Chemical Bank v. Belk

• Decision Date: 05 June 1979
• Docket Number: No. 7826SC580,7826SC580
• Citation: Chemical Bank v. Belk, 255 S.E.2d 421, 41 N.C.App. 356 (N.C. App. 1979)
• Court: North Carolina Court of Appeals
• Parties: CHEMICAL BANK, v. Henderson BELK.

Page 421

255 S.E.2d 421

41 N.C.App. 356

CHEMICAL BANK, v. Henderson BELK.

No. 7826SC580.

Court of Appeals of North Carolina.

June 5, 1979.

Grier, Parker, Poe, Thompson, Bernstein, Gage & Preston by Mark R. Bernstein, Fred T. Lowrance and J. William Porter, Charlotte, for plaintiff.

Weinstein, Sturges, Odom, Bigger, Jonas & Campbell by Maurice A. Weinstein, T. LaFontine Odom and L. Holmes Eleazer, Jr., Charlotte, for defendant.

ROBERT M. MARTIN, Judge.

We note at the outset that, according to an addendum to the record filed by the parties, the property in question has been sold by mutual consent of the parties, mooting any discussion of foreclosure on these facts. We also have noted the opinion of our Supreme Court in Ross Realty Co. v. Trust Co., 296 N.C. 366, 250 S.E.2d 271 (1979), reversing the ruling of this Court in the same case at 37 N.C.App. 33, 245 S.E.2d 404 (1978). Under Ross Realty, it is clear that where a mortgage or deed of trust is executed by a vendee to secure to the vendor the balance of the purchase price of real property, the vendor is limited, in the event of default by the vendee, to the security and may not sue upon the note. Accordingly, in the case before us, if the note sued upon is determined to be a purchase money note, plaintiff's recovery will be limited to the proceeds identifiable under the sale of the hotel property. Therefore, the principal question for our review is whether the trial judge ruled correctly when he determined that G.S. § 45-21.38 did not apply to the instant transaction. We conclude that he did not rule correctly and reverse the order entered below.

Plaintiff vigorously contends that the anti-deficiency statute is not applicable to this transaction for several reasons. First, plaintiff argues that the note executed by defendant was not marked as a "purchase money note" and therefore does not conform to the statutory prerequisites for asserting G.S. § 45-21.38 as a defense. Second, plaintiff contends that its rights are as those of a holder in due course, and that therefore no defenses to the note may be asserted against it. And third, plaintiff contends that defendant, through his actions, has waived the protection of the statute and is estopped from asserting it as a defense.

Defendant controverts all of these assertions by plaintiff, contending that the note was adequately identified as a purchase money note, that no holder in due course status may be found to exist on plaintiff's part, and that he has not waived or by his conduct estopped himself from asserting the benefits and protection of the anti-deficiency statute; he argues further that the very nature of N.C.Gen.Stats. § 45-21.38 prevents any waiver or estoppel from effectively acting to remove him from its protective umbra. Defendant also contends that the second proviso of the statute (which makes a seller liable for any deficiency judgment recovered against a purchaser where the instruments evidencing and securing the debt were prepared under the seller's supervision, the instruments secured what in fact was a purchase money obligation, and the identifying notation of "Purchase Money" was not included on the face of the instruments) will make plaintiff liable for any deficiency in any event, even if the note is determined not to be a purchase money note, since the seller (Charlotte Venture Corp.) caused to be prepared all of the instruments pertinent to the transaction now before us and the protection of the second proviso of the statute is applicable to the assignees of the seller.

It is a long-standing rule governing related written instruments executed contemporaneously that they are to be considered as one instrument and are to be read and construed as such to determine the intent of the parties, provided the instruments are not contradictory. This rule is applicable to notes and deeds of trust. See generally 11 Am.Jur.2d Bills and Notes, § 70; 55 Am.Jur.2d Mortgages, § 176. This proposition has been supported in North Carolina. See Frye v. Crooks, 258 N.C. 199, 128 S.E.2d 257 (1962) (holding that cross-reference from note to deed of trust and vice versa were sufficient to incorporate due date from deed of trust into note); Gambill v. Bare, 32 N.C.App. 597, 232 S.E.2d 870, rev. denied, 292 N.C. 640, 235 S.E.2d 61 (1977) (suggesting that purchase money nature of debt may be shown on either note or deed of trust). In view of the liberality of interpretation that our Supreme Court has indicated to be appropriate in effecting the Legislature's intent in enacting N.C.Gen.Stats. § 45-21.38, we hold that where a note and deed of trust cross-refer to each other, and incorporate each other by reference, and only one of the documents clearly indicates the purchase money nature of the transaction, the other document may be deemed to include the same language indicating the nature of the transaction. Therefore, nothing present or absent from the face of the note now before us will serve to block the applicability of N.C.Gen.Stats. § 45-21.38 to it.

Having thus determined that the provisions of N.C.Gen.Stats. § 45-21.38 are applicable to the note, we must determine if any of the actions or conduct of the defendant will serve to remove him from its protection. Plaintiff has contended that, even should the statute otherwise be found applicable, application of it to the specific facts before us would be improper, citing theories of waiver, estoppel and guaranty. We do not agree and find, for the reasons stated below, that defendant has not removed himself from the protective umbra of the anti-deficiency judgment statute.

We are of the opinion that the benefits of this statute cannot be waived. As interpreted by our Supreme Court in Ross Realty, it effects the broad public purpose of abolishing deficiency judgments in purchase money transactions if foreclosure on the security yields an insufficient fund to satisfy the indebtedness secured. The protection it offers is afforded to all purchasers of realty who secure any part of the purchase price with a deed of trust on the realty they are purchasing. We are persuaded that this protection was enacted as an expression of public policy by the 1933 General Assembly. Considering the depressed state of the economy at that time, and also looking to the chaos which could have occurred upon the wholesale foreclosure of deeds of trust followed by executions upon deficiency judgments, leaving a potentially substantial group of purchasers without their land or adequate general assets to subsist, we have no difficulty in concluding that the protection of the anti-deficiency judgment statute was designed for the benefit of the general public and was not intended to be merely a right which could be waived (or which purchasers could be compelled to waive as a prerequisite for obtaining financing). We are buttressed in our conclusion by our Supreme Court's analysis of the intent of N.C.Gen.Stats. § 45-21.38 in Ross Realty, and also by our careful study of an article quoted in that opinion, Currie and Lieberman, Purchase-Money Mortgages and State Lines: A Study in Conflict-of-Laws Method, 1960 Duke Law Journal 1. As to waiver of benefits conferred by statutes designed to protect public interests, the law is well settled. Ordinarily, effect will not be given to an attempted waiver of a protective public policy by an individual. "A waiver is not . . . allowed to . . . transgress public policy or morals." Memorial Hospital v. Wilmington, 237 N.C. 179, 190, 74 S.E.2d 749, 757 (1953). Also see generally 28 Am.Jur.2d Estoppel and Waiver, §§ 161 and 164; 3 Powell on Real Property, § 474 at 696.55. Ector v. Osborne, 179 N.C. 667, 103 S.E. 388 (1920), cited by plaintiff, is wholly distinguishable on its facts and is simply not applicable. Waiver by implication is not looked upon with favor by the courts; in fact, every reasonable intendment will be indulged against the waiver of fundamental rights, the courts never presuming acquiescence in their loss. See 28 Am.Jur.2d Estoppel and Waiver, § 173; Cf. Bunn v. Braswell, 139 N.C. 135, 51 S.E. 927 (1905). We find no express waiver of the statute's protection anywhere in the record; nor do we find any facts of record sufficient to imply such a waiver. Even if an attempted waiver could be said to exist, however, it would be void notwithstanding the form it...