STAUNTON MILITARY ACADEMY, Inc.
v.
J. S. DOCKERY, Trustee, David Lindsay, Julius E. Brown and wife, Vera E. Brown.
No. 25.
Supreme Court of North Carolina.
September 19, 1956.*356 Roy D. Davis, Marion, for plaintiff, appellant.
Proctor & Dameron, Marion, for defendants J. S. Dockery, Trustee, and David Lindsay, appellees.
BOBBITT, Justice.
The rules applicable in testing the sufficiency of the complaint are well settled and need not be repeated. G.S. § 1-151; Pressly v. Walker, 238 N.C. 732, 78 S.E.2d 920, and cases cited.
Absent special circumstances, a foreclosure sale by a trustee in a junior *357 deed of trust is made subject to prior liens on the property. The property was so conveyed to the trustee. He can sell and convey no better title than he acquired. Title vests in the purchaser subject to such prior liens. Bobbitt v. Stanton, 120 N.C. 253, 26 S.E. 817; Brett v. Davenport, 151 N.C. 56, 65 S.E. 611; Merchants Bank & Trust Co. v. Watson, 187 N.C. 107, 121 S.E. 181; 59 C.J.S., Mortgages §§ 514, 556; 37 Am.Jur., Mortgages sec. 760.
Nothing appears in the complaint to take the foreclosure sale made by defendant J.S. Dockery, Trustee, out of the general rule. On the contrary, it is expressly alleged that the property was advertised and announcement was made that the property was offered for sale subject to the four prior deeds of trust.
On the facts alleged, the duty of defendant J. S. Dockery, Trustee, was to pay the surplus of $44,252.93 to the owners of the equity of redemption or to discharge junior liens, as the facts required. Bobbitt v. Stanton, supra. Defendant J. S. Dockery, Trustee, had actual notice of plaintiff's claim and lien before he disbursed said surplus. This distinguishes this case from cases where the trustee disbursed the surplus to the owner of the equity of redemption prior to actual notice of the junior lien. Skinner v. Coward, 197 N.C. 466, 149 S.E. 682; Barrett v. Barnes, 186 N.C. 154, 158, 119 S.E. 194; Norman v. Hallsey, 132 N.C. 6, 43 S.E. 473.
When adverse claims were asserted, defendant J. S. Dockery, Trustee, might have discharged his liability by paying said surplus to the clerk of the Superior Court of McDowell County under authority of G.S.§ 45-21.31 (b)(4). On the facts alleged, he elected to make payment thereof at his own risk in discharge of the debts secured by the four prior deeds of trust. Lenoir County v. Outlaw, 241 N.C. 97, 84 S.E.2d 330.
True, the complaint contains no explicit allegation that defendant J. S. Dockery, Trustee, paid any portion of said surplus to defendant Lindsay. However, plaintiff's allegations, when liberally construed, are deemed sufficient to permit the inference that some portion of the $44,252.93 "devoted * * * to the discharge of the five deeds of trust outstanding against said property, * * *" was paid to defendant Lindsay as cestui que trust in three of the four deeds of trust prior in lien to that foreclosed.
If, as contended by appellees, Freeman paid full value for the property with the understanding that the purchase price of $45,500 would be disbursed in payment of the debts secured by the four prior deeds of trust, the obvious answer is that nothing of this sort appears in the complaint. Nor are we now concerned with Freeman's rights, if any, to rescind or set aside the sale. Compare Bobbitt v. Stanton, supra; Mayer v. Adrian, 77 N.C. 83.
On the facts alleged, nothing else appearing, defendant J. S. Dockery, Trustee, is liable for failure to pay plaintiff's claim and lien out of said surplus, and defendant Lindsay is also liable to the extent of the amount of said surplus paid to him by defendant J. S. Dockery, Trustee, up to the full amount of plaintiff's claim and lien. The liability of defendant Lindsay is predicated on the ground, that he received and has money belonging to plaintiff. Allgood v. Wilmington Savings & Trust Co., 242 N.C. 506, 508, 88 S.E.2d 825, and cases cited.
While no specific ruling was made, failure to dismiss the action implies that the court below rejected the demurrers as related to misjoinder of parties and causes of action. We concur in this view.
Apparently, J. S. Dockery, individually, was not made a party defendant herein.
Based upon the foregoing, the judgment of the court below sustaining the demurrers for failure to allege facts sufficient to constitute a cause of action for the recovery of money against defendants herein is reversed. *358 Such reversal supersedes all further provisions of said judgment inconsistent with the law as stated herein.
Reversed.
JOHNSON, J., not sitting.