Gibson v. . Barbour

Smith, C. J., (after stating the facts). We proceed to ex *196 amine the series of exceptions taken to the rulings of the Judge, and brought up on the appeal. 1st Excep. — So far as the finding of the agency of the attorney rests upon the sufficiency and credibility of the testimony in establishing the fact, the finding of the Judge is conclusive. If the objection be predicated upon the absence of any evidence, i't cannot be sustained, for the attorney expressly states, that he acted as such in the matter of selling the property. £d Ex. — The same witness states: “ I made the sale for W. P. Kornegay & Co., the mortgagees, and bid off the land as agent for Gibson. Mr. Barbour was here, and made no objection to the sale.” There was no evidence that the defendant was aware of the fact, that the agent, a witness for the plaintiff, knew for whom the land was bid off. This supports the finding. 3d Ex. — As every fact must be found upon evidence, and there was none that the defendant had the suppposed knowledge, it could not be so found. 4th Ex. — The Court does not find the rental value of the land, for in the judgment following the general statement of facts, iff is declared that “ the rental value of said land was $40 or $50.” The exception is founded in error. 5th Ex. — The main, and really only point, embodied in the 5th exception, is as to the effect of the proceedings in conducting the sale upon the title acquired by the plaintiff, in divesting it of the trusts of the mortgage, upon which the ruling is against the plaintiff; and, in our opinion, it rests upon well established, and universally recognized principles of equity. At law, a sale by a vendor directly to a vendee, when one person, is a nullity, since all contracts must be between two or more persons with antagonistic relations as to the subject-matter of the contract; but a deed executed by the owner of land or other property to another person, though *197 the latter accepts the title under an agreement to reconvey, at law, passes the estate, when the parties are competent to contract; but it may be avoided by persons in interest, because, though pursuing the forms of law, such a transaction tends to fraud, under the veil which covers it, and, in equity, will be avoided, if demanded by those who may be prejudiced. The principle is elucidated by Reade, J., in Froneberger v. Lewis, 79 N. C., 426, and reiterated in the more recent case of Sumner v. Sessoms, 94 N. C., 371. So far has been carried the doctrine, of' the right to have set aside a sale madp by a trustee to one who was buying for him, under a promise to reconvey, that creditors, not secured in a deed of trust, may demand an annulling of the transaction and an execution of the trust, though all others interested in the disposition of the property were content with what was done, and this even after a long interval of delay. Elliott v. Pool, 3 Jones Eq., 17. Even when the trustee has an interest in the property thus transferred, it may be avoided. Hunt v. Bass, 2 Dev. Eq., 292; Boyd v. Hawkins, 2 Ired. Eq., 304. The principle underlying the equitable rule is in the language of Lord EldoN, in ex parte James, 8 Ves., 345: “ The purchase is not permitted in any case, however honest the circumstances ; the general interests of justice requiring it to be destroyed in every instanceand he uses substantially the same language in reference to a commissioner in bankruptcy, purphasing through a solicitor, in ex parte Bennett, 10 Ves., 385. . “ It is an inflexible rule,” are the words of the late Chief Justice, an Associate Justice when they were uttered, “ that when a trustee buys at his own sale, even if he gives a fair price, the cestui que trust has his election to treat that sale as a nullity, not because there is, but because there may be, fraud. Brothers v. Brothers, 7 Ired. Eq., 150. *198 In Joyner v. Farmer, 78 N. C., 196, after land had been bid off by an agent of the mortgagee, the mortgagor being present and not objecting, and as tenant of the latter remaining in possession for a year, nevertheless, as no intervening rights had been acquired by others, and no misconduct in the selling was alleged, the mortgagor was held to be entitled to have a resale, because, as was said by Rudsian, J., in the opinion, “the interest of a vendor and a purchaser are so antagonistic that the same man cannot be allowed to fill both characters.” “ In all cases where a purchase has been made by a trustee,” we quote from section 322 of the 1st volume of Mr. Justice Story’s excellent treatise on Equity Jurisprudence, “on his own account, of the estate of his cestui que trust, although sold at public auction, it is in the option of the cestui que trust to set aside the sale, whether bona fide made or not.” It can make no difference in the result, that the same agent employed to make the sale is employed to make the bid for an independent purchaser. There is a legal incompatibility in one man’s occupying such adverse relations, and representing antagonistic interests in the transaction, and a Court of Equity will not tolerate, the attempt and give efficacy to what is done, when opposed by competent parties in interest. The cases, to which the brief of appellants’ counsel calls our attention, are in no degree hostile to this universally accepted rule. That of Dexter v. Shepard, reported in 117 Mass., 480, simply decides that a trustee, expressly authorized under the deed to purchase at his own sale, may exercise the right by employing some one to bid for him at the sale, and so might the Court, directing a commissioner, interested in the trusts, to make a sale, give him authority to bid, as a means of securing himself against loss, as was done in McKay v. Gilliam, 65 N. C., 130, although the fact does not appear in the report, and so, we think, may *199 this be allowable with the general consent-of all who could otherwise make objection to the sale. The judgment of the Court must therefore be upheld, so far as it charges the legal estate vested in the plaintiff with the trusts of the mortgage. But, inasmuch as it is apparent that a sale of the property — some of it, at least, is necessary to discharge the secured indebtedness — the attempted sales being out of the way, and there being no rule which requires the personal to be put in front of the real estate in disposing of the property, the judgment, giving a day for redemption, should have directed a sale of the land, unless the debt was before paid as ‘‘ the only property in controversy in this act ion.” The case has this aspect: The mortgagee holds, as such, the personal property under the trusts, and has parted with the legal estate in the land, by his deed to the plaintiff, with its adhering trusts, and lias received $500 in payment thére-for. There is no marshaling of the funds required. The land has been sold and the title conveyed. The plaintiff occupies the place of the trustee, so far as the mortgagor is concerned, and he has paid money into the trust fund in the hands of the mortgagees, which, if the purchase were •upheld, would go in diminution of the indebtedness, and if not, must be restored to the plaintiff, and this would be a self adjustment, pro tanto, should the plaintiff again become purchaser. The presence, of the members of W. F. Kornegay & Co. in the cause, is only necessary to compel the restoration of the purchase mbney in the event of the land being bought by some one else, at a sum less than that already paid, or to return to the plaiuliff, should he buy, the excess coming to him. This is the whole extent of the controversy in the action, and it is limited to the land and the disposition to be made of it. It would be unjust to the plaintiff to allow his action *200 to lose its identity by merging into one of wider dimensions, involving the administration by the mortgagees of the whole trust estate, with which, outside of the land, he has no interest whatever; and this seems to have been comprehended in the action of the Court in the form of the judgment. N.or does this practice find any countenance in the provisions of the Code of Civil Procedure, in respect to a defence or counter-claim. § 244 only authorizes a counter-claim when, as “ a cause of action,” it is one “ arising out of the contract or transaction set forth in the complaint, as the foundation of the plaintiff’s claim, or connected with the subject of the action or when the action is on a contract a counter-claim on another and independent contract is allowed. The present counter-claim or defence is not such as the statute authorizes, inasmuch as it goes wholly outside the limits of the complaint, and is foreign to the controversy, which springs out of the plaintiff’s action, and introduces a new controversy among the defendants, to which he is indifferent. In the case of Hulbert v. Douglas, 94 N. C., 128, this practice was declared inadmissible, and supported by no known precedent. In this case the Court declared that such controversies cannot be “ rightfully introduced in the present action, as they are wholly foreign to its purpose, and must be. settled in another suit between the defendants themselves. The practice, sanctioned by The Code, does not go so far as to permit.the introduction of questions in dispute among the defendants, unless they arise out of the subject of the action, as set out in the complaint, and have such relation to the plaintiff’s claim as that their adjustment is necessary to a full and final determination of the cause,” citing Hughes v. Boone, 81 N. C., 204. So much of the proceeding as looks to an adjustment of controversies arising out of the administration of the whole trust estate, by the mortgagees and beyond that which belongs to the land, must be declared to be erroneous, and is *201 reversed. The cause will proceed in the Court below in accordance with the law as declared in this opinion. Modified and affirmed.