Court Opinion

ID: 6698478
Source: CourtListenerOpinion
Date Created: 2022-07-20 22:01:50.298229+00
Date Added: 2024-06-11T16:01:19.838973
License: Public Domain

Sea well, J.,
dissenting: If the subject dealt with in this decision were not so important I would content myself with a simple dissent, without discussion, hut I think that it operates to destroy the force and effect of a progressive and salutary law, upon which those who have the duty of investigating and abstracting titles, and the profession generally, have been accustomed to rely, and who are now turned back to the uncertainty and difficulties of a blind search.
Succinctly stated, the holding is that statutes requiring notice of Us pendens to be filed and properly cross-indexed in a Us pendens docket do not apply to a suit to foreclose a mortgage.
The principal reasons assigned may he summarized: that a foreclosure suit is not an “action affecting the title to land”; that the registration of the instrument is sufficient notice of the pendency of an action to foreclose it; that because of the notice by registration of the mortgage or other instrument, the statute must he construed as applying only to actions brought to enforce equities in land incapable of registration, such as parol trusts, cancellation or correction of instruments for fraud or mistake, and the like; and that the suit brings the property in custodia legis.
As will be observed, these reasons do not rest upon any ground peculiar to our statute, hut are necessarily predicated of all similar statutes wherever found. Similar statutes in a great number of the United States are practically identical in verbiage with our own, but none of the theories above suggested has been accepted by these courts or by the text writers on the subject. We stand alone.
Since, under C. S., 502, an action shall not be deemed to have been begun against any person not a party to the suit until the notice of Us pendens required by the statute has been cross-indexed, it becomes, as I insist, a simple question whether a foreclosure suit is an action affecting the title to property. This, it seems to me, is hardly arguable. At any rate, it has been uniformly so considered. See cases cited below. If so, I think it should he recognized that the Legislature, in the exercise of a legitimate power has substituted this mode of notice for all others which might be suggested as theretofore efficient and has applied it to the class of cases we are now considering.
The situation is simply this. When these defendants were brought into the case, the mortgage sued upon by plaintiff had become subject *737to tbe bar of tbe statute of limitations, wbieb they tben pleaded. Stancill v. Spain, 133 N. C., 76, 45 S. E., 466. Tbis brings up tbe question dealt witb in tbe main opinion: What did tbey get by tbeir mesne title from tbe mortgagor ?
Our law requiring tbe registration of mortgages dates back to tbe Act of 1829; it is now section 3311 of tbe Consolidated Statutes. Its purpose was to prevent frauds and to apprise purchasers and creditors of tbe existence and nature of the encumbrance. Starke v. Etheridge, 71 N. C., 240, 244. It bas never before been suggested that it bad any other purpose. It is, of itself, however, notice of tbe existence of tbe lien effective only as long as tbe lien is alive. Cowen v. Withrow, 112 N. C., 736, 740, 17 S. E., 575, 576; Collins v. Davis, 132 N. C., 106, 43 S. E., 579; Bank v. Sauls, 183 N. C., 165, 170, 110 S. E., 865, 867.
But tbe purchaser, either from tbe mortgagor directly or by mesne conveyances ensuing upon a sale under a valid second mortgage, as we find here, acquires more than tbe bare right to pay off tbe debt and remove tbe encumbrances — he gets tbe equitable title of tbe mortgagor, which, upon tbe termination of tbe trust created by tbe senior mortgage other than by foreclosure, becomes tbe legal title. Tbe term, “equity of redemption,” as now used, refers to such equitable estate. “A mortgage or deed of trust in tbe nature of a mortgage is intended as security for tbe payment of money, or for tbe performance of some collateral act, and becomes void upon such payment or performance. A ‘mortgage’ does not invest tbe mortgagee witb an absolute and indefeasible title. Tbe equitable title, called tbe ‘equity of redemption,’ remains in tbe mortgagor. . . . There is no difference in legal effect between a mortgage witb a power of sale and a deed of trust executed to secure a debt. . . . Both are securities for a debt. Both create specific liens on tbe property; and in both tbe equitable title or right of redemption remains in tbe debtor, and is an estate or interest in tbe property that tbe debtor may sell, or that may be seized or sold under judicial process. . . .” Words and Phrases, Perm. Ed., Vol. 15, p. 80; Brecht v. Law Union & Crown Ins. Co., 153 F. 452, 455; Ladd v. Johnson, 32 Ore., 195, 200, 49 Pac., 756; Hawkins v. Stiles, 158 S. W., 1011, 1024 (Tex. Civ. App.); Walker v. King, 44 Vt., 601, 612; Grant v. Cumberland Valley Cement Co., 58 W. Va., 162, 52 S. E., 36.
Those jurisdictions which regard mortgages and deeds of trust as mere liens on tbe land to secure debts, where that is tbeir purpose, without undue regard to tbe niceties anciently prevailing when forfeiture rendered absolute tbe legal title conveyed in tbe trust, prefer to regard tbe legal estate as still subsisting in tbe mortgagor, subject to tbe lien. Seals v. Chadwick (Del.), 2 Pennewill, 381, 45 Atl., 718; Messer v. American Eagle Fire Ins. Co., 227 Ky., 3, 12 S. W. (2d), 358; Logan County v. *738McKinley-Lanning Loan & Trust Co., 70 Neb., 406, 101 N. W., 991; Higgs v. McDuffie, 81 Ore., 256, 158 Pac., 953; Navassa Guano Co. v. Richardson, 266 S. C., 401, 2 S. E. (2d), 307.
That tbe term, “equity of redemption,” as referring to tbe equitable title of tbe mortgagor, is so regarded in our State there can be no doubt. Hemphill v. Ross, 66 N. C., 477; Fraser v. Bean, 96 N. C., 327, 2 S. E., 159; Stevens v. Turlington, 186 N. C., 191, 119 S. E., 210; Layton v. Byrd, 198 N. C., 466, 152 S. E., 161.
Tbe conveyance of tbe encumbered lands by tbe mortgagor, or trustor, or title obtained through mesne conveyances, confers upon tbe assignee all tbe rights, with respect to tbe lands conveyed, which tbe original mortgagor bad, including tbe right to make legal or equitable defenses against foreclosure which would be available to tbe mortgagor. He has, therefore, tbe right to rely upon tbe statute of limitations against such mortgage in tbe same way and to tbe same extent as tbe original mortgagor. Stancill v. Spain, 133 N. C., 76, 45 S. E., 466. If available, it will have tbe effect of destroying tbe lien and terminating tbe trust, in which case bis equitable title will draw to it tbe legal title, as it would have done bad be been tbe original mortgagor.
Nothing else appearing, tbe statute was available here because as to tbe Irvins, appellants, action was not brought until they were made parties to tbe suit, which was admittedly more than ten years after tbe last payment on tbe mortgage. The plaintiff is therefore relegated to such other protection as it may have against tbe claim of innocent purchase without notice.
There is none in contemplation of tbe present situation, except tbe institution of a foreclosure action in apt time against those who are at tbe time concerned with tbe title or lien, and tbe filing of a notice of Us pendens as to all others who may become purchasers pendente lite.
There can be no question as to tbe fact that statutory Us pendens substitutes its provisions for tbe common law wherever it applies. Badger v. Daniel, 77 N. C., 251; Todd v. Outlaw, 79 N. C., 240; Collingwood v. Brown, 106 N. C., 362, 368, 10 S. E., 868, 870. Such a statute — now C. S., 500 — has been on our books for a sufficient length of time to be often reviewed by tbe courts, and its effect on tbe common law doctrine fully explained. This statute, as it stood before tbe 1919 amendment, requires tbe filing of a notice of lis pendens and provides that, “In action affecting tbe title to real property, the plaintiff, at or any time after a warrant of attachment is issued, or a defendant when be sets up an affirmative cause of action in bis answer and demands substantive relief, at or any time after tbe time of filing bis answer, if it is intended to affect real estate, may file with tbe clerk of each county in which tbe property is situated a notice of tbe pendency of tbe action, containing *739the names of the parties, the object of the action, and the description of the property in that county affected thereby.”
Thereafter the pendency of an action was no longer sufficient to bind the purchaser of lands in controversy where they lay in another county (because of the want of notice of Us pendens in that county). However, even under this statute an action pending in the county where the land lies, in which appear the names of the parties to the suit, the object of the action, and a description of the property to be affected was notice of Us pendens in that county, only because such a suit, with its pertinent disclosures, was a sufficient compliance with the Us pendens statute, and no further notice of Us pendens was required. Badger v. Daniel, supra; Todd v. Outlaw, supra; Culbreth v. Hall, 159 N. C., 588, 75 S. E., 1096; Lamm, v. Lamm, 163 N. C., 71, 79 S. E., 290; Dalrymple v. Cole, 170 N. C., 102, 86 S. E., 988; ibid., 181 N. C., 285, 107 S. E., 4; Collingwood v. Brown, supra.
C. S., 501 (sec. 464 of the Revisal, as amended by ch. 31, Public Laws of 1919; see Michie’s Code, 1939), provides as follows:
“Any party to an action desiring to claim the benefit of a notice of Us pendens, whether given formally under this article or in the pleadings filed in the case, shall cause such notice to be cross-indexed by the clerk of the superior court in a docket to be kept by him, to be called Record of Lis Pendens, which index shall contain the names of the parties to the action, where such notice (whether formal or in the pleadings) is filed, the object of the action, the date of indexing, and sufficient description of the land to be affected to enable any person to locate said lands. The clerk shall be entitled to a fee of twenty-five cents for indexing said notice, to be paid as are other costs in the pending action.”
C. S., 502 (sec. 462 of the Revisal, as amended by the compilers of the Consolidated Statutes), provides:
“From the cross-indexing of the notice of Us pendens only is the pend-ency of the action constructive notice to a purchaser or incumbrancer of the property affected thereby; and every person whose conveyance or incumbrance is subsequently executed or subsequently registered is a subsequent purchaser or incumbrancer, and is bound by all proceedings taken after the cross-indexing of the notice to the same extent as if he were made a party to the action. For the purposes of this section an action is pending from the time of cross-indexing the notice.”
It will be noted that the radical changes effected in the law are those requiring cross-indexing of a notice of Us pendens and making such notice effectual only from the date of the filing and further providing that as to any party, and for the purposes of the section, “an action is pending from the time of cross-indexing the notice.”
*740Since these changes were made in the law, several cases touching the subject have been reported, but the factual situation in all of them escaped the statute — in Brinson v. Lacy, 195 N. C., 394, 142 S. E., 317, and Dalrymple v. Cole, supra, because the transfer of title took place before this change in the law; in Threlkeld v. Malcragson Land Co., 198 N. C., 186, 151 S. E., 99, because action was upon a note, not the mortgage securing it, and therefore did not affect the title to land; and in Pierce v. Mallard, 197 N. C., 679, 150 S. E., 342, because the action involved attachment and the land was taken in custodia legis and was subject, upon recovery by plaintiff, to a lien superior to that of other judgments taken after the effective date of the attachment. Perhaps the real basis of decision in that case, from our present viewpoint, should be that the judgment docket upon which the attachment is noted (see O. S., 807) is required to be cross-indexed (0. S., 613, 952 [4]).
In the case at bar the point is squarely presented. It is my opinion that the pending action itself did not constitute notice of lis pendens at the time of the purchase by appellants because the plain wording of the statute — C. S., 501, 502 — requires cross-indexing of the notice to give it that effect and neither the summons docket of the Superior Court nor the civil issue docket, to which cases are transferred after the pleadings have been filed and the issues joined, is required to be cross-indexed, and in practice they are not so indexed. C. S., 952 (3).
There is no question that the requirement of notice of lis pendens applies to foreclosure suits. Ordinarily, the pendency of a suit to foreclose a mortgage on lands is sufficient notice of Us pendens to affect purchasers pendente lite with notice and bind them by the judgment in the ease. But this is only true where statutes requiring notice of lis pendens regarding interest in lands have not been enacted. Where such statutes exist, as they do in our State, such a foreclosure suit comes within its provisions as would a suit asserting any other interest in the lands. Jones, Mortgages, Vol. 3, 8th Ed., p. 1799; McKinney v. Sutphin, 196 N. C., 318, 145 S. E., 621. “Applications of the doctrine accordingly occur in connection with actions of ejectment as well as in connection with equitable proceedings, such as suits to foreclose a mortgage or enforce any other lien.” Tiffany, Real Property, 3rd Ed., sec. 1295.
I think this branch of the subject is sufficiently dealt with in the'terse statement made in Wiltsie on Mortgage Foreclosure, 5th Ed., Vol. 1, sec. 464, directed pointedly to foreclosure suits: “Where a notice of Us pendens is required by statute its object is to give constructive notice of the pendency of the suit to all parties dealing with the defendant in regard to the land, the title to or possession of which is to be affected by the suit, and to bind them by the judgment in the same manner as though they had originally been made parties to the action. Where a *741notice is not filed as required by tbe statute, tbe judgment of foreclosure and tbe sales thereunder are not operative as against persons wbo, without notice and pending the suit, succeed to the title or interest in the property of a party to the action.” To the same effect is Jones, Mortgages, loc. cit., supra; Jones v. Williams, 155 N. C., 179, 71 S. E., 222; Threlkeld v. Malcragson Land Co., 198 N. C., 186, 190, 151 S. E., 99, 101; Broom v. Armstrong, 137 U. S., 266, 34 L. Ed., 428; 34 Am. Jur., 377.
Jones v. Williams, supra, follows the lis pendens statute as it then existed and as it modified the common law, although the action was for mortgage foreclosure. It proceeded on authority of the cited cases, including Collingwood v. Brown, supra, and the rationale of decision was the same as in the cases cited in its support' — that the pleadings themselves were a compliance with the statute. It is clear from the reservation thus made that the pendency of the suit was not good as it had been at common law; in a county other than that in which the proceeding was brought, notwithstanding that registration had been made in that county.
The theory that Jones v. Williams, supra, intended to withdraw such eases from the operation of the Us pendens statute falls to pieces when we observe that the statute then being considered expressly and eo nomine recognized mortgage foreclosure suits as being within the category of actions affecting the title to land. Rev., sec. 460. The statute was subsequently changed only with regard to the additional data required when the subject of the action was mortgage foreclosure.
I cannot accept the suggestion that the statutes of Us pendens apply only to equities in real estate incapable of registration, such as parol trusts, correction of instruments because of fraud or mistake, and the like, or that the registration acts are sufficient to give notice of a pending-suit. The main opinion, in support of this proposition, quotes certain statements from Bennett on Lis Pendens, but, I think inadvertently, misses the paragraph that explains them. At most, these quotations only go to the effect of the common law doctrine of lis pendens upon registration laws and the fact that it does not affect them. For instance, if the law requires an instrument to be registered, the filing of lis pendens will not take its place. The one is a rule established by the court to make the judgment effective; the other is positive law. But I do not gather anywhere from this work that registration has any effect as a substitution for Us pendens. On the contrary, and here is the paragraph to which I have referred.
“Where the property involved is contained in an unregistered mortgage, which by the statutes of the State is required to be registered before becoming effective as against bona fide purchasers and creditors, *742the filing of the bill to establish such unregistered mortgage will not constitute constructive notice lis pendens to such subsequent purchaser or creditor. In such cases the courts give force to the registry laws and hold the superior equity in the pendente lite purchaser or creditor, because the law has appointed a place where mortgages must be registered in order to be notice to purchasers, and if there be no registry there the purchaser is not held to constructive notice [of the mortgage] by any other means.”
There is a further expression in the main opinion somewhat as follows : “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. . . . They are each record notices.” This is taken verbatim from Jones v. McNarrin, 68 Me., 334, 339. In that case the opinion adds: “A purchaser must consult both places of record for light and information.” It is interesting to note that in that case the suit was to enforce a recorded lien and the case in effect holds that registration will not take the place of a notice of Us pendens. The registration was referred to only because of the fact that an ambiguous description existed both upon the record and in the pending suit.
We must concede to the Legislature the purpose, as we certainly must the right, to prescribe the mode in which notice of Us pendens may be given in actions “affecting the title to real property,” in the enactment of these statutes, C. S., 500, 501, 502, which have, step by step, entirely relieved the harshness of the common law rule by providing a convenient place where the notice may be found, thus substituting certainty for the admitted confusion and harshness of the common law.
The contention that the notice required by the statute of lis pendens is not necessary in foreclosure suits is altogether inconsistent with the decisions of this Court. Wherever these decisions have dealt with foreclosure suits they have recognized the necessity of the notice required by the lis pendens statute, and that the statute is substituted for the common law rule. Todd v. Outlaw, supra; Dancy v. Duncan, 96 N. C., 111, 1 S. E., 455; Jones v. Williams, supra. This distinction is noted and upheld in Collingwood v. Brown, supra, in which Justice Shepherd, speaking for the Court, and commenting on Todd v. Outlaw, supra, and defining the effect of the lis pendens statute (and incidentally the function of registration) holds that the statute is paramount :
“We are of the opinion, however, that, as to real property there is hut one rule of lis pendens in North Carolina, and that the provisions of The Code (sec. 229) (now C. S., 500) are a substitute for the common-law rule. When the Court held, in the cases cited, that it was not necessary to file a *743formal notice of Us pendens wben the action was pending in the county in wbicb the land was situated, we do not understand that it intimated that two rules of lis pendens, varying in their extent and operation, prevailed in this State.
“As Bynum, J., in Todd v. Outlaw, supra, very justly remarks: ‘It would seem that the purpose of our statute was to assimilate the law of Us pendens to the registration laws and the docketing of judgments, and to produce consistency and certainty in the doctrine of constructive notice.’ This consistency can be secured by holding, as we do, that where the action is brought in the county where the land is situated, and the pleadings contain ‘the names of the parties, the object of the action, and the description of the property to be affected in that county,’ that this is a substantial compliance with The Code, sec. 229, as to the filing of notice, and puts in operation all of the provisions of the statute. . . .
“Again, it is hardly probable, in view of the legislation in England and many of the United States, dictated by the demands of public convenience and necessity and commerce, that this important statute was only to apply in those rare instances where suits affecting real property were brought in counties in which the land was not situated.
“The rule of Us pendens is often regarded as harsh in its operations, but it is universally admitted to be based upon public policy imperatively demanded by a necessity which can be met and overcome in no other manner. Freeman on Judgments, 191. Where, however, its rigors may be softened, and at the same time its advantages preserved, it is the duty of the Legislature to act, as it has done in this State, for the protection of purchasers and subsequent incumbrances.”
Since Todd v. Outlaw, supra; Dancy v. Duncan, supra; and Jones v. Williams, supra, regarded actions affecting the title to real estate, including foreclosure suits, as completely subject to the law requiring statutory notice of Us pendens as the law then stood, it seems to me that the conclusion -is inescapable that when the statute was amended by C. S., 501 and 502, requiring the cross-indexing of the notice of Us pendens in a separate Us pendens docket, compliance with that statute is still necessary to bind a tona fide purchaser pendente lite. Formerly the pleadings disclosed the threefold requirements of the statute as notice — -a statement of the names of the parties, a description of the land, and the purpose of the action — and only by virtue of these facts did it serve as notice. The additional requirement is that such notice shall he cross-indexed in a separate Us pendens docket and the consequence annexed in the statute is plainly that if this is not done the bona fide purchaser will not be bound by the judgment.
The mere fact that property is in litigation through a foreclosure suit or in any other way does not take it in custodia legis; nor does either the *744common law or statutory doctrine of lis pendens so regard it. The term is of-technical significance, applicable only where in some appropriate proceeding the property in question has been seized or taken by the court, as in attachment, levy under execution, receivership, and the like. It has no application to the principle of Us pendens. Wiltsie, op. cit., supra, p. 154, sec. 449.
I may say that there is no principle better established than that under the common law lis pendens operated altogether ex proprio vigore and without external aid. It was an arbitrary rule established by the courts as a mere device to keep the subject of the action in siaiu quo until final judgment. While the weight of authority is decidedly to the effect that no theory of notice is involved in the doctrine of lis pendens at the common law, if the doctrine was ever based upon any theory of notice, such notice was never supposed to have been given from any source other than the mere pendency of the action and because of an antiquated and outmoded assumption that “all the inhabitants of the realm are supposed to pay attention to and be familiar with what is going bn in courts of justice.” Fox v. Reeder, 28 Oh. St., 181; 34 Am. Jur., 363, see. 3 and notes. Speaking of the notice of Us pendens afforded from the pendency of the action, Thompson, Real Property (1940), sec. 4508 (4237), says: “The cases generally hold that the rule of Us pendens is a harsh and oppressive one when given operation against a bona fide purchaser without notice. One relying on the rule must understand that his claim is strictissimi juris.” The statutory lis pendens, together with the 1919 amendment to the law is calculated to relieve this harshness and to give the intending purchaser a more reasonable notice, since it does not require him to explore the jungle of litigation in the clerk’s office without the guidance afforded by a proper index. But whatever the reason, it is our business to interpret, not to write the law.
Action was commenced against the Irvins, appellants, only when they were made parties to the suit. C. S., 404, 475; Hatch v. R. R., 183 N. C., 617, 112 S. E., 529; Jones v. Vanstory, 200 N. C., 582, 157 S. E., 867. By that time the statute of limitations had run against the mortgage, and it was adequately pleaded. Since the pendency of the suit falls short of compliance with the statute in the essential of cross-indexing, and was therefore not constructive notice, and since appellants had no actual notice of the pendency of the suit and were bona fide purchasers, the bar of the statute was not repelled. In law they are innocent purchasers without notice.
These laws requiring notice of Us pendens and requiring these notices to be properly cross-indexed in a Us pendens docket are remedial in their nature. Even if it be conceded — and I do not concede it — that the registration of an instrument had the prophetic power to point out the *745existence of a lawsuit not yet begun, it was still within the power of the Legislature to provide a more reasonable notice more appropriate to the progress and to the crowded business transactions and multiplied litigation of the modern age, and their attempt to do so should be sustained by the court in the spirit accorded the beginning of such a reform as expressed in Todd v. Outlaw, supra. The act as heretofore understood took an intolerable burden from those whose duty it is to investigate and abstract titles and who have become familiar with the aid given by the Us pendens docket and I doubt if they will welcome a return to the old condition.
But if the Legislature should see fit again to deal with a frustrated statute, I do not know what clearer language it might use to express its purpose.
There was no reason why the plaintiff in this action should not have observed the simple requirements of the statute, and I think the judgment should be reversed.