Lawing v. Jaynes, 79

• Decision Date: 01 July 1974
• Docket Number: No. 79,79
• Citation: 206 S.E.2d 162,285 N.C. 418
• Court: North Carolina Supreme Court
• Parties: Ernest LAWING and wife, Jenny Lee Lawing v. Arthur JAYNES and wife, Edith Jaynes. Ernest LAWING and wife, Jenny Lee Lawing v. John C. McLEAN and wife, Kathleen H. McLean.

Page 162

206 S.E.2d 162

285 N.C. 418

Ernest LAWING and wife, Jenny Lee Lawing v. Arthur JAYNES and wife, Edith Jaynes.

Ernest LAWING and wife, Jenny Lee Lawing v. John C. McLEAN and wife, Kathleen H. McLean.

No. 79.

Supreme Court of North Carolina.

July 1, 1974.

Bennett, Kelly & Cagle, P.A. by E. Glenn Kelly, Asheville, for plaintiffs-appellants.

Prince, Youngblood & Massagee by Kenneth R. Youngblood and Boyd B. Massagee, Jr., Hendersonville, for defendants-appellees.

BOBBITT, Chief Justice.

In the agreement of 9 March 1964 defendants Jaynes granted to plaintiffs an option to purchase the real property at a purchase price to be computed on the basis of $500.00 per acre, or fractional part thereof, as determined by a surveyor acceptable to both parties, and the additional sum of $9,000.00 for the dwelling. The agreement provided: 'This option shall exist and continue for a period of TWO CALENDAR YEARS from the 1st day of March, 1964, but no longer.'

In their agreement of 9 March 1964, defendants Jaynes also granted to plaintiffs an option to purchase the interest of defendants Jaynes in a herd of cattle and in a milk base. The Court of Appeals held, and we agree, that these options were severable. Since plaintiffs elected to exercise only their option relating to the real property, the terms of the separate option relating to the cattle and milk base are not germane to decision.

The Court of Appeals held, and we agree, that the evidence supports Judge Thornburg's findings to the effect that, within the time provided therefor, plaintiffs duly exercised their option to purchase the real property, including the dwelling thereon.

Moreover, we agree with the disposition made by the Court of Appeals of defendants' assignments of error relating to Judge Thornburg's rulings on the admissibility of evidence. Hence, as between plaintiffs and defendants Jaynes, plaintiffs were entitled to specific performance. Although their action to compel specific performance was instituted 13 April 1966, and had been at issue since 31 May 1966, it was pending and awaiting trial on 4 March 1971 when defendants Jaynes conveyed to defendants McLean all the real property except the small portion on which the Jaynes dwelling was located.

The crucial question is whether defendants McLean, in respect of the portion of the real property conveyed to them, acquired rights therein superior to the rights of defendants Jaynes, their grantor.

It is here noted that, in order to obtain the relief they seek in their action against defendants McLean, plaintiffs must first establish their right to compel specific performance by defendants Jaynes. Since the two cases were consolidated for trial, the findings of fact of Judge Thornburg pertinent to plaintiffs' right to compel specific performance by defendants Jaynes apply to the Lawing-McLean case as well as to the Lawing-Jaynes case.

Defendants McLean excepted to and assigned as error Finding of Fact No. 10 that, on or before the execution and recordation of the Jaynes-McLean deed, defendants McLean had constructive notice of plaintiffs' recorded option and of their pending action against defendants Jaynes.

G.S. § 1--118 provides: 'From the cross-indexing of the notice of lis pendens only is the pendency 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.'

Since the Jaynes-McLean deed was executed and recorded in March of 1971, the Notice of Lis Pendens cross-indexed on 22 May 1973 did not constitute constructive notice to defendants McLean of the pendency of the Lawing-Jaynes action.

To what extent, if any, did the option agreement, which was recorded in March of 1964, constitute constructive notice to defendants McLean that plaintiffs had exercised their option and had instituted an action to compel specific performance?

G.S. § 47--18(a) provides: 'No conveyance of land, or contract to convey, or lease of land for more than three years, shall be valid to pass any property as against lien creditors or purchasers for a valuable consideration from the donor, bargainor or lessor but from the time of registration thereof in the county where the land lies. . . .'

By the unilateral contract of 9 March 1964, defendants Jaynes granted to plaintiffs Option rights. Their contract did not legally bind plaintiffs to purchase the property at any time at any price. See Sandlin v. Weaver, 240 N.C. 703, 707, 83 S.E.2d 806, 809 (1954), in which the Court quotes from 55 Am.Jur., Vendor and Purchaser § 27, the following: 'An option to purchase real property may be defined as a contract by which an owner of real property agrees with another person that the latter shall have the privilege of buying the property at a specified price within a specified time, or within a reasonable time in the future, and which imposes no obligation to purchase upon the person to whom it is given. Until the holder or owner of an option for the purchase of property exercises it, he has nothing but a mere right to acquire an interest, and has neither the ownership of nor any interest in the property itself.' Accord, 91 C.J.S. Vendor & Purchaser § 4.

'The optionee has no 'interest' in the land itself, legal or equitable, whereas in a contract for sale, both the vendor and the vendee have 'interests' in the land, and both are bound by certain obligations. An option is not a contract to sell, but it is transformed into one on acceptance by the optionee.' Christopher, Options to Purchase Real Estate in North Carolina, 44 N.C.L.Rev. 63, 64 (1965), citing numerous supporting cases.

G.S. § 47--18(a) refers expressly to conveyances of land, to contracts to convey land, and to leases of land for more than three years. It provides that These are not valid to pass any property as against lien creditors or purchasers for a valuable consideration from the donor, bargainor or lessor but from the time of registration thereof in the county where the land lies.

'The registration or record of an instrument operates as constructive notice only when the statute authorizes its registration; and then only to the extent of those provisions which are within the registration statutes. Therefore, the registration of a deed or other instrument not entitled or required to be recorded is not constructive notice to subsequent purchasers. . . . ' 92 C.J.S. Vendor & Purchaser § 341b(1), pp. 260--261. The author cites as supporting authority the decision of this Court in Chandler v. Cameron, 229 N.C. 62, 47 S.E.2d 528, 3 A.L.R.2d 571 (1948), which, as succinctly and accurately stated in the fourth headnote (N.C. Report), holds: 'Registration is constructive notice as to all instruments authorized to be registered, but in not constructive notice of provisions not coming within the registration laws, even though embodied in an instrument required to be recorded.'

Under G.S. § 47--18(a) registration of an option to purchase land is not essential to its validity as against lien creditors or purchasers for a valuable consideration from the optionor. Unless modified by Chapter 1174, Session Laws of 1961, codified as G.S. § 47--117 through G.S. § 47--120, it did not charge defendants McLean with Constructive notice thereof.

The 1961 Act is entitled 'An Act to Amend Chapter 47 of the General Statutes so as to Provide for the Filing of Memoranda of Leases and Options for Registration.' The portion thereof enacted as G.S. § 47--119 is entitled, 'Form of memorandum for option to purchase real estate,' and provides: 'An option to purchase real estate May be registered by registering a memorandum thereof which shall set forth: (1) The names of the parties thereto; (2) A description of the property which is subject to the option; (3) The expiration date of the option; (4) Reference sufficient to identify the complete agreement between the parties. Such a memorandum may be in substantially the following form: . . .' (our italics.) (The statute then sets forth a short form prepared in accordance with the quoted provisions.) G.S. § 47-118 contains similar provisions with reference to 'a lease of land or land and personal property.' G.S. § 47--120 provides: 'Such memorandum of an option to purchase real estate, or lease as proposed by G.S. 47--118 or 47--119, when executed, acknowledged, delivered and registered as required by law, shall be as good and sufficient notice, and have the same force and effect as if the written lease or option to purchase real estate had been registered in its entirety.' Although the 1961 Act provides that an option May be registered by using the approved short form memorandum, the registration thereof is only 'as good and sufficient notice, and (has) the same force and effect as if the written . . . option to purchase real estate had been registered in its entirety.'

Since the question has not been considered in the briefs, we make no ruling with reference to whether the recordation of the option agreement was sufficient to give defendants McLean constructive notice of the contents thereof. Our further consideration with reference to constructive notice assumes that defendants McLean had knowledge of The contents of the recorded option prior to the deed of 4 March 1971 from defendants Jaynes to defendants McLean.

Inspection of the recorded option would have disclosed that the time within which plaintiffs were permitted to exercise their option had expired on 1 March 1966, that is, more than five years before the deed from defendants Jaynes to defendants McLean.

We note that, under the registration statutes of...