Wood v. North Carolina Trust Co.

• Decision Date: 27 January 1931
• Docket Number: 339.
• Parties: WOOD et al. v. NORTH CAROLINA TRUST CO. et al.
• Court: North Carolina Supreme Court

156 S.E. 523

200 N.C. 105

WOOD et al. v. NORTH CAROLINA TRUST CO. et al.

No. 339.

Supreme Court of North Carolina

January 27, 1931

Appeal from Superior Court, Alamance County; Grady, Judge.

Action by John A. Wood and wife and another against the North Carolina Trust Company, trustee, and others. From the judgment, named defendant and a certain other defendant appeal.

Reversed and remanded.

Innocent purchaser for value from purchaser at foreclosure sale had right to rely on record respecting title.

This is an action to restrain and enjoin the defendant North Carolina Trust Company, trustee, from executing a deed, and thereby conveying to its codefendant, Pilot Life Insurance Company the land described in the complaint, pursuant to a sale made by the said trustee under the power of sale contained in a deed of trust executed by the plaintiffs John A. Wood and wife, conveying said land to said trustee to secure the payment of a note executed by the said John A. Wood to the said Pilot Life Insurance Company; and for judgment and decree that the plaintiff the First National Bank of Burlington, N. C., and the defendant Mrs. Blanche Brindle, as holders of certain bonds executed by the plaintiff John A Wood, have a first lien on said land, by virtue of a deed of trust executed by the said John A. Wood and wife to the Alamance Insurance & Real Estate Company for the purpose of securing the payment of said bonds.

At the trial of the action, judgment was rendered as follows:

"This cause coming on for hearing at the above named term of Court, and all parties having agreed in open Court to waive a jury trial and submit the matter to the presiding Judge with the understanding that he is to find the facts and render such judgment as in his judgment the facts would justify; and evidence having been offered by the parties the Court finds the facts to be as follows:

"1. Subject to the liens and incumbrances hereinafter referred to, the plaintiff, John A. Wood, at the times referred to in the pleadings, was the owner in fee simple of a certain tract of land situate in the Town of Burlington, Alamance County, North Carolina, described by metes and bounds in the complaint.

"2. On May 14, 1924, John A. Wood and wife executed and delivered to the Alamance Insurance & Real Estate Company, as Trustee, a deed of trust on said land in order to secure the payment of the sum of $5,000.00, evidenced by ten bonds, bearing interest at the rate of 6 per cent per annum, payable to bearer, or the registered holder thereof; said bonds being in the denomination of $500.00 each, due and payable at the rate of $1,000.00 each year, until fully paid; said deed of trust is recorded in Book 95 at page 293 of the Register's office of Alamance County; and the said record is made a part of this finding of facts.

"3. All of said bonds were registered, and bonds Nos. 4, 6 and 7 were retired before the institution of this action.

"4. Bonds Nos. 8, 9 and 10, each in the sum of $500.00 were duly registered in the name of the defendant, Mrs. Blanche E. Brindle, on September 28, 1924, before the maturity thereof, and she is now the owner of said bonds in due course and for full value; bonds Nos. 1 and 2 were registered in the name of Dr. R. G. McPherson on June 6, 1924; bond No. 3 was registered in the name of M. S. Gatewood on July 8, 1924, and bond No. 5 was registered in the name of Rev. N. G. Bethea on June 11, 1926; said bonds Nos. 1, 2, 3 and 5 are now the property of the First National Bank of Burlington, it having acquired said bonds by purchase, but the same were never registered in the name of said bank.

"5. On August 5, 1926, after advertisement, a sale of said land was made purporting to have been done under the powers contained in the said deed of trust; and the Alamance Insurance & Real Estate Company, Trustee, conveyed said lands to George G. Sharpe, who at that time was an employee of the defendant, Alamance Insurance & Real Estate Company; and while said deed recited a consideration of $5,000.00, nothing in fact was paid by the said George G. Sharpe to the said Alamance Insurance & Real Estate Company, Trustee; said deed is recorded in Book 88, page 226, of the Register's office of Alamance County. The purchase of said lands at said sale by George G. Sharpe was made pursuant to an agreement entered into between him and the Alamance Insurance & Real Estate Company, Trustee, in the original deed of trust, to the end that he, the said George G. Sharpe, should take the title to said lands and convey the same back to the Alamance Insurance & Real Estate Company.

"6. On August 28th, 1926, pursuant to said agreement referred to in the next finding of fact, George G. Sharpe and his wife, Linda Sharpe, for a purported consideration of $10.00, conveyed said lands to the Alamance Insurance & Real Estate Company by deed recorded in Book 86 at page 285; but the Alamance Insurance & Real Estate Company paid nothing to the said George G. Sharpe for said land.

"7. On January 26th, 1927, for a purported consideration of $10.00, which was never paid, the Alamance Insurance & Real Estate Company, attempted to convey said lands to John A. Wood, and did in fact execute and deliver to him a deed for said land with full covenants of warranty and seizin; the said John A. Wood being the grantor in the original deed of trust hereinbefore referred to.

"8. The Court finds as a fact that said attempted foreclosure and sale of the lands in question was fraudulent; and done for the purpose, insofar as the Alamance Insurance & Real Estate Company is concerned, of defrauding the holders of the bonds secured by said deed of trust; and the Court further finds that nothing was paid to the holders of the bonds which form the basis of this action, to-wit: bonds Nos. 1, 2, 3, 5, 8, 9 and 10.

"9. On December 6, 1926, the plaintiff, John A. Wood, made application to the defendant, Pilot Life Insurance Company for a loan of $5,000.00, which application was made through and by the Alamance Insurance & Real Estate Company, the name of the said John A. Wood having been signed to said application by some officer of said Alamance Insurance & Real Estate Company; said application offered as security for said loan a deed of trust upon the same lands hereinbefore referred to, and being the same lands described in the deed of trust from John A. Woods to the Alamance Insurance & Real Estate Company, Trustee; and in said application it is stated that the loan is desired by the said John A. Wood for the purpose of repaying a present loan to the Alamance Insurance & Real Estate Company, and secured by a mortgage upon said property.

"10. Pursuant to said application the title to said property was examined by E. S.W. Dameron, attorney for the Pilot Life Insurance Company, residing at Burlington, N. C., who prepared an abstract of title to said land, which was submitted to said Pilot Life Insurance Company; said abstract is hereby filed and made a part of this finding of fact. In said abstract, attention is called to the deed of trust from John A. Wood to the Alamance Insurance & Real Estate Company, Trustee.

"The said E. S.W. Dameron, Attorney-at-law, was also the attorney-at-law for the said Alamance Insurance & Real Estate Company, Trustee, in the foreclosure or attempted foreclosure of the deed of trust from John A. Wood and wife to said Alamance Insurance & Real Estate Company, and there appears upon the margin of the record where said deed of trust is recorded the following entry: "The property described in this deed of trust sold under foreclosure on May 3, 1926. (Signed) Alamance Insurance & Real Estate Company, Trustee, by Dameron, Rhodes & Thomas, attorneys.' Said entry is in the handwriting of the said E. S.W. Dameron.

"11. The application of the said John A. Wood for said loan of $5,000.00 was accepted by the defendant, Pilot Life Insurance Company; and the abstract of title above referred to was prepared at the instance of the said Pilot Life Insurance Company, as set out in Article 4 of the second and further defense of the said Pilot Life Insurance Company; and pursuant to said application and abstract, the plaintiffs, John A. Wood and his wife, executed a note for $5,000.00 to said Pilot Life Insurance Company, dated February 2, 1927, payable $500.00 a year for ten years on the 2nd day of February of each year; and the said John A. Wood and wife secured said note by a deed of trust of even date therewith upon the lands described in the original deed of trust from John A. Wood and wife to the Alamance Insurance & Real Estate Company, which latter deed is recorded in Book 108, page 1111 of the Register's office of Alamance County.

"12. On June 2, 1927, the Pilot Life Insurance Company sent to Walter E. Sharpe, manager of the Alamance Insurance & Real Estate Company, a check for $5,000.00, payable to the order of John A. Woods and the Alamance Insurance & Real Estate Company; which check was endorsed by John A. Wood and the Alamance Insurance & Real Estate Company, per S. C. Huffines, Treasurer, and was deposited in the bank, duly collected and placed to the credit of the said Alamance Insurance & Real Estate Company; and no part of the same was ever paid out in satisfaction of the bonds held by the plaintiff, the First National Bank of Burlington, N. C., and the defendant, Mrs. Blanche E. Brindle.

"The Pilot Life Insurance Company had no actual notice of the fact that said bonds had not been paid.

"13. The Court finds as a fact that the Pilot Life Insurance Company, owing to the facts hereinbefore found, constituted the said Walter E. Sharpe as its agent for the purpose of receiving and distributing the loan of $5,000.00 made by it to the said John A. Wood, and to see that its...