Dunn v. Œttinger Bros.

CoNNOR., J., after stating the facts: The general principle upon which the plaintiff’s learned counsel rests his client’s right to recover is universally recognized and enforced. That a trustee cannot, during the existence of the trust, buy in or by any other method, either directly or indirectly, acquire the title to the estate or property to which the trust attaches, and hold it against his cesiui que irusb, is a basic and cardinal principle in equity. It is equally well settled with us that the relation of mortgagor and mortgagee comes within the class or relation to which this principle applies. Fronerberger v. Lewis, 79 N. C., 426, in which Judge Beade says that the rule is so well established “that we would scarcely be excused for encumbering the case with authorities, except to *282 show bow general is tbe rule and bow few tbe exceptions.” He cites and comments upon almost every case in our reports in which tbe rule was applied. Taylor v. Heggie, 83 N. C., 304, is directly in point, provided there was any trust relation existing between (Ettinger and Dunn at tbe time Becton conveyed to tbe former. It is settled that a sale of property, pursuant to a power given in tbe mortgage, in tbe absence of fraud, is effectual to foreclose tbe equity of redemption of the mortgage. “A sale under a mortgage or deed of trust, if valid and free from fraud or unfairness, will extinguish the equity of redemption in tbe mortgaged premises, leaving him no title or interest of any kind.” 27 Cyc., 1503. Tbe sale also cuts out and extinguishes all liens, encumbrances and junior mortgages executed subsequent to tbe mortgage containing tbe power. It. This is clearly established by tbe decision in Paschall v. Harris, 74 N. C., 335. Plaintiff’s intestate held a second mortgage on tbe locus in quo. Tbe bolder of the first mortgage executed bis power of sale and sold tbe land, making title to tbe purchaser. Plaintiff -filed a petition to sell tbe interest of bis intestate in tbe land. Pearson, C. J., said: “Plaintiff’s intestate bad an equity of redemption, but it was subject to a power of sale. * * * Tbe right of tbe intestate was extinguished by tbe sale.” This is tbe doctrine uniformly recognized and, we think, founded upon sound principle. It Avould seem, therefore, that when Hay sold tbe property under the power contained in tbe mortgage, and it was purchased by and conveyed to Becton, all right, title and interest of Dunn, as mortgagor, and (Ettinger, as mortgagee, was extinguished. In respect to this property, no trust or other relation existed between Dunn and (Ettinger. It is not necessary for us to discuss tbe question whether (Ettinger could have purchased at tbe sale and acquired the title, discharged of tbe trust. Mr. Jones says that be could do so. 11 Jones Mortgages, sec. 1884. He is sustained by the English authority cited. Taylor v. Heggie, supra, is to tbe con *283 trary, and we have no disposition to disturb the doctrine of that and other cases upon the question. Here, however, Bec-ton was the .absolute owner, holding title under a power created by Dunn in Hay. It is a rule of law that when one takes title pursuant to the execution of a power he is in under the grantor of the power (22 Am. and Eng. Enc., 1125) ; hence Becton was in as if Dunn had conveyed directly to him at the date of Hay’s mortgage. (Ettinger, who had brought suit to foreclose his mortgage on this and other lands prior to the sale, recognizing the effect of the sale by Hay under the power, took no decree in regard to the property, but accepted and credited his debt with the surplus of the purchase money paid by Becton, after discharging Dunn’s indebtedness to Hay. Dunn, who is presumed to have notice of the proceedings in the action against him in respect to the property, makes no objection to the receipt of the surplus, and takes benefit of it by way of reducing his debt. We can see no reason why, after Becton took title and paid the money, (Ettinger could not purchase from Mm and acquire a good title, free from any trust or obligation to Dunn. The learned counsel has cited to us a large number of cases, English and American, bearing upon the subject. In Bennett v. Austin, 81 N. Y., 322, it appeared that the junior mortgagee attempted to purchase for himself the land mortgaged, at a sale for foreclosure of the prior mortgage. It was well decided that he could not do so. There, at the time of the purchase, the mortgagor had an equity of redemption. It was foreclosed at the time and by means of the sale. The language of Miller, J., is illustrative of the distinction between that case and this: “He could not be a trustee before the sale, and immediately afterwards a stranger to the trust. A trustee cannot thus get rid of his obligation, discharge the trust and reap the advantage of a sale for himself individually.” This is strictly in line with the equitable doctrine, but it is to be noted that the defendant, by the very act of making the pur- *284 abase, sought to discard his trust obligation, whereas here the property had by the sale to Becton been removed from the trust. It was impossible for either Dunn or CEttinger, by any act of theirs, to bring it back into the trust. CEttinger is not seeking to “discharge the trust” by buying at the sale under the mortgage. That was done by the sale to Becton. So, in Brantly v. Kee, 58 N. C., 322, the defendant was a trustee for others at the time he purchased the slave from the trustee having a prior right. Thus Bispham (Eq., sec. 92) says: “Wherever one person is placed in such relation to another by the act or consent of the other or the act of a third person or of the law that he becomes interested with him in any subject of property or business, he is prohibited from acquiring rights in that subject antagonistic to him with whose interest he has become associated.” The difficulty with plaintiff’s case consists in the fact that, after the sale to Becton, the defendants occupied no relation to Dunn in respect to the property; they were not “interested with him” in the property. The interests of both had passed to Becton. It must be conceded that the decision in Boyd v. Hawkins, 37 N. C., 304, is very much in point. Boyd conveyed the property in’ trust to Eitts to pay certain debts to Richard Boyd and Thompson. Fitts conveyed the property to Hawkins upon the same trusts. A part of the land was situate in Granville County, and the deed was not recorded in that county. The Bank of New Bern procured judgment against Boyd and secured a levy upon and sale of the land in Granville to pay the judgment. Robards, the attorney for the bank, bought at the sale and took a deed from the Sheriff. He conveyed the land to Hawkins. The Court held that Hawkins held the land in trust for Boyd. The learned counsel strongly urges that there is no distinction between the cases. It must be conceded that the sale under the execution vested in Robards title paramount to that of the trustee, Hawkins. The learned Judge writing the opinion makes no mention of this fact, but treats *285 tbe parties as occupying tbe relation of trustee and cesiui que trust with respect to tbe land. Tbe decision is not in harmony with more modern cases and authority. If we could see tbe slightest evidence of any preconcerted arrangement or understanding between Eecton and defendants looking to a joint purchase of tbe lot at tbe mortgage sale-by Hay, suppression -of bidding or any other conduct calculated to prejudice tbe plaintiff’s right, we should not hesitate to declare defendants trustees for plaintiff, unless by bis conduct be is equitably estopped. Tbe balance of tbe purchase money, after paying Hay’s debt, was applied to plaintiff’s indebtedness to defendants. He had several opportunities in bis various lawsuits with Becton and defendants to set up tbe equity ■which be now seeks to use as a cause of action. He filed bis petition in bankruptcy, making no suggestion that be bad any such equity or interest in tbe land. Tbe decrees in the suit of defendants to foreclose bis mortgages were made, confirming tbe sale of tbe other property and crediting tbe plaintiff with tbe surplus proceeds of tbe sale of tbe Hay property, without any suggestion of tbe present claims. While possibly not an estoppel of record, certainly all of tbe acts and omissions of plaintiff ,are suggestive of laches on bis part and are inconsistent with bis present contention.' After a careful consideration and examination of tbe authorities, we concur with bis Honor’s ruling refusing to submit tbe issue or give tbe instruction requested. There is No Error.