Metropolitan Life Insurance v. Allen

BeogdeN, J. A. owns approximately nine thousand acres of land, and agrees to sell to B. a small tract containing about seventy-nine acres. B. enters into possession and makes a part payment on the purchase money, but receives no deed. Thereafter A. executes a deed of trust upon the entire body of land to secure a large indebtedness. About three years after the recording of said deed of trust A. conveys the seventy-nine-acre tract to B. by deed duly recorded. B. mortgages his seventy-nine-acre tract to secure an indebtedness, and being unable to pay, the land is duly sold under the mortgage and purchased by another. By mesne conveyances, duly executed and recorded, the title to the land was vested in'the First National Bank of Louisburg, and said bank conveyed the same to* the defendant by deed duly executed and recorded. A., the original owner of the land, did not pay his indebtedness secured by the deed of trust and sale was duly made thereunder, and the whole body of land purchased by the plaintiff. About six years after the land was purchased by the plaintiff it brought a suit in ejectment against the defendant and recovered possession. The defendant thereupon duly filed a petition for betterments and offered evidence tending to show that he had expended a substantial sum of money in making permanent improvements. Upon the foregoing facts the following question of law arises: Can the defendant maintain his petition for betterments ? The sale of the land under the original deed of trust, dated August, 1919, the purchase thereof by the plaintiff, and the deed from the trustee to the plaintiff dated 28 September, 1926, terminated the relationship *17 of mortgagor and mortgagee between the plaintiff and the original owners and mortgagors of the land. Hence, when the defendant went into possession in 1927 there was no such relationship existing between him and the plaintiff. Consequently, C. S., 710, does not apply. The doctrine of betterments rests upon equitable principles and considerations of natural justice. That is to say, if the mortgagee becomes the purchaser of the mortgaged premises, he is entitled to receive the land in the same condition it was when he loaned the money for the manifest reason that he was satisfied with the security as it stood, otherwise, he would not have entered into the transaction. The law, however, declares that if improvements are put upon the mortgaged premises by the mortgagor or his assigns during the existence of the mortgage that by such act he is improving his own land, and such improvements strengthen the security and inure to the benefit of the mortgagee. In the case at bar, however, the improvements were put upon the land after the termination of the mortgage relationship, and nothing else appearing, natural justice does not presume that a former mortgagee should be enriched by the labor and money of an innocent third party. Obviously it must be determined whether the defendant was such innocent third party. A solution of this inquiry invokes a consideration of certain pertinent facts, to wit: (a) The defendant was a purchaser for value of the land, and had a deed for it duly recorded, which deed was regular upon its face and purported to convey the land in fee. (b) The defendant went into possession and made all the improvements claimed by him after the foreclosure of the deed of trust under which the plaintiff claims. (e) Evidence was offered that it was not within contemplation of the original parties that the defendant’s land should be included in the deed of trust. (d) The defendant was advised at the time of the purchase that a reputable attorney had theretofore examined the title to the property and found no spot or blemish upon it. (e) The defendant offered evidence that he had paid full value for the property. (f) The defendant offered evidence that he had reason to believe, and did believe, that he had a good title. The decisions in this jurisdiction shedding light upon the principles of law involved are Hallyburton v. Slagle, 132 N. C., 947, 44 S. E., 655; Pritchard v. Williams, 176 N. C., 108, 96 S. E., 733; Eaton v. Doub, 190 N. C., 14, 128 S. E., 494; Layton v. Byrd, 198 N. C., 466, 152 S. E., 161. While none of these cases are specifically in point, nevertheless they contain signboards marking out the highway along which the *18 law travels in determining whether the defendant is entitled to better-ments. The opinion in Pritchard v. Williams, supra, quoted with approval the following: “The good faith which will entitle to compensation for improvements has been defined to mean simply an honest belief of the occupant in his right or title, and the fact that diligence might have shown him that he had no title does not necessarily negative good faith in his occupancy.” The opinion proceeds: “There are many cases where it has been held that although aware of an adverse claim, the possessor may have reasonable and strong grounds to believe such claim to be destitute of any just or legal foundation, and so be a possessor in good faith, and as such entitled to compensation for improvements.” See, also, North Carolina Practice and Procedure, 860, et seq. As the Court interprets the applicable decisions, it holds the opinion that the defendant can maintain his petition, and, therefore, the judgment of nonsuit was inadvertently entered. Reversed.