Allied Mortgage & Development Co. v. Pitts , 272 N.C. 196 ( 1967 )

Higgins, J.

The demurrers were sustained because of failure of the complaint to allege facts sufficient to constitute any cause of action. In passing on a demurrer, the trial court in the first instance, and this Court upon appeal, must accept as true all facts properly pleaded. Kuykendall v. Proctor, 270 N.C. 510, 155 S.E. 2d 293. If, when liberally construed, a complaint alleges facts sufficient to constitute a cause of action, it may not be upset by demurrer. Belmany v. Overton, 270 N.C. 400, 154 S.E. 2d 538. A demurrer does not admit the legal conclusions of the pleader, and if such conclusions are required to make out a case, the complaint is deficient in factual averments and the demurrer should be sustained. Wright v. Casualty Co., 270 N.C. 577, 155 S.E. 2d 100; Freel v. Center, Inc., 255 N.C. 345, 121 S.E. 2d 562; Broadway v. Asheboro, 250 N.C. 232, 108 S.E. 2d 441.

The complaint before us alleges the defendants conspired to defraud the plaintiff and to defeat the collection of its debts by causing the sale of its security under a prior deed of trust on which was due only $67. The defendant Pitts, who bought the note secured by the first deed of trust, and the makers of that note, were good friends. The complaint alleges there was a balance due. The Trustee advertised and at the sale announced a bid of $91.42 made by Pitts. No other bids were made. Seventeen days elapsed and no advance bid was filed and no objections were made. The Trustee executed a deed to Pitts as purchaser. The deed was recorded in Randolph County where the lots are situated. This occurred 2 years and 9 months before the plaintiff acquired the note from the Allied Investment Company according to the plaintiff’s allegations.

Admittedly, the amount due on the Reavis note was small. Nevertheless, full payment was in default. This gave Pitts, the holder of the note, the legal right to demand foreclosure. Upon demand, it became the legal duty of the Trustee, Mattocks, to advertise and sell. After advertisement and before sale, Pitts filed with the Trustee a bid of $91.42. This was proper procedure so long as the Trustee was not acting as the agent of Pitts but was performing the duties of his trust. Elkes v. Trustee Corp., 209 N.C. 832, 184 S.E. 826; Denson v. Davis, 256 N.C. 658, 124 S.E. 2d 827. The Trustee announced Pitts’ bid and when no others were made, he declared Pitts the purchaser. Seventeen days after the sale, the Trustee executed the deed, which was promptly recorded.

The foregoing facts are alleged in the complaint. On inquiry by the Court during oral argument, counsel for the plaintiff advised that no improper conduct was chargeable to Mattocks. He, as Trustee, was the principal actor in the sale. He is not a party to the action. When wrongful conduct is not charged against the Trustee, and it being alleged in the complaint he acted under the power in a recorded first mortgage which secured a debt then in default, advertised and sold the property covered by the first lien, and executed a deed to the purchaser, that deed may not be set aside without allegations of facts which will permit a legitimate inference that the sale and deed made pursuant thereto were fraudulent and the trustors were parties to the fraud.

If the makers of both notes had bought, or if facts alleged showing or permitting the legitimate inference Pitts bought for them, and not for himself, a different question would be presented. Facts and not conclusions must be alleged. The complaint is deficient in this respect. Inadequacy of consideration, standing alone, is not sufficient to justify setting aside a foreclosure sale. Products Corp. v. Sanders, 264 N.C. 234, 141 S.E. 2d 329; Roberson v. Matthews, 200 N.C. 241, 156 S.E. 496.

A junior mortgagee (or beneficiary in a junior deed of trust) has a number of remedies to which he may resort in order to protect his security. At any time prior to foreclosure, he may pay off the prior obligation. Broadhurst v. Brooks, 184 N.C. 123, 113 S.E. 576. At the foreclosure sale under the prior lien, he may bid on the property or see that the sale brings enough to protect him after discharging the prior lien. King v. Lewis, 221 N.C. 315, 20 S.E. 2d 305. Following foreclosure, he may, within 10 days, enter an upsetting bid and cause a resale. G.S. 45-21.27.

At the time Mattocks, Trustee, made the sale in April, 1964, the plaintiff failed to avail itself of any of its legal remedies. It now seeks to invoke an equitable remedy. In a court of equity, the plaintiff stands on slippery ground due to the fact it acquired the note more than 2% years after the records of Randolph County gave notice that the security for its note had been sold under a prior lien. The plaintiff was put on constructive notice that it was acquiring an unsecured note. The defendants Rush and wife admit the execution and that the note has not been paid. On this admission, the plaintiff appears to be entitled to a judgment against the makers. For the reason assigned, the judgment of the Superior Court sustaining the demurrers is

Affirmed.