Friedlmeier v. Altman

WELLS, Judge. Plaintiffs contend that the trial court erroneously categorized their action as being based on the promissory note, rather than as an action for breach of the settlement agreement, fraud, and declaration of a constructive trust. At the outset we emphasize, however, that defendant Altman satisfied his obligations under the land sale portion of the settlement agreement when the parties closed the transaction on 21 December 1985; he paid plaintiffs $225,000 in cash and his corporation executed a promissory note for the remaining $330,000. Thereafter the parties’ rights and liabilities with respect to the land sale arose from the promissory note and deed of trust, not from the settlement agreement. Plaintiffs further contend that the note and deed of trust were not purchase money instruments, and consequently the anti-deficiency judgment statute, N.C. Gen. Stat. § 45-21.38 (1984), does not apply. “[A] deed of trust is a purchase money deed of trust only if it is made as a part of the same transaction in which the debtor purchases land, embraces the land so purchased, and secures all or part of its purchase price.” Dobias v. White, 239 N.C. 409, 80 S.E. 2d 23 (1954). Because the entire transaction was more than simply a sale of land, as reflected by the various provisions of *495 the settlement agreement, plaintiffs contend that it did not satisfy the “same transaction” test. We believe, however, that the fact that the land sale transaction occurred as part of an agreement settling a dispute between the parties does not prevent its categorization as a purchase money transaction in this case. This is not a situation where the deed of trust covered land other than that purchased by the debtor buyer from the seller, see Dobias, supra, nor did the deed of trust secure money borrowed from a third party to pay the seller for the land, see Childers v. Parker’s Inc., 274 N.C. 256, 162 S.E. 2d 481 (1968). “[S]o long as the debt of the purchaser of property is secured by a deed of trust on the property or part of it given by the purchaser to secure payment of the purchase price the deed of trust is a purchase money deed of trust.” Burnette Industries v. Danbar of Winston-Salem, 80 N.C. App. 318, 341 S.E. 2d 754, disc. rev. denied, 317 N.C. 701, 347 S.E. 2d 37 (1986). The existence of additional promises not directly arising out of the land sale transaction does not remove this deed of trust and promissory note from the definition of a purchase money instrument. The trial court did not err, as plaintiffs contend, in concluding that the settlement agreement was ambiguous and in admitting extrinsic evidence to clarify its terms. We also reject plaintiffs’ contention that the instruments are not purchase money instruments because the settlement agreement did not specifically state on its face that this was to be a purchase money transaction. Plaintiffs were carefully advised by their attorney, who testified that the parties anticipated that the note and deed of trust would contain purchase money instrument language. The anti-deficiency judgment statute provides: In all sales of real property by mortgagees and/or trustees under powers of sale contained in any mortgage or deed of trust executed after February 6, 1933, or where judgment or decree is given for the foreclosure of any mortgage executed after February 6, 1933, to secure to the seller the payment of the balance of the purchase price of real property, the mortgagee or trustee or holder of the notes secured by such mortgage or deed of trust shall not be entitled to a deficiency judgment on account of such mortgage, deed of trust or obligation secured by the same: Provided, said evidence of indebtedness shows upon the face that it is for balance of pur *496 chase money for real estate: Provided, further, that when said note or notes are prepared under the direction and supervision of the seller or sellers, he, it, or they shall cause a provision to be inserted in said note disclosing that it is for purchase money of real estate; in default of which the seller or sellers shall be liable to purchaser for any loss which he might sustain by reason of the failure to insert said provisions as herein set out. N.C. Gen. Stat. § 45-21.38 (1984). Both the note and deed of trust recited on their faces that they were for the balance of purchase money for real estate, as required by the statute. Plaintiffs’ counsel, furthermore, testified that he explained to Mr. Friedlmeier that because it was a purchase money transaction, “the only money [he] could count on getting in this settlement was . . . [the] $225,000 that was to be paid at closing.” We hold that the trial court correctly concluded that the deed of trust and promissory note were purchase money instruments, and that pursuant to N.C. Gen. Stat. § 45-21.38 (1984) plaintiffs were not entitled to a deficiency judgment. The judgment of the trial court is Affirmed. Chief Judge HEDRICK and Judge EAGLES concur.