Merch.S' Bank Of Danville v. Ballou

• Decision Date: 08 February 1899
• Citation: 32 S.E. 481,98 Va. 112
• Parties: MERCHANTS' BANK OF DANVILLE. v. BALLOU et al.
• Court: Virginia Supreme Court

32 S.E. 481

(98 Va. 112)

MERCHANTS' BANK OF DANVILLE.

v.BALLOU et al.

Supreme Court of Appeals of Virginia.

Feb. 8, 1899.

Tkusts for Creditors—Knowledge of Trustee of Unrecorded Conveyance — Judgments — Constitutional Law—Vested Rights—Obligation of Contracts.

1. Though trustees in a deed of trust to secure creditors did not know of the debtor's intention to execute the deed, nor of its recordation, until afterwards, their knowledge of a prior unrecorded conveyance binds the beneficiaries.

2. The legislature cannot destroy or diminish the value of an existing judgment, as it is a vested right of property.

3. The fact that a retroactive statute, which destroys the lien of a judgment, does not impair its validity, does not prevent the statute being unconstitutional, as impairing vested rights.

4. The statute giving the right to a judgment lien is a part of the contract on which the judgment is based, and hence a retroactive law, taking away the lien, is void, as impairing the obligation of contracts.

Keith, P., dissenting.

Appeal from circuit court, Halifax county.

Suit by the Bank of South Boston against C. E. Ballou and others. There was a decree for complainant, and defendant The Merchants' Bank of Danville appeals, and complainant brings a cross appeal. Affirmed.

Green & Miller, for appellant.

William Leigh, for appellees.

HARRISON, J. This is an appeal from an interlocutory decree settling the principles of the cause, determining the right of priority between hens, and ordering the sale of certain real estate for the satisfaction of said liens. The appellee contends that the appellant has no standing in this court—First, because the appeal was not taken from the interlocutory decree complained of until after there had been a final decree; and, second, because appellant acquiesced in the decree complained of until it was too late to put the parties in statu quo if the same was reversed.

These questions it is unnecessary to consider, for the reason that the decree complained of must be affirmed, and therefore, whether they are decided for or against appellant, the result is the same.

The case presented by the appellant is as follows: On September 21, 1892. C. E. Ballou conveyed to R. W. Lawson, trustee, a cer tain mill property to secure the Bank of South Boston $2,000. This deed was not recorded until April 14, 1893. In the meantime, on April 12, 1893, C. E. Ballou conveyed this same property to J. M. Carrington and H. J. Watkins, trustees, to secure numerous creditors; this last-named deed being recorded on April 13, 1893. Soon thereafter Carrington and Watkins proceeded to execute the deed to them by advertising the property for sale, and on May 17, 1893, an injunction was awarded stopping the sale, upon the alleged ground that the trustees, Carrington and Watkins, had notice of the deed for the benefit of the appellee the Bank of South Boston, and that, therefore, neither they nor the beneficiaries under their deed had acquired priority over appellee by its recordation. The rights of all the creditors were determined in this proceeding, the court holding that the beneficiaries under the deed to Carrington and Watkins took in subordination to the Lawson deed securing the Bank of South Boston.

The testimony of Carrington and Watkins shows that each of them had full and complete knowledge all the time of the Lawson deed securing the Bank of South Boston, and that they knew of the existence of said deed at the time the deed from Ballou to them was executed, although they did not know of the intention of Ballou to execute the second deed, and did not know it was executed until it was recorded; that on the day it was recorded they were notified of the fact, and immediately asked if the Bank of South Boston had been protected.

That Carrington and Watkins had full knowledge of the Lawson deed at the time the deed to them was made and recorded is not denied. That a trustee or trustees in a deed to secure bona fide debts are purchasers for value, and that notice to him, or them, or either of them, is notice to the beneficiaries in said deed, is not controverted.

The contention of appellant is that Carrington and Watkins, being ignorant of the execution and recordation of the deed to them at the time it was executed and recorded, were in no sense agents of the beneficiaries under that deed; that they knew nothing of the claims of the beneficiaries, or of the intention of Ballou to make a deed to secure them, until the deed had been fully executed and recorded; that they were only purchasers of the legal title, and if they had died, or had declined to accept the trust, that notice to them would not have affected the beneficiaries; that their failure to act would have related back to the date of the record of the deed, and their appointment thereunder become void, while the deed would have remained a subsisting security in favor of the beneficiaries; that, under such circumstances, it would be inequitable to allow the rights of the beneficiaries to be affected by knowledge of the trustees, not acquired in their capacity as agents of the beneficiaries, but as agents of the South Boston Bank, it appearing thatthe trustees acquired their knowledge of the first deed while officers of the South Boston Bank.

In contemplation of law, the relation of principal and agent between the trustee named in a deed and the beneficiaries under it begins when the transaction is completed. The trustee named may not act when informed of his appointment, but his acceptance is presumed until he declines, and when he refuses to act a successor is appointed, who takes his shoes, and is substituted to all the rights and responsibilities of the position, as if he had been originally appointed, and the trust in his hands is tainted with all the imperfections that attached to it in the hands of the original trustee. It is not necessary to the validity of the deed that it should be executed by the trustee or the beneficiaries, or even that they, as a matter of fact, should know of its execution. The duties and powers of the trustee are not conferred by the creditor, but arise out of the instrument creating the trust. The rights of the creditor come to him through the trustee, under the provisions of the deed, and so it has been repeatedly held by this court that the knowledge of the trustee of a prior existing deed is imputed to the creditor. Under the settled law of this state, Carrington and Watkins are, under the deed in question, purchasers for value, and under the facts proven they are purchasers with notice; for they were, confessedly, at the time of the execution and recordation of the deed to them, fully possessed of...