Cauble v. . Trexler

42 S.E.2d 77, 227 N.C. 307, 1947 N.C. LEXIS 406

• Court: Supreme Court of North Carolina
• Decided: April 9, 1947
• Status: Published

Opinion

Winborne, J.

The evidence shown in the record on this appeal, considered in the light most favorable to plaintiff and under applicable principles of law, is sufficient, in our opinion, to take the case to the jury. Hence, appellant’s exception to the judgment from which this appeal comes to this Court is well founded, and is sustained.

It is a general rule of law that agreements against public policy are illegal and void. Burbage v. Windley, 108 N. C., 357, 12 S. E., 839, 12 L. R. A., 409; Phosphate Co. v. Johnson, 188 N. C., 419, 124 S. E., 859.

Agreements are against public policy when they tend clearly, among other things, to injure “the public confidence in the purity of the administration of the law.” And where the law-making power speaks on a particular subject over which it has power to legislate, public policy in such cases is what the law enacts. 12 Am. Jur., pp. 662, 664, 668. Hence an agreement which violates a provision of a statute or which cannot be performed without a violation of such provision is illegal and void. Phosphate Co. v. Johnson, supra.

In connection with the subject of the case in hand, it is seen that the Emergency Farm Mortgage Act of 1933, 48 Stat. at Large, 48, 12 USCA, Subchapter II, Sections 1016, et seq., pertaining to and authorizing loans to farmers by Land ilank Commissioner for “any of the purposes for which Federal Land Banks are authorized by law to make loans,” to be secured by first or second mortgages upon farm property, real or personal, provides, among other things: That “the amount of the mortgage given by any farmer, together with all prior mortgages, or other evidence of indebtedness secured by such farm property of the farmer, shall not exceed 75 per cent of the normal value thereof, as determined upon an appraisal made pursuant to the preceding subchapter, as amended”; and that “no loan shall be made . . . unless the holder of any prior mortgage or instrument of indebtedness secured by such farm property arranges to the satisfaction of the Land Bank Commissioner to limit his right to proceed against the farmer and such farm property for default in payment of principal.”

The purpose of the statute becomes a public policy. The primary object of the statute is relief to farmers from the load of oppressive debts, and any benefit to the creditors of the farmer is merely incidental. Compare Annotation 125 A. L. R., 809. Hence, if Land Bank Commissioner as condition precedent to making loan to debtor with which to pay existing indebtedness, required the creditor to agree to a scaling down of debt, on terms set forth in purported statement and agreement of creditor introduced in evidence, mortgage deed taken thereafter by creditor to secure a note for difference between original indebtedness and the amount received in satisfaction thereof, would be void as against public policy.

While this particular subject does not seem to have been treated heretofore by this Court, the courts of other jurisdictions have dealt with it ill well considered opinions, and have held almost uniformly, that notes and mortgages, given by a former debtor to his creditor to make up and secure the difference between the amount paid under a scaledown settlement pursuant to the Emergency Farm Mortgage Act of 1933, supra, and the amount originally owed, are contrary to public policy and void. See Federal Land Bank of Columbia v. Blackshear Bank, 182 Ga., 657, 186 S. E., 724; Jones v. McFarland, 178 Miss., 282, 173 So., 296; Federal Land Bank v. Koslofsky, 67 N. D., 322, 271 N. W., 907; Kniefel v. Keller, 207 Minn., 109, 290 N. W., 218; Oregon & Western Colonization Co. v. Johnson, 164 Ore., 517, 102 P. (2d), 928; Robinson v. Reynolds, 194 Ga., 324, 21 S. E. (2d), 214. See analogous cases as to such transactions under the Home Owners Loan Act of 1933, 12 USCA, Section 1461, et seq., Annotations 110 A. L. R., 250, 121 A. L. R., 119, 125 A. L. R., 809.

In Robinson v. Reynolds, supra, the Supreme Court of Georgia, in an opinion by Jenkins, J., appropriately sums up the principle as applied in above cases in this way: “The beneficent purpose of loans made by Federal agencies under and pursuant to the Emergency Farm Mortgage Act of 1933 . . . was to enable persons in debt and without ability to make payment to constitute such agencies the sole creditors, thereby eliminating by way of compromise all other creditors. Contracts that obviously and directly tend in a marked degree to bring about results that the law seeks to prevent cannot be made the ground of a successful suit. . . . Accordingly, a new obligation assumed by a debtor to a lien creditor, in violation of the expressed terms of the creditor’s acceptance, as in full payment of an amount less than his debt, from a Federal agency, making a loan t'o the debtor, under the farm mortgage act, of an amount insufficient to pay lien indebtedness, is void as against public policy.”

However, defendants contend that plaintiff stands in pari delicto with them in relation to the execution of the note and second mortgage, and, hence, may not invoke the aid of equity, — that the courts will leave the parties where they found them, and will not lend aid to either of them,—citing Waggoner v. Publishing Co., 190 N. C., 829, 130 S. E., 609; and Merrell v. Stuart, 220 N. C., 326, 17 S. E. (2d), 458. The rule there stated is the policy of the law in this State, but it has its limitations and exceptions, and is not necessarily controlling here. See 3 Pomeroy Equity Jurisprudence, 5th Ed., Sections 940, 941, and 942. Basket v. Moss, 115 N. C., 448, 20 S. E., 733; Herring v. Lumber Co., 159 N. C., 382, 74 S. E., 1011; Courtney v. Parker, 173 N. C., 479, 92 S. E., 324; Hodges v. Hodges, opinion handed down this day, post, 334.

In this connection we quote from Pomeroy, supra, “The rule has sometimes been laid down as though it were equally universal, that where the parties are in pari delicto, no affirmative relief of any kind will be given to one against tbe other. This doctrine, though true in the main, is subject to limitations and exceptions.” Sec. 940. “Even where the contracting parties are in pari delicto, the courts may interfere from motives of public policy. Whenever public policy is considered as advanced by allowing either party to sue for relief against the transaction, then relief is given to him. In pursuance of this principle, and in compliance with the demands of a high public policy, equity may aid a party equally guilty with his opponent, not only by canceling and ordering the surrender of an executory agreement, but even by setting aside an executed contract, conveyance or transfer, and decreeing the recovery back of money paid or property delivered in performance of the agreement.” Sec. 941. “Lastly, when the contract is illegal, so that the parties are to some extent involved in the illegality, — in some degree affected with the unlawful taint, — but are not in pari delicto, — that is, both have not, with the same knowledge, willingness, and wrongful intent engaged in the transaction, or the undertakings of each are not equally blameworthy, — a court of equity may, in furtherance of justice and of a sound public policy, aid the one who is comparatively the more innocent, and may grant him full affirmative relief, by canceling an executory contract, by setting aside an executed contract, conveyance or transfer . . . by means of an appropriate action not directly based upon the contract.” Sec. 942.

Applying these principles, this Court in Basket v. Moss, supra, pertinently states that Pomeroy “calls attention to the fact that the rule in pari delicto is often misunderstood, and its application is properly and correctly that in such cases 'Potior est conditio possidentis’ — that is, that the Court will permit nothing to be done which will enable a party to collect from the other the fruits of his wrong. When he sues to recover, the law will not give him judgment. When he has shrewdly attempted to evade this by taking a mortgage with a power of sale, the court will, by injunction, prevent his collecting on a mortgage denounced as void by reasons of public policy.”

In the light of these principles applied to the evidence offered in the trial below, it does not necessarily follow that the plaintiff is in pari delicto with defendants in relation to the transaction in question. But even if he be in pari delicto with defendants in respect thereto, we are of opinion that if the facts be as plaintiff’s evidence tends to show, a court of equity will by injunction prevent defendants from collecting on the mortgage so taken.

Defendants also plead and contend that any cause of action which plaintiff may have rests on the ground of fraud, and that same is barred by the three years statute of limitations. G. S., 1-52 (9). Since plaintiff seeks to remove the second mortgage deed as a cloud upon his title to land, and since the evidence is susceptible of the inference that plain tiff has been in actual possession of the land from the date of the said mortgage deed, the statute of limitations so pleaded is inapplicable. The prevailing rule in such case is that the right to maintain an action to remove a cloud from a title is a continuing one to which the statute of limitations is not applicable. 44 Am. Jur., 47—Quieting Title, Sec. 63; 51 C. J., 199—Quieting Title, Sec. 126; Annotations 29 L. R. A. (N.S.), 390, to case of Cooper v. Rhea, 82 Kan., 109, 107 P., 799. See also Cauley v. Sutton, 150 N. C., 327, 64 S. E., 3, and Sears v. Braswell, 197 N. C., 515, 149 S. E., 846.

The demurrer ore tenus entered in this Court is overruled. The allegations of the complaint, liberally construed, are sufficient to state a cause of action.

The judgment as of nonsuit entered below is

Reversed.