Appeal by plaintiffs in Case Nos. 75CVS561 and 74CVS882 and defendants in Case No. 74CVS889 from McKinnon, Judge. Judgment entered 14 December 1977 in Superior Court, Orange County. Heard in the Court of Appeals 30 May 1979.
Erwin, Judge. Judges Martin (Robert M.) and Arnold concur.
The threshold issue essential to determination of the questions raised by appellants is what were the respective rights of the parties at the beginning of the loan transactions?
Daniel Boone Complex, Inc. executed a purchase money deed of trust to the Freelands in the amount of $1,085,000 to secure the purchase price of the complex. This deed of trust had priority
over the amount of money secured by the Furst-Camilco loan. Camilco asserts that since it furnished the consideration, the $136,550.73 used for settlement costs, it was the owner of the equity of redemption ab initio. This is not altogether correct.
Daniel Boone's conveyance of title to the complex property to Furst was intended as a mortgage. A mortgage or deed of trust to secure a debt passes legal title to the mortgagee or trustee, as the case may be, but the mortgagor or trustor is looked on as the equitable owner of the land with the right to redeem at any time prior to foreclosure. This right, after the maturity of the debt, is designated as his equity of redemption. Riddick v. Davis, 220 N.C. 120, 16 S.E.2d 662 (1941).
In the absence of circumstances indicating a contrary intent, where one person pays the purchase price for land, but legal title is taken in the name of another for whom he is under no duty to provide, a trust in favor of the payor arises by operation of law and attaches to the subject of the purchase. Vinson v. Smith, 259 N.C. 95, 130 S.E.2d 45 (1963); Grant v. Toatley, 244 N.C. 463, 94 S.E.2d 305 (1956); Summers v. Moore, 113 N.C. 394, 18 S.E. 712 (1893); accord, Campbell v. Freeman, 99 Cal. 546, 34 P. 113 (1893). To the extent that Camilco furnished funds enabling Daniel Boone to purchase the property, a resulting trust arose in its favor. Cline v. Cline, 297 N.C. 336, 255 S.E.2d 399 (1979); McWhirter v. McWhirter, 155 N.C. 145, 71 S.E. 59 (1911); Cunningham v. Bell, 83 N.C. 328 (1880); Edwards and Van Hecke, Purchase Money Resulting Trusts in North Carolina, 9 N.C. L. Rev. 177, 185 (1930-31).
We are well aware that the presumption of a resulting trust which arises from the furnishing of consideration to another who purchases the property in his own name is a rebuttable one. Edwards and Van Hecke, supra. However, the record before us is void of any evidence that the money furnished by Camilco was intended as a loan, Cf. In re Gorham, 173 N.C. 272, 91 S.E. 950 (1917); Lassiter v. Stainback, 119 N.C. 103, 25 S.E. 726 (1896), nor have the respondents raised this contention below.
Even though the property was conveyed by Daniel Boone to secure Furst's loan to Camilco, Camilco was the owner of the equity of redemption, mortgagor, to the extent that it furnished
Daniel Boone a portion of the purchase price. Cline v. Cline, supra.
In Osborne, Nelson & Whitman's, Real Estate Finance Law, § 3.20, pp. 70-71 (1979), the law of mortgages of tripartite transactions is stated as follows:
"'. . . The conveyance is nonetheless a mortgage because it was conveyed to him directly by a third party, to secure his loan to the purchaser for the amount of the purchase money, than if the conveyance had been made directly to the purchaser in the first instance, and the purchaser had then made a conveyance to him, as a security for the money that he had previously borrowed with which to make the purchase.'"
Even so, we hold that Camilco is estopped by the doctrine of ratification from asserting the existence of its equity of redemption.
Camilco voluntarily executed the July 30th agreement, which stated:
"Whereas, pursuant to the terms of a Security and Trust Agreement dated March 14, 1974, title in fee simple absolute to that real and personal property known as Daniel Boone Complex, located at Hillsborough, North Carolina, as further described in that deed dated March 14, 1974, was conveyed by Daniel Boone Complex, Inc., to Mitchell Furst, Trustee."
In the agreement, Camilco arranged to repurchases the land upon certain conditions. In doing so, it recognized the existence of the title in Furst. See Council v. Land Bank, 213 N.C. 329, 196 S.E. 483 (1938). Where, in the course of making a contract, the title of one party or the other to the property involved in the transaction is recognized, and the dealing proceeds on that basis, both parties are ordinarily estopped to deny that title or to assert anything in derogation of it. 31 C.J.S., Estoppel, § 125, p. 656. We hold that by executing the July 30th agreement, ...