Citizens Savings Bank & Trust Co. v. White

Adams, J. In the note sued on — -executed by James W. "White and Mary E. White to Sauls & Lamb — there is the clause, “This note is secured by mortgage on real estate in Craven County.” By proper endorsement of the payees the plaintiff became a holder of the note in due course; but as the mortgage was not transferred or assigned the legal title to the mortgaged property remained in the mortgagees. In these circumstances the plaintiff held the note without notice of any infirmity in it or any defect in the title of the payees, and in the absence of an agreement to the contrary the security followed the note. C. S., 3033; Jones v. Ashford, 79 N. C., 173; Miller v. Hoyle, 41 N. C., 270. The mortgagees held the legal title in trust for the benefit of the plaintiff who, as holder of the note, was vested with an equity to have the land sold under the mortgage and the proceeds applied in payment of the debt. Hyman v. Devereux, 63 N. C., 624, 629; Williams v. Teachey, 85 N. C., 402; Kiff v. Weaver, 94 N. C., 274; Jenkins v. Wilkinson, 113 N. C., 532; Baber v. Hanie, 163 N. C., 588; Stevens v. Turlington, 186 N. C., 191. It is immaterial that the plaintiff had no right to exercise the power of sale in the absence of a proper transfer of the mortgaged property by the mortgagees, because all interested parties were before the court when the decree of foreclosure was made. Weil v. Davis, 168 N. C., 298; Bank v. Sauls, 183 N. C., 165. But the appellant contends that these principles are not applicable in the instant case for the'reason that before making the purchase he was assured by one of the mortgagees that there was no encumbrance upon the land and that he paid the purchase price to the mortgagees at the request of the mortgagor and accepted the deed upon this assurance. In support of this position he relies chiefly on Bank v. Sauls, supra. There it appeared that the defendant J. L. Sauls had executed his promissory note for $6,000 to Sauls & Lamb and had secured its payment by a mortgage on land in Craven County, the mortgage having been *284 duly registered; that the mortgagees had thereafter obtained a loan of $4,000 from the First National Bank of Kinston and had delivered the notes and the mortgage to the bank as collateral security, but that the mortgage had not been assigned; that sometime thereafter the defendant Sauls had conveyed the same land to Lafayette King and his wife, by whom a deed of trust had been executed to Dunn, trustee, to secure the notes for the purchase money. It appeared, further, that Sauls & Lamb, mortgagees, had canceled the record of the. first mortgage in accordance with the statute (O. S., 2594 (1) ; and that after such cancellation they had obtained a loan of $8,500 from the Peoples Bank of New Bern by placing as collateral security for such loan the notes executed by King and his wife and secured by the deed of trust to Dunn. It was shown also that the mortgage had been canceled without the permission or knowledge of the First National Bank of Kinston. The court held that as the legal title to the land conveyed by the mortgage to Sauls & Lamb had never been divested by a transfer or assignment of the mortgage to the First National Bank of Kinston the cancellation of the registration by the mortgagees was effective and that the Peoples Bank of New Bern was thereby protected. In the opinion it is said: “The Peoples Bank of New Bern had the records of the county examined and, finding therein the mortgage to Sauls & Lamb properly canceled by the mortgagees, was absolutely protected in the loan made to the holders of the notes secured by the King deed of trust.” In that case and in Guano Co. v. Walston, 187 N. C., 667, there was a proper cancellation of the registered instrument; but not so in the case before us. The registered mortgage was constructive notice to all who were interested in the mortgaged property or dealt in reference to it with the parties of record. C. S., 3311; Smith v. Fuller, 152 N. C., 7. Sauls & Lamb, mortgagees, did not join in the conveyance executed to Skinner by J. W. White, mortgagor, and his wife; but the appellant contends that Lamb’s alleged false representation had the effect of canceling the mortgage. He rests this contention upon the doctrine of equitable estoppel, for he does not claim a formal cancellation either at common law or under the statute. If it be granted that Sauls & Lamb as between themselves and Skinner are estopped by Lamb’s representation, concerning which we express no opinion, it does not necessarily follow that the plaintiff’s equity of foreclosure is thereby defeated. The rule is that only parties and privies to the representation relied on are affected by an estoppel in pais. It is not suggested that the plaintiff was a party to the communication between Skinner and Lamb or that it had any knowledge of the transaction between them; and as to alleged deceit it can hardly be *285 insisted there was any privity between tbe plaintiff and tbe mortgagees. Bigelow says: “In tbe law of estoppel one person becomes privy to another (1) by succeeding to tbe position of that other as'regards tbe subject of tbe estoppel, (2) by bolding in subordination to that other. . . . Thus, to give an illustration of privity by succession, an assignee is not estopped by judgment against bis assignor in a suit by or against tbe assignor alone, instituted after tbe assignment was made, though if tbe judgment bad preceded tbe assignment tbe case would have been different.” Estoppel, 158. Tbe same principle is stated in 21 C. J., 1182: “A person in privity is bound by an estoppel because be comes in after tbe fact creating tbe estoppel by succession or representation to tbe original title or interests. . . . Tbe general rule is that a grantee will not be estopped by any act, conduct, declaration of bis grantor of which be has- no notice or which is subsequent to bis conveyance.” Since tbe plaintiff held tbe note as an innocent purchaser for value and was vested with an equitable right to demand a sale of tbe mortgaged land, tbe legal title to which tbe mortgagees held in trust for bis benefit, and, moreover, bad no knowledge of tbe alleged fraud we are of opinion that tbe equitable estoppel relied on by tbe defendant is not effective against tbe plaintiff and that bis Honor was correct in declining to sign tbe judgment tendered by tbe defendant. We presume it will readily be conceded that Stevens v. Turlington, 186 N. C., 191, is not decisive of tbe question presented here; and in Finance Co. v. Cotton Mills Co., 187 N. C., 233, it is said that evidence of an unwritten release of tbe mortgage would become material only in tbe event tbe jury should find that tbe plaintiff was not tbe bolder of tbe note in due course. In our case this contingency is met by tbe verdict of tbe jury. We find No error.