*1 IN THE SUPREME COURT VILLAGE, NEIL BARNABY and MARINA H. INC. ELBRIDGE BOARDMAN GRAHAM, wife, R. RUTH BOARDMAN and O. Trustee 559PA84
No. 1985) (Filed 4 June Mortgages purchase money § 32.1— and Deeds of Trust deed of trust —release of security permitted on note not —action promissory A given pur- holder of a seller for the embracing chase of land and secured a deed of trust such land security exclusively release and then sue on but must the note look conveyed any property seeking to recover balance owed. To allow the would, effect, holder to release its and then sue statute, repeal 45-21.38. G.S. of Brown v. rejected. expressly Vaughn participate
Justice did of this case. decision Meyer concurring Justice in result. discretionary
On review of the decision of the Court of Ap- peals, reversing order dismissing the defendants’ counterclaim entered Wil- Judge Court, May liam H. Freeman on Superior CARTERET County. Heard in Supreme Court March Kirkman, P.A., Jr., M. Kenneth E. Way, John plaintiff appellants. Sumrell, Carmichael, M. Sugg by Fred Carmichael and Ashton, III, A. Rudolph appellees.
MITCHELL, Justice. presents This case questions concerning inter proper pretation N.C.G.S. 45-21.38.1 The Deficiency judgments 45-21.38. mortgage represents abolished § where part price. property In all sales mortgagees powers of real trustees under of sale and/or any 6, 1933, mortgage February contained in or deed of executed after judgment given where mortgage or decree is for the foreclosure of executed February payment after to secure to seller of the balance of the purchase price property, mortgagee of real or trustee holder of the notes or deed of trust shall not be entitled to a mortgage, on account of such obligation deed of trust or
Barnaby v. Boardman
promis-
a
is whether
the holder of
controlling question
appeal
on
a
land
sory
by
purchase
a
to
seller for the
of
note given
may
by
such land
release
embracing
a deed
trust
and secured
any
We
that
security and then sue on the note.
conclude
exclusively
property conveyed in
must
look
to the
note holder
any
He
not sue
the note.
recover
balance owed.
on
seeking to
of Appeals.
reverse the decision of the Court
Accordingly, we
this case
point
requires appellate
the outset we
out
At
by the trial
defendants’ counterclaim
of a dismissal of the
review
12(b)(6)
1A-1,
claim
Rule
for failure to state a
under
court
N.C.G.S.
Therefore,
allega-
material
can be
granted.
which relief
upon
are taken as admitted.
in that counterclaim
alleged
tions of fact
Stanback, 297
On December wife, County certain land near Cedar Island Carteret sold Barnaby. Barnaby Neil Neil executed and deliv- plaintiff, $150,000 a por- a promissory ered the Boardmans note for price promissory of the land. purchase tion of the money purchase embracing a the land sellers, by Barnaby Board- and his wife. The defendant signed wife, all releasing executed certain deeds subsequently man and the deed of trust. This done at of the land embraced buyer, Barnaby, Neil compliance request plaintiff which had been reference agreement incorporated a prior wife Barnaby and his money deed trust. Neil purchase in the Marina conveyed entirety to the plaintiff the land its later Inc., money subject deed trust. Village, Thereafter, wife, defendants, directed the Boardman and Graham, trustee, foreclosure defendant O. to commence deed of trust executed under the proceedings Provided, upon the face that it is shows said evidence of indebtedness the same: further, Provided, when said for real estate: for balance of supervision of the seller or prepared direction and under the note or notes are he, it, sellers, provision a to be inserted in said note disclos- cause shall in default of the seller or ing of real it is for estate: might purchaser which he sustain reason loss shall be liable to provisions as set herein out. failure to insert said Barnaby, Neil and his plaintiff, complied. wife. trustee As Superior a result of an order Clerk Court dated Feb- ruary trustee caused notice of sale filed indicating and advertised that the land would be question on sold March Inc.,
The plaintiffs, Barnaby Neil and Marina com- Village, menced this action filing complaint February 1982, seeking among things other to restrain the defendants from exercising attempting power exercise the of sale contained *3 money the deed trust. The defendants filed an answer and By counterclaim and amendments thereto. these the pleadings, they defendants admitted that all of had released the counterclaim, money land embraced By the deed of trust. their
the sought personam judgment defendants an against plaintiffs the for the balance owed on plus the note costs 12(b)(6) attorneys’ and fees. plaintiffs moved under Rule dismiss the defendants’ counterclaim as amended for failure to state a claim. After hearing, the court an trial entered order which, among other things, allowed motion the to dismiss the counterclaim as amended. The trial court specifically found that no just there for delay. was reason The defendants appealed the of Appeals which reversed the order of the trial court. On December we allowed for plaintiffs’ the dis- petition cretionary review. error to plaintiffs assign holding the of Ap- the Court
peals reversing the trial court’s order dismissing the defendants’ on the promissory counterclaim note. The plaintiffs contend that to allow a creditor to release the property pur- embraced chase forming
then obtain a personal on judgment against purchaser note would have the effect of repealing contend, hand, statute. The defendants other their their release of security makes the statute since it inapplicable, applies notes secured money mortgages deeds of trust. They argue statute does apply, because the note is no longer by any hold such mort- gage or deed of trust. The Court Appeals agreed with rea- soning of the defendants and stated: THE IN SUPREME COURT pur- Realty supra, statute nor
Neither
a rights
or restrict
determine
ports default,
who,
is unsecured because
at the time of
mortgagee
he,
security in accordance
released his
has
mortgagee,
in the
contained
agreement
terms of
deed of trust.
302-03,
318 S.E. 2d
at
by the
statute advanced
interpretation
of the
We find the
mechanical-
too
accepted
the Court
defendants
ly
In
Co.
literal
restrictive.
of the
we
the intent
pointed
out that
vend-
protect
Assembly in
the statute
“to
enacting
General
oppression
from
mortgagors
vendors
oppression
ees from
371,
Having in mind the G.S. seeks to which the statute adopted, perceived problem remedy, which a and the literal construction effect we compelled are to construe the statute produces, broadly Legislature and to conclude that intended more away option suing upon from creditors the to take *4 This construction in a transaction. purchase-money evasion, only ef- gives but also prevents the statute not its Legislature’s fect to the intent. 373,
296 250 S.E. N.C. at 2d at nevertheless, they longer here no argue, The defendants they security must have since have released their “options” security, if releasing recover all. Prior to upon at however, were secured and could foreclose under the defendants money deed event default of trust on the security note. To allow them to release their and then sue by the give “option” the note would them the forbidden statute. Assembly Such a result the General would violate the intent of and, effect, repeal statute. deny does not allow the “to statute, protection
himself
him”
as this
afforded
directly
which was
“would
to allow
indirection that
forbid-
428,
Belk,
421,
v.
41
den.” Bank
N.C.
denied,
disc. rev.
[T]he creditor to the when property conveyed the note and mort- gage or deed of trust are executed to the seller of the real estate the securing instruments state that are for. of securing the balance of purchase price. (em v.Co. N.C. at S.E. 2d added). phasis “may Such creditors sue upon Bank note.” Belk, 255 S.E. App. at 2d See Brown v. Jensen, denied, 259 P. Cal. 2d 2d 425 347 U.S. cert. The defendant rely in the present upon this Court’s decision in Brown v. and contend that the holder of originally note secured by a purchase money an bring ac- personam tion under the note in case in which the note later becomes unsecured. In Brown this Court held that the holder aof note purchase money second deed of trust could bring in personam action upon the when he was unpaid left unsecured because the property had been sold under a deed of trust having priority over his. The Brown holding was based upon the following reasoning: statute does not its terms prohibit
[T]his note, the holder of a trust, though a second deed of from obtain- ing judgment on the note when the property has been sold under another deed of trust having priority of lien. The statute applies to the holders of notes “secured trust,” the deed of trust under which the security was foreclosed and the land sold. It refers *5 “obligation secured the same.” The holder of foreclosure, the first deed of trust presum- ably, will sale, receive satisfaction of his note from the or he can protect himself of the land. But the holder of trust, the note the second deed who receives amount, sale, nothing, or insufficient from finds him- IN 570 THE SUPREME COURT security. self In this situation will ex- without the Court by judicial interpretation provisions tend deny him the debt. right for valid 487-88, 8 217 S.E. 2d N.C. is reasoning
The in same as employed Brown that harmony and is in present Court of case (1979). 366, Co., 296 S.E. 271 Realty Co. v. N.C. 250 2d It has been said: between v. Realty conflict Brown and Ross Kirkpatrick If
is value is apparent. less than the a purchase balance on the outstanding purchase price, has debt after mortgagee hope recovering no the entire default unless the can subor a third-party dinated secured creditor who rights Brown, Relying will and sell the property. foreclose creditor, unsecured, now can assert though on the note. rights against debtor 855, Note, 58 Rev. 862-63 also significant N.C. It Ford, v. part upon Page relied in the case of expressly this Court 450, P. 1013 holding 65 131 for its Or. however, analyzed Page In more Realty this Court Brown. rejected its We conclude that the reasoning. and expressly detail 2d v. N.C. of Brown rationale (1940) severely v. Trust undercut Co. reject we expressly S.E. 2d now Brown.2, reasoning of and sale in the The defendants contend by “sophisti- a commercial represented transaction present subject the anti- not be people” business should cated rules special have Some courts fashioned statute. types particular anti-deficiency statutes exceptions to their of California in Supreme commercial transactions. Memel, Rptr. 498 P. 102 Cal. 3d 2d Cal. Spangler money deeds exempted certain example, commercial construction loans subordinated of trust because argued result reached Brown correct can be It under G.S. “purchase-money case was not in that Inc., Parker's, S.E. Childers v. 45-21.38.” *6 IN THE SUPREME COURT Barnaby Boardman Jensen, P. Brown v. Cal. it had established rule denied, any remedy barring cert. 347 U.S. 2d 425 course, were, inter of in such cases other than foreclosure. Courts find them. We before statutes particular applying preting the 1933 General or elsewhere in our statute no indication of exclusion any special intended North Assembly of Carolina To the anti-deficiency statute. from our transactions commercial “sophisticated indicating evidence exists contrary, some during even protection special needed no such people” business our statute. adoption led to the which Depression the Great Brabner-Smith, Deficiency Judg Aspects Economic See ment, this contention reject We 20 Va. Rev. the defendants. that our anti- Trust Co. is Co. v. teaching before the note whether any suit on “bars Note, L. Rev. Forest 15 Wake after foreclosure.” "to is limited creditor here our statement
We reiterate or deed of the note and conveyed when the property the secur- estate and of the real to the seller trust are executed securing are for the state that instruments ing v. Trust Realty Co. price.” the purchase the balance of added). In such cases (emphasis S.E. 2d at 273 the note. may not sue upon simply creditor This case is is reversed. of Appeals The decision Court to reinstate with instructions remanded counter- dismissing defendants’ the trial court order of claim. and remanded.
Reversed Vaughn of this in the decision not participate did Justice case. Meyer in result. concurring
Justice I deem it majority. reached only in the result I concur to reach out and simply majority unwise for unnecessary overrule) (i.e., Brown v. virtually reject when the issue remotely before us not even decided that case was v. McLamb State *7 by a second case. dealt with in this Brown unsecured because unpaid and deed of trust left purchase-money having under a had been sold first property clearly is from the factual distinguishable That situation priority. issue was case. The Brown this Court this situation before argued was neither briefed nor appeal raised this thus virtually Brown majority’s overruling boldness in parties. since, ordinarily, surprising is in this situation somewhat Brown issue in and bar would consider comment on the bench be obiter dictum. this to again, point ap- is once to out that appropriate,
It also relatively is rare judgment statute of the plication is purchases because of home seller-financing in North Carolina sale relatively Usually need equity rare. itself a new Most home acquire home for themselves. of their home but sav- is done not the vendor financing purchase-money institutions, banks, and in- mortgage companies, and loan ings statute judgment to which the companies, surance so, of the anti- This the ostensible being apply. does not served. The really being statute unwary today is not home- primarily statute application owners, speculators and land who developers sophisticated but to Perhaps financing. owner partial least least to the extent it usefulness —at has outlived its institutions, mortgage thrift third-party applicable is not companies, provide great insurance companies, financing. bulk of home v. ROY NORTH CAROLINA McLAMB
STATE OF 660PA84 No. 1985) (Filed 4 June jury peremptory challenge impaneled Jury § after abuse 7.14— refusal of —no discretion permit refusing did not abuse its discretion The trial court juror peremptory challenge remaining to excuse a after the exercise to jury impaneled opening had statements been made when it came had been juror receptionist was a in a attention that the dental office at the court’s