Chandler v. CLEVELAND SAVINGS AND LOAN ASS'N

211 S.E.2d 484 (1975) 24 N.C. App. 455

Marshall CHANDLER and Austiene Chandler
v.
CLEVELAND SAVINGS AND LOAN ASSOCIATION.

No. 7427SC712.

Court of Appeals of North Carolina.

February 5, 1975.

Mullen, Holland & Harrell, P.A. by Graham C. Mullen, Gastonia, for plaintiff appellants.

Hamrick & Hobbs by L. L. Hobbs, Shelby, for defendant appellee.

PARKER, Judge.

When a mortgage or deed of trust is wrongfully foreclosed, the injured mortgagor who elects not to ratify the sale may either (1) treat the sale as a nullity and sue to set it aside, or (2) permit the sale to stand and sue the mortgagee to recover damages suffered as a result of the wrongful foreclosure. Smith v. Land Bank, 213 N.C. 343, 196 S.E. 481 (1938); Burnett v. Supply Co., 180 N.C. 117, 104 S.E. 137 (1920); 55 Am.Jur.2d, Mortgages, § 535; 5 Strong, N.C. Index 2d, Mortgages and Deeds of Trust, § 37. In the present case, plaintiffs have elected to pursue the second remedy.

In the light of the above statement of applicable legal principles, we first examine defendant's contention, which was adopted by the trial court as one of the bases upon which it rested its judgment, that plaintiffs' failure to assert their claim in the prior summary ejectment proceeding now bars and estops them from doing so in the present action. Determination of this question requires that we examine the nature of the summary ejectment proceeding and the laws applicable thereto.

The remedy by summary proceedings in ejectment is provided for in G.S. Chap. 42, which deals with the rights and remedies as between landlord and tenant, and is restricted to those cases expressly provided for by G.S. 42-26. Morris v. Austraw, 269 N.C. 218, 152 S.E.2d 155 (1967). Under our former practice, when the remedy of summary ejectment was obtained in a proceeding before a justice of the peace, in the absence of an allegation that the relationship of landlord and tenant existed between the parties and that the tenant was holding over, it was held that the justice of the peace was without jurisdiction, and on appeal, "[t]he jurisdiction of the Superior Court was derivative only and was limited to the powers which the justice of the peace could have exercised." Howell v. Branson, 226 N.C. 264, 265, 37 S.E.2d 687, 688 (1946). In a case in which a mortgagor retained possession after foreclosure of the deed of trust and refused to surrender possession after demand by the mortgagee and by the purchaser at the foreclosure sale, our Supreme Court held that the relationship of landlord and tenant did not exist between the parties within the meaning of the summary ejectment statute and that in such case the remedy was not available. McCombs v. Wallace, 66 N.C. 481 (1872).

Following the adoption of the 1962 amendment by which Article IV of our State Constitution was rewritten, and since the enactment of statutes implementary thereto, the remedy of summary ejectment provided for by G.S. § 42-26 et seq. may now be obtained in a small claim action heard by a magistrate. G.S. § 7A-210. A magistrate is an officer of the district court, G.S. § 7A-170, and the judgment of the magistrate in a civil action assigned to him by the chief district judge is the judgment of the district court. G.S. § 7A-212. Therefore, under our present practice when the remedy of summary ejectment is sought, the allegation that the relationship of landlord and tenant exists between the parties is no longer necessary as a jurisdictional matter. Nevertheless, it is still necessary to show that the relationship exists in order to bring the case within the provisions of G.S. § 42-26 before the remedy may be properly granted.

In the present case, when, in November 1971, the defendant brought the summary ejectment proceeding against the present plaintiffs, the case was assigned to the magistrate as a small claim action. As such, the practice and procedure provided for small claim actions generally were to be observed. G.S. § 7A-223. Among the applicable statutes governing procedure in small claim actions generally was G.S. § 7A-219 which, in 1971, read as follows:

"§ 7A-219. Certain counterclaims; cross-claims; third-party claims not permissible. — No counterclaim, cross-claim or third party claim which would make the amount in controversy exceed three hundred dollars ($300.00) is permissible in a small claim action assigned to a magistrate. No determination of fact or law in an assigned small claim action estops a party thereto in any subsequent action which, except for this section, might have been asserted under the Code of Civil Procedure as a counterclaim in the small claim action."

(Effective 1 July 1974 G.S. § 7A-219 was amended to substitute "five hundred dollars ($500.00)" for "three hundred dollars ($300.00)" in the first sentence.)

By reason of the express language of G.S. § 7A-219, even if plaintiffs' present claim be considered to be a compulsory counterclaim, as defendant now contends it should, which by reason of Rule 13 of the Rules of Civil Procedure plaintiffs would have been required to plead had the ejectment proceeding been brought otherwise than as a small claim action, plaintiffs could not have asserted it in the small claim action which was brought and they are not now estopped from doing so in the present action. It is true that plaintiffs could have attacked defendant's title in the summary ejectment action and if they had done so the action would have been placed on the civil issue docket of the district court division for trial before a district judge. G.S. § 7A-223. However, as above noted, plaintiffs had a choice of remedies, and while they might have elected to attack defendant's title derived through the foreclosure proceeding, they were not required to do so. They were free to pursue the alternate remedy of seeking damages for the wrongful foreclosure, and we see no inconsistency between plaintiffs' present position in so doing and their prior position in permitting judgment by default to be taken against them in the summary ejectment proceeding. We hold that plaintiffs are not estopped by reason of the prior action and judgment from presently asserting their claim and that the summary judgment dismissing plaintiffs' action cannot be sustained on that ground.

Turning to the other grounds upon which defendant's motion for summary judgment was allowed, we note that a comparison of the facts as disclosed by the oral testimony of defendant's President offered in support of the motion and the facts as set forth in plaintiffs' affidavits offered in opposition thereto reveals the existence of genuine issues as to material facts. For example, such comparison reveals that a genuine issue of fact exists between the parties as to whether the loan was in default when, according to plaintiffs' affidavits, the feme plaintiff tendered payment of the monthly installment due in July 1971 and such payment was rejected by defendant, and even as to whether such tender was in fact made. In view of the existence of genuine issues between the parties as to material facts, defendant's motion for summary judgment should have been denied.

In passing, we note that although Rule 43(e) of the Rules of Civil Procedure does permit the court to hear oral testimony in ruling upon a motion for summary judgment, "[t]his procedure should normally be utilized only if a small link of evidence is needed, and not for a long drawn out hearing to determine whether there is to be a trial." 6 Moore's Federal Practice, 2d Ed., § 56.02 [9], p. 2042. In discussing the use of oral testimony at a hearing on a motion for summary judgment, the same treatise points out that receiving evidence at the hearing, as distinguished from considering supporting affidavits or depositions which are normally required to be filed before the hearing,

"may not give the other party a fair opportunity to rebut; and this is particularly important in the case of the party opposing the motion for summary judgment.

"Also the summary judgment procedure is apt to be wasteful and burdensome if the summary judgment hearing is a protracted hearing, in effect a trial, to determine that a trial must be held." 6 Moore's Federal Practice, 2d Ed., § 56.11 [8], p. 2206.

We find these comments particularly pertinent to the present case.

The judgment allowing defendant's motion for summary judgment is reversed and this case is remanded for trial.

Reversed and remanded.

BROCK, C. J., and MARTIN, J., concur.