Daniel Boone Complex, Inc. v. Furst

• Decision Date: 02 October 1979
• Docket Number: No. 7815SC847,7815SC847
• Citation: 43 N.C.App. 95,258 S.E.2d 379
• Court: North Carolina Court of Appeals
• Parties: DANIEL BOONE COMPLEX, INC., a North Carolina Corporation, Camilco, Inc., A Virginia Corporation, Clarence A. McGillen, Jr., and Linda S. Broyhill McGillen, Plaintiffs, v. Mitchell FURST, Individually, Mitchell Furst, Trustee, and Matthew Mezzanotte, Defendants. Mitchell FURST, Trustee, Plaintiff, v. CAMILCO, INC. and Clarence A. McGillen, Jr., Defendants. CAMILCO, INC., Plaintiff, v. Mitchell FURST, Trustee, Mitchell Furst, Individually, Daniel Boone Complex, Inc., Dalton H. Loftin, Trustee, James J. Freeland and wife, Maxine H. Freeland, Central Carolina Bank and Trust Company, Assignee, Matthew H. Mezzanotte and wife, Genevieve D. Mezzanotte, Defendants.

Page 379

258 S.E.2d 379

43 N.C.App. 95

DANIEL BOONE COMPLEX, INC., a North Carolina Corporation,

Camilco, Inc., A Virginia Corporation, Clarence A.

McGillen, Jr., and Linda S. Broyhill

McGillen, Plaintiffs, v. Mitchell FURST, Individually, Mitchell Furst, Trustee, and Matthew Mezzanotte, Defendants.

Mitchell FURST, Trustee, Plaintiff, v. CAMILCO, INC. and Clarence A. McGillen, Jr., Defendants.

CAMILCO, INC., Plaintiff, v. Mitchell FURST, Trustee, Mitchell Furst, Individually, Daniel Boone Complex, Inc., Dalton H. Loftin, Trustee, James

J. Freeland and wife, Maxine H. Freeland, Central Carolina

Bank and Trust Company, Assignee, Matthew H. Mezzanotte and

wife, Genevieve D. Mezzanotte, Defendants.

No. 7815SC847.

Court of Appeals of North Carolina.

Oct. 2, 1979.

Everett, Everett, Creech & Craven by Robinson O. Everett, Durham, and Robert E. Cooper, Chapel Hill, for plaintiffs-appellants.

Newsom, Graham, Hedrick, Murray, Bryson & Kennon by Josiah S. Murray III, Durham, for defendants-appellees.

ERWIN, Judge.

The threshold issue essential to determination of the questions raised by appellants is what were the respective rights of the parties at the beginning of the loan transactions?

Daniel Boone Complex, Inc. executed a purchase money deed of trust to the Freelands in the amount of $1,085,000 to secure the purchase price of the complex. This deed of trust had priority over the amount of money secured by the Furst-Camilco loan. Camilco asserts that since it furnished the consideration, the $136,550.73 used for settlement costs, it was the owner of the equity of redemption Ab initio. This is not altogether correct.

Daniel Boone's conveyance of title to the complex property to Furst was intended as a mortgage. A mortgage or deed of trust to secure a debt passes legal title to the mortgagee or trustee, as the case may be, but the mortgagor or trustor is looked on as the equitable owner of the land with the right to redeem at any time prior to foreclosure. This right, after the maturity of the debt, is designated as his equity of redemption. Riddick v. Davis, 220 N.C. 120, 16 S.E.2d 662 (1941).

In the absence of circumstances indicating a contrary intent, where one person pays the purchase price for land, but legal title is taken in the name of another for whom he is under no duty to provide, a trust in favor of the payor arises by operation of law and attaches to the subject of the purchase. Vinson v. Smith, 259 N.C. 95, 130 S.E.2d 45 (1963); Grant v. Toatley, 244 N.C. 463, 94 S.E.2d 305 (1956); Summers v. Moore, 113 N.C. 394, 18 S.E. 712 (1893); Accord, Campbell v. Freeman, 99 Cal. 546, 34 P. 113 (1893). To the extent that Camilco furnished funds enabling Daniel Boone to purchase the property, a resulting trust arose in its favor. Cline v. Cline, 297 N.C. 336, 255 S.E.2d 399 (1979); McWhirter v. McWhirter, 155 N.C. 145, 71 S.E. 59 (1911); Cunningham v. Bell, 83 N.C. 328 (1880); Edwards and Van Hecke, Purchase Money Resulting Trusts in North Carolina, 9 N.C.L.Rev. 177, 185 (1930-31).

We are well aware that the presumption of a resulting trust which arises from the furnishing of consideration to another who purchases the property in his own name is a rebuttable one. Edwards and Van Hecke, Supra. However, the record before us is void of any evidence that the money furnished by Camilco was intended as a loan, Cf. In re Gorham, 173 N.C. 272, 91 S.E. 950 (1917); Lassiter v. Stainback, 119 N.C. 103, 25 S.E. 726 (1896), nor have the respondents raised this contention below.

Even though the property was conveyed by Daniel Boone to secure Furst's loan to Camilco, Camilco was the owner of the equity of redemption, mortgagor, to the extent that it furnished Daniel Boone a portion of the purchase price. Cline v. Cline, supra.

In Osborne, Nelson & Whitman's, Real Estate Finance Law, § 3.20, pp. 70-71 (1979), the law of mortgages of tripartite transactions is stated as follows:

" '. . . The conveyance is nonetheless a mortgage because it was conveyed to him directly by a third party, to secure his loan to the purchaser for the amount of the purchase money, than if the conveyance had been made directly to the purchaser in the first instance, and the purchaser had then made a conveyance to him, as a security for the money that he had previously borrowed with which to make the purchase.' "

Even so, we hold that Camilco is estopped by the doctrine of ratification from asserting the existence of its equity of redemption.

Camilco voluntarily executed the July 30th agreement, which stated:

"WHEREAS, pursuant to the terms of a Security and Trust Agreement dated March 14, 1974, title in fee simple absolute to that real and personal property known as Daniel Boone Complex, located at Hillsborough, North Carolina, as further described in that deed dated March 14, 1974, was conveyed by Daniel Boone Complex, Inc., to Mitchell Furst, Trustee."

In the agreement, Camilco arranged to repurchase the land upon certain conditions. In doing so, it recognized the existence of the title in Furst. See Council v. Land Bank, 213 N.C. 329, 196 S.E. 483 (1938). Where, in the course of making a contract, the title of one party or the other to the property involved in the transaction is recognized, and the dealing proceeds on that basis, both parties are ordinarily estopped to deny that title or to assert anything in derogation of it. 31 C.J.S. Estoppel § 125, p. 656. We hold that by executing the July 30th agreement, Camilco acknowledged the existence of Furst's ownership of the property in fee simple absolute. Cf. Denson v. Davis, 256 N.C. 658, 124 S.E.2d 827 (1962).

Appellants contend that the trial court erred in finding that it had not been damaged by civil conspiracy or fraud on the part of Furst and the Mezzanottes. We affirm the trial court's findings as to civil conspiracy, but we must reverse its ruling on the question of fraud.

An action for civil conspiracy will lie when there is an agreement between two or more individuals to do an unlawful act or to do a lawful act in an unlawful way, resulting in injury inflicted by one or more of the conspirators pursuant to a common scheme. Shope v. Boyer, 268 N.C. 401, 150 S.E.2d 771 (1966); Burton v. Dixon, 259 N.C. 473, 131 S.E.2d 27 (1963); 3 Strong's N.C. Index 3d, Conspiracy, § 1, p. 144. Appellants contend that Furst and the Mezzanottes conspired to defraud them of their interests in the property by intentionally misrepresenting the identity of the lender of their money. The trial court had competent evidence before it indicating that the Mezzanottes had not instructed Furst to lie as to their identity. Since there is competent evidence to support it, the trial court's finding must be upheld as to the absence of a conspiracy to defraud appellants.

Where an owner of land is induced by fraud or misrepresentation to execute a mortgage which he would not have given if fully and truly informed of the circumstances, the fraud thus practiced on him will be fatal to the validity of the instrument. 59 C.J.S. Mortgages § 141, p. 186. Only recently, we set out the elements of fraud in our State as follows:

"While our courts have been hesitant to formulate an all-embracing definition of fraud, the Supreme Court has stated the following elements of actionable fraud in Ragsdale v. Kennedy, 286 N.C. 130, 138, 209 S.E.2d 494, 500 (1974): '(1) False representation or concealment of a material fact, (2) reasonably calculated to deceive, (3) made with intent to deceive, (4) which does in fact deceive, (5) resulting in damage to the injured party.' "

Russo v. Mountain High, Inc., 38 N.C.App. 159, 162, 247 S.E.2d 654, 656-57 (1978).

The trial court found in its findings of fact that Furst had intentionally misrepresented the identity of his undisclosed principals, the Mezzanottes. In doing so, the trial court focused on the Mezzanottes' reasons for not having their identity revealed; however, the court's crucial inquiry, as trier of fact, should have focused on what significance Furst's misrepresentation of the identity had on Camilco's execution of the Furst-Camilco loan.

A contract can be avoided against one who through misrepresentation on his part or the part of his agent has become a party to it knowing that someone else was intended or knowing merely that he was not intended to be a party. Pearce v. Desper, 11 Ill.2d 569, 144 N.E.2d 617 (1957); Restatement (Second) of Agency § 304 (1957); See also Walker v. Galt,171 F.2d 613 (5th Cir. 1948), Cert. denied, 336 U.S. 925, 69 S.Ct. 656, 93 L.Ed. 1086 (1949). The rule does not differ when the identity of a moneylender is the fact being misrepresented. Gordon v. Street, 2 Q.B. 641 (1899). Persons borrowing money may very well consider the identity of their lender. In the instant case, Camilco has presented evidence indicating that it would not have dealt with the Mezzanottes for various reasons. We hold that the trial court erred in not making any determination of fact on the existence of this requisite element of fraud.

Respondents contend that, even if evidence of the first four elements of fraud exists, the trial court did not err in its determination of no fraud, because appellants suffered no damage. It is true that the appellants do not presently have any liability on the original $273,101.46 promissory note. Should the court determine that the identity of the undisclosed lenders, the Mezzanottes, was essential to Camilco's execution of the loan and mortgage agreements, Camilco would be able to meet the requisite damage element of fraud. The execution of the loan and mortgage agreement with a party with whom it did not wish to deal would be sufficient injury.

Ordinarily, a party who has been fraudulently induced to enter into a contract or sale has a choice of remedies. He may repudiate the contract, and tendering back what he has received under it, may recover what he had parted with or its value; or he may affirm the contract,...