Wallace v. Benner
| Decision Date | 27 January 1931 |
| Docket Number | 439. |
| Parties | WALLACE et al. v. BENNER et al. |
| Court | North Carolina Supreme Court |
Appeal from Superior Court, Moore County; McElroy, Judge.
Suit by C. D. Wallace and others, copartners, doing business as Wallace Bros., against W. P. Benner and others. From an adverse judgment, plaintiffs appeal.
Affirmed.
Subrogation is not allowed where party claiming relief is culpably negligent, or where junior lienholder would be prejudiced.
Facts pertinent to this appeal, as found by the referee and modified by the judge, are as follows:
In the spring of 1923 Bettie F. Benner was the owner of 300 acres of land, located in Moore county, N. C., subject to certain incumbrances which she and her husband had executed thereon said incumbrances having priority one over the other as follows:
First. Deed of trust to Thomas B. Wilder, trustee, securing principal indebtedness of $15,000, evidenced by notes payable to Page Trust Company, dated January 31, 1920, recorded in register of deeds office for Moore county February 16, 1920 Book of Mortgages 31, pp. 41 and 42.
Second. Deed of trust to P. K. Kennedy, trustee, securing principal indebtedness of $1,500, evidenced by notes payable to Page Trust Company dated May 10, 1920, recorded in register of deeds office for Moore county May 24, 1920, Book of Mortgages 32, at page 177.
Third. Mortgage to Wallace Bros. (plaintiffs) securing principal indebtedness of $2,117.07, dated December 15, 1921, recorded in register of deeds office for Moore county December 20 1921, Book of Mortgages 34, at page 537.
On or about April 24, 1923, Bettie F. Benner made written application to defendant North Carolina Joint Stock Land Bank of Durham, requesting a loan upon the usual amortization plan in the sum of $18,500, agreeing to secure said loan with a first mortgage on the 300 acres owned by her. Said application enumerated the respective liens against the land above set forth, and stated that the purpose of loan was to pay off these prior incumbrances. Her reason for applying for this loan was because she had defaulted in payment of the first and largest lien, and her lands were being advertised for sale, and she hoped to save her lands by refinancing.
The defendant land bank approved this loan for $12,500. Abstract of title was prepared and furnished by S. R. Hoyle, attorney and Johnson & Johnson, attorneys. Said abstract set out the several incumbrances against the land. Bettie F. Benner and husband, W. P. Benner, executed note and deed of trust in favor of the defendant land bank, and said deed of trust was dated April 12, 1923, and duly recorded in registry of Moore county April 26, 1923, in Book of Mortgages 39, at page 182. There was delay in closing loan due to fact that the bank could not furnish the money due to inability to market its bonds.
On April 24, 1924, defendant bank issued its check payable to Bettie F. Benner and Johnson & Johnson, attorneys in the sum of $12,273.53, which represented net proceeds of loan after deducting expenses of bank and adjusting accrued interest. The bank sent this check to Johnson & Johnson, attorneys, with instructions that prior incumbrances be removed before delivery of check or money refunded.
In disobedience of said instructions, without procuring cancellation of prior incumbrances, and without the knowledge or consent of defendant land bank, a member of the firm of Johnson & Johnson, attorneys, procured indorsement of Bettie F. Benner to said check, cashed same, and disbursed proceeds thereof, after first deducting $200 as attorney fees, as follows: Paid 1923 and 1924 taxes $272.68, balance $11,800.85 to Page Trust Company.
Page Trust Company applied this money as follows: $1,250 was used for purchase of stock North Carolina Joint Stock Land Bank of Durham, and said stock was hypothecated and held as collateral security to the $1,500 Kennedy deed of trust. This stock was later sold for $1,300, and said amount was applied on Kennedy deed of trust. The balance of said $11,800.85, to wit, $11,550.85, was paid over to Page & Co.--then owner and holder of Wilder deed of trust, and notes thereby secured.
At the time of receiving this money, Page & Co. and Page Trust Company, through its officers, were aware of the entire situation, and knew that all incumbrances against the land prior to the defendant land Bank's deed of trust would have to be removed or released. At said time, Johnson & Johnson, attorneys, represented generally both Page & Co. and Page Trust Company.
The defendant bank had no actual knowledge of the fact that its instructions had been disobeyed and prior liens not removed, until a short time before commencement of this action. The land bank, being under supervision of acts of Congress, was required by such acts to accept only first mortgages, and in this case it intended and expected to accept only a first lien, and believed and acted upon the assumption that its mortgage was a first lien until notice to the contrary was received.
All of said liens now appear uncanceled of record, and the Benners have defaulted in payment of all of said liens, and each lien is subject to foreclosure.
Referee's findings of facts show respective amounts due on the several liens.
Page & Co. and Page Trust Company through Johnson & Johnson, attorneys, representing them in this cause, in request for findings of facts submitted to referee, have waived their rights in favor of defendant land bank, agreeing, so far as their claims are concerned, to recognize and allow the bank's claim as having priority.
The judgment of the court below is as follows: "This cause coming on to be heard and being heard before His Honor, P. A. McElroy, Presiding Judge, at the September, 1930, Term of the Superior Court of Moore County upon the plaintiffs' exceptions to the report of the referee, C. A. Armstrong, said report having been filed February 15, 1930, and the facts having been found by the Court to be as stated in said report of the referee, except as the same have been changed or modified by the statement of the Court signed by His Honor which is made a part of the record in this cause, and upon and after hearing Messrs. Seawell and Seawell, attorneys for the plaintiffs, Mr. W. G. Mordecai, attorney for the defendant North Carolina Joint Stock Land Bank of Durham, and Murdoch M. Johnson, Attorneys for Page Trust Company and Page & Company, it is considered, ordered, adjudged and decreed that the said North Carolina Joint Stock Land Bank of Durham be subrogated to and have an equitable assignment of the liens of the defendants, Bettie F. Benner and W. P. Benner, to T. B. Wilder, Trustee, and Bettie F. Benner and W. P. Benner to P. K. Kennedy, Trustee, to the extent of the sum of $12,273.53, less $200.00 charged and received by Johnson and Johnson as attorneys fees, the said sum of $12,273.53 being the amount of the check of the said North Carolina Joint Stock Land Bank to Johnson and Johnson, attorneys, and Bettie F. Benner, and the said Johnson & Johnson, attorneys, retaining from the proceeds thereof the sum of $200.00 attorney's fees, and disbursing the balance, to-wit, the sum of $12,073.53, in the payment of taxes on the premises secured by the deeds of trust herein and the balance after payment of the said taxes, namely, $11,800.85, to Page Trust Company and Page and Company for application of the indebtedness secured by the deed of trust to T. B. Wilder, Trustee, and the deed of trust to P. K. Kennedy, Trustee, so that the extent of the subrogation of the Land Bank to the said deeds of trust to Wilder, Trustee, and Kennedy, Trustee, is adjudged and decreed to be the sum of $12,273.53, with interest thereon from the 24th day of April, 1924.
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