In re the Foreclosure of the Deed of Trust Executed by First Resort Properties of N.C., Inc.

LEWIS, Judge. This appeal, No. 8820SC1022, concerns a proceeding to foreclose on a Deed of Trust securing a debt plus interest of $79,300.00. A companion appeal, No. 8820SC1023, relates to a proceeding to foreclose on a Deed of Trust securing a debt plus interest of $90,000.00. On behalf of petitioners, the substitute trustee petitioned the Clerk of Superior Court of Moore County for foreclosure of both Deeds of Trust. On 29 February 1988, the clerk entered an order allowing foreclosure on both Deeds of Trust. Berkeley Federal Savings and Loan Association and Charles Gordon Brown, trustee, gave notice of appeal to the superior court. The parties submitted the following written stipulations, which apply to both Deeds of Trust, to the superior court: 1. That on February 1,1984 Petitioners Charles and Janice Billings made loans to First Resort Properties of N.C., Inc. in the amount of of [sic] $59,300.00 and $70,000.00. 2. That in return for the money lent, First Resort gave Petitioners promissory notes in the amount of $79,300.00 and $90,000.00 respectively. 3. That the promissory note for $79,300.00 was secured by a Deed of Trust on a piece of real property located in Moore County, North Carolina known as unit 109 Foxgreen Villas Condominiums and now known as unit 309 Foxgreen Villas Condominiums; and the $90,000.00 loan was secured by a Deed of Trust on a piece of real property located in Moore County, North Carolina known as Unit 1 of Foxcroft Villas Condominiums and now known as Unit 235 Foxcroft Villas Condominiums. 4. That both Deeds of Trust were recorded in the Moore County Public Registry. 5. That Berkeley Federal Savings and Loan Association transferred funds in the amount of $169,300.00 to Mid-South Bank in Sanford, North Carolina and Mid-South Bank issued checks payable to James E. Holshouser, Jr., attorney, in the amount of $79,300.00 and $90,000.00. 6. That the front of the $79,300.00 check from Mid-South to Holshouser had been annotated by Mid-South Bank ‘Payoff [101] of Unit 309’; and the front of the $90,000.00 check from Mid-South to Holshouser had been annotated ‘Payoff of Unit 235’. 7. That James E. Holshouser, Jr. endorsed both checks payable to First Resort Properties, Inc., the debtor on both notes and Deeds of Trust. 8. That in the presence of Holshouser the two checks were endorsed by John Mitchell, Jr., Vice-president of First Resort Properties, Inc. payable to the order of Charles Billings. 9. That both checks contained the purported signature of Charles Billings and said signature has been analyzed by handwriting experts and the Court may find as a fact that said signatures are the signatures of Charles Billings. 10. That the $79,300.00 check and the $90,000.00 check were paid by Mid-South Bank on March 6, 1984. 11. That from the proceeds of the above-described checks, Charles Billings received an official check in the amount of $64,300.00 and a deposit was made to the account of First Resort Properties, Inc. in the amount of $105,000.00; both said transactions occurring on March 6, 1984. 12. That Charles Billings was furnished a copy of the deposit slip showing the deposit of $105,000.00 to the account of First Resort Properties, Inc. at the time he received the official check of $64,300.00. 13. That at all times Charles Billings was acting as agent for his wife Janice Billings with regard to any transaction surrounding this claim. 14. That the notes and Deeds of Trust dated February 1, 1984 have not been cancelled. 15. That the sole issue for the Court to determine is whether or not the endorsement of Charles Billings on the $79,300.00 and $90,000.00 checks constitute payment and satisfaction of the notes and Deeds of Trust dated February 1, 1984. Based upon these stipulations, the promissory notes and the Deeds of Trust, the trial court made findings of fact and conclusions of law. On 6 June 1988, the trial court vacated the clerk’s orders allowing foreclosure and dismissed both foreclosure actions. Petitioners appeal. [102] Petitioners bring forward three assignments of error. First, they contend the trial court erred in concluding the note had been paid in full in that there is no evidence to show the checks or their proceeds were received by petitioners. Second, they assign error to the court’s conclusion that endorsement of the checks constitutes satisfaction of the indebtedness. Finally, plaintiffs contend the trial court erred in concluding the note was paid in full in that there is insufficient evidence to show the parties intended the underlying debt to be satisfied. We have reviewed petitioners’ assignments of error and conclude the trial court’s order should be affirmed. Petitioners contend the Mid-South checks were not taken in satisfaction of the entire debt evidenced by the promissory notes. They contend the debts were satisfied only to the extent of $64,300.00 ($32,150.00 per note), the amount of the official check Charles Billings admits receiving. Respondent contends that Charles Billings’ endorsement of the Mid-South checks, payable for the exact amount of the indebtedness and marked on the front as payment for the two condominium loans, evidences payment in full. The North Carolina Uniform Commercial Code provides: Any writing to be a negotiable instrument within [Article Three] must (a) be signed by the maker or drawer; and (b) contain an unconditional promise or order to pay a sum certain in money and no other promise, order, obligation or power given by the maker or drawer except as authorized by this article; and (c) be payable on demand or at a definite time; and (d) be payable to order or to bearer. G.S. 25-3-104(1). Article Three also “applies to any instrument whose terms do not preclude transfer and which is otherwise negotiable within this article but which is not payable to order or to bearer.” G.S. 25-3-805. The checks issued by Mid-South Bank payable to James E. Holshouser, Jr. are negotiable instruments within the scope of Article Three. “Unless otherwise agreed where an instrument is taken for an underlying obligation . . . the obligation is pro tanto discharged if a bank is drawer, maker or acceptor of the instrument and there is no recourse on the instrument against [103] the underlying obligor.” G.S. 25-3-802(l)(a). Therefore, if the Mid-South checks were taken to pay off the two promissory notes on the condominiums, the debt on the two promissory notes is discharged pro tanto, to the extent of payment made. “The liability of any party is discharged to the extent of his payment or satisfaction to the holder.” G.S. 25-3-603(1). To the extent payment was made to a holder of the Mid-South checks, liability on the checks is discharged. Charles Billings was a holder of the Mid-South checks. The checks were endorsed to him and he endorsed the checks in blank. Annotations on each check note that the check was in payment of the amounts due on the condominium loans. Petitioners contend that since there is no stipulation that Charles Billings was ever in possession of the Mid-South checks, the trial court could not conclude he was a holder of the checks. We disagree. It is true that “[i]t is the fact of possession which is significant in determining whether a person is a holder, and the absence of possession defeats that status.” In re Foreclosure of Connolly v. Potts, 63 N.C. App. 547, 550, 306 S.E. 2d 123, 125 (1983). However, the stipulations show that Charles Billings signed the backs of the Mid-South checks and received a check for $64,300.00 and a deposit slip showing a $105,000.00 deposit into First Resort Properties, Inc.’s account. The evidence is sufficient to show that Charles Billings was a holder of the checks and that he received payment on the checks. Therefore, there has been payment in full of the underlying obligation pursuant to G.S. 25-3-802(l)(a). The underlying debts have been discharged and the foreclosure actions were properly dismissed. The judgment of the trial court is affirmed. Affirmed. Judge ARNOLD concurs. Judge Greene dissents.