Traders Land Co. v. Abbott Realty Co., 207 N.C. 453 (1934)

Dec. 12, 1934 · Supreme Court of North Carolina

207 N.C. 453

TRADERS LAND COMPANY v. ABBOTT REALTY COMPANY and JOHN SPRUNT HILL.

(Filed 12 December, 1934.)

Contracts P a: Damages P b — Transferee of equity liable for the debt held not party to contract to refinance first mortgage made by second mortgagee with holder of first mortgage notes.

Plaintiff alleged that he was liable under a debt assumption contract on notes secured by a first mortgage on property in which he had purchased and later sold the equity of redemption, that defendant, the holder of a second mortgage on the property, agreed with the holder of the first mortgage notes that if the holder of the first mortgage notes would grant extension of time for payment and would defer foreclosure, defendant would lend the holder of the equity money to refinance the first mortgage notes, that at the expiration of the extension agreement defendant refused to lend the money in accordance with his agreement, and that the holder of the first mortgage notes foreclosed the property and recovered a deficiency judgment against plaintiff on the debt assumption contract, which plaintiff was forced to pay. Plaintiff brought suit to recover of defendant the amount of the deficiency judgment, claiming that plaintiff had been injured in this sum by defendant’s breach of the contract: Held, plaintiff was not a party to defendant’s agreement to lend the money to the holder of the equity, made with the holder of the first mortgage notes, nor was the agreement made for plaintiff’s benefit, and plaintiff could not maintain an action thereon, and held further, the measure of damages for the breach of the contract to lend the money would not be the amount of deficiency after foreclosure.

Civil actioh, before Stack, J., at Regular April Term, 1934, of MeCKLENBTJKG.

The complaint alleges that on 13 June, 1927, F. D. Lethco executed and delivered two promissory notes, aggregating $16,000, payable to I. W. Stewart. The notes were secured by deed of trust upon certain property owned by the maker. Thereafter Stewart endorsed the notes to the plaintiff and the plaintiff duly endorsed said bonds and negotiated the same to the Commercial National Bank of Charlotte, N. 0. Subsequently, Lethco and wife conveyed the land described in the deed of trust to the defendant Abbott Realty Company, and said grantee “assumed liability for and the payment of said bonds and interest thereon.” On 10 December, 1929, Abbott Realty Company borrowed $5,000 from the defendant John Sprunt Hill and executed a second deed of trust upon the property to secure said note. Prior to 10 July, 1930, “said Commercial National Bank, being the owner and holder of the bonds herein mentioned aggregating the sum of $16,000, served notice upon said defendant John Sprunt Hill that said bonds were past due, and unless said Abbott Realty Company made prompt payment thereof, foreclosure would be had.”

It was alleged that “Jobn Sprunt Hill, defendant, for tbe purpose of deferring tbe foreclosure of said deed of trust, . . . and in consideration of extension of tbe foreclosure of said deed of trust, did, on or about 10 July, 1930, covenant and agree that if tbe said Commercial National Bank would extend tbe time of payment of said bonds until tbe ■period between tbe first and tenth of September, 1930, tben and in sucb event said defendant Jobn Sprunt Hill would place a new loan of $16,000 on said property and make payment of tbe said bonds of $16,000 owned by said Commercial National Bank, thereby relieving tbe estate of said F. D. Letbco of liability upon said notes.” Tbe time of payment was extended until 10 September, 1930, when tbe bank demanded payment of said bonds and tbe defendants failed and refused to pay same. Foreclosure resulted, and tbe property was duly sold for $11,-329.50, thus creating a deficiency of $4,670.50, plus interest. Plaintiff was required by tbe bank to* pay said deficiency, and thereupon brought suit against tbe defendants to recover tbe said sum of $4,670.50.

Tbe defendant Abbott Realty Company filed an answer admitting that Jobn Sprunt Hill agreed with tbe Commercial National Bank and tbe Abbott Realty Company that be would refinance tbe notes mentioned in tbe complaint provided tbe Realty Company could give him a mortgage on certain other property securing bis $5,000 note. Tbe Realty Company further alleged that it was unable to give sucb security. Tbe defendant Hill filed an answer alleging that his negotiations were conducted with tbe bank and that be was never informed that tbe plaintiffs bad anything to do with tbe transactions, or were in anywise interested therein. He further alleged that be bad stated to tbe bank that be would refinance tbe property for Abbott Realty Company if certain additional security could be given, and that sucb security was not given, and be bad thereupon notified bis codefendant Abbott Realty Company that be could not make tbe loan.

At tbe trial tbe defendant Hill demurred ore terms to tbe complaint, asserting that it did not state a cause of action against him in that no contract was alleged between him and tbe plaintiff which was enforceable on behalf of plaintiff. Tbe trial judge sustained tbe demurrer, and tbe plaintiff appealed.

II. L. Taylor for plaintiff.

Whitlock, Doclcery & Shaw for John Sprunt Hill.

BeoqdeN, J.

If tbe defendant Jobn Sprunt Hill made any contract at all, it was with tbe Commercial National Bank, tbe owner and bolder of tbe bonds or notes executed by Letbco. Obviously, if it be conceded that tbe negotiations between Hill and tbe bank amounted to a contract, it does not appear that sucb agreement was made far tbe benefit of tbe plaintiff. Consequently, tbe principles of law permitting a beneficiary to sue into a contract made witb a third party has no application to tbe facts alleged. Moreover, tbe purported contract was in all essential features an agreement to lend money to tbe Abbott Eealty Company, and neither this corporation nor tbe bank is seeking to enforce tbe same. In addition, tbe measure of damages for tbe breach of a contract to lend money would not ordinarily be tbe deficiency arising from a sale of property for less than tbe face value of tbe notes. See Coles v. Lumber Co., 150 N. C., 183, 63 S. E., 736; Norwood v. Crowder, 177 N. C., 469, 99 S. E., 345; 36 A. L. R., 1408; 41 A. L. R., 357.

Affirmed.