Annotate this Case

183 S.E.2d 115 (1971)

279 N.C. 361


No. 86.

Supreme Court of North Carolina.

September 6, 1971.

*117 Cecil C. Jackson, Jr., Asheville, for plaintiff appellant.

Prince, Youngblood, Massagee & Groce, Hendersonville, for defendant appellees.

*118 SHARP, Justice:

This case was tried before a jury. In nonjury trials the motion for nonsuit has been replaced by the motion for a dismissal under G.S. § 1A-1, Rule 41(b); in jury trials, by the motion for a directed verdict under G.S. § 1A-1, Rule 50(a). In a jury trial, the motion for a directed verdict is now the only procedure by which a party can challenge the sufficiency of his adversary's evidence to go to the jury. Cutts v. Casey, 278 N.C. 390, 180 S.E.2d 297. Plaintiff, therefore, mislabeled her motion when she moved "for dismissal on the grounds of insufficient evidence to go to the jury," and the judge duplicated this error in nomenclature in his judgment. However, "where a motion for dismissal is made pursuant to Rule 41(b) in a jury case, it may properly be treated as a motion for directed verdict under Rule 50(a). The trial court does not determine the facts, but simply determines whether the plaintiff has made a `case for the jury.'" Bragen v. Hudson County News Company, 321 F.2d 864, 868 (3d Cir. 1963). Accord, 5 Moore's Federal Practice § 50.03(1) (2d ed. 1969).

"On a motion by a defendant for a directed verdict in a jury case, the court must consider all the evidence in the light most favorable to the plaintiff and may grant the motion only if, as a matter of law, the evidence is insufficient to justify a verdict for the plaintiff." Kelly v. International Harvester Co., 278 N.C. 153, 158, 179 S.E.2d 396, 398.

Plaintiff's appeal presents only the question whether her evidence was sufficient to withstand defendant's motion for a directed verdict. In re Johnson, 277 N.C. 688, 693, 178 S.E.2d 470, 473-474. Applying the rule enunciated in Kelly v. International Harvester Co., supra, the answer is NO.

When the court required an election between the inconsistent allegations in the complaint, plaintiff's counsel correctly and succinctly appraised her case by this statement: "[T]he evidence is she did sign the papers, but she signed them in blank."

Creasman, who testified that he fraudulently procured the signatures of his 85-year-old mother upon the note and deed of trust, stated positively and unequivocally that they were blank forms at the time she signed them"no typewriting on any of the papers." He also testified that she knew she was signing the papers in blank; that she admonished him "not to put anything about her land and home in the deed of trust"; and that, in response to her question as to the amount of the loan, he told her he would not know the amount until the interest was figured. In this context, plaintiff's testimony that Creasman "brought in some kind of paper here on that little old trailer out there" cannot be expanded into a statement that he represented to her she was merely signing a completed chattel mortgage on a trailer. Furthermore, the allegation of the complaint, under which plaintiff elected to proceed, is that the instrument which she signed "was to encumber a trailer" on her property. This averment clearly implies that the description of the property to be conveyed was to be written in at a future time.

The theory of plaintiff's case is that in January 1965 Creasman was the Association's agent, engaged in procuring loans for it; that, as such agent, he secured plaintiff's signature upon a blank note and deed of trust (the Association's printed forms) by falsely telling her he "wanted to mortgage the trailer that sits on her property" for an amount "somewhere around $600.00"; that he thereafter filled in the blanks so that the note was for $6,000.00 and the deed of trust encumbered her home. However, neither the evidence nor the law will sustain a finding that Creasman ever acted as agent for defendants. His testimony establishes that, in obtaining the loan which satisfied the prior mortgage on plaintiff's property, he was merely a prospective borrower applying for a loan. It likewise establishes that, in the other dealings he *119 said he had with the Association, he was either representing a prospective borrower or acting for himself as the holder of a note seeking to discount the paper.

In Parker v. Brown, 131 N.C. 264, 42 S.E. 605, the trial judge sustained the defendant's objection to this question: Was Spencer "the agent of Brown for the purchase of the lumber?" In upholding that ruling this Court said: "Whether the relation of principal and agent had been created depended upon the authority or power delegated. What that authority was is a question of fact; its effect a question of law * *. The agency being in dispute, the express or implied authority to act must be shown. The facts being shown, then whether the relation of principal and agent is created becomes a question of law for the court to declare, and not for the witness." Id. at 265, 42 S.E. at 606. Accord, Stansbury, N.C. Evidence § 130 (2d Ed.1963); 3 Am.Jur.2d Agency, § 356 (1962); Annot., 90 A.L.R. 749. Clearly, therefore, Creasman's statement that in January 1965 he was "representing" the Association in Buncombe County was properly stricken.

There is also no evidence to support plaintiff's contention that, in order to make the loan, the executive vice-president, or any other agent of the Association, colluded with Creasman to obtain plaintiff's signature on a note and deed of trust by fraudulent misrepresentation. Nor is there evidence that they had any reason to suppose Creasman would secure his mother's signature in the manner he stated. Incidentally, we note that the Association's board of directors lent plaintiff only the amount necessary to pay off the prior deed of trust, which was then in default. According to Creasman, he had obtained that deed of trust and note in the same manner as the ones in suit. If so, those instruments were valid as to innocent third parties for the same reason the note and deed of trust here involved are valid. Therefore, having extinguished that encumbrance, defendant would be subrogated to the rights of the first creditor. Peek v. Wachovia Bank & Trust Co., 242 N.C. 1, 86 S.E.2d 745.

The rule governing this case is specifically stated in Mielcuszny v. Rosol, 317 Pa. 91, 94, 176 A. 236, 237: "Where one executes a bond and mortgage in blank and places it in the hands of a third person, he assumes all the consequences of his act."

Golden Prague Bldg., Loan & Savings Association v. Crimi, 172 Md. 238, 190 A. 830, involved a mortgage which was signed in blank; "there was nothing on the paper but the printed matter, no script or typewriting." The mortgage, signed by Crimi, secured a loan made by the Loan & Savings Association to Magris, who was purchasing from Klecka, the attorney for the Loan & Savings Association, property owned by him. Klecka fraudulently failed to insert in the mortgage the limitation of liability upon which he, Crimi, and Magris had agreed. Upon discovery of the fraud, Crimi sued to reform and cancel the instrument. In denying relief the court held that the filling of blanks in a printed mortgage form in a wrongful manner by a person having express or implied authority to fill them in another way is deemed merely a breach of confidence, and "when an innocent third party becomes involved in the transaction the loss must fall on those whose carelessness and neglect have occasioned the loss." Id. at 245, 190 A. at 833. See 59 C.J.S. Mortgages § 122 (1949); 23 Am.Jur.2d, Deeds, § 139 (1965).

This Court has long applied the foregoing rule to notes which were signed in blank and thereafter completed in violation of the maker's instructions. In Phillips v. Hensley, 175 N.C. 23, 94 S.E. 673, it is said:

"It is well settled that, if the maker of an instrument intrusts it to another for use with blanks to fill up, such instrument so delivered carries on its face an implied authority to fill up the blank spaces and deliver the instrument.

"As between such party and innocent third persons, the person to whom the instrument *120 is entrusted is deemed the agent of the party who committed the instrument to his authority. The ruling is founded upon the principle that, where one of two persons must suffer by the bad faith of another, the loss must fall upon the one who first reposed the confidence and made it possible for the loss to occur." Id. at 25, 94 S.E. at 674. Accord, McArthur v. McLeod, 51 N.C. 475; Humphreys v. Finch, 97 N.C. 303, 1 S.E. 870; Furst & Thomas v. Merritt, 190 N.C. 397, 130 S.E. 40.

Plaintiff argues that the foregoing doctrine is not applicable to this case because Creasman obtained her signature on the note and deed of trust "by a trick," which constituted fraud in the factum; that "the want of identity between the instrument she executed and the one she intended to execute" rendered the deed of trust and note void; and that no rights could be acquired thereunder even by innocent third parties. Furst & Thomas v. Merritt, supra. This contention is untenable.

When one signs an instrument in blank the plea of non est factum or fraud in the factum is not available to him. "As a general rule, it may be said that fraud in the factum arises from a want of identity or disparity between the instrument executed and the one intended to be executed * * *." Furst & Thomas v. Merritt, supra at 401, 130 S.E. at 43. When a person signs a blank deed of trust form he cannot say that the instrument he signed was different from what he intended to sign, for he intended to sign a blank form, leaving it to another to complete. In such a case, notwithstanding he may have been induced to sign by false representations that the blanks would be filled in a certain way, he knowingly executed the very instrument which he intended to execute. See Medlin v. Buford, 115 N.C. 260, 20 S.E. 463.

For the reasons stated, the decision of the Court of Appeals affirming the judgment of the Superior Court is