In The Matter Of The Foreclosure Of: L.L. Murphrey Co.

NO. COA14-166
NORTH CAROLINA COURT OF APPEALS
Filed: 7 October 2014
IN THE MATTER OF THE FORECLOSURE
of a North Carolina Deed of Trust
executed by L.L. Murphrey Co.,
f/k/a/ L.L. Murphrey Hog Co., Lois
M. Barrow, Larry Barrow, Connie M.
Stocks, Donald Stocks and Doris
Murphrey dated April 23, 1996 and
recorded April 24, 1996 in Book Greene County
489 at Page 620, as modified by No.: 13 SP 61
those certain Modification and
Extension Agreements dated August
30, 1996, Recorded October 7, 1996
in Book 493 at Page 20, dated
April 4, 1997, recorded April 25,
1997 in Book 497, Page 94, dated
May 26, 1998, recorded June 29,
1998 in Book 507, Page 24 and
dated August 21, 1998, recorded
October 2, 1998, all in the Office
of the Greene County Register of
Deeds,
By Kluttz, Reamer, Hayes,
Randolph, Adkins & Carter, L.L.P.
Substitute Trustee.
Appeal by respondents from order entered 31 October 2013 by
Judge Paul L. Jones in Greene County Superior Court. Heard in
the Court of Appeals 27 August 2014.
-2-
Driscoll Sheedy, P.A., by Susan E. Driscoll, for appellee.
WHITE & ALLEN, P.A., by John P. Marshall and Ashley C.
Fillippeli, for appellants.
ELMORE, Judge.
Lois M. Barrow, Larry Barrow, and Doris Murphrey
(respondents) appeal from the Order Denying Motion to Dismiss
and Authorizing Foreclosure entered by Judge Paul L. Jones on 31
October 2013. After careful consideration, we affirm.
I. Background
In the instant case, the particular real estate security
interest being foreclosed was a North Carolina Deed of Trust
entered into on 23 April 1996 by Doris Murphrey, Lois M. Barrow,
Larry Barrow, Connie M. Stocks, Donald Stocks, and L.L. Murphrey
Hog Co. (LLM), a North Carolina corporation, in favor of
Wachovia Bank, N.A., predecessor in interest to D.A.N. Joint
Venture Properties of North Carolina, LLM (DAN). The deed of
trust was recorded in the Greene County Register of Deeds and
the Lenoir County Register of Deeds and amended over time by
certain modification and extension agreements. To secure the
deed of trust, respondents pledged certain items of real
property as collateral. Wachovia also received a security
interest in LLM’s fixtures and items of personal property. The
-3-
deed of trust secures an indebtedness evidenced by five
promissory notes (the Wachovia notes) executed by LLM, the
borrower, in favor of Wachovia between July 1993 and March 1999.
LLM previously filed a voluntary petition for relief under
Chapter 11 of the Bankruptcy Code on 8 June 2000. At that time,
LLM was in default to Wachovia for $12,790,522.36 pursuant to
the Wachovia notes. In LLM’s Chapter 11 case, the Bankruptcy
Court entered an order confirming LLM’s fourth amended plan of
reorganization (“Confirmed Plan” or “the Plan”). Pursuant to
class III of the Confirmed Plan, Wachovia’s claims were divided
into Note A and Note B. Note A is an amortizing note in the
amount of $8,000,000; Note B is a cash flow note in the amount
of $3,500,000. Both Notes remained secured by the collateral
pledged to secure the Wachovia notes. Respondents, LLM’s
principals, guaranteed Note A and Note B, which both listed a
maturity date of 30 September 2011. Upon maturation, the Plan
provided that Note A and Note B would be recapitalized and that
the obligations of the guarantors would be limited to the amount
of recapitalized debt.
The Confirmed Plan also specified:
R. Execution and Delivery of Revised Loan
Documents
The Debtor and Wachovia will enter into
-4-
amended and restated Loan Documents (the
“Wachovia Restated Loan Documents”)
consistent with the provisions of this Plan
of Reorganization. The Debtor shall execute
and
deliver such agreements, instruments and
documents as may be reasonably requested by
Wachovia. The Wachovia Restated Loan
Documents shall contain reasonably and
customary warranties, covenants and other
terms as the Debtor and Wachovia may agree
upon. The following shall constitute events
of default:
(i) Nonpayment as required under [the] terms
of Note A or Note B,
(ii) Material misrepresentation,
(iii) Material breach of warranties of
covenants,
(iv) Subsequent voluntary or involuntary
bankruptcy proceedings, or
(v) Reopening of current bankruptcy
proceedings.
S. Implementation Date
The Implementation Date for Note A and Note
B shall be October 1, 2001, provided that
the following Conditions Precedent have been
met:
(i) Cash shall be available to the Debtor in
an amount sufficient to permit payment in
full of all Administrative Claims,
(ii) Eleven days shall have expired since
the Confirmation Date and no stay of the
Confirmation Order shall be in effect, and
(iii) The Wachovia and MLLC Restated Loan
-5-
Documents [referred to above as the
“Wachovia Restated Loan Documents”] required
by the
Plan of Reorganization shall have been
executed and delivered.
Wachovia did not execute the Restated Loan Documents
referenced in the Confirmed Plan. Nonetheless, LLM made
payments pursuant to the terms of the Confirmed Plan from 1
October 2001 through 2011. Post-confirmation, Wachovia sold the
Wachovia notes to CadleRock Joint Venture, L.P., who later sold
or assigned the Wachovia notes to DAN in 2008. DAN filed the
necessary notices of assignment, amendments, and continuation
statements with the Greene County Register of Deeds, the Lenoir
County Register of Deeds, and the North Carolina Secretary of
State.
Upon maturity of Note A and Note B, LLM and DAN could not
agree to the amount of the recapitalized debt. Seeking a
determination, LLM reopened the Chapter 11 case and filed an
adversary proceeding in Bankruptcy Court. Judge J. Rich
Leonard, United States Bankruptcy Judge for the Eastern District
of North Carolina, ruled that LLM’s total indebtedness due and
owing to DAN was $6,186,362.00. Neither party appealed this
judgment.
-6-
Thereafter, LLM filed a voluntary petition for relief under
Chapter 7 of the Bankruptcy Code on 21 May 2012. After LLM’s
Chapter 7 filing, DAN filed a proof of claim in the amount of
$6,056,645.26. DAN attached a copy of LLM’s fourth amended plan
of reorganization, copies of the requisite security agreements,
and copies of the assignments it filed with the Greene and
Lenoir County Register of Deeds. In January and February 2013,
LLC’s bankruptcy trustee filed motions requesting approval to
conduct a proposed public sale of LLM’s real and personal
property free and clear of liens. The trustee submitted a draft
of a proposed complaint that he anticipated filing in an
adversary proceeding against DAN. The complaint alleged that
the Wachovia notes and the deed of trust were avoidable pursuant
to 11 U.S.C. § 5444(a)(3) (2013).
The real property that was the subject of the proposed
public sale included five tracts of land in Greene County and
one tract of land in Lenoir County. As DAN asserted liens on
all but one of the tracts of real property, it filed an
objection to the trustee’s motion to sell free and clear of
liens. DAN asserted that pursuant to 11 U.S.C. § 363(f)(4), its
interest was not subject to a factual or legal dispute because
LLM: (1) did not file any objection to DAN’s proof of claim, and
-7-
(2) because LLM’s indebtedness was reaffirmed in the bankruptcy
court adversary proceeding. See L.L. Murphrey Co. v. D.A.N.
Joint Venture III, L.P., Adv. No. 11-00139, 2011 WL 6301214
(Bankr. E.D.N.C. Dec. 16, 2011) (calculating the recapitalized
debt under the Confirmed Plan to be $6,168,362.00).
On 6 June 2013, Judge Leonard entered an order (“the
Leonard order”) in the Chapter 7 case. The Leonard order
reviewed the terms of the Confirmed Plan, particularly the
portions that purported to require Wachovia to execute Restated
Loan Documents to reaffirm the loan. Judge Leonard determined
the terms of the Confirmed Plan were “unambiguous and impose[d]
an obligation on the parties, the debtor and Wachovia, to
execute amended and restated agreements, instruments and other
loan documents consistent with the treatment provided therein.”
Judge Leonard further concluded, “[i]n addition to being
explicitly required, the execution and delivery of the amended
and restated loan documents was a condition precedent for
setting the implementation date for Note A and Note B as October
1, 2001.”
Further, Judge Leonard held that in the absence of the Restated
Loan Documents, the description of Note A and Note B and the
recitation of the terms were insufficient to constitute
-8-
negotiable instruments. Accordingly, Judge Leonard found that
the trustee established the existence of a “bona fide dispute”
regarding the validity of DAN’s liens. Judge Leonard authorized
the trustee to sell the real property free and clear of the
liens asserted by DAN. Notably, the Leonard order did not
terminate DAN’s rights to foreclose on the deed of trust—it
merely recognized the existence of a bona fide dispute between
the parties and authorized the trustee to proceed with the sale
of the requisite property.
DAN filed a Notice of Hearing for Foreclosure of Deed of
Trust on 4 September 2013. Based on the Leonard order, LLM
filed a motion to dismiss DAN’s foreclosure action on 2 October
2013. On 31 October 2013, the matter came on for hearing before
Judge Paul L. Jones in Greene County Superior Court. Judge
Jones entered an order denying LLM’s motion to dismiss. He also
authorized the Substitute Trustee for DAN to proceed with the
foreclosure of the subject property pursuant to the power of
sale granted to him under the deed of trust. Judge Jones
entered the following findings of fact:
2. The Deed of Trust secures an indebtedness
evidenced by certain promissory notes
executed by [LLM] in favor of Wachovia
Bank, which were modified over time and
through the Fourth Amended Plan (Confirmed
Plan) filed in [LLM’s] Chapter 11
-9-
Bankruptcy Case[.]
3. The Deed of Trust states that it operates
as security for “any renewals,
modifications or extensions” of the Notes
identified in the Confirmed Plan, as well
as “all present and future obligations of
Grantor[s] to [DAN].” (Deed of Trust,
p.3.)
5. Under the terms of the Confirmed Plan, the
Notes were divided into two tranches: Note
A and Note B were to “remain secured by
that collateral pledged to Wachovia by
[Borrower] prior to the Petition Date”.
[sic] Although the Confirmed Plan
required entry by Borrower and Wachovia
into “amended and restated Loan
Documents”, [sic] it did not specify what
documents were required. Instead, the
Confirmed Plan required that Borrower
“execute and deliver such agreements,
instruments and documents as may be
reasonably requested by Wachovia.” There
was no requirement that the Barrow Family,
Donald Stocks or Connie Murphrey execute
any new documents.
. . .
8. Through the Adversary Proceeding, it was
determined that the amount of the
Recapitalized Debt was $6,186,362.00. (May
10, 2012 Order, Adv. Proc. No.: 11-00139-
8-JRL, p.6.) Instead of paying the
Recapitalized Debt in full or entering
into new loan documents for the amount of
the Recapitalized Debt, Borrower filed for
bankruptcy under Chapter 7 of the United
States Bankruptcy Code, Case No.: 12-
03837-8-JRL. (Chapter 7 Case).
9. D.A.N. Joint Venture Properties of N.C.,
LLC is the current holder of the Notes and
-10-
the Deed of Trust.
Respondents now appeal.
II. Analysis
A. Judge Leonard’s order
Initially, we note that defendant challenges finding of
fact #2, #5, and #9 above as being unsupported by competent
evidence. The forgoing analysis addresses each of these
challenged findings in substance and illustrates how each is, in
fact, supported by competent evidence.
Much of respondents’ argument is premised on the belief
that the Leonard order constituted a final judgment purportedly
affecting the merits of the foreclosure action. We find it
necessary to dispel this argument at the outset of this appeal.
In their brief, respondents advance the following argument:
The issue of whether the language of the
Confirmed Plan, in the absence of Restated
Loan Documents, is sufficient to constitute
negotiable instrument has already been
litigated and determined by the Leonard
Order. The Leonard Order specifically
provides that the Confirmed Plan is
“unambiguous and imposes an obligation on
the parties, the debtor and Wachovia, to
execute [Restated Loan Documents] consistent
with the treatment provided therein.” In
addition, the Leonard Order holds
specifically that “in addition to being
explicitly required, the execution and
delivery of the [Restated Loan Documents]
was a condition precedent for setting the
-11-
implementation date of Note A and Note B as
October 1, 2001.” Finally the Leonard Order
provides that “these provisions appear
mandatory and are not self-executing” and
that “in the absence of [Restated Loan
Documents], the description of Note A and
Note B as well as the recitation of its
terms, obligations and the treatment
provided to Wachovia are insufficient to
constitute negotiable instruments.” DAN does
not and cannot meet the Holder requirement
of N.C.
Gen. Stat. §45-21.16(d).
North Carolina must give full faith and
credit to final judgments of Federal Courts.
. . . An Order of a Bankruptcy Court
avoiding a mortgage lien is a Final Order. .
. . Issue preclusion prevents [DAN] from
re-litigating the issue concerning holder
status.
Respondents are misguided. “In order for collateral
estoppel to apply in this case, the issues to be concluded must
be the same as those in the prior Bankruptcy Court action[.]”
In re Foreclosure Under That Deed of Trust Executed by Azalea
Garden Bd. & Care, Inc., 140 N.C. App. 45, 56, 535 S.E.2d 388,
396 (2000). The Bankruptcy Court did not rule on the merits of
DAN’s foreclosure action, and the Leonard order was not an
adjudication on the merits. For example, the issue of whether
DAN was the holder of a valid debt was not litigated and
determined in the bankruptcy proceeding. Therefore, collateral
estoppel is inapplicable. Respondents’ counsel was aware that
-12-
Judge Leonard’s order did not constitute an adjudication on the
merits of the foreclosure. During the foreclosure hearing
counsel stated, “Judge Leonard’s decision is not an adjudication
. . . but it’s really darn convincing and persuasive argument as
to how it is he was going to rule.” In respondents’ reply
brief, they clarify that their position is not that the Leonard
order constitutes a final order avoiding a mortgage lien;
instead, they aver that it is an order establishing: (1) that
the reorganization plan mandated new loan documents, and (2)
that the failure to execute new loan documents meant that the
payment obligations under the Confirmed Plan were insufficient
to constitute negotiable instruments.
Regardless, as applied to the foreclosure action before us
on appeal, the Leonard order lacks controlling authority. It is
merely a determination that a “bona fide dispute” exists between
LLM and DAN regarding the validity of DAN’s liens. Under 11
U.S.C. §363(f), a trustee has the right to sell property free
and clear of liens if there is a bona fide dispute as to the
validity of the lien. Despite respondents’ arguments to the
contrary, Wachovia was not required to execute Restated Loan
Documents for the Confirmed Plan to be valid and enforceable
against respondents in the foreclosure action. As the trial
-13-
court found in Finding #5, the Confirmed Plan simply provides:
“The debtor shall execute and deliver such agreements,
instruments and documents as may be reasonably requested by
Wachovia.” Thus, the Confirmed Plan allowed Wachovia to
determine what, if any, new loan documents Wachovia required.
Restated Loan Documents were neither required nor a condition
precedent for the Confirmed Plan to bind the parties.
Further, respondents have waived their right to advance the
above argument because the record shows that they made timely
payments pursuant to the terms of the Confirmed Plan for
approximately ten years. Clement v. Clement, 230 N.C. 636, 639,
55 S.E.2d 459, 461 (1949) (holding doctrine of waiver provides
that “[a] person may waive almost any right he has, unless
forbidden by law or public policy.)
B. Foreclosure by Power of Sale
Next, we must consider whether the trial court erred in
authorizing DAN to foreclose on the subject properties. In a
foreclosure by power of sale, the trial court shall enter an
order permitting foreclosure upon finding: (i) a valid debt of
which the party seeking to foreclose is the holder, (ii)
default, (iii) right to foreclose under the instrument, and (iv)
notice to those entitled. N.C. Gen. Stat. § 45-21.16(d)
-14-
(2013). Here, respondents essentially challenge the first and
third elements of N.C. Gen. Stat. § 45-21.16(d) on the basis
that DAN failed to produce competent evidence of a valid debt,
failed to show that it was the current note holder, and was
unable to show that it had a right to foreclose under the deed
of trust. These issues are “question[s] of law controlled by
the UCC [Uniform Commercial Code], as adopted in Chapter 25 of
the North Carolina General Statutes.” In re Bass, 366 N.C. 464,
467, 738 S.E.2d 173, 175-76 (2013). We conclude that the trial
court did not err.
The following documents set out the rights of the parties
in this case: (1) the five Wachovia promissory notes executed
between 1993-1999 by LLM in favor of Wachovia; (2) the deed of
trust securing the notes executed by respondents and amended
over time; (3) LLM’s fourth amended plan of reorganization filed
4 May 2001; (4) the Confirmed Plan effective 13 July 2001; and
(5) the order determining LLM’s indebtedness entered in the
adversary proceeding. L.L. Murphrey Co. v. D.A.N. Joint Venture
III, L.P., Adv. No. 11-00139, 2011 WL 6301214 (Bankr. E.D.N.C.
Dec. 16, 2011) (calculating the recapitalized debt under the
Confirmed Plan to be $6,168,362.00).
-15-
For the reasons set forth above, we decline to address
respondents’ arguments that are premised entirely on the
contention that the Confirmed Plan is not enforceable against
them. However, we will address the following three specific
arguments advanced by respondents: First, respondents aver that
DAN is not the holder of a valid debt because the Confirmed Plan
fails to qualify as a negotiable instrument. Second,
respondents argue that the Confirmed Plan does not contain a
sufficient description of the debt it proposes to secure.
Third, respondents argue that the Confirmed Plan was not
intended to operate as an extension or modification of the deed
of trust.
First, we note that DAN need not prove that it is the
holder of a negotiable instrument in order to satisfy element
one of N.C. Gen. Stat. § 45-21.16(d). When determining whether
a party is the holder of a valid debt, we must find (i)
sufficient competent evidence of a valid debt, and (ii)
sufficient competent evidence that the party seeking to
foreclose is the current holder of the notes that evidence that
debt. In re Adams, 204 N.C. App. 318, 322, 693 S.E.2d 705, 709
(2010). Prong two, whether DAN is the holder of a valid debt,
need not be addressed. Respondents’ argument that DAN is not
-16-
the “holder” of a valid debt is based on the premise that the
Confirmed Plan is a nullity. Accordingly, we must only find
competent evidence of a valid debt. In Azalea, this Court held
that a “valid debt” can be evidenced by several documents
(including a confirmed bankruptcy plan), each modifying the
terms of the other. Azalea, 140 N.C. App. at 53, 535 S.E.2d at
394 (2000) (finding that “the compromise and settlement
agreement and plan of reorganization that were negotiated,
amended and ratified by the parties in this case modified the
original documents[.]”) (emphasis added). Here, the Wachovia
notes were modified by the plan of reorganization, which was
negotiated, amended, and ratified by the parties through the
Confirmed Plan. The Confirmed Plan set forth the maturity date
of the loans, interest rate, and events triggering default. LLM
(at respondents’ direction) made payments under the terms of the
Confirmed Plan for approximately ten years. Upon review, we
hold that the Confirmed Plan evidences a valid debt of which DAN
is the holder.
In addition, the valid debt and DAN’s holder status is
further evidenced in the order entered by Judge Leonard. See
L.L. Murphrey Co. v. D.A.N. Joint Venture III, L.P., Adv. No.
11-00139, 2011 WL 6301214 (Bankr. E.D.N.C. Dec. 16, 2011).
-17-
Judge Leonard calculated LLM’s recapitalized debt under the
Confirmed Plan at $6,168,362.00 and found that DAN became the
holder of this indebtedness in 2008. LLM did not appeal this
order and it is therefore binding on this Court.
Second, the deed of trust and the Confirmed Plan both
adequately describe the indebtedness each secures. In North
Carolina, a deed of trust must identify the obligation secured
so that all subsequent purchasers or lenders are afforded
sufficient notice as to the nature of the obligations secured by
the deed of trust. In re Hall, 210 N.C. App. 409, 413, 708
S.E.2d 174, 177 (2011) (holding “[t]o be a valid lien on real
property, North Carolina law requires a deed of trust to
specifically identify the obligation it secures.”) Here, the
deed of trust provides a detailed description of the obligations
secured, as follows:
(a) Note, dated July 9, 1993, in the
original principal amount of $1,000,000,
executed by Larry Barrow and Lois M. Barrow
and payable to the Beneficiary (which,
together with any and all renewals,
modifications and extensions thereof, is
hereinafter referred to as the “Barrow
Note”).
(b) Note, dated July 9, 1993, in the
original principal amount of $1,000,000,
executed by Donald Stocks and Connie M.
Stocks and payable to the Beneficiary
(which, together with any and all renewals,
-18-
modifications and extensions thereof is
hereinafter referred to as the “Stocks
Note”).
(c) Note, dated July 9, 1993 in the original
principal amount of $1,131,478.94, executed
by the Maker and payable to the Beneficiary
(which, together with any and all renewals,
modifications and extensions thereof, is
hereinafter referred to as the “1993 Company
Note”).
The deed of trust also details the modification of the
Wachovia notes over time, including the decrease in principal
balance and extension of maturity dates. Further, the deed of
trust contains a catchall phrase—stating it operates as security
for “any renewals, modifications or extension” of the Wachovia
notes and “all present and future obligations of [LLM and
respondents] to [DAN].”
The Confirmed Plan specifically describes the obligations
it secures as including:
A. Note #1: Note #1 is a promissory note
dated July 9, 1993 in the original
principal amount of $1,131,478.94. By its
terms, this obligation accrued interest at
the annual rate of 7.15%. It was to be
repaid by monthly principal and interest
payments in the amount of $17,160.40.
This note matured July 10, 1999.
B. Note #17: Note #17 is a promissory note
dated April 23, 1996 in the original
principal amount of $3,500,000.00. By its
terms, this obligation accrued interest at
the annual rate of prime plus .75%. It
-19-
was to be repaid by monthly principal
payments in the amount of $58,334.00 plus
accrued interest. This note matures on
May 1, 2001.
C. Note #18: Note #18 is a Declining
Revolver Note dated April 23, 1996 in the
original principal amount of
$5,420,000.00. By its terms, this
obligation accrued interest at the annual
rate of 9%. It was to be repaid by
quarterly principal payments in the amount
of $250,000.00 plus accrued interest.
This note matured March 15, 2000.
D. Note #19: Note #19 is a Grain Line of
Credit Note dated April 23, 1996 in the
original principal amount of
$2,750,000.00. By its terms, this
obligation accrued interest at the annual
rate of prime plus 1%. It was to be
repaid by monthly interest payments with
principal due and payable at maturity.
This note matured February 25, 1999.
E. Note #22: Note #22 is a future advances
note dated March 16, 1999 in the original
principal amount of $175,000.00. By its
terms, this obligation accrued interest at
the annual rate of prime plus 1.5%. It was
to be repaid by monthly interest payments
with principal due and payable at
maturity. This note matured April 15,
1999.
We conclude that the description of the indebtedness evidenced
in the deed of trust and the Confirmed Plan is sufficient under
North Carolina law to notify creditors of the nature of the
obligations secured by the deed of trust and likewise by the
-20-
Confirmed Plan. Hall, supra.
As to respondents’ third argument, we note that they
advance no specific argument to support their position that the
Confirmed Plan was not intended to act as an extension or
modification of the deed of trust. Our Supreme Court has held
that a deed of trust executed as security for a debt will secure
all renewals of the debt unless a different intent appears.
Wachovia Nat'l Bank v. Ireland, 122 N.C. 571, 29 S.E. 835 (1898)
(“The deed contains a covenant that the charge shall be binding
for all renewals of the debts specified. This would be so
without any agreement, unless a different intent appeared.”).
“Where a note is given merely in renewal of another note and not
in payment thereof, the effect is to extend the time for the
payment of the debt without extinguishing or changing the
character of the obligation, and, in case of default, the holder
may sue upon the original instrument.” Dyer v. Bray, 208 N.C.
248, 180 S.E. 83 (1935).
Where a [subsequent] contract involves the
same subject matter as the first, but where
no recession has occurred, the contracts
must be construed together in identifying
the intent of the parties and in
ascertaining what provisions of the first
contract remain enforceable, and in such
construction the law pertaining to
interpretation of a single contract applies.
-21-
In re Fortescue, 75 N.C. App. 127, 130, 330 S.E.2d 219, 221
(1985) (citation omitted) (applying terms of a loan modification
agreement to find default of promissory note and foreclosure of
deed of trust). “The court’s primary purpose in construing a
contract is to ascertain the intention of the parties.” Id. at
130, 330 S.E.2d at 222; see also In re Foreclosure of Sutton
Investments, 46 N.C. App. 654, 659-60, 266 S.E.2d 686, 689
(1980) (concluding “that proper interpretation of the provisions
in the Note and the Deed of Trust prescribing the conditions of
default requires that the instruments be read together as one
contract rather than as two independent agreements.”)
The modification of the Wachovia notes through the
Confirmed Plan did not eliminate the original debt, as
respondents contend. The plan of reorganization specifies:
“[Note A and Note B] shall remain secured by that collateral
pledged to Wachovia by the Debtor prior to the Petition Date and
guaranties will remain in full force and effect for the Notes
except as adjusted to reflect the amount of Recapitalized Debt,
defined herein” and “[t]he Recapitalized Debt shall remain
secured by the same Pre-Petition Collateral.” The Confirmed
Plan provides: “The guarantors of Wachovia’s Notes A and B as
provided for under the Plan shall be the same as pre-petition,
-22-
with the exception [] [of] Connie S. Murphrey[.]” Notably, the
Confirmed Plan does not provide for a payoff of the Wachovia
notes—it merely reclassifies the preexisting debt. Thus, the
Confirmed Plan “set new, specific requirements that the parties
in this case intended to follow, in addition to any agreements
in the original promissory note and deed of trust, that were not
irreconcilable.” Azalea, 140 N.C. App. at 52, 535 S.E.2d at
393.
The deed of trust also states that it is to operate as
security for “any renewals, modifications or extensions” of the
Wachovia notes as well as “all present and future obligations of
[LLM and the Barrow family] to [DAN].” Based on the language
of the Confirmed Plan and deed of trust, we conclude that the
parties intended for the deed of trust to operate as security
for the Wachovia notes, as modified under the terms of the
Confirmed Plan.
C. Statute of Limitations
Respondents argue that DAN’s foreclosure action is barred
by the applicable statute of limitations set forth in N.C. Gen.
Stat. § 1-47(2) and (3) (2013). We disagree and note that the
crux of the statute of limitations argument hinges on our having
-23-
concluded that the Confirmed Plan is unenforceable against
respondents.
N.C. Gen. Stat. § 1-47(3) (2013) provides:
For the foreclosure of a mortgage, or deed
in trust for creditors with a power of sale,
of real property, where the mortgagor or
grantor has been in possession of the
property, within ten years after the
forfeiture of the mortgage, or after the
power of sale became absolute, or within ten
years after the last payment on the same.
As the statute provides, the statute of limitations does
not run until ten years after a final payment is made on an
obligation. Respondents do not contest the fact that LLM made
payments pursuant to the terms of the Confirmed Plan through
2011. Clearly, DAN is squarely within the requisite time frame
in which it can bring its foreclosure action. We overrule
respondents’ argument.
II. Conclusion
In reviewing the record in its entirety, we hold that DAN
presented competent evidence of: (i) a valid debt of which the
party seeking to foreclose is the holder, (ii) default, (iii)
right to foreclose under the instrument, and (iv) notice to
those entitled as required under N.C. Gen. Stat. § 45-21.16(d).
Accordingly, we affirm the trial court’s order.
-24-
Affirmed.
Judges CALABRIA and STEPHENS concur.