Citizens' Nat. Bank Of Connells-ville v. Harrison-doddridge Coal &. Coke Co

• Decision Date: 29 November 1921
• Docket Number: (No. 4059.)
• Citation: 109 S.E. 892
• Court: West Virginia Supreme Court
• Parties: CITIZENS' NAT. BANK OF CONNELLS-VILLE et al. v. HARRISON-DODDRIDGE COAL &. COKE CO. et al.

109 S.E. 892

CITIZENS' NAT. BANK OF CONNELLS-VILLE et al.

v.HARRISON-DODDRIDGE COAL &. COKE CO. et al.

(No. 4059.)

Supreme Court of Appeals of West Virginia.

Nov. 29, 1921.

(Syllabus by the Court.)

[Ed. Note.—For other definitions, see Words and Phrases, First and Second Series, Goods.]

Appeal from Circuit Court, Harrison County.

Suit by the Citizens' National Bank of Connellsville and others against the Harrison-Doddridge Coal & Coke Company, the Commonwealth Trust Company of Pittsburgh, and others. Decree for plaintiffs, and last-named defendant appeals. Affirmed.

Neely & Lively, of Fairmont, for appellant.

P. J. Crogan, of Kingwood, and Starling, Higbee & Matthews, of Uniontown, Pa., for appellees.

POFFENBARGER, J. The decree complained of on this appeal determines questions of priority between the Citizens' National Bank of Connellsville, assignee of notes secured by a deed of trust, and also of an interest in a mortgage, on the one hand, and the Commonwealth Trust Company of Pittsburgh, a subsequent mortgagee of the same property on which the assigned debts were secured, on the other, in favor of the bank, and cancels releases of the deed of trust and prior mortgage executed by the original creditor.

The property involved is about 30, 000 acres of coal made up of numerous small tracts consolidated, one-sixth of which was owned by Joseph E. Barnes, one-half by Alfred J. Cochran, and the residue by James R. Barnes. After Joseph E. Barnes and Cochran had incumbered their interests by the deed of trust and prior mortgage, all of the interests in the coal became vested in Josi-ah V. Thompson, who organized a corporation known as the Harrison-Doddridge Coal & Coke Company, and conveyed the entire body of coal to it. That company executed the subsequent mortgage upon the entire property to the Commonwealth Trust Company to secure an issue of bonds amounting to $4,000, 000.

On July 6, 1907, Joseph E. Barnes execut-ed a mortgage by which he conveyed his undivided one-sixth of the property to Jasper Augustine to secure a debt of $150,000, evidenced by the provisions and covenants of the mortgage, and not otherwise. No notes are mentioned or described in it. By a formal deed dated October 26, 1907, and properly acknowledged, Augustine assigned four-fifteenths of the mortgage to P. E. Markell, who is shown to have been the president of said bank, to secure notes executed by Joseph E. Barnes and others, on which he was liable as indorser and otherwise, amounting in the aggregate to about $40,000, according to a recital in the instrument. Both the mortgage and assignment were duly recorded in Harrison and Doddridge counties, in which the coal was situated, long before the mortgage to the Commonwealth Trust Company was executed.

On December 11, 1907, Cochran conveyed his undivided one-half of the property to John Bassel, trustee, to secure his twenty notes for the sum of $10,000 each, made and delivered to Augustine. This instrument was likewise recorded in both of said counties. On the day of its execution Cochran assigned four of the notes to Markell, as collateral security for the same notes for security of which the Barnes mortgage was partially assigned, two $16,000 notes and one $18,000 note, held by Markell for the bank, none of which have been paid, and all of which were duly presented for payment and protested for nonpayment.

Augustine, on January 14, 1910, executed releases of both the mortgage and deed of trust, which were recorded in both counties December 21, 1910. He swears he executed them by mistake, superinduced by misrepresentation and fraud on the part of Thompson, who, before the date of these transactions, acquired the property subject to the indebtedness thereon. Thereafter; July 26, 1912, Thompson conveyed it to the Harrison-Doddridge Coal & Coke Company, and on August 1, 1912, that company executed said $4,000, 000 mortgage.

As the notes secured by the deed of trust and the mortgage differ in point of status, the assignment of the former not having been recorded, while that of the other was, and the deed of trust being a mere security for a debt, while the mortgage vested the legal title to the property in the mortgagee, they will be separately considered.

A debt secured by a deed of trust is a mere chose in action, wherefore an assignment thereof is not required to be recorded. It is not included in the terms "goods and chattels, " as used in section 5, c. 74 (sec. 3835), of the Code. Turk v. Skiles, 45 W. Va. 82, 87, 30 S. E. 234; Fleshman v. Hoyl-man, 27 W. Va. 728; Tingle v. Eisher, 20 W. Va. 498; Bank v. Gettinger, 3 W. Va. 317; Kirkland, Chase & Co. v. Brune, 31 Grat. (Va.) 126. In this state and Virginia this doctrine has been enunciated, in most instances, in controversies between claimants of the secured debt, or between the assignee and the debtor, but it may have some bearing upon the relative rights of the assignee and a purchaser of the property upon which the debt is secured, taking it after a release by the trust creditor.

The original trust creditor, after having assigned the debt, cannot validly release the lien and thus destroy the right of, his assignee therein. Fleshman v. Hoylman, cited; Taylor v. Godfrey, 62 W. Va. 677, 59 S. E. 631; 2 Jones on Mortgages, § 957. This rule is applicable to judgments and mortgages securing payment of notes and bonds. Crum-lish v. Railroad Co. and Fidelity Co. v. Railroad Co., 32 W. Va. 244, 9 S. E. 180; Clarke v. Hogeman, 13 W. Va. 718; First National Bank v. McGraw, 85 W. Va. 298, 311, 101 S. E. 474.

Upon the inquiry as to the effect of a release by the original trust creditor upon the relative rights of the assignee and a purchaser of the property upon which the debt is secured, without notice of the assignment and in reliance upon the recorded release, the propositions above stated are not decisive nor strongly persuasive. The distinction between two claimants of the secured debt or the debtor and an assignee of the debt, on the one hand, and a purchaser of the property on which it was secured and an assignee, on the other, is very clear. The subjects of controversy or conflicting claims, though related, are entirely different. To the purchaser the recorded deed of trust is constructive notice, as is also the release. If the release is as broad in its scope as the deed of trust and specifically covers all of its possible elements, the purchaser ought to be protected by it, and this view is sustained by authority. The vendor's lien involved in Turk v. Skiles, 45 W. Va. 82, 30 S. E. 234, described no note for the unpaid purchase money, although one had been executed. The vendor holding that note joined the vendee in the execution of a deed of trust on the land, and thus released or conveyed his lien to the trustee and creditor in the deed of trust, and then assigned the note. Upon this state of facts, the trust creditor, being in law a purchaser, was held to have a right superior to that of the assignee of the note, and this conclusion was based largely upon the fact that the reservation of the vendor's lien did not mention the note, and, for that reason, gave no notice of its existence. The only debt disclosed by the record, the obligation evidenced by the deed, was released, and the purchaser was under no duty to look beyond it. Such also was the holding in Bank v. Harman, 75 Va. 604, notwithstanding the unmentioned note had been assigned before the vendor released his contract by asale of the land to a third party and a conveyance made by his vendee at his instance. If, in these cases, the existence of the notes had been disclosed by the record or otherwise and brought to the attention of the purchaser, the assignees would no doubt have been accorded right superior to that of the purchasers. That is the import of the argument found in the opinions, and it seems to rest upon sound reason. A purchaser is bound to take notice of everything the record discloses, When a lien secures notes or bonds, he knows they are assignable and may have been assigned. Hence, if he relies upon a release by the original creditor and looks no further, he closes his eyes to the probability that some of the notes or all of them may be unpaid and in the hands of assignees. The deed of trust is not, in such case, the primary evidence of the debt, and the release constitutes no certain proof that such evidence, the note or bond, has been surrendered. He must ascertain if the original creditor still has the notes or whether they have been paid.

In jurisdictions in which an assignment of the deed of trust or mortgage is not required to be recorded, the assignee of the note or bond, under such circumstances, is protected, and the purchaser takes the property subject to his right. Bamberger v. Geiser, 24 Or. 203, 33 Pac. 609; Lee v. Clark, SO Mo. 556, 1 S. W. 142; Trust Co. v. Shaw, 5 Sawy. 340, Fed. Cas. No. 10, 556; Reeves v. Hayes, 95 Ind. 521; James v. Morey, 2 Cow. (N. Y.) 246, 14 Am. Dee. 475; Dixon v. Hunter, 57 Ind. 278; Hasselman v. McKernan, 50 Ind. 441; People's Trust Co. v. Tonkonogy, 144 App. Div. (N. Y.) 333, 128 N. Y. Supp. 1055; Quimby v. Williams, 67 N. H. 489, 41 Atl. 862, 68 Am. St. Rep. 685; Wilson v. Kimball, 27 N. H. 300; Singleton v. Singleton, 60 S. C. 216, 38 S. E. 462. For other cases see 5 Ann. Cas. 339, note. An overwhelming weight of authority stands in favor of this proposition, and it follows that, in so far as the decree accords priority to the bank in respect of the four $10,000 notes, it is correct and irreversible. Recordation of the assignment of the notes was not required and they were described in the deed of trust.

To bring the assignment of the mortgage within the requirements of the recording acts, and thus give force and effect to a recorded assignment thereof, the distinction between a mortgage and a deed of trust, in point of character, is relied upon. It is contended that, to give it effect as against a subsequent purchaser...