Opinion
04-02-1873
GRÆ ME v. CULLEN & als. HUNTER v. JOHNSTON & als.
Lyons, Meredith and John Howard, for the appellants. Jones & Bouldin and Daniel, for the appellee. 3d question by counsel for defendants, on his examination in chief. Where were you in the summer of the year 1865?
1. Deed of trust to two trustees to secure debts, empowers the two, or either of them, to sell upon the demand of the creditor. If one of the trustees refuses to unite in the sale, the other may make a valid sale.
2. The house on the lot in a city conveyed in trust is burned down, and the grantor in the deed employs workmen to build another house, upon an agreement to give them a lien upon the lot and house for the cost of the building. The workmen are not informed of the first lien, until they have nearly completed the work, though it was duly recorded. The whole property is subject to satisfy the first lien.
3. The act, ch. 135, s. 30-34, " concerning the action of ejectment," and the act, ch. 136, concerning the allowance for improvements," do not apply to this case. They are confined to cases of ejectment, or cases in which a decree or judgment is rendered against any defendant for land.
4. Though the builders have obtained a second deed of trust on the property, and claim that only the value of the lot without the house should be applied to satisfy the first lien, this is not such a cloud on the title as forbade the trustee to sell under the first deed; especially as the grantor in the deeds had obtained an injunction to a sale of the property on that ground; which had been dissolved before the advertisement of the second sale.
5. The trustee should sell according to the provisions of the deed.
6. In what cases, and upon what principles, a party making permanent improvements upon land, which belongs to another, will be allowed compensation therefor; see the opinion of Moncure, P.
7. A vendor of a house and lot transfers to the vendee an insurance policy upon the house, and takes a deed of trust upon the house and lot to secure the purchase money. The house is afterwards consumed by fire. The debt not being paid, the vendor is not bound to pursue the insurance company, but may enforce payment by sale of the house and lot.
8. Upon a sale of a house and lot, upon credits extending through several years, separate bonds are taken for the interest. They will bear interest from the time they fell due.
By deed bearing date the 15th of February 1860, John Græ me, of the city of Richmond, conveyed to Gustavus A. Myers and John Græ me, jr., a certain lot of land in the city of Richmond, situated on the south side of Main street, on which there was a brick house, and bounded by the same boundaries as when Patrick Cullen purchased the same from James Talley, on the 23d of January 1835; in trust to secure to Patrick Cullen the payment of the sum of $22,200, for which the said Græ me had that day executed and delivered to the said Patrick Cullen thirty writings obligatory commonly called single bills, by which he promised to pay to said Cullen, the several sums of money, and at the times, respectfully set forth and specified in a schedule annexed to the deed. These single bills were for various amounts and their times of payment ran from 1860 to 1875.
The deed provides that in the event that default be made in the payment of either of the above mentioned writings obligatory as they become due and payable, then the trustees, or either of them, on being required so to do by the said Patrick Cullen, his executors, administrators or assigns, shall sell the property hereby conveyed. And it is covenanted and agreed between the parties aforesaid, that in case of a sale, the same shall be made after first advertising the time, place and terms thereof, for ten days in some newspaper published in the city of Richmond, and upon the following terms, to wit: For cash as to so much of the proceeds, as may be necessary to defray the expenses of executing this trust, the fees for and recording this deed, if then unpaid, and to discharge the amount of money and interest then payable upon the said writings obligatory; and if at the time of such sale any writing shall not have become due and payable, and the purchase money be sufficient, such part or parts of said purchase money as will be sufficient to pay off and discharge such remaining writings obligatory shall be made payable at such time or times as the said writings obligatory will become due; the same to be properly secured; and for any residue, of purchase money on such credit as Græ me his executors, & c., should direct, or on his failure to direct as the trustees should think fit.
This deed was not executed by the trustees. It was recorded in the clerk's office of the Hustings court of the city of Richmond on the acknowledgment of Græ me, on the 21st of February 1860.
The house and lot conveyed in this deed, had been sold by Cullen to Græ me, and the writings obligatory mentioned, were for the purchase money. About the time of the conveyance by Cullen to Græ me, Cullen assigned to him a policy of insurance on the house.
The writings obligatory were paid by Græ me as they fell due, up to the year 1864. Those that fell due that year and subsequently were not paid; and on the 3d of April 1865 the house was burned in the fire which consumed a great part of the city.
In July 1865 John Græ me being the owner of the ground extending from the lot conveyed as aforesaid, to Twelfth street, and running back on that street, made a contract with S. H. and J. F. Adams, of Baltimore, for the building of three tenements on his ground on Main street, and two to front on Twelth street; and the agreement seems to have been that the contract should be reduced to writing and placed on record, so as to give them a lien on the lot and buildings for the price of building them. This, however, was not done until November, for the reason as S. H. Adams states, that they were advised by their counsel, that the clerk's office was in the possession of the United States Military authorities, and therefore it could not be recorded. In November they had been informed of the deed of trust held by Cullen, and then John Græ me and James Hunter and Mary his wife, who was the daughter of Græ me, entered into an agreement in writing, which was admitted to record, by which Græ me covenanted that the Adams' should have a lien on the ground and the buildings they were putting up for Græ me; and Hunter covenanted that they should have a lien on certain real estate of his own, for the cost of building the said houses; and by deed bearing date the 15th of March 1866, and duly admitted to record on the 17th, Græ me conveyed to Andrew Johnston and John Græ me, jr., the ground and buildings aforesaid, and Hunter and wife conveyed to them the real estate mentioned in his agreement, in trust, to secure to S. H. Adams for himself and his partner J. F. Adams, the payment of seven negotiable notes bearing date the 15th of March 1866, with interest from the date, executed by Græ me to S. H. Adams, payable in from one to six years, amounting together to $58,660. The first of these notes, which was payable in one year, was for $9,450, and the second, which was payable in eighteen months, was for $5,525.
The trusts of the deed were to sell if and when any of the said notes were not paid; and for cash for expenses of executing the trust, and to discharge all principal and interest then due, and upon a credit for such sums and at such times as required to meet the other notes not then due, if any, and the surplus if any was to be paid as Græ me should direct. And it was provided that as soon as the first two notes were fully paid Hunter should be entitled to have and receive a release of the property which he conveyed by the deed. By another deed bearing date the 14th of March 1867, executed by Græ me, Hunter and wife, the trustees and S. H. Adams, reciting the sale by Græ me to Robert A. Mayo, of a part of the property conveyed by him, in consideration of the trustees and Adams uniting in a conveyance of the same to Mayo, Turner and wife released the provision in his favor for a release of his property on the payment of the first two notes.
By the direction of Cullen the trustees, Myers and John Græ me, jr., advertised the property embraced in the deed from John Græ me to them to be sold on the 7th of March 1868 on the terms of the deed. The advertisement set out the several writings obligatory secured by the deed, then stated the several bonds then due, and also the bonds which were yet undue, with the amount of each and the time it fell due. The amount due and for which cash was required was between seven and eight thousand dollars, the amount to fall due and for which a credit was to be allowed, was $8,680, and extended from August 1868 to February 1875.
To enjoin this sale John Græ me filed his bill in the Circuit court of the city of Richmond. The grounds on which the injunction to the sale was asked, was that the building which was on the lot when Cullen sold it to Græ me had been burned, and the new building put upon it by the Adams' and built under an agreement that gave them a lien upon it; and that Cullen with a knowledge that they were putting up the building, had not given them any notice of his lien. The plaintiff insisted, therefore, that Cullen was entitled to a lien to the value of the ground, and that the Adams' were entitled to the balance of the price at which it should be sold; and that the property should not be sold until this question was settled.
The injunction was refused by the judge of the Circuit court, but was granted by a judge of the court of Appeals. This injunction was dissolved on the 11th of April 1868. And then Cullen directed the trustees to proceed to sell the property under his deed of trust; and John Græ me, jr., declining to unite in the sale, it was advertised by Gustavus A. Myers, the other trustee, to be sold on the terms prescribed in the deed, and was sold on the 22d of March 1868, and purchased by S. H. Adams for himself and his partner, at the price of $20,000. To this sale John Græ me, jr., objected both by advertisement in the newspaper and also at the sale.
The Adams' not complying with the terms of the sale, Cullen, in June 1868, filed his bill in the Circuit court of the city of Richmond, against John Græ me, Gustavus A. Myers, John Græ me jr., as trustee in both deeds, the Adams', Andrew Johnston and Mrs. Hunter, as executrix and sole devisee of James Hunter, deceased, setting out his deed of trust, the sale by Myers, and the purchase by the Adams', and asking for a specific execution of the contract of purchase by the Adams'.
S. H. and J. F. Adams answered the bill. They say that S. H. Adams attended the sale, and gave notice to the autioneer that they had a claim against said property, and any action of his was for the protection of their interest; and that they did not mean to compromise the same by such action. They admit the purchase at the sale made by Myers, for twenty thousand dollars, and that the purchaser did decline to comply with the terms of said purchase, until he should be satisfied upon the subject of the validity of the sale made by Myers as sole trustee, and also until the question was settled between the said Cullen and the respondents, as to the priority of their respective claims upon the value of the buildings which they had erected upon said lot. After stating the facts as to the refusal of the trustee, John Græ me, jr., to unite in the sale, and the burning of the house on the 3d of April, they said that on the 24th of July 1865, they entered into a contract with John Græ me to furnish all the materials and labor, and build the houses on Main and Twelfth streets, and to take security for their reimbursement by instalments, upon the property, with the improvements so to be made. They aver that they were not informed by the said Græ me nor by the said Cullen, nor by any body else, that Cullen had any lien or claim whatsoever upon the said property or any part of it; and they had no suspicion of such a lien, nor any grounds to suspect it. In pursuance of this contract the respondents went on to furnish the labor, materials and money, and erected the house upon this lot, and upon the adjoining property aforesaid, with their own money and other resources. The fact that they were doing so was notorious. The site of the property was one of the most public, and its value inferior to few in the city; and it was known to every body acquainted with the affairs of John Græ me, that he had not the means himself to defray the costs of such improvements. The plaintiff had been a resident of the city of Richmond for many years, and if he was not a resident at that time, he was a sojourner therein during a considerable part of the year 1865, and at the time the respondents were going on with said improvements; and they charge that the plaintiff well knew, or was informed and believed, that the said improvements were being made by these respondents, under a contract with Græ me, and that the funds for the same were in fact advanced by the respondents; or if he was not informed as to the precise facts, he knew or was informed of enough to be assured that some person or persons, other than John Græ me, was engaged in the erection of said improvements, and was advancing the funds for that purpose. And they insist that under these circumstances it was the duty of the plaintiff to have enquired and ascertained the facts, if they were not known to him, and to have given notice of his alleged lien and claim upon the property, to the person engaged in making such improvements; and not making such enquiry and giving such notice, but standing by and suppressing the fact of his interest in the property, he will be regarded in law as having fraudulently concealed the same, and he will be postponed in the enforcement of his lien to these respondents, to the extent of the value of the improvements erected upon said lot by them.
They further say, that before they had any notice or suspicion as to the lien of the plaintiffs, they had expended upon this and the adjoining property about $40,000; that it was in November 1865 when they received this information, when John Græ me was about to enter into the agreement with these respondents, which was to be duly recorded in order to give them a lien upon the property; and the reason why this had not been done at the commencement of the work, was that the office of the Hustings court of the city was then in the possession of the Military authorities of the United States; and respondents were informed and believed that no agreement could then be so recorded as to give them a valid lien on the property.
Mrs. Hunter in her own right and as executrix of James Hunter deceased, filed her bill in the same court against Cullen, the Adams', John Græ me and the trustees in Cullen's deed, in which she insists upon the illegality of the sale made by Mr. Myers, and also on the conduct of Cullen and his trustees in standing by and not giving notice of his lien, as giving the Adams' preference over him.
The depositions of Cullen and of S. H. Adams were taken. That of Cullen, so far as it refers to the last point, is stated by Judge Moncure in his opinion, for which see other facts referred to by him. That of Adams' is in accord with his answer.
On the 14th day of February 1871 the causes came on to be heard together, when the court dismissed Græ me's bill with costs; and held that Cullen was entitled as against the Adams' to specific performance of their contract of purchase under the sale by the trustee Myers, which sale was confirmed; and that he was entitled to have, out of the purchase money, satisfaction of the debts due and to become due from Græ me to Cullen, and secured by the deed aforesaid, without abatement, because of the improvements put upon the lot by Græ me since the said deed of trust was executed to secure the same; and that the Messrs. Adams must be postponed to said Cullen. It was therefore decreed accordingly; interest being charged upon all the writings obligatory, from the time they fell due, whether given for the principal or for the interest. From this decree Mary Hunter, John Græ me and John Græ me, jr., applied for, and obtained an appeal to this court.
Lyons, Meredith and John Howard, for the appellants.
Jones & Bouldin and Daniel, for the appellee.
OPINION
MONCURE, P.
The two main questions arising in this case are, first: whether the sale made by Gustavus A. Myers, one of the two trustees named in the deed of trust of the 15th day of February 1860, from John Græ me to said Myers and John Græ me, jr., for the benefit of Patrick Cullen, was a valid sale? And second: whether Cullen is entitled to have full satisfaction of his debt secured by that deed, out of the proceeds of that sale, before S. H. & J. F. Adams, the builders of the house which was upon the lot of ground sold at the time of the sale, will be entitled to any part of the said proceeds on account of the debt due to them by said Græ me for said building? These two questions, substantially, in the above order, were considered by the learned judge of the court below, in the opinion delivered by him on pronouncing the decree appealed from in this case, and were discussed by the able counsel in their argument of the case before this court. We will, therefore, consider the same questions, and in the same order, in our examination of the case. Other questions arise in the case which were considered in the court below, and were argued by counsel in this court, and which we will also have to consider; but they are subordinate and collateral to the main questions aforesaid. Proceeding, then, to consider those two main questions, we will enquire:
First--Was the sale made by Myers, as aforesaid, a valid sale?
The law in regard to the power of one of two or more trustees, named in the instrument creating the trust, to execute the trust severally, is very plain, and is familiar to us all. Where two or more persons are authorised to execute a trust or power jointly, of course they are not authorised to execute it severally, unless such authority be also given by the instrument creating the trust or power. That instrument being the only source of the authority, of course there can be no authority which does not flow from that source. Lewin on Trusts, 266, marg.; 1 Lom. Dig. 249. A trust or power given to two or more, is joint only, unless words be added making it several also. But while one or two or more joint trustees cannot execute the trust severally, it is perfectly competent for the author of the trust to empower the trustees to act severally, as well as jointly; and in that case, the act of one of the trustees, in pursuance of the trust, is just as valid as if he only had been appointed to execute it. The law on this branch of the subject is correctly laid down in the opinion of the court below and the authority therein cited. By the terms of the instrument creating the trust, its author " may confide the execution of the trust to one person alone, or to two or more jointly, or to two or more jointly and severally; and in the latter case, one of the trustrustees alone, or a less number than the whole, may execute the trust where the deed provides that less than the whole number may act. 1 Lom. Dig., marg. p. 325. When there are several trustees, and there is no provision in the deed that a less number than the whole may act, all must act; because it is an office of personal confidence, (Lewin 262,) and in such case the grantor has not confided in any one, or in any number less than the whole. But, when the deed does provide that a less number may act, it is a clear indication that the grantor has the same confidence in the lesser number that he has in the whole; and it follows, that in such case it is competent for a less number than the whole to execute the trust." The case of Taylor & ux. v. Dickinson, & c., 15 Iowa R., 483, cited by one of the counsel for the appellee Cullen, bears directly on this branch of the case, and seems to be a correct decision. Then, the question in regard to the power of Myers to act severally in making the sale, is one of construction merely. Does the deed of trust confer such power?
The deed was executed to secure the purchase money, or part of the purchase money, of the lot of ground thereby conveyed, which it seems, on the same day had been sold and conveyed by Cullen to Græ me. The amount secured by the deed was $22,200, for which Græ me executed and delivered to Cullen thirty writings obligatory, for different sums of money, payable at different times, between the 15th day of February 1860, the date of the deed, and the 15th day of February 1875, inclusive, according to schedule annexed to the deed. The deed provides, that in the event that default shall be made in the payment of either of the above mentioned writings obligatory as they become due and payable, then the trustees or either of them, on being required so to do, by the said Patrick Cullen, his executors, administrators or assigns, shall sell the property hereby conveyed." Certainly language could not be plainer, nor more unlimited and unconditional, than is the language here used to empower the trustees, severally as well as jointly, to make the sale, on being required so to do as aforesaid. The power thus given to either of the trustees to make the sale, is not a conditional power to make it only in the event of the death of the other trustee, or of his non-residence in the State, or of his refusal to accept the trust, but it is general and unconditional; just as much so, as is the power given to them to act jointly in the matter. How then can it be said, that Myers had not power to make the sale severally in this case? Suppose both of the trustees had signed the deed of trust, (though neither of them did,) that would have been the most express and binding acceptance of the trust which the trustees could possibly have given; and yet, could it have been contended in that case, that one of the trustees could not have made the sale on being required by the trust creditor to do so, notwithstanding the refusal of the other trustee to join in making it? How then can it be said that by joining in the first advertisement of sale, Græ me, jr. accepted the trust, and thereby put it out of the power of Myers, afterwards, to make the sale severally, though Græ me, jr. was expressly requested and expressly refused to join in making it? Did Græ me, jr's. acceptance of the trust, and his refusal afterwards to join in making a sale, annul that portion of the deed which expressly requires either of the trustees to make the sale, on being required by the trust creditor to do so? It may be true that in the selection of the trustee, the trust debtor and creditor may have been influenced, to some extent, by the consideration, that one of them was the son of the debtor, and the other the friend, if not counsel of the creditor; (though it seems he was only such counsel in drawing the deed, and not the general counsel; ) but it was certainly not intended that the trustees should only act together, and not severally; for the deed expressly provides otherwise. The parties were friendly at the time of the execution of the deed, and did not anticipate any difficulty in the future. But the debts to be secured had a long time to run, covering a period of fifteen years; and the parties could not know what would turn up in the meantime. It was a prudent precaution, therefore, in the trust creditor to stipulate in the deed for a right to require the trustees or either of them to make a sale, in the event of a default by the debtor in making his payments. Before all the debts became payable, the parties, debtor and creditor, might become inimical to each other, (as turned out to be the case,) and the trustee, who is a son of the debtor, might naturally take sides with his father, and be biased in his favor; and might think it improper to join in making a sale, and therefore refuse to do so. In such an event, it was important to the creditor to have the right to require the other trustee to make the sale, and the right was accordingly secured to him by the deed. We do not mean to say that this was the only motive for inserting that provision in the deed. On the contrary, there were many other motives for its insertion. But this may have been one of the motives, and was a reasonable one; and at all events, such a state of things presents a case in which either of the trustees may be required to make a sale, notwithstanding the refusal of the other trustee to join in making it, and even against his protest, if such sale would be otherwise proper. We do not mean to say that one of the trustees might have been required to make the sale alone, if the other had been willing to join him in making it. It is unnecessary to decide that question in this case, and we therefore express no opinion upon it. But we do mean to say, that if one refuse, though requested to join in making a sale, no matter what may be the motive of such refusal, the other has power to make it; and if it be otherwise proper, the sale will be valid. In this case Græ me, jr., was requested to join in making the sale; and he did join in the first advertisement; but he refused to join in the second. After being made trustee in the deed for the benefit of Cullen, he accepted another trust upon the same property for the benefit of S. H. and J. F. Adams. These trusts were, in his opinion, conflicting, and he could not decide between them, " and what right," enquires the petition, " had Cullen, or Myers either, to require him to assume the grave responsibility of so doing?" This may have been a very good reason for his refusing to join in making the sale under the deed for the benefit of Cullen; but it was at least as good a reason, why Myers should have power to make the sale alone, if such a sale would otherwise be proper.
Then we proceed to enquire, whether the sale was otherwise proper; in other words, whether it is valid, notwithstanding the fact that both trustees did not join in making it?
The sale was advertised and made in strict pursuance of the terms prescribed by the deed of trust. There was no uncertainty as to the amount due on account of the trust debt at the time of the sale. The debtor had made default in the payment of the instalment which became payable on the 15th of February 1864, and of all the semi-annual instalments which became payable afterwards, down to the time of the sale on the 22d of May, 1868, and had paid nothing on account of the principal or interest of the debt during all that period. The title to the property was perfect, and there was no cloud whatever over it, at least at the time of the execution of the deed of trust. The deed was duly recorded a few days after its date. The creditor was prevented by the stay law from having the deed of trust enforced by a sale of the property, until after it was decided by this court in Taylor v. Stearns, & c., 18 Gratt. 244, that so much of that law as suspended the enforcement of deed of trust liens was unconstitutional; which decision was made in 1868, February 19. Shortly thereafter, the sale was advertised and made as aforesaid. It does not appear, and is not pretended, that the trustee did not use every means in his power to make the property produce the highest possible price at the sale. On what ground, then, can it be, that the said sale is invalid?
The ground on which the appellants insist that it is invalid is, that at the time it was made there was a pending controversy in regard to the improvements which had been constructed upon the said property by S. H. and J. F. Adams; that is to say, whether the proceeds which might arise from the said sale, on account of the said improvements, would be properly applicable, in the first place, to the payment of the trust debt due to Cullen, or to the payment of the debt due to the Adams' for said improvements; for the security of which latter debt a subsequent deed of trust on the said property had been executed and recorded. The appellants contend that this controversy, in itself, (however the right may be,) was such a cloud over the title as made it improper in the trustee to make the sale until the said cloud was removed; and that the necessary effect of making the sale, under such a cloud, was to produce a sacrifice of the property. We will now enquire as to the nature of this supposed cloud, and as to its probable effect upon the sale.
The question now to be considered is, not how the proceeds of the sale of the property ought to be applied--that will be the subject of our next enquiry--but what was the nature and state of the controversy on the subject at the time of the sale, if controversy it could be called; and whether it injuriously affected the sale.
It is manifest, we think, that when the agreement of the 18th of November 1865, between Græ me, James Hunter and the Adams,' providing for a lien to be given to the Adams' on the property therein mentioned, to secure the payment of the cost of the improvements, which had been and were expected to be put upon the said property, all of the parties to said agreement believed that Cullen would have a prior lien to that of the Adams', not only on the lot of ground conveyed by the deed of trust for Cullen's benefit, but also on the improvements which had been, or might be, put upon that ground, as aforesaid. And this belief, no doubt, continued down to the time of the advertisement of the property for sale by Græ me, jr. and Myers, the two trustees under the said deed of trust. But afterwards a change seems to have occurred in the views of the said parties. That change in the views of Græ me, sr., manifested itself by the bill which, on the third or fourth of March 1868, just three or four days before the day fixed by the trustees for the sale of the property, was presented to the Judge of the Circuit court of the City of Richmond, praying for an injunction of the said sale, upon the ground of the alleged, or supposed, prior lien of the Adam's to that of Cullen, on the improvements aforesaid, and of the injurious effects of making a sale of the property under such a supposed cloud. The injunction prayed for, was refused by the Judge of the Circuit court on the 4th of March 1868, but was granted by a judge of this court on the 10th of March 1868, and the sale advertized to be made on the 7th day of the same month was not made. Cullen filed his answer to the bill, and gave notice to Græ me that he would, on the 28th of the same month, move the judge of the said Circuit court to dissolve the injunction: which motion was accordingly made. And on the 11th day of April 1868, to which day the said motion was continued by consent of parties, it came on to be heard by the said judge in vacation, on the original bill, the answers of the defendants Cullen, Myers, and S. H. & J. F. Adams to the said original bill, with general replication to said answers, the answer of the defendant Mary Hunter on that day filed, the amended and supplemented bill (making said Mary Hunter a defendant to the suit,) the exhibits filed and the depositions of witnesses, and was argued by counsel: On consideration whereof, the said Judge in vacation adjudged, ordered and decreed that the said injunction should be, and the same was thereby dissolved. And on the motion of the plaintiff by counsel, who represented that he desired and intended to present a petition for an appeal from the said decree, it was further ordered that the said decree be suspended for thirty days from its date, to enable the plaintiff to present such petition. No such petition ever was presented; or, at all events, no such appeal ever was obtained. After the said period of thirty days had expired, to wit: on the 12th of May 1868, Myers, as sole acting trustee, again advertised the property for sale, in pursuance of the terms prescribed by the deed of trust, on the 22d day of the same month. Before proceeding to act as sole trustee in advertising and making the sale, Myers, on the 11th of May 1868, sent the advertisement to his co-trustee, Græ me, jr., with a note requesting him to sign it. The latter replied by a note dated on the same day, in which he said: " as co-trustee alike in the deed from John Græ me, to secure Messrs. S. H. and J. F. Adams, and in the deed from said Græ me to secure Dr. Cullen, both of which trusts I have accepted, I am advised by counsel, that under the circumstances, it would not be proper or safe in me to unite with you in the sale of the house erected on the lot in question by Messrs. Adams, to pay the debt due to Dr. Cullen, or to consent to such sale by you, my co-trustee, in said deed to secure Cullen. I therefore notify you that I can not consent to the sale proposed to be made, the advertisement of which was submitted to me to-day, and shall decline to do any act to divest the title in me, in part, under said deed, in order to effectuate the said proposed sale. Any expenses, costs, or damages that may be incurred by reason of an attempt to make such sale by you, will of course be assumed by yourself, and on your own responsibility; and such a sale would be regarded by me, co-trustee in said several deeds, as an act done without lawful authority, and therefore null and void, & c." The writer also appended to the said advertisement of Myers in the newspaper, a notice signed by himself, in which he stated: " I have notified Mr G. A. Myers, under the advice of counsel, that I could not safely consent to the sale above advertised by him to take place on the 22d instant, and that such sale would be regarded by me as illegal, and therefore null and void." It seems also that he attended the sale, and then and there gave a similar notice, and that he had been notified by his sister, Mrs. Mary Hunter, executrix and sole devisee of James Hunter, " not to unite in such a sale; that she would regard the same as a null and void act, so far as it affected her rights; and that she would hold him personally responsible for any damage that might accrue to her by reason of his uniting in or giving any countenance to such a sale." Myers, however, made the sale, according to his advertisement; and S. H. & J. F. Adams, being the highest bidders, became the purchasers at the price of twenty thousand dollars. It does not appear that that was not an adequate price for the property at that time, on the terms on which it was sold; which were the terms prescribed by the deed of trust. Real estate in Richmond had considerably fallen in market value, since 1865 and '6, and it was uncertain whether there would not be a still further fall therein. The property might have produced more if sold on different terms; or rather if a less amount of cash had been required; but it certainly does not appear, nor is there any evidence in the case, that more could have been gotten for it on the same terms. The trustee properly sold it on the terms prescribed by the deed, which he had no right to vary. The amount of the cash payment required was quite large, but it was made so by the long continued default of the debtor, which accumulated the amount in arrear. But still, the terms were favorable in regard to the portion of the purchase money required to meet the instalments of the debt which had not become payable, and which were to run to February 1875, nearly seven years after the sale. Then was this sale valid, under these circumstances?
We are of opinion it was. There was no cloud over the title at the time of the sale. The only controversy which then existed, if any, was as to the application of the proceeds of the sale. The injunction of the sale which had been granted by a judge of this court after having been refused by the Judge of the Circuit court, had been dissolved by the latter, and no appeal had been taken from the order of dissolution. There was then no impediment in the way of a sale, and no reason for believing that a fair sale could not be made, at as full a price as could be obtained for such property, at that time and on the terms prescribed by the deed. There had been no decree dismissing the injunction suit after the injunction was dissolved, and it was a pending suit at the time of the sale; but it was pending only for the purpose, if any, of having the proceeds of the sale applied according to the respective rights of the claimants, as they might thereafter be determined by the court. Græ me's suit against Cullen (the injunction suit) was the only one of the four suits in which the decree appealed from was rendered, which had been brought, or, at least, in which a bill had then been filed; and the injunction awarded in that suit had been dissolved. To be sure, it seems that Mary Hunter, executrix and sole devisee of James Hunter, on the very day on which the injunction was dissolved, sued out the subpœ na which was the commencement of the suit of " " Hunter v. Johnston, & c.," which was one of the said four suits; but no bill was filed in the suit until the 7th day of September, 1868, nearly four months after the sale. If the property did not in fact, produce a full price, it was owning, doubtless, to the means used by the debtor Græ me, sr., his son, one of the trustees, Græ me jr., and his daughter Mary Hunter, to prevent the other trustee Myers from making a sale, after the court, by dissolving the injunction had decided that there was no impediment in the way. It was their duty then to do every thing in their power to promote a good sale; and it was their interest also, except so far as it may have been more to the interest of Græ me, the debtor, to postpone the sale as long as possible, in order that he might, in the meantime, continue to receive and enjoy the rents of the property. If the sale was injured by the course pursued by them, they, surely, have no just cause to complain. See Ford v. Heron, 4 Munf. 316, cited by one of the counsel for Cullen. The Messrs Adams do not complain. But the property sold for a fair price, considering the time at and the terms on which it was sold. The Messrs. Adams in their answer to Mrs. Hunter's bill, deny that the sale was made under such circumstances of difficulty and cloud as to title, that fair competition for it, at its real value in the market, was excluded." And they " aver, on the contrary, that the price bid for the said property by them, and at which the said property was struck off to them, as the highest bidders therefor, was, in fact, the full market value of the said property, supposing the title to be conveyed to be a full and complete title in fee simple, without any cloud or difficulty whatever." And they say they were induced to offer a full price for the same, in order to save themselves, as far as possible, from loss; and relying upon the judgment of the court to make such distribution of the purchase money as should be consistent with their rights and those of the said Patrick Cullen." And Mrs. Hunter herself, in her answer to Cullen's bill for the appointment of a receiver, in Cullen v. Græ me, one of the said four suits, manifests her willingness and indeed suggests that the purchase money should be paid into bank to the credit of the cause, which she is advised, it would be entirely competent for the court to do, and respectfully suggests that it ought to do; and then a conveyance may be made to the purchaser." Thus showing that the real controversy on her part, was not as to the propriety or fairness of the sale or the adequacy of the price, but as to the proper application of the proceeds. We can readily see how the existence of a controversy between Cullen and the Adams' as to the proper application of the proceeds, might enhance the price of the property at the sale, by producing a competition between these parties as bidders. This case is very different from the cases cited by the counsel for the appellants to show, that property should not be sold by a trustee while there is a cloud over the title. The difference will readily appear by a comparison of the circumstances of this case with those which existed in them. The cases referred to are Rossett v. Fisher, 11 Gratt. 498; and Roberts v. Roberts, 13 Id. 639. We proceed now to enquire:
Secondly--Is Cullen entitled to have full satisfaction of the balance due to him by Græ me, out of the proceeds of the sale of the said lot of ground with the building thereon, before S. H. and J. F. Adams will be entitled to any part of the said proceeds on account of the balance due to them by Græ me for said building.
It is a general rule of law, that the owner of land owns every thing annexed to it. Cujus est solum, ejus est usque ad cæ lum, is a well established and familiar maxim of the law. To this general rule, there seems, originally, to have been few or no exceptions. But there are now many exceptions to it, as well established as the rule itself; though there is some uncertainty, and apparent conflict in the cases, as to the extent of some of these exceptions; and it is sometimes difficult to determine whether a particular case comes within any of them. Most of these exceptions arise under the law in regard to what are called " fixtures; " which law has undergone great change in modern times, as trade has increased and its necessities and conveniences have required a modification of the law. The decision of Lord Ellenborough in Elwes v. Maw, 3 East's R. 38, is a celebrated case on this subject. He considers it under three heads: 1st, as between heir and executor; 2dly, as between executors of tenant for life or in tail, and the remainderman or reversioner; and 3dly, as between landlord and tenant. This case may be found in 2 Smith's Leading Cases p. 117 top and 228 marg.; and in it and the notes appended thereto both by the English and American publishers of that valuable work, all the authorities having any material bearing on the subject are referred to. These authorities show how carefully the law in regard to these exceptions, guards the inheritance against injury by the removal of fixtures, even where they are annexed by a tenant for the purpose of trade; in which case the right of such removal is most favored by the law. The removal must be effected during the possession of the tenant and without any substantial injury to the freehold. But it is unnecessary to comment further on the cases which relate to the law of fixtures, as that law has no direct application to this case. The building erected by the Adams', on the lot of ground conveyed by the deed of trust, to secure the debt due by Græ me to Cullen, is certainly not a fixture, within the meaning of that law; and if the parties, Græ me and the Adams', or Cullen and the Adams', stood towards each other in the relation of landlord and tenant, the Adams' would not have a right to remove the building without the consent of Græ me and Cullen, according to any of the authorities in regard to fixtures. Indeed no such right is claimed in this case. The right claimed here by the Adams' is, to have so much of the proceeds of the sale aforesaid as arose from the building applied, in the first place, to the payment of the debt due to them for erecting the said building; upon the ground, first, that they contracted to do the work without any knowledge of the existence of the deed of trust for Cullen's benefit, and on the terms that the price of the work should be secured to them by a lien on the said lot when the building should be completed; and also upon the ground, secondly, that Cullen was aware that they were doing the work, relying on such security, and yet failed to inform them of his deed; and so was guilty of a fraud, by reason of which his lien will be postponed by a court of equity to theirs. Now, let us see whether these two grounds, or either of them, be sufficient to sustain their claim.
But before we consider them separately, we will make some general observations which apply to them both. And first--all buildings and other improvements and fixtures put upon mortgaged premises by the mortgagor, after the execution of the mortgage, become a part of the freehold, and enure as such to the benefit of the mortgagee. There are a great many authorities on this subject, but no conflict among them. All affirm or recognize the principle just stated. It is, perhaps, no where more clearly stated than by Chief Justice Shaw, in the case of Butler's adm'r v. Page, 7 Metc. R. 40, referred to in the opinion of the chancellor in this case: " All buildings erected, and fixtures placed on mortgaged premises, by the mortgagor," says the Chief Justice, " must be regarded as permanently annexed to the freehold; they go to enhance the value of the estate, and will, therefore, enure to the benefit of the mortgagee, so far as they increase his security for his debt; and to the same extent, they enhance the value of the equity of redemption, and thereby enure to the benefit of the mortgagor. Winslow v. Merchants Ins. Co. 4 Metc. R. 306. There is no necessity to adopt any liberal rule in regard to fixtures to enable the mortgagor to remove what he has erected at his own expense; because he has the full benefit of all such improvements when he regains the estate by redemption, which he may do simply by payment of his actual debt. The general rule of the common law, therefore, that what is fixed to the freehold becomes part of the realty, and passes with it, has its full effect in regard to things erected on the land by an owner who ubsequently mortgages the land, and also in regard to things erected by the mortgagor after the mortgage. It was argued that a mortgagor in possession is tenant to the mortgagee, and the authorities were cited to show that temporary buildings erected by a tenant at his own expense may be removed. This we think is founded on a fallacy." Nobody ever contended that permanent buildings, erected by the mortgagor, or at his expense, could be removed by him, or that the mortgagee could be compelled to account for them, or the proceeds of the sale of them, at least until the mortgage debt was fully paid. The counsel for the appellants admit the correctness of this principle. And they do not deny, but in effect admit, the correctness of what is further said by the chancellor on this subject, (which is undoubtedly true,) that " there is no difference in this respect between a deed of trust and a mortgage, but the principle is equally applicable to both. 2dly: It will be observed, that on the 21st day of February 1860, just six days after the date of the deed of trust for Cullen's benefit, it was duly recorded in the office of the court of Hustings for the city of Richmond, the place prescribed by law for that purpose; and Cullen thus did every thing required of him by law to give public notice of his lien upon the land. 3dly: It will be observed, that there was no time, at or after the commencement of the building on the land by S. H. and J. F. Adams, when they could not have seen the deed of trust by enquiring at the said office, which was situated only a few hundred yards from said land; and yet they made no such enquiry, until after the work had been more than half done. They did not even enquire of Græ me, nor any body else, whether there was any lien upon the land; nor did Græ me give them any, the slightest, information on that subject. They seem to have dealt with him in perfect confidence in his ability and willingness to make good his engagements; and he seems not to have doubted, that the property, subject to the prior liens upon it, would be ample security for the cost of the improvements about to be erected on the land. The high price of such property in Richmond at that time, and the prospect of its continued increase in value, afforded a just foundation for such an opinion. 4thly: It will be observed, that until after the improvements were completed, not a word was said to Cullen about them, either by Græ me, or by S. H. and J. F. Adams, or by any body else; and even after the Adams' were informed of the existence of Cullen's lien, they did not go to him to have any negotiation about the continuance of the work, but went to Græ me and demanded of him further security, in consequence of that prior lien; and accordingly, such further security was given, by a lien on additional property of Græ me, and by Hunter and wife; the son-in-law and daughter of Græ me joining him in the conveyance of their property as such security. The parties concerned thus admitting, by acts if not by words, that Cullen's lien was prior and paramount to that of the Adams' on the property conveyed by the deed of trust, including all the improvements thereon. And it does not appear that there was ever any claim or pretension to the contrary, until after the trustees named in that deed had advertised a sale of the property in pursuance thereof; and then a bill of injunction was filed by Græ me as aforesaid. 5th: It will be observed, that notwithstanding the destruction by fire, of the building which stood upon the land when the deed of trust was executed, and until the 3d of April 1865, such was the favorable location of the ground, and such was the high market value of the property for one or two years after the war, that it could have been sold for enough, during that period, without any improvements thereon, to have paid the balance of the debt due to Cullen. He would have had it sold under the deed of trust, but was prevented from doing so by the stay law. Græ me could have sold it if he would, notwithstanding the stay law, but he would not; and preferred to have a new building erected thereon and take the chances of deriving greater benefit from the property, in that way. In November 1865, Cullen sold his own lot on the same square at a price which Goddin regarded (" all things considered," ) as the highest sale ever made in Richmond. Under all these circumstances, the parties must stand upon their legal rights; Cullen on the one side; and Græ me, Mrs. Hunter and the Adams' on the other; and the law must determine whether Cullen is entitled to the priority which he claims for his lien, as well in regard to the improvements on the land as in regard to the land itself. And now we address ourselves to the several considerations of the two grounds relied on as aforesaid, to show that Cullen is not entitled to such priority, at least in regard to the improvements. And,
First, as to the ground that the Adams', without any actual knowledge of Cullen's lien, contracted to erect the building, upon an understanding or agreement with Græ me that a lien should be given on the ground and improvements for the cost of the work, and that the greater part of the work was done before they had such knowledge.
We have seen that the general rule of the ommon law is, that all buildings and other fixtures annexed to the freehold become part of it, and enure to the benefit of those who are entitled to it; and that this rule applies to property subject to a deed of trust or mortgage. Now, any exceptions which may be set up to this rule, either under any statute or under any established principle of law or equity, must be clearly made out by the party who seeks to have the benefit of them. If the building had been erected in this case under a contract with Cullen, or under a license from him, there would have been no doubt that his lien would have been postponed to the lien for the cost of the building. But such was clearly not the case, and no such fact is pretended.
The statute law gives a lien or claim for improvements against the owner of the land on which they are made, in certain cases and under certain circumstances. The Code, ch. 119, p. 567, gives what is called the " mechanic's lien, on buildings in towns." The 2d section provides, that " If a person owning, or having interest in land, in a city or town, shall, by writing signed by him, contract with another, to pay him money for erecting or repairing any building, & c., on such land, there shall be a lien for such money on the whole interest of the said person in such land, from the time that the said writing is duly admitted to record in the county or corporation wherein the said land lies. But the said lien shall not be in force more than six months from the time when the money, or the last instalment of the money to be paid under such contract shall become payable, unless a suit in equity to enforce the lien shall have been commenced within the said six months. If in such suit the lien be established, the court shall order a sale of such interest in the said land, to satisfy the money which ought to be paid under such contract." It is not pretended that there is any lien in this case under that statute. Some of its most important provisions were not complied with, and indeed were not intended to be complied with, as the parties had not that statute in their view, and had no idea of stipulating for a lien under it. There was no contract in writing for a lien until after the builders were informed of Cullen's deed of trust; and the contract then entered into never was recorded at all, though such lien can only take effect " from the time that the said writing is duly admitted to record." But, what is most significant and instructive in this statute is, that it confines the right to give such a lien only to the interest of the person who contracts with another to pay him money for erecting or repairing any building, and does not authorise a lien to be given on the interest of others in the land, although they may be much more interested therein than the party who has the building erected or repaired. Therefore, Græ me had no right, under the statute, to bind Cullen's interest in the land, even if he had intended to do so; which he did not.
The only other statute law which gives a lien for improvements, is that to be found in ch. 135 of the Code, concerning the action of ejectment §§ 30-34, p. 612; and in ch. 136 concerning " allowance for improvements," p. 613-616. This latter chapter, which embraces all the material provisions of the two relating to the subject we are now considering, introduced a new principle into the law of Virginia, and was taken by the revisors and the joint committee of revision in framing the Code, substantially from the revised statutes of New York and Massachusetts: See Code, p. 613, note. But they do not apply to this case. They are confined to cases of ejectment, or cases in which a decree or judgment is rendered against any defendant for land. And ch. 136, § 1, provides that such defendant may, at any time before the execution of the decree or judgment, present a petition to the court rendering such decree or judgment, stating that he or those under whom he claims, while holding the premises under a title believed by him or them to be good, have made permanent improvements thereon, and praying that he may be allowed for the same, over and above the value of the use and occupation of such land; and thereupon the court may, if satisfied of the probable truth of the allegation, suspend the execution of the judgment or decree, and empannel a jury to assess the damages of the plaintiff and the allowances to the defendant for such improvements." Subsequent sections of the chapter give a lien on the land to the defendant for any balance due to him on account of such improvements; and also give to the plaintiff, in such a case, a right to have the value of his estate in the premises, without the improvements, ascertained, and to elect to relinquish his said estate to the defendant, at the value so ascertained, instead of paying him the balance aforesaid. But these statutes have no application to this case, and apply only to a case against a defendant for land which he bona fide claims as owner thereof, under a title believed by him to be good, and on which he has made improvements under such belief. Here the building was not erected by a person in possession of the land claiming it under a title believed by him to be good; but was erected by a person not in possession, nor claiming any title to the land, who erected it under a contract made with Græ me, who could set up no claim against Cullen, for whose benefit he had conveyed the land, by deed of trust duly admitted to record. But the 9th section of ch. 136 expressly declares that " nothing in this chapter nor any thing in the 135th chapter, concerning rents, profits and improvements, shall extend or apply to any suit brought by a mortgagee, or his heirs or assigns, against a mortgagor or his heirs and assigns, for the recovery of the mortgaged premises." We think, therefore, that these chapters can afford no ground for the claim of priority of lien asserted in this case by or for the Adams'.
There being nothing in the statute law to sustain the claim, let us now see if there be any established principle of law or equity which can sustain it.
If there be any such it must be found laid down in Story's Eq. Ju. §§ 385-390; or in 2 Id. §§ 799 a 799 b, and 1237 and 1238; all of which sections were cited and much relied on by the counsel for the appellants. The sections cited from 1 Story's Eq. relate to the ground of fraud, which will be considered presently. Those cited from 2 Id. relate to the ground we are now considering. In § 799 a, it is said, that " if a plaintiff in equity seeks the aid of the court to enforce his title against an innocent person, who has made improvements on land, supposing himself to be the absolute owner, that aid will be given to him only upon the terms that he shall make due compensation to such innocent person, to the extent of the benefits which will be received from these improvements." In § 779 b., after referring to the more liberal rule of the civil law in favor of a bona fide possessor of land, whose title is defective, and who claims compensation for improvements made by him upon the land in good faith against the true owner, who asserts his title to it, the writer says: " But courts of equity seem not to have gone to this extent, but to have confined themselves simply to the administration of the equity in cases where their aid has been invoked by the true owner in support of his equitable claims. They have never enforced, in a direct suit by the bona fide possessor, his claim to meliorations of the property from which he has been evicted by the true owner." To the same effect are §§ 1237 and 1238; and in the latter it is said: " In all cases of this sort, however, the doctrine proceeds upon the ground, either that there is some fraud, or that the aid of a court of equity is required; for if a party can recover the estate at law, a court of equity will not, unless there is some fraud, relieve a purchaser or bona fide possessor on account of money laid out in repairs and improvements." What is said in regard to fraud will be noticed presently. In regard to the rest of what is said in these sections, we think that nothing can be found therein to sustain the claim of the appellants. These sections relate to improvements made by a bona fide purchaser or possessor of the land on which they are made for his own use. Here the building was erected by persons who were neither purchasers nor possessors of the land, and not for their own use, but for the use of another, who was in possession of the land as an apparent owner, and with whom a contract was made by them for the erection of the building. Relief is afforded under these sections only upon the principle (except in cases of fraud) that he who asks equity mnst do equity. Here there is no room for the application of that principle. Cullen does not ask equity, in the sense of this principle. His trustee was clothed with the legal title, and might have recovered possession of the land at law, if it had been held adversely to him; but it was not. He was virtually in possession when he made the sale, and the purchasers had no equity which they could claim against him in the sense of the said principle.
In Putnam v. Ritchie, 6 Paige's R. 390. referred to in a note to § 799 b, supra, Chancellor Walworth said: " This principle of natural equity is constantly acted upon in this court, where the legal title is in one person, who has made the improvements in good faith, and where the equitable title is in another, who is obliged to resort to this court for relief. The court in such cases acts upon the principle, that the party who comes here, as a complainant, to ask equity, must himself be willing to do what is equitable. I have not, however, been able to find any case, either in this country or in England, wherein the court of Chancery has assumed jurisdiction to give relief to a complainant who has made improvements upon land, the legal title to which w as in the defendant; where there has been neither fraud nor acquiescence on the part of the latter, after he had knowledge of his legal rights. I do not, therefore, feel myself authorized to introduce a new principle into the law of this court without the sanction of the Legislature, which principle, in its application to future cases, might be productive of more injury than benefit."
On the other hand, Judge Story, in Bright v. Boyd, 1 Story R. 478, 494, a case very much relied on by the counsel for the appellants in this case, said: " The other question as to the right of the purchaser, bona fide and for a valuable consideration, to compensation for permanent improvements made upon the estate, which have greatly enhanced its value, under a title which turns out defective, he having no notice of the defect, is one upon which, looking to the authorities, I should be inclined to pause." " I am aware that the doctrine has not, as yet, been carried to such an extent in our courts of equity." After stating the instances in which relief is afforded to a defendant for such improvements, upon the maxim that he who seeks equity must do equity, he further said: " But it has been supposed that courts of equity do not and ought not to go further, and to grant active relief in favor of such a bona fide possessor, making permanent meliorations and improvements, by sustaining a bill, brought by him therefor, against the true owner, after he has recovered the premises at law. I find that Mr. Chancellor Walworth in Putnam v. Richie (cited supra ) entertained this opinion; admitting, at the same time, that he could find no case in England or America where the point had been expressed or decided either way. Now if there be no authority against the doctrine, I confess that I should be most reluctant to be the first judge to lead to such a decision. It appears to me, speaking with all deference to other opinions, that the denial of all such compensation to such bona fide purchaser in such a case, where he has manifestly added to the permanent value of an estate by his meliorations and improvements, without the slightest suspicion of any infirmity in his own title, is contrary to the first principles of equity." The court accordingly, in that case, which was one of extraordinary hardship, gave such active relief to a bona fide purchaser, suing for the same against the owner who had recovered the estate in an action at law against the purchaser. See the same case in 2 Story's R. p. 605. " This," said the Judge, " is the clear result of the Roman law; and it has the most persuasive equity, and I may add common sense and common justice for its foundation. The Betterment Acts (as they are commonly called) of the States of Massachusetts and Maine and of some other States, are founded upon the like equity, and were manifestly intended to support it, even in suits at law for the recovery of the estate." This decision of Judge Story seems to be contrary to what is laid down by him as law in 2 Story's Eq. Ju. § 1238, already referred to, and we are not aware that it has been followed in any subsequent case. We do not mean to say, however, that it would not be followed; especially in this State; in which the provision of the Betterment Acts, or some of them, seem to have been substantially copied in chapters 135 and 136 of the Code. But we express no opinion upon that question, because it is unnecessary to the decision of this case.
If the decision in Bright v. Boyd correctly expounds the law, it does not govern this case. The two cases are very different, as perhaps plainly appears from what has already been said. There the party who made the improvements was in possession of the estate as bona fide purchaser claiming title to it, and having no notice of any defect in his title. Here the party who erected the building on the land subject to Cullen's deed of trust, was not in possession of the land, and claimed no title to it. He claims to have erected the building upon an understanding or agreement with Græ me, the mortgagor, as he may be called, that the cost of the building should be secured by a lien on the land when the building should be completed, and that until the greater part of the work was done, the builder had no knowledge of Cullen's lien. Was he not bound, like any other party contracting for a lien on real estate, to search the record to ascertain whether there were any prior liens upon the estate? Suppose he had loaned money to Græ me, and taken a deed of trust on the estate to secure the loan, not having actual notice of the prior lien of Cullen, though duly recorded; would not his lien have been subordinate to Cullen's lien? Can it make any difference that the debt for the security of which he contracted to take a lien, was a debt due for work and labor done and materials found, and not for money loaned? He does not claim a lien upon the ground that the mere erection of the building by him at the request of Græ me entitled him to such lien. Suppose that, having perfect confidence in Græ me's ability and willingness to pay for the building, he had erected it upon the personal credit of Græ me; could he then have claimed to be entitled to a lien upon the land or the building, even as against Græ me, much less as against Cullen, who had a prior duly recorded lien on the land, and who had made no contract or request in regard to the building? Certainly not. And this shows that a lien for the cost of the building in such a case must spring, not from any vague idea that whenever a house is put by one man upon another's land there is an equitable lien upon the house for the cost of building it, but from the contract and consent of the parties concerned, as was said by the Supreme court in Kutler v. Smith, 2 Wall, A. S. R. 491. " The well settled rule is that such erections as this become a part of the land, as each stone and brick are added to the structure. The only exceptions to this rule are, the class of fixtures already adverted to, and such rights as may grow out of express contract."
Here then is a contest for priority between two lienors, Cullen and the Adams', each of them claiming under a contract which the law requires to be recorded. The Adams' was not recorded, and moreover was entered into by them with full knowledge of the existence of Cullen's lien; which knowledge of itself, without the registration of that lien, would have given it priority. Can there be a doubt as to Cullen's right of priority in this case? We clearly think not; unless he has postponed that right by fraudulent conduct on his part. And we will therefore now consider:
Secondly: As to the ground relied on by the appellants, that Cullen was aware that the Adams' were doing the work, relying for their security on a lien to be given on the lot, and yet failed to inform them of his deed of trust; and so was guilty of a fraud, by reason of which his lien will be postponed by a court of equity to theirs.
There can be no difficulty about the law which is to govern this question. The only difficulty which can arise upon it must be about the facts. The law is correctly laid down in 1 Story's Eq. Ju. §§ 385-390, before referred to; and that part of the law which especially applies to this case, may be found in §§ 385, 388, 389 and 390. Thus in § 385, it is said: " In many cases a man may innocently be silent; for as has often been observed, aliud est tacere, aliud celare. But in other cases a man is bound to speak out; and his very silence becomes as expressive as if he had openly consented to what is said or done, and had become a party to the transaction. Thus, if a man, having a title to an estate, which is offered for sale, and knowing his title, stands by and encourages the sale, or does not for bid it, and thereby another person is induced to purchase the estate, under the supposition that the title is good, the former so standing by, and being silent, will be bound by the sale; and neither he nor his privies will be at liberty to dispute the validity of the purchase." " So if a party having a title to an estate, should stand by, and allow an innocent purchaser to expend money upon the estate, without giving him notice, he would not be permitted by a court of equity to assert that title against such purchaser, at least not without fully indemnifying him for all his expenditures." In § 388, it is said: " Another case, illustrative of the same doctrine, may be put, arising from the expenditure of money upon another man's estate, through inadvertence or a mistake of title; as for instance, if a man, supposing he has an absolute title to an estate, should build upon the land, with the knowledge of the true owner, who should stand by and suffer the erections to proceed, without giving any notice of his own claim, he would not be permitted to avail himself of such improvements, without paying a full compensation therefor; for in conscience he was bound to disclose the defect of title to the builder." And in § 390, it is said: " A more common case illustrative of the same doctrine, is where a person, having an encumbrance or security upon an estate, suffers the owner to procure additional money upon the estate by way of lien or mortgage, concealing his prior encumbrance or security. In such a case he will be postponed to the second encumbrancer; for it would be inequitable to allow him to profit by his own wrong in concealing his claim, and thus lending encouragement to the new loan."
This being the law bearing upon this part of the case, let us now see what is the charge of fraud, and what is the evidence relied on to sustain the charge.
Substantially the charge is this: that Cullen saw the building while it was being constructed by the Adams'; that he knew Græ me had no means of paying for the building, or securing such payment, but by giving a lien on the lot; that he gave no notice of his deed of trust to the builders, as it was his duty to do, but on the contrary purposely remained silent on the subject, in order, as is plainly implied, if not expressly charged, that the builders, in ignorance of his prior lien, might proceed to complete the building, and thus increase and perfect his security. If this charge had been proved by the evidence, the complainants might have made good their ground of fraud, though it is unnecessary to decide that question in this case, and we do not mean to do so.
But what is the evidence? There is none whatever on the subject, but that of Cullen himself. The building was commenced in June or July 1865. Cullen testifies on the subject as follows:
3d question by counsel for defendants, on his examination in chief. " Where were you in the summer of the year 1865?
Ans. I was in Richmond until the 12th day of June, and was in extremely bad health for a month previously to that date. On that day I left for New York, having been carried on board the steam vessel, and remained in New-York until the 30th day of the following September.
4th question by same. When did it first come to your knowledge that a house was going up on the lot in question in this suit--I mean the lot you have spoken of as sold by you to Mr. Græ me?
Ans. I can't positively say; but I suppose I saw it when it was visible--that is, when the building was some height above the level of the street. Being still in feeble health, I was not as much about the city as was my wont, for some weeks after my arrival; and also having been engaged in the repairing of a house in which I then lived, with the intention of selling it; which I afterwards did.
5th question by same. In what way did you come to the knowledge that the Messrs. Adams had any interest in the lot?
Ans. The first knowledge I had of it, or of the Messrs. Adams, was communicated to me by my nephew, Dr. Dorsey Cullen, whom I met on the Main street of Richmond some four weeks after my arrival; the precise time, at this distance of time, I cannot determine. He informed me that he had just parted with a Mr. Adams, of Baltimore, who stated to him that he was putting up houses for Mr. Græ me, and that he understood that I had a hen on one of the lots, and that he should like to know what I would take for the bonds that were given to secure said lien.
6th question. What were your relations with Mr. John Græ me, sr.?
Answer. I had no intercourse with Græ me, directly or indirectly, from February 1864.
7th question. Were you on good or bad terms with him?
Answer. In consequence of a nefarious attempt to rob me of my property, by applying in the aforesaid month of February 1864 to the confederate court to confiscate it, of course I was not on good terms with him.
10th by same. What knowledge had you of the terms on which the Messrs. Adams were building the house on the said lot?
Answer. None whatever. I did not know one of the Messrs. Adams' till the month of May last (1868.) I was introduced to one of them, whose name I do not know.
1st question on cross-examination by counsel for S. H. and J. F. Adams. When it came to your knowledge that the Messrs. Adams were building houses upon Mr. Græ me's property, did you acquaint them, or any person acting for them, with the existence of your lien upon a part of the property?
Answer. I did not think it necessary, inasmuch as I relied upon my lien to secure my debt. I came to Richmond for the purpose of winding up my affairs and requesting a sale of the lot, but I found the stay law interposed and prevented its sale.
2d question by same. You say that you did not think it necessary; do you mean to be understood that you did not in fact take any steps to acquaint the Messrs. Adams with the existence of your lien upon the said property?
Answer. I did not; because I was under the impression they already knew it, from the statement made to my nephew; being the first time I knew of any lien, and thereby ascertaining that he was aware of my lien, I did not think it necessary. I will here remark that I believe the buildings were very near completion at that time.
7th by same. Did you have any information until you returned to Richmond in the September following (1865,) that any building was going up on said lot?
Answer. None whatever; I expected on my return to have the lot sold by virtue of my lien.
9th by same. Was not your trustee and counsel, Mr. Myers, a resident of Richmond during the summer and fall of 1865?
Answer. Mr. Myers was, I believe, here in 1865; I am not Mr. Myers' keeper. He was my trustee, but not my counsel in that case; not having any occasion for law advice in it. Nor was Mr. Myers my general attorney; having no power to act for me in any case without specific directions."
This is the evidence. Does it sustain the charge of fraud? We think it clearly does not. There ought to be strong proof to sustain a charge of fraud. We do not think the evidence in this case warrants even a suspicion of fraud on the part of Cullen. He knew nothing of the building until the greater part of it was completed. He knew nothing of the arrangement which Græ me had made for its construction, nor that the Messrs. Adams had any thing to do with it, until after they were fully apprised of his prior lien. He had caused that lien to be duly recorded, and had good reason to believe, and no doubt did believe, if he thought at all on the subject, that any person who might contract with Græ me for the erection of the building upon the faith of a lien to be taken on the property to secure the payment of the price of the work, would use the obvious and necessary precaution to examine the record, to see if there were any prior liens on the property; which could so readily be done. He might well have taken it for granted, and no doubt did, if he thought at all on the subject, that Græ me, whose duty it was to do so, had fully informed the contractor for the work of the prior lien on the property, if it was intended to give such contractor also a lien on the property for his security. Goddin proves that when Græ me entered upon the erection of the building, the lot could have been sold for about enough to have paid the whole balance then due Cullen; and that he regarded Græ me as a gentleman of undoubted solvency and of excellent credit. The Messrs. Adams might have been willing, so far as Cullen knew, to do the work on the credit of Græ me's interest in the property and on the personal credit of Græ me, or even on the latter alone. It is not uncommon for work of this kind, as well as any other, to be done on personal credit only. It was not incumbent on Cullen to enquire into this matter, when he had no suspicion, and no ground for suspicion, on the subject. He had done his whole duty in the matter by putting his deed of trust on record, where all concerned could easily see it. It is a thing of every day occurence that a mortgagor improves the mortgaged premises, and that the improvement enures to the benefit, as well of the mortgagee as of the mortgagor. Such improvements are rarely made by the mortgagor's own hand, but generally by the hands of others employed by him for that purpose. Whether made by one or the other, they are his improvements; that is, in effect, made by him. And when the mortgagor sees such improvements going on, he may well believe, in the absence of evidence to the contrary, that the mortgagor is making them, whether by his own hand or the hands of others, on his own personal credit. The case is different where a man is in possession of another's land, claiming it as his own, and ereciting valuable improvements upon it with the knowledge of the real owner. In such a case the owner knows that the man is acting under a mistake, and it is his duty to give notice of his title. If he stand silently by, and permit the party to go on with the work under such mistake, it will be a fraud in him, and create an equitable estoppel against him.
But we deem it unnecessary to say any thing more on this subject, and are of opinion that the ground of fraud relied on by the appellants has not been sustained.
Only one or two more points remain to be noticed; and upon them little will be said.
One of them is, that there was a policy of insurance existing upon the house which stood upon the lot when the deed of trust for Cullen's benefit was executed, and which was burned down by the great fire of the 3d of April 1865; that the insurance company is liable for the loss; that the liability is covered by the deed of trust; and that Cullen is bound to have that liability enforced, before he can subject the proceeds of the sale of the lot to the payment of his debt. In other words, he is regarded by the counsel for the appellants, as the assignee of that claim, and as bound to use diligence in endeavoring to recover it. We do not think that such is the case. It is altogether uncertain whether any liability at all exists on that policy to any body. The policy was transferred by Cullen to Græ me in 1860, about the time of the execution of the deed by which the property was conveyed by the former to the latter. It is not mentioned in the deed of trust, and seems to have remained in the possession of Græ me ever since it was first transferred to him. Indeed, it appears that Græ me has actually instituted suit upon it to enforce the supposed liability aforesaid. At all events, conceding that the liability exists, and that it is virtually assigned by the deed of trust, it is a mere collateral security; and there is no obligation on Cullen to embark in an expensive and protracted litigation to enforce it before he can have the property conveyed by the deed of trust sold, and the proceeds of sale applied to the payment of his debt, in pursuance of the terms of the deed. If such liability exists, it can be enforced by Græ me or his assigns, as they may be advised.
Another, and the only remaining point, is, that by the decree appealed from, compound interest, on a considerable portion of Cullen's debt, is allowed. It is said " that interest is allowed on bonds given for interest, and on bonds past due, including principal and interest on their face." The court is of opinion that there is no error in the decree in this respect--at least to the prejudice of the appellants. And we do not understand the appellees as complaining of such error. See Kraher v. Shields, 20 Gratt. 377-398; and Græ me v. Adams, decided during the present term.
Upon the whole, we are of opinion that there is no error in the decree appealed from, and that it ought to be affirmed.
DECREE AFFIRMED.