Grady v. Parker, 228 N.C. 54 (1947)

Oct. 15, 1947 · Supreme Court of North Carolina
228 N.C. 54


(Filed 15 October, 1947.)

1. Mortgages § 431)—

In an action by a successor guardian against tbe original guardian to recover funds of tbe estate wbicb tbe original guardian bad loaned to bimself. and secured by deed of trust, judgment was entered for tbe amount and foreclosure of tbe deed of trust decreed. Tbe trustee in tbe deed of trust was not a party to tbe action. Meld,: Tbe decree of foreclosure is invalid, since jurisdiction of tbe trustee, wbo bas legal title to the res, is prerequisite to such order.

2. Same: Parties § 10a—

Where decree of foreclosure of a deed of trust is entered in an action in which tbe trustee is not a party, tbe defect cannot be cured by an order entered subsequent to tbe decree making tbe trustee a party mine pm tune.

3. Evidence § 2—

Tbe courts will take judicial knowledge of the terms of the Superior Courts.

4. Mortgagés § 33d—

Whether tbe resident judge during vacation and at chambers could confirm a foreclosure sale of a mortgage or deed of trust without consent of tbe parties, G. S., 1-21S, quaere.

5. Mortgages § 89e (8) —

Where decree of foreclosure is entered in a suit in wbicb tbe trustee is not a party and tbe cestui bids in tbe property at tbe sale, tbe foreclosure is void, and tbe trustor is entitled to redeem tbe property and to have an accounting of rents and profits against tbe mortgagee in possession.

DepbNDANt’s appeal from Harris, J., at April Term, 1947, of Johnston.

Certain phases of tbe case now under review were here on appeal at tbe Fall Term, 1945, of tbis Court and will be found reported as Trust Go. v. Parlcer, 225 N. 0., 480 (35 S. E. (2d), 489). Reference to tbe statement of tbe case as there reported and tbe opinion by Mr. Justice' Barnhill is sufficient to show tbe historical background of tbe case and to supplement tbis statement in parts essential to an understanding of tbe present appeal.

It will be found that tbe action was originally instituted on February 6. 1935, by one of tbe successive guardians of an incompetent veteran *55against James D. Parker, tbe original guardian, and Ms wife, was tried at September Term, 1936, of Johnston County Superior Court, and resulted in a judgment on the $4,000 note given by Parker for funds “loaned” to himself out of the guardianship fund; and an order of foreclosure upon certain property of Parker conveyed to H. Y.'Eose, Trustee, in a deed of trust securing the “loan.” In this action Eose, the trustee, was not made a party, either plaintiff or defendant. Mrs. Parker filed an answer resisting a sale of the property at that time because of the inevitably low price which the property would bring because of the depression. The property, however, was sold under order of the court by W. P. Wellons, Commissioner.

The present controversy concerns only that portion of the real estate known as the “office property” which appears to have been resold under an order entered at November Term, 1938, in which the First-Citizens Bank & Trust Co., a successor guardian, was permitted to bid on the property. A report of this sale followed without any recommendation or statement of the value of the property, and on January 28, 1939, an order of confirmation was made by Hon. Clawson L. Williams, Judge, who purports to make the confirmation as Eesident Judge of the Fourth Judicial District, and signs himself as such. At that time, the record discloses, there was no session of Superior Court holden in the County of J ohnston.

The record does not disclose that the parties defendant herein had any notice of any motion for a resale of the property, or of the intended confirmation.

At the April Term, 1947, of the Superior Court of Johnston County the successor guardian, having been made a plaintiff in the action, caused the proceeding to be put on the motion docket. At the call of the docket and before the case was heard the defendants demurred ore terms on the ground that the complaint as to the foreclosure of the mortgage did not state a cause of action, for that the mortgagee or trustee in the deed of trust, holder of the legal title, was not, and never had been a party to the action. The demurrer was overruled and the defendants excepted and appealed.

Thereupon the plaintiff, upon unverified petition and without affidavit, moved the court that the original complaint be amended so as to name the mortgagee, H. Y. Eose, Trustee, as a party plaintiff therein and that he be allowed to adopt the original complaint nunc pro tunc.

The court, over objection of the defendants, entered an order upon the motion making the said Eose, Trustee, a party plaintiff to take effect nunc pro tunc at the time of the hearing and order of foreclosure, and from this defendant excepted and appealed.

*56 Lyon Parlcer for plaintiff, appellee.

B. A. Parlcer and Jane A. Parlcer for defendants, appellants.

Seawell, J.

Tbe defendants do not challenge tbe validity of tbe deed of trust or tbe present right of enforcement, nor do they dispute tbe effectiveness of tbe judgment against Mrs. Parker on tbe note. They do contend that tbe order of foreclosure, made while Rose, trustee in tbe deed of trust, was not a party to tbe proceeding, was void; and that tbe order attempting to cure its invalidity by making Rose a party by relation nunc pro tunc before tbe order was made is beyond tbe present power of tbe court, and at best could only make tbe trustee a party for some subsequent action in tbe premises as might be properly taken; that tbe order of confirmation was a final order without which no title is vested in tbe bidder, and under tbe law then current could not be made out of term and out of tbe county where tbe action was pending without consent of parties, which should affirmatively appear of record.

For these reasons they conclude that they are now entitled to redeem tbe property and to that end have an accounting for rents and profits against tbe mortgagee in possession.

These challenges to tbe validity of tbe foreclosure proceeding are so related that a fatal defect in either tbe order of foreclosure or tbe order of confirmation of the same, if it exists, is sufficient to entitle tbe defendants to tbe relief they seek. We need only to pass upon tbe first.

Tbe Court has frequently held that tbe mortgagee or trustee in a deed of trust, is a “necessary,” and “indispensable” party to an action for foreclosure; Smith v. Bank, 223 N. C., 249, 25 S. E. (2d), 859; Alexander v. Bank, 201 N. C., 449, 160 S. E., 460; Hughes v. Hodges, 94 N. C., 56, 60, 61; Williams v. Teachey, 85 N. C., 406.

Careful consideration of tbe bases on which these declarations are made justifies tbe position that tbe presence of tbe trustee as a party,— either plaintiff or defendant, — is jurisdictional with tbe Court, and without it no valid judgment of foreclosure can be bad. Tbe nature, purpose and importance of tbe trust confided to him, tbe fact that tbe foreclosure is a proceeding in rem, and that tbe legal title to tbe res is in tbe trustee and cannot be divested in a proceeding to which be is not a party, — these are amongst tbe considerations which lead to tbe conclusion that tbe court dealing with such a proceeding must first acquire jurisdiction of tbe trustee as such before entering a valid order of foreclosure. We do not consider it material whether be stands north or south of tbe versus.

There is no statutory or other authority under which tbe court could be justified in its attempt to cure this invalidity by an order making tbe trustee, by relation, a party nunc pro tunc to tbe proceeding, so as to *57place bim in that position prior to tbe rendition of tbe challenged judgment. At best any effect tbe order might have would be to make bim presently a party for such action as might be permissible subsequent to tbe order. As a curative attempt it was non coram judice.

Confirmation of tbe resale of tbe office property here in controversy purports to have been made by Hon. Clawson L. Williams as Eesident Judge of tbe Fourth Judicial District. Tbe Court will take judicial knowledge that no session of Johnston Superior Court was being held at that time, although we do not see that this fact is disputed. It is contended that under tbe law as it then existed, confirmation, unless by consent of parties,' could only be made at a regular term of tbe Superior Court, could not be made out of term or out of tbe county where tbe suit was pending except by consent of parties, — and neither notice nor consent appears in tbe instant case. Defendants cite May v. Insurance Co., 172 N. C., 795, 90 S. E., 890; Bynum v. Powe, 97 N. C., 374, 378, 2 S. E., 170; Laundry v. Underwood, 220 N. C., 152, 16 S. E. (2d), 703; Brown v. Mitchell, 207 N. C., 132, 134, 176 S. E., 258; Panic v. Peregoy, 147 N. C., 293, 296, 61 S. E., 68; Godwin v. Monds, 101 N. C., 354, 7 S. E., 793.

In view of tbe conclusion which we have reached we do not deem it necessary to decide tbe question whether Gr. S., 1-218, is broad enough to give jurisdiction to tbe resident judge during vacation and at chambers to confirm a foreclosure sale without consent of parties. We may say that barring the provision that a commissioner’s sale may be confirmed after 10 days where there is no objection and no raised bid, there is nothing in the statute, reasonably construed, that may be given that effect, — and jurisdiction by an inference not altogether necessary, — is not favored. Under the old practice it was considered necessary to allow 20 days to elapse before moving for confirmation of the commissioner’s sale under order of the Superior Court, and this sometimes prevented confirmation at the ensuing term. In view of the fact, however, that other titles might be disturbed by any present ruling, we refrain from passing upon the question until it becomes necessary.

We are clearly of the opinion, however, that the original order of foreclosure is void for the reasons stated and its invalidity was not cured by the present attempt to make the trustee a party nunc fro tunc. The defendants are entitled to the relief they have asked.

The judgment and order of the lower court overruling the defendants’ demurrer is reversed. The cause is remanded to the Superior Court of Johnston County for judgment in accordance with this opinion.

Eeversed and remanded.