Jessup v. Nixon, 199 N.C. 122 (1930)

July 2, 1930 · Supreme Court of North Carolina

199 N.C. 122

CORNELIA T. JESSUP et al. v. THOMAS NIXON.

(Filed 2 July, 1930.)

1. Moit,gages H p — Heirs at law of deceased mortgagor may bring action to redeem land even though estate was insolvent at time of sale.

The heirs at law of a deceased mortgagor are not precluded in proper instances from bringing suit to redeem the mortgaged land on the ground that the sale was not made in compliance with the terms of the mortgage even though the estate of the mortgagor was insolvent at the time of the sale.

3. Mortgages H h — Execution of power of sale must be had in strict conformity with provisions in mortgage.

Where a mortgage conveyance expressly provides that the mortgagee should give written notice thirty days before exercising the power of sale contained therein, the provisions must be strictly complied with to extinguish the equity of redemption.

3. Appeal and Error I b — Under the facts of this case the doctrine of the law of the case does not preclude court from reviewing former decision.

Where on appeal in an action to redeem lands from a mortgage sale the Supreme Court holds that the heirs at law of a deceased mortgagor may not bring action to set aside the mortgage when at the time of the sale the estate of the mortgagor was insolvent, but states that there was no evidence that the power of sale had been improperly executed, and on subsequent appeal it is held that the former decision was the law of the ease and precluded further inquiry: Held,, upon a petition to rehear where the record discloses that the power of sale had not been properly executed, the doctrine of the law of the case will not preclude the court from determining the phase of the case not before the Court at the time the first decision was rendered when the rights of third persons have not intervened, the Court having the power to review its own decisions.

Clakkson, J., dissenting.

Civil actioN, before Moore, Special Judge, at April Term, 1928, of PERQUIMANS.

From judgment rendered in this cause tbe defendants appealed to the Supreme Court, and the opinion of the Court is reported in 196 N. C., 33, 144 S. E., 375.

Thereafter, in apt time, the plaintiffs filed a petition to rehear. The petition was granted and additional briefs were filed by the parties, and the cause is now before us for decision.

This same cause was considered by this Court and opinions rendered and reported in 186 N. C., 100, 118 S. E., 908; 193 N. C., 830, 136 S. E., 722, and 196 N. C., 33, 144 S. E., 375. The facts are fully set forth in said cases, and therefore it becomes unnecessary to restate them.

Whringhaus & Hall and McMullan & Leroy for plaintiffs.

Whedbee & Whedbee, Thompson & Wilson, H. S. Ward and Stephen O. Bragaw for defendant.

Brogden, J.

Are the heirs at law of a deceased mortgagor precluded from setting aside a sale of the mortgaged premises, not made in compliance with the terms of the mortgage, when at the time of said sale the estate of the mortgagor was insolvent and unable to pay more than fifty-three per cent of the indebtedness thereof?

From time immemorial it has been held by the courts that the law looks upon a mortgagor with a kindly eye, and this legal beneficence has grown into a maxim “that once a mortgage always a mortgage.” Ray v. Patterson, 170 N. C., 226, 87 S. E., 212. It is also beyond question in this jurisdiction that the heirs at law of a deceased mortgagor may maintain an action to redeem. Rich v. Morisey, 149 N. C., 37, 62 S. E., 762; Morris v. Carroll, 171 N. C., 761, 88 S. E., 511.

In the case at bar, the ancestor of'plaintiffs executed a mortgage providing for the exercise of power of sale “upon written notice to the party of the first part for thirty days that prompt payment is expected and upon default thereof sale will be made under the power of this mortgage,” etc. The jury found in response to the first issue that the mortgagee failed to give written notice for thirty days that prompt payment was expected. Therefore, the sale was not properly made and the equity of redemption was not extinguished, for “in an instrument of this kind the-law is that a statutory requirement or contract stipulation in regard to notice is of the substance, and unless complied with a sale is ineffective as a foreclosure, and even when consummated by deed the conveyance only operates to pass the legal title, subject to certain equitable rights in the purchaser, as of subrogation, etc., in case he has paid the purchase money in good faith.” Brett v. Davenport, 151 N. C., 56, 65 S. E., 611; Eubanks v. Becton, 158 N. C., 231, 73 S. E., 1009.

The opinion of the Court in 196 N. C., 33, followed the opinion reported in 186 N. C., at p. 100, and the petition to rehear attacks the legal soundness of that opinion. In 186 N. C., 100, 118 S. E., 896, the Court said: “The plaintiffs must show that the assets of the estate were sufficient to pay his debts before they could ask the court to decree that they recover this land and its rents when the creditors had not been paid in full.” In other words, this proposition means, as the writer interprets it, that the heirs at law of a deceased mortgagor cannot assert the right to redeem even though the sale he invalid, when it appears that the estate was insolvent, and that it would be necessary to sell the land at any event to make assets to pay debts. The cases cited in the opinion in 186 N. C., 100, in support of the principle announced are Highsmith v. Whitehurst, 120 N. C., 123, 26 S. E., 917, and Russell v. Roberts, 121 N. C., 322, 28 S. E., 406. In the IlighsmÁth case an action was instituted to sell the land to make assets and the administrator was the purchaser at the sale. The widow and heirs at law of the mortgagor sought to redeem the land. It did not appear that the sale had been improperly made, and the attack upon the sale failed, because in referring to the proceeding- the Court declared: “And while it is not as formal as it might have been, it appears to have been substantially correct and authorized the defendant administrator to sell the land.” Clearly the equity of redemption was properly extinguished, and the only question left in the case was whether the conveyance could be set aside on the ground of fraud for the reason that the administrator was the purchaser of the property. The Court said: “Indeed, it is shown that the plaintiffs could not have been injured by the purchase of Barnhill, though made for the administrator, as the land sold for $1,211, when the jury on the trial of this case found that at the date of the sale it was only worth $1,200.”

In the Russell case, supra, it appeared without question that tbe land» was properly sold and brought a fair price, and that every dollar of the purchase money was applied to the payment of debts of decedent.

These cases, therefore, hold that if the power of sale is properly exercised, the equity of redemption is properly extinguished, and hence, in order to set aside a conveyance upon the ground of fraud because it was purchased by a person acting in a fiduciary relation, injury must be shown, and in such event, if no injury is shown, the conveyance will not be set aside.

However, the case at bar presents both aspects of the legal question, because the jury has found that the power of sale was not properly exercised, and that the sale was invalid from the beginning. Indeed, the proposition that the insolvency of the estate of the mortgagor precluded the exercise of the right of redemption was considered by this Court in Rich v. Morisey, 149 N. C., 31. In that opinion the Court said: “The defendants except to his Honor’s refusal to permit them to show that O. B. Morisey was insolvent at the time of his death. We see no error in this. It was not relevant to, and could not affect the verdict upon any issue, besides, with the final account of the administrator in evidence, unimpeached, insolvency was clearly shown.”

In the case at bar the report of the administrator clearly showed insolvency, and thus the Rich case is positive authority that mere insolvency of the estate will not preclude the heirs at law of the mortgagor from asserting the right of redemption where the sale of the land was not properly made.

After careful examination, we are of the opinion that the decision in 186 N. C., p. 100, with respect to the right of redemption is not in accord with the weight of authority or the logic of the law.

The decision of the Court reported in 196 N. C., 33, adopted the view that the decision in 186 N. C., 100, was the “law of the case,” and, therefore precluded further inquiry. Ray v. Veneer Co., 188 N. C., 414, 124 S. E., 756; Mfg. Co. v. Hodgins, 192 N. C., 577, 135 S. E., 466; Newbern v. Tel. Co., 196 N. C., 14, 144 S. E., 375. Undoubtedly this is a strong position and presents serious legal difficulty. However, it has been held in School Directors v. City of Asheville, 137 N. C., 503, 50 S. E., 279, that the doctrine of “law of the case” does not preclude the Court from reviewing its own decision, “certainly when no rights of property have become vested or change made in the status of the parties by reason of a ruling at some former stage of litigation.” Furthermore, in the appeal reported in 186 N. C., p. 100, the Court expressly said that “there was no evidence that due notice and advertisement of sale were not given in 1896, or that the mortgage sale was not regular.” In the record now before us.the jury finds upon competent evidence that the sale was not properly and regularly made, and conceding that, the principle of “law of the case” is salutary and essential in giving uniformity and permanence to judicial decision, it is apparent that it should not be applied in full vigor to a phase of the case which was not before the Court at the time the decision was rendered. That is to say, in the case reported in 186 N. C., p. 100, the evidence tended to show that the sale was regularly made. In the ease as now constituted it appears that the sale was not regularly made. Hence the “law of the case” does not preclude the Court from determining the question as now constituted.

There are many exceptions in the record, and we have given earnest and careful consideration to the records, the briefs, the petition to rehear, and the additional briefs filed by the parties, and have come to the conclusion that the judgment rendered at the April Term, 1928, of Perquimans Superior Court ought to be upheld and affirmed, and it is so ordered.

Petition allowed.

ClabicsoN, J.,

dissenting: I signed the petition for a rehearing in this action so that again this long drawn out controversy could be reconsidered. I cannot make up my mind that the petition should be allowed.

On 30 March, 1896, Erancis Nixon, Jr., died and left several children, all are dead except Cornelia T. Jessup, the plaintiff, a minor six years of age at her father’s death. On 11 August, 1921, she brought this action, nearly ten years after she became of age, against her uncle the defendant.

The case came on for trial at April Term, 1923. The issues submitted to the jury and their answers thereto will explain the controversy:

“1. Was the deed from David Cox, mortgagee to the defendant, invalid and ineffective to pass the equitable title to the land in question, because made without notice of sale and advertisement, as alleged in the complaint? Answer: Yes.

2. Was said deed invalid and ineffective to pass the equitable title to said land because the same was sold subject to the homestead rights of the children, as alleged in the complaint? Answer: Yes.

3. What was the fair market value of said land at the time of said sale, to wit, 1 July, 1896 ? Answer: $1,250.

4. Did the defendant fraudulently procure the foreclosure of said mortgage and the sale of said land and cause the same to be sold subject to the dower interest of the widow and the homestead rights of the children of Francis Nixon and thereby obtain the same at a grossly inadequate price, as alleged in the complaint? Answer: No.

5. Did the defendant, while administrator, and with a purpose of purchasing-the property in question at an undervaluation cause or knowingly permit it to be understood at sucb sale tbat be was purchasing sucb property for the benefit of tbe heirs of Eraneis Nixon, deceased, as alleged ? Answer: No.

6. Is plaintiffs’ cause of action barred by tbe ten-year statute of limitations, as alleged in tbe answer? Answer: No.

7. Did plaintiffs discover, or could they by due diligence have discovered prior to three years before tbe commencement of this action tbe fraudulent conduct of defendant alleged in tbe complaint and referred to in tbe fourth and fifth issues? Answer: (Not answered by jury.)

8. Is plaintiff’s cause of action based on alleged fraudulent conduct of defendant barred by tbe three-year statute, of limitations as alleged in tbe answer? Answer: (Not answered by jury.)”

Judgment on tbe verdict was rendered for tbe plaintiff and on appeal this Court found error. 186 N. C., 100. Tbe case came on for trial again at April Term, 1928, and tbe following issues were submitted to tbe jury and their answers thereto :

“1. Did tbe mortgage sale from Dr. David Cox, to tbe defendant, Thomas Nixon, fail to comply with tbe terms of tbe mortgage, in tbat said sale was bad and made without written notice for thirty days tbat prompt payment was expected, and, in default thereof, sale would be made under tbe power of tbe mortgage, as alleged in tbe complaint? Answer: Yes.

2. Did said mortgage sale fail to comply with tbe terms of said mortgage, in tbat said sale was bad and made subject to tbe dower rights of tbe widow, and to tbe homestead rights of tbe children of Francis Nixon, Jr., as alleged in tbe complaint? Answer: Yes.

3. Is plaintiff’s cause of action barred by tbe statute of limitations, as alleged in tbe answer? Answer: No.”

Tbe only serious contention is tbat tbe defendant Thomas Nixon failed to comply with tbe terms of tbe mortgage “in tbat said sale was bad and made without written notice for thirty days tbat prompt payment was expected,” etc.

It will be noted tbat tbe defendant was administrator of Francis Nixon, Jr., and tbe judgment at April Term, 1923, found: “What was tbe fair market value of said land at tbe time of said sale, to wit, 1 July, 1896? Answer: $1,250. Did tbe defendant fraudulently procure the foreclosure of said mortgage and tbe sale of said land and cause tbe same to be sold subject to tbe dower interest of tbe widow and tbe homestead rights of tbe children of Francis Nixon and thereby obtain tbe same at a grossly inadequate price, as alleged in tbe complaint? Answer : No.”

From tbe proceeds of tbe sale and other assets, defendant bad 53 per cent to pay on Francis Nixon, Jr.’s, debts. Tbe fair market value of tbe land at the time was $1,250, which would about pay the debts of Francis Nixon, Jr., and practically nothing would be left for plaintiff, heir at law, if all the debts were paid. As the jury found there was no fraud in the sale, the notice under the mortgage was technical, and after a quarter of a century such a bona fide sale that is without fraud should not be resurrected. Defendant under the sale went into possession of the land and has been in possession ever since. Under the facts and circumstances of this case, I think the principle and laches applies and this contest between blood-kin, a niece and uncle, should be forever buried.

The principle is well stated in McIntosh, N. C. Prae. and Proc., p. 103-4, as follows: “It does not follow that, because the statutes of limitations may bar a remedy in equity as at law, the court will grant' equitable relief in every case where the statute has not barred. Laches, or unreasonable delay, independently of any statute of limitation, will prevent relief in equity, upon the principle that equity aids the diligent and not the slothful. "When a claimant has slept on his rights until the rights of innocent third persons have intervened, or it would be otherwise inequitable to change the existing conditions, equitable relief may be denied, although the statute of limitations has not barred the claim. Conscience, good faith, and reasonable diligence are necessary to call forth the exercise of the peculiar powers of a court of equity. No particular rule can be given as to what will constitute laches; it must depend upon the circumstances of each case.”