DOBIAS et ux.
v.
WHITE et ux.
No. 163.
Supreme Court of North Carolina.
January 29, 1954.*26 Everette C. Carnes and William C. Chambers, Marion, for plaintiffs-appellees.
Proctor & Dameron, Marion, for defendants-appellants.
ERVIN, Justice.
"A motion for judgment on the pleadings is allowable only where the pleading of the opposite party is so fatally deficient in substance as to present no material issue of fact. * * * A complaint is fatally deficient in substance, and subject to a motion by the defendant for judgment on the pleadings if it fails to state a good cause of action for plaintiff and against defendant. * * * An answer is fatally deficient in substance and subject to a motion by the plaintiff for judgment on the pleadings if it admits every material averment in the complaint and fails to set up any defense or new matter sufficient in law to avoid or defeat the plaintiff's claim." Erickson v. Starling, 235 N.C. 643, 71 S.E.2d 384, 394.
The answer in the instant case admits every material allegation of the complaint. Since the deed of trust covers land other than that purchased from the plaintiffs by the defendants, it cannot qualify as a purchase money deed of trust under the statute embodied in G.S. § 45-21.38. This is true because 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. Miller v. Miller, 211 Iowa 901, 232 N.W. 498; Gray v. Kappos, 90 Utah 300, 61 P.2d 613; 36 Am.Jur., Mortgages, Section 15; 59 C.J.S., Mortgages, § 168. Thus it appears that the answer is fatally deficient: in substance and subject to a motion by the plaintiffs for judgment *27 on the pleadings unless the second plea of the defendants is sufficient to avoid or defeat the plaintiff's cause of action.
According to the allegations of the second plea, which are admitted for the purpose of this appeal by the motion for judgment on the pleadings, the plaintiffs bound themselves by a bilateral contract with the defendants to accept the conveyance of the land embraced by the deed of trust in satisfaction of the pre-existing contractual obligation of the defendants to make payment of the indebtedness secured by the deed of trust. As a consequence, the decision on this appeal necessarily turns on the doctrine of accord and satisfaction.
Much confusion is avoided in this field of the law if constant heed is paid to the circumstance that agreements governed by the doctrine of accord and satisfaction fall into two categories. In the one case the parties agree that the agreement itself shall operate as the satisfaction of the old right; and in the other the parties agree that it is only the performance of the agreement that shall have that effect. Hayes v. Atlanta & C. Air Line R. Co., 143 N.C. 125, 55 S.E. 437, 10 Ann.Cas. 737; Restatement of the Law of Contracts, section 418; Williston on Contracts (Rev.Ed.) section 1846. What is set forth below applies to agreements of the second category because the agreement involved in this case is of that class. Walker v. Burt, 182 N.C. 325, 109 S.E. 43.
An accord and satisfaction is compounded of the two elements enumerated in the term. "An `accord' is an agreement whereby one of the parties undertakes to give or perform, and the other to accept, in satisfaction of a claim, liquidated or in dispute, and arising either from contract or from tort, something other than or different from what he is, or considers himself, entitled to; and a `satisfaction' is the execution, or performance, of such an agreement." 1 C.J.S., Accord and Satisfaction, § 1.
The relevant rules of accord and satisfaction may be stated in this wise:
1. If the accord is fully performed, the performance satisfies the original claim, and bars a subsequent action to enforce it. Snyder v. Kenan Oil Company, 235 N.C. 119, 68 S.E.2d 805; Hinson v. Davis, 220 N.C. 380, 17 S.E.2d 348; Owens v. Branning Manufacturing Company, 168 N.C. 397, 84 S.E. 389; Griffin v. Petty, 101 N.C. 380, 7 S.E. 729; Cabe v. Jameson, 32 N.C. 193, 51 Am.Dec. 386; Smitherman v. Smith, 20 N.C. 86.
2. If the accord is not fully performed, the original claim is not satisfied. 1 Am.Jur., Accord and Satisfaction, sections 65, 67; 1 C.J.S., Accord and Satisfaction, § 37. As a consequence, an unperformed accord does not constitute a defense to a subsequent action to enforce the original claim. President, etc., of State Bank v. Littlejohn, 18 N.C. 563; Williston on Contracts (Rev.Ed.) section 1842. This is true even though "the debtor within the time agreed or, if no time was specified, within a reasonable time tenders performance of his promise, but the creditor in violation of his agreement refuses to accept the performance in satisfaction of his claim and brings suit on the original cause of action." Williston on Contracts (Rev.Ed.) section 1843. See paragraph 5 Post.
3. Since an accord is as much a contract as any other agreement, an action may be maintained against the party in default for the breach or nonperformance of an accord under the ordinary principles of the law of contracts. Union Central Life Ins. Co. v. Imsland, 8 Cir., 91 F.2d 365; Williston on Contracts (Rev.Ed.) section 1840; 1 Am.Jur., Accord and Satisfaction, section 74.
4. If an accord is not performed by the debtor, the creditor has a choice of alternative remedies. He may enforce his original claim, or recover damages for the breach of the accord. Sherman v. Sidman, 300 Mass. 102, 14 N.E.2d 145; Waitzkin v. Glazer, 283 Mass. 86, 185 N.E. 927; Dissette v. W. J. Cutler Co., 29 Ohio App. 88, 163 N.E. 53; Restatement of the Law of Contracts, section 417.
*28 5. If the creditor breaks the agreement for the accord, the debtor's original obligation to him is not discharged, for the creditor's breach prevents the performance of the accord. The debtor nevertheless acquires rights against the defaulting creditor at law and in equity. Union Central Life Ins. Co. v. Imsland, supra. The debtor acquires a right of action against the defaulting creditor for damages for the breach of the agreement for the accord; and if the specific enforcement of that agreement is practicable, he acquires an alternative right against the defaulting creditor to its specific enforcement. If the agreement for the accord is specifically enforced, the debtor's original obligation is discharged. Union Central Life Ins. Co. v. Imsland, supra; Corrigan v. Payne, 312 Mass. 589, 45 N.E.2d 829; Restatement of the Law of Contracts, section 417; Williston on Contracts (Rev.Ed.) section 1845. See, also, in this connection these decisions relating to the specific enforcement of agreements for accords: Very v. Levy, 13 How. 345, 14 L. Ed. 173; Boshart v. Gardner, 190 Ark. 104, 77 S.W.2d 642, 96 A.L.R. 1130; French v. Commercial Credit Co., 99 Colo. 447, 64 P.2d 127; Girasulo v. Consolidated Motor Lines, Inc., 5 Conn.Supp. 245; Cook v. Richardson, 178 Mass. 125, 59 N.E. 675; Hunt v. Brown, 146 Mass. 253, 15 N.E. 587; Burtman v. Butman, 94 N.H. 412, 54 A.2d 367; Dissette v. W. J. Cutler Co., supra; Beattie v. Traynor, 114 Vt. 495, 49 A.2d 200. When a defaulting creditor sues the debtor to enforce his original claim, the debtor may set up either a demand for damages for the breach of the accord or a demand for its specific enforcement as a counterclaim. Either of these demands meets the twofold requirement of the counterclaim statute embodied in the first subdivision of G.S. § 1-137; Garrett v. Rose, 236 N.C. 299, 72 S.E.2d 843.
Let us read the allegations of the second plea in the light of these and other applicable rules. Since it entitles the plaintiffs to receive a distinct benefit, i. e., land, which they otherwise would not obtain, the agreement for the accord is supported by a valuable consideration. Very v. Levy, supra; 1 Am.Jur., Accord and Satisfaction, section 51; 1 C.J.S., Accord and Satisfaction, § 4. Although the agreement for the accord requires their direct conveyance of the incumbered property to the beneficiaries of the deed of trust in satisfaction of the debt secured by that instrument, the defendants allege by necessary implication that the stipulated transaction is fair in substance and honest in origin, and thereby estop themselves to assume any subsequent inconsistent position to the prejudice of the plaintiffs. Rand v. Gillette, 199 N.C. 462, 154 S.E. 746; Harvey v. Kinston Knitting Company, 197 N.C. 177, 148 S.E. 45; Bizzell v. Auto Tire & Equipment Co., 182 N.C. 98, 108 S.E. 439; Hill v. Director-General of Railroads, 178 N.C. 607, 101 S.E. 376. See, also, in this connection: Holland v. Dulin, 205 N.C. 202, 170 S.E. 784, rehearing denied in 206 N.C. 211, 173 S.E. 310; Lawrence v. Beck, 185 N.C. 196, 116 S.E. 424; McLeod v. Bullard, 86 N.C. 210; 59 C.J.S., Mortgages, § 438. The defendants tendered to the plaintiffs full performance of the accord within a reasonable time, and the plaintiffs breached their contractual obligation by refusing to accept the tendered performance in satisfaction of their original claim. Inasmuch as the defendants are still able, ready, and willing to perform the accord in full, and the plaintiffs still hold and own the four notes evidencing their original claim, specific enforcement of the agreement for the accord is practicable, and will extinguish the cause of action stated in the complaint.
These things being true, the second plea sets up a counterclaim for the specific enforcement of the agreement for the accord. To be sure, the defendants may not demand such relief in explicit terms. They are nevertheless entitled to relief appropriate to the facts alleged by them, and the facts alleged by them in their second plea make out a counterclaim for specific enforcement of the agreement for the accord. Griggs v. Stoker Service Co. (York-Shipley, Inc.), 229 N.C. 572, 50 S.E.2d 914, 15 A.L.R. 2d 798.
It necessarily follows that the second plea avers facts sufficient to defeat the cause of *29 action on the two notes mentioned in the complaint, and that the presiding judge erred in allowing the motion of the plaintiffs for judgment on the pleadings.
We deem it advisable to observe in closing that the court may be disabled to make a complete adjudication of all of the rights of the parties on the final hearing on account of the non-joinder of the trustee as a party, and that the question of the applicability of the statute of frauds to the accord in suit was not presented or considered on this appeal.
The judgment on the pleadings is vacated, and the cause is remanded for further proceedings agreeable to law.
Error.