Smith v. Clerk of Superior Court

Campbell, J.

The determinative facts in the instant case are not in dispute. The Harris judgment established a lien against the real estate and the improvements thereon as of 22 May 1965, the date the materials were first furnished. The Air Control judgment, likewise, established a lien against the real estate and the improvements thereon as of 6 July 1965, the date it first furnished materials. By virtue of the statutory provisions permitting such liens to date back to the time materials were first furnished for these improvements, both of the judgments predated the deed of trust, which established a lien as of 29 July 1965. Both the notice of the trustee’s sale under the deed of trust and the trustee’s deed conveying the property specifically provided that the sale and conveyance were made “subject to all prior unpaid taxes, liens and encumbrances of record”. Therefore, the purchasers at the foreclosure sale, who were the predecessors in title of Hutchens and from whom Hutchens derived title to the premises, acquired the premises subject to the outstanding liens of Harris and Air Control.

In connection with the enforcement of a judgment procured by virtue of a materialmen’s lien, G.S. 44-46 provides:

“Upon judgment rendered in favor of the claimant, an execution for the collection and enforcement thereof shall issue in the same manner as upon other judgments in actions arising on contract for the recovery of money only, except that the execution shall direct the officer to sell the right, title and interest which the owner had in the premises or the crops thereon, at the time of filing notice of the lien, before such execution shall extend to the general property of the defendant.”

In Surety Corp. v. Sharpe, 236 N.C. 35, 72 S.E. 2d 109, Mr. Justice Ervin, speaking for the Supreme Court, stated:

“G.S. 44-1 gives a contractor an inchoate lien upon a building and the lot on which it is situated for work done and materials furnished by him in constructing, improving, or repairing such building pursuant to a contract with the owner. Assurance Society v. Basnight, 234 N.C. 347, 67 S.E. 2d 390. When the contractor perfects such inchoate lien in compliance with the requirements of Article 8 of Chapter 44 of the General Statutes, the resulting judgment creates this twofold lien: (1) A special lien on the building and the lot upon which it is situated; and (2) a general lien on the other real property of the owner in the county where the judgment is docketed. Under the controlling statute, the property subject to the special lien, i.e., the building and the lot on which it is situated, must be sold for the satisfaction of the judgment before resort can be had to the other property of the owner. G.S. 44-46; Pipe & Foundry Co. v. Howland, 111 N.C. 615, 16 S.E. 859; McMillan v. Williams, 109 N.C. 252, 13 S.E. 764.”

In support of the judgment entered by Judge Collier, Hutchens contends that the surplus funds retained the identity of the real estate and that he is, therefore, entitled to satisfy his judgments out of the surplus funds rather than out of the real estate itself. In support of this position, he relies upon Realty Co. v. Wysor, 272 N.C. 172, 158 S.E. 2d 7, wherein it was stated:

“. . . The surplus paid into the hands of the clerk of superior court must be used to discharge the junior liens, in the same priority as if resort were made to the land. For the purpose of satisfying the junior liens, and thus for the purpose of this decision, the fund in the hands of the clerk of Superior Court and the land described in the deeds of trust are one and the same.” (Emphasis added)

It is to be noted that Realty Co. involved “junior liens”, while the instant case involves senior liens. The judgments which were assigned to and are now owned by Hutchens, constitute senior liens and not junior liens. Therefore, Realty Co. affords no support to Hutchens under the particular facts here presented.

In the instant case, the surplus funds, which arose from the foreclosure sale and which were deposited by the trustee with the clerk of.superior court, did not constitute real estate. The surplus funds represented the general funds of the plaintiffs, the owners of the premises and the grantors in the deed of trust which was foreclosed. This being so, Hutchens, as owner of the Harris judgment and the Air Control judgment, had no claim against the funds on deposit with the clerk until the real estate and the house thereon were first sold for the satisfaction of these judgments, and only after this was done could there be resort to the plaintiffs’ other property, including the funds in question. The judgment of Judge Collier provided otherwise, and this was error.

Reversed.

BROCK and Morris, JJ., concur.