Piney Mountain Properties, Inc. v. National Theatre Supply Co.

Brock, J. The primary question for determination is whether the note and deed of trust to Florida Capital Corp. was in substitution, within the contemplation of the parties, of the note and deed of trust to Knox Homes Corp.; and whether the note and deed of trust to Goodyear Mortgage Company was in substitution, within the contemplation of the parties, of the notes and deeds of trust to Cameron Brown and Florida Capital Corp. If so, the recitations and provisions of the Escrow Agreement and the deed of trust from Motel to Mohow would apply equally to the deed of trust to Goodyear Mortgage Company. Defendant filed an exception to a portion of finding of fact No. 24, which deals with the loan from Florida Capital Corp., and this is subject to its assignment of error No. 17. The portion of finding of fact No. 24 which is excepted to reads as follows: “That the monies borrowed by Mohow, Inc., and Host of America Motels of Asheville, Inc., were used to pay off the note executed by Mohow, Inc., in favor of Knox Homes Corporation, said note being secured by a deed of trust from Mohow, Inc., to Elmer Hilker, Trustee as aforesaid.” Defendant makes no argument or contention in its brief that there is no competent evidence to support this finding of fact, and since no reason or argument is stated in defendant’s brief in support of [339] this assignment of error, it is deemed abandoned. Rule 28, Rules of Practice in the Court of Appeals of North Carolina. Therefore, for purposes of this lawsuit, it is established as a fact that the proceeds from the Florida Capital Corp. loan were applied to pay off the balance of the original construction loan from Knox Homes Corp. Finding of fact No. 28 by the trial court is as follows: “28. That a portion of the proceeds from the loan by Goodyear Mortgage Corporation as aforesaid was applied to pay off the aforesaid note to Cameron-Brown Company, said note being secured by a deed of trust recorded in Deed of Trust Book 645 at Page 251 and the note to Florida Capital Corporation said note being secured by a deed of trust recorded in Deed of Trust Book 661 at Page 418.” Defendant filed an exception to this finding of fact and it is the subject of its assignment of error No. 20. However, defendant makes no argument or contention in its brief that there is no competent evidence to support this finding of fact, and since no reason or argument is stated in defendant’s brief to support this assignment of error, it is deemed abandoned. Rule 28, supra. Therefore, for purposes of this lawsuit, it is established as a fact that a portion of the proceeds from the Goodyear Mortgage Company loan was applied to pay off the original construction loans from Cameron Brown and Florida Capital Corp. (the proceeds from Florida Capital Corp. loan having been applied to pay the balance of the Knox Homes Corp. loan). The foregoing facts, when coupled with the recitals and provisions of the Escrow Agreement, with the provisions of the deed of trust from Motel to Mohow, and with the provisions of the subordination agreement executed by Piney Mt. and Mohow for the benefit of Goodyear Mortgage Company, clearly support the trial judge’s finding of fact No. 30, which reads as follows: “30. That it was the intention of all parties to said deed of subordination and affected thereby that the transaction with Goodyear Mortgage Corporation and the said loan from Goodyear Mortgage Corporation was to be a substitution of capital for and in place of the liens paid off from the proceeds of the loan from Goodyear Mortgage Corporation, to wit: The loan from Cameron-Brown Company and the loan from Florida Capital Corporation, and that it was further the intention of all of the parties that all of said parties would retain all rights under the agreements and instruments theretofore entered into by them.” [340] By findings of fact Nos. 37 (a) and 37 (b), to which no exceptions are taken, Judge Martin found, in effect, that at the time of the institution of this action the 1961,875 note was not in default. These findings of fact are as follows: “37(a). That the payments made on the note in the amount of $961,875.00 and the Goodyear note in the sum of $672,000.00 prior to the institution of this action totaled $241,100.86. “37(b). That the total amount which could have been due on the Mohow note by its terms prior to the institution of this suit was in the sum of $224,437.50.” Absent an exception properly taken and assigned as error, this Court is bound by the findings of fact by the trial court. For purposes of this lawsuit those findings are conclusive. Therefore, having determined that the $961,875 note, secured by deed of trust, from Motel to Mohow was not in default by reason of the credits due thereon from the terms of the deed of trust itself, because the note and deed of trust to Goodyear Mortgage Company was in substitution of the original construction loan, it follows that we concur in the ruling of the trial judge that the substituted trustees under the $961,875 note should be restrained and enjoined from foreclosing under the deed of trust. National Theatre Supply Company is not a holder in due course of the $961,875 because by its terms it .is a nonnegotiable note; therefore National Theatre Supply Company took the note subject to all defenses which might have been asserted against the payee. 1 Strong, N.C. Index 2d, Bills and Notes, § 19, p. 732. However, they should not be permanently restrained and enjoined for the reasons that it is possible that the $961,875 note may become in default at some time in the future while defendants are still assignees thereof. Therefore, we modify and affirm paragraph 1 of the Order of the trial judge to the extent that it should be modified to read as follows: 1. That the defendants, National Theatre Supply Company, a corporation; Clark C. Totherow and John R. Ingle, Substitute Trustees, be and they are hereby restrained and enjoined from foreclosing on the lands described in the deed of trust recorded in Deed of Trust Book 650 at Page 375 in the Buncombe County, North Carolina, Registry, from Host of America Motels of Asheville, Inc., to Jack T. Hamilton, Trustee for Mohow, Inc., the same being dated July 12, 1963, and recorded July 16, 1963, in the office of the Register of Deeds for Buncombe County, North Carolina, until such time as they can show that the note [341] secured by said deed of trust is in default, after considering the credits due upon said note by payments made upon the Goodyear Mortgage Company note. Apparently paragraphs 2 and 3 of the Order of the trial court were entered as a result of the trial judge’s conclusion that a merger of the legal and equitable title has occurred in Mohow, thereby extinguishing the lien of the deed of trust. Mohow is not a party to this action. The assignment of the $961,876 note was not of the full value thereof, but, on the contrary, it was assigned only as collateral security for the $45,025.65 note given by Mohow to defendant. Mohow would be a necessary party to a determination that the lien of its deed of trust to secure the $961,875 note had been extinguished by any merger of the legal and equitable title. Since Mohow is not a party to this action any adjudication in regard thereto was error. Therefore, we reverse that part of the Order set out in paragraphs 2 and 3, reading as follows: “2. That the note in the sum of $961,875.00 from Host of America Motels of Asheville, Inc., to Mohow, Inc., be and the same is hereby, declared to be null and void and of no effect; and that the deed of trust securing the same from Host of America Motels of Asheville, Inc., to Jack T. Hamilton, Trustee for Mohow, Inc., be and the same is hereby cancelled of record. AND It Is Further OedeRed that the defendants, National Theatre Supply Company, Clark C. Cotherow (sic) and John R. Ingle, Substitute Trustees, cancel the same of record. “3. That the instrument recorded in Deed Book 931 at Page 39 be and the same is hereby cancelled of record.” We do not disturb paragraph 4 of the Order which taxes the cost of the action against the defendant. Modified and affirmed in part. Reversed in part. Campbell and Morris, JJ., concur.