In Re the Deed of Trust of Simon

243 S.E.2d 163 (1978)

In the Matter of the Deed of Trust of Marvin SIMON, Herbert Cashvan and Claude Harris, partners t/a Lea Company, Grantors, to Archie C. Walker, Trustee, Recorded in Deed of Trust Book 2703, page 481, Guilford County Registry.

No. 7718SC151.

Court of Appeals of North Carolina.

April 18, 1978.

Dees, Johnson, Tart, Giles & Tedder by J. Sam Johnson, Jr., Charles M. Tate and Charles R. Tedder, Greensboro, for petitioner-appellee.

Turner, Enochs, Foster & Burnley by C. Allen Foster, James L. Burnley, IV and Eric P. Handler, Greensboro, for respondents-appellants.

MORRIS, Judge.

Although appellants concede that appellee is entitled to damages, they contend that the damages must be limited by the amount of the bond. We are constrained to agree. For many years, the law in North Carolina has provided that a person wrongfully restrained could elect either (1) to recover only the amount of the bond for the damages he has suffered simply by petitioning the trial court in that action for recovery or (2) to forego his action on the bond and bring an independent tort suit for malicious prosecution. Electrical Workers Union v. Country Club East, 283 N.C. 1, 194 S.E.2d 848 (1973); Shute v. Shute, 180 N.C. 386, 104 S.E. 764 (1920). Petitioner's position in this case is no different. By petitioning the trial court in the present action for a recovery on the bond, the petitioner limited his recovery to the amount of the bond. The reason underlying the rule is obvious. The trial court has the power to award only the amount which the surety has contractually bound himself to pay. In the absence of a bond, the court could award no recovery at all in that action. The injured party would be forced to file a new and independent action, and a full trial on that action would be necessary. The process of recovering on the bond involves a compromise. One can recover on the bond in the same action simply by showing that he was damaged by the restraint, but to do so he must limit his recovery to the amount of the bond. Bank v. Hicks, 207 N.C. 157, 176 S.E. 249 (1934), and Gruber v. Ewbanks, 199 N.C. 335, 154 S.E. 318 (1930). Therefore, petitioner's recovery in this case is limited to $34,500, the amount of the two bonds.

We now determine whether the court correctly allowed interest as an item of damages.

In determining whether interest on the indebtedness is a proper measure of damages, we must look both to the statutes which required the bonds and to the language of the bonds. Respondents argue that the initial $2500 bond was issued pursuant to G.S. 45-21.16 but that the subsequent $32,000 bond was issued pursuant to G.S. 1-292. We agree.

What is now G.S. 45-21.16 was first enacted by the First Session of the 1975 General Assembly. G.S. 45-21.16 provides for a right to appeal the clerk's decision to allow foreclosure to the district or superior court. The appeal automatically entitles the appealing party to a stay provided that he posts "a bond with sufficient surety to protect the prevailing party from any probable loss by reason of the delay in the foreclosure." G.S. 45-21.16(d). The language of G.S. 45-21.16(d) makes reference only to an appeal from the clerk of court. Inasmuch as G.S. 45-21.16 was the first legislation enacted which affected foreclosure proceedings after the decision in Turner v. Blackburn, 389 F. Supp. 1250 (W.D.N. C.1975) (which held the then existing procedures before the clerk unconstitutional), it is safe to assume that the legislature was responding to the due process requirements set out in that case. G.S. 45-21.16, therefore, would be concerned solely with procedures taking place before the clerk of court and appeals therefrom to the district or superior court, not with the more traditional and constitutionally permissible procedures for appeal from the district court or the superior court to the Court of Appeals. Thus, we conclude that G.S. 45-21.16 governs only the bond covering the appeal from the clerk to the trial court; bonds for appeals from the traditional trial courts to the Court of Appeals in foreclosure actions are governed as they previously were by G.S. 1-292.

G.S. 45-21.16(d) requires a bond "to protect the prevailing party from any probable loss by reason of delay in the foreclosure." This language deviates substantially from the language used in other bond statutes. G.S. 1-292, which covers bonds for appeals from the trial courts to the Court of Appeals, requires a bond to cover "waste" and "the value of the use and occupation of the property". G.S. 45-21.34, which covers injunctions against the confirmation of sales, requires a bond covering "costs, depreciation, interest and other damages." The language of G.S. 45-21.16 is considerably broader than the language under either G.S. 45-21.34 or G.S. 1-292. We must, therefore, conclude that the legislature intended that the courts have great latitude in measuring damages under G.S. 45-21.16. In actions involving injunctions against foreclosure, our Supreme Court has in Bank v. Hicks, supra, approved the use of interest on the value of the land, and in Gruber v. Ewbanks, supra, approved the use of the interest accruing on the indebtedness during the period of the injunction. Under the very broad language of G.S. 45-21.16, we believe that either one of these measures of damage would be proper. Therefore, interest accruing on the indebtedness during the pendency of stay would be a proper measure of damages under a bond conforming to the language of G.S. 45-21.16.

It is obvious that the only proper measure of damages under a bond using the very same language as G.S. 1-292 would be waste plus the value of the use and occupation of the property.

Regardless of the statutory language, a surety is liable on his bond under the language of the bond he has actually given rather than the most restricted language which would suffice under the statute. The surety is liable on the instrument in accordance with the language he actually used. See generally Town of Hillsborough v. Smith, 10 N.C.App. 70, 178 S.E.2d 18 (1970), cert. denied 277 N.C. 727, 178 S.E.2d 831 (1971). Therefore, in this case, respondent is liable on the bond for "any probable loss by reason of the delay." Although G.S. 1-292 does not require a bond which uses language as expansive as respondents used in the $32,000 bond, the language actually used in the bond entitles petitioner to use interest accruing on the indebtedness as the measure of damages. Gruber approved accrued interest as an acceptable measure of damages where the bond, pursuant to C.S. § 854 (now repealed), protected the other party against "such damages ... as he sustains by reason of the injunction." The language the court confronted in Gruber closely parallels the very broad language ("any probable loss") used in this bond. Therefore, interest accruing on the debt would be a proper measure of damages. Since the language used for both the $2500 bond and the $32,000 bond is the same, the petitioner is entitled to use the same measure of damages in both instances. Thus, there was no error in the trial court's use of interest on the indebtedness as a measure of damages.

Petitioner in this case proved to the satisfaction of the trial court damages in the amount of $48,983.14 as measured by interest accruing on the indebtedness. We have held that petitioner's recovery is limited to $34,500, the total amount of the two bonds. Because petitioner's recovery cannot exceed $34,500 and because petitioner has already proved damages in excess of that amount, it is unnecessary for this Court to decide whether the trial court's allowance of ad valorem taxes and attorney's fees was appropriate since any error would be harmless. Insurance Co. v. Tire Co., 286 N.C. 282, 210 S.E.2d 414 (1974).

Respondents have also assigned as error the trial court's refusal to allow further discovery by the respondents. It appears that the primary purpose of this effort was to determine facts with respect to the billing procedures of the petitioner's attorney. Respondents do not seriously argue that the calculation of accrued interest was erroneous. Because accrued interest exceeds the amount of the bonds, respondents cannot show wherein they have been harmed by the trial court's refusal to permit further discovery. Thus, there is no reversible error. Insurance Co. v. Tire Co., supra.

Finally, respondents argue that the decision of the trial court should be reversed because the trial court considered affidavits not served on them prior to the hearing. While it may be true that the affidavits were not served on them prior to the hearing, respondents had a period of 12 days between 10 September 1977, the date on which the hearing was commenced, and 22 September 1977, the date on which the hearing was completed, to review the affidavits. While we do not approve this procedure, we do not find prejudice to respondents sufficient to warrant reversal. Story v. Story, 27 N.C.App. 349, 219 S.E.2d 245 (1975).

For the reasons we have previously stated, the petitioner is entitled to recover $34,500, the amount of the two bonds, with interest thereon as provided in the judgment entered. The case, therefore, will be remanded to the trial court for entry of judgment in the amount of the total of the two bonds, plus interest thereon. The judgment of the trial court is

Affirmed in part; reversed in part; and remanded.

HEDRICK and ARNOLD, JJ., concur.