Lynchburg Perpetual Building & Loan Co. v. Fellers

Buchanan, J., delivered the opinion of the court. In February, 1891, W. P. Huff, who was the owner of a lot — 340 — of land in the city of Roanoke, on which there were three houses, executed a deed of trust to secure the payment of the sum of $2,000, which he had borrowed from the appellant. In July following, Huff sold and conveyed a part of the lot to the trustees of the Hnited Brethren Church for $2,600. They paid $600 in cash, and assumed, it is alleged, payment of the debt due the appellant. At or about the same time Huff sold and conveyed another portion of the lot, with a house on it, to W. H. Strickler, one of the trustees of the church. In November of the same year M. L. Fellers purchased from Huff another portion of the lot, upon which the other two houses were located, and received a conveyance therefor. The trustees of the church, after paying three monthly instalments (July, August, and September,) of $42.94 each, upon the debt secured by the deed of trust, notified Huff that they could not, and would not, proceed further with their purchase. Between that time and November, 1892 (precisely when does not clearly appear), Huff and the church trustees agreed to rescind the contract between them for the sale and purchase of the lot. No reconveyance was made, but the deed from Huff to them, which had never been recorded, was destroyed. Prior to the 26th day of November, 1892, Huff agreed to sell to the trustees of the church a portion of the lot embraced in their first contract, which had been rescinded. The trustees of the church required as a condition precedent to their purchase, that Huff should have that portion of the lot released from the lien of the deed of trust. The lien was released by the appellant by deed dated November 12, 1892, as to that portion of the lot, and on the 26th of the month Huff conveyed it to the trustees of the church. A large part of the appellant’s debt remains unpaid, and the-questions presented by this record are, what property is liable for its payment, and the order in which the property liable should be subjected. The second, third, fourth, fifth, and sixth assignments of — 341 — error raise substantially the same question, viz., to what extent, if at all, had the land purchased by Fellers been released from the lien of the deed of trust by reason of the conduct of the appellant. The conduct relied on to show that it had been absolutely released was that Huff and the trustees of the church had rescinded the contract between them of July, 1891, by which the latter had assumed the payment of the debt secured by the ■deed of trust, and that this rescission was with the assent of the appellant. , The burden of proving that the appellant had assented to the rescission of the contract was upon Fellers. He had purchased with full knowledge of the appellant’s lien, and, in order to prevent the land so purchased from being subjected to its payment, it was necessary for him to show that the appellant, with notice of his equities, had done some act to his prejudice. The evidence does show, we think, that the appellant had notice of Fellers’ purchase, or that he had an interest in the land when the appellant executed the release of November 12, 1892. After his purchase was made and the policy of insurance had expired, which had theretofore been taken out by Huff on the property for the benefit of appellant, and as a further protection to the debt secured by the deed of trust, Fellers obtained a new policy in his own name on the house on that portion of the property purchased by him. That policy was sent to the appellant by the secretary of the insurance company, accompanied by a letter dated July 7, 1892, in these words: “ Please find enclosed fire insurance policy, 111,200, in renewal of policy of W. P. Huff, expired on the 9th, on property on which you have a lien. It was the opinion of Mr. Fellers that the houses insured would not stand more insurance than $600 each, and for that reason the amount was reduced.” It is proved that it appeared from Fellers’ policy ■of insurance that the title was in him, and that the appellant had a deed of trust upon the property. It further appears — 342 — that, in December, 1893, after the property had been advertised for sale under the deed of trust, Fellers went to the office of appellant to see the secretary in order to get an extension of time, and whilst there he inquired if the policies of insurance had not expired, thinking that he had only taken them out for twelve months, when the secretary replied that they had not; that they were three-year policies; went to his safe and took them out, and said, “Here are the policies and deed of trust.” "When asked if the appellant knew before that time that he was a purchaser of the property, he replied that he could not say that it did, as there had never been any correspondence between them, but that the facts seemed to be familiar to the secretary when he (Fellers) told him who he was. Unexplained, and the- appellant made no effort to explain them, these facts show that the company must have known, when it released the church lot from the lien of the deed of trust, that Fellers had acquired an interest in the property embraced in the deed of trust. Upon no other reasonable theory can its acceptance and retention of Fellers’ policy of insurance be explained or justified. The evidence, however, does not show, in our opinion, that the appellant was a party to or knew of the rescission of the contract of July, 1891, by which the trustees of the church assumed to pay the debt secured by the deed of trust. The Circuit Court erred, therefore, in holding that the Fellers property was absolutely released from the lien of the deed of trust. It was only discharged from an amount of the deed of trust debt equal to the value of the parcel released so far as the proceeds of that parcel had not been applied to the payment of the lien. The injury done to Fellers by the release was the difference between the value of the property released and what was actually paid out of its proceeds, or on account of it, upon the lien. In the event the proceeds of the Fellers lot is not sufficient to satisfy that portion of the appellant’s debts chargeable upon — 343 — it, as hereinbefore shown, the S trickier lot will be liable, being next in order of alienation by Huff. It will also be chargeable with that portion of the debt of appellant from which the Fellers lot was discharged by the release of the church lot from the lien of the deed of trust. Ordinarily, when the equities of the various owners of lands subject to a deed of trust are unequal, so that their respective parcels are liable, in the inverse order of their alienation, if the deed of trust creditor, having notice of this situation, releases a parcel which is primarily liable, he thereby discharges or releases those parcels which are subsequently liable in the order of their several liabilities from an amount of the deed of trust debt equal to the value of the parcel released. But this effect of the release may be obviated by the conduct of the parties to be affected. 3 Pom. Eq. Jur., sec. 1226. In this case Strickler’s conduct has been such that he cannot claim the benefit of the general rule. He was one of the trustees of the church when their first purchase was made; when that contract was rescinded; when they made their second purchase upon the condition that the lien of the deed of trust upon it should be released, and when that release was made. He was an active participant in all these various transactions between Huff and the trustees of the church, and had full knowledge of all the facts. The evidence does not show that the appellant had notice of his rights or interest in the property when it released its lien, even if notice under the facts of the case could affect the question. There is no pretense that Strickler informed the appellant of his purchase. The registry of his deed was not notice to the appellant. It is true, we think, as stated by counsel, that this court has never passed upon that question, but it is well settled, both upon principle and authority, that the registry of a deed by a subsequent purchaser is no notice to parties who have acquired their rights before the time when the deed is registered. Heither the language nor the policy of the registry acts was — 344 — intended to affect the holders of antecedent rights, but only such persons as are compelled to search the records in order to protect their own interests. Cheeseborough v. Millard, 1 Johns. Chy. 409, 414; George v. Wood, 9 Allen, 80; notes to Aldrich v. Cooper, 1 White & Tudor’s Lead. Cas. in Eq. (4th Am. from 4th London Ed.), pp. 307 to 812; 1 Jones on Mortgages, secs. 562, 372; 2 Pom. Eq. Jur., secs. 656, 657, and 1226. Neither is it satisfactorily shown that Judge Woods was such an agent of the appellant and acquired his knowledge of Strickler’s purchase under such circumstances as that his knowledge would be notice to it. Whether the trustees of the church, who, it is alleged, assumed payment of the appellant’s debt, are personally liable for it, and, if so, whether Fellers is substituted to the appellant’s rights against them or to their rights, if any, against the church propetty, are questions which cannot be passed upon at this time. Only two of the five or more trustees of the church who are charged with having assumed the payment of the appellant’s debt are parties to this suit. They are necessary parties, and before any decree is made affecting their rights, they should be made parties to this suit. We are of opinion, therefore, that the decree complained of must be affirmed in so far as it fixes the amount due appellant on its debt, and directs the vacant lot situated on the southeast corner of Franklin road and Day avenue, still owned by Huff, to be first subjected to its payment, and that in all other respects the decree must be reversed, and the cause remanded to the Circuit Court to be proceeded with in accordance with the views expressed in this opinion. Reversed in part.