Harvey v. Kinston Knitting Co

• Decision Date: 08 May 1929
• Docket Number: (No. 209.)
• Court: North Carolina Supreme Court
• Parties: HARVEY. v. KINSTON KNITTING CO. et al.

148 S.E. 45

(197 N. C. 177)

HARVEY.

v.KINSTON KNITTING CO. et al.

(No. 209.)

Supreme Court of North Carolina.

May 8, 1929.

Appeal from Superior Court, Lenoir County; Cranmer, Judge.

Action by C. F. Harvey against the Kinston Knitting Company and others. Judgment for defendants, and plaintiff appeals. Modified, and, as modified, affirmed.

Certain phases of this case were considered by this court in Harvey v. Kinston Knitting Co., 194 N. C. 734, 140 S. E. 746, and Harvey v. Oettinger, 194 N. C. 483, 140 S. E. 86.

The Orion Knitting Mills issued bonds in the sum of $150,000 on May 1, 1922, and to secure the payment thereof executed and delivered to the Virginia Trust Company a mortgage or deed of trust on all of its property consisting of real estate, machinery, etc. These bonds were indorsed by the directors of the mortgagor, C. F. Harvey, the plaintiff, and the individual defendants in this action. Some of said directors and indorsers, as aforesaid, were dead at the commencement of this action, and their personal representatives were duly made parties.

Thereafter the defendant Kinston Knitting Company was duly organized in 1925, and this corporation became the owner of the real and personal property of the mortgagor, Orion Knitting Mills, under a contract or agreement to assume and pay off the balance due on the bonds issued by the Orion Knitting Company and secured by said deed of trust. Thereupon the Orion Knitting Mills was duly dissolved. The real estate embraced in said mortgage or deed of trust was located in Lenoir and Carteret counties.

This action was instituted by plaintiff, Harvey, against the Kinston Knitting Mills and the individual defendants, alleging that said corporation was insolvent, and asking for the appointment of a receiver, and a re-ceiver was appointed on the 31st day of March, 1927. Prior to the commencement of this action the company had sold to C. E. Raynor 26 tenement houses covered by the lien of Virginia Trust Company for $20,000, said purchase price consisting of $1,000 in cash and notes aggregating $19,000, secured by deed of trust upon the property. These Raynor notes were indorsed by the defendant Kinston Knitting Company, and were delivered to the lien-holder, Virginia Trust Company. Whereupon the Virginia Trust Company released the property purchased by Raynor from the operation of said deed of trust. After applying the cash proceeds derived from sales of portions of the mortgaged property, as aforesaid, there was a balance due the Virginia Trust Company of approximately $90,000, with some accrued interest. Subsequently Judge Sinclair entered an order of sale of all the property of the defendant Kinston Knitting Mills including, of course, the land covered by the deed of trust of the Virginia Trust Company. The order of sale directed that the property should be offered free of lien, and also "subject to the lien held by the Virginia Trust Company, trustee, so that the purchaser thereof shall take the said property burdened with and subject to the said lien aforementioned." Pursuant to said order of sale the receiver advertised for sale the property in Carteret county on the 18th day of July, 1927, and the property in Lenoir county was to be sold on the 19th day of July, 1927. The advertisement followed the language of the order of sale, reciting that if said property had been sold freed from lien "the same said property will immediately be offered for sale subject to the lien held under the deed of trust of the Virginia Trust Company, so that the purchaser thereof will purchase and take the property subject to the said lien held by the Virginia Trust Company." The report of sale duly made by the receivers was filed on the 19th day of July, 1927, reciting that "the receivers further made a true and accurate statement of the status as to the indebtedness secured by the lien under the deed of trust to the Virginia Trust Company." In addition to the advertisement, the receivers announced that the total indebtedness due the Virginia Trust Company as of May 1, 1927, was $92,-700. Announcement was also made at the sale that the Raynor notes and the cash payment of $1,000 made by him had been forwarded to the Virginia Trust Company.

The real estate in Carteret county, covered by said deed of trust, was purchased by the plaintiff, C. F. Harvey, "subject to and bur-neded by the said lien, " for the sum of $100, and the real estate in Lenoir county, covered by said deed of trust, was also purchased by Harvey for $300, "subject to the lien held by the Virginia Trust Company."

Thereafter the defendants H. E. Moseley, L. L. Oettinger, F. C. Dunn, Myrtie A. Tull, ex ecutrix, Lundsford Abbott, administrator, and Lillie T. Oettinger, executrix, filed exceptions to the confirmation of said sale, alleging that the price offered for said property was inadequate, and that Harvey, having purchased the Carteret county property for $100, "subject to and burdened with the indebtedness due to the Virginia Trust Company, * * * in law * * * by virtue of his said bid * * * thereupon assumed as a part of his bid and agreed to pay off the secured indebtedness to the Virginia Trust Company, " and that the Virginia Trust Company had in its possession $21,000 which ought not to be applied to the reduction of its indebtedness to the detriment of unsecured creditors. The objections to confirmation so filed stated in conclusion: "If the court be of the opinion that the bid placed by C. F. Harvey for the property at Beaufort (Carteret county) does not amount in law to an assumption of the mortgage indebtedness, that then the whole sale of both the properties at Beaufort and Kinston be not confirmed."

Hearing was had upon the exceptions by Judge Cranmer at Kenansville September 7, 1927. At this hearing the judge found the following facts:

(1) "That the sale was in all respects regular, fair, and in accordance with the requirements by the court."

(2) "That the bid or bids of the purchaser, C. F. Harvey, * * * is a fair and reasonable price for the said property purchased in accordance with the terms of sale."

(3) "Full and specific announcement was also made before the sale of the true status of liens held by the Virginia Trust Company."

Thereupon the receivers were "authorized, empowered, and directed to execute and deliver unto the said purchaser, C. F. Harvey, a deed in fee simple, subject to the lien held by the Virginia Trust Company."

The objectors appealed from said decree of confirmation, and this appeal was considered by the court in 194 N. C. 734, 140 S. E. 746.

After the decision of the Supreme Court the receivers tendered deed to Harvey and demanded the purchase money in accordance with the terms of the sale. Harvey declined to accept the deed upon the ground that announcement had been made at the sale by the receivers "that the successful bidder for the equity of redemption of the Kinston Knitting Company would get the benefit of the proceeds of the Raynor notes and of certain personal property sold by the receivers because such proceeds would be credited upon the mortgage indebtedness of $91,200. Furthermore, the purchaser contended that by reason of the delay the property had greatly depreciated in value, and that it would be inequitable to require him to comply with the terms of the sale and pay the purchase money. The rule to show cause was served upon the purchaser, and the matter came on for hear-ing before Cranmer, J., at the February term, 1928.

The court rendered the following judgment: "This cause coming on to be heard upon an instanter rule directed to C. F. Harvey to show cause why he should not be required to accept a deed to the property heretofore sold by the receivers at public auction on the 18th and 19th days of July, 1927, respectively, and to...