Schmidt & Wilson Inc v. Carneal

• Decision Date: 13 June 1935
• Citation: 180 S.E. 325
• Court: Virginia Supreme Court
• Parties: SCHMIDT & WILSON, Inc. v. CARNEAL.

180 S.E. 325

SCHMIDT & WILSON, Inc.

v.CARNEAL.

Supreme Court of Appeals of Virginia.

June 13, 1935.

Error to Law and Equity Court, Part 2, of City of Richmond.

Action by Schmidt & Wilson, Inc., in its own right, and as assignee, against J. D. Carneal, Jr., trustee. Judgment for defendant, and plaintiff brings error.

Reversed and rendered.

Argued before CAMPBELL, C. J., and HOLT, HUDGINS, GREGORY, BROWNING, and CHINN, JJ.

George B. White, of Richmond, for plaintiff in error.

Gordon B. Ambler, of Richmond, for defendant in error.

CHINN, Justice.

The Virginia Mutual Life Insurance Company owned certain property in Richmond, Va., on which it gave three deeds of trust.

The first deed, dated March 2, 1931, conveyed the property to Central Trust Company, trustee, to secure the payment of the principal sum of $6,500 evidenced by the notes of the owner, of even date with the said deed of trust, payable one year after date.

The second deed, also dated March 2, 1931, conveyed said property to J. D. Carneal, Jr., trustee, the defendant herein, to secure the payment of the principal sum of $1,000, evidenced by the notes of the owner, of even date with said deed of trust, payable one year after date. This deed of trust specifically provides that the lien thereby created is subordinate and inferior in dignity to the lien created by the deed of trust from said owner to Central Trust Company, trustee, to secure $6,500 as aforesaid. It also provided that, in the event of sale thereunder, the terms should be for only so much cash as would be necessary to defray the expenses of executing the trust, including a commission of 5 per cent. to the trustee, and to discharge the amount due on the notes thereby secured.

The third deed of trust, dated June 5, 1931, conveyed said property to E. F. Schmidt, trustee, to secure the payment of certain other notes made by the said owner, held by the plaintiff herein.

Default having been made in the payment of the debt secured by the second deed of trust, the trustee therein, J. D. Carneal,. Jr., after advertising said property, without the consent of the owner or the beneficiary under the third deed of trust, sold the whole property for the price of $8,900 cash. At the time of the sale, the debt secured by the first deed of trust was also past due and unpaid, and the holder thereof was demanding payment. Out of the proceeds derived from the sale, said trustee paid the costs and expenses attending the same, and retained out of said proceeds as his commissions 5 per cent. of the said sum of $8,900, amounting to $445; then paid the full amount of principal and interest due under the first deed of trust, amounting to $6,725.13, and the principal and interest due under the second deed of trust, amounting to $1,034.- 94; and the balance of said proceeds paid to the plaintiff, Schmidt & Wilson, on account of the notes secured under the third deed of trust. This balance was not sufficient to discharge the notes held by the plaintiff, and, the owner of the property having assigned to, the plaintiff all its rights in the fund, this suit was brought to recover the sum of $336.25, the same being 5 per cent. on $6,725.13, the amount paid on the first deed of trust, which the plaintiff claims said trustee had no right to retain. The whole matter of law and fact being submitted to the court on an agreed statement of facts, the court entered judgment for the defendant, of which judgment plaintiff below complains.

The sole question in the case is whether or not the defendant, trustee in the second deed of trust, had the right to sell and convey the legal title to the property conveyed to him and charge a trustee's commission on the gross proceeds of such sale.

It is well settled that a trustee in a deed of trust can only do with the trust property what the deed either in express terms or by necessary implication authorizes him to do. In other words, the powers of the person foreclosing under a mortgage or deed of trust are limited and defined by the instrument under which he acts, and he has only such authority as is thus expressly conferred upon him, together with incidental and implied powers that are necessarily included therein. Accordingly, the trustee or mortgagee must see that in all material matters he keeps within his powers, and must execute the trust in strict compliance therewith. Wilson v. Wall, 99 Va. 353, 38 S. E. 181; Graeme v. Cullen, 23 Grat. 266; George v. Zinn, 57 W. Va. 15, 49 S. E. 904, 110 Am. St. Rep. 721; 19 R. C. L. p. 592.

In Jones on Mortgages (7th Ed.) § 1853, it is said that the mortgagee or trustee cannot sell a greater interest than his mortgage or deed of trust gives him authority to sell. He must sell subject to the incumbrances having...