Redic v. Mechanics & Farmers Bank , 241 N.C. 152 ( 1954 )

Barnhill, C. J.

For some undisclosed reason plaintiff prays cancellation of the tax foreclosure deed. But whether plaintiff has stated a cause of action does not depend upon the validity or invalidity of the tax foreclosure deed. The quality of the estate it conveyed to Gibson, and through him to the defendant Bank, is the determinative factor.

The holder of a note secured by deed of trust on real property has the right to purchase the encumbered land at a sale had in a tax foreclosure proceeding. When the creditor is a bank entrusted with the investment of the money of its depositors, it may well be said that it is its duty to appear at such sales and, if necessary to protect the best interests of its depositors, bid tberefor whatever in its best judgment is necessary to that end.

Here there was no relationship whatsoever between the defendant Bank and the commissioner appointed to make sale in the tax foreclosure proceeding which placed the obligation on the Bank to purchase the land for the use and benefit of plaintiff. The commissioner was making sale in foreclosure of a senior lien, and the Bank was the holder of a junior encumbrance the value of which might be completely destroyed by the tax foreclosure sale. Nothing in connection with this bare relationship could possibly create an obligation on the part of the Bank to purchase the land at said sale for the use and benefit of its debtor- Its first duty was to protect its depositors.

In any event, plaintiff does not rely upon the existence of a relationship between the commissioner to make sale and the defendants which created a fiduciary relation between the two. The cause of action he conceives exists in his favor against the defendants is made to rest upon the provisions of the paragraph contained in the trust deed to McDougald quoted in the foregoing statement of facts, granting the trustee the right “immediately before any foreclosure proceedings whether in court or by advertising” to enter upon the premises and “collect the rents and income from the property and apply the same to the payment of taxes, insurance premiums, assessments and the principal and interest of the obligation” secured thereby, and the provisions of Gr.S. 105-409 vesting in the holder of a lien upon real property the right to pay the taxes assessed against the mortgagor to the extent they are a lien upon the property. He takes the position that they created a positive obligation on the part of defendant Bank to pay the taxes due by plaintiff on the locus and thereby avoid the tax foreclosure sale. He alleges in effect that the defendant Bank breached this duty and instead appeared at the foreclosure sale through its agent and purchased the land for its own use and benefit. His alleged cause of action is grounded upon the assumption that by reason of this alleged breach of trust, equity will impress a trust upon the title thus acquired by defendant for his use and benefit. But this assumption is not well founded.

The provision in the trust deed was for the protection of the creditor. It created a right, but imposed no duty. Furthermore, as there had been no default at that time, and no foreclosure of the trust deed “in court or by advertising” was ever begun, the right of entry to collect the rents and profits had not accrued at the time plaintiff was divested of his equity of redemption by the tax foreclosure deed.

Likewise, G-.S. 105-409 was enacted for the benefit and protection of the holders of notes and bonds secured by a trust deed or mortgage on real property. It vests them with the right, at their election, to pay taxes due on their security without being charged with having made a voluntary payment and creates a lien on the property in their behalf as security for the payment of the amount thus expended by the creditor to pay the taxes due by his debtor.

The defendants did not owe the plaintiff the duty to pay his taxes assessed against his property. Their failure so to do created no equity in favor of plaintiff which may be made the basis of an action to impress a trust upon the title of the defendants in favor of plaintiff. As they did not take possession of the property and begin collecting the rents and profits until after plaintiff had been divested of any interest in the land, plaintiff is not entitled to an accounting.

The decisions cited and relied on by plaintiff are not in point. They are clearly distinguishable.

Since the allegations contained in the complaint constitute a statement of a defective cause of action rather than a defective statement of a good cause, Davis v. Rhodes, 231 N.C. 71, 56 S.E. 2d 43; Scott v. Veneer Co., 240 N.C. 73; Mills v. Richardson, 240 N.C. 187, the judgment sustaining the demurrer and dismissing the action must be

Affirmed.