Kitchin v. Grandy

• Decision Date: 22 October 1888
• Citation: 7 S.E. 663,101 N.C. 86
• Parties: KITCHIN v. GRANDY et al.
• Court: North Carolina Supreme Court

7 S.E. 663

101 N.C. 86

KITCHIN v. GRANDY et al.

Supreme Court of North Carolina

October 22, 1888

Appeal from superior court, Halifax county; J. F. GRAVES, Judge.

Action by W. H. Kitchin against Richard H. Smith, Jr., and C. W Grandy and Albert H. Grandy, copartners as Grandy & Sons, for the administration of a trust fund in the hands of defendant Smith. The defendants Grandy & Sons appeal from a judgment rendered on the report of a referee.

A debtor assigned four notes and a deed of trust securing them to defendants, to secure advances. Defendants advanced $1,500 to the debtor, on account of which they had received a payment. Held, that their lien on the notes extended only to the balance, and did not include a charge for liquidated damages for breach of one of the conditions contained in the act of pledge.

Batchelor & Devereaux, for plaintiff.

T. N Hill, for appellants.

SMITH C.J.

This action, instituted to have a trust fund in the hands of defendant R. H. Smith properly administered, after the pleadings were filed, was referred to James M. Mullen, with the direction "to hear and determine all matters of controversy in the same arising." The referee accordingly made and returned his report at fall term, 1886 from which we extract so much of his findings of fact as is necessary to a proper understanding of the controversy, and the rulings in the court below, brought up by the appeal of the defendants C. W. Grandy & Sons, for review. On December 21, 1880, Joseph J. Edmondson, having purchased a tract of land lying in Martin county and described in the deed therefor executed to him by Burton H. Spruill and wife, Laura K., on the same day, paid $200 of the purchase money and gave his five several notes, under seal, for the residue,--one in the sum of $500, due, with accruing interest at 8 per cent., on October 1, 1881, and the other four each in the sum of $575, with like interest, due on the 1st day of the same month in the successive years from 1882 to 1885, inclusive. To secure the deferred installments at the same time, the vendee, Edmondson, reconveyed the land to the defendant Richard H. Smith, trustee, vesting in him the right, and imposing an obligation in case of default in the payment of said notes, or any one of them, on the request of the holder, to advertise and sell said land for cash, and requiring him, after deducting the expenses and costs attending the execution of the assumed trust out of the funds thus arising, to apply the residue "to the amount remaining unpaid upon said note or notes, with interest accrued, and the balance, if any, he shall pay to the said Joseph J. Edmondson, his heirs and assigns." The earliest maturing note, of $500, was drawn payable to said Laura K., and was kept by her until, with the others, before the maturing of either, it was transferred to and became the said Burton H. Spruill's property. On January 15, 1884, the said Burton H. entered into a contract with defendants Grandy & Sons, (and when we speak of the defendants generally we mean them,) for an advance to him of $1,500, to secure the payment whereof, as also other stipulations contained in it for the consignment to them, as commission merchants, to sell, of eight bales of cotton for each $100 advanced, and the payment of $1.50 for each bale deficient, he gave them his written obligation, and further assigned to them as collateral security in his deed of January 22d, the same month, the four notes of $575 each, upon the first of which had been paid $300, and conveying also "all of his crops to be grown during the year on the Cypress Swamp farm in Halifax county, which the said Spruill had theretofore bought from the plaintiff, and his "carts, wagons, and farming implements," with a power of disposing of the property in case of a failure to comply with his contract to refund the money so to be advanced, and for which he had also given his separate written obligation due by the 1st day of December of the same year. At the time of executing these papers, the plaintiff and one Neems held a mortgage security on the Cypress Swamp farm, on which were to be grown the crops that were under the defendants' then, amounting to about $4,000, though originally more, and due to the plaintiff alone, whereof he had passed to the said Neems about $1,100 that she then held. The said defendants had no notice of this incumbrance when the transaction with said Spruill was consummated, but ascertained the fact a few days afterwards. They then declined to make further advances until assured that the said Spruill would not be disturbed in his possession, but permitted to proceed in the cultivation of the crop for their benefit, and this determination was, early in February, communicated to the plaintiff by their attorney, to which the following is his answer: "Spruill is now, at 9 o'clock P. M., in my office, badly upset. I have no note due against him, and cannot sell if disposed to do so, and certainly I would not sell if I could. Mrs. Neems holds one note for $1,100.00 now due, and she is the one to apply to, to not sell. If she does not sell there will be no sale. I could not guaranty that, if sold, the purchaser would charge no rent; but the fourth is all any one could charge, and it seems to me that the other three-fourths, his part, in case of a sale, together with the notes you have, would be ample security for $1,500. If Grandy will advance no more than that amount on the crops and notes, and will hold them after paying his $1,500 advance for me, with Spruill's consent, he can have all the crops if the land should be sold, provided I bought it, and I certainly will buy it, unless it should bring over four thousand dollars cash, which it will never do in this age and generation. I should be compelled to do it, in self-defense. I have just agreed with Spruill that he is to convey to me all his interest in the notes you have and all his crops, subject to Grandy's lien of $1,500, and $100 more, if I say so. Now, if this is satisfactory to you, I will guaranty that Spruill shall not be disturbed, nor his crop, until Grandy gets his money out of the crops and notes, at which time Grandy is to deliver the notes to me. I will stop the sale, or buy, if Mrs. Neems should attempt to sell." This paper was communicated by the attorney to the defendants, and they then addressed a letter to their said attorney in these words: "If we understand about the farm that Mr. Spruill bought of Mr. Kitchin, it stands as follows viz.: All of Spruill's indebtedness on account of said farm is to Kitchin, except first note of $1,100, to Mrs. Neems. If Kitchin will place his notes in your hands, as a guaranty that Mrs. Neems shall not sell the land, and in case she does he will buy it, and the mortgage made to us shall not be disturbed, we think that would be safe. If Mrs. Neems sold the land, and land is worth it, we would bid enough on same, through you, to protect our interest. In case of sale and Kitchin not doing as promised, forfeits the notes that he will place in your hands. If this is agreeable all around, and Mr. Spruill desires it after we are paid,--principal, interest, and commissions on cotton he is to ship us,--we have no sort of objection to Mr. Kitchin having the Edmondson notes, in our hands. This will be done, of course,--you advising it. We have been (as Kitchin says Spruill is) 'upset' entirely in statements made to us (as we understood them) to act very judiciously in this matter, and hence it is that we call on you." On February 21, 1884, the plaintiff addressed to the said defendants a communication in these terms:

"SCOTLAND NECK, N. C., Feb. 21st, 1884.

"Mess. C. W. Grandy & Sons--DEAR SIRS: I will see that your lien for the present year on the crop of B. H. Spruill, on the Cypress Swamp farm, shall not be disturbed or subjected to any of the debts of said Spruill, secured by mortgage or trust on said farm, and will save you harmless on account of the same, to-wit: said debts secured by said mortgage or trust.

"W. H. KITCHIN."

Contemporaneously with the making the last-mentioned communication, and as a condition thereof, the plaintiff required the said Spruill to assign to the plaintiff, as a collateral indemnity in subordination to that of the defendants, and as a security for the payment of the purchase money yet due for the Cypress Swamp farm, the four notes held by the defendants, which transfer in writing the said Spruill made, stipulating therein that the defendants held them for supplies only which did not exceed $1,500 in amount. This instrument was never registered, nor its existence and contents known to defendants or their attorney, until after the beginning of the present suit. The defendants claim as due them under their contract the aggregate sum of $1,790.79, to be reduced by the net proceeds of cotton sent to them and sold ($420.17) to the sum of $1,370.62, their demand being made up from the sum advanced, $1,500, with interest, $104.70, the sum of $21 paid their attorney, and $165 for the deficiency in the number of bales of cotton to be sent to them. On September 30, 1885, the trustee, Smith, on the demand of the other defendants, sold the land, under the provisions of the deed from Edmondson, to the plaintiff for $1,864.88; the net proceeds after deducting charges being $1,771.64, of which bid the plaintiff has paid but $1,500, and $98.24, the cost incurred in making the sale, and he refuses to...