Where an officer, pursuant to a duly issued execution levies on personal property which is subject to prior encumbrances, is it proper for the sheriff to sell or attempt to sell such personalty "free and clear of all encumbrances," pay prior lienors and tender the balance to the Clerk of Superior Court to be applied to the judgment on which execution was issued?
G.S. 1-315 provides in relevant part:
§ 1-315. Property liable to sale under execution; bill of sale. -- (a) the following property of the judgment debtor, not exempted from sale under the Constitution and laws of this State, may be levied on and sold under execution:
- Equitable and legal rights of redemption in personal and real property pledged or mortgaged by him, or transferred to a trustee for security by him. . . .
- Interests as vendee under conditional sales contracts or personal property.
Only the property of the judgment debtor may be levied on and sold under execution. A levy made on the property of a person other than the judgment debtor constitutes a trespass. The owner of personal property may maintain an action for claim and delivery against an officer for taking property under an execution against a third person. Mica Industries v. Penland, 249 N.C. 602, 107 S.E.2d 120 (1959). The interest of the lienor is not, under this section, subject to levy or sale. Only the interest of the judgment debtor is subject to levy and sale.
The sheriff, by virtue of G.S. 7A-311 is required to collect certain fees and commissions for the use of the county. The sheriff may collect these fees and commissions before remitting the proceeds of the sale to the Clerk of Superior Court. G.S. 1-339.70(a). Upon receipt of the proceeds of sale, "(t)he clerk shall apply the proceeds of the sale so received to the payment of the judgment upon which the execution was issued." G.S. 1-339.70(b). When a surplus exists, the clerk shall apply the proceeds of the sale so received to the payment of the judgment upon which the execution was issued." G.S. 1-339.70(b). When a surplus exists, the clerk may pay the proceeds to the person entitled thereto and conduct a special proceeding to determine the persons entitled thereto and the priority of their claims, G.S. 1-339.70(c); 1-339.71. The commissions, fees and expenses which the sheriff claims from the proceeds of the sale for the use of the county are the only moneys which the sheriff is authorized by statute to deduct from the proceeds of the sale.
Although levy on and sale of property under execution is incident to and part of a judicial proceeding, the sheriff is not a judge. He is not vested with authority to determine competing claims or the priority of claims to the proceeds of a sale of property. The sheriff takes unnecessary risks in announcing that he intends to sell the property "free and clear of all encumbrances" as he then makes a warranty against encumbrances a term of the sale. The sheriff, as the person making the sale and the warranty is, therefore, the person who would be liable on the warranty should a lienor assert his claim against the collateral.
By virtue of G.S. 1-339.68(b) the sheriff is required to sell real estate subject to existing liens, although the sheriff might examine the public records and determine the existence and amount of liens on the realty, Pittsburgh Plate Glass Co. v. Forbes, 258 N.C. 426, 128 S.E. 2d 875 (1963). If personal property is levied upon, a search of the public records may very well not disclose the existence of liens, see, e.g., G.S. 25-9-302. The policy which mandates sale of realty subject to liens applies, therefore, as strongly to the sale of personalty.
Rufus L. Edmisten Attorney General
David S. Crump Assistant Attorney General