Davenport v. . Vaughn

Adams, J. A. A. Paul executed and delivered to the plaintiff his promissory note in the sum of one thousand dollars, to secure which he, as a holder in due course, assigned to the plaintiff in due course as •collateral a note for $2,000, executed by J. E. Leppard to- H. B. Smith •on 1 April, 1920. The latter was the sixth of a series of eight notes, in the aggregate sum of $16,000, given for the purchase of land, and secured by a deed of trust executed by Leppard to W. L. Yaughn. The Washington-Beaufort Land Company, of which the defendant Simmons was president, obtained an assignment of these eight notes — -the note set out in the complaint, the sixth of the series, assigned by Paul, being then in possession of the plaintiff, who had no notice of the assignment before fhe alleged foreclosure. Default was made in the payment of the notes, and Simmons caused the land to be advertised for sale in the name of the trustee. Yaughn had no knowledge of the advertisement; no knowledge of the sale at the time it was made. Simmons prepared a deed naming himself as grantee and Yaughn signed it under the circumstances appearing in the fourth, fifth, and sixth findings of fact. The first question relates to the measure of the trustee’s duty in foreclosing the deed of trust and conveying the land. As the agent of the debtor and the creditors he was charged with’ the duty of fidelity as well •as impartiality; of good faith and every requisite degree of diligence; of making due advertisement and giving due notice. When the sale was made, he was bound to inquire for the debts made payable out of the fund, though, said Chief Justice Ruffin, it may have been enough to inquire for them according to the description given in the deed. If *650 through haste, imprudence, or want of diligence his conduct was such as to advance the interest of one person to the injury of another, he became personally liable to the injured party. Johnston v. Eason, 38 N. C., 330; Allmand v. Russell, 40 N. C., 183; Hinton v. Pritchard, 120 N. C., 1. According to the facts as set forth by the referee, the trustee knew nothing of the advertisement or the foreclosure until some time after the sale had been made, and afterwards, at a time when apparently he had occasion to doubt and reason to scrutinize the proceeding, he executed a deed to Simmons upon his bare representation that a forged note, which was wholly inoperative (C. S., 3003), was in fact the note held by the plaintiff. Waiving the question of bad faith, the facts exhibit a degree-of negligence and want of prudence which fully justify the referee and the judge in their conclusions of law. It is insisted that the plaintiff, also, was negligent in declining to-inform the trustee that he was the holder of the note, and that his laches, should bar his recovery; but the plaintiff’s silence did not relieve the trustee of exercising due diligence to ascertain the holders of the several negotiable notes which were secured by the deed of trust. Allmand v. Russell, supra. It is further contended by the defendant that the plaintiff can have no-recovery against Vaughn until it is made to appear that Paul cannot pay the note held by the plaintiff, and that the land cannot be resold.. As to the sale, Vaughn’s ratification of it hardly leaves him in a position to ask that it be reopened; and the referee’s report shows that the plaintiff was a holder of the note in due course, and had it in his possession at the time of Paul’s purported assignment. It is not easily perceived how Paul’s assignment could adversely affect the plaintiff’s title; and the plaintiff’s right to bring suit on the collateral cannot be doubted. Bank v. Hill, 169 N. C., 235. The real basis of the action, however, is. the defendant’s negligent failure to protect the plaintiff’s interest; and as default has been made in the payment of the note, and there is no-allegation in the answer and proof that the debt due the plaintiff by-Paul has been paid, we discover no sufficient reason for holding that the action cannot be maintained. Bank v. Hill, supra; Bank v. Northcutt, 169 N. C., 219. The judgment is Affirmed.