State Ex Rel. Watkins v. Simonds , 202 N.C. 746 ( 1932 )

Plaintiffs brought suit on the official bond of the defendant Simonds, the register of deeds of Cherokee County, for his negligent failure to cross-index a paper-writing as a part of its registration.

L. L. Heaton borrowed from the Bank of Murphy the sum of $1,000 and to secure its payment executed his note for this amount on which the plaintiffs were endorsers. To indemnify the endorsers L. L. Heaton and Maud K. Heaton, his wife, executed a paper-writing, the material parts of which are as follows: "L. L. Heaton has assigned, transferred and made over to Lee Watkins and R. T. Heaton, and hereby assigns, transfers and makes over to them and their administrators and assigns, to secure and hold them harmless by reason of having signed said note, the following . . . also, the equity of $1,450 paid in cash of the town property in Murphy known as the Ricks house and lot, the legal title to which is in Maud K. Heaton, wife of said L. L. Heaton, and who signed this instrument for the purpose of encumbering said equity, to the extent of same. In the event said Lee Watkins and R. T. Heaton, or either of them, sustains any loss or damage on account of signing the note above mentioned, or any renewal or renewals of the same, then and in that event they may sell the above mentioned property at the courthouse door in Murphy to the highest bidder at public outcry for cash."

The acknowledgment of this instrument with the privy examination of Mrs. Heaton, was taken before L. E. Bayless, a notary public, who was the cashier of the Bank of Murphy and a stockholder in the corporation.

The paper-writing was registered by the defendant Simonds who entered the name of L. L. Heaton on the index as the maker or grantor and the plaintiffs, Watkins and Heaton, as grantees, the date of registration being 23 April, 1924. On 26 September, 1924, L. L. Heaton and Maud K. Heaton, his wife, conveyed to Mattie A. Taylor for value all their interest in Maud K. Heaton's equity in the Ricks house and lot described in the paper-writing above set out. The deed to Mattie A. Taylor was registered 2 October, 1924. Sometime after its registration the defendant Simonds entered upon the index after the name of L. L. Heaton the two words "and Maud."

The plaintiffs allege that they paid the note of L. L. Heaton to the Bank of Murphy and are unable to subject Maud K. Heaton's equity to the payment of their claim against L. L. Heaton for the reason that Mattie A. Taylor acquired title before the name of Maud K. Heaton was entered on the index. The suit is prosecuted to recover damages for the register's negligent failure properly to register and cross-index the paper-writing above referred to. Upon the issues submitted there was a verdict for the plaintiffs and the defendants excepted and appealed. It is the duty of the register of deeds to register all written instruments the registration of which is required or authorized, and to keep in his office full and complete alphabetical indexes of the names of the parties. No instrument is deemed to be registered until it is indexed as the statute provides. N.C. Code 1931, secs. 3553, 3561; Fowle v. Ham,176 N.C. 12; Heaton v. Heaton, 196 N.C. 475; Story v. Slade, 199 N.C. 596. If the register makes negligent default in the performance of this duty and pecuniary injury to the claimant is caused thereby the register and his official bond are liable for the resultant loss. Daniel v. Grizzard, 117 N.C. 106; Manufacturing Co. v. Hester,177 N.C. 609. We have held that as to Maud K. Heaton the instrument signed by her and her husband was not properly registered and indexed and that Mattie A. Taylor was the owner of the real property therein described.Heaton v. Heaton, supra. So the immediate question is whether the plaintiffs have suffered pecuniary loss by reason of the register's negligent failure to index the name of one of the parties.

The defendants say that no loss has resulted to the plaintiffs because the instrument just referred to neither conveyed an interest nor created a lien upon the real property of Mrs. Heaton.

The writing purports to assign and transfer to the plaintiffs, as indemnity against loss by their endorsement of the note, certain personal property which is not in controversy and "the equity of $1,450 paid in cash for the town property in Murphy known as the Ricks house and lot, the legal title to which is in Maud K. Heaton, wife of said L. L. Heaton, and who signed this instrument for the purpose of encumbering said equity to the extent of the same." The plaintiffs are authorized to sell this property if either of them sustains any loss or damage "on account of signing the note."

What did the parties mean by "encumbering the equity"?

Mrs. Heaton executed the paper under seal, and the only mention of her name in the body of the writing is in the clause stating the purpose for which she affixed her signature — that is, to "encumber" her equity in the Ricks house and lot in order to indemnify the plaintiffs.

In a legal sense to encumber or incumber land is to make it subject to a charge, lien, or liability — to burden it with financial obligations, as debts or mortgages. An encumbrance is any right or interest in land which may subsist in a third person to the diminution of the value of the property. Butterfield v. Butler, 150 Pac. (Okla.), 1078; Johnson v. Bridge, 213 Pac. (Cal.), 512; Hartford Fire Ins. Co. v. Jones, 250 Pac. (Ariz.), 248, 251; First Unitarian Society v. Citizens Savings Trust Co., 142 N.W. (Iowa), 87; Black's Law Dictionary, 614; 20 C. J., 1250.

In searching for the intention of the parties to a written instrument this Court has adopted a liberal rule of construction to which technicalities and formal divisions must frequently give way. Triplett v.Williams, 149 N.C. 394; Berry v. Cedar Works, 184 N.C. 187. Tested by this rule the contract under consideration is not difficult of solution. The parties obviously intended, though their intention is inartificially expressed, to create a lien or mortgage on Mrs. Heaton's equity in "the town property in Murphy" — the property here in litigation. Indeed, the contract in its relation to the clause in question has been referred to by this Court as a mortgage on her land (Heaton v. Heaton, supra); and this construction is fortified by the principle set forth in Ely v. Norman,175 N.C. 294.

It is argued that the plaintiffs have not paid the note and have therefore incurred no loss. This position cannot be sustained. The plaintiffs testified that they borrowed money with which to pay the note they had endorsed; that they paid it in full, took it up, and executed their own note for the amount borrowed. The bank delivered to them the note of L. L. Heaton when it was paid. Moreover, they paid interest on the note, and by the terms of the contract their liability extended to "any renewal or renewals."

The execution of the contract was acknowledged before L. E. Bayless, a notary public, who was an officer and stockholder in the bank, and for this reason the defendants say the probate is defective and the registration void. They cite Cowan v. Dale, 189 N.C. 684 and Bank v. Tolbert,192 N.C. 126.

The mortgage was not made to the bank; it was a part of the contract between the principal and the endorsers; the bank was not a party. We cannot, under these circumstances, particularly in view of section 3301(a), N.C. Code, 1931, hold the acknowledgment of the contract to be invalid.

No error.