University of Richmond v. Stone

• Decision Date: 22 September 1927
• Citation: 148 Va. 686
• Parties: UNIVERSITY OF RICHMOND v. ERNEST L. STONE, ET ALS.
• Court: Virginia Supreme Court

Page 686

148 Va. 686

UNIVERSITY OF RICHMOND v. ERNEST L. STONE, ET ALS.

Supreme Court of Virginia, Staunton.

September 22, 1927.

1. BILLS, NOTES AND CHECKS — Provision for Counsel Fees — Validity. — A provision in a note for the payment of counsel fees in the event that the note is not paid at maturity is a valid, binding and enforceable contract.

2. MORTGAGES AND DEEDS OF TRUST — Attorney's Fees — Note Secured by Deed of Trust Providing for Attorney's Fees — Lien for Attorney's Fees on the Property in Hands of Subsequent Purchasers — Case at Bar. — Notes secured by a deed of trust provided for the payment of attorney's fees in case the notes should not be paid at maturity. The deed of trust provided for sale if the notes were not paid at maturity, and the application of the proceeds "to discharge the amount of money then payable upon the said notes." The property covered by the deed of trust was transferred several times and each successive purchaser assumed the debt secured by the trust deed. It was conceded that the grantor of the deed of trust was liable to the holder of one of the notes for the attorney's fee, but it was contended that the attorney's fee did not constitute a lien upon the property, and the contract did not bind the subsequent purchasers personally.

Held: That under the deed of trust there was a lien for the attorney's fees upon the property and that the subsequent purchasers in assuming the debt assumed liability for the attorney's fees.

3. VENDOR AND PURCHASER — Purchaser of Equitable Title Takes Place of Person from Whom he Purchases. — The general rule is that a purchaser of a mere equitable title must take the place of the person from whom he purchases. He stands in his vendor's shoes, and gets the title of his vendor and nothing more, subject to all equities existing against it in the hands of his vendor.

4. VENDOR AND PURCHASER — Notice — Duty of Grantee to Investigate — Grantee Charged with Notice of Facts Investigation would have Disclosed. — When it is the duty of a grantee of property to investigate the extent of the liens against his title, and he fails to do so, he is chargeable with notice of all facts which such an investigation properly made would have disclosed.

5. MORTGAGES AND DEEDS OF TRUST — Conveyance of Mortgaged Property — Duty of Grantee to Inquire as to Rights of Mortgagee. — Where a person is informed that certain property is mortgaged, this puts him on inquiry as to the rights of the mortgagee.

6. NOTICE — Constructive Notice — Party Put on Inquiry — Notice Imputed. — It is a general rule that whatever puts a party on inquiry amounts in judgment of law to notice, provided the inquiry becomes a duty, and would lead to a knowledge of the facts by the exercise of ordinary intelligence and understanding. Wherever facts put a party on inquiry, constructive notice will be imputed to him if he designedly abstains from inquiry for the purpose of avoiding notice.

7. NOTICE — Constructive Notice Equivalent to Actual Notice. — Notice may be actual or constructive, and whether the one or the other, the result is the same.

8. VENDOR AND PURCHASER — Bona Fide Purchaser — Purchaser Must Exercise Due Diligence. — A person who fails to exercise due diligence and to avail himself of the information which is easily in his reach is not a bona fide purchaser.

9. MORTGAGES AND DEEDS OF TRUST — Subsequent Purchasers — Actual Notice of Provision of Deed of Trust as to Counsel Fees — Case at Bar. — The instant case involved the question of liability of subsequent purchasers of property covered by a deed of trust, who assumed the debt, for attorney's fees provided for by the deed of trust. The purchasers contended that in assuming the debt secured by the deed of trust they relied on the recorded mortgage. The recorded mortgage, however, was to secure notes for $17,000.00, whereas the debt assumed by the purchasers was for only $12,000.00, and the deed to the subsequent purchasers referred to some of the notes secured by the deed of trust as having been paid.

Held: That, from this, actual notice of the provisions as to attorney's fees might reasonably be inferred, and that the purchasers fully informed themselves as to the provisions contained in the notes secured and as to which of the notes had been paid.

10. MORTGAGES AND DEEDS OF TRUST — Subsequent Purchasers Assuming Mortgage — Liability of Such Purchasers. — Each of the subsequent purchasers of property covered by a trust deed assuming payment of the mortgage in general terms, or without restrictions, is liable for all that might be recovered thereon against the grantor in the deed of trust, including overdue as well as accruing interest, according to the terms of the contract, and taxes on the premises which it was the duty of the mortgagor to pay, and also attorney's fees and costs of suit.

11. MORTGAGES AND DEEDS OF TRUST — Lien of Deed of Trust — Attorney's Fees. — The lien of a deed of trust secures payment of attorney's fees provided for in the notes secured by the deed of trust.

12. MORTGAGES AND DEEDS OF TRUST — Vendor and Purchaser — Assumption of Mortgage — Liability of Purchaser. — Subsequent purchasers of the land who assume the payment of the mortgage in general terms, are personally liable for all that may be actually due upon it, for which the mortgagor may be liable, including attorney's fees provided for on the face of the notes secured by the mortgage or deed of trust.

Appeal from a decree of the Circuit Court of Roanoke county. Decree for complainants. Named defendant appeals.

The opinion states the case.

A. W. Patterson, for the appellant.

R. Grayson Dashiell, A. Ellis Baker, H. W. Goodwyn, W. J. Henson, Allen, Walsh & Michie, and Brooks & Grove, for the appellees.

WEST, J., delivered the opinion of the court.

On March 24, 1922, Nannie M. Goodwyn conveyed to H. W. Goodwyn, Trustee, the property in South Richmond, Virginia, known as the "Leader Building," in trust to secure "the deferred purchase money on said property amounting to seventeen thousand dollars ($17,000.00), and interest and evidenced by twenty-seven (27) negotiable notes of even date with this deed, drawn by the said Nannie M. Goodwyn, party of the first part, and payable to bearer at the Bank of Commerce and Trust, Manchester Branch."

There were three principal notes, two for $2,500.00 each, and one for $12,000.00, and the remaining twenty-four notes were interest notes. Each of these notes contained the following provision: "The makers and endorsers hereby * * * agree to pay all expenses incurred in collecting the same, including ten per cent attorney's fee, in case this note shall not be paid at maturity."

Subsequent to the execution of the deed of trust, the property therein conveyed was sold and conveyed by successive deeds to Chas. H. Bowman, B. E. Wheeler, John E. Buck, Ernset L. Stone and Mary Duffield Hilliard, each of said purchasers expressly assuming the payment of the debt secured by the Goodwyn deed of trust.

Upon default being made in the payment of all of the unpaid notes, the trustee sold the property pursuant to the terms of the deed of trust and Ernest L. Stone and National Investment Company became the purchasers at $21,750.00.

Soon after the sale, John E. Buck instituted a chancery suit, to which all persons interested were made parties, alleging his interest in the property, and stating that there were four other subsequent deeds of trust on the property at the time the trustee sold the same. The prayer of the bill is that the consummation of the sale be enjoined, an account of the liens be taken, that the property be resold under a decree of the court, and for general relief. The style of that suit is "John E. Buck Ernest L. Stone, and others."

The petitioner, University of Richmond, demurred to the bill. The court without passing upon the demurrer referred the cause to Commissioner Fellers to take, state and settle an account of all liens on the real estate known as the Leader Building, with their dignities and priorities. The commissioner executed the decree and filed his report, from which it appears that there is an unpaid balance due on the deed of trust from Nannie M. Goodwyn to H. W. Goodwyn, trustee, amounting to $12,000.00, with interest thereon at six per cent from December 24, 1924, till paid, as evidenced by a note for $12,000.00 held by the University of Richmond, which provides for the payment of ten per cent attorney's fees. A part of the evidence upon which the report was based was the following memorandum, which is signed by the attorneys for all parties:

"It is admitted and agreed that the debt secured by the trust deed from Nannie M. Goodwyn to H. W. Goodwyn, Trustee, as shown by a certain note for the principal sum of $12,000.00, now in hands of University of Richmond, was assumed by each successive purchaser from said Nannie M. Goodwyn, to-wit: Chas. H. Bowman, B. E. Wheeler, John E. Buck, Ernest L. Stone and Mary Duffield Hilliard, as per their several deeds of bargain and sale, which were used in the argument and may be treated as part of this record."

The case was heard upon the exceptions to the report and the court, after a rehearing, entered a decree adjudging that the attorney's fees mentioned in the several notes are not liens on the "Leader Building," and are not an issue before the court; but permitting parties, if any, who are entitled to such fees to enforce their rights in the proper forum. From that decree an appeal was allowed to the appellant, University of Richmond.

Appellant makes three assignments of error. It seems unnecessary to consider the first as the second and third involve the real contest in the case. They are as follows:

"2. That the court refused to allow petitioner's claim for ten per cent on the amount of its notes under the Goodwyn trust deed as a part of petitioner's lien upon the Leader Building.

"3. That the court refused to give a...