Norfolk Bank for Savings & Trusts v. Whipple

• Decision Date: 27 September 1918
• Docket Number: 177.
• Citation: 254 F. 195
• Court: U.S. District Court — District of South Carolina
• Parties: NORFOLK BANK FOR SAVINGS & TRUSTS v. WHIPPLE.

254 F. 195

NORFOLK BANK FOR SAVINGS & TRUSTS v. WHIPPLE.

No. 177.

United States District Court, E.D. South Carolina.

September 27, 1918

Bryan A. Hagood, of Charleston, S.C., and Edward P. Buford, of Lawrenceville, Va., for complainant.

L. D Lide, of Marion, S.C., Townsend & Rogers, of Bennettsville S.C., and W. C. Miller, of Charleston, S.C., for defendant.

CONNOR District Judge.

The bill, answer, exhibits, and testimony disclose the following case:

On January 30, 1899, H. R. Peele, being the owner of a tract of land with the timber standing and growing thereon, containing 777 acres, in consideration of the sum of $400 conveyed the timber of the dimensions named in the deed to the Cape Fear Lumber Company. The deed contains the following clause:

'The said Cape Fear Lumber Company to have ten (10) years from time they commence to cut the timber to cut and remove the same, and (if) at the end of that time they have not removed said timber, then to pay six per cent. upon the purchase price, they can have ten years longer to remove the same.'

Thereafter in August, 1904, and before the said lumber company had cut or removed any timber from said land, it conveyed to the Marion County Lumber Company all of its right, title, and interest in and to the timber, with the right to cut and remove the same, conveyed by Peele. Thereafter, on December 27, 1910, and before either of said companies had cut or removed any part of the timber, Peele conveyed the land upon which the timber was standing, in consideration of $4,600, to Ansel A. Gray, who, at the time of filing the bill herein, was the owner thereof. On March 5, 1905, the Marion Lumber Company executed a deed in trust to complainant, Norfolk Bank for Savings & Trusts, conveying, among other timber rights and contracts, the timber conveyed by Peele to the Cape Fear Lumber Company, and by said company to the Marion County Lumber Company, for the purpose of securing a bond issue. On April 3, 1913, said Marion County Lumber Company executed a second deed in trust, conveying the same property, to secure an additional bond issue. There was, at the time of filing the bill, bonds secured by said deeds outstanding to the amount of $50,000.

On the 6th day of February, 1913, Ansel A. Gray instituted in the court of common pleas of Marlboro county a suit against the Marion County Lumber Company, for the purpose of removing the cloud from the title to the standing timber. alleging that, by its failure to cut and remove the timber on the land purchased by him from H. R. Peele within a reasonable time, the title had reverted to plaintiff, etc. The bill was dismissed by the circuit judge. Upon appeal to the Supreme Court the judgment was reversed, and it was adjudged that by the failure to commence to cut the timber in a reasonable time 'the right to cut was ended. ' Gray v. Marion County Lumber Co., 102 S.C. 289, 86 S.E. 640. This decision was rendered October 15, 1915. On the 13th day of October, 1913, said Ansel A. Gray and defendant, C. S. Whipple, entered into a contract whereby Gray agreed to sell and Whipple agreed to buy the timber on the tract of land purchased from Peele, provided that in the suit brought by Gray against the Marion County Lumber Company it was adjudged that the title to the timber was in Gray. If the suit resulted adversely to Gray, the contract was to 'terminate.' Whipple agreed to pay $3,000 cash and execute his notes secured by mortgage on the timber for $6,000. He was to have ten years from the date of the deed to cut and remove the timber.

On November 1, 1915, upon the decision of the case by the Supreme Court, Gray executed to Whipple, pursuant to the terms of the contract, a deed for the timber, upon receipt of $6,000 cash and his notes for $3,000. Whipple began to cut the timber, whereupon complainant brought this suit. The jurisdiction of this court is based upon diversity of citizenship. All of the deeds and contracts referred to were duly recorded in Marlboro county. Defendant shows, in addition to the foregoing facts relating to the title to the timber, that the deed in trust to the complainant, trustee, includes several other lots of timber and timber contracts, the value of which is not shown; that there is outstanding $40,000 of the bonds secured by the first trust deed, and $20,000 of those secured by the second deed; that the Marion County Lumber Company has surrendered its charter and conveyed its property to the Marion County Lumber Corporation, a Virginia corporation, which has assumed the payment of the debts of the lumber company; that the officers of complainant had knowledge of the pendency of the suit by Gray against the Marion County Lumber Company, and of other suits pending in the courts of South Carolina, involving the title to the timber covered by the deeds in trust, and failed to intervene therein. It appears that Gray did not have actual notice of the deeds in trust to complainant when he purchased from Peele. This is immaterial, because the deeds were recorded. He had notice of, and purchased subject to, the deed from Peele to the Cape Fear Lumber Company.

It is not seriously contended that complainant, in respect to the first deed in trust, is bound by the decree in the case of Gray v. Marion County Lumber Company. Its deed was on record, and, if plaintiff had so desired, he could, by substituted service, have brought it into the record. As to the second deed, executed after the suit was instituted, it would seem that it occupies the attitude of a purchaser pendente lite and is bound by the decree.

Counsel for complainant challenge the decision of the Supreme Court of South Carolina, in the case of Gray v. Lumber Company, in respect to the extent to which it is binding upon this court, and its value as a correct adjudication of the rights of the parties claiming under the deed from Peele to the Cape Fear Lumber Company. It is conceded that the title of complainant is dependent upon the construction of that deed and the course pursued by the successors in title to the land and the timber. Counsel insist that, conceding the well-settled rule by which this court is required to follow the decision of the state courts, upon which property rights, or rules of property, are based, the remedies afforded and modes of procedure pursued in the federal courts, sitting as courts of equity, are not determined by local laws and rules of decisions, but by general principles, rules, and usages of equity having uniform operation in those courts wherever sitting. Guffey v. Smith, 237 U.S. 101, 35 Sup.Ct. 526, 59 L.Ed. 856. I do not understand that the decision in that case drew into question or limited the well-settled rule laid down in Burgess v. Seligman, 107 U.S. 20 (33), 2 Sup.Ct. 10, 27 L.Ed. 359, and Kuhn v. Fairmont Coal Co., 215 U.S. 349, 30 Sup.Ct. 140, 54 L.Ed. 228, and followed in numerous other cases.

It is uniformly held that state Codes of Procedure, abolishing the distinction between actions at law and suits in equity, with the results which follow therefrom, do not limit or affect either the jurisdiction or modes of procedure of federal courts in equity causes. The primary question to be settled in this case is whether the Supreme Court of South Carolina has, by a current of decisions, so construed deeds containing substantially the same language and provisions as to make a rule of property in that state. The latest discussion of the subject and classification of the cases coming within the rule laid down in Burgess v. Seligman is found in the opinion of Mr. Justice Harlan in Kuhn v. Fairmont Coal Co., supra. The cases are cited in the opinion in Highland Park Mfg. Co. v. Steele, 232 F. 10, 146 C.C.A. 202.

The questions ably discussed by the learned counsel for complainant are: Should the court, in obedience to the decisions of the Supreme Court, adopt as binding upon its judgment the decision of the Supreme Court of South Carolina in Gray v. Marion County Lumber Co. , not as res judicata, but as prescribing a rule of property, which the court should apply in this case? Gray v. Marion County Lumber Co., is decided upon the authority of Minshew v. Lumber Co., 98 S.C. 8, 81 S.E. 1027 (1914), in which a writ of error was dismissed for want of jurisdiction. See 235 U.S. 685, 35 Sup.Ct. 202, 59 L.Ed. 424. While the deed construed in that case is not in the exact language used in this, the court said:

'This case cannot be distinguished in any essential particular, either of law or fact, from the particular case.'

After disposing of exceptions directed to the admissibility and effect to be given to parol evidence, Mr. Justice Watts says:

'Under contracts of this character, the purchaser has only the right to have a reasonable time to get the fruits of his purchase. He has no right to enjoy, by indefinite extension, what would practically amount to a perpetuity and deprive the owner of the enjoyment of his property.'

The learned justice says:

'It has been decided by this court in Flagler v. Lumber Company, 89 S.C. 328, 71 S.E. 849 (1911), McClary v. Lumber Company, 90 S.C. 153, 72 S.E. 145 (1912), and Atlantic Coast Realty Company v. Litchfield, 90 S.C. 363, 73 S.E. 182 (728), that the grantee must begin the removal of the timber within a reasonable time, and it follows, as a natural, logical, and irresistible sequence that, upon the failure to commence the removal within a reasonable time, the estate or interest granted is terminated and the interest granted reverts to the grantor or his privies.'

An examination of the cases cited discloses that in each of them the grant of the timber is followed by a limitation upon the time within which the grantee may cut and remove the timber fixed by reference to the...