Ridge Community Investors, Inc. v. Berry

Annotate this Case

239 S.E.2d 566 (1977)

293 N.C. 688

RIDGE COMMUNITY INVESTORS, INC., F. L. Wrenn, Trustee, W. Clyde Burke and wife, Norma B. Burke, Harold H. Griswold and wife, Dorothy B. Griswold, and Mill Ridge Property Owners Association, Inc. v. Billy Eugene BERRY and Ward Carroll, Sheriff of Watauga County, North Carolina.

No. 41.

Supreme Court of North Carolina.

December 15, 1977.

*569 Dark & Edwards, by L. T. Dark, Jr., Siler City, and Henderson, Henderson & Shuford, by David H. Henderson and William A. Shuford, Charlotte, for plaintiff-appellants.

Harkey, Faggart, Coira & Fletcher, by Francis M. Fletcher, Jr., and Henry A. Harkey, Charlotte, for defendant-appellee, Billy Eugene Berry.

BRANCH, Justice.

This appeal presents the question of whether the trial judge erred by denying plaintiffs' application and motion for a preliminary injunction prohibiting defendants from enforcing the claim of lien filed in Watauga County. It is plaintiffs' position that he did.

Plaintiffs first contend that the Mecklenburg Superior Court is without jurisdiction to enforce a claim of lien filed in Watauga County. In support of this contention, they point to the following language in G.S. 44A-12:

(a) Place of Filing.All claims of lien against any real property must be filed in the office of the clerk of superior court in each county wherein the real property subject to the claim of lien is located. The clerk of superior court shall note the claim of lien on the judgment docket and index the same under the name of the record owner of the real property at the time the claim of lien is filed. An additional copy of the claim of lien may also be filed with any receiver, referee in bankruptcy or assignee for benefit of creditors who obtains legal authority over the real property. G.S. 44A-13(a) further provides: Where and When Action Instituted. An action to enforce the lien created by this Article may be instituted in any county in which the lien is filed. No such action may be commenced later than 180 days after the last furnishing of labor or materials at the site of the improvement by the person claiming the lien. If the title to the real property against which the lien is asserted is by law vested in a receiver or trustee in bankruptcy, the lien shall be enforced in accordance with the orders of the court having jurisdiction over said real property.

Plaintiffs argue that since a notice and claim of lien must be filed in every county in which the land to be encumbered lies and since an action to enforce the claim may be instituted "in any county in which the lien is filed," the necessary implication is that such actions may be brought only in the county in which the land lies.

This Court considered a similar question in Sugg v. Pollard, 184 N.C. 494, 115 S.E. 153, 155. There an action to foreclose a labor and materialman's lien was instituted in Lee County to enforce a claim of lien filed in Pitt County, the county in which the land was situated. Defendant claimed that plaintiffs had thereby lost their lien and were only entitled to a money judgment. Treating the question as one of venue, this Court stated:

The lien sued upon in this action was duly filed in the county of Pitt, where the land lay. It is not provided in any of these sections where the action to foreclose such lien should be brought, but if it had been brought in any of those cases where the venue is specifically prescribed, still the error in the venue would not have been fatal, and a judgment obtained in any county where the action was brought would not have been invalid for error in the venue, "unless the defendant, before the time of answering expired, demanded in writing that the trial be conducted in the proper county, and the place of trial is thereupon changed by consent of parties, or by order of the court."

See also, Penland v. Church, 226 N.C. 171, 37 S.E.2d 177.

At the time Sugg and Penland were decided, the statutes concerning foreclosure of labor and materialmen's liens contained no language relating to where an action to enforce such lien should be instituted. Amendments to Chapter 44A enacted by the 1969 Legislature by Session Laws 1969, *570 Chapter 1112, effective 1 January 1970, resulted in the language which appears in the above-quoted statutes. We are, therefore, confronted with the question of whether the language contained in G.S. 44A-13(a) stating that the action to enforce a lien "may be instituted in any county in which the lien is filed" is a jurisdictional requirement.

G.S. 7A-240 confers jurisdiction in all civil matters upon the General Court of Justice, and which court within the General Court of Justice is to hear a civil matter is controlled by the venue provisions of Article 7, Chapter 1 of the General Statutes. We are of the opinion that the ambiguous language contained in G.S. 44A-13(a) does not indicate a legislative intent to depart from the established law governing the enforcement of labor and material liens.

This conclusion is buttressed by the recent enactment of an amendment to Chapter 44A. G.S. 44A-13(c), effective 1 July 1977, provides:

Notice of action. Unless the action enforcing the lien created by this Article is instituted in the county in which the lien is filed, in order for the sale under the provisions of G.S. 44A-14(a) to pass all title and interest of the owner to the purchaser good against all claims or interests recorded, filed or arising after the first furnishing of labor or materials at the site of the improvement by the person claiming the lien, a notice of lis pendens shall be filed in each county in which the real property subject to the lien is located within 180 days after the last furnishing of labor or materials at the site of the improvement by the person claiming the lien. It shall not be necessary to file a notice of lis pendens in the county in which the action enforcing the lien is commenced in order for the judgment entered therein and the sale declared thereby to carry with it the priorities set forth in G.S. 44A-14(a). If neither an action nor a notice of lis pendens is filed in each county in which the real property subject to the lien is located within 180 days after the last furnishing of labor or materials at the site of the improvement by the person claiming the lien, as to real property claimed to be subject to the lien in such counties where the action was neither commenced nor a notice of lis pendens filed, the judgment entered in the action enforcing the lien shall not direct a sale of the real property subject to the lien enforced thereby nor be entitled to any priority under the provisions of G.S. 44A-14(a), but shall be entitled only to those priorities accorded by law to money judgments.

In interpreting statutes, the primary duty of this Court is to ascertain and effectuate the intent of the Legislature. Newlin v. Gill, 293 N.C. 348, 237 S.E.2d 819; Highway Commission v. Hemphill, 269 N.C. 535, 153 S.E.2d 22; Lockwood v. McCaskill, 261 N.C. 754, 136 S.E.2d 67. In ascertaining this intent, it is always presumed that the Legislature acted with full knowledge of prior and existing law. State v. Benton, 276 N.C. 641, 174 S.E.2d 793. Further, light may be shed upon the intent of the General Assembly by reference to subsequent amendments which, although normally presumed to change existing law, may be interpreted as clarifying it. See, Childers v. Parker's, Inc., 274 N.C. 256, 162 S.E.2d 481.

The enactment of G.S. 44A-13(c) is a strong indication that it was not the intent of the Legislature to enact a jurisdictional requisite when it used language in G.S. 44A-13(a) to the effect that such action "may be instituted in any county in which the lien is filed." The effect of this amendment is to give protection to purchasers and examiners of titles no matter where the action to enforce the lien is instituted. Had the Legislature intended to create a jurisdictional requirement as to the enforcement of liens, it could easily have done so by the use of explicit language. In our opinion, it is the better practice to file the action to enforce a lien in the county in which the claim of lien is filed. Even so, the General Assembly has the power to regulate proceedings in all courts below the Supreme Court, Highway Commission v. Hemphill, supra, and the procedure for enforcing labor and material liens is for that body.

*571 The Court of Appeals correctly held that the Superior Court of Mecklenburg County had jurisdiction to enforce the claim of lien filed in Watauga County.

Plaintiffs next contend that the Assistant Clerk was without jurisdiction to enter that portion of the default judgment which purports to enforce the claim of lien and, therefore, that part of the judgment is void.

In Pruden v. Keemer, 262 N.C. 212, 136 S.E.2d 604, 607, Justice Bobbitt (later Chief Justice) stated:

The basic question is whether the clerk had jurisdiction to enter the purported default judgment of August 1, 1961. If not, said purported judgment is absolutely void and must be treated as a nullity. Deans v. Deans, 241 N.C. 1, 9-10, 84 S.E.2d 321, and cases cited. The clerk of the superior court has no common law or equitable jurisdiction. McCauley v. McCauley, 122 N.C. 288, 30 S.E. 344. The clerk is a court "of very limited jurisdictionhaving only such jurisdiction as is given by statute." Moore v. Moore, 224 N.C. 552, 555, 31 S.E.2d 690, and cases cited; In re Dunn, 239 N.C. 378, 383, 79 S.E.2d 921; Deans v. Deans, supra. As stated by Seawell, J., in Johnston County v. Ellis, 226 N.C. 268, 279, 38 S.E.2d 31: "The jurisdiction of the clerk of the Superior Court is statutory and limited, and can be exercised only with strict observance of the statute."

Considering a former statute which provided that the clerk could enter judgment only on Mondays, this Court held that a sale based upon a judgment rendered by the clerk on a day other than Monday was void. Ange v. Owens, 224 N.C. 514, 31 S.E.2d 521. Likewise, where the clerk's authority was limited to the entry of voluntary nonsuits and the judgment signed by the clerk showed on its face that the nonsuit was entered upon his findings of fact, the Court held that "the clerk having undertaken to enter a kind of judgment which she had no jurisdiction to enter the judgment so entered is void and is a nullity, and may be so treated at all times." Moore v. Moore, 224 N.C. 552, 31 S.E.2d 690, 692. The Legislature has granted assistant clerks of superior court the same authority as that given to clerks of the superior court. G.S. 7A-102(b). Accordingly, the actions of an assistant clerk of court are also guided by the principles set forth in the cases above discussed.

The authority of a clerk or an assistant clerk of court to enter default judgments and make further orders to consummate foreclosure is found in Rule 55 of the Rules of Civil Procedure. Rule 55, in pertinent part, provides:

(b) Judgment.Judgment by default may be entered as follows: (1) By the Clerk.When the plaintiff's claim against a defendant is for a sum certain or for a sum which can by computation be made certain, the clerk upon request of the plaintiff and upon affidavit of the amount due shall enter judgment for that amount and costs against the defendant, if he has been defaulted for failure to appear and if he is not an infant or incompetent person. A verified pleading may be used in lieu of an affidavit when the pleading contains information sufficient to determine or compute the sum certain. In all cases wherein, pursuant to this rule, the clerk enters judgment by default upon a claim for debt which is secured by any pledge, mortgage, deed of trust or other contractual security in respect of which foreclosure may be had, or upon a claim to enforce a lien for unpaid taxes or assessments under G.S. 105-414, the clerk may likewise make all further orders required to consummate foreclosure in accordance with the procedure provided in Article 29A of Chapter 1 of the General Statutes entitled "Judicial Sales."

Thus, the clerk's authority to enter orders consummating foreclosure in default judgments is limited to judgments entered on a debt which is secured by "any pledge, mortgage, deed of trust, or other contractual security . . . or upon a claim to enforce a lien for unpaid taxes or assessments *572 under G.S. 105-414." Obviously, the entry of that portion of the judgment here under attack was not based on the clerk's statutory authority to enter judgments where the debt was secured by pledge, mortgage, deed of trust or to enforce a lien for unpaid taxes or assessments. We, therefore, must decide whether the enforcement of a claim of lien pursuant to Chapter 44A of the General Statutes is a claim for debt secured by "contractual security."

At common law, liens upon the property of a debtor were created only by contract, by statute, or by usages of trade and commerce. See, Gunton v. Nock, 76 U.S. (9 Wall.) 373, 19 L. Ed. 717. These methods remain the only means by which a lien upon a debtor's property may be created. 51 Am.Jur.2d, Liens, Section 6. Thus, there has always been a distinction between liens created by contract and liens created by statute. There is nothing in the language of Rule 55(b)(1) which blurs this ancient distinction.

Defendant Berry concedes that his statutory lien is not truly "contractual," but he contends that since the lien is founded upon a contract to furnish materials and to perform labor it is, nevertheless, "contractual security." This position is contrary to the long standing distinction between contractual and statutory liens. Our examination of Chapter 44A of the General Statutes and Rule 55 of G.S. 1A-1 discloses nothing which indicates that the Legislature intended that the provisions of 44A be included in every contract which might ultimately result in the establishment of a lien for materials furnished or labor performed.

Furthermore, acceptance of defendant's argument would require us to violate established principles of statutory construction. Pledges, mortgages, and deeds of trust all result from expressions of consent or agreement between the affected parties. They are, in the truest sense, examples of liens upon property created by contract. For us to hold that the terms "other contractual security" includes statutory liens would require us to give a meaning to that term which is wholly distinct and contrary to the connotation of the terms which precede it. Such construction would be contrary to the doctrine of ejusdem generis. See, State v. Ross, 272 N.C. 67, 157 S.E.2d 712; In re Dillingham, 257 N.C. 684, 127 S.E.2d 584; Turner v. Board of Education, 250 N.C. 456, 109 S.E.2d 211.

We hold that liens established pursuant to Chapter 44A of the General Statutes are not "contractual security" within the meaning of Rule 55(b)(1) of the Rules of Civil Procedure and that a clerk or assistant clerk of court is without jurisdiction to make orders consummating foreclosure of liens established pursuant to Chapter 44A of the General Statutes. Therefore, that portion of the judgment entered by the Assistant Clerk of Superior Court of Mecklenburg County which ordered the enforcement of defendants' claim of lien is void.

We turn to defendants' contention that plaintiffs do not have standing to attack the default judgment.

The general rule is that a judgment may not be attacked by one who is a stranger to the action in which it was entered. In re Bank, 208 N.C. 509, 181 S.E. 621. However, this rule is not without exception. A judgment which is void, as opposed to being merely voidable or irregular, may be attacked at any time by anyone whose interests are adversely affected by it. See, Simmons v. Simmons, 228 N.C. 233, 45 S.E.2d 124; Fowler v. Fowler, 190 N.C. 536, 130 S.E. 315. For example, when a judgment operates as a lien upon real property, one who later acquires the property, even after entry of judgment, may move to vacate the judgment on the ground that it is void. Freeman, 1 Judgments, Section 261; 49 C.J.S. Judgments Section 293 at page 542. One qualification to the above-stated exception is that the grounds which support an allegation that a judgment is void must appear upon the face of such judgment, Carpenter v. Carpenter, 244 N.C. 286, 93 S.E.2d 617, or the plaintiff must allege facts which, if supported by competent evidence, would vitiate or nullify an otherwise apparently valid judgment. See, Hinton v. Whitehurst, 214 N.C. 99, 198 S.E. 579.

*573 The grounds upon which plaintiffs here attack the judgment appear upon its face. Obviously, the record owners of the property would be adversely affected by a sale of their property pursuant to the void judgment. We, therefore, hold that plaintiffs have standing to attack the default judgment entered by the Assistant Clerk of Mecklenburg County.

Plaintiffs question the sufficiency of the claim of lien upon which the original action was based. The Court of Appeals did not directly address this question but disposed of this contention by deciding that only the defendants in the prior action had standing to raise that point.

In Priddy v. Lumber Co., 258 N.C. 653, 129 S.E.2d 256, defendant lumber company furnished materials on the property in litigation prior to the time that owners executed a note to plaintiff secured by a deed of trust, which was recorded prior to the time that defendant instituted its action to foreclose its material lien. The owner defendant filed no answer in the action to foreclose and default judgment was entered. Neither plaintiff nor the trustee in the deed of trust securing plaintiffs' note was made a party to the action to foreclose defendants' lien. The property was sold under the lumber company's purported lien and plaintiff bought at the execution sale. Thereafter plaintiff instituted action to determine the priority of liens as between him and defendant lumber company.

By that action, the plaintiff attacked the purported claim of lien upon which the action was based on the grounds that it contained items fraudulently furnished in order to keep the claim alive and that the claim of lien was not filed within the time required by statute. The defendant, on the other hand, contended that plaintiff was estopped from denying the validity of the sale. The trial judge heard the matter without a jury and concluded as a matter of law that defendant's judgment had priority over plaintiff's deed of trust, held the execution sale to be valid and dissolved an existing temporary order restraining the sheriff from completing the sale.

In ordering a new trial, Justice Sharp (now Chief Justice) speaking for the Court, in pertinent part, stated:

If a third person had become the last and highest bidder at the sale, clearly plaintiff would not have been estopped to maintain the priority of his deed of trust. While the defendant's judgment is in all respects binding as between Davis and defendant, the plaintiff is not bound by it since he was not a party to it. Thomas v. Reavis, 196 N.C. 254, 145 S.E. 226.

See also, Childers v. Powell, 243 N.C. 711,92 S.E.2d 65; Assurance Society v. Basnight, 234 N.C. 347, 67 S.E.2d 390, for the proposition that when a subsequent encumbrancer is not joined in the action to enforce a mechanics or materialman's lien, he is not bound by the judgment between the contractor and the owner and may assert his rights, whatever they may be, in a separate action.

In Lumber Co. v. Builders, 270 N.C. 337, 154 S.E.2d 665, 668, we held that where a claim of lien required itemization there must be "a statement in sufficient detail to put interested parties, or parties who may become interested, on notice as to labor performed or materials furnished, the time when the labor was performed and the materials furnished, the amount due therefor, and the property on which it was employed." (Emphasis ours.) Accord, Lowery v. Haithcock, 239 N.C. 67, 79 S.E.2d 204; Cameron v. Lumber Co., 118 N.C. 266, 24 S.E. 7.

In instant case, plaintiffs hold title through the foreclosure and sale of the lands in litigation under a deed of trust securing a note to Wachovia Bank and Trust Company. The deed of trust securing Wachovia's note was executed and recorded prior to the institution of the action in Mecklenburg Superior Court. Neither plaintiffs nor the holder of the note secured by the deed of trust nor the trustee in that deed of trust were made parties to the action to foreclose the lien instituted in Mecklenburg County. Under these circumstances, we conclude that plaintiffs do have standing to attack the sufficiency of the claim of lien.

*574 A preliminary injunction, the relief here sought, is an extraordinary measure taken by a court to preserve the status quo of the parties during litigation. It will be issued only (1) if a plaintiff is able to show likelihood of success on the merits of his case and (2) if a plaintiff is likely to sustain irreparable loss unless the injunction is issued, or if, in the opinion of the Court, issuance is necessary for the protection of a plaintiff's rights during the course of litigation. Waff Bros., Inc. v. Bank, 289 N.C. 198, 221 S.E.2d 273; Pruitt v. Williams, 288 N.C. 368, 218 S.E.2d 348; Conference v. Creech, 256 N.C. 128, 123 S.E.2d 619.

The creation of a cloud on title has been held to result in such injury as to warrant a permanent injunction, 42 Am.Jur.2d, Injunctions, Section 71, and to warrant the continuance of a preliminary injunction. Holden v. Totten, 224 N.C. 547, 31 S.E.2d 635. Here enforcement of the lien and sale thereunder would create a cloud on plaintiffs' title which would require litigation to clear the title.

We are of the opinion that plaintiffs have sufficiently shown the likelihood of success upon the trial of their case upon its merits and that injunctive relief is necessary for the protection of plaintiffs' property rights during the course of this litigation. We, therefore, hold that Judge Snepp erred by denying plaintiffs' application and motion for a preliminary injunction.

The decision of the Court of Appeals is reversed and this cause is remanded to the Court of Appeals with direction that it be remanded to the Superior Court of Mecklenburg County for proceedings consistent with this opinion.

REVERSED AND REMANDED.