Hughes v. North Carolina State Highway Commission , 275 N.C. 121 ( 1969 )

165 S.E.2d 321 (1969) 275 N.C. 121

William L. HUGHES, Jr.
v.
NORTH CAROLINA STATE HIGHWAY COMMISSION.
COLVARD OIL COMPANY, Inc.
v.
NORTH CAROLINA STATE HIGHWAY COMMISSION.
FARMERS EQUIPMENT, INC.
v.
NORTH CAROLINA STATE HIGHWAY COMMISSION.

No. 443.

Supreme Court of North Carolina.

January 31, 1969.

Thomas Wade Bruton, Atty. Gen., Deputy Atty. Gen. Harrison Lewis, Trial Attorney Charles M. Hensey, Raleigh, Associate Counsel E. James Moore, North Wilkesboro, and Associate Counsel Porter & Conner, North Wilkesboro, for respondent appellee.

McElwee & Hall and Moore & Rousseau, North Wilkesboro, for appellants.

BRANCH, Justice.

A special proceeding was instituted 27 January 1940 by Blair pursuant to N.C. Gen.Stat. Chap. 40, entitled "Eminent Domain," for compensation for land allegedly taken by the Highway Commission and the Town for highway purposes. At that time title was not divested until the condemnor obtained a final judgment in his favor and paid to the landowner the amount of damages fixed by such final judgment, and the landowner could sell during the pendency of the special proceeding. The person who owned the land when the award was confirmed and final judgment entered was the proper person to be compensated. Highway Commission v. York Industrial Center, Inc., 263 N.C. 230, 139 S.E.2d 253. Since the landowner, Blair, was in position to sell prior to final judgment, the question presented is whether subsequent purchasers, who were not parties to the action and who bought the real property while the action was pending or after entry of judgment, were bound by the consent judgment entered in the special proceeding instituted by Blair.

The statutory law as to lis pendens embodied in N.C.Gen.Stats. § 1-116 et seq., provides a definite method for giving constructive notice, so that a search of known records will convert it into actual notice. Since the application of this rule may work hardship in many instances, a strict compliance with its provisions is required. Arrington v. Arrington, 114 N.C. 151, 19 S.E. 351. The parties to this appeal stipulated that the defendant "did not file a lis pendens, nor did the defendant crossindex the pending suit." It is thus apparent that we need not consider the statutory lis pendens as contained in N.C.Gen.Stats. 1-116 et seq., since there was no attempt to comply with its terms.

N.C.Gen.Stat. 40-26 provides: "When any proceedings of appraisal shall have been commenced, no change of ownership by voluntary conveyance or transfer of the real estate or other subject matter of the appraisal, or any interest therein, shall in any manner affect such proceedings, but the same may be carried on and perfected as if no such conveyance or transfer had been made or attempted to be made."

The Court construed N.C.Gen.Stat. 40-26 in the case of Caveness v. Charlotte, R. & S. R. R., 172 N.C. 305, 90 S.E. 244. There, action was brought against the defendant for permanent damages by reason of construction and operation of a railroad by the defendant on a street which abutted the plaintiff's property. Although none of the plaintiff's land was actually taken, he sought damages for impairment of value to his land which resulted from operation of the railroad. The plaintiff conveyed the land while suit was pending and the defendant contended that the plaintiff thereby lost his right to recover. The Court, in holding for the plaintiff, stated:

"Under our statute and in condemnation proceedings, (Rev. § 2587), the railroad acquires the right to remain upon the land, construct and operate its road on the payment into court of the amount assessed by the appraisers, and the recovery should inure to the one who owns the property at that time. True, provision is made for appeal by either party, and the damages may thereafter be increased or lowered, and the right may be lost by failure to pay the amount ultimately awarded; but the right to enter and construct and operate its road is acquired when the company pays the amount assessed by the first appraisers, and the owner at that time is entitled to the compensation for the easement. In that case, however, if the owner at the time of entry shall have instituted condemnation proceedings, the statute (section 2594) expressly provides that: ``No change of ownership, by voluntary conveyance or transfer of real estate or any interest therein or of the subject-matter of the appraisal, shall in any manner affect such proceedings, but the same may be carried on and perfected as if no such conveyance or transfer had been made or attempted to be made.' The proceedings by this section are constituted a lis pendens, and, although the grantee, as stated, prior to payment of the amount, may be entitled to this compensation, if proceedings have been instituted, he must assert his right by action or appropriate proceedings in the cause. * *"

The method prescribed by N.C. Gen.Stat. Chap. 40 entitled "Eminent Domain" for arriving at compensation for condemnation of land for highway purposes is open to the landowner as well as the Highway Commission. Yancey v. North Carolina State Highway Commission, 222 N.C. 106, 22 S.E.2d 256. However, the landowner may not maintain a proceeding under this chapter unless there has been a taking under the power of eminent domain, Penn v. Carolina Virginia Coastal Corp., 231 N.C. 481, 57 S.E. 2d 817, and when the condemnor seeks to follow the procedure permitted by this portion of the statute, his petition must contain a description of the property actually in litigation, and not merely a description of the entire tract. The property must "first be located." City of Gastonia v. Glenn, 218 N.C. 510, 11 S.E.2d 459.

Neither the Highway Commission nor Town challenged the sufficiency of Blair's pleadings or took action to make the description of the property more certain so as to "locate the property." Neither did they, by cross action, assert their right to proceed with condemnation under the provisions of Chapter 40. Rather, both denied a taking by eminent domain and alleged that the highway through Blair's property was constructed by agreement with Blair, pursuant to which, inter alia, he executed a written waiver of claim for damages.

The Highway Commission and the Town by their pleadings in the 1941 special proceeding further denied the taking of 100 feet of Blair's land, and by this denial were precluded from maintaining a contrary position at trial or on appeal. Hemphill v. Board of Aldermen of Forest City, 212 N.C. 185, 193 S.E. 153.

The pleadings in the Blair special proceeding sound of contract and none of the parties proceeded so as to clearly invoke the provisions of N.C.Gen.Stat. 40-26.

The Highway Commission presently contends that the exceptions or reservations appearing in plaintiffs' chains of title were sufficient to effectively reserve the land involved in this litigation to Blair. We do not agree with this contention. If the reservations or exceptions—which do not describe or delineate the area now claimed by the Highway Commission—affect the land in litigation, it must be that they were sufficient to put subsequent purchasers to inquiry.

Conceding, without so deciding, that the provisions of N.C.Gen.Stat. 40-26 are applicable to instant case and that the language of the exceptions or reservations contained in plaintiffs' chains of title were sufficient to put them to inquiry, we consider the effect of the statute and the reservations and exceptions when applied to instant facts.

A party having notice must exercise ordinary care to ascertain the facts, and if he fails to investigate when put upon inquiry, he is chargeable with all the knowledge he would have acquired had he made effort to learn the truth of the matters affecting his interest. Hargett v. Lee, 206 N.C. 536, 174 S.E. 498. However, the rigor of the lis pendens rule has been softened by the equitable requirement that the means of information should be accessible to those who are careful enough to search for it. Arrington v. Arrington, supra. It logically follows that this equitable requirement would apply with equal force when a party is charged with notice by means other than lis pendens.

3 Merrill on Notice, § 1159, at 79 (1952) states:

"Concomitant to the rule that the lis pendens notification is confined to the apparent effect of the pleadings, they must contain a description of the property affected. As has been said, ``the res must be sufficiently described in the pleadings.' Hence the lis pendens notification will be confined to the property specified in the papers, and where a partial interest only in the property is asserted to be in issue the lis pendens notification does not extend to the entire interest."

It is further well recognized that the purchaser of land is charged with notice of every description, recital, reference and reservation in deeds or muniments in his grantors' chain of title, and that if the facts disclosed in such chain of title are sufficient to put the purchaser on inquiry, he will be charged with notice of what a proper inquiry would have disclosed. Morehead v. Harris, 262 N.C. 330, 137 S.E.2d 174.

The examiner of a real estate title by his search of the records seeks to determine if the grantors in the chain of title were seized of a marketable title, free of all taxes, liens or encumbrances, at the time such grantor made or intends to make the conveyance. In making such examination he is entitled to rely with safety upon an examination of the records and act upon the assurances against all persons claiming under the grantor that what did not appear did not exist. Smith v. Fuller, 152 N.C. 7, 67 S.E. 48.

Ordinarily, proceedings under Chapter 40 are instituted by the condemnor by petition containing an accurate description of the property which it seeks to condemn, thereby placing the landowner on the defendant's or respondent's side of the indexes and cross-indexes of the public records and furnishing accessible means by which the property may be identified.

Blair instituted a special proceeding in the nature of inverse condemnation by petition which was devoid of description as to the property in litigation, and only contained a reference to an entire subdivision by name and reference to a map "which will be presented at the hearing of this case," together with allegations, upon information and belief, that a right of way of 100 feet was confiscated. Blair's name does not appear on the defendant, or respondent, side of the indexes or crossindexes of the public records, nor was the special proceeding instituted by Blair mentioned in any of the deeds or muniments of title in plaintiffs' chains of title. The record contains no map or any evidence which would show that defendants by any sign or overt act of any kind ever indicated a claim to the right of way of greater width than was actually used for highway purposes from ditch to ditch. Defendant Highway Commission only exercised dominion over so much of the right of way as it used in construction of the road from ditch to ditch, and allowed Blair's successors in title to erect and maintain improvements up to the area over which it exercised dominion. Thus, had plaintiffs made diligent search of the public records, they would have found nothing to further locate or give notice of any adverse claim beyond the right of way used for construction of a highway, from ditch to ditch. Had plaintiffs directed their inquiry to an actual examination of the area in which the land in litigation was located, they would have found a highway 30 feet in width, extending from ditch to ditch, which would have been entirely consistent with the reservations or exceptions of record and not inconsistent with their grantors' title.

In 3 Merrill on Notice, § 1167, at 89 (1952) it is stated:

"It may be said that a lawsuit not diligently prosecuted is fraudulently maintained, in so far as the parties urge its pendency as a bar to the acquisition in good faith of interests free of the claims asserted therein. Accordingly, it is held generally that abandonment of the suit or a failure to prosecute it diligently, even after an interlocutory decree, defeats lis pendens notification. Delay to prosecute his claim with dispatch may be as fatal to the cross-complainant relying upon the doctrine of lis pendens as it is to the complainant. * * *"

Certainly the strength of plaintiffs' contentions in the instant case is highly accentuated by the action of the parties to the special proceeding in allowing the special proceeding, to which plaintiffs were not parties, to lie dormant for a period of eleven years before attempting to conclude it by a consent judgment.

Plaintiffs, Blair's successors in title, were not bound by the consent judgment entered in the special proceeding instituted by Blair.

The decision of the trial court was without error, and the decision of the Court of Appeals is

Reversed.