Thompson v. Pilot Life Insurance

67 S.E.2d 444 (1951) 234 N.C. 434

THOMPSON et al.
v.
PILOT LIFE INS. CO. et al.

No. 234.

Supreme Court of North Carolina.

November 7, 1951.

James N. Smith, Goldsboro, for plaintiffs-appellants.

Charles P. Gaylor and J. Faison Thomson, Goldsboro, for defendant-appellee.

VALENTINE, Justice.

This is not an action to recover from the estate of J. H. Gardner a balance due upon the indebtedness secured by the deed of trust, but is an action to establish the rights of the parties with respect to the proceeds of a life insurance policy assigned by J. H. Gardner to B. G. Thompson as security for the debt. Therefore, the statutory principle of law regulating the recovery of deficiency judgments, G.S. § 45-21.36, has no application here.

The controversy is between the plaintiffs and the defendant, Ezra S. Pate, executor of J. H. Gardner. There is no dispute with the defendant, Pilot Life Insurance Company. Hence, the appellation "defendant" is hereafter used to designate only the defendant, Ezra S. Pate, executor of J. H. Gardner.

The policy of insurance was properly and lawfully assigned to B. G. Thompson by the insured as additional security for the loan. No insurable interest was necessary. He had a right to pay the premiums on the policy in order to keep it in force and protect his rights. McNeal v. Life & Casualty Insurance Co., 192 N.C. 450, 135 S.E. 300.

Plaintiffs' motion to strike draws into question the validity of defendant's cross action as it relates to the alleged wrongful taking of title to the land, receipt of rents and profits therefrom, and the payment of premiums on the insurance policy. This appeal challenges the correctness of his Honor's action in over-ruling plaintiffs' motion.

We must, therefore, consider whether the challenged allegations set up facts sufficiently related to the transactions involved in the original loan to bring the cross action within the purview of G.S. § 1-137.

"The language of G.S. § 1-123, subd. 1, relating to causes which may be joined in the same action, and G.S. § 1-137, subd. 1, defining causes of action which may be pleaded as counterclaims, is substantially the same. The purpose and intent of each is to permit the trial in one action of all causes of action arising out of any one contract or transaction.

"Whether joined in the complaint with another cause of action or pleaded as a cross action, the claim must arise out of the contract or transaction sued upon by plaintiff or it must be connected with the same subject of action. Hence, decision on the one is authority on the other. * * it must appear that there is but one subject of controversy." Hancammon v. Carr, 229 N.C. 52, 47 S.E.2d 614 615, and authorities cited.

The cross action must be so related to the matters alleged in the complaint that an adjustment of both is necessary to a full determination of the controversy. Schnepp v. Richardson, 222 N.C. 228, 22 S.E.2d 555.

"To be connected with the subject of the action `the connection of the case asserted in the counterclaim and the subject of the action must be immediate and direct, and presumably contemplated by the parties'. * * * The connection must be immediate and direct. A remote, uncertain, partial connection is not enough to satisfy the requirements of the statute * * * the connection must be such that the parties could be supposed to have foreseen and contemplated it in their mutual acts; in other words, that the parties must be assumed to have had this connection and its consequences in view when they dealt with each other." Hancammon v. Carr, supra. There must also be a mutuality of parties. Hoyle v. Carter, 215 N.C. 90, 1 S.E.2d 93.

The transaction giving rise to plaintiffs' cause of action transpired at the time the loan was made and the policy of insurance assigned. The matter about which the defendant complains in his cross action occurred long after the transactions by which the original debt was created, and is bottomed upon subsequent wrongs charged against the plaintiffs and their testator. Hence, the alleged wrong committed by the plaintiffs in respect to the deed of trust and its foreclosure is not so related to the rights of the plaintiffs arising upon the assignment of the insurance policy as to bring defendant's claim within the purview of the statute.

It must be borne in mind that upon the death of the owner, title to his real estate vests in his heirs at law and not in his executor or administrator. If the foreclosure of the deed of trust was voidable, as hinted in defendant's cross action, this question could be raised only in a suit by the heirs at law of J. H. Gardner. Council v. Greensboro Joint Stock Land Bank, 213 N.C. 329, 196 S.E. 483; Smith v. Greensboro Joint Stock Land Bank, 213 N.C. 343, 196 S.E. 481. On this question the Court has said: "The sale of the mortgagee (i. e., the sale under the power in the mortgage by the mortgagee to himself) is not void, but only voidable, and can be avoided only by the mortgagor or his heirs or assigns." Joyner v. Farmer, 78 N.C. 196; Shuford v. Greensboro Joint Stock Land Bank, 207 N.C. 428, 177 S.E. 408; Peedin v. Oliver, 222 N.C. 665, 24 S.E.2d 519, and cases cited.

Thus it appears that if defendant's further defense be treated as a cross action, the alleged cause of action rests in the heirs at law of defendant's testator, and, if considered as an offset, nothing could be due for rents and profits until the foreclosure deed is first vacated. So long as this deed is unassailed by those having a right to attack it, the purchaser may not be treated as a mortgagee in possession and required to account for rents and profits.

There is, therefore, in this case a lack of sufficient mutuality of parties and of direct and immediate connection between the cause of action of the plaintiffs and the cross action of the defendant. The matters contained in the further answer of the defendant and challenged by plaintiffs' motion do not constitute a defense to the cause of action alleged in the complaint and should have been stricken as irrelevant, immaterial and prejudicial matter. First Carolina's Joint-Stock Land Bank v. Stewart, 208 N.C. 139, 179 S.E. 463.

The judgment of the court below is reversed.