Miller v. Lilly S.
| Decision Date | 01 February 1921 |
| Docket Number | No. 3961.,3961. |
| Citation | 87 W.Va. 608 |
| Parties | A. E. Miller v. T. H. Lilly et als. |
| Court | West Virginia Supreme Court |
An accommodation payee and endorser of a note, indeamified against loss resulting from his endorsement, by a deed of trust on property of the principal debtor, which also secures payment of the note, and further indemnified against such loss by a guaranty agreement between him and other persons, which contains a clause obligating them to repay to him any sum he should be compelled to pay by reason of his endorsement, cannot actively participate in, or cause, such a disposition of the property on which the debt is secured as will inflict direct and inevitable loss upon the guarantors, and still hold them liable to him upon their contract of guaranty, (p. 613).
If, in such case, the indemnified endorser, being liable with other persons for other debts of the maker of the note, or being his creditor, forms a combination with other persons for the purpose of purchasing such property at a sale thereof to be made by the trustee, at a price insufficient to pay the debt secured upon it, with intent to endeavor to realize enough out of the property to protect himself and associates similarly situated, in respect of such other debts as well as the secured debt, and actively participates in causing the sale to be made, and, at such sale, purchases the property for himself and his associates, at such price, with knowledge of the desire, readiness and ability of one of the guarantors to purchase it at a price sufficient to pay the secured debt and without actual notice to such guarantor of the time of the sale, and then pays the part of the debt remaining after application of the proceeds of the sale thereon, he cannot recover any part of the money so paid, from such guarantor, (p. 613).
On an issue, in such case, as to whether the purchasers, in raising a fund sufficient to pay all of the debts of the debtor, prior to the sale, or obligating themselves to do so, intended to take the property in consideration of payment of all of the debts, so as to relieve the guarantors, all of the facts and circumstances attending the transaction, both before and after the sale, are admissable in evidence, (p. 617).
Instructions requested by the defendant, in the trial of such a case, which, if given, w^ould have authorized a verdict for him, on the finding of a purchase of the property by the endorser for himself and his associates, at a price less than the secured debt, intention on their part to pay all of the debts of the principal from a fund raised by them and the making of an offer to him by another person to take the property and pay the secured debt, but not requiring any finding as to the time of such offer, are properly refused, (p. 615).
It is reversible error, however, to refuse an instruction requested by the defendant, in such case, which, if given, would have required a verdict for him, on a finding that he had, before the sale, made an offer to the plaintiff, to purchase the property at a price sufficient to pay the debt secured upon it, and rejection thereof by the latter, (p. 615).
A count in a declaration upon such a contract of guaranty as the one above described, need not allege insolvency of the principal debtor, (p. 617).
Error to Circuit Court, Summers County.
Action by A. E. Miller against T. H. Lilly and others. Judgment for plaintiff, and defendant named brings error.
Reversed and remanded.
A. A. Lilly, T. J. 7Ally and R. F. Dunlap, for plaintiff in error.
T. N. Read, for defendant in error.
poefenbaeger, judge:
The judgment under review on this writ of error was rendered in an action of assumpsit, for contribution; and the defense was, in substance payment of the secured debt by the plaintiff, out of property of the principal debtor. If there was such payment it was so involved in indirectness and beclouded by uncertainty, as to give rise to the controversy culminating in this litigation.
The principal debtor was a corporation known as^ the Hinton Foundryf Machine and Plumbing Company, and the parties to this litigation and others originally bound for the debt were its stockholders and all of them, save one, the plaintiff herein, directors. On Dec. 16, 1907, the company borrowed $6,000.00 from the National Bank of Summers, on its note executed to A. E. Miller, the plaintiff, and endorsed by him, with which it paid off its, indebtedness to said bank. At the name time the six directors of the company entered into an agreement with Miller, by which they obligated themselves to indemnify him' from loss, b}^ reason of his endorsement; and, three days later, the company executed a deed of trust by which it conveyed its property to a trustee to secure payment of the note and all renewals thereof, and to indemnify the endorser and save him harmless.
On March 8, 1919, the debt remaining unpaid and having grown to $6,500.00, the property was sold under the deed of trust and purchased by Miller, for the sum of $3,000.00, a substantial, but probably not a full and. adequate, consideration, and he took a conveyance thereof, March 27, 1919. A few days later, April 1, 1919, he conveyed it to his brother, 0. L. Miller, as trustee, to hold for the use and benefit of himself, J. T. McCreery, A. D. Daly, O. A. Miller, Lee Walker, C. L. Miller and the personal representatives of IP. Ewart, deceased, constituting what is called a "pool," three of whom, McCreery, Walker and Ewart, had been guarantors of the debt, and all of whom had been interested in the corporation. Walker having retired, from the "pool," the other six members paid and agreed to pay the trustee $9,120.00, out of which all of the indebtedness of the company is to be, or has been, paid, and Miller reimbursed, or to be reimbursed, for all of the money paid by him in the transaction, if the testimony is to be taken literally in dealing with it.
Besides the $6,500.00 debt, the company owed another amounting to $850.00 for which Miller was bound and the defendant, Lilly, was not; and still another amounting, with accrued interest, to about $2,600.00, all of which, except one aliquot part, had been paid by the sureties therefor, of whom Lilly was one, before the sale of the property. Miller and his associates in the new trust of April 1, 1919, undertook to provide for payment of these and all other debts of the company and to take its property in lieu of the money, but to take it in such manner as would deny to Lilly and his associates in the guaranty, not joining them in the enterprise, the benefit of such payment, and leave them still liable for their pro rata share of the $6,500.00 debt, after application thereon, of the $3,000.00 paid for the property by Miller, less the costs of the sale. Accordingly, the trustee who sold the property, after deduction of the expenses, $78.00, paid the residue of the proceeds of the sale, $2,922.00, on the note. This left an unpaid balance of $3,637.58 and this action was brought to recover from Lilly one-sixth of that amount, $606.26.
Before the sale, Miller and others interested contemplated, and may have consummated, an arrangement by which the property was to be taken by them for a sufficient amount of money to pay the debts. In his testimony, he swears he did not sell it to the trustee to whom he conveyed it, nor to the beneficiaries of the new trust. His language is, In response to an interrogation as to whether he had "just made a deed to it," he said: "Transferred it to the people I bought it for." Tn a letter written to the defendant, after the sale, he said: ' He also admits that the recovery in this action, if any, is to go to the beneficaries of the C. L. Miller trust, or to C. L. Miller, trustee, for them.
Nevertheless, his theory and contention is that there was no agreement on his part, in acting for himself and his associates, that they were to pay the trustee from whom they bought the property, enough money to pay the debts, or to pay the debts in consideration of a conveyance of the property to them. On the contrary, his position, though not clearly expressed, is that the property was to be obtained at the trustee's sale for such sum as it could be purchased for and that then they would pay all of the debts and endeavor to reimburse themselves out of the property. Some of their acts in execution of their plan harmonize with this interpretation. Through their representative, Miller, they purchased the property for $3,-000.00. Miller personally paid the balance of the bank debt, $3,037.58, and collected from four of the six guarantors the pro rata portions thereof assigned and charged to them, under the terms of the guaranty. But his contention is apparently inconsistent with other acts. The "pool"...
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