Brumley v. Mallard, L.L.C.

EAGLES, Chief Judge. Mallard, L.L.C., and Bonn A. Gilbert, Jr., (“defendants”) appeal from the trial court’s granting of summary judgment in favor of A. Neal Brumley (“plaintiff’) and award of $150,000 plus interest and attorneys’ fees. On appeal, defendants have two assignments of error: (1) that the trial court erred in granting plaintiff’s motion for summary judgment; and (2) that the trial court erred in denying defendants’ motion for summary judgment. We discern no error and affirm. The evidence tends to show the following. Plaintiff is the executor of the estate of William Dellinger. The estate owned two tracts of land. As executor, plaintiff contracted on 6 May 1996 with Bonn Gilbert (“Gilbert”) to sell the two parcels of land. The total purchase price was $532,000; $354,666 of the purchase price was to be a promissory note secured by a purchase money deed of trust. At the property closing on 31 December 1996, plaintiff was informed that Gilbert intended for plaintiff to convey the land to Mallard, L.L.C. (“Mallard”) instead of conveying it to Gilbert personally. Mallard’s articles of incorporation were filed in the North Carolina Secretary of State’s office on 31 December 1996 as well. Plaintiff refused to convey land to Mallard unless the security instruments were amended to show they were “for consideration” instead of “purchase money” and unless Gilbert personally guaranteed the obligations. Gilbert’s attorney, Jameson Wells, prepared the documents according to those specifications. [565] This action only involves the sale of Parcel II. The purchase price was financed by a promissory note in the amount of $150,000. Mallard defaulted on payment of the note. Plaintiff began this action on 7 July 2000 against Mallard as the maker and Gilbert as the guarantor of the note. Defendants allege that the note is a purchase money note and plaintiff’s action is barred by the anti-deficiency statute. Defendants alternatively allege that they are entitled to indemnification, if the note is not a purchase money note. Defendants also allege there is a lack of consideration. The parties’ motions for summary judgment were heard in Mecklenburg County Superior Court on 30 April 2001. The trial court granted plaintiff’s motion for summary judgment and denied defendants’ motion for summary judgment. The trial court ordered that plaintiff recover $150,000 plus interest. Defendants appeal. I On appeal, defendants argue that the trial court erred by granting plaintiff’s motion for summary judgment. Defendants’ argument is based on its contention that the promissory note here was a purchase money note. We disagree. Summary judgment is appropriate when the only issues to.be decided are issues of law. Mortgage Co. v. Real Estate, Inc., 39 N.C. App. 1, 4, 249 S.E.2d 727, 729, aff'd, 297 N.C. 696, 256 S.E.2d 688 (1978). Here, the only issues contested are questions of law, namely the applicability of the anti-deficiency statute. The anti-deficiency statute reads: 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 purchase money for real estate. G.S. § 45-21.38 (2001). This section of the anti-deficiency statute is only applicable if the “evidence of indebtedness” indicates on its face that it is a purchase-money transaction. [566] Here, the promissory note states that it was “given for consideration,” while the offer to purchase and contract state that the note was to be “secured by purchase money deed of trust.” Defendants allege that the phrase “evidence of indebtedness” includes all documents surrounding the sale of the property. We disagree. Here, neither the deed of trust nor the promissory note contain any language indicating that they are purchase money instruments. Accordingly, the anti-deficiency statute cannot be applied to bar plaintiffs suit against defendants. The phrase “evidence of the indebtedness” in G.S. § 45-21.38 refers only to the promissory note and the deed of trust. Gambill v. Bare, 32 N.C. App. 597, 598, 232 S.E.2d 870, 870, disc. rev. denied, 292 N.C. 640, 235 S.E.2d 61 (1977). If there is no indication on the face of the promissory note or deed of trust that “the indebtedness is for the balance of purchase money,” the anti-deficiency statute cannot be applied by implication. Gambill, 32 N.C. App. at 598, 232 S.E.2d at 870; see also Merritt v. Edwards Ridge, 323 N.C. 330, 372 S.E.2d 559 (1988); In re Foreclosure of Fuller, 94 N.C. App. 207, 380 S.E.2d 120, disc. rev. denied, 325 N.C. 271, 384 S.E.2d 515 (1989); Bigley v. Lombardo, 90 N.C. App. 79, 367 S.E.2d 389 (1988). If there is language in the promissory note that denominates the transaction which does not appear in the deed of trust, the deed of trust is deemed to include the same language as the note. See Bank v. Belk, 41 N.C. App. 356, 365, 255 S.E.2d 421, 427, disc. rev. denied, 298 N.C. 293, 259 S.E.2d 911 (1979). In Green Park Inn, Inc. v. Moore, 149 N.C. App. 531, 562 S.E.2d 53 (2002), this Court did not apply the anti-deficiency statute to a long-term lease followed by an option to purchase. “We hold that the Anti-Deficiency Statute does not apply to this transaction, in which there is neither an instrument of debt nor a securing instrument stating on its face that the transaction is a purchase money mortgage.” Moore, 149 N.C. App. at 537, 562 S.E.2d at 57-58. Accordingly, this assignment of error fails. II Defendants alternatively allege that plaintiff must indemnify them for any loss as a result of the transaction because the promissory note was prepared under the supervision of plaintiff as seller. Defendants argue plaintiff’s insistence that the words “purchase money” be removed from the promissory note before the sale, cou [567] pled with the addition of Gilbert as guarantor, created a responsibility to indemnify them according to G.S. § 45-21.38. We disagree. Defendants rely on a portion of the anti-deficiency statute that reads, in pertinent part: 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. G.S. § 45-21.38 (2001). This portion of the anti-deficiency statute has never been judicially interpreted. Plaintiff, the seller here, took no part in the preparation of the promissory note or deed of trust. His only involvement was his refusal to sign the original documents as purchase money instruments. Defendant Gilbert’s attorney prepared the documents according to the agreement of the parties at the property closing. The above portion of the statute upon which the defendants rely anticipates a situation where the seller prepares security documents without the buyer’s participation and consent, unlike the instant case. Here, defendants were present and represented by counsel when the security documents were amended. In fact, defendants’ attorney prepared the amended documents. Accordingly, the provision of the anti-deficiency statute relied upon by defendants does not require plaintiff here to indemnify defendants for actions taken by their own attorney. Ill Finally, defendants allege that the agreement to amend the security documents at closing was not supported by consideration. Plaintiff was under a contractual obligation to sell to defendant Gilbert or his designee as a result of the offer to purchase. Defendants contend that Gilbert’s agreement to personally guarantee the loan and the changing of the words “purchase money” to “for consideration” in the promissory note were not supported by additional consideration and are unenforceable. We disagree. It is well-settled law that a contract must be supported by consideration in order to be enforceable. Investment Properties v. Norbum, 281 N.C. 191, 195, 188 S.E.2d 342, 345 (1972). A modification [568] to a contract occurs if there is mutual assent to the terms of the modification and consideration supporting the modification. Altman v. Munns, 82 N.C. App. 102, 105, 345 S.E.2d 419, 422 (1986); see also Lewis v. Edwards, 147 N.C. App. 39, 49, 554 S.E.2d 17, 23 (2001). Here, both parties were present and agreed to change the language of the security documents and make defendant Gilbert guarantor of the note. Defendants’ lack of protest at the time of closing precludes them from raising this defense after they have already accepted partial performance of the obligation and have performed partially in return. In addition, there was ample consideration to support the modification of the contract at the property closing. Plaintiff accepted a different buyer (Defendant Mallard, L.L.C.), with different potential for liability than the original buyer (Defendant Gilbert). The new buyer Mallard had not even been created as a legal entity when the original contract was formed between plaintiff and Gilbert. In return, the language of the security instruments was amended and Gilbert agreed to guarantee the transactions. This exchange represents sufficient consideration to support the contract as modified. For the foregoing reasons, we conclude that the trial court did not err in granting plaintiffs motion for summary judgment and denying defendants’ motion for summary judgment. Accordingly, we dissolve the temporary stay preventing execution of summary judgment entered in plaintiff’s favor on 30 May 2001. Affirmed. Judge WALKER concurs. Judge BIGGS dissents.