Swindell v. Overton, 323PA83

• Decision Date: 30 April 1984
• Docket Number: No. 323PA83,323PA83
• Citation: Swindell v. Overton, 310 N.C. 707, 314 S.E.2d 512 (N.C. 1984)
• Parties: Roger SWINDELL and wife, Betty L. Swindell v. Larry OVERTON, Substitute Trustee, Thomas Edison Cahoon and wife, Julia Jones Cahoon, Walter G. Credle and wife, Donna S. Credle.
• Court: North Carolina Supreme Court

Page 512

314 S.E.2d 512

310 N.C. 707

Roger SWINDELL and wife, Betty L. Swindell v. Larry OVERTON, Substitute Trustee, Thomas Edison Cahoon and wife, Julia Jones Cahoon, Walter G. Credle and wife, Donna S. Credle.

No. 323PA83.

Supreme Court of North Carolina.

April 30, 1984.

J. Michael Weeks, P.A. by J. Michael Weeks, Zebulon, for plaintiffs.

Cherry, Cherry, Flythe & Overton by Thomas L. Cherry and Joseph J. Flythe, Ahoskie, for defendant Overton.

Geo. Thomas Davis, Jr., Swan Quarter, for defendants Credle.

MARTIN, Justice.

In its opinion, the Court of Appeals held that pursuant to N.C.G.S. 45-21.34, .35, Judge Peel had correctly entered summary judgment for defendants Overton, Cahoon, and Credle as to plaintiffs' right to injunctive relief in this matter. "Once the Clerk's Order of Confirmation is entered, an action for injunctive relief will not lie ...." 62 N.C.App. at 166, 302 S.E.2d at 845. The opinion further concluded, at least by implication that the plaintiffs Swindell are also barred from the remedy of setting aside the foreclosure sale on the same grounds that their action was not brought until after the sale was confirmed. Upon this conclusion rests the holding that summary judgment in favor of the Credles was therefore proper on the issue of plaintiffs' claim for damages against the Credles for conversion of the soybean crop, given the well-settled North Carolina rule that the purchaser at a foreclosure sale is entitled to crops unsevered at the time of the trustee's delivery of the deed. Collins v. Bass, 198 N.C. 99, 150 [310 N.C. 712] S.E. 706 (1929). We granted discretionary review to consider the correctness of these conclusions, and we reverse. As a matter of law plaintiffs should be allowed to challenge the clerk's confirmation of a foreclosure sale by an independent action under circumstances hereinafter set forth. We further find that the forecast of evidence as established by the exhibits and affidavits before the trial court was clearly sufficient to survive the summary judgment motion of the defendant-purchasers Credle.

The trustee is bound by his office to present the sale under every possible advantage to the debtor as well as to the creditor. He is bound to use not only good faith but also every requisite degree of diligence in conducting the sale and to attend equally to the interest of the debtor and creditor alike. Mills v. Building & Loan Assn, 216 N.C. 664, 6 S.E.2d 549 (1940).

Our analysis is twofold: (1) Plaintiffs are correct in applying this Court's decision in Foust v. Loan Asso., 233 N.C. 35, 62 S.E.2d 521 (1950), to this case. (2) Because the facts of this case do not support a finding that the defendants Credle were innocent purchasers for value, they are not protected thereby from having the foreclosure sale set aside.

In Foust, property having a market value of approximately $6,000 was sold at foreclosure for $825. The trustee erroneously reported that it was sold for $6,400. The sale was confirmed. This Court responded as follows: "These facts raise the single question of law: Was the irregularity in the report of such substantial nature as to require the Court to vacate the order of confirmation and the deed executed pursuant thereto? We must answer in the affirmative." 233 N.C. at 36, 62 S.E.2d at 523.

The Court spoke to the nature and potential effects of the irregularity:

There is no contention that the error in the report was deliberate, or was prompted by an evil purpose, or was other than the result of an honest mistake. It appears to have been one of those slips which may occur in business transactions. Nonetheless, it was highly deceptive and its natural and probable effect was to chill any desire on the part of interested parties to engage in further competitive bidding. Thus it tended to prevent any upset bid.

Actuality of injury is not a prerequisite of relief. The potentialities of the error, considered in connection with the grossly inadequate price, compel the conclusion that the irregularity in the sale was material and prejudicial--sufficient in nature to justify the interposition of a court of equity.

233 N.C. at 37-38, 62 S.E.2d at 523 (emphasis added).

Allegations of inadequacy of the purchase price realized at a foreclosure sale which has in all other respects been duly and properly conducted in strict conformity with the power of sale will not be sufficient to upset a sale. Hill v. Fertilizer Co., 210 N.C. 417, 187 S.E. 577 (1936); Roberson v. Matthews; Matthews v. Roberson, 200 N.C. 241, 156 S.E. 496 (1931); Weir v. Weir, 196 N.C. 268, 145 S.E. 281 (1928). Foust stands for the proposition that it is the materiality of the irregularity in such a sale, not mere inadequacy of the purchase price, which is determinative of a decision in equity to set the sale aside. Where an irregularity is first alleged, gross inadequacy of purchase price may then be considered on the question of the materiality of the irregularity. Foust, supra, 233 N.C. 35, 62 S.E.2d 521; Hill v. Fertilizer Co., supra (and cases cited therein). Where inadequacy of purchase price is necessary to establish the materiality of the irregularity, it must also appear that the irregularity or unusual circumstance caused the inadequacy of price. 2 Wiltsie, Mortgage Foreclosure § 899 (5th ed. 1939).

Plaintiffs Swindell were obligors and defendants Cahoon were obligees on three separate notes for $2,000, $30,000, and $2,589, secured by two deeds of trust on two different tracts of land. The worth of the land was alleged to be in excess of $70,000, excluding the value of a growing soybean crop on one of the tracts, to which an additional $50,000 in value was alleged. Despite plaintiffs' requests that bids be received for the two tracts of land separately as well as together in order to maximize the potential sale price, defendant Overton advertised and sold the land together, in one offering, with the Credles purchasing at the third and final sale for $47,980.

We hold that the en masse sale of these two tracts of land constituted a material and prejudicial irregularity...