Jones v. Pullen

• Decision Date: 13 November 1894
• Citation: 20 S.E. 624,115 N.C. 465
• Parties: JONES et al. v. PULLEN.
• Court: North Carolina Supreme Court

20 S.E. 624

115 N.C. 465

JONES et al. v. PULLEN.

Supreme Court of North Carolina

November 13, 1894

Appeal from superior court, Wake county; Hoke, Judge.

Action by Alfred Jones and others against R. S. Pullen to set aside a sale under a trust deed. Judgment was rendered for defendant, and plaintiffs appeal.

T. M Argo and T. R. Purnell, for appellants.

Haywood & Haywood and J. W. Hinsdale, for appellee.

SHEPHERD C.J.

On a previous investigation of this case we were of the opinion that the decision in Joyner v. Farmer, 78 N.C. 196 would amply sustain the action of his honor in denying the plaintiffs the relief prayed for. The delay of the plaintiffs of over five years after the sale, and their surrender of possession (there being no fraud and the price being reasonable), were sufficient, under the principles of the above-mentioned case, to bar the plaintiffs of their alleged right of election to set aside the sale. Our attention however, has been called to the more recent case of Bruner v. Threadgill, 88 N.C. 361, in which it is said that, in the absence of affirmation, the right of a mortgagor to avoid a sale under a power, where the mortgagee has indirectly become the purchaser, is not barred by his laches for a shorter period than the statutory limitation of 10 years. Code, § 158. As the mortgagee had a right to enter under his legal title, the entry in this case would not alone be sufficient evidence of affirmation, and, nothing further appearing, the principle of Bruner's Case would seem to apply. This renders it necessary to further investigate this case in the light of the other facts found by the referee and in this we have had the aid of a second argument by counsel on each side. There is no question, according to our authorities, that if a mortgagee, with power to sell, indirectly purchases at his own sale, the mortgagor may elect to avoid the sale, and this without reference to its having been fairly made and for a reasonable price. This is an inflexible rule, and it is "not because there is, but because there may be, fraud." Gibson v. Barbour, 100 N.C. 192, 6 S.E. 766; Froneberger v. Lewis, 79 N.C. 426; Cole v. Stokes, 113 N.C. 270, 18 S.E. 321; Dawkins v. Patterson, 87 N.C. 384. If, however, the mortgagee with power of sale deals directly with the mortgagor, and purchases of him the equity of redemption, quite another principle applies. In such a case there is, by reason of the trust relation, a presumption of fraud; but the mortgagee so purchasing may rebut this presumption by showing that the transaction was free from fraud or oppression, and that the price was fair and reasonable. The doctrine is fully discussed in McLeod v. Bullard, 86 N.C. 210, and need not be elaborated in this opinion. If the presumption of fraud is rebutted, the plaintiff has no election to set aside the sale, and a court of equity will grant him to relief.

Now, if this be the rule applicable to a direct purchase of the equity of redemption, why should it not also apply to a case like the one before us, where the mortgagor has by his deed expressly authorized the mortgagee to become the purchaser? If the mortgagee can directly purchase if the transaction is fair, why can he not, when the transaction is fair, purchase as the highest bidder at the sale when expressly authorized to do so? In 1 Jones, Mortg. 1883, provisions of this kind are said to be in general use where there is no statute authorizing the mortgagee to purchase at his own sale, and cases are cited which deny that the privilege should be strictly construed; and the author remarks that it is generally held that, "under such a provision, the court will not interfere with a purchase by the mortgagee unless there be some other objection which would invalidate a purchase by any one else under the same circumstances." On the other hand, while the right to purchase is fully recognized, there are numerous authorities to the effect that the mortgagee so purchasing "will be held by a court of equity to the strictest good faith and the utmost diligence in the execution of the power for the protection of the rights of the mortgagor, and his failure in either particular will give occasion to allow the mortgagor to redeem." In Fox v. Mackreth, 1 White & T. Lead. Cas. Eq. 244 note, it is said: "The mortgagor may indeed dispense with the restraint by authorizing the mortgagee...