Hagan v. Richmond Trust Co. Inc

• Decision Date: 22 September 1927
• Citation: 139 S.E. 317
• Parties: HAGAN. v. RICHMOND TRUST CO., Inc., et al.
• Court: Virginia Supreme Court

139 S.E. 317

HAGAN.

v.RICHMOND TRUST CO., Inc., et al.

Supreme Court of Appeals of Virginia.

Sept. 22, 1927.

Appeal from Circuit Court, Wise County.

Suits, consolidated for hearing, by the Richmond Trust Company, Incorporated, and another, against the Dungannon Lumber Company, Incorporated, and others, and by Charles R. Hagan, trustee, against the Dungannon Lumber Company. From the decree rendered, Hagan appeals. Affirmed.

J. S. Ashworth, of Bristol, for appellant.

Wirt P. Marks, Jr., and Hunton, Williams, Anderson & Gay, all of Richmond, and S. W. Coleman, of Gate City, for appellees.

CHICHESTER, J. This suit was instituted in the circuit court of Wise county by the Richmond Trust Company, a corporation, and E. Randolph Williams, trustee, against Dungannon Lumber Company, Incorporated, with its principal office at Big Stone Gap, Wise county, Va., and others, the main objects of the suit being to have the court appoint receivers for the defendant company which was then in a hopelessly insolvent condition, to take an account of the claims and liens against the lumber company, to liquidate and convert its unliquidated property into cash, and distribute it among its creditors in order of their priority, and to establish the claim of the complainants as a first lien upon the property of the defendant company mentioned and described in a certain deed of trust bearing date February 12, 1918, and hereinafter designated as the "Richmond trust, " from the Dungannon Lumber Company, Incorporated, to E. Randolph Williams, trustee. Thereare two main controversies which are before us upon this appeal.

(1) The question of priority of lien, as between the Richmond Trust Company, on the one hand, and what is referred to in the record as the "Baltimore trust, " upon certain steel rail, logging engine, logging cars, etc., described in the "Richmond trust."

(2) The question of priority of lien as between the "Baltimore trust" and what are described in the record as the "Dunn trust" and the "Pennington trust" on the one hand, and the "Coleman trust" on the other, upon certain lumber and certain steel rail, being the same rail referred to in the "Richmond trust."

The trial court decided the first question in controversy in favor of the contention of the "Richmond trust." Upon the second question, the court held that the "Baltimore trust" was a superior lien to the "Coleman trust" on 70 per cent. of the lumber or its proceeds, and that the "Dunn and Pennington trusts" were superior to the "Coleman trust" on the steel rail.

(1) The facts out of which the first proposition in controversy grew are necessarily preliminary to the second controversy, as will be seen later, and are fairly stated in the brief of the Richmond Trust Company, in substance, as follows: By deed dated June 7, 1909, Patrick Hagan and wife conveyed to A. Kyle Morison the timber and timber rights on a large boundary of land in Scott and Wise counties, Va. It appears from the recitals in the deed, dated November 7, 1913, from Charles F. Hagan, trustee, to Clinch-land Timber Corporation, that Morison in turn conveyed to R. T. Irvine, and that Irvine in turn conveyed to Clinchland Timber Corporation. It likewise appears from those recitals that on January 27, 1911, Patrick Hagan and wife constituted Charles F. Hagan their attorney in fact to act for them in all matters pertaining to their real estate and interests therein in the state of Virginia, and that by deed dated February 23, 1912, Patrick Hagan and wife conveyed to Charles F. Hagan, as trustee, all their real estate and interests therein in the state of Virginia. From the same source it appears that negotiation ensued between Charles F. Hagan, trustee, and the Clinchland Timber Corporation, which resulted in the deed of November 7, 1913, from Charles F. Hagan, trustee, to the Clinchland Timber Corporation. By the last-mentioned deed Charles F. Hagan, trustee, conveyed to the Clinchland Timber Corporation "all of the merchantable timber, trees of specified circumference, upon a boundary of land containing 23, 152.21 acres, more or less, less the timber upon the tracts aggregating 3, 436.89 acres included in that boundary. This deed provided, in paragraph "fifth" thereof, that the timber corporation released, conveyed, and retransferred to Hagan, trustee, all properties, rights, and priv ileges mentioned in the deed of June 7, 1909, from Patrick Hagan and wife to A. K. Morison, which were different from those set out in the deed of November 7, 1913, from Hagan, trustee, to the timber corporation, and provided that the timber corporation, its successors, and assigns "shall and will hold the properties, rights, and privileges hereinbefore in this deed mentioned, under and subject to the terms and conditions of this deed and none other." (This eliminates the deed and all the terms thereof from Hagan and wife to Morison, above referred to, from further consideration in determining the rights of the parties in this controversy, and the trial court correctly so ruled.)

By deed of trust from Clinchland Timber Corporation to the Safe Deposit & Trust Company of Baltimore, Md., trustee (referred to hereinafter as the "Baltimore trust"), the Clinchland Timber Corporation conveyed to the trustee the timber rights which it acquired under the deed of November 7, 1913, from Hagan, trustee. This deed of trust secured an issue of $250,000 of bonds of the timber corporation, and the phase of the case with which the Richmond Trust Company is concerned is between Hagan, trustee, as the owner of bonds issued under this deed of trust, on the one hand, and the Richmond Trust Company, as holder of an unpaid note secured by the deed of trust to E. Randolph Williams, trustee (the "Richmond trust"), heretofore mentioned, on the other.

By an agreement dated October 25, 1913, between the Clinchland Timber Corporation and the Dungannon Dumber Company, the timber corporation sold to the Dungannon Lumber Company a part of the timber and timber rights which Hagan, trustee, conveyed to the Clinchland Timber Corporation by his deed of November 7, 1913, which part so conveyed was located in Scott county, Va. After describing the timber conveyed, that agreement provided:

" * * * The said party of the second part takes the same subject to all the terms, conditions, and agreements made in the aforesaid deeds to said party of the first part, and subject also to the terms and conditions of a certain deed of trust or mortgage from the said party of the first part to the Safe Deposit & Trust Company of Baltimore, state of Maryland, likewise bearing date of July 1, 1913, and of record in the Scott county clerk's office."

The Dungannon Lumber Company did not assume payment and performance of the obligations of the "Baltimore trust, " but took the timber subject to the lien and conditions of that trust. By that agreement the Dungannon Lumber Company agreed to pay the Clinchland Timber Corporation, as compensation for the property sold $4.50 per thousand feet for all logs cut from the boundary. This agreement was never recorded, and it is admitted that the Richmond Trust Company had no actual knowledge of its existence.

At the time the Clinchland Timber Corporation executed the Baltimore deed of trust, and at the time it entered into the agreement of sale with the Dungannon Lumber Company, it owned no property except the timber and timber rights acquired by the deed from Hagan, trustee, dated November 7, 1913. The Clinchland Timber Corporation never owned the lumber mill or equipment or any logging roads, engines, "rail or track or any personal property of any kind or description. The plant and equipment and the logging engines and ears and the steel rail in the logging tracks were acquired by the Dungannon Lumber Company from other parties. In fact, the mill and equipment and about one-third of all the steel rail in the logging track were located on land leased or otherwise acquired from other parties, while about two-thirds of the rail were laid on the land upon which the boundary of timber conveyed by Hagan, trustee, to the Clinchland Timber Corporation stood, and no part of the logging track had been constructed or the steel rail laid when the "Baltimore trust" was given.

In 1918 the Dungannon Lumber Company required funds for use in its business, and it negotiated a loan of $25,000 from the Richmond Tr.ust & Savings Company, whose name was subsequently changed to Richmond Trust Company, to evidence which it gave ita five negotiable notes for $5,000 each and secured payment thereof by deed of trust dated February 12, 1918, to E. Randolph Williams, trustee, upon the steel rail of the Dungannon Company, a Climax logging locomotive, and ten logging cars. This deed was recorded on March 7, 1918, and is the deed under which the Richmond Trust Company claims its lien for the balance due of $4,500, with interest.

It seems important to set out more specifically the contents of the deeds heretofore briefly referred to, in order to clarify the contentions of the parties upon this issue.

(1) The deed from Hagan, trustee (November 7, 1913), conveyed to the Clinchland Timber Corporation (a) all merchantable trees 60 inches, or more, in circumference, on certain described boundaries of land in Scott and Wise counties, containing 23, 152.21 acres, more or less; (b) the easements of necessary rights of way, and the privilege of selecting and using any and all lines, routes, and locations for construction of drag roads and steam roads, wagon roads, etc., for cutting, logging, and transporting the timber, with the right to use so much of the surface of the land as is necessary for lumber yards and sawmill sites. All rights and privileges to last as long as is necessary to remove the timber conveyed, not to exceed however 40 years. It is then provided that when any watershed has been cut over it shall not be cut over again but is released to the grantor, except as to...