Brumley v. Mallard, L.L.C.

BIGGS, Judge

dissenting.

I agree with the majority that “the evidence of indebtedness” in the case sub judice fails to indicate on its face that the transaction is a purchase money transaction, as required by N.C.G.S. § 45-21.38. However, I do believe the evidence raises a genuine issue of material fact regarding whether the closing documents were “prepared under the direction and supervision of the seller.” In addition, I do not agree that the modified agreement is supported by consideration. For these reasons, I respectfully dissent.

*569Summary judgment is only proper if “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law.” N.C.G.S. § 1A-1, Rule 56(c) (2001); Dept. of Transportation v. Idol, 114 N.C. App. 98, 440 S.E.2d 863 (1994). “Its purpose is ... to permit the disposition of cases in which there is no genuine controversy concerning any fact, material to issues raised by the pleadings, so that the litigation involves questions of law only.” Savings & Loan Assoc. v. Trust Co., 282 N.C. 44, 51, 191 S.E.2d 683, 688 (1972). Summary judgment should therefore “be cautiously used so that no one will be deprived of a trial on a genuine, disputed issue of fact. The moving party has the burden of clearly establishing the lack of triable issue, and his papers are carefully scrutinized and those of the opposing party are indulgently regarded.” Koontz v. City of Winston-Salem, 280 N.C. 513, 518, 186 S.E.2d 897, 901 (1972). Moreover, “Rule 56 does not authorize the court to decide an issue of fact, but rather to determine whether a genuine issue of fact exists.” Caldwell v. Deese, 288 N.C. 375, 378, 218 S.E.2d 379, 381 (1975). If issues of material fact are in controversy, summary judgment is not appropriate. Dockery v. Quality Plastic Custom Molding, Inc., 144 N.C. App. 419, 547 S.E.2d 850 (2001).

As recognized by the majority, N.C.G.S. § 45-21.38 provides in pertinent part:

[Wjhen said note or notes are prepared under the direction and supervision of the seller . . . [he] 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.

The majority, however, in reaching its conclusion that plaintiff “took no part in the preparation of the promissory note or deed of trust” ignores the affidavit of the closing attorney, which states in relevant part:

3. I was employed by the buyer to conduct the closing and also represented the seller to the extent of preparing some of the documents in connection with the closing.
*5704. ... Since [plaintiff] acted as lender in this transaction, I prepared the security instruments subject to his review and approval.
6. . . . This was a seller financed closing and Exhibit B is in reality a purchase money deed of trust[.]”

This affidavit, coupled with plaintiff’s insistence on the removal of the phrase “purchase money” from the promissory note and deed of trust creates a genuine issue regarding whether the security documents were prepared “under the direction and supervision of the seller,” and renders summary judgment improper.

Moreover, I disagree with the majority’s holding that the amendments to the security instruments — the replacement of the phrase “purchase money” with the phrase “for consideration” and adding Bonn Gilbert as guarantor — were supported by “ample consideration,” thereby removing the transaction from the scope of N.C.G.S. § 45-21.38. The general warranty deed, promissory note, deed of trust, and Federal Housing and Urban Development (HUD) settlement statement, were all executed on 31 January 1996, in a single real estate transaction. The general warranty deed transferred “3.85 acres Nevin Road” from plaintiff to defendant Mallard, Inc., (Mallard). The promissory note, executed by Mallard for $150,000, is secured by the deed of trust for “3.85 acres, Nevin Road,” which was given by Mallard to plaintiff, to secure defendant’s indebtedness for $150,000 “as evidenced by the Promissory Note.” Finally, the HUD statement, signed by all parties, states that plaintiff sold the Nevin Road property to Mallard and that plaintiff acted as lender, providing financing for the entire sale amount of $150,000. This undisputed evidence establishes that this was a seller financed real estate sale evidenced by a purchase money promissory note and deed of trust and, thus, was the type of transaction addressed in N.C.G.S. § 45-21.38.

The majority, however, concludes that because plaintiff originally intended to finance a land sale to Gilbert, his acceptance of Mallard as the buyer was consideration for the execution of the promissory note, and that the promissory note for $150,000 was executed in exchange for this consideration rather than for purchase money. I find the majority reasoning on this point unpersuasive.

First, as acknowledged in the majority opinion, the contract to purchase obligated plaintiff to sell to Gilbert “or his assignee.” *571Therefore, plaintiffs “acceptance” of Gilbert’s assignee, Mallard, cannot be a consideration. Virmani v. Presbyterian Health Services Corp., 127 N.C. App. 71, 76, 488 S.E.2d 284, 287 (1997) (“the promise to perform an act which the promisor is already bound to perform cannot constitute consideration to support an enforceable contract”). Further, even assuming, arguendo, that plaintiffs agreement to sell to Mallard represented some consideration to the defendant Gilbert, this would not alter the fact that, as part of the parties’ overall agreement, plaintiff financed the sale of the property to Mallard, and plaintiff and Mallard executed a purchase money promissory note and deed of trust. “[S]o long as the debt of the purchaser of property is secured by a deed of trust on the property ... given by the purchaser to secure payment of the purchase price the deed of trust is a purchase money deed of trust” notwithstanding the existence of “additional [terms] not directly arising out of the land sale transaction!.]” Friedlmeier v. Altman, 93 N.C. App. 491, 495, 378 S.E.2d 217, 219 (1989) (presence of additional features of agreement “does not remove this deed of trust and promissory note from the definition of a purchase money instrument”).

Plaintiff was not obligated to act as lender for this transaction; if he was concerned about Mallard’s financial solvency, he could have required defendants to obtain third party financing. However, having agreed to transfer the Nevin Road property in exchange for what is, in fact, a purchase money promissory note and deed of trust, the seller may neither require the buyer to waive the protections of N.C.G.S. § 45-21.38. Merritt v. Edwards Ridge, 323 N.C. 330, 336, 372 S.E.2d 559, 563 (1988) (“purchase money debtor cannot waive the protection of the anti-deficiency statute”), nor bring suit against a purported “personal guarantor” for the purchase money promissory note. Crocker v. Delta Group, Inc., 125 N.C. App. 583, 481 S.E.2d 694 (1997).

This Court is obliged to “give proper weight to the intent of the General Assembly as construed by [the North Carolina Supreme Court].” Merritt, 323 N.C. at 335, 372 S.E.2d at 562. “[T]he legislature did not intend to allow suit upon the note in a purchase-money mortgage.” Realty Co. v. Trust Co., 296 N.C. 366, 372, 250 S.E.2d 271, 275 (1976). Transactions like the one in the instant case must be rigorously examined to ensure that they are not designed to circumvent the sprit and purpose of N.C.G.S. § 45-21.38.

For the reasons stated herein, I conclude that the trial court’s grant of summary judgment was improper and should be reversed.