General Realty Co. v. Lewis, 212 N.C. 45 (1937)

Sept. 22, 1937 · Supreme Court of North Carolina

212 N.C. 45

GENERAL REALTY COMPANY v. LEONARD LEWIS.

(Filed 22 September, 1937.)

1. Mortgages §§ 8, 32a — Where instrument does not empower trustee to sell, such power may not he implied from its other provisions.

The instrument in question empowered the holder or holders of the notes to enter upon the land conveyed as security and sell same upon default, but the granting clause and habendum were in the correct form of a deed of trust, and the instrument provided for the payment of the trustee’s commissions and costs in case of foreclosure. Held: The instrument did not empower the trustee named therein to sell the land upon default, and such power may not be implied from its other provisions under the rule that an instrument will be construed to effectuate the intent of the parties as gathered from the instrument as a whole.

2. Mortgages § 32a—

The power of sale contained in a mortgage or deed of trust will be strictly construed, and the power of sale must be clearly set forth and the contract as written must prevail.

Appeal by plaintiff from Clement, J., at Chambers, 15 May, 1937, 'Winston-Salem, N. C. Erom HeNdeesoN.

Affirmed.

This is a submission of controversy without action, accompanied with proper affidavits. N. C. Code, 1935 (Michie), sec. 626.

Tbe agreed statement of facts is as follows:

“1. Tbat tbe General Realty Company is a corporation, duly created, organized, and existing under and by virtue of tbe laws of tbe State of North Carolina, and tbe said Leonard Lewis is a citizen and resident of tbe county of Henderson in said State.

“2. Tbat on 5 April, 1937, tbe said parties entered into a valid written agreement whereby tbe General Realty Company agreed to sell and convey in fee simple, and tbe said Leonard Lewis agreed to purchase, tbe following described lot, situate in tbe city of Hendersonville, county of Henderson, and State of North Carolina, and known and 'described as follows: Being Lot No. 9 of Eassifern Court Subdivision, as shown on a plat of said Eassifern Court Subdivision, registered in tbe office of tbe register of deeds for Henderson County, in Plat Book 2, page 157.

“3. Tbat tbe General Realty Company derived its title to said property by, through, and under tbat deed of trust from H. 0. Buzzaird and wife, Ida L. Buzzaird, to Ernest E. Smith, trustee, of date 1 September, 1927, and duly registered on 22 September, 1927, in Book 124, at page 113, of tbe Records of Mortgages and Deeds of Trust for Henderson County, a copy of said deed of trust being hereto annexed, marked Exhibit A, and made a part hereof.

“4. Tbat tbe trustors in said deed of trust at tbe time of its execution were tbe owners of a valid, unencumbered fee simple title to said property, and upon its execution and registration said deed of trust became a valid first lien thereon.

“5. Tbat default was made in tbe payment of tbe indebtedness secured by said deed of trust, and thereupon one of tbe alternate trustees, after having advertised said property once a week for four consecutive weeks in a newspaper published in Henderson County, and also after having posted notice of said sale at tbe courthouse door of Henderson County for thirty days, sold said property to tbe highest bidder for cash, at tbe courthouse door in Henderson County, and said bid not having been raised, tbe said trustee executed a deed to tbe purchaser, and under which purchaser tbe said General Realty Company claims title to said property.

“6. It is admitted tbat tbe alternate trustee bad all tbe powers under said deed of trust possessed by tbe original trustee, and no point is made as to tbe sale having been made by tbe alternaté trustee any more than would or could have been made as to tbe original trustee.

“7. It is admitted tbat if said deed of trust conferred tbe power of sale upon either tbe original trustee or tbe alternate trustee, tbat tbe purchaser at tbe foreclosure sale obtained a valid, fee simple title thereto, and it is also admitted tbat General Realty Company has duly acquired whatever title the said original purchaser at the foreclosure sale obtained, and is now in position to convey such title to the said Leonard Lewis.

“8. That by virtue of and pursuant to the agreement hereinbefore alleged, the said General Eealty Company at the time provided for in said contract of purchase made, executed, and tendered to the said Leonard Lewis a deed, regular in form, and sufficient in every respect to vest in said Leonard Lewis a valid, unencumbered fee simple title to said property, provided the said General Eealty Company is the owner of such title thereto, and which said deed the said Leonard Lewis refused to accept on the ground that the said General Eealty Company is not the owner of such title for the reason that the said trustee was not vested with the power of sale to foreclose said deed of trust and convey said property to the purchaser.

“9. It is agreed that if the deed of trust, of- which 'Exhibit A’ is a copy, confers the power upon the original trustee to sell the property hereinbefore mentioned at foreclosure sale, and execute title to the purchaser, then the said Leonard Lewis shall accept the deed tendered him by the said General Eealty Company and thereby specifically perform the contract hereinbefore mentioned, but if no such power of sale is conferred upon said trustee by said deed of trust, then the said General Eealty Company is not in position to convey a valid title to the said Leonard Lewis, and he shall not be required to accept the same.

“10. It is further agreed that this matter shall be submitted for determination and decision to Hon. J. H. Clement, judge holding the courts of the 18th Judicial District, of which Henderson County is a part, at his chambers at "Winston-Salem, North Carolina, and that said judgment shall be in all respects as valid and binding upon the parties hereto as if rendered at term time, in Henderson County.

“We therefore present to the court the question arising upon the foregoing statement of facts for its determination as provided by section 626 of the Consolidated Statutes of North Carolina.

Eespectfully submitted,

W. G. Moedecai,

J. E. Shipman,

Attorneys for General Realty Company.

By J. E. Si-iipmaN.

G. H. VALENTINE,

Attorney for Leonard Lewis."

The court below rendered the-following judgment: “This cause coming on to be heard by consent of counsel for both parties before his Honor, J. H. Clement, judge holding the courts of the Eighteenth Judicial District, at chambers in Winston-Salem, North Carolina, on this 15 May, 1931, and being heard, and the court being of the opinion from the agreed statement of facts that the plaintiff General Realty Company is not the owner of a valid, fee simple title to the property therein described, and is not therefore in position to convey a valid title thereto to the defendant Leonard Lewis: It is therefore, on motion of counsel for' said defendant Leonard Lewis, ordered, adjudged, and decreed that the plaintiff take nothing, and that the defendant Leonard Lewis go without day and recover his costs of the plaintiff General Realty Company, to be taxed by the clerk of the Superior Court of Henderson County. J. H. ClemeNT,

Judge Holding the Courts of the 18th Judicial

District, at Chambers at Winston-Salem,, North Carolina.”

The plaintiff excepted and assigned error as follows: “That the court erred in signing the judgment set out in the record.”

J. E. Shipman and W. G. Mordecai for plaintiff.

G. H. Valentine for defendant.

ClakiísoN, J.

The question involved : Is the defendant’s objection to plaintiff’s title sufficiently grounded to avoid a decree of specific performance? We think so.

The deed of trust from H. 0. Buzzaird and wife, Ida L. Buzzaird, to Ernest F. Smith, trustee, dated 1 September, 1927, is to secure certain gold notes for money loaned, in the sum of $4,500. The same was duly recorded in Henderson County, N. C., Book 124, page 113, registry of deeds. It is set forth in the record, “Exhibit A,” as a part of the agreed statement of facts. The alternate trustee in the deed of trust sold the land after due advertisement, and plaintiff claims under the sale.

The language of the deed of trust in controversy relating to the provision for sale in case of default is as follows: “In the event of a breach of any one of the aforesaid covenants and agreements, or in case of default in the payment of any note secured hereby or any installment of interest thereon, according to the terms thereof, . . . And said holder or holders (of any or all of the first lien notes) may immediately enter into and upon the above described premises and sell and dispose of the same, and also all benefit and equity and redemption of the said grantor, unless such equity and benefit of redemption is reserved by law, and out of the proceeds of such sale to retain the principal and interest which shall then be due on said first lien gold note or notes and junior lien notes hereby secured, and such other debts that may be due and against said premises, together with the cost and charges of foreclosure, or may sell said premises at public auction, after complying with the statutes of tbe State wherein tbe property described herein is located, in reference to foreclosure and sale of real property; and tbe purchaser thereof shall not be required to see to tbe application of tbe purchase money and of tbe proceeds of said sale.”

Tbe plaintiff calls attention to other provisions in tbe deed of trust:

“Tbe granting clause reads: 'Does by these presents grant, bargain, convey, and warrant in fee simple unto tbe said trustee, bis successors and assigns, forever, tbe following described real estate.’ Tbe habendum clause reads: 'To have and to bold tbe above described premises, with all appurtenances and fixtures, unto tbe said, party of tbe second part, bis successors and assigns, forever, for tbe purpose, uses, and trusts set forth.’ It is provided in tbe acceleration clause that tbe indebtedness shall, 'at tbe option of tbe legal bolder or holders of any or all of said first lien gold note or notes, or by tbe guarantor or guarantors, if any, or tbe trustee, become immediately due and payable. . . .’ The trustee shall conduct tbe actual sale is also shown by subsequent provisions of tbe trust deed, wherein it is provided that in case of sale, tbe proceeds shall be applied: '(a) To tbe payment of reasonable compensation of tbe trustee, its agents, attorneys, and counsel, and all costs of advertisement, notices, sale, and conveyance, and other necessary expenses in case of sale, under tbe power of sale herein conferred.’ All proper expenses of tbe trustee incurred as herein provided, including attorneys’ and agents’ fees and tbe expenses of litigation, shall be paid out of tbe proceeds of tbe sale of tbe property described herein should a sale be bad. 'And in case of- foreclosure of this trust deed, in any court of law or equity, or by action or advertisement, there shall be allowed tbe trustee in such proceedings all costs and charges of such foreclosure, together with tbe maximum attorneys’ fees for foreclosure of mortgages allowed under tbe laws of tbe state wherein this instrument is recorded.’ ”

Tbe plaintiff contends: “Applying tbe rule that an instrument is to be construed from its four corners and tbe intent of tbe parties gathered from tbe instrument in its entirety, . . . that tbe trustee bad a right to both advertise, sell, and make deed to tbe purchaser, and that tbe defendant is without sufficient grounds to avoid a decree of specific performance,” citing Benton v. Lumber Co., 195 N. C., 363, at p. 365, as follows: “In tbe construction of deeds these principles seem to be settled: (1) Tbe entire deed must be considered and such construction of particular clauses must be adopted as will effectuate tbe intention of tbe parties; (2) such construction will be adopted as, if possible, will give effect to every part,” etc.

We cannot bold as plaintiff contends we should. Tbe deed of trust soems, in its various provisions, .to be drawn by a draughtsman not familiar with, our North Carolina forms and laws on the subject. It seems to have been drawn in Ohio. If a power of sale is given, it appears to be to the “bolder or holders” of any or all of the first lien notes.

In Eubanks v. Becton, 158 N. C., 230 (233), it is written:' “Powers of sale in a mortgage are contractual, and as there are many opportunities for oppression in their enforcement, courts of equity are disposed to scrutinize them, and to hold the mortgagee to the letter of the contract. If a different view should prevail and we could dispense with some stipulation in the power because we could not see that injury had ensued from failure to observe it, we could practically destroy the contract of the parties.”

“The courts look with jealousy on the power of sale contained in mortgages and deeds of trust, and the provisions are strictly construed.” Alexander v. Boyd, 204 N. C., 103 (108); Mitchell v. Shuford, 200 N. C., 321; Ins. Co. v. Lassiter, 209 N. C., 156; Woodley v. Combs, 210 N. C., 482 (486).

By a long unbroken line of decisions, mortgages and deeds of trust with power of sale must be strictly construed. Courts look with jealousy on the power of sale in these instruments and require the power of sale to be clearly set forth. The contract as written must prevail. The implied provisions cited by plaintiff are contrary to the language that in case of default the sale shall be made by “said holder or holders” (of any or all of the first lien notes). Under the peculiar provisions of the deed of trust perhaps the only safe method is by foreclosure by suit in court and all interested made parties.

Por the reasons given, the judgment of the court below is

Affirmed.