Beasley v. Newell

• Decision Date: 13 November 1893
• Citation: 40 S.C. 16,18 S.E. 224
• Parties: BEASLEY et al. v. NEWELL.
• Court: South Carolina Supreme Court

18 S.E. 224

40 S.C. 16

BEASLEY et al.

v.NEWELL.

Supreme Court of South Carolina.

Nov. 13, 1893.

Indemnity Mortoaqe—What Constitutes— Foreclosure— Estoppel.

1. A mortgage executed by a trustee to the sureties on his bond stated that it was given to secure them "free and harmless from any loss which they may sustain on account of their being my security, " and recited that, if they should be injured by being security, "if the within-mentioned premises can be sold for more than the amount which they * * * may have paid for me, that then and in that event" they should sell the premises, returning any overplus to the mortgagor. Held, that the latter clause did not destroy the character of the mortgage, as one of indemnity, which may be enforced by the sureties when endangered, and before actual payment of the debt for which they are sureties.

2. The probate court granted a petition by a life tenant, joined in by the trustee, which set forth that such life tenant was entitled to the interest on the trust fund, with remainder to her children, and prayed that the trustee might pay over to such children as were then of age, and to others as each became of age, their respective shares, and the trustee paid the children that were then of age their shares. Fourteen years afterwards, such life tenant and the other children filed a petition stating that such children were of age, and that the trustee was in arrears, and praying that he account to her and such children. The court ordered the trustee to forthwith pay the amounts found due, and no appeal was taken from the order. Held that, in an action by the trustee's sureties to foreclose an indemnity mortgage because the trustee had failed to pay as ordered, such trustee and the grantee of the mortgaged premises were estopped from claiming that the probate court had no jurisdiction to order the trust fund paid to the children during the life of the life tenant.

Appeal from common pleas circuit court of Darlington county; J. J. Norton, Judge.

Action by Reuben Beasley and W. A. Parrott Clark, as administrator of the estate of Giles Carter, deceased, against William D. Newell, to foreclose a mortgage. From a judgment sustaining exceptions to the report of a referee, and dismissing the complaint without prejudice, plaintiffs appeal. Reversed and remanded.

The report of the referee, and the exceptions thereto, are as follows:

"The above-stated case was referred by his honor, J. B. Kershaw, on the 19th day of November, ' 1887, to J. J. Ward, as special referee, to ascertain and report what amount is due the plaintiff on the mortgage claim set forth in the complaint, and that he hear and decide all other issues raised by the pleadings, and report his findings of law and fact to this court. it being so that the said J. J. Ward could not act as said referee, the undersigned was, per agreement, substituted, and hereby submits the following report:

"James Newberry, of the county and state aforesaid, by his will, left certain property in trust to Alexander M. Newberry and Samuel C. Graham, for the use of Elizabeth Jane Scaff for life, and after her death to be divided among her children. That the said Alexander M. Newberry and Samuel C. Graham declined to accept the said trust, and that, by due proceeding held in the court of equity, one Isaac J. Newberry was appointed trustee on the 16th day of February, 1859. That the said Reuben Beasley and Giles Carter, the intestate of the said J. N. Garner, became the sureties on the trust bond of the said Isaac J. Newberry. That the said Isaac J Newberry, on the 9th day of November, A. D. 1859, executed the mortgage in question (a copy of which is hereunto attached) to the said Reuben Beasley and the said Giles Carter to indemnify them against all loss by reason of the said suretyship. The said mortgage was duly recorded in the office of R. M. C. for the county and state aforesaid, on the 25th day of April, 1860, in book T, pages 414 and 415. On September 7, 1872, the said Elizabeth Jane Scaff filed a petition in the office of the probate judge for the county and state aforesaid, setting forth that she was only entitled to the interest of the trust fund for her natural life, with remainder to her children, and praying that the court would empower the trustee to pay over to the children then of age, and to the ones then under age, as each became of age, their respective shares in the trust funds; stating that she, the said Elizabeth Jane Scaff, was willing to make such a surrender of her life interest, and that the said trustee concurred and joined in said petition. That the judge of probate, James M. Brown, passed an order on the 7th day of September, 1872, granting the prayer of said petition. That in accordance with that order the said trustee paid over to the children then of age, to wit, James J. Scaff and Mary A. Baker, their respective shares. That Frances Rebecca Cobb, Milton Scaff, Annie Dubose, Nettie Lovett, and Elizabeth Jane Scaff, on the 15th day of March, 1886, filed a petition in the probate court against Isaac J. Newberry, as trustee, alleging that he, the said Isaac J. Newberry, as trustee, had failed to pay over to the children as they arrived of age, and also to pay the interest annually to the life tenant, the said Elizabeth Jane Scaff. That, after due proceeding had in the probate court, the Hon. E. C. Baker, judge of said court, on the 15th day of May, 1886, filed a decree against the said Isaac J. Newberry, to wit, that the said I. J. Newberry do pay over, forthwith, to said Elizabeth Jane Scaff the said sum of $650.04, being the amount of interest due her as aforesaid. it is further ordered that he do also, forthwith, turn over and distribute equally to and among the said Frances Rebecca Cobb, Milton Scaff, Minnie Dubose, and Nettie Lovett the said trust fund of $403.36, with interest on each of said sums, to the respective parties, till the same is paid. That abstract of said judgment was duly filed. That the parties in interest pressed for payment, but the judgment has never been paid by the said trustee or by the said sureties, and that the amount due by the said trustee is the amount of the said judgment and cost, plus the interest, which amounts to the sum of one thousand four hundred and seventy-six 86-100 dollars, up to date. That the said Reuben Beasley lives in Arkansas, and that the estate of the said Giles Carter is insolvent That the said defendant, W. D. Newell, came into possession of the land through intermediate purchasers of the said Isaac J. Newberry, by deed bearing date 4th day of December, 1878, for the sum of $1,150. That Newell (the defendant) was a purchaser with notice. The above is a concise statement of the facts, as I find them.

"Questions of law: Can the sureties on a trust bond foreclose a mortgage like the one in question, given to secure them free and harmless on account of their being my security on said bond against a purchaser with notice, when the sureties have not paid anything by reason of the default of the trustee? A surety is not liable to suit on a trust bond until it has been judicially ascertained that the trustee has defaulted. Crane v. Moses, 13 S.C. 561. it has been judicially determined by the judgment of the probate court that the trustee, Isaac J. Newberry, is in default. Therefore, the sureties are liable to suit, and have become endangered thereby, and can foreclose a mortgage against the principal, given to indemnify them against loss. Tankersley v. Anderson, 4 Desaus, Eq. 45; Hellams v. Abercrombie, 15 S.C. 110. Can the sureties foreclose against Newell, a purchaser with notice? 1 hold that they can. Granting that the judgment does not bind Newell as to amount, and that he had a right to surcharge and falsify the same, —on which points no evidence was introduced, — it is evidence of the default of the trustee. The defendant claimed that the order of the probate court passed on the 7th of September, 1872, changed the contract of suretyship, and thereby discharged the sureties. it is a principle of law that, when the cred-itor and principal change the terms of the contract, the surety is released, but that principle does not apply in this case. Whatever change of contract there was, it was done by the court, and the principal was a party; and, furthermore, that rule is for the protection of the sureties, and those claiming under them, and not for the principal, who was a party to it, or those parties who claim under or through the principal. I recommend that the mortgage be foreclosed; that the land be sold by the clerk of court, and the proceeds applied to the said debt, of one thousand four hundred and seventy-six and 86-100 dollars, ($1,476.86;) and I further recommend that the plaintiffs' attorneys be paid out of the proceeds a fee of one hundred dollars, and after paying the said debt and fee, and the cost of this action, the surplus, if any, to be paid to the defendant."

Exceptions to referee's report: "The defendant excepts to the report of T. H. Spain, Esq., referee herein, dated the 2d day of November instant: (1) Because the said referee erred, in law, in finding that the said mortgage from Newberry to the sureties on his bond as trustee was the ordinary obligation of indemnity, whereas the said referee should have found the said mortgage to be a special contract, binding on Newberry only in case of actual loss to his sureties. (2) Because the said referee erred, in law, in finding that there was a breach in the condition of the said mortgage from Newberry to his sureties before actual loss to them. (3) Because the said referee erred, in law, in finding that the probate court had jurisdiction of the action instituted by Elizabeth Jane Scan" against Isaac J. Newberry to recover the amount due to her by him as trustee. (4) Because the said referee erred, in law, in finding that the indebtedness of Newberry as trustee was legally established against the...