Morgan v. Farmington Coal & Coke Co.
| Decision Date | 09 September 1924 |
| Docket Number | 4974. |
| Parties | MORGAN ET AL. v. FARMINGTON COAL & COKE CO. |
| Court | West Virginia Supreme Court |
Submitted June 16, 1924.
Syllabus by the Court.
In a suit solely for the purpose of enforcing a vendor's lien reserved on an undivided interest in coal and mining rights in a boundary of land, the owner of the other undivided interest is not a necessary party, no relief being asked against him, and his rights being in no way questioned.
In such suit it is error to decree a sale of all the coal on the assumption that defendant is the owner thereof, the lien sought to be enforced being reserved on an undivided interest only, and the bill praying for a sale of such undivided interest, although a master commissioner has reported that defendant owns all the coal.
Such error is not merely clerical, it is prejudicial to defendant and upon correction by the appellate court on an appeal by defendant, costs of the appeal will be awarded appellant.
Notes negotiable on their face under the Uniform Negotiable Instruments Statute, which state on their face that they are for installments of purchase money for coal and mining rights, conveyed to the maker by deed in which a vendor's lien is reserved for their payment, are not rendered nonnegotiable, because the deed reserving the lien provides that prior liens if not paid at maturity by the vendor may be paid by the vendee, and the notes credited by the amounts so paid. The clause in the deed for possible credits is not constructive notice to a purchaser of the notes in due course.
In a suit to enforce the vendor's lien by a purchaser of such notes in due course, the maker may reduce the amount of the recovery under the lien by whatever sums he has paid or is compelled to pay in discharge of such prior liens. When the holder in due course invokes the remedy afforded by the lien he is bound by the provisions of the instrument which create the lien.
A vendor's lien reserved for payment of a debt evidenced by negotiable notes automatically follows the transfer of the notes and is available to the holder of the notes in due course as a remedy for collection of the debt. In a suit to enforce that remedy the amount of the notes fixes the amount of recovery under the lien, unless the instrument creating the lien otherwise provides, and no secret equities which the maker of the notes could have set up against the payee can be set up against the lien, even though remedy on the notes has been barred by limitation.
The remedy, free from all equities between the original parties is fixed as of the time the notes are purchased by the holder in due course, and the character and strength of the remedy is not changed or weakened because the other remedy (suit on the notes) is barred by limitation.
The fact that one of a series of negotiable notes has become due and is not paid does not of itself constitute notice of infirmity in the notes to a purchaser in due course of those not due, especially where the maker has paid the interest on the note over due, and there are no facts or circumstances indicating that he has or would repudiate payment. Mere suspicion of an infirmity in the note does not preclude a purchaser from attaining the status of a holder in due course. The facts and circumstances pointing to an infirmity must be so strong and obvious as to impute bad faith in the purchaser, if he remains passive and does not make prudent inquiry. The rights of the holder must be determined by the simple test of honesty and good faith, and not by speculative issues of diligence or negligence.
A suit by the payee of negotiable notes to enforce a vendor's lien securing them ending in a decree for recovery against the maker for the amount of the notes does not merge the notes into the decretal judgment, where they have been transferred to an innocent purchaser in due course before the decree is rendered, and the payee has parted with all right or interest therein, so far as the innocent purchaser in due course is concerned; and such decree will not preclude such purchaser from enforcing the notes or lien in any proper action.
Appeal from Circuit Court, Marion County.
Suit by Rufus E. Morgan and others against Farmington Coal & Coke Company and others. From a decree for plaintiffs, the named defendant appeals. Modified in part, affirmed in part, and remanded.
Ernest R. Bell and M. M. Neely, both of Fairmont, for appellant.
Harry Shaw, of Fairmont, and Poffenbarger, Blue & Dayton, of Charleston, for appellees.
The object of this suit is to enforce a vendor's lien against an undivided interest in the Pittsburgh vein of coal sold to defendant Farmington Coal & Coke Company, a corporation under certain lands situate on Plum run and Mods run in Marion county, including mining rights and privileges.
The boundary of land under which this undivided interest in the coal lies is composed of five tracts aggregating 967.8 acres. By deed of January 3, 1910, Albert L. Lehman, now deceased, and Homer J. Price conveyed to Farmington Coal & Coke Company (hereinafter called the coal company) the undivided two-thirds interest in the Pittsburgh seam of coal in two of the tracts aggregating 397.8 acres, and an undivided 125/570 of the said coal underlying the three other tracts aggregating 570 acres, for the sum of $102,967.68, of which $25,101.92 was paid in cash and the balance on time, represented by six interest-bearing notes, three of which were executed and delivered to Lehman, each for $13,336.33, payable at the People's National Bank of Waynesburg, Pa., the due dates thereof being as follows: First note on September 28, 1910, the second, September 28, 1911, and the third, September 28, 1912, all bearing interest from September 28, 1909. The other three notes were executed and delivered to Price, each for the sum of $12,405.58, and due and payable at the same times and place as set out in the Lehman notes. The deed conveyed the usual mining rights and privileges for mining and removing the coal, and a vendor's lien was expressly retained in the deed to secure the payment of the unpaid purchase money as represented by the notes above described. The first note payable to Lehman and the first note to Price, both due September 28, 1910, were paid. The interest on the other notes was also paid up to September 28, 1910. The two second notes, one to Lehman and the other to Price, not having been paid at maturity, they instituted a chancery suit at August rules, 1912, in the intermediate court of Marion county, against the coal company, to enforce the vendor's lien, the bill averring that the remaining four purchase-money notes unpaid were owned and held by plaintiffs Lehman and Price. The undivided interest in the coal deeded to the coal company had previously been conveyed to Lehman and Price by various persons who had reserved vendor's liens in their deeds; and one of the tracts conveyed to the coal company by Lehman and Price was incumbered by a prior deed of trust. Provision was made in the deed to the coal company to the effect that, if Lehman and Price did not pay these prior vendor's liens and discharge the deed of trust after they became due, then the coal company should have the right to apply so much of the deferred purchase money to the discharge of these prior liens, and it was stipulated that Lehman and Price should give credit on the deferred purchase-money notes for the amount so paid in discharge of the prior liens. These lienors and the trustee in the deed of trust and his cestui que trust were made parties defendant to the suit to enforce the vendor's lien in the intermediate court. A decree was entered on November 27, 1912, which fixed the amount of Lehman's lien at $30,126.76 and Price's lien at $28,024.20, and provision made by which the coal company should pay off the various prior liens and credit the amounts paid on the Lehman and Price liens. No further steps were taken to enforce that decree, and the coal company made various payments to Lehman and Price on their liens so decreed, amounting to $46,600 as of the 7th day of December, 1915. However, it appears that the four notes representing the balance of the purchase money had been negotiated by Lehman and Price as follows: The $13,336.33 note due September 28, 1911, payable to Lehman, was on June 15, 1910, indorsed and assigned by Lehman to plaintiff Festus Parrish, as collateral security for the payment of a debt of $10,000 owing by Lehman to Parrish; the other Lehman note for the same amount ($13,336.33), due September 28, 1912, had been indorsed and assigned by Lehman to plaintiff Rufus E. Morgan; the Price note of $12,405.50, due September 28, 1911, was on January 17, 1912 (after the maturity thereof), indorsed and assigned to plaintiff People's National Bank of Fairmont, as collateral security for a debt which Price owed to that bank; the other Price note for $12,405.50, due September 28, 1912, had been indorsed and assigned by Price to plaintiff People's National Bank of Fairmont, on May 12, 1912, as collateral security for the same debt which the other Price note was assigned to secure. It will be noted that the interest on these four notes so assigned had been paid by the coal company up to September 28, 1910, and the amount thereof credited upon each note.
It appears that the coal company knew nothing of the assignment of the purchase-money notes, until after it had paid the $46,600 to Lehman and Price; and upon a refusal of the coal company to pay these notes to the holders, the plaintiffs Rufus E. Morgan, Festus Parrish, and the People's National Bank, instituted this suit in the circuit court of Marion county to October rules, 1920, for the purpose of...
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