Smith's Ex'x v. Profitt's Adm'r

Richardson, J.

(after stating the case), delivered the opinion of the court.

The appellants make several assignments of error in the decree, which will be considered consecutively.

I. “That the circuit court erred in overruling the appellants’ exception to the reading of J. A. Profitt’s deposition.” This deposition was taken September 4,’ 1877. The witness was cross-examined by the appellants on all the issues, and no exception was taken to his competency until September 11, 1884. In Hord v. Colbert, 28 Gratt. 49 , this court held that such cross-examination was a waiver of objection to competency, to which exceptions could not be made afterwards. But it is contended that Profitt was not incompetent when he testified, but became incompetent afterwards. Competency at the time of giving evidence is all that was ever required of a witness, and it is all that is essential. In Keran v. Trice, 75 Va. 690 , this court also held that the deposition of a witness taken at a time when he was competent to testify, is not rendered inadmissible as evidence by subsequent incompetency. This would seem a sufficient answer to this assignment, which is *845 plainly untenable. But the record discloses a different state of facts from the presentation made by the appellants, and clearly shows that the interests of the wife of this witness had become involved in this suit when his deposition was taken, and that he was, therefore, incompetent to testify in this cause when he deposed. The original bill mentions the claims of Profitt’s creditors to the property in controversy, and prays that the court decide' upon the conflicting claims of Page, and of those creditors. The answer of Cochran, as assignee in bankruptcy of Profitt, filed February 6, 1877, and Profitt’s own answer, set up the claim of Profitt’s wife to a contingent right of dower in the property, and asked for its ascertainment. The decree of February 13, 1877, directs the master to enquire and report whether Profitt or Ms wife or his creditors have any claim to the property. This deposition was taken in execution of this decree; and in order to enable the master to compute the present value of the wife’s contingent right, this witness was asked, and testified that he was then fortj'-five and his wife forty-one years old; and the master afterwards reported on this basis the commuted value of her contingent right of dower. The cross-bill says that Mrs. J. A. Profitt had filed her petition in the cause, and none of the answers deny it. And her petition, dated 2d July, 1877, which is also the date of her husband’s answer, is found in the record, though there is no note of when or how it came into the record. When T. T. Norman’s deposition was taken on 4th of September, 1877, the record shows that among those present was “E. R Watson, counsel for J. A. Profitt and wife,” and that Norman was cross-examined by “E. R. Watson, counsel for J. A. Profitt and Mrs. Profitt.” And so, likewise, when the appellant White’s deposition was taken. The general rule is that a husband is not competent to testify for or against his wife. Profitt, then, was incompetent when he deposed. But this does not change the *846 result; for, the cross-examination without previous exception, waived the objection of in competency. Nor was this deposition inadmissible because it was taken before the cross-bill was filed. The circuit court had provided for this by decreeing in October, 1880, that all depositions taken in the original should be read in the cross-suit also, with the same effect and subject to the same exceptions, evidently meaning exceptions that had theretofore been taken. Besides, the parties and the issues were the same in both suits.

II. “That the circuit court erred in overruling appellants’ exceptions to the reading of J. L. Cochran’s deposition, Cochran and Smith being the original parties to the transactions involved, and Smith having died after Cochran had testified and before he had closed his evidence.” This deposition, like Profitt’s, was taken before the master under the decree of account. The witness was cross-examined by the appellants in August, 1882, without objection to his competency. The exception for want of competency was taken February 10, 1883. It came too late. Moreover, no certificate is necessary to depositions taken under a decree for account. The master’s statement in his report supplies the place of the certificate usual and necessary when the depositions are taken under other circumstances. And here the master’s report says: “Nothing more was done in the cause until 10th of August, 1882, when the deposition of J. L. Cochran was commenced, and, not being completed, was adjourned over until the 12th, and again to the 14th August, 1882, when it was completed and closed.” And Norman’s affidavit says: “Cochran concluded his evidence 19th August, 1882.” But that affidavit was ex parte and otherwise illegal as evidence.

After instituting his suit, Smith lived over seven years, and had time enough, surely, to testify, had he been willing to subject himself to cross-examination. His delay to testify *847 until the evidence of his adversary was all in, and “his sudden death” defeating his alleged intention to testify, cannot render inadmissible the deposition of Cochran, who was competent when he deposed. The depositions, as is the usual practice, were taken in no special order, but promiscuously, as was dictated by convenience. The prescribed order for taking evidence in an action at law is seldom, observed in chancery causes, and in many, if not in the majority of cases, the enforcement of the rules would ofteuer produce confusion and delay than otherwise. There was, therefore, no error in this particular.

III. “That it was error to overrule the appellants’ exception to so'much of the master’s report as found that the alleged contract of Profitt with Flanagan and White had not been abandoned” [forfeited] “at the date of the sale to Smith and Norman.”

The record discloses that J. A. Profitt first became purchaser of the property in question under a decree of the circuit court of Albemarle county, in the suit of Fray v. Points, the property being then known as the Points property, but since as the Virginia House. Early in 1869 Profitt, as such purchaser, being largely in default, a rule was awarded against him in said suit, returnable to the May term, 1869, to show cause why the property should not be re-sold. In advance of action by the court on this rule, Profitt engaged Drury Wood and John L. Cochran to act as his attorneys in fact, and make sale of said property, Profitt’s object being to put himself in an attitude to make good his default as purchaser from the court, and to retain the property. The property being thus sold by Wood and Cochran for the default of Profitt, he was not in a position to bid for it, and being desirous to retain the property, he entered into the arrangement with Flanagan and White to buy it for him. The contract, in substance, was this: “ Profitt *848 agrees to pay Flanagan and White $5Q0 bonus, and to meet their payments as they fall due.”

Flanagan and White made the purchase for Profitt at $4,200. And in accordance with the agreement and understanding of the parties, Flanagan and White were reported to the court in the case of Fray v. Points, and the sale was confirmed to them.

A careful examination of the evidence discloses that Profitt paid the bonus promptly; that he took immediate possession and made improvements, between 1869 and 1873, enhancing the value of the property about one-third, and rented the property out. But he did not meet the payments of Flanagan and White as they fell due. On the contrary, up to the 26th of October, 1869, he had paid only $20. Hence, he failed to meet both the small cash payments of $150, and the first deferred payment of $1,643.46, due September 1st, 1869. That was the time to cry out “ abandonment! ” forfeiture! ” But after that, Flanagan, acting for himself and White, received from Profitt, at different times, the following sums, to wit: $100, $101.30, $230, $675, $450, and $60, aggregating $1,616.30, and along in 1872 and 1873, up to and after the sale by Flanagan and White to Smith and Norman, Flanagan actually received from Mclntire, Profitt’s tenant, rent to the amount of $391.38, and had opportunity to collect, but failed to collect additional rent of Mclntire to the amount of $368.62, all of which he had agreed should go as credit on Profitt’s contract, making them an aggregate of $2,386.30, in addition to the bonus, for which Profitt is entitled to credit.

There is certainly, so far, nothing to evince that Profitt meant to abandon the contract. He went into bankruptcy August 31st, 1871. In his schedule, which is in the record, he surrendered this property, exactly describing his relation thereto, and claimed his exemption out of it. Then, there is the evidence - of his connection with the sale of the property, *849 June 30th, 1873, and with this suit up to his death in May, 1881, which refutes the idea that, after paying out for bonus, payments and improvements of $4,500, he designed to abandon his purchase.

As a rule, the courts will not infer that the parties intended to make time of the essence of the contract for the sale of land, from the mere appointment of a day for the delivery of a deed, or the payment of the price. The intention must be unequivocally expressed, or it must appear from the fluctuating, uncertain or perishable nature of the commodity. It is a general rule that language which admits of a milder interpretation, shall not be so construed as to work a forfeiture. In a case where the first installment was to be paid October 1st,. 1848, when the title was to be conveyed, the court said; “This is nothing more than a naked covenant to pay money at a particular day, which has never been held to mean that time is of the essence of the contract, for the plain reason that it admits of adequate compensation ascertained by law in the shape of damages.” 1 Smith’s Lead. Cas 115, 136; 2 Lead. Cas. in Eq. 1129; Jackson v. Ligon, 3 Leigh, 187 .

In Booten v. Scheffer, 21 Gratt. at page 493, Staples, J., said: “Now, it is true that a mere default in payment, as a general rule, is not a sufficient reason for refusing a specific performance, because the default admits of compensation, and in most; cases, interest is regarded as equivalent for the non-payment of the purchase money.” In that case, the purchase price of the real estate sold to Scheffer was payable in Confederate currency, which was daily depreciating in value. Scheffer failed, under circumstances indicating a disposition to profit by such depreciation, to pay the purchase money when due. This court held in that case, that time was of the essence of the contract, under the peculiar circumstances. That case is in no material feature, at all like the case at bar, but it does *850 illustrate most clearly the principle applicable here, by its very dissimilarity. Here, there was no depreciation of the currency in which the price was payable, and the delay in payment was fully compensated with interest. We think, therefore, that this assignment is not well taken.

IV. “ That it was error to overrule the appellants’ exception to so much of the report as found that Profitt had an interest in the proceeds of the sale of the property; such claim, if it existed, depending on his ability to have specific performance of his alleged contract.” The contract, as averred and proved, is fully up to the standard as respects certainty. It was partly performed by delivery of possession and partial payment. It had not been abandoned or forfeited, it not being expressly, nor, from the circumstances, impliedly a contract wherein time is of the essence. In Jackson v. Ligon, supra, Tucker, P., said: “At law, in every case of dependent covenants, time is of the essence of the contract, since the plaintiff cannot recover without showing on his part, performance, or a readiness and ability to perform. But in equity, it is on general principles, otherwise. Although a vendor may not have complied with his contract to convey, or the vendee may not have paid his purchase money precisely at the stipulated time, equity will nevertheless, upon a proper case, enforce the contract, instead of permitting either party to insist on an arbitrary forfeiture of its benefits.”

Profitt’s willingness to have the property sold and its proceeds applied to the payment of the balance due on his purchase, contradicts the charge of backwardness. Had the vendors brought their suit for specific performance, it would have been entertained. And so, doubtless, had the vendee sued for similar relief and tendered the balance due. Or if, his contract being only parity performed, and he being unable to tender the residue of .the purchase money, it could not be specifi *851 cally executed, the court, in such a case, would decree compensation. Anthony v. Leftwich, 3 Rand. 238 . But there arises here no question of specific performance or of compensation. The principle exactly applicable here, is that of implied or constructive trusts. Flanagan and White purchased the property for Profitt. The legal title was in them. He had paid them, besides $500 bonus, $2,386.30 on the property, and still owed them $3,147.35. He was the beneficial owner pro tanto. As trustees they held the legal title for him charged with what he owed them. Floyd v. Harding, 28 Gratt. 407 .

When one holds the legal title, and another is beneficially entitled, in whole or in part, an implied or constructive trust arises in favor of the latter to the extent of his interest. Such a trust is one which, without being expressed, is deducible from the nature of the transaction as a matter of intent, or which is superinduced upon the transaction by the operation of law as a matter of equity independently of the particular intention of the parties. 5 Field’s Briefs, Title, Trusts, section 632; Hill on Trustees, 144. It follows, therefore, that the fourth assignment is without merit.

V. “That there was error in decreeing exemption to the bankrupt, Profitt, it being the assignee’s duty to assign him his exemption and report it to the bankrupt court to give the creditors opportunity to except.”

If there was any error in this, it was a matter of distribution of the assets of the bankrupt, in which the appellants have no concern, even if the creditors could complain of it, which they seem not to have done.

VI. “That it was error to overrule the appellants’ exception to the sufficiency of the evidence to establish the payments found by the master to have been made by Profitt to Flanagan and White.”

*852 On a careful examination the evidence appears to fully sustain the master’s finding that Profitt was entitled to credit for the sum of $2,386.30, on account of his payments in money, rents, &c. The master probably knew the witnesses who testified in his presence. Besides, there were written receipts, and it is manifest that the master formed his conclusions with caution and deliberation. And the court below, after a few immaterial amendments, confirmed his report. The point mainly controverted by counsel in argument was the authority of Flanagan to receive the payments for White. But as to this the evidence is clear and definite. Profitt deposed that he proposed that Flanagan should buy the property in for him, and that he would pay Flanagan $500 bonus, and meet the payments as they fell due. White came up, and Flanagan restated the proposal, and asked White to join him, saying that “he (Flanagan) would attend to the whole matter, including the collecting.” To this White assented, and Flanagan and White together made the purchase, paid the purchase money, and took the conveyance. This testimony of Profitt is uncontradicted. White admits that he received his half of the bonus. There is, then, nothing in this assignment.

VII. “ That there was error in holding that appellants, Smith and Norman, are affected with notice of the claim of Profitt, and must take the property subject to that claim.”

On this question the case hinges. As the legal title stood in Flanagan and White by a recorded deed conveying the property to them absolutely in fee, there certainly was no constructive notice to Smith and Norman of the claim of Profitt, his wife, his assignee, or his creditors. But, was there not actual notice? This is a question of fact; and it cannot be disguised that the evidence is conflicting. Profitt deposes, and so does Cochran, positively and circumstantially, that they told Smith all about the title, legal and equitable, before they purchased *853 and before they made the deferred payments, and about the relations of Flanagan and White as well as of Profitt, to the property, Cochran telling him how and to whom the purchase money would be payable, and warning him afterwards not to make the deferred payments until there was a settlement of accounts between Profitt and Flanagan and White. In their original bill, Smith and Norman aver that they were purchasers without notice. Cochran and Profitt, in their answers, deny that allegation of want of notice, and enter into the particulars of the information given to Smith. In his cross-bill, Cochran declares that Smith and Norman had notice of Profitt’s equities when they purchased the property, and before they made the deferred payments. In their answer, Smith and Norman deny the averments, but admit that on one occasion Cochran did say something about his .not making the deferred payments until Cochran had an interview with Flanagan. But, though Smith lived seven years after, the suit was instituted, and seven months after Cochran’s deposition was taken, yet he never gave his own testimony in the cause. And Flanagan, who, with Cochran’s concurrence, made the sale to Smith and Norman, and was present on one occasion, as Cochran deposes, when the latter informed Smith, and though Flanagan filed an answer to the cross-bill, making but feeble opposition to the claim asserted by Profitt’s assignee, &c., yet Flanagan also never testified in the cause. Norman did depose; but he only denied that Cochran had given him, or Smith in his presence, such information. The circumstances very strongly cor-' robórate the evidence of Cochran and Profitt. These are, that Smith and Norman did a grocery business close by the Virginia House, and used the pump on the lot when Profitt took possession, put a new front to the house, fitted up a store-room and a bar-room, built a stable on the lot, and exercised all the rights of ownership over* the property from March, 1869, to *854 September, 1871. These are undisputed facts. They must-have been known to Smith and Norman; and were undoubtedly sufficient to put them on inquiry as to who was-the actual owner of the property. The decided preponderance of evidence, direct and circumstantial, establishes that Smith and Norman are purchasers with notice of the claim of Profitt- and those claiming under him. Therefore, the circuit court-did not err in decreeing that the appellants, Smith and Norman, take the property subject to that claim.

VIII. “That there was error in decreeing against the appellants, Smith and Norman, without first decreeing against Flanagan and White; and after having done that, in failing to-decree over, against the latter in favor of the former.”

This assignment is not well 'taken. The claim, of Profitt’sassignee, widow and creditors was primarily against the proceeds of the sale to Smith and Norman, and not against Flanagan and White. The latter, as the holders of the legal title, and trustees for their vendee, had, with his, or his assignee’sconsent, a perfect right to sell the property, and were only liable secondarily, to him for any unfaithfulness as such trustee. Had Smith and Norman not been affected with notice of Profitt’s claim, they would have held the property free from any liability, so far as they had paid the purchase money before receiving such notice. But the payments they made in disregard of such notice are nullities, as to Profitt and those-claiming under him.

The decree complained of is not a direct personal decree against Smith and Norman, but is a decree in the alternative. It orders that, unless within sixty days, they pay the sum of money, which, with the sum they had previously paid into court, was sufficient to satisfy the claims of Profitt and those-claiming under him (except Cochran, as assignee in bankruptcy), then the trustee in the deed executed by them to- *855 secure their bonds for the purchase money should sell the property on the terms prescribed by the trust deed.

As to the question of a decree over in favor of Smith and Norman against Flanagan and White, for compensation for the breach of their covenants of special warranty, contained in the deed of June, 18—, that is a matter which lies altogether between those parties, and does not in the least affect the validity of the decree complained of.

IX. “That there was error in hearing these causes on the answer of J. A. Profitt, and also in hearing them on the petition of Mrs. Mary J. Profitt, neither of which had been filed.”

This representation is hardly borne out by the record. It is true that the causes were heard upon both the answer and the petition, but, as already intimated under another assignment, it is fairly inferable from- the facts disclosed by the record that those papers were presented in court, and without objection, ordered to be filed, and that by mere clerical omission no note of the filing was made. Both pleadings are in the record, are of the same date, and in the cross-bill are mentioned as having been filed at a time when, had they not been filed, there was ample opportunity to file them; and in none of the answers is it denied that they had been filed, whilst the depositions show that both Profitt and his wife were represented at their taking by the same counsel.

X. “ That there was error in failing to pass upon the demurrers after hearing them, and in not sustaining them.”

In Mathews v. Jenkins, 80 Va. 463 , this court, per Hinton, J., decided that when the court has adjudged the principles of the cause in favor of the plaintiff, the presumption is that it overruled the demurrer, though the record does not show what was done with it. The cross-bill to the demurrer to which this assignment has reference was not a bill for the specific performance of Profitt’s contract with Flanagan and White, nor *856 for compensation for their non-performance of that contract, but merely for the enforcement of the rights of J. L. Cochran as the assignee in bankruptcy of J. A. Profitt, subject to the contingent right of dower of his wife and the liens of his judgment creditors under the constructive trust which grew out of that contract, its part performance, and the sale of the property to purchasers, with notice thereof. The record shows that the circuit court did decide upon the demurrer, to the cross-bill, because it decided that “Cochran, as such assignee, had no right to his bankrupt’s interest in the property, and must take nothing by his cross-bill and go out of court.” The circuit court did not err in this respect.

Finding thus no error in the record prejudicial to the appellants, we come to the consideration, under the ninth rule of this court, of errors assigned by the appellee, Cochran, as the assignee in bankruptcy of J. A. Profitt. These are two in number.

I. “That there was error in holding that J. L. Cochran, as assignee in bankruptcy of J. A. Profitt, has no rights,, as such assignee, in his bankrupt’s interest in the property.”

It has already been shown that Profitt had an interest in the proceeds of the sale of the property in question to Smith and Norman. It is not denied that Cochran was duly appointed such assignee. There is in the record, bearing date August 19,1874, an assignment to him, as such assignee, by the register in bankruptcy of the District Court of the United States for the Western District of Virginia, wherein J. A. Profitt was adjudicated a bankrupt, of all the estate, real and personal, of said bankrupt, including all property of whatever kind, of which he was possessed or in which he was interested, or entitled to have, on the 31st day of August, 1871, together with all his deeds, books and papers relating thereto, excepting such property as is exempted from the operation of this assignment *857 by tbe provisions of the fourteenth section of the act of Congress, entitled, “ An act to establish a uniform system of bankruptcy throughout the United States, approved March 2,1867.” That section provides expressly that “such assignment shall relate back to the commencement of the proceedings in bankruptcy, and thereupon, by operation of law, the title to all such property and estate, both real and personal, shall vest in said assignee.” Bump on Bankruptcy (3d ed.), 282.

Flanagan and White held the property as trustees, and had a right to sell with the concurrence of Profitt or those entitled under him, and out of the proceeds to pay, first, the balance due themselves from Profitt, and, secondly, to turn the residue over to Profitt’s assignee, to do which an order of the bankrupt court was by no means essential. Such being the case, and the ownership of those proceeds being in litigation, and Profitt and his assignee having been made parties to the suit, it is contrary to all the rules and principles of equitable jurisdiction and practice to hold that they could not assert their claims in that suit, either by cross-bill, or by answer treated as a cross-bill. Therefore, it is evident that the assignment is well made.

.II. “That there was error in .holding that J. L. Cochran’s claim as Profitt’s assignee in bankruptcy, was barred under the Federal statute of limitations by the lapse of two years from August 19th, 1874, the date of the assignment, and October 6th, 1876, the date of the institution of this suit.

In considering the appellant’s eighth assignment of error, it has already been said that the claim of Profitt’s assignee, &c., was primarily against the proceeds of the sale of the property to Smith and Norman. No cause of action, however, arose to recover those proceeds, until the bonds given by them, for the same, became respectively due and payable. The second bond fell due June 30th, 1875, and the last bond, June 30th, 1876. *858 The Federal statute of limitations requires that the assignee bring his suit against any person claiming an adverse interest, touching the property and rights of property (and under the decision of the Supreme Court of the United States in Jenkins v. International Bank 106 U. S. 571 ), “all debts” belonging to the bankrupt, within two years from the time the cause of action accrued. See second section of the Bankrupt Act of 1867; Bump on Bankruptcy, (3d Ed.), 253. It is manifest, then, that this suit having been (as the circuit court said) instituted on the 6th of October, 1876, two years had not elapsed since those two bonds became respectively due and the cause of action accrued. The court below made the mistake of computing the period of limitation from the date of the register’s assignment to the assignee—that is, August 19th, 1874, to the date of the institution of the suit.

For these errors assigned by the appellee, J. L. Cochran, assignee as aforesaid, the decree of May 26th, 1885, might be reversed in his favor as such assignee. But as it is an interlocutory decree, it will be amended as to the two last mentioned errors, and affirmed with costs to the appellees, and the cause remanded to the circuit court of Albemarle county for further proceedings in conformity with the law and the views expressed in this opinion.

Decree amended and affirmed.