Swindell v. Overton

302 S.E.2d 841 (1983)

Roger SWINDELL and Wife Betty L. Swindell
v.
Larry OVERTON, Substitute Trustee, Thomas Edison Cahoon and wife, Julia Jones Cahoon, Walter G. Credle and wife, Donna S. Credle.

No. 822SC283.

Court of Appeals of North Carolina.

May 17, 1983.

J. Michael Weeks, P.A. by William H. Bingham, Jr., Zebulon, for plaintiffs-appellants.

Cherry, Cherry & Flythe by Thomas L. Cherry and Joseph J. Flythe, Ahoskie, for defendant-appellee Overton.

Geo. Thomas Davis, Jr., Davis & Davis, Swan Quarter, for defendants-appellees Credle.

Taylor & McLean by Mitchell S. McLean, Ahoskie, for defendants-appellees Cahoon.

WELLS, Judge.

Although not raised by appellees, the first issue we must address is whether this appeal is premature. G.S. 1A-1, Rule 54(b) of the Rules of Civil Procedure provides:

Judgment upon multiple claims or involving multiple parties.—

When more than one claim for relief is presented in an action, whether as a claim, counterclaim, crossclaim, or third-party claim, or when multiple parties are involved, the court may enter a final judgment as to one or more but fewer than all of the claims or parties only if there is no just reason for delay and it is so determined in the judgment. Such judgment shall then be subject to review by appeal or as otherwise provided by these rules or other statutes. In the absence of entry of such a final judgment, any order or other form of decision, however designated, which adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties shall not terminate the action as to any of the claims or parties and shall not then be subject to review either by appeal or otherwise except as expressly provided by these rules or other statutes. Similarly, in the absence of entry of such a final judgment, any order or other form of decision is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties.

In his judgments, Judge Peel did not state that there was no just reason for delay, and thus "certify" his judgments as final and ripe for appellate review. We hold, however, that under the decisions of our Supreme Court in Bernick v. Jurden, 306 N.C. 435, 293 S.E.2d 405 (1982), and Oestreicher v. Stores, 290 N.C. 118, 225 S.E.2d 797 (1976), plaintiffs had a right pursuant to G.S. 1-277 and 7A-27(d) to have all of their claims in this action heard by the same judge and jury. We, therefore, proceed to consider the merits of plaintiffs' appeal.

While plaintiffs' claims were disposed of by way of summary judgment, we note that some of the facts essential to our decision—that both of the tracts of land were sold together in one sale; that two upset bids were filed, with defendant Walter G. Credle eventually submitting the highest bid; and that an Assistant Clerk of Superior Court for Hyde County confirmed the sale to Walter G. Credle—are not in dispute. It is well-settled that summary judgment is only proper when the undisputed facts warrant judgment as a matter of law. Lowe v. Bradford, 305 N.C. 366, 289 S.E.2d 363 (1982). It is in light of the foregoing that we review the judgments rendered by Judge Peel.

The second issue we address is whether plaintiffs are entitled to pursue injunctive relief in this action. We answer that issue against plaintiffs.

G.S. 45-21.34 provides, in pertinent part, that "[a]ny owner of real estate ... may apply to a judge of the superior court, prior to the confirmation of any sale of such real estate by a ... trustee ... authorized to sell the same, to enjoin such sale or the confirmation thereof, upon the ground that the amount bid or price offered therefore is inadequate and inequitable and will result in irreparable damage to the owner ..., or upon any other legal or equitable ground which the court may deem sufficient ...." (Emphasis supplied).

G.S. 45-21.35 provides, in pertinent part, that "[t]he court or judge granting such order or injunction, ... shall have the right before, but not after, any sale is confirmed to order a resale ...." (Emphasis supplied).

These foregoing statutory provisions must be considered in para materia with G.S. 1A-1, Rules 2, 3, and 65 of the Rules of Civil Procedure. Rule 2 provides, in summary, that there shall be but one form of action to be known as a civil action. Rule 3 provides, in summary, that a civil action is commenced by filing a complaint, or by the issuance of a summons under certain conditions not applicable to this case. The provisions of Rule 65 clearly imply that injunctive relief is available only in pending civil actions. See Shuford, N.C. Practice and Procedure (2nd ed.) § 65-6. The record before this court clearly indicates that the Clerk's Order of Confirmation was entered at 9:45 a.m. on 29 October 1980, and that plaintiffs did not file their complaint until 1:48 p.m. on that date. When plaintiffs filed their motion for an injunction at 9:30 a.m. on that date, this action had not been commenced and Judge Brown, therefore, was without jurisdiction to hear plaintiffs' motion or to enter his initial order, which was entered at 10:30 a.m. on that date. See Freight Carriers v. Teamsters Local, 11 N.C.App. 159, 180 S.E.2d 461, cert. denied, 278 N.C. 701, 181 S.E.2d 601 (1971); see also In re Watts, 38 N.C.App. 90, 247 S.E.2d 427 (1978); Swenson v. Assurance Co., 33 N.C.App. 458, 235 S.E.2d 793 (1977). We hold that for the Clerk's jurisdiction in a foreclosure to be divested and jurisdiction to vest in the superior court to consider injunctive relief under G.S. 45-21.34, the action seeking injunctive relief must be actually commenced prior to any order of confirmation entered by the Clerk. Once the Clerk's Order of Confirmation is entered, an action for injunctive relief will not lie, and Judge Brown, in his order of 3 November 1980, therefore, correctly concluded that he was without jurisdiction to enjoin the Clerk's Order of Confirmation. Judge Peel, therefore, correctly entered summary judgment for defendants Overton, Cahoon and Credle as to plaintiffs' right to injunctive relief, and we therefore affirm Judge Peel's judgment in that respect.

The next issue we address is whether defendant Overton, acting as substitute trustee, breached his fiduciary duty to plaintiffs by selling the two separately indentured tracts of land in one sale. On this issue, we are persuaded that the materials before Judge Peel raised genuine issues of material fact as to the manner of notice and sale and resulting injury or damage to plaintiffs. G.S. 1A-1, Rule 56(b) of the Rules of Civil Procedure. In their first claim for relief in their amended complaint, plaintiffs alleged the existence of the two separate initial debts and two separate deeds of trust on the two separate tracts of land. The affidavits before Judge Peel show that these facts are not in dispute. Plaintiffs also alleged that the two separate tracts were foreclosed in one proceeding, noticed for sale together in all notices of sale, and actually offered for sale and sold together at each sale by defendant Overton. These facts are not in dispute. Plaintiffs further alleged that they had requested that defendant Overton request separate bids, that the highest or final bid, confirmed by the Clerk, was in the amount of $47,980.00, while the fair market value of the lands sold was in excess of $70,000.00, and that they were damaged by defendant Overton's failure to fulfill his duties as trustee. In his affidavit in support of his motion for summary judgment, defendant Overton stated that the sale price of $47,980.00 reflected the fair market value of the lands sold and set out facts and circumstances to support that opinion. In response to Overton's motion, plaintiffs offered the affidavit of Larry W. Windley, a licensed real estate broker experienced in the valuation, listing, and sale of real property in Hyde County, who estimated the fair market value of plaintiffs' two tracts of land to be $70,000.00. Thus, the materials before Judge Peel reflect a genuine material issue of fact as to the fair market value of the property sold.

While our Courts have consistently held that inadequacy of sale price alone is not sufficient grounds to attack or overturn a foreclosure under a power of sale, such inadequacy of sale price, coupled with any other irregularity or inequitable element, constitutes grounds for relief. See Foust v. Loan Assoc., 233 N.C. 35, 62 S.E.2d 521 (1950), and cases cited therein; Sloop v. London, 27 N.C.App. 516, 219 S.E.2d 502 (1975). The dispositive question, therefore, is whether defendant Overton's conduct of the sale at issue in this case was irregular or inequitable as to plaintiffs. In Mills v. Building and Loan Assoc., 216 N.C. 664, 6 S.E.2d 549 (1940), Justice Barnhill (later Chief Justice), speaking for our Supreme Court, stated the duties and obligations of a trustee under a deed of trust as follows:

That it is inequitable to permit a mortgagee to purchase the mortgagor's equity of redemption apparently was first declared (inferentially) by this Court in Lee v. Pearce, 68 N.C. 76, and in express terms in Whitehead v. Hellen [76 N.C. 99], supra. The principle was fully discussed and reaffirmed in McLeod v. Bullard [84 N.C. 515], supra.

The restrictions upon the creditor in respect to the security when the conveyance was made directly to him in the form of a mortgage brought about the creation of deeds of trust as a more acceptable form of conveying real property for security. This form of security has now come into general and, in some instances, universal use.... When a sale is had under power in this form of security the creditor may bid at the sale, ... for, by the intervention of a disinterested third party, the opportunity for oppression is removed.

The object of deeds of trust is, by means of the introduction of trustees as impartial agents of the creditor and debtor alike, to provide a convenient, cheap and speedy mode of satisfying debts on default of payment; to assure fair dealing and eliminate the opportunity for oppression; to remove the necessity of the intervention of the courts; and to facilitate the transfer of the note or notes secured without the necessity for a similar transfer of the security.

The relaxation of the strict rules equity imposes upon the mortgagor in relation to deeds of trust is predicated upon the theory that the trustee is a disinterested third party acting as agent both of the debtor and of the creditor, thus removing any opportunity for oppression by the creditor and assuring fair treatment to the debtor. He is trustee for both debtor and creditor with respect to the property conveyed. A creditor can exercise no power over his debtor with respect to such property because of its conveyance to the trustee with power to sell upon default of the debtor....

The trustee for sale is bound by his office to bring the estate to a sale under every possible advantage to the debtor as well as to the creditor.... and he is bound to use not only good faith but also every requisite degree of diligence in conducting the sale and to attend equally to the interest of the debtor and the creditor alike, apprising both of the intention of selling, that each may take the means to procure an advantageous sale.... He is charged with the duty of fidelity as well as impartiality, of good faith and every requisite degree of diligence, of making due advertisement and giving due notice.... Upon default his duties are rendered responsible, critical and active and he is required to act discreetly, as well as judiciously, in making the best use of the security for the protection of the beneficiaries. (cites omitted).

See also Sloop v. London, supra.

The irregularity or inequitable action asserted by plaintiffs was the notice, advertisement, sale, and resale of plaintiffs' two separately indentured tracts of land together. Our careful review of the entire statutory scheme relating to foreclosures under a power of sale, see Article 2A of Chapter 45 of the General Statutes, persuades us that sales of separately indentured properties must be separately conducted, in order to (1) maximize the potential value of each tract; (2) to facilitate the debtor's opportunity to satisfy each separate debt before sale is completed; (3) to properly allow upset bids on each separate property; and (4) to properly apply the proceeds from each sale, including the surplus, if any. The forecast of evidence before Judge Peel clearly established that defendant Overton noticed, advertised and sold the properties together, in one offering. We hold that this constituted a breach of his fiduciary duty to plaintiffs.

Defendant Overton contends that the execution by plaintiffs of the 14 October 1978 note to defendants Cahoon had the effect of combining the two deeds of trust so as to allow a single foreclosure sale. We disagree. Neither do we agree with Overton's argument that our Supreme Court's opinion in Dillingham v. Gardner, 219 N.C. 227, 13 S.E.2d 478 (1941), furnishes the blessing Overton seeks for his single sale. In Dillingham, the properties in the two deeds of trust were just separately offered for sale, then sold together for a higher combined price. The Court stated:

While the offering of the properties in the two deeds of trust together was unusual, no prejudice was thereby created against the plaintiff, but, on the contrary, this proceeding inured to its benefit rather than to its detriment in that the amount realized thereby was increased by $200.00, and the amount thereof, $2,200.00, was within $4.00 of the total amount due on both notes, $2,204.00.

For the reasons stated, we must reverse the trial court's entry of summary judgment for defendant Overton as to plaintiffs' claim for relief for breach of fiduciary duty and remand for trial on this claim.^[1]

We next address plaintiffs' claim for relief against defendants Credle, who were the purchasers at the final sale. Because we have held that the trustee's final sale to the Credles was validly confirmed and may not be set aside, plaintiffs' claim for conversion of their soybean crop must fall. The long-standing rule in North Carolina is that the purchaser at a foreclosure sale is entitled to crops unsevered at the time of the delivery of the deed by the trustee. Collins v. Bass, 198 N.C. 99, 150 S.E. 706 (1929); see also Price v. Davis, 208 N.C. 75, 179 S.E. 1 (1935). While this rule, on the surface, may seem harsh, and may, under some circumstances, result in significant losses to farm debtors, we find no basis in the decisional law of this State to hold to the contrary. All of the materials before Judge Peel show that plaintiffs' soybean crop had not been harvested on 3 November 1980, the date the trustee's deed was delivered to the Credles. There being no factual dispute on these matters, defendants Credle were entitled to judgment as a matter of law, and to summary judgment on plaintiffs' second claim for conversion.

We have examined plaintiffs' other assignments of error and find them to be without merit.

Finally, we address defendant Overton's cross-assignment of error to the trial court's granting plaintiffs' motion to amend their complaint. G.S. 1A-1, Rule 15(a) of the Rules of Civil Procedure provides that leave to amend pleadings shall "be freely given when justice so requires." The ruling on such a motion is in the discretion of the trial court; and the objecting party must show that he will be prejudiced if the motion is allowed. See Rogers v. Rogers, 39 N.C.App. 635, 251 S.E.2d 663 (1979) and cases cited therein; Public Relations, Inc. v. Enterprises, Inc., 36 N.C.App. 673, 245 S.E.2d 782 (1978). Defendant Overton has not shown any prejudice by this action of the trial court, there was no abuse of discretion, and this cross-assignment is overruled.

The results are:

As to the trial court's granting of summary judgment against plaintiffs on plaintiffs' claim to set aside the Clerk's confirmation of sale,

Affirmed.

As to the trial court's granting defendant Overton's motion for summary judgment as to plaintiffs' claim for damages for breach of fiduciary duty,

Reversed.

As to the trial court's granting summary judgment on plaintiffs' claim against defendants Credle for conversion of crops,

Affirmed.

As to the trial court's allowing plaintiffs' motion to amend their complaint,

Affirmed.

In all other respects, the judgment entered by Judge Peel are

Affirmed.

VAUGHN, C.J., and BRASWELL, J., concur.

NOTES

[1] Although plaintiffs also argue that defendant Overton failed to properly advertise and post notice of the sales, defendant Overton's affidavit clearly establishes compliance with the statutory requirements, see G.S. 45-21.17, which were the requirements incorporated into the deeds of trust. Plaintiffs have not rebutted this showing, and it therefore appears that the issue of proper notice and advertising has been settled in defendant Overton's favor.