Virginia Trust Co. v. Lambeth Realty Corporation
| Decision Date | 03 May 1939 |
| Docket Number | 526. |
| Citation | 2 S.E.2d 544,215 N.C. 526 |
| Parties | VIRGINIA TRUST CO. v. LAMBETH REALTY CORPORATION et al. |
| Court | North Carolina Supreme Court |
[Copyrighted Material Omitted]
This action was instituted October 28, 1935,for the purpose of setting aside conveyances in trust of the property of the corporate defendant alleged to be fraudulent as to the plaintiff, a creditor, as attempting to dispose of all its property while defendant was insolvent, in defeat of plaintiff's debt.
On February 2, 1931, it is alleged the defendant, Lambeth Realty Corporation, obtained from or through the plaintiff $47,500 for which it executed 30 first lien notes of $1,000 each, due and payable February 1, 1935, and four second lien notes three for $2,500 each, payable respectively on the first day of February of the years 1933, 1934, and 1935, and one note for $10,000 to become due on the first day of February, 1936.
In security for the thirty first lien notes and for the security of the subordinate second lien notes aggregating $17,500, the Lambeth Company made a deed of trust to plaintiff on certain real estate described in the complaint.
Two of the notes, in the sum of $2,500 each, were taken up by the defendant Laura Cannon Mattes, and it is alleged they became subordinated in lien to the balance of the indebtedness. The plaintiff claims in its own right the remaining $2,500 note and the $10,000 note referred to as second lien notes, and as trustee, with authority to represent the owners, the 30 first lien notes.
It is alleged that there have been placed on the records of Mecklenburg County two deeds of trust from the corporate defendant to defendant C. A. Cannon, Trustee, both dated February 15, 1934, and filed February 19, 1934. The first conveys the real estate on which plaintiff's debt is secured by deed of trust, together with various other lands, alleged to be all the real estate owned by the corporate defendant; the other, it is alleged, conveys substantially all of its personal property. They purport to secure $218,095.34, alleged to be due Mrs. Mattes, and advancements which may be made, not in excess of $350,000. The complaint sets up particulars as to insolvency and circumstances as to the alleged fraud.
It is further alleged that the deeds of trust executed to Cannon, Trustee, were intended to be, and were in fact and law, assignments for the benefit of creditors of the corporate defendant, and that because of non-compliance with C.S. § 1610, requiring the filing of an inventory within ten days, they are void.
The complaint alleges that subsequently to the execution of the trust deeds to the defendant Cannon, Mrs. Mattes, co-defendant, undertook to take an assignment of certain stocks conveyed in one of them through an exchange of stocks and credit on indebtedness without payment in cash, and not in accordance with the deed of trust, and asks that the stocks be returned, surrendered, or paid for.
Plaintiff further alleges that defendants Cannon, Trustee, and Mrs. Mattes, have advertised the real estate conveyed in one of the deeds of trust for sale, alleges irreparable damage if the sale is permitted to take place, and asks that the sale be restrained until the matters in controversy have been determined. It is alleged that the value of the property conveyed in the trust deed to plaintiff is less than the total amount due on the bonds secured, and has so depreciated as to afford no security for the $12,500 notes held by plaintiff in its own right.
The prayer for relief asks that Mrs. Mattes make an accounting for the stocks taken by her; that C. A. Cannon, Trustee, be perpetually enjoined from exercising any of the powers contained in the deeds of trust made to him; and that plaintiff have such other relief as it may be entitled to.
After intermediate pleadings unessential to an understanding of this appeal, all of the defendants answered. Summarizing, the answers admit the execution of the various conveyances in the chronological order stated, and the face amounts of the notes as alleged. It is denied that any fraudulent invasion of plaintiff's rights was involved in the various transactions between Lambeth Corporation and Mrs. Mattes and Cannon, Trustee. It is averred that these transactions were bona fide, and that the conveyances representing them were for value, legal and legitimate.
The answer of Lambeth Company, in a further defense, charges that the indebtedness to the plaintiff was brought about by a fraudulent scheme of the plaintiff to avoid loss upon other loans, and should not, in equity, be collected, and pleads that its officers acted ultra vires in executing the notes and deed of trust securing them.
The answer of Mrs. Mattes, in addition to the summarized statement above, alleges in a further defense that plaintiff has received moneys from her through advancements made to Lambeth Corporation, under the foregoing conditions, of which plaintiff had the benefit, and under circumstances which estop plaintiff from attacking the validity of the deeds of trust to Cannon; and similar allegations appear in the answer of Lambeth Corporation.
The defendants, Mrs. Mattes, Cannon, Trustee, and Lambeth Corporation, were permitted to file amendments to their answers and set up a charge of usury against the plaintiff with respect to the entire loan secured by its deed of trust, and the several notes evidencing the same, reciting the particulars thereof. Both answers demand a forfeiture of all interest on plaintiff's notes and the denial to it of equitable relief, upon the ground that the notes upon which its right of action is based are tainted with usury.
Upon these affirmative pleas plaintiff filed a written demurrer to the answer of Lambeth Corporation and demurred ore tenus to the answer of Mrs. Mattes and C. A. Cannon, Trustee, upon the ground that these defendants had made no tender to the plaintiff of the amount due, with lawful interest, as required by law.
The demurrer was overruled, and plaintiff excepted and appealed.
Taliaferro & Clarkson, of Charlotte, for appellant.
E. T. Bost, Jr., of Concord, for appellee Lambeth Realty Corporation.
Robinson & Jones, of Charlotte, for appellees C. A. Cannon, trustee, and Laura Cannon Mattes.
The plaintiff's demurrer to the answers of the defendants setting up usury, apparently is based on the assumption that these defendants in pleading the usury were pursuing an equitable remedy and had taken the offensive. "He who seeks equity must do equity". The statute itself, however, gives to the debtor, defendant in a suit upon notes tainted with usury, the right to plead forfeiture of all interest, C.S. § 2306, and makes no condition of previous tender upon such defense. The forfeiture of all interest is one of the law; and only when the debtor must resort to equity to restrain collection of the usurious debt or prevent foreclosure of the mortgage security, thereby becoming, both in the real and technical sense, actor, is it required that he tender the amount of the debt with legal interest. When attacked, he may defend according to the terms of the statute. Noland v. Osborne, 177 N.C. 14, 97 S.E. 714; Gore v. Lewis, 109 N.C. 539, 13 S.E. 909, and cited cases; Arrington v. Jenkins, 95 N.C. 462. As to the usurious lender, there may be a...
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