Virginia-Carolina Chemical Corp. v. Stuart, 200 N.C. 490 (1931)

March 25, 1931 · Supreme Court of North Carolina

200 N.C. 490

VIRGINIA-CAROLINA CHEMICAL CORPORATION v. MARGARET STUART and J. H. STUART.

(Filed 25 March, 1931.)

Homestead A d — Where homestead is laid off in equity of redemption the mortgage debt should not be considered in ascertaining its value.

A homestead exemption may be laid off in an equity of redemption, but when so done it is subject to the lien of the mortgage registered prior to the docketing of the judgment under which the execution is issued, and the mortgage debt should not be taken into consideration in appraising the value of the land for the homestead right.

Appeal by plaintiff from Moore, Special Judge, at Second February Term, 1931, of Waice.

Reversed.

By consent of the parties, a jury trial was waived and the court below found the facts and rendered judgment:

“1. That on 21 October, 1929, judgment was rendered in the above-entitled cause in favor of the plaintiff and against the defendants in the sum of $500, with interest thereon from said date until paid, at the rate of six per cent per annum; that said judgment is docketed in Judgment Docket No. 33, at page 233, of the office of the clerk of the Superior Court.

2. That at the time of rendition and the docketing of said judgment the defendant, Margaret Stuart, was the owner and was possessed of a life estate in 71.37 acres of land, located and being in Middle Creek Township, Wake County, North Carolina; that the defendant, J. H. Stuart, was the owner and possessed of a life estate in 66.69 acres of land located in said county and state.

3. That on 5 April, 1927, the defendant, Margaret Stuart, joined in a deed of trust along with the remainderman, embracing the said 71.37 acres of land, wherein and whereby the North Carolina Joint Stock Land Bank was beneficiary, securing the said bank for a loan in the sum of $2,000 on the amortization plan, which deed of trust was filed and duly recorded prior to tbe time of tbe rendition and docketing of plaintiff’s judgment above set forth.

4. Tbat on 9 April, 1927, tbe defendant, J. H. Stuart, joined in a deed of trust along witb tbe remainderman, embracing tbe said 66.69 acres of land, wherein and whereby tbe North Carolina Joint Stock Land Bank was beneficiary, securing tbe bank for a loan in tbe sum of $1,500 on tbe amortization plan, which deed of trust was filed and duly recorded prior to tbe time of rendition and docketing of tbe plaintiff’s judgment above set forth.

5. Tbat on 6 November, 1930, at tbe instance of tbe plaintiff, the clerk of tbe Superior Court of Wake County, issued an execution in tbe above-entitled cause directed to tbe sheriff of Wake County, North Carolina, and tbat under and by virtue of tbe said execution tbe said sheriff summoned three discreet persons qualified to act as jurors, as appraisers, and after being sworn by him, there being no personal property found belonging to tbe defendant, Margaret Stuart, proceeded to allot and assign to her a homestead in tbe said 71.37 acres of land, which homestead included tbe main dwelling, tobacco pack barn, garage, smoke-house, and cow shed, including four acres of land upon which tbe same was situate. Tbat tbe said appraisers did not take into consideration in allotting and assigning to said defendant her homestead tbe outstanding mortgage mentioned above on said premises, but assessed .the value of said buildings and land included therein at tbe sum of $1,000, burdened witb tbe said mortgage. Tbat it is agreed by plaintiff and defendants that tbe said homestead allotted and assigned to defendant, Margaret Stuart, affected by and burdened witb said mortgage is worth tbe sum of $1,000. Tbat tbe said homestead was allotted and assigned, as aforesaid, on 11 November, 1930.

6. Tbat pursuant to said execution and under and by virtue of tbe authority contained therein, tbe sheriff of Wake County did on 12 October, 1930, summons three discreet persons qualified to act as jurors, as appraisers, and after being duly sworn by him, proceeded to lay off and assign to tbe defendant, J. H. Stuart, bis personal property exemption, and there being no excess, they allotted and assigned to tbe said J. H. Stuart a homestead in tbe 66.69 acres of land mentioned above, which homestead included 6.2 acres of land, embracing bis dwelling-house and other outhouses which they valued at $1,000, tbe same being affected by and burdened witb tbe mortgage mentioned above. Tbat they did not take into consideration tbe said mortgage debt in tbe allotment of tbe said homestead. Tbe court finds tbat tbe said homestead as allotted is not worth $1,000, whether affected by or burdened witb said mortgage debt.

7. Tbat the commissioners, in making tbe allotment of tbe homestead of tbe defendant, Margaret Stuart, and tbe defendant, J. H. Stuart, did not take into consideration the encumbrances on said lands, nor the fact that each of said defendants were life tenants only in arriving at the value of the said two homesteads, but they allotted the said homesteads as though the said lands were unencumbered and said defendants were seized in fee thereof; that each of the defendants in apt time filed exceptions to the returns.

Upon the foregoing findings of facts the court is of the opinion, and so holds as a matter of law:

First. That the homestead of the defendant, Margaret Stuart, should be allotted and assigned to her in said 71.37 acres of land, in which she has a life estate, in the sum of $1,000, over and above the encumbrance, to wit, $2,000, to the North Carolina Joint Stock Land Bank.

Second. That the homestead of the defendant, J. II. Stuart, should be allotted and assigned to him in the 66.69 acres of land, in which he has a life estate in the value of $1,000, over and above the mortgage encumbrance, to wit, $1,500, to the North Carolina Joint Stock Land Bank.

It is thereupon ordered, decreed and adjudged that the returns of the sheriff of Wake County filed in this matter and the appraisers or jurors selected and summoned by him to lay off and assign the homestead of the defendant, Margaret Stuart and J. H. Stuart, be and the same is hereby set aside, and it is further ordered, decreed and adjudged that A. L. Jackson, E. L. Keith and Mayton Smith be, and they are, hereby appointed commissioners, the same being found by the court to be discreet persons qualified to act as jurors, who shall after being duly summoned and sworn by the sheriff of Wake County meet upon the premises of the defendant, Margaret Stuart, and allot and assign to her a homestead in the 71.37 acres of land in which she has a life estate, at the value of $1,000, over and above the $2,000 outstanding mortgage in favor of the North Carolina Joint Stock Land Bank, the homestead to include the dwelling of said defendant. And it is further ordered that the said commissioners will allot and assign to the defendant, J. H. Stuart, a homestead in said 66.69 acres of land in which he has a life estate, at the value of $1,000, over and above the $1,500 outstanding mortgage in favor of the North Carolina Joint Stock Land Bank, the said homestead to include the dwelling of the said defendant, and of their proceedings report to the next term of this court.”

Dupree ■& Strickland for plaintiff.

B. B. Lewis for defendants.

ClabicsoN, J.

The only question involved on this appeal: In enforcing a judgment lien should prior recorded mortgages and other encumbrances be taken into consideration in arriving at the value of a homestead, or should the homestead be allotted subject to and burdened with prior encumbrances as though they did not exist? We think the homestead should be allotted subject to and burdened with prior encumbrances as though they did not exist. This has been long the practice and procedure in this jurisdiction.

In Cheatham, v. Jones, 68 N. C., 153, the headnote is as follows: “A debtor is entitled to a homestead in an equity of redemption, subject to the mortgage debts.”

Pearson, C. J., at p. 155, speaking to the subject: “The question presented by the case is this: Has a mortgagor in possession a right to a homestead, as against all other creditors, save the creditors secured by the mortgage ? We concur in the opinion of his Honor, that the homestead is exempt from sale under execution, and that the mortgagor, although he holds subject to the mortgage debt, holds his homestead paramount to the other creditors. A mortgage is a mere encumbrance upon a man’s land, given as a security for the debts therein set out; and if he can discharge the encumbrance by the sale of the lands outside of his homestead, or in any other way, creditors who are not secured by the mortgage, have no ground upon which to deprive him of the homestead secured by the Constitution. We are of opinion that a debtor is entitled to a homestead in an ‘equity of redemption/ subject to the mortgage debts, just as a purchaser in possession is entitled to a homestead, subject to the payment of the purchase money.” Cheek v. Walden, 195 N. C., 752; Farris v. Hendricks, 196 N. C., 439.

'In McIntosh N. C. Practice and Procedure, part sec. 764, at p. 885, we find: “The debtor may also have a homestead in an equitable interest in land. When the land is subject to mortgage, the legal title is in the mortgagee, as between him and the mortgagor, but as to others the mortgagor is considered the owner, and he may have a homestead in the equity of redemption. (Citing the Cheatham case, supra). It is taken, however, subject to the mortgage lien, and it is obtained by allotting from all the land a part to the value of $1,000, and requiring the part outside of the homestead to be applied first to the lien before resorting to the homestead, instead of attempting to lay off enough land to make the equity of redemption worth $1,000,” citing Burton v. Spiers, 87 N. C., 87.

Under the above authorities we think the judgment of the court below should be

Reversed.