Thayer v. South Side Foundry & Machine Works

• Decision Date: 12 April 1932
• Docket Number: 7097.
• Citation: Thayer v. South Side Foundry & Machine Works, 112 W. Va. 134, 163 S.E. 821 (W. Va. 1932)
• Parties: THAYER v. SOUTH SIDE FOUNDRY & MACHINE WORKS et al.
• Court: West Virginia Supreme Court

163 S.E. 821

112 W.Va. 134

THAYER v. SOUTH SIDE FOUNDRY & MACHINE WORKS et al.

No. 7097.

Supreme Court of Appeals of West Virginia.

April 12, 1932

Submitted March 30, 1932.

Syllabus by the Court.

Purchaser of bonds secured by recorded trust deed is presumed to have purchased in light of statements and recitals in trust deed.

Trustee though certifying that each bond was one of series covered by trust deed, held not guarantor of sufficiency of security or of regularity of obligor's conduct in issuing bonds.

1. A purchaser of bonds secured by a properly recorded deed of trust to which reference is made in the bonds, is presumed to have purchased the bonds in the light of facts appearing from statements and recitals in the trust.

2. A trustee under a deed of trust to secure bonds, who, in accordance with a provision of the trust certifies each bond as "one of the series of bonds mentioned and described in the indenture or deed of trust within referred to" does not thereby become a guarantor of the sufficiency of the security or of the regularity of the conduct of the obligor in the issuance of the bonds.

Appeal from Circuit Court, Kanawha County.

Suit by G. T. Thayer against the South Side Foundry & Machine Works and others, wherein the Citizens' National Bank of Covington filed a cross-bill. From a decree sustaining the demurrer of the Kanawha Banking & Trust Company to the cross-bill, the cross-complainant appeals.

Affirmed.

Revercomb & Revercomb, of Covington, Va., and Koontz, Hurlbutt & Revercomb, of Charleston, for appellant.

Price Smith & Spilman, of Charleston, for appellee Kanawha Banking & Trust Co.

MAXWELL J.

The Citizens National Bank of Covington, Virginia, appeals from a decree of the circuit court of Kanawha County sustaining the demurrer of the Kanawha Banking & Trust Company to a cross-bill filed in this cause by the said bank.

In 1915 the South Side Foundry & Machine Works, a corporation executed a deed of trust to Kanawha Banking & Trust Company, trustee, on the properties of the grantor to secure the payment of $50,000 of bonds with interest at six per centum. These bonds were issued and in 1922 $40,000 thereof remained outstanding. In 1922, the said Foundry Company again conveyed its property to the same trustee to secure a new issue of $150,000 of bonds with interest at seven per centum.

Of the latter issue appellant acquired thirty-eight bonds of the par value of $500 each, aggregating $19,000. Appellant, along with many other bondholders and creditors of the Foundry Company, was made a defendant in the bill which has for its primary purpose the winding up of the affairs of the South Side Foundry & Machine Works, Inc.

The cross-bill of appellant is predicated on the fact that although the bonds of 1922 were denominated first mortgage bonds and were acquired by appellant under the belief of its officers that such bonds were in fact first mortgage bonds, and without any knowledge to the contrary, the information has subsequently come to the appellant that at the time of the issuance of the 1922 bonds there were outstanding and unpaid $40,000 of the 1915 issue, and that at the time of the filing of the cross-bill there were still outstanding at least $31,000 of said 1915 bonds. It is urged by appellant that the trustee was derelict in its duty in authenticating and placing its signature upon the bonds of 1922, so that the same could be put on the market by the mortgagor, while the above-mentioned portion of the 1915 issue remained outstanding and unsatisfied; and that the appellant has been prejudiced by that action of the trustee, in that it has become apparent that the appellant does not in fact hold first mortgage bonds such as they purport to be but that they are secondary to the unpaid portion of the 1915 issue.

The prayer of the cross-bill is that after sale of the properties of the South Side Foundry & Machine...