Morriss v. Virginia State Insurance

18 S.E. 843, 90 Va. 370, 1893 Va. LEXIS 62

Opinions

Laoy, J.,

delivered the opinion of the court.

The controversy between the parties to this appeal has arisen over the execution of a trust deed executed by the appellants to a certain trustee, conveying a tract of land in Ilenrico county, near the city of Richmond, containing 856 acres, to secure a debt due the Virginia State Insurance Company of $12,229 37. There were several abortive attempts at a sale, one on the premises, and another in the city of Richmond, when a sale was made at $12,000, when, it appearing by affidavits that the price of $12,000 was grossly inadequate, and in the opinion of numerous persons — real estate dealers and others — that the property was worth $25,000, by consent of all parties the sale was set aside by the court, and a resale ordered. The trustee advertised the sale to take place at the door of the city hall iu the city of Richmond, when the appellants procured an injunction, upon the ground that the property could hot safely be sold in the city of Richmond with a reasonable expectation that it would bring a reasonable price, and that such a sale would result only in a sacrifice of the property; that it was a large farm near the city, situated iu the county, and capable of subdivision into several valuable truck farms; that the trustee should not be allowed to sell the whole tract unless necessary to pay the debt due on it; that, if sold in bulk, it would not bring its value, whereas the record showed that it was worth $25,000, and that land just across the road had recently sold for $100 per acre, and this, by proper advertisement and judicious offering, might be sold as well; that the ten days’ notice required by the deed had not been given; that the advertisement was inserted on Sunday, the 4th, to take place on the 15th iustant; that this was not a compliance with the terms of the deed in letter or in “ spirit ”; and that the advertisement contains no notice of the terms of sale as to the residue after the cash payment has been paid and the debt discharged. This bill was answered, and a motion made to dissolve the injunction. Upon the hearing the court dissolved the injunction by decree in the cause on the 18th of October, 1892, but reserved all other questions, and, on motion of the plaintiffs, suspended the decree upon the usual terms for ten days, to allow the plaintiffs to present their petition to this court for an appeal, which being done, the appeal was allowed.

In the first place, it appears that the advertisement was as long as the terms of the deed required — “ten days at the least.”

The next question is as to the place of sale, and upon this question we will remark that the deed contained no stipulation as to the place where the sale should be made; and according to the rule established by the law, and to be found in the decisions, of this court, this matter was left to the sound discretion of the trustee. Shurtz v. Johnson, 28 Gratt., 657, and cases cited; Walker v. Beauchler, 27 Gratt., 511, and cases cited. Mr. Barton says on this subject (2 Bart. Ch. Pr., 446): “When the deed does not fix the place for the sale, the trustee may make it in any place which, in discretion, he may select; but he should exercise that discretion fairly and prudently,” (citing Shurtz v. Johnson, supra); and he cannot sell more of the trust subject than is necessary to satisfy the debt, unless the interest of the owners demand it, or they request it, or unless it would be injurious not to sell the whole. This rule, of course, relates to a divisible subject, the trustee’s duty in every case being to act for the best interest of all the parties. It is a settled principle in this court that trustees ought not to allow any urgency of the creditor to have an influence on their conduct, but that, whether they act under deeds of trust or under decrees of a court of chancery, they ought to consider themselves as impartial agents of both parties, and should act for the interest of the debtor as well as of the creditor. Quarles v. Lacy, 4 Munf., 251. And it is now incontrovertibly settled that a trustee is to be considered as the agent of both parties, bound to act impartially, and to disregard the suggestions of either inconsistent with that obligation, and that he has, in general, no greater powers touching his trust than a commissioner of a court of equity for a sale of lands under its decree. Lane v. Tidball, Gilmer, 130; 4 Minor Inst., 65; Chowning v. Cox, 1 Rand. (Va.), 311; 2 Minor Inst., 285; 1 Lomax Dig. 424. Mr. Barton says (2 Minor Inst., 286): “The general principle of his duty is to act justly, impartially, and discreetly, without permitting himself to be swayed to the one side or the other by the suggestions or pursuasions of either party. He has been likened in this respect to the commissioner of the court of equity. He must conform to the terms of the deed in respect to the time and manner of giving notice, and the time and manner of sale, as well as in all other particulars, and in all points when the deed is silent he must govern himself by the general rule to sell to the best advantage, and with an impartial regard to the rights and interests of both parties.” It is a principle, also, of such transactions that the trustee is charged with a personal confidence, and must therefore act in person aud not by agent. 1 Lomax Dig., 427; 1 Tuck. Comm., 108; Harvey v. Steptoe, 17 Gratt., 289. It is the trustee’s duty to forbear to sell, and to ask the aid and instructions of a court of equity, in all cases where the amount of the debt is unliquidated or in good faith disputed, when any cloud rests upon the title, when a reasonable price cannot be obtained, or when, for any reason, a sale is likely to be accompanied by a sacrifice of the property, which, at the cost of some delay, may be obviated. 2 Minor Inst., 287; 1 Tuck. Comm., 106; Lane v. Tidball, supra; Wilkins v. Gordon, 11 Leigh, 547; Miller v. Argyle, 5 Leigh, 460; Miller v. Trevilian, 2 Rob. (Va.), 25; Bryan v. Stump, 8 Gratt., 247. Judge Lomax, in bis Digest (volume 1, p. 425), says: “ These trustees, may, of their own motion, apply to a court of equity to remove impédiments in the way of a fair execution of their trust,” and, if the trustee fails to do so, the debtor may enjoin the sale, and ask the execution of the trust under and by the aid of a court of equity, and thus, to adopt the language of Lord Bacon, substitute for the private conscience of the trustee “the general conscience of the realm, which is chancery,” which Justice Story says implies uothing more than that a trustee who does not know his duty shall be at the pains to learn it.

As we have said, the deed is without directions as to the place where the sale shall be made, and the trustee must, in the exercise of a sound discretion, such as we have above referred to, select the place; and, if he shall be in doubt, he may apply to a court of equity for a determination of that question. If he determines for himself, and either party is not satisfied with his decision, he may apply to the court of equity to have it determined before the sale by the court, according to the circumstances of the case. That this question is determinable in the light of the circumstances of the particular case is clear under the decisions. In Walker v. Beauchler, supra, Judge Staples, speaking for the unanimous court, said: “It is very true the deed does not prescribe the place of sale, and much was therefore left to the discretion of the trustee: In the exercise of that discretion, it would seem clear that the salé ought certainly to have been made at least in the county where the property was situated.” And the subsequent case of Shurtz v. Johnson, supra., Judge Burks says, speaking of a sale of land situated in York county, Va.: “ It thus appears that neither Baltimore nor any other place is specially designated in the deed as the place where the sale is to be made, but by the plainest implication the selection of such place is left to the discretion of the trustee, as is usual in deeds of this character. It may not be doubted, therefore, that the trustee had the power under the deed to make the sale at Baltimore, or at any other place which he, in his discretion, might select. The real and only question is whether he exercised that power fairly and prudently; in other words, whether he committed a breach of trust.” Both of these two last-named cases were brought to invalidate the sale after it had been made. In the first the sale was set aside, and in the latter the sale was sustained. And, after the sale had been made, the court interposes with more reluctance than when it is applied to in the first instance, and before the sale is actually made. Taylor v. King, 6 Munf., 366; Harris v. Harris, Id., 368; Gibson v. Jones, 5 Leigh, 370; Hughes v. Caldwell, 11 Leigh, 348. In this case the trustee; in the exercise of his discretion, selected the place of sale outside of the county. The debtors, who claim that they have a tract of land worth at least $25,000, and a debt on it of $12,000, object to the place selected by the trustee, and, before the sale is made, insist that it ought to be made on the premises; that the land is worth a good deal more than the debt on it; that it is capable of advantageous sub-division, and that it ought to be sold in parcels; that it is not necessary to sell the whole to satisfy the debt, and that only so much ought to be sold as is necessary to pay the debt on it; that its appearance and situation will increase the prospects of a good sale when the sale is made on the premises in view of the bidders. The trustee, in his notice, says: “There are few estates combining more elements of value than this. In the first place, it is a large estate, very near to the city of Richmond, on an excellent road, and embracing some of the finest trucking land in the county, the soil being similar to that of the noted vegetable section of Hanover county; then, again, its nearness to a growing city, such as Richmond now is, justifies the hope of a very largely increased value in a few years; and, again, it is said to contain inexhaustible quantities of the finest clay for pottery, fire brick, tiling, etc.”; and besides, he says, “ embracing, besides the excellent highland, a quantity of Chicka-hominy low grounds and a sufficiency of woodland.” In view of the fact that such large interests are involved, the property being both extensive and valuable, and the debt being safely secured and bearing 7 per cent interest, in reviewing the discretion of the trustee, and considering all the circumstances of the case, we are of opinion that the wishes of the debtor in this ease ought to be so far respected as to make the sale on the premises, the deed not prescribing any other place, and that, before dissolving the injunction, the chancery court ought to have so directed, and its refusal to do so is error, for which the decree complained of must be reversed and annulled.

¥e are further of opinion that the land should be subdivided and sold in parcels; that no more may be sold than is necessary to pay the debt; and, when enough has been realized to pay the debt, no more ought to be sold. It is true that the deed simply directs the trustee to sell the property conveyed, but this must be taken in connection with the statute, chapter 113, § 6, Code 1873, which applies to this case, which provides, in such case, that when, default shall have been made in the payment of the debt, or any part thereof, by the grantor, the trustee shall sell the property conveyed by the deed or so much thereof as may be necessary. And Judge Moncure, speaking of this subject, and construing a similar law to this, says, in Michie v. Jeffries, 21 Gratt., 347: “It is the duty of the trustee not to sell more of the trust subject than the purposes of the trust require, even though the deed direct him, in case of default, to sell the trust subject, without saying, ‘ or so much thereof as may be necessary to satisfy the purposes of the trust,’ ” the last part of the sentence, “ to satisfy the purposes of the trust,” being the phraseology of the law applicable to that case. Code 1860, c. 117, § 6. He adds: “ That is always implied, unless a contrary intention plainly appears”; and again: “In saying ‘under and by virtue of the trust deed,’ the tract of land thereby conveyed to him is to be construed and read as if the words ‘ or so much thereof as may be necessary ’ followed the words above mentioned. In saying ‘ under and by virtue of the trust deed,’ all the terms of the deed, and of the law on which it is founded, are in effect embodied in the decree, except such as are expressly varied.” To the same effect is Terry v. Fitzgerald, 32 Gratt., 851; the opinion in that ease saying: “ We hold that it was the duty of the trustee to sell it in parcels, if by that mode it would bring the best price; and, although he has a discretion, it is a legal discretion, which is subject to the control of a court of equity; and if the land will bring a better price by dividing it and selling it in several lots, and the owner desires and requests it, and the trustee refuses, the owner thereby invokes the intervention and assistance of a court of equity, * * * to control him in the exercise óf his discretion,” citing Judge Moncure as saying, in Crenshaw v. Seigfried, 24 Gratt., 272: “If the debtor desires that a particular and designated portion of the land, fully adequate by a sale for cash to produce the amount of the debt and expenses, such desire.ought to be carried into effect. In this case the debtor does not insist that only a part of the land shall be sold, or object to selling the whole if necessary for the payment of the debt and expenses, but only insists that it shall be laid off into particular and designated portions, having assurance that it will sell better, and will not require the sale of the whole to pay the debt and the expenses.” In the same case it is said that the court having possession of the case ought, instead of dissolving the injunction, to have retained it, and directed the execution of the trust; and further, “the court is of opinion, therefore, that the circuit court, instead of dissolving the injunction, should have continued it, retaining the cause, and had the sale made under its supervision and direction.” And we think that in this case the court ought not to have dissolved the injunction, but should have retained the ease, and directed the sale to be made under its supervision, directing a division into portions, and making a sale only of so much as was necessary to satisfy the debt; and its refusal so to do, and its action in dissolving the injunction, was error, for which, moreover, the decree of that court must be reversed and annulled.

As to the length of time that the land should be advertised before selling, the terms of the deed are not restrictive, except only so far as to prohibit a shorter notice than “ten days at the least,” and in this case the court, in justice to the debtor, should prescribe a reasonable notice of at least thirty days, and not only in the newspaper as directed by the deed, but by handbills posted and so distributed as to bring the best price attainable for the property, if these expenses are incurred at the instance and request of the debtor, as they do not diminish the amount to be received by the creditor, and in no way impair his rights. It is right to add that in this case the creditor has been liberal and not unduly aggressive in enforcing his claim. It appears that he has been as anxious as the debtor to make the property bring the best price possible, and there is no proper criticism that can be, or ought to be, made upon him, nor upon the trustee throughout these transactions. Much has been done in a mutual spirit of friendliness; but the parties have reached the point where divergence of interest has finally culminated in disagreement, and, the debtor seeking the aid of a court of equity, as he had a right to do, we have considered the rights of the parties as they now appear, and will reverse the decree for the stated reasons, and remand the cause to the chancery court, with directions to continue the injunction, and direct the proceedings of the trustee in order to a sale of the property and the payment of the creditor’s debt as soon as it can be done, having regard to the just rights of all concerned.

Fauntleroy, J., concurred in the result.