Monteith v. Welch, 36

• Decision Date: 19 September 1956
• Docket Number: No. 36,36
• Citation: 244 N.C. 415,94 S.E.2d 345
• Parties: John W.MONTEITH and wife, Nettie A. Monteth v. Wllliam C. WELCH and wife, Velma Welch, Leslie R. Rogers and wife, Mary D. Rogers, and Thomas H. Franks, Trustee.
• Court: North Carolina Supreme Court

Page 345

94 S.E.2d 345

244 N.C. 415

John W.MONTEITH and wife, Nettie A. Monteth v. Wllliam C. WELCH and wife, Velma Welch, Leslie R. Rogers and wife, Mary D. Rogers, and Thomas H. Franks, Trustee.

No. 36

Supreme Court of North Carolina.

Sept. 19,1956

Potts & Ramsey, Brevard, and Redden & Redden, Hendersonville, for plaintiff appellees.

B. A. Whitmire and L. B. Prince, Hendersonville, for defendants Welch.

RODMAN, Justice.

Defendants insist that Franks, the trustee, was authorized to receive payment of the notes and to cancel the deed of trust; and hence they are protected by the cancellation entered of record.

The assertion that Franks, the trustee, was authorized to collect the notes and thereupon to cancel the deed of trust finds no support in the evidence or in law.

Plaintiff testified: 'I never authorized Mr. Franks or any other person to collect any money represented by these notes secured by the deed of trust.'

The trustee never had possession of the notes or deed of trust. The notes were not due when Welch purchased the land or when the entry was made on the record reciting payment.

The recorded deed of trust was notice of all of its provisions. Collins v Davis, 132 N.C. 106, 43 S.E. 579; Massachusetts Bonding & Insurance Co. v. Knox, 220 N.C. 725, 18 S.E.2d 436, 138 A.L.R. 1438; Blankenship v. English, 222 N.C. 91, 21 S.E.2d 891.

'The general principle supported and recognized by the cases is that the mere naming of one as trustee in a trust mortgage or deed does not constitute him the agent of the bondholders for the purpose of receiving payment. On the contrary, the authority of the trustee to receive payment must affirmatively appear, either expressly or as an implication specially to be gathered from the terms of the trust instrument and bonds.' 36 Am.Jur. 896.

Walker, J., speaking in Wynn v. Grant, 166 N.C. 39, 81 S.E. 949, 954, said: '(1) Payment of money due on written security, to an agent who has not either possession of the security or express authority to receive such money, is not good, and the principal may compel the debtor to pay it again.

'(2) The facts that a loan is made through the agent, and that he has collected the interest, and that he has, in special cases, been authorized to collect the principal of particular mortgages, are not evidence of general authority to collect moneys due his principal, and one who pays to him the amount of a mortgage, without his having the mortgage in his possession, does so at his own risk.

'(3) Even though an agent has authority to receive payment of an obligation, this does not authorize him to receive payment before it is due.'

Since Franks was not, because of his position, the implied agent of plaintiffs and had no authority, actual or apparent, collection by him of the debt evidenced by the unmatured notes was not a payment.

Notwithstanding the lack of authority of Franks, the trustee, to receive payment, were the defendants protected by the cancellation entered on the records?

The statute, G.S. § 45-37, provides: 'Any deed of trust or mortgage registered as required by law may be discharged and released in the following manner:

'1. The trustee or mortgagee or his or her legal representative, or the duly authorized agent or attorney of such trustee, mortgagee or legal representative, may, in the presence of the register of deeds or his deputy, acknowledge the satisfaction of the provisions of such deed of trust or mortgage, whereupon the register or his deputy shall forthwith make upon the margin of the record of such deed of trust or mortgage an entry of such acknowledgment of satisfaction, which shall be signed by the trustee, mortgagee, legal representative or attorney, and witnessed by the register or his deputy, who shall also affix his name thereto.

* * * * * *

'Every such entry thus made by the register of deeds or his deputy, and every such entry thus acknowledged and witnessed, shall operate and have the same effect to release and discharge all the interest of such trustee, mortgagee or representative in such deed or mortgage as if a deed of release or reconveyance thereof had been duly executed and recorded.'

Defendants insist that this statute, as interpreted in First National Bank of Kinston v. Sauls, 183 N.C. 165, 110 S.E. 865, 867, is conclusive and affords them complete protection.

The case on which they rely is not authority for the position taken by them. There the mortgage was cancelled by the mortgagee, the payee of the note. There a creditor relied on the cancellation which had been made by one who had the apparent right to receive payment and to cancel. There the notes secured by the mortgage were past due and the mortgagee certified to the bank that they had been paid and satisfied, and there was nothing which pointed to any transfer of the mortgage securing the same.

Here the record shows the notes were not due, the deed from the owners of the equity of redemption to the defendants bears date October 7,1952. The cancellation does not purport to have been made until October 15, 1952. True the deed to defendants was recorded on October 15,1952, the same day on which the asserted cancellation was made.

Defendants, in their answer say:

'That all monies paid to the said Thomas H.Franks by these defendants was paid to him in his capacity as a representative of the plaintiffs. That if any funds paid by these answering defendants were not properly and legally applied to the indebtedness, then these defendants are in no way in fault nor are they answerable therefor.'

Clark, C. J., in First National Bank of Kinston v. Sauls, supra, says:

'The statute is plain, and, in the absence of fraud participated in by the creditor or purchaser, if the statute is followed the creditor is protected by the entry of cancellation of the mortgage which, if made in the manner provided in the statute, is conclusive.'

This language must be interpreted in the light of what was said in Smith v. Fuller, 152 N.C.7,67 S.E. 48, 51. Manning, J., there said: 'It will be observed that the entry of satisfation of the mortgage on the record of its registry was made by Whitley, the mortgagee, was in proper form, and was made more than 4 1/2 years before Smith purchased. This is not the case of the attempted cancellation of a mortgage or deed of trust by a person not authorized to make the entry of satisfaction. An existing, uncanceled mortgage, properly admitted to registration, is constructive notice to subsequent purchasers of the mortgaged premises of the rights of the mortgagee; but a mortgage or deed of trust, properly canceled by a person authorized to cancel it, is notice to no one; it continues no lien upon the property.'

The cancellation made by Franks...