Belton v. Farmers & Merchants Bank, 186 N.C. 614 (1923)

Dec. 12, 1923 · Supreme Court of North Carolina

186 N.C. 614

W. R. BELTON et ux. v. THE FARMERS AND MERCHANTS BANK AND TRUST COMPANY and F. B. KEMP, Trustee.

(Filed 12 December, 1923.)

Baúles and Banking — Bills and Notes — Collaterals—Equity—Intent— Mortgages — Substitution—Redemption.

A general provision of notes given to a bank by tbe same borrower tbat collaterals beld by tbe bank may be applied to tbe surety of each or all of. them so beld will not be beld to apply to an indebtedness not coming witbin tbe contemplation of tbe parties; and where tbe maker bas given bis note to tbe bank in substitution for one given by bimself to another, who bad placed it as collateral for her own note to tbe bank, carrying a mortgage on his lands as security, with provision in bis mortgage tbat tbe title would revest in him upon its payment, tbe mortgage security will not, under tbe general provision, inure to tbe benefit of other indebtedness be may owe to tbe bank; and held further, there being no further consideration for tbe note given in substitution, it would not be inequitable to permit him to redeem the land by paying tbe original debt secured by tbe mortgage.

Appeal by defendants from Shaw, J., at June Term, 1923, of Rocic-INGI-IAM.

Civil action, to restrain tbe sale of certain lands under power of sale contained in a deed of trust, and to have tbe said deed of trust canceled and surrendered to tbe plaintiffs.

From a judgment rendered on admissions in tbe pleadings and agreed statement of facts, granting tbe relief sought, tbe defendant Farmers and Merchants Bank and Trust Company appealed.

Manly, Sendren & Womble for plaintiffs.

Qlidewell & Mayberry and Leland Stanford for defendants.

Stacy, J.

Tbe essential facts upon which tbe case pivots are as follows:

1. On 15 December, 1919, tbe plaintiff W. R. Belton gave bis note' of $200 to Mrs. L. E. Coleman, representing a part of tbe purchase price of certain lots, and, to secure tbe payment of said note, executed a deed of trust, conveying said lots to E. B. Kemp, trustee.

2. Prior to 5 May, 1921, this note was, by partial payment, reduced from $200 to $100; and on said date Mrs. Coleman assigned tbe note in question, and deed of trust securing it, to tbe defendant.

3. At this time tbe plaintiff W. R. Belton was indebted to tbe Farmers and Merchants Bank and Trust Company in tbe further sum of $3,593.33, which represented tbe balance of a loan made in 1919, and tbe defendant bad demanded of Belton tbat be place with tbe bank additional security to protect said loan.

4. At tbe request of tbe defendant, and as a renewal and in lieu of tbe Coleman note, tbe plaintiff executed to tbe bank a new note for $100, bearing same date as tbe original Coleman note, and containing tbe following pertinent provisions:

“$100. StoNeville, N. C., 15 December, 1920.

“On 15 December, 1921, after date, I promise to pay to tbe Farmers and Merchants Bank and Trust Company, or its order, at tbe office of said company at Stonesville, N. C., tbe sum of $100, witb interest thereon at tbe rate of 6 per cent per annum, for value received.

“I herewith deposit witb tbe said company tbe following securities and properties, to wit:

“Deed of trust attached, same being renewal in part of note $200 due to Mrs. Coleman; and agree that the above-named properties and securities, and any others added to or substituted therefor, shall be held as collateral security for tbe above obligation, and for any other obligation or liability of tbe undersigned to tbe said company now existing or which may hereafter be contracted and due or to become due.”

5. There was a clause in tbe deed of trust which provided that, upon tbe payment of tbe note secured thereby, tbe said lands “shall be recon-veyed to W. R. Belton, or tbe title thereto revested in him according to tbe provisions of law.”

6. On 22 December, 1921, plaintiff tendered to tbe defendant, in cash, tbe amount then due on tbe above note, but tbe bank declined to surrender tbe deed of trust, claiming tbe right to bold it as security for tbe other debt due by tbe plaintiff.

Tbe plaintiff thereupon paid into court tbe sum tendered, and brought this action to restrain tbe defendant from attempting to foreclose under tbe said deed of trust. From a judgment in favor of plaintiff tbe defendant has appealed.

Tbe question presented is whether tbe bank, by virtue of tbe foregoing provisions in tbe renewal note of $100, given in lieu of tbe balance due on tbe Coleman note, can now sell tbe land, conveyed by tbe deed of trust, to satisfy plaintiff’s other indebtedness to tbe defendant, arising out of other transactions, after plaintiff has tendered payment in full of tbe note secured by tbe deed of trust. We think not, under tbe facts of tbe present case. Straeffer v. Rodman, 146 Ky., 1, Ann. Cas., 1913 C, 549, and note; Jones on Mortgages (6th Ed.), sec. 357; 19 R. C. L., 393.

It is provided in tbe deed of trust that, upon tbe payment of tbe Coleman note of $200, tbe title to tbe property therein conveyed shall revert immediately to tbe plaintiff by operation of law. Stevens v. Tur lington, ante, p. 194; Barrett v. Hinkley, 124 Ill., pp. 46-47; Carpenter v. Longan, 16 Wall., 271, 21 L. Ed., 313; Bank v. Mowry, 13 L. R. A., 294, and note. We are sure tbe minds of tbe parties never met on tbe proposition that tbe land conveyed in tbe deed of trust should stand as security for tbe payment of any debt other than tbe debt originally due Mrs. Coleman, and which she assigned to tbe bank after tbe payment of $100 bad been made thereon. In this respect, as well as in others, tbe case at bar is distinguishable from Upton v. Bank, 120 Mass., 153, a case strongly relied on by tbe defendant.

An agreement to secure one or more obligations must be confined to those intended to be secured by tbe parties to tbe contract, for nothing not within tbe contemplation of tbe parties will be included in any such agreement. Huntington v. Kneeland, 187 N. Y., 563, 102 App. Div., 284.

There was no new or additional consideration passing from tbe bank to Belton at tbe time of tbe execution of tbe renewal note, or tbe one given in lieu of tbe balance due on tbe Coleman note. Hence, there is nothing inequitable in allowing tbe plaintiff to redeem tbe land by paying tbe original debt secured -by tbe deed of trust. Hayhurst v. Morin, 104 Me., 169; Carpenter v. Plagge, 192 Ill., 82.

Upon tbe record, we think tbe correct judgment was entered below.

Affirmed.