Case Name: Fultz v. Davis
Court: Supreme Court of Appeals of Virginia
Jurisdiction: Virginia
Decision Date: 1875-11
Citations: 26 Gratt. 903
Docket Number: 
Parties: *Fultz v. Davis.
Judges: Christian J. dissented.
Reporter: Virginia Reports
Volume: 67
Pages: 295–298

Head Matter:
*Fultz v. Davis.
November Term, 1875,
Richmond.
Absent, Bouldin, J.
I. Debts—Confederate Money.—In April 1862 F lends to D $7,000, and takes bis bond, secured by a deed of trust on land, payable in six years “in current money of Virginia,” tbe interest to be paid semiannually. For tbe loan D receives tbe checks of F on a bank -which is then paying- Confederate money. Nothing- is said, either before or at the time of the loan, as to the kind of money in "which the bond is to be paid, except what is stated in the bond. D pays the interest in Confederate money up to April 1864. In September of that year he offers to -pay tbe interest, but F refuses to receive the money. In December 1865, 1866, 1863, and in February 1869, D made payments on the bond. Held;
i. Same—Same—Time of Scaling. —This is a Confederate contract, and is to be scaled as of the date of the contract.
a. Same—Same—rianner.of Scaling.—In ascertaining the amount still due to F on the bond, the value of the bond in gold at its date is first to be ascertained, then interest is to be charged upon the amount so ascertained up to the time of the first payment, and the premium on the gold is then to be added to it; and the payments deducted at their nominal amount, from the amount so ascertained.
II. Same—Payment—Interest. —Where payments are made from time to time, on a debt bearing interest, the interest is to be computed on the debt up to the time of payment,'and the payment is to he deducted from the amount, principal and interest. It is, error to compute interest on payments to a .future day when the debt is paid or settlement made, and then credit the payment and interest .upon the debt, principal and interest.
III. Same—Judicial Sales under Deed of Trust. —When a decree is made for the sale of real estate for the payment of a debt secured by a deed of trust upon said real estate, the decree must be for the sale of .the property upon the terms of the deed: and it is error to decree a sale upon credits not authorized by the deed.
*This case was argued in Staunton, but decided in Richmond. It was a suit in the Circuit court of Nelson county, brought in June 1873, by Robert C. Davis to enjoin the sale of a tract of land under a deed of trust executed on the 18th of April 1862, by the plaintiff to Wm. A. Burnett, in trust to secure a debt of $7,000, due to David Fultz. The bill charged that the debt was a loan of Confederate money; and insisted it should be scaled. Fultz in his answer denied that it was a loan of Confederate money, and insisted that the face of the bond showed that it was to be paid in “current money of Virginia,” and such was the understanding of the parties.
The plaintiff Robert C. Davis lived in .Nelson county, and on the 24th of March 1862, he wrote to David Fultz, who resided in Staunton, stating that he had heard that Fultz had money to loan out secured on real ■estate: That he, Davis, wished to borrow $7,000, the interest to be paid punctually :semi-annually, and the principal to be paid at the expiration of six years; and that he was willing to secure the payment by a lien on his home farm containing seven hundred and eighty acres. He seems to have received a favorable answer from Mr. Fultz, and he went to Staunton to complete the contract. There he received from Fultz checks upon the Bank of the Valley in Staunton for the $7,000. At this time the bank was paying checks in Confederate money; and $3,500 was advanced to Fultz that day by a friend, part in Confederate money and about $1,000 in Virginia • bank notes, when was deposited by Fultz in t’he bank and drawn upon by him.
For the money so loaned to him, Davis executed to Fultz his bond as follows:
*$7,000. Six years after date I bind myself, my heirs, &c., to pay to David Fultz or order, the sum of seven thousand dollars, with legal interest from this date, in current money of Virginia, it being for borrowed money. I am to pay the.interest every six months, and if demanded, I will pay one thousand dollars of the principal at the expiration of each year from this date. Witness my hand and seal this the 18th of April 1862.
(Signed) Ro. C. Davis, [Seal].
On the same day Davis conveyed to Wm. A. Burnett, the tract of land mentioned in his letter, “in trust to secure to David Fultz the sum of $7,000, money loaned by him to Davis, evidenced by said Davis’ bond, payable six years after date—the legal interest on said debt to be paid every six months, and if said Fultz shall demand it, said Davis is to pay $1,000 of the principal of said debt at the expiration of twelve months from date, and -upon” like demand, said Davis will pay a like sum at the expiration of each succeeding'year thereafter.” And if Davis made default in payment of the interest or the $1000, if demanded, then the trustee was to proceed to enforce the trust according to the provisions of the 117th chapter of the Code.
It does not appear that anything was said by the parties at the time, as to the kind of currency in which the debt was to be paid, except what appears in the bond.
Davis paid the interest on the bond in Confederate money, up to April 1864. In September 1864 Fultz wrote to Davis, saying, that the interest would be due upon his bond in a short time, and in view of the great depreciation, in Confederate notes he submits whether *Davis cannot pay the interest in old bank notes. He says—“I cannot ask you to make Confederate notes equivalent to their value at the time the money was loaned. If you cannot pay the interest in bank notes, or a good bond, let it stand for the present.”
Davis replied to this letter, saying he would as soon pay the interest on his bond in bank notes if he had them. He is not willing that his debt to Fultz should increase: he must pay the interest, and he has no other money to pay with than Confederate money. He wishes to send him a check when it is due for the interest, and asks Fultz to inform him whether he will receive it.
In December 1865 Davis paid on his bond $450, and in December 1866, he paid the like amount, by a draft on Spotts & Gibson, of Richmond; and ih December 1868 he paid $2,000, and in February 1869 $946: these last payments were made by the notes of the same firm.
The defendant filed with his answer a number of letters written to him by Davis, extending from December 1865 to January 1872. These letters relate to the payments Davis made, or to his reasons for. not being able to pay at -the time. They all speak of the debt he owes Fultz, but none of them speak of the amount or nature of the debt.
The cause came on to be heard on the 5th of September 1873, when the court expressed the opinion, that the contract in the bill and proceedings mentioned, was entered into with reference to Confederate States Treasury notes as a standard of value, without any agreement as to the kind of currency in which it was to be fulfilled; and that it must therefore be scaled as of the date of the bond of - the plaintiff to Fultz. And it was decreed that a commissioner do take an account of the' debt, reducing it to its true value in *gold as of that date; and being of opinion, that the plaintiff had a right to pay the interest up to the 10th of April 1865 in Confederate money and offered to do so, but Fultz refused to receive it, that interest should be remitted. And the said commissioner was instructed to charge the true value of said ■debt to Davis as of the 10th of April, 1865, after which interest was to be allowed, but not compounded, giving credit to Davis for all sums thereafter paid by him. But if said payments were paid in currency or greenbacks, the commissioner was directed 'to scale said payments as of the date of such payment, to their value in gold, and the amount less the gold premium, should be credited against said demand, and the gold premium at the time of the close of the account must be added to the balance found •due to the defendant Fultz.
The commissioner made his report; but it is not necessary to state it, as the court adopted a special statement, by which the principal debt was scaled as of the 10th of April 1865; the interest was then charged thereon to the 4th of February 1874; and the premium on gold at 11J¿ per cent, was added, making the debt as of that date 58,154.17. The payments with interest on each from the date of its payment to the 4th of February 1874, amounting in the whole to $4,586.56, was then deducted, leaving as due to Fultz, as of that date, the sum of $3,937.51.
The cause came on to be finally heard on the 19th of March 1874, when the court confirmed the special statement, and decreed that the injunction awarded the plaintiff in the cause be dissolved as to the sum of $3,937.51, with interest thereon from the 4th of February 1874 till paid. And it was further decreed that unless the plaintiff shall pay the said sum of money with interest as aforesaid, in lawful money of the '^United States, within sixty days from the date of the decree, then the trustee Wm. A. Burnett as commissioner of the court shall proceed to sell at public auction the tract of land in the bill mentioned, or so much thereof as may be necessary for the purpose of raising the amount due the defendant Fultz, for cash enough to defray the expenses of sale, and the residue on a ’ credit of one, two and three years, &c.
From this decree Fultz applied to a judge •of this court for an appeal; which was allowed.
A. H. Fultz, for the appellant.
Whitehead, for the appellee.
Debts—Confederate Honey—Time of Scaling.—The authorities on this subject are collected in Ashby v. Porter, 26 Gratt. 455, and note.
-Debts—Payment—Interest.—See note on “Interest Generally” appended to Fred v. Dixon, 27 Gratt. 541.
Judicial Sales under Deed of Trust.—See Wood v. Krebbs, 33 Gratt. 685, and note.

Opinion:
Staples J.
delivered the opinion of the court.
This contract was entered into with reference to Confederate treasury notes as a standard of value. This, if not conceded by the parties, is clearly established by the evidence. The debt must therefore be scaled, unless it. is made to appear, that according to the. true understanding and agreement of the parties, it was to be discharged in a currency not liable to the scale of depreciation. The appellant relies upon the bond to show that the debtor agreed to pay in a sound currency. The promise is to pay "six years after date in current money of Virginia." It is, however, very apparent, that these words were used not so much to designate a particular medium of payment, as to exclude the inference of a contract to pay in coin.
In none of the conversations or negotiations preceding or contemporaneous with the loan, was anything said as to the kind of currency in which the debt was to be paid. In the correspondence of the parties no reference whatever is made to the subject. ^The appellant, in his petition, admits there is.no evidence of an agreement as to the kind of currency in which the debt was to be paid, other than what appears upon the face of the bond. The proposition to pay in six years emanated from the debtor, and was acceded to by the creditor, as a measure of indulgence. The promise to pay "in current money" does not necessarily indicate an agreement to pay the nominal amount of the debt in such money, at the maturity of the contract. These words are sometimes used to express a contract of hazard, in which both parties assume the risk of the currency in use when the debt is payable. This court is always reluctant, however, to adopt a construction of the contract which leads to a construction which might often deprive the creditor of any recovery whatever.
But in this case there is nothing from which it can be inferred, that either party contemplated an ag-reement of that kind. It was simply an application for a loan upon time, and the advancement of the money upon that, application, followed by the execution of the bond and deed of trust.
In the deed of trust no reference is made to the kind of currency in which the debt is to be paid, although, in other respects, the terms of the contract are set out with great minuteness.
The next circumstance relied upon, as showing that both parties understood the debt as payable in a sound currency, at its nominal amount, is the correspondence between the appellee and appellant since the close of the war. The letters of the appellee certainly do not show that he at any time claimed the right to scale the debt. It may be said, on the other hand, they do not show any distinct admission of an obligation to pay the whole amount of the bond. It is very probable *that the appellee supposed he was bound for the whole, and did not understand his right to insist upon the scale of depreciation. Still the court is not thereby precluded from an inquiry into the nature of the original transaction. It is very certain the letters contain nothing which changes the rights and obligations of the parties.
The debt being a proper one for the scale of depreciation, it is agreed that the scale must be applied as of the date of the contract. The real controversy is as to the, mode of deal ing with the payments made from the years 1865 to 1869 inclusive. These pa'yments were made in United .States currency, which was then greatly depreciated, the depreciation varying considerably at the several periods of payment. In reducing the nominal amount of Confederate debts to their gold value under the statute, this court has adopted the practice of adding the premium to such value. The debtor may pay in gold if he pleases, or he may pay in currency; but the injustice can never be tolerated of allowing him to pay the gold value in a depreciated currency greatly less than such value.
Here, however, it is insisted that the payments must be also scaled to the gold value. It is urged with great force, that during all the time the appellee was making his payments and asking for indulgence, on no occasion did he ever intimate a purpose to insist upon scaling the debt; that his conduct was such as to delude the appellant into the belief that he intended to pay the face of the bond, and under this impression the appellant received the currency at its par value, and gave the credit accordingly.
To this it is answered, there is no rule of law authorizing payments to be scaled; that the creditor having consented to receive the currency as money it ^operates necessarily as an extinguishment of the debt pro tanto. Besides it is a mere matter of conjecture what the appellant would have done. His necessities or the chance of a profitable speculation may have induced him to take the currency at par, although he must have known the debt was to be scaled. Instances are not rare in which creditors, both during and since the war, were very willing to accept a highly depreciated currency in payment of gold debts. It is very difficult to adopt any plan of scaling payments without injustice to the debtor, and great embarrassment in the administration of justice. All that can be safely done is to add the premium to the gold value of the debt as scaled, and then apply the payments to the aggregate thus ascertained. This as nearly approaches exact justice as any rule that can be adopted.
Complaint is made by the appellant, and very justly so, that the appellee is allowed interest upon these payments. The rule is well settled in Virginia, that interest is not to be computed on payments; but -upon the debt to the time of payment; and the latter deducted from the sum of principal and interest. This rule is violated by the decree.
Another ground of complaint on the part of the appellant, is, that he is not allowed compound interest. The appellant mig'ht have collected his interest at the expiration of'any six months according to his contract; but having failed to do so he cannot now convert that interest into principal so as to make it an interest-bearing fund. Even though the appellee had expressly agreed to pay such interest it would have been invalid, as hard and oppressive and tending to usury. Childers v. Deane, 4 Rand. 408-9. There is no error in this respect in the decree of the Circuit court.
*But for the errors already mentioned the decree must be reversed.
Christian J. dissented.
The decree was as follows:
The court is of opinion, for reasons stated in writing and filed with the record, that the Circuit court did not err in holding that the contract evidenced by the bond bearing date 18th April 1862, was entered into with reference to Confederate notes as a standard of value, and that the debt was under the circumstances proper to be scaled as of the date of said contract. Nor did the said court err in holding that the payments made by the appellees were not subject to the scale of depreciation. Nor did .said court err in holding that the appellant is not entitled to recover compound interest.
The court is of opinion that the Circuit court did err in holding that the appellee is entitled to interest upon the several payments made by him: The rule being well settled, that interest is not to be computed on payments, but upon the debt to the time of each payment, and the latter deducted from the sum of principal and interest; and in the present case there is nothing warranting a departure from this rule.
The court is further of opinion, that the Circuit court after reducing the appellant's debt to the gold standard, and calculating the interest thereon to the date of the first payment made December 7th 1865, ought to have added thereto the premium of 11J£ per cent., and then to have deducted from the aggregate amount thus ascertained the several payments made by the appellee.
*The court is further of opinion, that the Circuit court erred in decreeing a sale of the land embraced in the deed of trust upon a credit of one, two and three years. The deed having provided for a sale for cash, the Circuit court was not authorized to vary the terms of said deed without the consent of the creditor.
It is therefore adjudged, ordered and decreed, that so much of the decree of the Circuit court as is in conflict with the views herein announced, be reversed and annulled ; and that the appellant do pay, &c.
And the same is remanded to the said Circuit court for , further proceedings in conformity with the views herein expressed.
Decree reversed.