Hinton v. Pritchard, 120 N.C. 1 (1897)

Feb. 1897 · Supreme Court of North Carolina

120 N.C. 1

JOHN L. HINTON v. J. L. PRITCHARD, et al.

Trustee, Discretion and Duties of — Sale under Deed of Trust.

1. In trust deed for the benefit of creditors, the trustee is agent of both creditor and debtor and must exercise his discretion in a reasonable and intelligent manner, and use his power in such a way as neither to oppress the debtor nor sacrifice the estate.

2. The holder of a note secured by a junior deed of trust bought one of two parcels of land embraced in it, and afterwards purchased the note secured by the senior deed, and then,- treating the latter deed as still in force, demanded that the trustee at the sale under it should first sell another parcel embraced in both deeds, while the debtor requested that the lot purchased by the creditor at the first sale should be first offered; Held, that the trustee had the right, in his discretion, to disregard the instructions of the creditor and to follow the request of the debtor, there being no allegation of fraud or wrong doing on the part of the trustee.

Civil actioN, for the recovery of land, tried before Tim-berlake, J., and a jury, at Fall Term, 1896, of PasquotanK Superior Court. There was judgment for the plaintiff and defendants appealed.

Messrs. Battle c6 Mordecai, for plaintiff.

Mr. E. F. Aydlett, for defendant (appellant).

.MONTGOMERY, J.:

The plaintiff purchased the tract of land, which is the subject of this action, at a trustee’s sale made under a deed of trust subsequent to and subject to the provisions of a former deed of trust. The debtor was the same in both deeds and both deeds embraced the tract of land described in the complaint, and also another parcel of real estate described as the town lot. The plaintiff purchaser was the cestui que trust in the deed under which he bought, and the trustee’s deed to him recited that the land sold was subject to the former trust deed. The former trust deed referred to w as executed to U. L. Simpson,trustee. After the purchase of the land by the plaintiff, he bought from the holder the note secured in the first deed of trust. Roth parcels of land were tlien ad\ ertised regularly and sold by Simpson under the first deed. At the sale, the plaintiff insisted that Simpson should sell the town lot first, and the debtor insisted that the tract which the plaintiff had purchased under the first sale should be sold first. The trustee, Simpson, sold first the tract which the plaintiff had bought at the first sale, and the defendant J". L. Pritchard, a son of tbe debtor., became the purchaser at the price of five dollars. There is no allegation of fraud or wrong doing alleged in the complaint, and no allegation as to the value of the tract of land.

The question then presented is, did the trustee Simpson have the discretion and power to sell first in order the tract of land which he did sell first, against the plaintiff’s specific direction that he should sell tfie town lot first? If the trustee has this power and discretion, it follows that the defendant got a good title to the land, notwithstanding that the purchaser wras the son of the debtor and the purchase money was only five dollars (no fraud baying been alleged in the transaction), and. the plaintiff cannot recover. The plaintiff having bought the tract of land at the first sale under the junior trust deed got title to the land upon his purchasing the note secured in the first deed of trust. At the sale of the land he acquired, by bis deed fr.m the trustee, all the interest of the debtor in the same, subject to the charge upon it of the indebtedness secured in the first deed, and the purchase of that indebtedness was a payment of it if he chose to so regard it. But the plaintiff did not choose to be satisfied with this position. He treated the first deed of trust as still open and in force, and ordered the trustee to proceed under it with a sale of one of the parcels of land conveyed in it. In our opinion he could not treat the trust as open for the sale of one parcel of the land and closed as to the other. In trust deeds for the benefit of creditors, the trustee is the agent of both creditor and debtor, and he is required to discharge his duties with the strictest impartiality as w ell as with fidelity, and according to his best ability. Johnston v. Eason, 38 N. C., 330; Perry on Trusts, Section 620.' The purposes of the creditor and debtor, here, are plainly to be seen in this transaction. The creditor wished to place the burden of his debt upon the town lot, he having bought the other tract at the first sale but still subject to the first trust deed; and'the debtor wished to make him proceed against the tract which he had bought at the first sale, and by that course to save his home. Under this condition of things the trustee was forced to exercise his discretion, and the law holds him to the exercise of this discretion in a reasonable and intelligent manner. He was bound in. the exercise of his power to use it neither for the oppression of the debtor nor to sacrifice the estate. We cannot say from the facts in this case that the trustee, Simpson, exercised his power unjustly towards tbe creditor, the plaintiff, or unnecessarily prejudical to his interests. We can see from the record in the case how the trustee may have impartially, and with the utmost good faith, acted as he did, thinking that the creditor might be unprejudiced in his rights and that the debtor might be enabled to save his home. There is nothing going to show either bad faith or unfair discretion in the action of the trustee. The result is serious to the plaintiff, but a person sui juris is allowed to manage his own affairs in his own way, if not contrary to law.

There was error in the ruling of Ilis Honor, and judgment should have been rendered for the defendants.

Error.