In re Sale of Sermon's Land, 182 N.C. 122 (1921)

Oct. 12, 1921 · Supreme Court of North Carolina

182 N.C. 122

In re Sale of SERMON’S LAND.

(Filed 12 October, 1921.)

1, Mortgages — Sales of Lands — Powers of Sale — Statutes.

The provisions of O. S., 2591, concerning the sale of land under a power thereof contained in a mortgage or deed of trust, enter into and control the sale under such instruments.

2. Same — Proposed Bidder — Judicial Sales.

Under the provisions of O. S., 2591, requiring that a sale of land under a mortgage or deed of trust be left open for ten days for the acceptance of an increased bid, under certain conditions, and a resale if these conditions are complied with, the bidder at the sale during such period acquires no interest in the property itself, but only a position similar to a bidder at a judicial sale, before confirmation.

3. Same — Title—Possession.

Before the expiration of the ten days required by O. S., 2591, for the sale of land under a mortgage or deed of trust, the sale shall not be deemed closed, and the successful bidder thereat acquires no title or right of possession during that time, but is only considered as a preferred bidder, his right depending upon whether there is an increased bid and a resale of the land ordered under the provisions of the statute.

4. Same — Value Substantially Diminished — Fires.

Where the mortgaged premises has been materially diminished in value by the loss by fire of a house thereon, which has been sold under a power contained in the instrument, the bidder at such sale having no title or right of possession, or control over the property for its preservation or protection, within the ten days provided by O. S., 2591, the loss occurring within that time falls on the owner, and the preferred bidder is not chargeable therewith, or required by law to take the property at the price he has bid therefor.

5. Same — Contracts—Specific Performance.

The principle upon which specific performance of a binding contract to convey lands is enforceable, has no application to the successful bidder at a sale under the power contained in a mortgage or deed of trust of lands, during the ten days allowed by C. S., 2591, in which an increase of bid may be received and a resale ordered, for, within that time, there is no binding contract of purchase, and the bargain is incomplete.

6. Same — Courts—Clerks of Court — Resales.

C. S., 2591, controls as to ordering a resale of lands sold under a power of sale contained in a mortgage or deed of trust, and confers no power on the clerk to make such order, unless within the ten days allowed there shall be an increased bid, etc., and does not extend to instances wherein a material loss has been sustained by destruction of a house on the lands, within the stated period.

7. Appeal and Error — Statutes—Mortgages—Courts—Resales—Dismissal of Appeal.

Where it appears on appeal to the Supreme Court that the clerk of the court, under judgment of Superior Court on appeal, has ordered a resale of lands theretofore sold under the power of sale contained in a 'mortgage or deed in trust, not according to the provisions of the statute as to increase bids within the ten days, etc., the appeal will be dismissed.

8. Appeal and Error — Mortgages—Powers of Sale — Sales—Preferred Bidder — Harmless Erroi*.

Where the preferred bidder at a resale of land theretofore sold under a power contained in the mortgage has become the successful bidder at the second sale, without the suggestion of unfairness or fraud, the mere fact that the resale was'unwarranted will not affect the validity of the resale, or cause it to be set aside on appeal to the Supreme Court, it appearing that this was the proper course to have pursued.

9. Mortgages — Deeds in Trust — Sales—Powers oí Sale — Assignments.

A written assignment, under seal, of a mortgage on lands transferring to the purchaser the interest of the mortgagee therein, the power of sale and the property of the mortgagee therein, confers the right of foreclosure on the assignee. Williams v. Teaohey, 85 N. C., 402, cited and distinguished.

10. Appeal and Error — Dismissal — Expression of Opinion — Supreme Court.

The Supreme Court may dismiss an appeal and express an opinion as to the law on the facts contained in the record, in exceptional instances, where the importance of and the general interest in the question presented make it desirable.

MotioN to relieve a bidder from obligation to buy land, beard on appeal from clerk of tbe Superior Court before bis Honor, Devin, J., bolding tbe courts of tbe Eiftb Judicial District on 24 May, 1921.

From tbe facts properly presented it was made to appear tbat R. L. Sermons and wife having executed a mortgage witb power of sale to H. L. Sermons, of date 12 September, 1919, to secure three promissory notes aggregating $3,200. Tbe mortgagee, for valuable consideration, duly assigned said notes and mortgage and tbe land conveyed to Merchants Bank of Kinston, N. 0., by assignment under seal, written on back of said mortgage,, as follows: “For value received, I hereby transfer' and assign all my right, title, interest and estate in and to tbe within mortgage and tbe property conveyed therein to tbe Farmers and Merchants Bank of Kinston, N. O., including tbe power of sale therein contained. This 12 December, 1919.” Default having been made in tbe payment of said note and requirements of tbe mortgage, tbe said bank sold same by proper advertisement in said county on 18 April, 1921, at which Clarence Oettinger became tbe last and highest bidder in tbe sum of $4,500, and said sale was immediately reported to tbe clerk of tbe Superior Court of tbe county.

It appears further tbat within tbe ten days, where it is provided by statutes tbat such a sale “should not be deemed closed,” O. S., sec. 2591, tbe dwelling bouse on tbe lot, amounting to a third or more of its value, was accidently destroyed by fire, whereupon tbe bidder, Clarence Oettin-ger, filed bis petition before tbe clerk alleging tbe facts and asking tbat sale be rescinded and tbe applicant be relieved from bis bid. Tbe clerk being of opinion against tbe applicant, entered bis judgment as follows: “This cause coming on to be beard and being beard upon tbe petition and affidavit of Clarence Oettinger, and tbe court finding tbat tbe building described in tbe petition was a material part of tbe value of tbe premises and was destroyed by fire as set out in tbe affidavit, but tbe court being of tbe opinion tbat tbe destruction of said bouse by fire does not affect or release the petitioner’s liability or his said bid, and that it has no jurisdiction and is not vested with power to set aside the sale and to direct a resale, denies the petition, confirms the sale and directs the assignee of the mortgagee to collect the purchase money and execute deed to the purchaser.”

On appeal by the bidder from the order his Honor, Devin, J., reversed the action of the clerk and entered judgment as follows:

“This cause came on to be heard before Devin, J., upon the appeal of Clarence Oettinger, petitioner, from an order of the clerk of the Superior Court of Craven confirming a sale and denying petitioner’s plea to withdraw, his bid therein.

“This was a proceeding before the clerk in relation to sale of land under mortgage made by the Farmers and Merchants Bank, assignee of mortgage. After due advertisement sale was piade under power contained in the mortgage and reported to the clerk. At the sale the petitioner became the last and highest bidder for the land at the price of $4,500. A material inducement to the sale and one relied on by the petitioner was the statement at the sale that a valuable dwelling house was situated on said land.

“After said sale and within ten days thereof, and before confirmation, the dwelling house on said land was, without fault on part of petitioner, accidently destroyed by fire. Thereupon petitioner filed his plea asking that he be allowed to rescind his bid and that the sale be not confirmed.

“The facts set forth in the petition are found by the clerk to be true, and his findings are approved by the judge.

“It therefore appearing by the admitted facts that a substantial part of the property, to wit, a third or more in value, was destroyed after sale and before confirmation, and that such fact was a material inducement for petitioner’s bid and a substantial part of the consideration thereof, and that the property has been physically changed before confirmation, that the court is of the opinion that before confirmation no title had passed to petitioner and that his right's were only those of a preferred bidder, and that the loss sustained by the destruction of a portion of the property ought not to fall upon the petitioner when he had neither possession to enable him to protect it, nor title to permit him to insure it, and had only the uncertain right of a preferred proposer and the assignee of the mortgage unable to make title to the petitioner for all the property advertised and bid off by him, the court should not now confirm the sale and order him to pay the full purchase price. For these reasons the order of the clerk herein is overruled and a resale of the property according to law directed to be made.”

To this judgment the assignor of the mortgage excepts and appeals to the Supreme Court. Notice waived, etc. Appeal bond given.

It is further stated in the record that upon the foregoing appeal being prayed there was no request for a stay bond by the applicant and none was fixed by the judge. Thereafter the land was advertised and sold again on 1 August, 1921, when and where the former bidder, Clarence Oettinger, again became the last and highest bidder in the sum of $2,500, which bid was reported to the clerk, and after a delay of ten days from the filing of the report, order was made that a deed be executed. No increased bid had been made.

R. A. Nunn for H. L. Sermons.

Cowper, Whitalcer & Allen, and Guión & Guión for appellee. .

Hoee, J.,

after stating the case: Chapter 54,'Section 2591, Consolidated Statutes, is as follows: “In the foreclosure of mortgages or deeds of trust on real estate, or in the ease of public sale of real estate by an executor, administrator, or administrator with the will annexed, or by a person by virtue of the power contained in a will, the sale shall not be deemed to be closed under ten days. If in ten days from the date of the sale, the sale price is increased ten per cent where the price does not exceed five hundred dollars, and five per cent where the price exceeds five hundred dollars, and the same is paid to the clerk of the Superior Court, the mortgagee, trustee, executor, or person offering the real estate for sale shall reopen the sale of said property and advertise the same in the same manner as in the first instance. The clerk may, in his discretion, require the person making such advance bid to execute a good and sufficient bond in a sufficient amount to guarantee compliance with the terms of sale should the person offering the advance bid be declared the purchaser at the resale. Where the bid or offer is raised as prescribed herein, and the amount paid to the clerk, he shall issue an order to the mortgagee or other person and require him to advertise and resell said real estate. It shall only be required to give fifteen days notice of a resale. Resales may be had as often as the bid may be raised in compliance with this section. Upon the final sale of the real estate the clerk shall issue his order to the mortgagee or other person, and require him to make title to the purchaser. The clerk shall make all such orders as may be just and necessary to safeguard the interest of all parties, and he shall keep a record which will show in detail the amount of each bid, the purchase price, and the final settlement between parties. This section shall not apply to the foreclosure mortgages or deeds of trust executed prior to 1 April, 1915.” The section enters and must be allowed controlling effect upon every deed of trust or mortgage with power of sale executed since the date specified, see White v. Kincaid, 149 N. C., 415, and provides and intends to provide that during the ten days, as stated in tbe first clause, tbe bidder acquires no interest in tbe property itself, but be acquires a position similar to a bidder at a judicial sale and before confirmation. Tbis in our opinion follows not only as tbe 'natural meaning of tbe words used, tbat tbe sale shall not be deemed ■closed under ten days, but tbe position is fully confirmed by tbe further provision of tbe law tbat during said ten days tbe matter is kept open for receipt of increased bids, and in case tbe stipulated increase is made, tbe property shall be readvertised and a second sale bad. Tbis being clearly tbe meaning of tbe law and the position of tbe purchaser. It is tbe accepted law in tbis State tbat a bidder at a judicial sale before confirmation acquires no interest in tbe property itself, but bis bid is considered only a proposal to buy, which tbe court may accept or reject in its discretion. In Upchurch v. Upchurch, 173 N. C., 88-90, tbe court said: “His offer is considered only as a proposition to buy at tbe price named, tbe court reserving tbe right to accept or reject tbe bid.” And in Harrell v. Blythe, 140 N. C., 415, quoted with approval in tbe Upchurch case, tbe position is stated as follows: “Where land is sold under a decree of court, tbe purchaser acquires no independent right. He is regarded as a mere preferred proposer until confirmation, which is the judicial sanction ■or tbe acceptance of tbe court, and, until it is obtained, tbe bargain is not complete.” Under tbe facts presented, therefore, tbe bidder during tbe ten days covered by tbe statute acquired no interest in tbe property, and in such case it is very generally held tbat where pending a contract for sale of improved real estate, tbe buildings thereon are damaged by fire tbe loss, as a rule, must fall upon tbe owner, and if tbe destruction wrought is such as make a material change in tbe property or substantially impair its value, specific performance will not be enforced at tbe instance of tbe vendor and tbe bidder will be relieved of bis obligation. By tbe weight of authority on tbe subject, when there exists a binding and enforcible contract to convey, tbe vendor being in tbe present position to make title, tbe purchaser is regarded as tbe owner and tbe loss must fall on him. But where tbe vendor has not yet obtained a title, or where tbe bargaining between the parties has not been such as to give tbe proposed purchaser any interest in tbe property, or tbe contract is otherwise incomplete, tbe loss, as stated, falls on tbe vendor, and under tbe circumstances indicated^ be may not insist on performance. Sutton v. Davis, 143 N. C., 474; Phinizy v. Guernsey, 111 Ga., 346; Huguenin v. Courtenay, 21 S. C., 403; Eppstein v. Kuhn, 225 Ill., 115; Lombard, v. Chicago Sinai Congregation, 64 Ill., 477; Christian v. Cabell, 63 Va., 82; Blew v. McClelland, 29 Mo., 304; Pomeroy on Contracts, sees. 434-435; 29 A. & E. (2 ed.), 712-713. In tbe citation to 29 A. & E., supra, it is said, “to tbe general rule tbat tbe purchaser must bear all losses there is one well recognized exception, that if tbe loss occurs at a time when, for any reason the contract lacks completion, the vendor being in such case the owner in equity, -must be responsible for the loss. Thus where the loss occurs before the vendor is in a position to convey a good title, it will fall on the vendor. So also where the vendor has an option to withdraw from the contract. But to make the vendor bear the loss, he must be in some fault other than mere delay in making the deed where he has never been requested to make it.” And the principle as stated has been directly applied to the case of a bidder at a judicial sale and before confirmation. 4 Edwards Chancery (N. Y.), 702; Ex parte Minor, 11 Ves. Jr., 559; 32 Eng. Rep., 1205; 24 Cyc., 34, and cases cited in note 54. As has been heretofore stated, during the ten days where the statutes provide that the sale shall be considered unclosed and open for further bids the applicant in the instant case is in a position exactly similar and the building having been destroyed during that period making a diminution in .value of $2,000 in a $4,500 sale. Ye think his Honor correctly ruled that the proposed purchaser should be relieved and a resale had under the powers contained in the deed. As well said by the presiding judge in entering his judgment to that effect: “It therefore appearing by the admitted facts that a substantial part of the property, to wit, a third or more in value, was destroyed after sale, and that such fact was a material inducement for petitioner’s bid and a substantial part of the consideration thereof, and that the property has been physically changed before confirmation, the court is of the opinion that before confirmation no title had passed to petitioner and that his rights were only those of a preferred bidder, and that the loss sustained by the destruction of a portion of the property ought not to fall upon the petitioner when he had neither possession to enable him to protect it, nor title to permit him to insure it, and had only the uncertain right of a preferred proposer.” While we hold that the same should be set aside at the instance of the bidder, we are of the opinion that on the record neither the clerk nor the judge on appeal from him had jurisdiction or power on the bidder’s mere application to make any orders affecting the rights of the parties in the premises. The power of foreclosure by advertisement and sale of the mortgagee or trustee fills a useful'and important place in our business life and should not be interfered with except to the extent expressly provided by law. The statutes, section 2591, as we have seen, in express terms provides that any and all sales of this character shall remain “unclosed for ten days,” but it confers no power on the clerk to make any orders in the matter except in case of an increase of bid, nor is any report required to be made in any other instance. That and that alone is the basis for his interference in sales of this kind. It might be well in the case presented the law should give the clerk jurisdiction to make the order tbat justice and right would require, but thus far the statutes has not done so, and we are not at liberty to go beyond the statutory provision. ~We consider it not improper to say, however, that as the parties have gone on and had another sale in which the same purchaser became the last and highest bidder, with or without orders of the clerk this was the proper course to pursue, and if the facts are as now admitted, no court would make other disposition of the matter. And inasmuch as the sassignment written on the back of the mortgage and under seal transfers both the interest of the mortgagee and the power of sale, as well- as the property contained in the mortgage, such assignment and deed clearly confers the right of foreclosure on the bank, the assignee. Weil & Bros. v. Davis, 168 N. C., 298. The case is thus distinguished from Williams v. Teachey, 85 N. C., 402, and that class of cases, in which it was held that as the assignment didn’t purport to pass the property itself, the power of sale and right of foreclosure remained in the mortgagee. Being of the opinion that on the record and a proper interpretation of the statutes the clerk and the judge on appeal from him are without jurisdiction to make orders and decrees in the matter, we must hold that the appeal and other proceedings be dismissed. But we have deemed it not improper to express an opinion on the facts contained in the record, a course pursued by the Court in exceptional instances where the importance and general interest in the question presented make it desirable. Gilbert v. Shingle Co., 167 N. C., 287-290; Milling Co. v. Finlay, 110 N. C., 411; S. v. Wylde, 110 N. C., 500.

This will be certified that the cause be

Dismissed.