#### I. C. DAMERON and R. C. ORMAND v. CARL *G.*CARPENTER and C. W. FULLER.

(Filed 2 December, 1925.)

1. Equity — Subrogation—Mortgages—Purchasers.

Equity subrogates the purchaser from the mortgagor of lands holding the equity of redemption to the rights of the mortgagor to clear the title, by payment of the mortgage debt and to procure the legal estate to the mortgaged premises.

2. Same — Courts—Jurisdiction.

Under our statutory procedure, wherein law and equity are administered in the same tribunal, there is no distinction between legal and equitable set offs where these principles are enforcible.

3. Equity — Set-Offs.

A set-off is in the nature of a. payment or credit when there are mutual debts existing between the parties.

4. Same — Mortgages.

In the case of set-offs, the payment of a debt thereby applies equally to a debt secured by mortgage and to unsecured debts in proper instances.

5. Same — Title—Actions1—Suits.

The plaintiff was the purchaser of lands.subject to mortgage, and also the owner of an unsecured note of the mortgagor, who after the plaintiff had demanded his right to set off, transferred the note for value after maturity and the plaintiff sought to enjoin the foreclosure sale of the mortgaged premises: *Held,*the defendant was a purchaser of the mortgage note with notice after demand, and the plaintiff was entitled to the set-off and thus to clear the title to the *locus in quo.*

6. Appeal and Error — Record—Courts—Findings of Fact.

Where the court in finding certain facts in the case on appeal makes such findings as are clearly contradictory to the judgment set out in the record, the findings will be disregarded, and the Supreme Court will construe the record to ascertain the actual facts when such clearly appear therefrom.

*596Appeal by plaintiffs from GastoN Superior Court. *Stack, J.,*and *Winston, Special J.*

Consolidated action to restrain a sale under mortgage and to cancel mortgage indebtedness. From a judgment declining to continue tbe restraining order to tbe final bearing tbe plantiffs appeal. Error.

Two actions were instituted, one "J. *C. Bameron and B. 0. Ormand v. Carl*Cr. *Carpenter”*to restrain a sale of certain lands in Bessemer City, under mortgage executed by Lizzie McLean and Lee McLean to C. W. Fuller, dated 23 October, 1922, wbicb are owned by plaintiffs by virtue of a purchase, subject to sucb mortgage. Tbe other: *“I. C. Bameron and B. C. Ormand v. C. W. Fuller”*was for tbe purpose of applying a debt due to plaintiffs by C. *W.*Euller on an unsecured note as a payment of tbe mortgage,note. Tbe consolidation was either at or before December Term, 1924. At this term certain proceedings were bad before bis Honor, A. M. Stack, J., as are shown in tbe judgment of Winston, J., at June Special Term, 1925, as follows:

“Tbe above entitled causes came on to be beard at tbe December Term, 1924, of Gaston County Superior Court, before bis Honor, A. M. Stack, judge presiding, and said causes having been consolidated, tbe following facts were found by tbe court, by consent of tbe several parties:

“1. That tbe defendant, C. W. Euller, is indebted to tbe plaintiffs, on a promissory note under seal, dated 15 August, 1916, in tbe principal sum of $734.40 with interest on said sum to date.

“2. That tbe defendant, Carl G. Carpenter, is tbe owner of a certain note and mortgage deed executed by Lizzie McLean and Lee McLean, her husband, to defendant, C. W. Fuller, under date of 23 October, 1922, and due and payable 23 October, 1923.

“3. That defendant, C. W. Euller, assigned said note and mortgage to defendant, Carl G. Carpenter, in writing, under date of 28 June, 1924.

“4. That tbe plaintiffs, I. C. Dameron and R. C. Ormand are tbe owners in fee of tbe lands described in said mortgage deed, subject to tbe encumbrance existing by virtue of said mortgage deed.

“Under tbe facts found as above, it is agreed by counsel that tbe judgment was announced as follows:

“It is ordered and adjudged that tbe plaintiffs do have and recover from tbe defendant C. W. Euller, tbe sum of $734.40, with interest thereon from 15 August, 1916, together with tbe costs of tbe action first entitled above: It is further ordered and adjudged that tbe order heretofore issued, restraining tbe defendant, Carl G. Carpenter, from advertising and selling tbe lands described in said mortgage deed, be vacated and tbe plaintiffs taxed with tbe costs of tbe second action above entitled.

*597“Plaintiffs excepted to tbe judgment of tbe court and gave notice of appeal to tbe Supreme Court. Appeal bond was fixed at $50.00, and supersedeas bond fixed at $500.

“It appearing to tbe court by admission of counsel for all tbe parties in said actions, that tbe proceedings as above stated were bad and judgment announced as above recited, but that said judgment, if signed, was misplaced and cannot be found, and that tbe record of. tbe clerk for said December Term, 1924, does not show tbe proceedings in relation to said actions:

“It is now, by consent of counsel for tbe parties in said actions, ordered and adjudged that tbe judgment, as above recited, be entered, reserving to tbe plaintiffs tbe right to perfect their appeal to tbe Supreme Court for bearing at tbe next term of said Court, but not later.”

From tbe judgment of Stack, J., as thus established tbe plaintiffs appealed.

*Whitney & Kiser and George W. Wilson for plaintiffs.*

*S. J. Durham for defendants.*

Varser, J.

In addition to tbe facts in this judgment it appears from tbe affidavit and complaint of tbe plaintiffs and tbe answer thereto by defendants, Carpenter and Fuller, that Carpenter does not deny, and Fuller admits, that 28 June, 1924, and prior to bis assignment of the" McLean mortgage to Carpenter, that plaintiffs offered to pay tbe mortgage indebtedness to Fuller by offering to credit oh tbe Fuller note held by plaintiffs tbe amount of tbe McLean note, and Fuller refused to accept this obligation in payment. Tbe alleged reason for such refusal is that tbe McLean note was in fact tbe property of a bank.

For the purpose of discharging tbe lands described in tbe mortgage, now owned by plaintiffs, upon these facts, tbe plaintiffs are entitled to have tbe McLean note and mortgage canceled. There is a mutuality of indebtedness *quoad*tbe land mortgaged. Tbe plaintiffs, purchasers, are entitled to all tbe rights, titles and equities of their grantor, McLean, including tbe right to pay off tbe indebtedness according to tbe terms of tbe mortgage, and thereby clear their title. *Baker v. Bishop Hill Colony,*45 Ill., 264; *Schoffner v. Fogleman,*60 N. C., 564. Equity sub-rogates tbe purchaser of tbe equity redemption to tbe rights of tbe mortgagor to. clear tbe title and procure tbe legal estate only as to tbe mortgaged premises, and no further. This is sufficient to permit him to set off debts due him by tbe mortgagee against tbe mortgage debt. *Harrison v. Bray,*92 N. C., 488. There is no practical pertinency in tbe distinction between legal and equitable set-offs in tbe case at bar, since *598both law and equity are administered in tbe same Court. *Shoffner v. Fogleman, supra.*

A set-off is in tbe nature of a payment or credit wben tbe debts are mutual. *Battle v. Thompson,*65 N. C., 406; *Lindsay v. King,*23 N. C., 401; *Worth v. Fentress,*12 N. C., 419. Set-off exists in mutual debts, independent of tbe statute of set-off. Its flexible character is used in equity to prevent injustice. *Bank v. Armstrong,*15 N. C., 519; *Jones v. Gilreath,*28 N. C., 339; *Walton v. McKesson,*64 N. C., 154; *Hodgin v. Bank,*124 N. C., 542; *Hodgin v. Bank,*125 N. C., 508; *Fertilizer Co. v. Lane,*173 N. C., 184; *Moore v. Trust Co.,*178 N. C., 128.

In *Cavendish v. Geaves,*24 Beav., 163, 53 English Rep., 319, *Sir John Bomilly*sets out tbe doctrine of set-off in assignable cboses in action, with always tbe requirement of notice to tbe debtor in tbe chose assigned so as to complete tbe right of set-off. That exists in tbe case at bar. The assignment to Carpenter followed on tbe heels of tbe demand by plaintiffs to set off and cancel tbe McLean note. Carpenter knew nothing of this demand, and bad no actual knowledge of plaintiffs’ equity, but be took, *after*the demand, a *past-due*note, and, therefore, bis taking is subject to all tbe equities in favor of plaintiffs.

Tbe fact that tbe Fuller-McLean note is secured, makes no difference. When tbe debt is paid tbe security fails. Tbe security lives no longer than tbe debt which gives it life. *Poston v. Rose,*87 N. C., 279; *Lumber Co. v. McPherson,*133 N. C., 290; *Stephens v. Turlington,*186 N. C., 191; *Porter v. Millett,*9 Mass., 101.

Tbe record contains what purports to be a verdict in tbe case of *Dameron and Ormond v. Fuller,*finding that tbe defendant is indebted to tbe plaintiffs in tbe sum of $734.40 with interest from 15 August, 1917, and that tbe plaintiffs did not have tbe right to pay off tbe mortgage on these lots by crediting same on tbe Fuller unsecured note, and that tbe assignee of tbe McLean note acquired title to tbe mortgage and note under tbe assignment 28 June, 1924. This verdict is recited to be in tbe one case against Fuller, while tbe judgment appealed from is in tbe consolidated cause. ¥e cannot reconcile tbe verdict with tbe findings by consent in tbe judgment rendered by Stack, J. Evidently tbe parties superseded tbe findings of tbe jury in the- one case with tbe consolidation and tbe findings of facts by Stack, J.

Tbe record is not satisfactory, and we have interpreted tbe record in tbe only way appearing to us.

In vacating tbe injunction against a sale under tbe McLean mortgage and in a denial of plaintiffs’ right to credit tbe McLean note on tbe Fuller note and thereby pay off tbe same there was

Error.