Cutter v. CUTTER REALTY COMPANY , 265 N.C. 664 ( 1965 )

144 S.E.2d 882 (1965) 265 N.C. 664

George K. CUTTER, John H. Cutter, III, and George K. Cutter, Jr.
v.
CUTTER REALTY COMPANY, Inc., a Corporation, J. H. Cutter and Company, Inc., a Corporation, E. C. Griffith, W. R. Cuthbertson, Colonel Francis J. Beatty, Mary Anne Davis, J. B. Bostick, I. Theodore Leader, Trustee for Prudential Real Estate Trust.

No. 283.

Supreme Court of North Carolina.

November 24, 1965.

Weinstein, Waggoner & Sturges, by William J. Waggoner, Charlotte, for plaintiff appellants.

Grier, Parker, Poe & Thompson, by Joseph W. Grier, Jr., and James Y. Preston, Charlotte, for defendant appellees.

LAKE, Justice.

After the appeal was docketed in this Court the appellees moved to dismiss it as moot on the ground that, following the entry of the order in question, Prudential was made a party to the action and entered a general appearance so that it will be bound by the final judgment, whether or not the notice of lis pendens was properly ordered and cancelled. The motion to dismiss is denied. The appeal did not become moot by Prudential's becoming a party. If the notice of lis pendens was proper and remains in effect not only Prudential, but every other subsequent purchaser during the life of the notice, will be bound by the judgment in this action. G.S. § 1-118. Without such notice of lis pendens, a bona fide purchaser or lien creditor not a party to the action and having no actual notice thereof would not be subject to a judgment rendered after his acquisition of title or lien. We must, therefore, consider the appeal upon its merit.

The common law rule of lis pendens has been replaced in this State by the provision of G.S. §§ 1-116 to G.S. 1-120.1. Arrington v. Arrington, 114 N.C. 151, 19 S.E. 351. Thus, there can be no valid notice of lis pendens in this State except in one of the three types af actions enumerated in G.S. § 1-116(a), which reads as follows:

"(a) Any person desiring the benefit of constructive notice of pending litigation must file a separate, independent notice thereof, which notice shall be cross-indexed in accordance with G.S. 1-117, in the following cases:

"(1) Actions affecting title to real property;

"(2) Actions to foreclose any mortgage or deed of trust or to enforce any lien on real property; and

"(3) Actions in which any order of attachment is issued and real property is attached."

Since it appears clearly from the plaintiffs' statement of the nature of their action that it does not fall into Class 2 or Class 3, the alleged notice of lis pendens is not valid unless this is an action "affecting title to real property."

The provisions of G.S. § 1-120 with reference to cancellation of a notice of lis pendens are applicable to the cancellation of a valid notice. If the notice filed in the office of the Clerk was not authorized by the statute, the court had jurisdiction to cancel it, upon the motion of the owner of the record title to the land, without waiting for the termination of the action. Parker v. White, 235 N.C. 680, 71 S.E.2d 122; McGurk v. Moore, 234 N.C. 248, 67 S.E.2d 53.

In Arrington v. Arrington, supra, the Court said:

"The rule lis pendens, while founded upon principles of public policy and absolutely necessary to give effect to the decrees of the courts is nevertheless, in many instances, very harsh in its operation; and one who relies upon it to defeat a bona fide purchaser must understand that his case is strictissimi juris."

Thus, notice of lis pendens may not properly be filed except in an action, a purpose of which is to affect directly the title to the land in question or to do one of the other things mentioned in the statute. The lis pendens statute does not apply, for example, to an action the purpose of which is to secure a personal judgment for the payment of money even though such a judgment, if obtained and properly docketed, is a lien upon land of the defendant described in the complaint. Jarrett v. Holland, 213 N.C. 428, 196 S.E. 314; Threlkeld v. Malcragson Land Company, 198 N.C. 186, 151 S.E. 99; Horney v. Price, 189 N.C. 820, 128 S.E. 321; McIntosh, N. C. Practice and Procedure, 2d ed., § 963; 54 C.J.S. Lis Pendens § 9.

In Massachusetts Bonding & Insurance Co. v. Knox, 220 N.C. 725, 18 S.E.2d 436, 138 A.L.R. 1438, Barnhill, J., said:

"The effect of lis pendens and the effect of registration are in their nature the same thing. They are only different examples of instances of the operation of the rule of constructive notice. One is simply a record in one place and the other is a record in another place. Each serves its purpose in proper instances. They are each record notices.

"Hence, the law of lis pendens and the statute requiring the registration of instruments affecting title to real property must be construed in pari materia. Otherwise, the one would be destructive of the other.

"When so construed the rule lis pendens applies in actions to set aside deeds or other instruments for fraud, to establish a constructive or resulting trust, to require specific performance, to correct a deed for mutual mistake and in like cases where there is no record notice and where otherwise a prospective purchaser would be ignorant of the claim. That is, lis pendens notice is required when the claim is contra or in derogation of the record."

It appears from the plaintiffs' statement of the nature of their action, the complaint not having been filed at the time of the order entered by Patton, E. J., that it has three purposes: (1) To restrain the officers and directors of the Realty Company, the holder of the record title, from executing a deed conveying that title to Prudential; (2) to restrain Cutter & Company from assuming the liabilities of the Realty Company; and (3) to rescind a contract for the sale of the land by the Realty Company to Prudential. Upon this appeal we are not concerned with the sufficiency of the allegations of the complaint, with the right of the plaintiffs as stockholders of Cutter & Company to maintain this action, or with the merits of the matter. The only question before us at this time is whether the action, as described in the plaintiffs' statement of it, is an action "affecting title" to the land in question. We hold that it is not such an action. It is not for the purpose of bringing about any change in the record title, but is brought for the purpose of preventing a change therein. It is not for the purpose of establishing a trust or lien upon the property. This is not an action of a type in which G.S. § 1-116 permits the filing of a notice of lis pendens and, therefore, the order cancelling the notice filed by the plaintiffs was properly entered.

Affirmed.