. Though the payment by W was made in Confederate money, yet it having been received by J at par for his good debt, the payment is not to be scaled.
5. W is not a competent witness to prove his payments of the debt made out of the trust fund of his wife and children; and this, though the objection to his competency was not made until four questions had been put to him on his examination-in-chief.
This case was heard at Staunton, but was decided at Richmond.
By deed bearing date the 22d of November, 1858, Daniel and James Warwick, in consideration of the sum of $42,500 payable in fifteen years, with interest payable annually from its date, conveyed to Jacob Warwick a tract of land lying in the counties of Amherst and Nelson, and containing sixteen hundred and seventy-two acres. And by deed of the same date Jacob Warwick and Ellen, his wife, conveyed this land and another tract of eight hundred and fifty acres lying on Rockfish river in the county of Nelson, to Henry Loving, Robert A. Coghill and N. F. Cabell, in trust to secure said debt. And it was provided in this deed that the land on Rockfish river was to constitute a security to the extent only of $15,000 of the said principal sum of $42,500, and when that amount of said principal sum was paid, the lien of the deed was to cease as to said tract of land, and should be released. Both of these deeds were admitted to record on the 28th of February, 1859. The bond recited in this deed was for $42,500, and by a subsequent arrangement bonds were given for the interest, payable as it should fall due. This bond and some of the bonds for interest were assigned to John M. Warwick of Lynchburg.
In July or August, 1862, William Massie, of Nelson county, the father of Mrs. Jacob Warwick, departed this life, leaving a will and a number of codicils, which in the last named month were duly admitted to probate, and Mrs. Massie, his widow, qualified as his executrix.
By his will William Massie gave to Jacob Warwick, in trust for his daughter Ellen, the wife of Jacob Warwick, and her children, one-eleventh of his estate, the same to be divided among the children at the death of Mrs. Jacob Warwick. And he made a like bequest upon the same trusts to Joseph Ligon, who had married his daughter Virginia.
Soon after the death of William Massie a suit in equity was instituted for the administration and division of the estate, and commissioners were appointed to divide the real estate among the devisees. Whilst the matter was before these commissioners, they suggested to Ligon and Jacob Warwick that one of them should purchase the share of the other; and Jacob Warwick professed his willingness to sell if John M. Warwick, who held his bond, would receive Confederate money in payment on the land. The division was postponed for some ten days to enable him to ascertain this fact, and when the commissioners met again Jacob Warwick expressed his willingness to sell his share of the land directed to be divided, and a contract was made between said Warwick and Ligon for the sale of said interest to Ligon, in consideration of the addition of $300 to the valuation put upon it by the commissioners; making the price amount to about $20,000. The commissioners reported their decision to the court; but owing to the condition of the country during the war, the report was not acted on by the court until 1866, when a decree was made by which it was ascertained that Ligon had paid to Jacob Warwick $15,455.98, and that there was yet due from Ligon to said Warwick $6,000 as of the 1st day of January, 1867.
In August, 1870, Jacob Warwick for himself, and as trustee for his wife and children, filed his bill in the circuit court of Nelson county, in which after setting out the foregoing facts, he alleged that from the money he had received from Ligon he had paid to John M. Warwick more than the $15,000 for which the Rockfish land was bound for his debt to Warwick, and he insisted that the trust money having been applied to discharge that lien, his wife and children were entitled to be substituted to it for the money so paid. He states a number of judgments which had been recovered against him, constituting liens upon all his property, so that he could not dispose of it for his relief, and he therefore, after giving a statement of all his property, asks that all his lien creditors be made parties to the suit, their rights ascertained, and his property sold for their payment.
John M. Warwick, the trustee in the deed, Mrs. Warwick and her children, all of whom but one were infants under the age of twenty-one, a number of his judgment creditors and others, were parties defendants to the bill.
In September, 1870, the court referred the cause to a commissioner with directions to take five different accounts; but the only questions before this court refer to the second and fifth. The second was an account of the trust fund belonging under the will of William Massie, deceased, to Mrs. Ellen Warwick and her children, which was used by the plaintiff in paying off, in part, the Warwick debt secured by the deed of trust aforesaid. 5th. An account of all liens, whether by deed of trust, judgments, decrees or otherwise, on the real estate of Jacob Warwick, or the proceeds of any sale or sales thereof made by him, and the order of priority among them, either generally, or with reference to any part of said property or proceeds.
The commissioner made his report, but it is only necessary to state such facts as concern this case. It appears from the report that Jacob Warwick paid of the principal of his debt in April, 1863, $11,000, and in May following $9,000. He claimed to have paid more, in paying the whole amount of the bonds given for the interest, after these payments reducing the principal were made.
To prove how much of the trust fund in his hands Warwick had applied to pay the principal of his bond, he was introduced as a witness in behalf of his wife and children before the commissioner; but after the fourth question had been put to him the counsel for his creditors objected to the reading of his evidence in behalf of his wife. This objection the commissioner was of opinion was well founded, and excluded it from his consideration in ascertaining the amount of the trust fund he had applied to the payment of the principal of the debt; and excluding this testimony, the other evidence, he held, showed but one payment out of that fund. That was a payment of $2,900 made May 2d, 1863, upon which the commissioner only allows interest from the 12th of September, 1873, the time when the other land embraced in the deed of trust was sold.
The commissioner reported numerous judgments, and to a large amount, recovered against Jacob Warwick, but none of these jedgments were rendered before the beginning of the year 1861, and only four of them before May 2d, 1863, but these four amounted to $9,407.28.
Mrs. Jacob Warwick excepted to the report for the rejection of the evidence of Jacob Warwick; and also to the sum of $3,164.86 allowed by the commissioner as having been paid out of the trust fund, which she insisted should have been $17,400. The judgment creditors insisted that the $2,900 allowed by the commissioner as aforesaid having been paid in Confederate money should have been scaled.
The cause came on to be heard on the 5th of July, 1875, when the court overruled the exceptions, and held that the sum of $2,900, with interest from the 12th of September, 1873, should be a lien on the Rockfish tract of land. But the court held further, that the four judgments recovered before that money was paid by Jacob Warwick to John M. Warwick, constituted prior liens on said land, and were to be first paid out of its proceeds. And thereupon Mrs. Warwick, by her next friend, obtained an appeal to this court.
D. Fultz, for the appellant.
R. Whitehead and T. P. Fitzpatrick, for the appellees.
OPINION
MONCURE, P.
1. The court is of opinion that there is a lien by way of implied trust on the tract of land in the county of Nelson on the south fork of Rockfish river, containing about eight hundred and fifty acres, included in the deed of trust dated the 22d day of November, 1858, by and between Jacob Warwick and wife of the first part, Henry Loving, Robert A. Coghill and N. F. Cabell, of the second part, and Daniel Warwick and James Warwick, of the third part, of which a copy is filed as " Exhibit B" with the original bill in this case, for the security and payment of so much of the trust fund created by the will of William Massie, deceased, of which a copy is filed as " Exhibit C" with the said bill for the benefit of the said wife of said Jacob Warwick, who was a daughter of said William Massie, and her children, as was applied by the said Jacob Warwick, who was trustee under the said will for the benefit of his said wife and children, to the payment of that portion of the debt secured by the said deed for the security of which the said tract of land was conveyed by said deed. This fully appears from the authorities on the subject cited by the counsel for the appellant; among which are, 2 Story's Eq. Juris. §§ 1210, 1211, and the cases cited in the notes thereto; 1 Leading Cases in Equity, 3d American from the 2d London edition, Dyer v. Dyer, top pages 266, 276, et seq., and cases, English and American, therein cited; Buckeridge v. Glasse, 1 Craig and Phillips, 18 Eng. Ch. R. p. 126; Bank U. S. v. Carrington, 7 Leigh 566; Heth, & c. v. Richm'd, Fred'g & Pot. R. R. Co., 4 Gratt. 482; Cook v. Tulles, 18 Wall. U. S. R. 332. See also Borst v. Nalle, 28 Gratt. 423, 434; Snavely v. Pickle, 29 Id. 27, 31.
2. The court is further of opinion that it sufficiently appears from the evidence in this cause that the sum of $2,900, received by the said Jacob Warwick on the 2d day of May, 1863, as trustee, for the benefit of his said wife and children, under the will of her father, the said William Massie, was, on the same day and year, applied by the said trustee to the payment of the said portion of the said debt secured by the said deed, in order to establish a lien therefor, by way of implied trust on the tract of land aforesaid.
3. The court is further of opinion that it does not sufficiently appear that any other portion of the said trust fund than the said sum of $2,900 was applied to the payment of the said portion of the said debt secured by the said deed, in order to establish a lien therefor, by way of implied trust or otherwise, on the tract of land aforesaid.
Jacob Warwick was an incompetent witness to prove that money received by him as trustee as aforesaid was applied to the payment of the said portion of the said debt, because his wife was interested in that question, and his evidence was excepted to on that ground by his creditors, who were parties to the suit. The cases relied on by the counsel for the appellees in support of this ground fully sustain it; among which are the following: Johnston & wife v. Slater & al., 11 Gratt. 321-323; William and Mary College v. Powell & al., 12 Id. 372, 382, 383; Steptoe v. Read, & c., 19 Id. 1, 12; Murphy's adm'r & als. v. Carter & als., 23 Id. 477, 488; Hord's adm'r v. Colbert & als., 28 Id. 49, 55. That his competency as a witness was not excepted to by them until four questions had been propounded to him on his examination in chief was no waiver of their right to make such exception. Hord's adm'r v. Colbert & als., 28 Gratt. 49, supra; see also Neilson & als. v. Bowman & als., 29 Id. 782. The question, therefore, depends upon the other evidence in the case, independently of the testimony of the said Jacob Warwick; and upon the said other evidence the opinion of the court upon the said question is as aforesaid.
4. The court is further of opinion that the circuit court did not err in refusing to scale the said sum of $2,900, as insisted by the judgment-lien creditors, and in holding that there is a lien on the said tract of land for that amount of good money in favor of the wife and children of the said Jacob Warwick as beneficiaries under the will of the said William Massie as aforesaid; for, although the said sum was received by the said Jacob Warwick on the 2d day of May, 1863, as trustee for the benefit of his said wife and children under the said will, in Confederate money at par, and was on the same day and year paid by him in the same depreciated currency on account and in part of the debt secured by the said deed of trust on the said tract of land, yet the said debt was due in good money, and as so much of it as was so paid was acquired by such payment, by way of implied trust, for the use of the said beneficiaries, a good money, and not a Confederate money, debt to that amount was thus acquired. Moreover, Jacob Warwick, as trustee for his wife and children, refused to receive Confederate money for the sale of her interest in the estate of her father, the said William Massie, until he ascertained that the same kind of money would be received in part payment of the debt for which the land of the said Jacob Warwick, including the said Rockfish tract, was bound by deed of trust as aforesaid; and it does not appear that he sold the said interest for more than its value in good money; though that fact is immaterial, as the money applied by him to the payment of his debt secured by the said deed of trust was worth to him the same amount in good money; and to the extent to which such payment was made out of the trust fund held by him for the benefit of his wife and children they are entitled to a lien on the said tract of land for the same amount of good money, by way of implied trust.
5. But the court is further of opinion that the circuit court erred in postponing the lien thus acquired in favor of the said wife and children to the four judgments obtained against the said trustee, Jacob Warwick, in his individual capacity, between the date of the said trust deed, or the time of its recordation, and the time of its redemption. Certainly the lien of the trust deed was prior in point of right as well as time to that of the said judgments as between the said trust-creditors and the said judgment-creditors. And to the extent to which the said lien of the trust-creditors was acquired, by way of implied trust, for the benefit of the said wife and children, its priority over that of the said judgment-creditors still continued. There was certainly nothing in the transaction which could impair the said lien in favor of the said wife and children or postpone it to that of the said four judgments.
6. The court is further of opinion that the circuit court erred in not extending the lien of the said deed of trust on the said Rockfish tract of land in favor of the said wife and children to interest on the said $2,900 from the time of the application of the said sum to the payment of the trust debt, to-wit: the 2d day of May, 1863, instead of from the 12th day of September, 1873. So much of the trust fund was on the former day applied by the trustee to the payment of so much of the principal sum of $15,000, for the security of which the Rockfish tract of land was bound by the said deed of trust. Why does not the lien of the said deed enure to the benefit of the said wife and children, as well for the security of interest on the said sum of $2,900 from the date of its application aforesaid as for the security of the said principal sum itself? The Rockfish tract of land is ample for the security of both, as well of the interest as the principal. Certainly, if the trustee, Jacob Warwick himself, were the only person besides the said beneficiaries interested in that question, the said tract of land would stand as a security for both. Who else can be interested therein? It is not pretended that any other person has any such interest than the judgment creditors of the said Jacob Warwick, whose judgment liens were acquired before such application was made. But certainly those judgment liens bound only what belonged to the judgment debtor, and did not bind what was not his, whether at law or in equity. When those judgments were obtained the Rockfish land was bound at law for $15,000 by means of the deed of trust aforesaid. Of course the lien of that deed on the said land was paramount to the said judgment liens thereon, which bound only the equity of redemption therein. Afterwards, to-wit: on the 2d of May, 1863, $2,900 of the principal of that prior lien was paid out of the trust fund of the said wife and children in the hands of the said husband and trustee. Although the legal lien of the said deed of trust ceased to exist on the full payment of the amount secured thereby, yet to the extent to which such payment was made out of the said trust fund, to-wit: $2,900, with interest from the time of such payment, an equitable lien was thereby immediately acquired for the benefit of the said wife and children on the said tract of land, which stands in the place of the said legal lien to that extent, and is just as paramount to the said judgment liens as was the legal lien of the said deed of trust. The judgment creditors are certainly not injured by this operation. Their liens were subject to a legal lien for $15,000. That legal lien was discharged by a payment on the 2d day of May, 1863, of $2,900 out of the trust fund held by Jacob Warwick for the benefit of his wife and children, in addition to payment made out of his own individual funds. How can the judgment creditors be injured by an equitable lien of the said beneficiaries for the said sum of $2,900 with interest from the time of its application aforesaid, to-wit: the 2d day of May, 1863, when it is the only prior lien now standing in the place of the said legal lien for $15,000?
It was agreed between Jacob and Daniel Warwick that payments might at any time be made, in part of the principal of the purchase money of the land in Amherst sold by the latter to the former, in advance of the period when such money would become payable by the terms of the bond, provided that such payments amounted to not less than $1,000 each. And at all events, such advance payments were made and received to the extent of the whole $15,000, for which the said Rockfish tract of land was bound by the said deed of trust, in part of which advance payments was the said sum of $2,900, paid on the 2d day of May, 1863, out of the trust fund held by the said Jacob Warwick for his wife and children as aforesaid.
7. The court is therefore of opinion that so much of the decree appealed from as is in conflict with the foregoing opinion is erroneous and ought to be reversed and annulled, and that the residue thereof is not erroneous and ought to be affirmed; and that the appellant, as the party substantially prevailing, recover against the appellees, the plaintiffs in the said four judgments, to-wit: Narcissa E. Dillard, J. N. Gordon & Son and J. L. Harris, her costs by her expended in the prosecution of her appeal in this case; and the cause is remanded to the court below for further proceedings to be had therein in conformity with the foregoing opinion.
The decree was as follows:
1. The court is of opinion, for reasons stated in writing and filed with the record, that there is a lien, by way of implied trust, on the tract of land in the county of Nelson, containing about eight hundred and fifty acres, called in the proceedings in this case " the Rockfish tract of land," included in the deed of trust dated the 22d day of November, 1858, of which a copy is filed as " " Exhibit B" with the original bill in this case, for the security and payment of so much of the trust fund created by the will of William Massie, deceased, of which a copy is filed as " Exhibit C" with the said bill, for the benefit of the appellant, Ellen Warwick, who was a daughter of said William Massie, and her children, as was applied by Jacob Warwick, who was trustee under the said will, for the benefit of his said wife and children, to the payment of that portion of the debt secured by the said deed, for the security of which the said tract of land was conveyed by said deed.
2. The court is further of opinion that it sufficiently appears from the evidence in this cause that the sum of $2,900 received by the said Jacob Warwick on the 2d day of May, 1863, as trustee, for the benefit of his said wife and children, under the will of her father, the said William Massie, was, on the same day and year, applied by the said trustee to the payment of the said portion of the said debt secured by the said deed of trust, in order to establish a lien therefor, by way of implied trust, on the said tract of land.
3. The court is further of opinion that it does not sufficiently appear that any other portion of the said trust fund than the said sum of $2,900 was applied to the payment of the said portion of the said debt secured by the said deed of trust, in order to establish a lien therefor, by way of implied trust or otherwise, on the tract of land aforesaid--the court being of opinion that the said Jacob Warwick was an incompetent witness to prove that money received by him as trustee as aforesaid was applied to the payment of the said portion of the said debt because his wife was interested in that question, and his evidence was excepted to on that ground by his creditors who were parties to the suit, and did not waive the right to make such exception.
4. The court is further of opinion that the circuit court did not err in refusing to scale the said sum of $2,900, as insisted by the judgment-lien creditors, and in holding that there is a lien on the said tract of land for that amount of good money in favor of the said wife and children of the said Jacob Warwick as beneficiaries under the will of the said William Massie.
5. But the court is further of opinion that the circuit court erred in postponing the lien thus acquired in favor of the said wife and children to the four judgments obtained against the said trustee, Jacob Warwick, in his individual capacity, between the date of the said trust deed, or the time of its recordation, and the time of its redemption, and in sustaining the first exception of the defendants, Narcissa E. Dillard and M. C. Massie, to Commissioner Brown's third report, so far as to give preference to the lien of the said four judgments, being the first four judgments mentioned in the said report, over the lien acquired in favor of the said wife and children as aforesaid.
6. The court is further of opinion that the circuit court erred in not extending the lien of the said deed of trust on the said Rockfish tract of land in favor of the said wife and children to interest on the said $2,900 from the time of the application of the said sum to the payment of the trust debt, to-wit: the 2d day of May, 1863, instead of from the 12th day of September, 1873.
7. The court is therefore of opinion that so much of the decree appealed from as is in conflict with the foregoing opinion is erroneous; and it is decreed and ordered that the same be reversed and annulled, and the residue thereof affirmed, and that the appellees, the plaintiffs in the said four judgments, to-wit: Narcissa E. Dillard, J. N. Gordon & Son, and J. L. Harris pay to the appellant, Ellen Warwick, by Henry Loving, her next friend, her costs expended in the prosecution of her appeal aforesaid here. And it is further decreed and ordered that the cause be remanded to the said circuit court for further proceedings to be had therein in conformity with the foregoing opinion and decree; which is ordered to be certified to the circuit court of Nelson county.
DECREE REVERSED.