Fleming v. North Carolina Joint Stock Land Bank of Durham, 215 N.C. 414 (1939)

April 12, 1939 · Supreme Court of North Carolina

215 N.C. 414

EVA FLEMING v. THE NORTH CAROLINA JOINT STOCK LAND BANK OF DURHAM, N. C.; INTERSTATE TRUSTEE CORPORATION, Trustee; JOHN L. WINDHAM, WILLIAM H. WOOD, R. D. HARRINGTON and Wife, EVA S. HARRINGTON (Original Parties Defendant); and ALBION DUNN, Trustee (Additional Party Defendant).

(Filed 12 April, 1939.)

1. Mortgages § 17—

A mortgagee in possession is chargeable with a reasonable rental and with the value of wood and timber removed from the premises during its possession which must be applied to the mortgaged indebtedness.

S. Same: Mortgages § 30a — Evidence held sufficient to entitle plaintiff to an accounting to ascertain if rents were sufficient to prevent default.

Plaintiff’s evidence tending to show that the mortgagee went into possession prior to foreclosure by making a direct rental contract with plaintiff’s tenant, and that the reasonable rental of the property, plus the value of timber cut therefrom during the mortgagee’s occupancy was sufficient to pay the installments of the mortgage notes, is held sufficient to entitle plaintiff to an accounting to ascertain whether at the time of foreclosure the mortgage indebtedness was in default in any sum.

3. Mortgages § 39d — Remedies of mortgagor or trustor for wrongful foreclosure.

If a mortgagee causes foreclosure when no sum is in default on the indebtedness upon a proper accounting by the mortgagee for rents collected by it while in possession prior to foreclosure, the mortgagor or trustor is entitled to redeem the land unless it has been transferred to an innocent purchaser, in which event the mortgagor or trustor is entitled to damages sustained by reason of such wrongful foreclosure.

4. Limitation of Action § 18—

Where plaintiff fails to affirmatively show that her cause of action against a defendant is not barred, such defendant’s motion to nonsuit upon his plea of the applicable statute of limitations is properly allowed.

Appeal by plaintiff from Frizzelle, J., at September Term, 1938, of Pitt.

Reversed as to Nortb Carolina Joint Stock Land Bank of Durham. Affirmed as to other defendants.

The plaintiff brought this suit to have an accounting made between herself and certain of the defendants, to have a sale of lands made by the Land Bank under deed of trust executed by her declared void, and to have conveyances made thereunder set aside, to recover of the defendants for waste and for the value of timber cut upon the premises, and to be permitted to redeem the lands of which she claims she was deprived by the fraudulent devices of the Land Bank, the defendant Windham, and others.

Tbe plaintiff alleges tbat sbe secured a loan from tbe defendant North Carolina Joint Stock Land Bank, and while tbis was in force sbe entered into a contract witb tbe defendant Windham under wbicb be became ber tenant on tbe lands in controversy, and agreed, amongst other things, to pay tbe installments on tbe Land Bank debt as they became due; tbat "Windham, witb tbe design to mature tbe notes and cause default in their payment and bring about a sale of tbe lands for bis own benefit, failed to apply tbe rent to tbe installments, and tbat, in collusion witb tbe Land Bank, Windham undertook to become, and did become, tbe tenant of tbe bank as to tbe lands. Tbat tbe bank made a separate contract of tenancy witb said Windham, in violation of plaintiff’s rights, and thereby went into possession of tbe lands; tbat tbe rents from tbe lands due plaintiff were sufficient to pay all installments as they became due upon tbe lands, but tbat tbe Land Bank refused or neglected to collect a proper rental from Windham and permitted a large amount of waste upon tbe premises; tbat tbe reasonable rental value of tbe lands while in tbe possession of tbe defendant Land Bank was amply sufficient to cover all demands wbicb tbe said Land Bank might rightfully have against tbe plaintiff witb respect to ber deed of trust and tbe installments due thereon. It is further alleged tbat tbe defendant Land Bank and tbe defendant Windham, fraudulently conspiring together, brought about a sale of plaintiff’s land under tbe power of sale contained in tbe mortgage deed, in September, 1933, at wbicb tbe Land Bank became purchaser at a grossly inadequate price. Tbat in 1934 tbe defendant Land Bank conveyed tbe land to E. H. Harrington and wife, Eva Harrington, taking a deed of trust therefor in tbe sum of $4,400 to tbe Interstate Trustee Corporation, Trustee, codefendant in tbis action, and .that about thirty days thereafter tbe defendant Harrington and wife conveyed tbe lands to tbe defendant Windham; tbat during all tbis time tbe Land Bank and Harrington and wife knew tbat Windham held tbe lands under tbe rental agreement witb tbe plaintiff and tbe terms thereof, and tbat be bad breached bis agreement in order to get a legal title to tbe land, and aided and assisted him in bis unlawful acts.

Tbe plaintiff further states tbat tbe defendants Land Bank and Wind-ham have been in possession of tbe land for tbe years 1933 to 1931, inclusive, during which time they have farmed tbe lands and have not accounted to tbe plaintiff for tbe rents and profits; tbat tbe defendants have permitted a large amount of waste to be committed on tbe premises and have caused and allowed tbe defendant William H. Wood to go upon tbe land and cut and remove timber trees to tbe value of $2,000; and tbat tbe defendant Windham has cut off valuable wood, selling tbe same and converting it to bis own use.

The defendants denied any conspiracy or fraud with, reference to plaintiff’s lands, the Land Bank alleging that plaintiff’s notes became due in regular course and were not paid, and that in the honest execution of the trust imposed the trustee sold the lands, at which sale the Land Bank became purchaser, conveying the property in the regular course of business thereafter. The defendants severally denied that any waste was committed upon the premises by them or anything removed therefrom in violation of the rights of plaintiff.

The corporate defendants denied that any agreement with the plaintiff was violated by the advertising and selling of the lands, and the Land Bank expressly denied that it had any agreement with the plaintiff or John L. Windham with regard to the matter.

The answer of the Interstate Trustee Corporation, defendant, is in agreement with that of the Land Bank, and denied any wrongful act of any nature toward the plaintiff.

The answer of John L. Windham is a substantial denial of the principal allegations of the plaintiff’s complaint, and, in addition thereto, Windham pleads the three-year statute of limitations.

The answer of the defendants Harrington and wife is immaterial to such phases of the case as the Court finds it necessary to consider.

There was evidence of the tenancy of Windham, of a contract of Windham to pay rentals sufficient to take care of the installments due on the Land Bank debt, and of a direct contract made later between Windham and the Land Bank, by which Windham became the tenant of the said Land Bank, and further evidence as to the rental value of the lands and as to the value of the timber and wood cut therefrom during the occupancy of the land by Windham and subsequent to the sale by the trustee under the deed of trust to secure the Land Bank note.

At the conclusion of plaintiff’s evidence,' and at the conclusion of all the evidence, the defendants separately moved for judgment as of non-suit and the motions were allowed. From this, the plaintiff appealed.

Julius Brown for plaintiff, appellant.

J. B. James and J. S. Patterson for defendants North Carolina Joint Stock Land Bank of Durham and Interstate Trustee Corporation, Trustee.

J. C. Lanier for defendant John L. Windham.

J. W. H. Roberts for defendants R. D. Harrington and Eva Harrington, appellees.

Seawell, J.

It is not necessary to analyze the voluminous evidence in the record, since upon the judgment of nonsuit, our consideration is narrowed to one phase of the case.

Tbe evidence, considered in the light most favorable to the plaintiff, raises an inference which must be left to the jury that the defendant Land Bank went into the possession of the land through a contract of tenancy with Windham some time prior to its sale under the deed of trust. As the mortgagee in possession, it was the duty of the Land Bank to apply to the notes and mortgage held by it the rentals received from Windham, and it was chargeable as such mortgagee in possession for a reasonable rental to be so applied, and for the value of wood and timber removed from the premises, if any, during its occupancy. Kistler v. Development Co., 205 N. C., 755, 172 S. E., 413; Green v. Rodman, 150 N. C., 176, 111 S. E., 408.

Under the evidence in this case, we think the plaintiff had the right to have an accounting, and if it appears therefrom that there was nothing due the Land Bank at the time of the sale of the lands in controversy, and if such sale was brought about through the wrongful action of the Land Bank, she would ordinarily be entitled to redeem the land unless this has been rendered impossible through the conduct of the Land Bank. In that event, she would be entitled to such damages as she may have sustained, and which may be provable under applicable law.

The evidence does not affirmatively show that any cause of action which the plaintiff may have had against Windham accrued within the three years next preceding the institution of the suit; nor is it sufficient to justify a recovery against any defendant other than the Land Bank.

As to the Land Bank, the judgment of nonsuit is

Reversed.

As to the other defendants, it is

Affirmed.