Court Opinion

ID: 8633248
Source: CourtListenerOpinion
Date Created: 2022-11-24 19:40:55.835788+00
Date Added: 2024-06-11T16:55:50.649230
License: Public Domain

BLATCHFORD, District Judge.
As the bill alleges that the deed to the trustees was executed by Dandridge, and as the answer admits that fact, and both parties affirm the deed of trust as one executed by Dandridge, the plaintiffs seeking to redeem the land from it and the defendants claiming title to the land under it, the fact that Dandridge did not join in it is immaterial.
The first question which arises in this case, is as to the status of the plaintiffs. There can be no doubt that they became a corporation under the laws of Virginia on the 14th of December. 1855. But, if there were any defects in the proceedings taken to incorporate them, which has not been shown, those defects were cured by the recognition of the existence of the corporation by the legislature of Virginia, by the passage of the acts of March 17th, 1856, and March 1st, 1858, and the extension and continuance of its corporate rights by the latter act for the term of fifty years. In regard to the claim set up by the defendants, that the plaintiffs forfeited their corporate rights and privileges before this suit was commenced, by the non-user of their franchise or the suspension of their operations, it is sufficient to say, that that is an objection which cannot be taken by these defendants, in this collateral way. Any forfeiture which may have been incurred must be enforced by the government under which the corporate rights are claimed to be held. The government may waive the forfeiture, and will be regarded as having waived it, unless it be shown to have been enforced. Since the passage of the act of March 17th, 1856, it cannot be claimed that the plaintiffs acted ultra vires in acquiring title to the lands in question.
The plaintiffs, as a Virginia corporation, are entitled to maintain a suit in this court against the defendants, as a New York corporation. It is as a Virginia corporation, and solely as such, that the plaintiffs bring this suit They do not bring it as a corporation of West Virginia, nor is there any evidence to show that they ever became a corporation of West Virginia, any more than the defendants became a corporation of West Virginia. The 12th section of the act of the legislature of West Virginia, passed October 26th. 1863, entitled, “An act providing for the formation of corporations and regulating the same” (Acts 1863. c. 86), and which was passed at the first session of that legislature, recognizes corporations then existing in that state, and provides that certain proceedings may be taken by them which shall result in their being declared by the secretary of the state of West Virginia to be corporations, and also provides that, after that, such corporations shall “no longer be under their former charters.” Such recognition is further shown by the 29th section of the same act. and by the 1st section of the act of November 16th. 1863 (Acts 1863, c. 105). The conclusion is clear, that every corporation created by the state of Virginia remained under its charter as a corporation of Virginia, until it became affirmatively a corporation of West Virginia, and that it did not become a corporation of West Virginia by merely having been formed to carry on mining and manufacturing operations in territory which afterwards ceased to be a part of Virginia and became a part of West Virginia. The provision of section 8, of article 11, of the constitution of West Virginia, that such parts “of the laws of the state of Virginia as are in force within the boundaries of the state of West Virginia, when this constitution goes into operation, and are not repugnant thereto, shall be and continue the law of this state until altered and repealed by the legislature,” *115taken in connection with the provisions referred to in the acts of the legislature of West Virginia, are decisive on this question. There is nothing to show that the plaintiffs ever became a corporation of West Virginia, or ever •ceased to be a corporation of Virginia. The plaintiffs have, therefore, the corporate capacity to sue as a corporation of Virginia.
The main ground urged on the part of the plaintiffs in support of the relief they seek is, that the power of sale under the deed of trust was suspended by the injunction of a ■competent court until December, 1803; that, during that period, neither the grantors in the deed of trust, who, as between themselves and the plaintiffs, were the real debtors to Edwards, nor the plaintiffs themselves, were, on the facts on which the injunction was granted and continued and finally dismissed, in any default in not paying the debt to Edwards; that, from the time the injunction was dissolved until a time subsequent to the sale to Edwards under the deed of trust and the sale by him to the defendants, all four of the debtors in the deed of trust, and all but two of the corporators of the plaintiffs, were domiciled and resident in the territory of the enemy of the United States, while Edwards, the creditor, was domiciled and resident in the territory of the United States, the war being in progress during the intervening period; that, by reason of these facts, the proceeding taken by Edwards in February, 18G4, to enforce the payment of his ■debt against the grantors in the trust deed, by a sale of the land under the deed of trust, was illegal and void; that no title to the land passed tc Edwards by virtue of such proceeding; and that the plaintiffs are, therefore, not barred or foreclosed of their equity of redemption in the land, but are entitled to redeem it from the defendants, as the owners and holders of the debt secured to Edwards by the deed of trust.
The proceeding taken in February, 18G4, to •sell the land under the deed of trust, was a proceeding by Edwards, as creditor, to enforce payment of a debt due to him by Thompson, Dandridge. Hunter and Maury, as debtors. The enforcement was, indeed, not by a judgment that the debtors personally pay the debt to the creditor, but was by a sale of land which the debtors had specifically put in trust to pay the debt. Nevertheless, the foundation of the proceeding was, that the ■debt existed and that the debtors had not discharged it. The duties and rights of the debtors and the creditor were correlative. The right which the creditor undertook to exercise, by enforcing a sale of the land, was the right to compel the discharge of the debt in invitum by that means, so far as the proceeds of the sale would go. That right could not exist in favor of the creditor, unless there existed at the same time a corresponding duty and capacity on the part of the debtors to pay the debt to the creditor. Since the decisions in the cases of The Venice, 2 Wall. [69 U. S.] 258, 274; Mrs. Alexander’s Cotton. Id. 404, 419; Mauran v. Insurance Co., 6 Wall. [73 U. S.] 1, 14; Ouachita Cotton, Id., 521, 530, 531; Hanger v. Abbott, Id. 532, 535; Coppell v. Hall, 7 Wall. [74 U. S.] 542, 554; McKee. v. U. S., 8 Wall. [75 U. S.] 163, 166; and U. S. v. Grossmayer, 9 Wall. [76 U. S.] 72,—it must be regarded as settled, that the late war between the so-called Confederate States and the United States was a public war, and a war not only between the respective governments, but between all the inhabitants of the one territory on the one side and all the inhabitants of the other territory on the other side, so that all the people of each must be regarded as having been, enemies of all the people of the other, during the continuance of the war; and that, not only on general principles did the existence of such war import a prohibition of all unlicensed commercial or' business intercourse and correspondence between persons domiciled in the one territory and persons domiciled in the other, but, by the express provisions of the 5th section of the act of congress of July 13th, 1861 (12 Stat. 257), and of the proclamation of the president of August 10th, 1861 (Id., 12G2), issued in pursuance thereof, all commercial intercourse between the territory that was in a state of insurrection against the United States and the citizens thereof, and the citizens of the rest of the United States, became unlawful during the continuance of such condition of hostility. The question arises, then —what is comprehended within the words, “commercial intercourse?” In the case of U. S. v. Grossmayer [supra], a creditor in New York, during the war, directed his debtor in Georgia to invest the amount of the debt in cotton and hold it for him till the close of the war. The cotton was bought and the creditor was, during the war. advised by the debtor of the purchase. The cotton having been captured at Savannah by the military forces of the United States, the creditor. Grossmayer, claimed it as his property. The court of claims awarded it to him, but the supreme court, on the foregoing facts, reversed the judgment. In its decision the supreme court says: “It has been found necessary, as soon as war is commenced, that business intercourse should cease between the citizens of the respective parties engaged in it, and this necessity is so great, that all writers on public law agree that it is unlawful without any express declaration of the sovereign on the subject.” The court then refers to the act of July 13th, 1861, prohibiting all commercial intercourse, and says, that the transaction in that case was not only inconsistent with the duties growing out of a state of war, but in open violation of that statute. It adds: “A prohibition of all intercourse with an enemy during the war affects debtors and creditors on either side, equally with those who do not bear that relation to each other. We are not disposed to deny the doctrine that a resident in the territory of one of the bellig*116erents may have, in time of wai-, an agent residing in the territory of the other, to whom his debtor could pay his debt in money, or deliver to him property in discharge of it, but, in such a case, the agency must have been created before the war began, for there is no power to appoint an agent for any purpose after hostilities have actually commenced; and to this effect are all the authorities. The reason why this cannot be done is obvious, for, while the war lasts, nothing which depends on commercial intercourse is permitted." The decision was, that if the debtor was to be considered as the agent of the creditor to buy the cotton, the intercourse which appointed him agent was unlawful; and that, even if the relation of- principal and agent was not created, but only that of debtor and creditor continued, the debtor and the creditor were prohibited from having any dealings with each other during the war. There can be no doubt, that if, on the dissolution of the injunction obtained by Thompson and others, as debtors, against Edwards, as creditor, Edwards had notified the debtors of the fact, and required them to pay the debt to him within a certain time, under pain of having the land sold if the debt were not paid, the payment of the debt by them to Edwards would have been business and commercial intercourse, and, therefore, unlawful. How, then, can this penalty be enforced against them, for not doing what it was unlawful for them to do? The proposition need only be stated to carry with it its own answer. No such proceeding can be upheld. The remedy for the recovery of the debt in this case by a sale of the trust land was suspended during the war.
In Tucker v. Watson, 6 Am. Law Reg. (N. S.) 220, in the court of appeals of Virginia, it was held, that the payment of a debt by a Massachusetts debtor to a Virginia creditor during the war, whether made in Massachusetts or in Virginia, was unlawful; that the remedy for the recovery of the debt was suspended during the existence of the war; and that interest on the debt during such suspension was not recoverable.
In Jackson Ins. Co. v. Stewart [Case No. 7.152], in the circuit court of the United States for the district of Maryland, it was held, that the right of a Tennessee creditor to sue a Maryland debtor in that court during the war was suspended; that the statute of limitations did not run in favor of the debt- or during such suspension; and that interest on the debt during such suspension could not be recovered.
In Hall v. Connecticut Mut. Life Ins. Co. [68 Ill. 357], a case where a mortgage on lands in Chicago had been foreclosed at Chicago. during the war, against a mortgagor and debtor who was domiciled in insurrec-tionary territory at the time, it was held by the superior court of Chicago, that, pending the late war, it was not lawful for a creditor residing in the United States to receive payment of his debt from his debtor residing in the Confederate States; and that the proceeding to foreclose the mortgage during the war, as an enforcement of the contract of mortgage in rem against the land mortgaged, was void. The view of the court was, that the publication in a newspaper of a notice directed to the debtor, informing him that, as he had failed to pay his bond, a bill had been filed to foreclose the mortgage, was illegal, as an act of unlawful intercourse with the enemy, whether it was expected that the debtor would receive the notice, or could not act upon it if he did receive it, or would not receive it; and that no rightful jurisdiction of a court could be founded on such an act. In the present case, the trust deed provided, that, in ease of any sale of the trust lands by the trustees under the deed of trust, they should give at least sixty days’ notice of the time and place of sale. The object of this notice must be held to have been to apprise the debtors that the creditor was about to sell the land, and that they must pay the debt and thus redeem the land and stop the sale within the sixty days. The presumption must be, either that the debtors saw the notice which the trustees published, or that they did not see it. If the presumption be that they saw it, they could only have seen it by means of an unlawful intercourse which this court cannot sanction. If the presumption be that they did not see it, because, by reason of hostilities, it could not reach them, it would be a fraud on them to uphold a sale made on a notice so given. A notice was made indispensable by the terms of the contract, and was necessary to be given, not only as a condition precedent to any right of the trustees to sell, but as affording time to the debtors to pay the debt and thus save the land from sale, on the presumption that they would see the notice on its being given, under circumstances where it was lawful for it to pass as a communication from the trustees to the debtors. There is no pretence that Smith and Rand, the persons who acted as trustees in publishing whatever notice was given under the deed of' trust, were not domiciled at the time in the territory of the enemies of the debtors.
In Cuyler v. Ferrill [Case No. 3,523], it was: held by the circuit court of the United States for the Southern district of Georgia, that a state court of Georgia had • no jurisdiction, during the war, to decree a partition and sale of lands in Georgia, as against the plaintiff, a citizen of Pennsylvania, interested in them. It was observed by the court that, whether either actual or constructive notice of the proceedings in Georgia reached the plaintiff at the time, he could not be charged with laches, for a response by him to the notice would have been a breach of his allegiance to-the United States.
In Semmes v. City Fire Ins. Co. [Id. 12,651]. it was held by the circuit court of the United States for the district of Connecticut, *117tliat a contract of insurance against fire made by a Connecticut corporation in Georgia, a loss under which occurred before the war, and the beneficial interest in which always belonged to persons domiciled in Mississippi, was, with all right of action on it, suspended during the war.
The right of action that is suspended must include the right to resort to any species of proceedings, judicial or otherwise, ■ to enforce the contract. In the present case, the suspension included the right of the creditor to procure, from the judge of the circuit in which the property was situated, the appointment of Band as a trustee in the place of Hansford, who was still living, and who had been selected as one of the trustees by both of the parties to the contract, as well as the right of Smith and Band to lay the foundation for exercising the power of sale, by giving a notice which it was unlawful for the debtors to receive.
As it was unlawful for the debtors to pay the debt to their enemy creditor during the war, it would be subversive of the first principles of justice to permit the creditor at the same time to enforce the payment of the debt by a sale of the land — especially so, when the debtors were, by the terms of the contract, entitled to a notice of sixty days, which it was unlawful for them to receive, or for the trustees to give to them. The proceedings in respect of the sale were void. Edwards acquired no title under it to the land, as against the debtors, and them grantees of the equity of redemption, the plaintiffs; and the defendants acquired no title to the land from Edwards, as against the same parties. The right of the debtors and of the plaintiffs to redeem the land from the lien or incum-brance of the deed of trust, by paying the debt secured thereby, remains, notwithstanding the attempted sale under the deed of trust. Such right stands in the same condition as if there had been no such attempted sale. Such sale is of itself no defence to the right of the plaintiffs to exercise such right of redemption. The plaintiffs, though not the debtors by contract with Edwards, or as between themselves and their grantors, have the right, as owners of the land by deed from the debtors, to claim to exercise the privilege, if they choose, of redeeming the land from the charge. The debtors would have the same right, but no good reason can be assigned why the plaintiffs should not have and-exercise an equal right. The right, if exercised by the debtors, would enure to the benefit both of themselves and of the plaintiffs, by relieving the former from liability on their covenant of warranty, and by relieving the laud of the latter from an in-cumbrance. The right, if exercised by the plaintiffs, will relieve the land from the in-cumbrance. The plaintiffs have, therefore, a sufficient interest to sustain alone this suit for redemption.
Is or can there be any doubt that this suit for redemption is properly instituted by the defendants. Although their title to the land fails by reason of the illegality of the proceedings for the sale of the land, yet they have succeeded to all the rights of Edwards under the deed of trust, and in and to the debt secured thereby. Effect will be given to the transaction between Edwards and the defendants, in so far as it conveyed anything to the defendants. Although the defendants did not, as against the plaintiffs, become legally grnn-tees of the land from Edwards, yet they will be regarded in this suit, and for the purpose of giving to the plaintiffs the relief to which, as owners of the equity of redemption in the land, they are entitled, as assignees from Edwards of the debt, and of his interest under the trust deed. Jackson v. Bowen, 7 Cow. 13; Robinson v. Ryan, 25 N. Y. 320, 325; Hunt v. Hunt, 14 Pick. 374; Freeman v. McGaw, 15 Pick. 86. Especially will this be so in a case where, as here, the conveyance from Edwards to the defendants contains a covenant for quiet enjoyment, and against all in-cumbrances.
The plaintiffs and the defendants being, then, in court, as proper parties to the suit. what are the defences set up, irrespective of those involved in the questions already considered?
It is objected, that, as this suit relates to lands lying in West Virginia, this court has. no jurisdiction of this suit. But, it is the ordinary case of a bill to redeem a mortgage. The owner of the equity of redemption, or the party entitled to redeem, must seek the mortgagee, or the party holding the lien on the land, in the forum where jurisdiction in personam can be obtained over such mortgagee or party, without reference to the situs of the land. The subject of controversy is immediately the mortgage or trust security from under which the land is sought to be redeemed. That is personal property and follows its owner.
It is urged, that a decree allowing the plaintiffs, to redeem will affect the rights of Edwards as warrantor to the defendants; and that, therefore, Edwards is a necessary party. If the defendants are fully assignees from Edwards of the debt and the security for it— and it is on that view alone that the plaintiffs can come in to compel the defendants to allow redemption — then Edwards is not, as between the plaintiffs and the defendants, a necessary party to this bill to redeem. There can be no difficulty in adjudicating upon the rights of the defendants, as against the plaintiffs, without the presence of Edwards as a party. What liability Edwards may ultimately come under to the defendants by reason of covenants he has heretofore made with them, is something which does not concern the plaintiffs; and Edwards, not being a party to this suit, can be in no manner affected or prejudiced by any decree therein.
It is also contended, that Thompson, Dand-ridge, Hunter and Maury are necessary par*118ties to this suit. But, a mortgagor, who has parted with his equity of redemption in the mortgaged premises, is not a necessary party, either to a bill by the mortgagee to foreclose such equity of redemption, or to a bill by the assignee of the equity of redemption, against the mortgagee or the assignee of the mortgage, to redeem the premises from the lien of the mortgage. Such is the position of the grantors in this trust deed.
It is also claimed, that Hansford and Smith and Band are necessary parties. But, they never had any beneficial interest in the debt or in the land, and no power to control the disposition by Edwards of his interest in the debt and in the security therefor. The debtors could have destroyed the lien of the deed of trust by payment of the debt to Edwards, without the intervention of the trustees, and there is no reason why the plaintiffs cannot equally destroy such lien by paying the debt to the assignees of Edwards, without the intervention of any of such trustees. So, also, as to Coleman, Morris and Coleman, it is not perceived how they are necessary parties.
It appears, by the record, that, on the 14th of April, I860, Thompson, Dandridge, Hunter and Maury tendered to the circuit court of ICanawha county, West Virginia, a bill of review and supplemental bill, praying that court to review, reverse, annul and set aside the decrees of that court of December 14th, 1803, and April 16th, 1864, and asked that such bill might be filed; and that the court, on the 14th of April, 1866, made an order, stating that it was of opinion not to allow said bill of review to be filed, and that there were no errors in the said two decrees which ought to be reviewed or corrected by the court, and that it, therefore, refused to allow the bill to be filed, and also refused to review, or reverse, or annul, or set aside the said two decrees or either of them. The defendants named in such bill of review included, among others, Edwards and his wife and the defendants in this suit. The plaintiffs in this suit were not named in it as defendants. The prayer of it was, that the two decrees in the original suit be set aside, the cause be restored to the docket, the sale by Smith and Band be set aside, the injunctions which had been dissolved be reinstated, the sale by Edwards to the defendants in this suit be confirmed. and they or Edwards be ordered to pay into court the $2,350,000 purchase money of the land, and their title be perfected on such payment of such money into court, and that such money be paid to the plaintiffs in such bill of review as the true owners of the land. From the decree refusing to allow the bill of review to be filed, Thompson, Dand-ridge, Hunter and Maury appealed to the supreme court of appeals of West Virginia, and that court, on the 3d of September, 1S69, made a decree adjudging that the sale of the 25th of February, 1S64, by Smith and Band, trustees, to Edwards, was valid. This last-named decree is set up by the defendants in this suit, in bar of the plaintiffs’ claim in this suit. To this defence it is a sufficient answer to say, that the plaintiffs in this suit were not parties either to the original suit in the circuit court of Kanawha county, or to any of the supplemental bills filed therein, or to the bill of' review, or to the appeal to the supreme court of appeals of West Virginia — in other words, to any of the litigation promoted by their grantors. The deed to the plaintiffs from Thompson and others was recorded on the 8th of March, 185G, in the Kanawha county clerk’s office. The deed to Coleman and others from Thompson and others was recorded on the same day, in the same office. The deed to the plaintiffs from Coleman and others was recorded on the 4th of September, 1856, in the same office. The original suit in the circuit court of Kanawha county, by Thompson and others, was not brought until the 10th of November, 1857. The rights of the plaintiffs which they are seeking to enforce in this suit accrued before the litigation commenced, and not post litem motara, and their title was on record in the proper office when such litigation commenced. Thompson and others being, as between themselves and the plaintiffs, as well as between themselves and Edwards, the real debtors to Edwards, even after the plaintiffs obtained title to the lands, brought the suit by reason of their own interest in the subject matter of the litigation. But the plaintiffs were not parties to it, nor were they privies to it, even though they may have known of its existence, and have informed the plaintiffs in it of the alleged defect of title in Edwards, on which it was founded. The plaintiffs are, therefore, not concluded from asserting in this suit the illegal character of the assumed sale to Edwards under the trust deed.
The defendants set up, in their answer, that they purchased from Edwards without any notice of any claim on the part of the plaintiffs to the land in question, and without any notice of any equity or right of redemption therein on the part of the plaintiffs. This allegation is contradicted by the record, for, not only were the deeds to the plaintiffs on record in the proper recording office of the county where the land purchased by the defendants was situated, but the deed from Edwards to the defendants refers to the land conveyed as land that had been conveyed to Edwards and his wife by Smith and Band, trustees, by the deed of February 25th, 1864, and refers to this last-named deed as being recorded in the recorder’s office of Kanawha county. The deed to the defendants is dated and acknowledged by Edwards, July 30th, 1864, and is acknowledged by his wife, August 2d, 1804. The deed from the trustees to Edwards was recorded February 26th, 1864. The defendants had notice, therefore, of all that is shown by the face of the deed from the trustees to Edwards, and of all that they were fairly put on inquiry by that deed to learn. That deed *119states, that the deed of trust Tras giren to Hansford and Smith, trustees, and gives the date of it, and the names of the grantors in it, and states that it was given to secure the debt due to Edwards by such grantors, and gives the place and book and page of its record. It also states the appointment of Rand, and by what court it was made, and that Edwards purchased the land, on a sale of it by Smith and Rand, under said deed of trust. The defendants were, by the deed from Smith and Rand to Edwards, remitted to the records of the circuit court of Kana-wha county, and to the order appointing Rand trustee in place of Hansford. That order recites the deed of trust, and states its place of record. The deed of trust refers to the deed from Edwards to Thompson and others, as being intended to be recorded in the clerk’s office of Kanawha county, at the same time with the recording of the deed of trust; and such deed from Edwards describes the grantees in it as “all of Virginia.” The order appointing Rand trastee also describes the grantors in the deed of trust as being engaged in giving aid and support to the then existing Rebellion, “carried on by the so-called Confederate States.” On these facts, the defendants must be lield chargeable with notice of the actual status of Edwards and of his debtors, as respected each other, in view of the Rebellion and the war. The defendants were, therefore, fully notified to take heed and see that the sale to Edwards was a valid sale, as against the plaintiffs, before purchasing from Edwards. They must, therefore, be held to have taken upon themselves the risk of its turning out that the sale to Edwards was invalid, as against the plaintiffs, and the risk of its being established that a light of redemption still existed in the plaintiffs. The right of the plaintiffs to redeem this land from the lien which still exists on it under the deed of trust, is, therefore, established.
It is set up, in the answer, that the defendants have, since they purchased and took possession of the land, expended more than the sum of $200.000 in erecting structures, opening mines, building roads, and constructing necessary appurtenances to the business to be conducted on the land, and making other improvements thereon; that the plaintiffs and their corporators knew that the defendants were in possession of the land as purchasers and claimed to own it, and were engaged in making such improvements and expenditures; that neither the plaintiffs nor their corporators made any objection thereto, or gave any notice of their claim to the defendants; and that the defendants took possession of the land on or about July 30th, 1864, and have ever since been in possession of it, but have derived no profits from it. The only evidence, as to these averments, is a stipulation by the parties, that the defendants have made improvements on the land in question, and that the plaintiffs did not remonstrate or protest against the making of such improvements by the defendants, and that the plaintiffs gave no actual notice of their claim to the defendants, until the bringing of this suit. The bill prays, that the sale to Edwards under the deed of trust, and the sale by Edwards to the defendants, may be decreed to be null and void; that the plaintiffs may be let in to redeem the land, on paying so much as shall be decreed to be due and owing on the bonds given by Thompson and others to Edwards; that the defendants may be decreed to account with the plaintiffs touching the rents, issues and profits of the land, and may be ordered to pay to the plaintiffs the value of the rents, issues and profits of the land which they have received and taken; and that it may be given in charge to a master to ascertain the value of the rents, issues1 and profits which the land might have been made to yield during the space of time in which the defendants have been in possession of it.
It is claimed, on the part of the defendants, that, inasmuch as the plaintiffs, at least from the close of the war, in June, 1865, until the filing of this bill, on the 31st of December, 1868, saw the expenditures going on, the plaintiffs being out of possession of the land, and the defendants being in possession of it, and made no remonstrance or objection, the plaintiffs ought not to be allowed to redeem the land, except on condition of first reimbursing to the defendants' such expenditures. On the other hand, it is contended, on the part of the plaintiffs, that, inasmuch as the answer of the defendants shows that, when the defendants made the purchase of the land from Edwards, Edwards was the president of the defendants, and was one of the nine trustees of their corporation, and that such trastees were the officers managing and directing the affairs of the defendants, and that the defendants made the purchase of the land by and through the said trustees, acting as its agents in the premises, it must be held that the knowledge which Edwards had was possessed by the defendants, aside from the rule as to notice, before referred to, based upon the state of the records in the recording office of Kanawha county; that, as Edwards must be held in law to have known, on the facts in his possession, the illegality of the attempted sale under the trust deed, the defendants, being chargeable with knowledge of the same facts, are chargeable, also, with knowledge of such illegality; that, therefore, the defendants cannot, in judgment of law, be held to have acted bona fide, or under a reasonable belief that they were acquiring, as against the plaintiffs, a good title to the land; and that, consequently, they are not entitled to be protected, in respect of the expenditures which they made on the land.
It is a settled principle of equity jurisprudence (2 Story, Eq. Jur., 9th Ed., § 799a) that, if a plaintiff in equity seeks the aid of the court to enforce his title against an innocent *120person, who lias made improvements on land, supposing himself to be the absolute owner, 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 such improvements; that if, in such a case, the plaintiff has fraudulently concealed his title, and has thereby misled the defendant, the title to such compensation is founded in the highest justice; but that, independently of any such fraud, if the plaintiff seeks from an innocent person an account of the rents and profits of an estate on which the latter has made improvements, without any notice of any defect in his title, a court of equity, in decreeing an account, will allow him to deduct or recoup therefrom a due compensation for his improvements. It is equally well settled (1 Story, Eq. Jur., 9th Ed., § 385), that, if a party who has title to an estate stands by and allows an innocent purchaser to expend money upon the estate, without giving him notice, such party will not be permitted by a court of equity to assert that title against such purchaser without fully indemnifying him for all his expenditures. The defendants claim that they are, and the plaintiffs claim that the defendants are not, in respect to the expenditures made by the defendants on the land in question, entitled, within these principles, to be allowed for such expenditures. At present, however, there are not sufficient facts before the court to enable it to pass upon the equities of the parties in this respect. The subject was not very fully discussed on the hearing, and, indeed, it could not have been, for the facts as to the nature, character, time, and circumstances of the expenditures were before the court only on the pleadings in the case, and on the inconclusive stipulation before mentioned. It is proper that the question as to whether there shall be an allowance to the defendants for such expenditures, and the question as to whether, if the expenditures shall be found to have exceeded any rents and profits properly chargeable against the defendants, the payment of such excess shall be made a condition precedent to the exercise of the right of redemption by the plaintiffs, and various other questions which will undoubtedly arise on the report of a master as to such expenditures, and their nature and character, and the time and circumstances under which they were made, and the status of the plaintiffs and their corporators, and of the defendants and their corporators, in regard to such expenditures, should remain open for consideration. It is not necessary that such questions should be decided now, or until all the. equities between the parties, in that regard, are brought fully before the court. Such was the course pursued in Bright v. Boyd [Cases No. 1,875, 1.876]. Those questions, and also the question as to whether such paper title as the defendants purport to have to the land in question, shall be conveyed by them to the plaintiffs, and the question of costs, and all other questions, are reserved until the coming in of the report of the master.
NOTE. The following was the decree in the cause: “This case having come on to be heard upon the pleadings therein, and a stipulation of the respective parties, .and James M. Carlisle and William A. Maury having been heard on the part of the plaintiffs, and John Slosson and Benjamin H. Smith on the part of the defendants, and the plaintiffs having applied to the court to strike out William H. Edwards, as a defendant, and to dismiss the bill in respect to him, upon the ground that the said Edwards is a citizen of the state of West "Virginia, as is averred in the defendants’ answer, it is ordered, that such application be, and the same is hereby granted. It is also ordered, adjudged, and decreed, that the sale, made on the twenty-fifth of February. 1864, by William J. Rand and Isaac N. Smith, as trustees, of the lands covered by the deed of trust to James F. Hansford and Isaac N. Smith, trustees, mentioned in the pleadings herein, and the deed thereof by said Smith and Rand to said Edwards, and the deed thereof by said Edwards to the defendants, were all and each of them null and void, so far as respects the conveyance of every and all of the said lands, as against the plaintiffs, and that the defendants acquired no title thereby, as against the plaintiffs, to the said lands, and that the defendants have a lien on said lands, to secure the payment of the amount due and unpaid on the debt secured by the said deed of trust, they being the owners of the said debt, and that the plaintiffs have the right to redeem the said lands from such lien; and that it be, and is hereby referred to John Sedgwick, Esquire, of the city of New York, counsellor at law, as master, pro hac vice, with the usual powers of a master, to take and state an account of the amount due on said debt, and an account of the amount of the rents, issues, profits, proceeds, and productions of the said lands, with which the defendants are properly chargeable, and an account of the improvements made on said lands, through expenditures made by the defendants, which improvements remain as benefits to be received by the plaintiffs, as owners of said lands, and their value at the time of making his report: and, the said master is directed to enquire and report as to the circumstances under which such improvements were made, and whether the same were made in good faith or not. and whether with or without notice of defect of title, and whether the plaintiffs ought to render compensation for the same to the defendants, and. if so, in what amount. And the court doth further direct, that, in taking such accounts, and making such inquiries, the said master may call for the production of such books and papers as it may seem to him fitting, and may examine such witnesses, and ■ ot such places, as shall seem to him proper, and receive and consider such depositions as shall be offered in evidence by either of the said parties, and may inspect the said lands; and that he return,' with his report, all such testimony as shall be adduced before him, and that he, with all convenient speed, make report to the court of his proceedings in the premises. All other questions are reserved until the coming in of said report.”
*120A decree will be entered, declaring the sale under the deed of trust, and the deed from Smith and Rand to Edwards, and the deed from Edwards to the defendants, to be null and void, so far as respects the conveyance of any title to the land, as against the plaintiffs, and that the defendants acquired no title thereby, as against the plaintiffs, to the land in question, and that, by virtue of the premises, the defendants have a- lien on the land to secure the payment of the amount due and unpaid on the debt secured by the deed of trust, they being the owners of such debt, and that the plaintiffs are entitled to redeem the land from such lien; and ordering a reference to a master, to take and state an account of the amount due on such debt, and of the amount of the rents, issues, and profits of the land in the hands of the defendants, and of the amount of the expenditures made by the defendants in improving the land; and reserving all other questions until the coming in of such report.