Hawks v. Brindle
275 S.E.2d 277
N.C. Ct. App.
1981
Check Treatment
CLARK, Judge.

Plaintiffs assign as error the trial court’s granting of a directed verdict for defendants at the close of plaintiffs’ evidence on the issue of fraud. A motion for directed verdict raises the question of whether the non-movant has produced enough evidence to go to the jury. The non-movant’s evidence must be taken as true and considered in the light most favorable to him, and a directed verdict may be properly granted only if, as a matter of law, the evidence is insufficient to justify a verdict for the non-movant. See W. Shuford, N.C. Civ. Prac. & Proc. § 50-5 (1975) and cases cited therein.

To overcome defendants’ motion for a directed verdict then, plaintiffs had to produce some evidence of each of the essential *22 elements of their claim. To get to the jury on the issue of fraud, the plaintiffs needed to produce evidence (1) that defendants made a definite and specific representation to them that was materially false, (2) that defendants made the representation with knowledge of its falsity, and (3) that they reasonably relied on defendants’ representation. Ragsdale v. Kennedy, 286 N.C. 130, 209 S.E. 2d 494 (1974). We have searched the record and can find nothing in plaintiffs’ evidence which tends to prove that at the time of defendant Arthur Brindle’s alleged representations to plaintiff Robert Hawks, Brindle had any knowledge that the acreage of the tract was less than 6-3/4 acres; that the boundaries were not what he indicated them, according to his information and belief, to be; or that any portion of the tract was subject to the highway right-of-way. “Erroneous statements made by the vendor in the sale of land as to the location of a boundary are not sufficient, standing alone, to impeach the transaction for fraud.” Tarault v. Seip, 158 N.C. 363, 368, 74 S.E. 3, 5 (1912). Just as in the earlier case of Gatlin v. Harrell, 108 N.C. 485, 13 S.E. 190 (1891),

“The whole of the evidence accepted as true did not in any reasonable view of it prove the alleged fraud and deceit. The proof was that the defendants pointed out to the plaintiff certain corners and line-trees and lines of the tract so sold, and that these or some of them were not the true ones; but there is nothing to prove that the defendants knew that they were not the true ones, nor that they fraudulently intended to mislead, deceive and get advantage of the ... plaintiff.”

Id. at 487-88, 13 S.E. at 191. See also Peyton v. Griffin, 195 N.C. 685, 687, 143 S.E. 525, 527 (1928). Plaintiffs’ evidence is thus insufficient to support a verdict in their favor on the issue of fraud absent some evidence that defendant Arthur Brindle’s false representations were made knowingly, and defendants’ motion for directed verdict was properly granted.

Plaintiffs assign error to the denial of their motion for summary judgment on the issue of breach of covenants and to the granting of directed verdict for defendants on the same issue. Defendants conveyed the property here in question by general warranty deed, the language of which follows:

*23 “And the grantor covenants that he is seized of said premises in fee, and has the right to convey the same in fee simple; that said premises are free from encumbrances (with the exceptions above stated, if any); and that he will warrant and defend the said title to the same against the lawful claims of all persons whomsoever.”

No exceptions are noted in the deed.

Plaintiffs argue that they were entitled to recover as a matter of law for defendants breach of the covenants of seisin and against encumbrances and that defendants were not entitled to judgment as a matter of law so as to support the directed verdict in their favor.

Directed verdict for defendants on the breach of covenant of seisin issue appears properly entered in light of the statements in analogous cases to the effect that “it is generally held that a deed conveying property on which there existed a right of way in the public, conveys the ultimate property in the soil, and therefore there is no breach of the covenant of seizin .... ” Tise v. Whitaker-Harvey Co., 144 N.C. 508, 515, 57 S.E. 210, 212 (1907). See also Goodman v. Heilig, 157 N.C. 6, 8, 72 S.E. 866, 867 (1911) (“such a right does not constitute a breach of the covenant of seizin .... ” Citing Kutz v. McCune, 22 Wis. 628; Rawls on Covenants, 83, 142.) In the case sub judice, defendants conveyed to plaintiffs around 6 acres of land in fee. The fact that about 3 acres were subject to the highway right-of-way bears on the covenant against encumbrances rather than the covenant of seisin. By holding that directed verdict for defendants was proper on this issue, we necessarily reject plaintiffs’ arguments that they were entitled to summary judgment on this same issue.

We hold that directed verdict for defendants was improperly entered on the issue of whether the highway right-of-way through the tract of land in question constituted an encumbrance sufficient to constitute breach of defendants’ covenant against encumbrances. It has been stated that “a public road and a right-of-way of a railroad are not considered encumbrances, it being presumed that a purchase of land through which a road or railway right-of-way runs was made with reference to the road or right-of-way and that the consideration was adjusted accordingly ...,” J. Webster, Real Estate Law in North *24 Carolina § 190 (1971); yet our Supreme Court long ago recognized that a right-of-way or easement for a public highway may constitute “an encumbrance or burden upon the fee .... ” Goodman v. Heilig, 157 N.C. 6, 8, 72 S.E. 866, 866 (1911) (railroad right-of-way). The rule in North Carolina appears to be that a covenantee may not recover for breach of the covenant against encumbrances where the encumbrance he alleges is a public highway or railroad right-of-way and either (1) the covenantee purchased the property with actual knowledge that it was subject to the right-of-way or (2) the property was “obviously and notoriously subjected at the time to some right of easement or servitude ...Id. at 8-9, 72 S.E. at 867. (Emphasis added). In short, the issue is whether the covenantee knew or should have known that the land he bought was subject to a public right-of-way. Once this issue of fact is determined in the affirmative, the covenantee is “conclusively presumed to have purchased with reference to” the right-of-way. Id. at 9, 72 S.E. at 867. The cases agree that this conclusive presumption exists only where the issue of the covenantee’s actual or putative knowledge (based on the notoriety of the right-of-way) is already resolved, see id. (“When the plaintiffs purchased the land they knew of the existence of the railroad and its right of way running over a portion of the land (emphasis added); Tise v. Whitaker-Harvey Co., 144 N.C. 508, 515, 57 S.E. 210, 212 (1907) (“The parties are taken to have contracted with reference to the existence of a burden of which they were fully aware.” (emphasis added)); Ex Parte Alexander, 122 N.C. 727, 729, 30 S.E. 336, 336 (1898) (“At the date of the sale the railroad was in actual operation over the said land, with a depot station thereon, and these facts were well known to the purchasers.” (emphasis added)); and where the issue has not been resolved there exists a genuine issue of material fact for the jury. Waters v. Phosphate Corp., 50 N.C. App. 252, 273 S.E. 2d 517 (1981).

In the case sub judice there is no evidence that either plaintiff or defendant knew that the tract of land was subject to the highway right-of-way. The tract as described in the deed was almost in the shape of an isosceles triangle, with the base at the south and the east side bordering on Fisher River. Plaintiffs’ evidence tended to show that defendant represented that the southeast corner of the tract was located at the intersection of the northern right-of-way line and the west edge of Fisher *25 River, and that the tract included a desirable building site. However, it does not appear that these representations were made falsely with intent to defraud. Both parties agreed that a survey would be made after the land sale was completed. The survey revealed that the southeast corner was not located as represented but was some several hundred feet south of the north right-of-way line, which placed a substantial part of the base of the triangular-shaped tract within the right-of-way and left only 2.85 acres unencumbered by the right-of-way. It appeared there was a mutual mistake of fact as to the location of the tract. However, plaintiffs did not elect to seek a rescission based on mistake of fact; instead they brought this action to recover damages. Since a part of the tract as surveyed was located within the highway right-of-way, we conclude that the evidence was sufficient to go to the jury on plaintiffs’ claim for breach of the covenant against encumbrances, and that the directed verdict on this claim was improvidently entered.

Professor Webster proposes the following rule of recovery for breach of the covenant against encumbrances:

“While there are no North Carolina cases establishing the point, if the encumbrance consists of a servitude on the land that cannot be extinguished, as in the case of an easement where the holder refuses to release it, the general view is that the diminution in value of the estate by reason of the encumbrance can be recovered; in other words, the measure of damages would be the difference between the value of the land without the encumbrance and its value as it is conveyed subject to the encumbrance.”

J. Webster, Real Estate Law in North Carolina § 191 (1971), citing Burby, Real Property § 127 (1965) and Cribbet, Principles of the Law of Property 212 (1962).

The directed verdict on plaintiffs’ claim for unjust enrichment was properly allowed since this claim is based on the equitable principle of restitution, and plaintiffs have an adequate remedy at law based on the breach of the covenant against encumbrances. See Insurance Co. v. Guilford County, 225 N.C. 293, 34 S.E. 2d 430 (1945); Johnson v. Stevenson, 269 N.C. 200, 152 S.E. 2d 214 (1967); Development Co. v. County of Wilson, 44 N.C. App. 469, 261 S.E. 2d 275, appeal dismissed, 299 N.C. 735, 267 S.E. 2d 660 (1980).

*26 The order appealed from is affirmed, except for that portion which directed verdict for defendants on the issue of breach of the covenant against encumbrances, which is reversed and remanded.

Affirmed in part; Reversed and Remanded in part.

Judges Hedrick and Martin (Robert M.) concur.