Seward v. Insurance Company

• Decision Date: 20 March 1930
• Citation: 154 Va. 154
• Court: Virginia Supreme Court
• Parties: J. M. SEWARD v. NEW YORK LIFE INSURANCE COMPANY.

Page 154

154 Va. 154

J. M. SEWARD v. NEW YORK LIFE INSURANCE COMPANY.

Supreme Court of Virginia, Richmond.

March 20, 1930.

Absent, Hudgins, Gregory and Browning, JJ.

1. MORTGAGES AND DEEDS OF TRUST — Equity of Redemption — Whether Purchaser at Sale under a Second Deed of Trust Bid $1,500.00 for an Equity of Redemption or $10,000.00 — Case at Bar. — Trustees in making a sale under a second deed of trust did not offer the tract for sale subject to the first deed of trust, the first deed of trust to be assumed and paid by the purchaser, nor did they offer it for sale clear of the lien of the first deed of trust, the same to be paid out of the purchase money or assumed by the purchaser as a part of the purchase price. The trustees offered the tract for sale merely subject to the first deed of trust; that is, they offered for sale only the equity of redemption. The terms of the sale were for cash. The amount bid by defendant for the equity of redemption was not recited in the deed by the trustees to him nor stated in the record. The deed recited that the sale was made "in consideration of the premises and the further consideration of $10,000.00, $1,500.00 of which is paid in cash" and $8,500.00 whereof was paid by defendant's assumption of the prior deed of trust. Defendant contended that the correct inference is that the amount bid for the equity of redemption was $1,500.00, while plaintiff contended that the correct inference from the record is that it was $10,000.00.

Held: That the inference that defendant bid $1,500.00 for the equity of redemption was the more probable and the better supported by the record.

2. MORTGAGES AND DEEDS OF TRUST — Equity of Redemption — Sale of Equity of Redemption — Liability of Land in Hands of Purchaser of Equity of Redemption to the Prior Deed of Trust — Case at Bar. — In the instant case defendant purchased at a sale of land under a second deed of trust the equity of redemption under the first deed of trust. Upon such a sale the land in the hands of defendant became, as between him and the maker of the first deed of trust, primarily liable for the payment of the first deed of trust. If, in pursuance of his personal liability, the maker of the first deed of trust should have been thereafter required to pay the debt secured by the first deed of trust, he would have been entitled to have the land in defendant's hands subjected to the reimbursement of himself pro tanto. Hence no part of the purchase money could have been due to plaintiff as the holder of the first deed of trust.

3. MORTGAGES AND DEEDS OF TRUST — Sale of Equity of Redemption — Land in Hands of Purchaser as between the Purchaser and the Vendor Primarily Liable for the Payment of the First Deed of Trust. — Where the owner of land mortgages it by mortgage or deed of trust to secure a debt, and subsequently sells the equity of redemption, the purchaser not assuming the payment of the prior deed of trust, or the equity of redemption is sold under a second deed of trust which is made subject to the first deed of trust, or which excepts from the covenants thereof the first deed of trust, or the equity of redemption is sold under judicial procedure, the land in the hands of the purchaser becomes as between the purchaser and his vendor primarily liable for the payment of the first deed of trust debt and the mortgagor to that extent a surety thereon, though he remains personally liable for the whole debt to the deed of trust creditor.

4. MORTGAGES AND DEEDS OF TRUST — Sale of Equity of Redemption — Land in Hands of Purchaser as between the Purchaser and the Vendor Primarily Liable for the Payment of the First Deed of Trust — Subrogation of Mortgagor to Rights of Deed of Trust Creditor — Liability of Purchaser for Deficiency. — Where the owner of land mortgages it by mortgage or deed of trust to secure a debt, and subsequently sells the equity of redemption, the purchaser not assuming the payment of the prior deed of trust, or the equity of redemption is sold under a second deed of trust which is made subject to the first deed of trust, or which excepts from the covenants thereof the first deed of trust, or the equity of redemption is sold under judicial procedure, if the mortgagor thereafter be forced to pay the debt in response to his personal liability, he is in equity entitled to be subrogated to the rights of the deed of trust creditor as against the land and may foreclose the deed of trust; but he has no right of recovery against the purchaser for any deficiency that may exist after foreclosing the deed of trust.

5. MORTGAGES AND DEEDS OF TRUST — Sale of Equity of Redemption — Land in Hands of Purchaser as between the Purchaser and the Vendor Primarily Liable for the Payment of the First Deed of Trust — Subrogation of Mortgagor to Rights of Deed of Trust Creditor. — Where a tract of land is subject to a first and second deed of trust and the equity of redemption therein is sold under the second deed of trust, if the purchaser pays off the prior deed of trust debt to protect his equity therein he is not entitled in equity to be subrogated to the right of the first deed of trust creditor to proceed against the mortgagor personally, nor can he take an assignment of the debt and pursue the personal liability of the mortgagor thereon, nor, if he permits the first deed of trust to be foreclosed, is he entitled to be subrogated to the rights of the first deed of trust creditor to pursue the personal liability of the mortgagor in order to recover for the amount of the debt paid from sale of the land, for the land in his hands has become the primary source for the payment of the debt, to the exoneration, pro tanto, of the deed of trust debtor.

6. MORTGAGES AND DEEDS OF TRUST — Sale of Equity of Redemption — Application of Proceeds of Sale. — Where a tract of land is subject to a first and a second deed of trust and the equity of redemption therein is sold under the second deed of trust, in the absence of any directions to the contrary in the second deed of trust, the proceeds of sale are applicable (1) to the payment of the costs of sale, (2) to the payment in full of the debt secured by the second deed of trust, and (3) to the payment of any lien debts subsequent in priority to the second deed of trust of which the trustees have knowledge or notice, and any residue of the purchase money is payable to the grantor. The trustees have no right, without the consent of the grantor and subsequent lien creditors, to apply any part of the proceeds of the sale to the payment of the prior deed of trust debt, or to accept the assumption of the purchaser of the first deed of trust debt as part payment of the purchase price of the equity of redemption.

7. MORTGAGES AND DEEDS OF TRUST — Sale of Equity of Redemption — Application of Proceeds of Sale — Section 5167 of the Code of 1919 — Case at Bar. — In the instant case, where a tract of land was subject to a first and second deed of trust and the equity of redemption was sold under the second deed of trust, and there were no provisions in the second deed of trust as to how and upon what terms the property should be sold or as to the disposition of the surplus after the payment of costs of sale and the debt thereby secured, section 5167 of the Code of 1919, which provides that the surplus, if any, shall be paid to the grantor, his heirs, etc., is controlling.

8. MORTGAGES AND DEEDS OF TRUST — Equity of Redemption — Sale of Equity of Redemption — Amount of Bid — Case at Bar. — In the instant case it was the contention of defendant that he bid $1,500.00 for the equity of redemption at a sale of a tract of land under a second deed of trust. Plaintiff, on the other hand, contended that defendant bid $10,000.00 — $1,500.00 cash, and $8,500.00 by assuming the first deed of trust to plaintiff.

Held: That if defendant's bid for the equity of redemption was $10,000.00, the trustees had no right to accept defendant's assumption of the prior deed of trust in payment of $8,500.00 where not authorized so to do by the grantor in the deed of trust. On the other hand, the inference that defendant's bid for the equity of redemption was $1,500.00 harmonized all the language in the deed, and was more in accord with the known value of the property.

9. MORTGAGES AND DEEDS OF TRUST — Equity of Redemption — Sale Under Second Deed of Trust — Conformity of Deed with Contract. — Where under a second deed of trust the equity of redemption under the first deed was cried out to defendant at $1,500.00, the contract of sale was complete, except for the memorandum, and upon payment of the $1,500.00 defendant was entitled to receive a deed for the property subject to the first deed of trust without assuming the payment of the first deed of trust, and in the execution and delivery of deed to defendant the trustees did only what they were obliged to do by the original contract of sale. Defendant thereby acquired no benefit which he was not entitled to receive under the original contract of sale. The record contained nothing from which it could be inferred that defendant received any consideration for his recited new promise in the deed to assume liability to plaintiff under the prior deed of trust, and if there was any consideration for the new promise by defendant to assume payment of the prior deed of trust of which plaintiff was the holder, the burden rested upon plaintiff to show it.

10. CONTRACTS — Consideration — New Promise on Consideration of Performance of an Existing Contract. — The general rule is that a new promise, without other consideration than the performance of an existing contract in accordance with its terms, is a naked promise without legal consideration therefor and unenforceable.

11. CONTRACTS — Consideration — New Promise on Consideration of Performance of an Existing Contract — Case at Bar. — Exception is sometimes made to the rule that performance of an existing contract is not a...