Warren v. Susman
| Decision Date | 24 March 1915 |
| Docket Number | 175. |
| Parties | WARREN ET UX. v. SUSMAN ET AL. |
| Court | North Carolina Supreme Court |
Appeal from Superior Court, Pamlico County; Peebles, Judge.
Action by G. W. Warren and wife against B. L. Susman and others. From a judgment for plaintiffs, defendants appeal. Affirmed.
Where a mortgagee brought in the property at foreclosure for less than its value, the mortgagor may either have the sale set aside or recover the difference between the foreclosure price and the value of the property.
This action was brought to recover the value of certain mules and land sold by defendant, the Washington Horse Exchange Company, under a mortgage given by the defendant to it. There is a power of sale in the mortgage, but it is restricted to the land. It was executed to secure $500, the price of the two mules, for which two notes of $250 each were given on March 9, 1910, one payable November 1, 1910, and the other on November 1, 1911. The transaction took place in Pamlico county where the land is situated and where the mortgage was registered. Plaintiff changed his residence to Carteret county and carried the mules with him. They were seized by the defendant, the mortgagee, carried to Washington, Beaufort county, N. C., and there sold at public outcry for $225. The land was afterwards sold in Pamlico in like manner and bought by the defendant, the mortgagee, through an agent, for $325. The jury returned the following verdict:
"1. What was the value of the mules described in the complaint at the time the said mules were taken into the possession of the defendant, Susman, and the Washington Horse Exchange Company? Answer: $500.00.
2. What is the highest fair hiring or rental value of said mules? Answer: $50.00 per year.
3. What was the value of the lands described in the complaint at the time the same was taken into the possession of the defendants? Answer: $800.00.
4. What is the highest rental value of said lands since the defendants took the same into their possession? Answer $25.00 per year.
5. Did E. L. Stewart buy in said lands for the Washington Horse Exchange Company? Answer: Yes.
6. Did said Stewart pay any money for said lands? Answer No."
Judgment was entered on the verdict, and defendant appealed.
Z. V Rawls, of Bayboro, and Small, MacLean, Bragaw & Rodman, of Washington, N. C., for appellants.
Abernethy & Davis, of Beaufort, for appellees.
WALKER J. (after stating the facts as above).
The mortgage had no power of sale as to the mules, and when the defendant seized and sold them to a third party, it amounted to a conversion and rendered them liable to the plaintiff for their real value. Otherwise, if the defendant had sold them regularly under a decree of court or under some authority given to that end. Bird v. Davis, 14 N. J. Eq. 467. The jury have found that the mules did not bring a fair price at the sale made by the defendant, but, on the contrary, were worth more than twice the amount they brought at the sale. The defendant is also liable for the value of any use of the mules by it.
As to the land, defendant bought it for itself, though it acted indirectly by an agent. It is the same in equity as if it had bought in its own name. Whitehead v. Hellen, 76 N.C. 99. The plaintiff could elect to have the sale set aside and the property returned to the trust fund, or recover of the defendant, who had sold and bought at the same time, in breach of his trust, the value of the land, where the trustee insists on the validity of the sale and his right to retain the property, and has conveyed it to a third person whose title he also insists is unassailable; otherwise the trustee would be allowed to speculate upon his trust and make an unfair profit out of it, which will not be tolerated by a court of equity. This is held to be the rule in Froneberger v. Lewis, 79 N.C. 426, where the subject is fully discussed. Huston v. Cassidy, 14 N. J. Eq. 320; Smith v. Drake, 23 N. J. Eq. 302. The cestui que trust, in making his election, is not required, in such circumstances, to take the property upon his trustee's terms, or at a price fixed by him, but equity requires that if the trustee elects to stand upon his right as purchaser, instead of surrendering the property to the beneficiary, he must pay the reasonable value of the land, or a fair compensation for the breach of his trust, and this, with greater reason, is true where the trustee has himself subsequently conveyed the land to a bona fide purchaser for value and without notice. Sprinkle v. Wellborn, 140 N.C. 163, 52 S.E. 666, 3 L. R. A. (N. S.) 174, 111 Am. St. Rep. 827; Froneberger v. Lewis, supra. When Froneberger v. Lewis was before this court the first time (70 N.C. 456) the court said:
(citing Ryden v. Jones, 8 N. C. 497, 9 Am. Dec. 660, and the trustee was charged accordingly in that case, even though the cestui que trust was present at the sale and assented to it).
This suit was heard in the court below upon the theory that the plaintiff had elected to take the value of the land as compensation for the breach of trust by the trustee in buying the land for himself at the sale, and afterwards disposing of it, and it was so submitted to the jury without apparent objection to the issues. The trustee, according to the record, is now insisting that the sale was valid, and that he has conveyed to an innocent purchaser, Felix Lee, as he excepted to the court's intimation that he was not such, and also moved to nonsuit the plaintiff. The court expressly states that the plaintiff has elected to take the value of the land. Although Felix Lee was made a party, he filed no answer, and no issue was submitted concerning his rights, as a bona fide purchaser for value and without notice. His honor told the jury, it is true, that he would submit an issue and to answer it, "No," but it was not, in fact, submitted and answered. Besides, as plaintiff takes the value of the land in the place of the land itself, Felix Lee cannot be prejudiced by the judgment, as he has a deed for the land from the defendant, who purchased it at the sale.
We observe that no issue was tendered and no request for instructions made upon the theory that defendants were entitled to have the same set aside and return the land to the plaintiff. Their whole defense proceeds upon quite a contrary basis, namely, that they have a right to hold the land against the plaintiff, having acquired it under a valid sale, and for this reason they moved for a nonsuit, which could not be based upon any other notion. Another exception taken by defendant was that the proceeds from the sale of the mules were not sufficient to pay the mortgage debt, and therefore it had the right to sell the land and to purchase at the sale. This proved not to be true, but even if it had been, it did not justify the defendant in buying the land at its own sale and afterwards resisting the claim of the plaintiff by denying that he had any right in or to the land, or any equity to have the sale set aside. The case of Tayloe v. Tayloe, 108 N.C. 69, 12 S.E. 836, where the trustee bought property at his own sale, seems to be directly in point. The court there said that the trustee had dealt with the property unlawfully and sold it for a sum of money greatly less than its value, to appellee's injury, and, having failed to dispose of it as the law directed, he was clearly liable for its value.
We do not mean to intimate that a mortgagee may not sometimes buy in property at his own sale to prevent a sacrifice of it by a sale to a third party below its value, as such a course may be necessary in order to prevent a loss to himself and the mortgagor. But he must do so in good faith, and in recognition of the mortgagor's right to avoid the sale if he elects so to do. Instead of pursuing this course, defendant company at the very outset denied plaintiff's right to anything out and out, and prayed for judgment that they take nothing by their action, but be taxed with the costs. They seized and sold the mules unlawfully, and after becoming responsible, by reason of the conversion, for their full value, which was sufficient to pay the debt, they nevertheless sold the land under the power contained in the mortgage, bought it in for themselves, asserted their right to hold it free from any interest or claim of plaintiff and conveyed it to a third party, and, as they alleged and maintained in the trial below, for value and without notice, if there was any defect in its title, which was denied. There is nothing in the record, by way of prayers for instructions, exceptions to issues, instructions of the court, or assignment of errors, that raises the question properly as to the defendant's nonliability for the value of the land. The issue as to the value of the land was submitted without objection, and it was raised by the pleadings, as plaintiffs by their amendment to the complaint asked that the value of the land be determined, and that they have judgment for it, and the inquiry was confined to this phase of the case without any objection. The effect of an amendment of a complaint, as superseding the original pleadings, was stated at the last term in Zagier v. Zagier, 83 S.E. 913, and in Warren v. A. & Y. R. Co., 156 N.C. 591, 72 S.E. 481. It is sufficient to say, though, that the case was tried below on the issues as to the value of the property with defendant's full acquiescence, and we hear the case here according to...
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