American Foods, Inc. v. Goodson Farms, Inc.

275 S.E.2d 184 (1981)

AMERICAN FOODS, INC., Plaintiff,
v.
GOODSON FARMS, INCORPORATED, and J. Michael Goodson, Defendant.

No. 805SC638.

Court of Appeals of North Carolina.

February 17, 1981.

Murchison, Fox & Newton by Wallace C. Murchison and William R. Shell, Wilmington, for plaintiff-appellee-appellant.

Poisson, Barnhill, Butler & Britt by L. J. Poisson, Jr., Wilmington, for defendants-appellants-appellees.

HILL, Judge.

Defendants contend the trial judge erred in denying their motion for summary judgment and in striking their Third Defense. Defendants cite as support for their contention G.S. 45-21.38, which reads, in pertinent part, as follows,

In all sales of real property by mortgagees... under powers of sale, contained in any mortgage or deed of trust executed after February 6, 1933, ... to secure to the seller the payment of the balance of the purchase price of real property, the mortgagee ... or holder of the notes secured by such mortgage or deed of trust shall not be entitled to a deficiency judgment on account of such mortgage, deed of trust or obligation secured by the same: Provided, said evidence of indebtedness shows upon the face that it is for balance of purchase money for real estate: The defendants contend this statute must be read in conjunction with Realty Co. v. Trust Co., 296 N.C. 366, 250 S.E.2d 271 (1979).

In Realty, the defendant purchased certain real estate from the plaintiff. As a part of the purchase price the defendant purchaser delivered to the plaintiff seller a purchase money note and deed of trust covering the property conveyed. Upon default, instead of foreclosing on the deed of trust, plaintiff instituted an action against the defendant upon the promissory note. The Supreme Court held that the defendant purchaser was entitled to the protection of G.S. 45-21.38 because the defendant was a purchase money mortgagor and that plaintiff seller could not avoid the provisions of the statute by abandoning its security in the real property and substituting a suit on the underlying note.

Justice Britt, speaking for the Court, at page 373, 250 S.E.2d 271 said:

Having in mind the purpose for which G.S. 45-21.38 was adopted, the perceived problem which the statute seeks to remedy and the effect which a literal construction of the statute produces, we are compelled to construe the statute more broadly and to conclude that the Legislature intended to take away from creditors the option of suing on the note in a purchase money mortgage transaction. This construction of the statute not only prevents its evasion, but also gives effect to the Legislature's intent.

The case sub judice is distinguishable from Realty. In that case, the collateral consisted of real estate only. In Realty the note and deed of trust each indicated on its face that it was a purchase money instrument. No such indication appears on the note in the instant case. In the case sub judice, title to the real estate was taken in the name of Lewis Nursery, Inc. only, and foreclosed in an action against the Nursery. Unlike the defendants in Realty, defendants in the case sub judice had no record title interest in the land acquired by foreclosure. (No trust relationship is alleged or in evidence.) The endorsements by the defendants were nothing more than additional collateral which were required by the plaintiff. We conclude that the trial judge did not err in denying defendants' motion for summary judgment and by striking defendants' Third Defense.

Defendants next contend the trial judge erred in striking their Fourth Defense. Defendants rely upon G.S. 45-21.36, which provides, in pertinent part, as follows:

When any sale of real estate has been made by a mortgagee, ... at which the mortgagee, ... becomes the purchaser and takes title either directly or indirectly, and thereafter such mortgagee, ... shall sue for and undertake to recover a deficiency judgment against the mortgagor, trustor or other maker of any such obligation whose property has been so purchased, it shall be competent and lawful for the defendant against whom such deficiency judgment is sought to allege and show as matter of defense and offset, but not by way of counterclaim, that the property sold was fairly worth the amount of the debt secured by it at the time and place of sale or that the amount bid was substantially less than its true value, and, upon such showing, to defeat or offset any deficiency judgment against him, either in whole or in part: (Emphasis added.)

The record in this case reveals that American Foods began a foreclosure suit under the deed of trust and became the last and highest bidder. The net proceeds from the sale were applied toward payment of the note, leaving a balance due. Defendants contend they were comakers under the note and as such are entitled to the protection against deficiency judgments provided by G.S. 45-21.36.

In Trust Co. v. Martin, 44 N.C.App. 261, 264, 261 S.E.2d 145 (1979), Judge Wells, speaking for this Court, points out that in passing G.S. 45-21.36,

[T]he General Assembly intended to limit protection to those persons who held a property interest in the mortgaged property, and that such protection was not applicable to other parties liable on the underlying debt. (Emphasis added.)

By contending they are comakers and as such are entitled to the defense established by G.S. 45-21.36, defendants are in effect asking this Court to pierce the corporate veil in a unique way. Defendant Goodson is asking us to wrap the corporate cloak of Lewis Nursery, Inc., around him, since he financed the corporation, and conclude that he and Goodson Farms had an equitable interest in the lands, title to which was recorded in the name of Lewis Nursery, Inc. This we cannot do. Defendants did not hold a property interest in Lewis Nursery, Inc. The trial judge did not err by striking defendants' Fourth Defense.

Defendants next assert that the trial court erred in allowing plaintiff's motion for summary judgment in the amount set forth in the court's order. Defendants contend that the award is not supported by the evidence.

Upon examination of the record, it becomes clear that there is a difference of $3,692.00 between the relief requested in plaintiff's complaint and the amount set forth as owing in plaintiff's vice-president's affidavit. Clearly, such a trivial variance— less than one-half of a percentage point of the amount awarded—is not crucial, particularly when, as in this case, the variance favors defendant. Furthermore,

So long as some demand for relief is made, it apparently is not crucial that the wrong relief has been demanded. Rule 54(c) provides in part that ``every final judgment shall grant the relief to which the party in whose favor it is rendered is entitled even if the party has not demanded such relief in his pleadings.'

Shuford, N.C. Civil Practice and Procedure, § 8-5, p. 69 (1975).

Defendants go on to question whether plaintiff was granted the relief to which it is entitled. Defendants contend that the only evidence to support the judgment is the testimony of plaintiff's vice-president, Mr. Wilson. An examination of the record shows, however, that Wilson also filed three affidavits which, together with his testimony, show that he was familiar with plaintiff's records concerning the amount owed on the note at issue.

We can find no error with the trial court's order allowing plaintiff's motion for summary judgment in the amount set forth. Plaintiff's evidence supports the order, and defendants have filed no affidavits or introduced any evidence to put the amount in dispute. Defendants have merely made a general denial in their complaint. Such denial, standing alone, is clearly insufficient to avoid entry of summary judgment under G.S. 1A-1, Rule 56.

Nor do we find the court erred in dismissing defendants' counterclaim. The Purchase Agreement provided that:

In addition to the North Carolina Assets, Seller [Plaintiff] hereby agrees to convey to Buyer [Defendant] within 60 days of the Closing Date all of the issued and outstanding capital stock of Hy-Yield, Inc., a Florida corporation and a wholly-owned subsidiary of Seller ("Hy-Yield"); provided, however ... (ii) appropriate consent by Ameribrom, Inc. to the change in ownership of Hy-Yield, shall have been obtained in accordance with the terms of the Joint Venture Agreement between Hy-Yield and Ameribrom, Inc. .... (Emphasis added.)

It became clear to the parties shortly after closing date that Ameribrom, Inc. would not consent to the transfer of Hy-Yield, Inc. stock under the joint venture agreement of the defendants. The parties attempted to negotiate a new agreement for the transfer, but were unsuccessful. Since the parties were unable to reach a new agreement regarding transfer of the Hy-Yield stock, or modify the purchase agreement, the terms set out still controlled. Inasmuch as Ameribrom would not consent to the transfer of the stock, and plaintiff could not procure Ameribrom's consent to release it from its guarantee of Hy-Yield obligations, both of which were conditions precedent to the transfer of the stock, plaintiff had no further obligation to transfer the stock to the defendants. The counterclaim was properly dismissed.

Plaintiff filed a counter-appeal contending the trial court erred in limiting its award of fees to $4,500.00.

The note which is the subject of this controversy provides, among other things, that if any amount payable is collected through an attorney, the maker agrees to pay to the holder a reasonable amount as costs, attorney and collection fees.

Plaintiff's attorney filed an affidavit, upon request of the trial judge, setting out the services he had rendered and further providing:

Affiant has spent 69 hours in attorney's time on this case in rendering the above described services. Considering the services rendered, the amount involved, the complexity of the case and the result achieved, Affiant is of the opinion that reasonable attorneys' fees would be in the amount of $60 per hour for the 69 hours incurred. (Emphasis added.)

The trial judge awarded the attorney $4,500.00.

Plaintiff appealed, now contending the award is controlled by G.S. 6-21.2, which provides in part that where, as in this case, a note is collected by an attorney and such note provides for "payment of reasonable attorneys' fees by the debtor, without specifying any specific percentage, such provision shall be construed to mean fifteen percent (15%) of the ``outstanding balance' owing on said note, ...."

Plaintiff is estopped to claim that which the statute provides. The trial judge awarded a fee in excess of that sought by plaintiff. The cross-appeal is dismissed.

The actions of the trial judge are

Affirmed.

ARNOLD, J., concurs.

WELLS, J., concurs in part and dissents in part.

WELLS, Judge, concurring in part and dissenting in part:

I concur in the portion of the majority opinion affirming summary judgment for the plaintiff on plaintiff's claim for recovery under the note and deed of trust.

I concur in the portion of the majority opinion that affirms the order of the trial court in awarding counsel fees.

I dissent from the portion of the majority opinion with respect to summary judgment in plaintiffs' favor on defendant's counterclaim. The essence of defendant's counterclaim was that in the purchase agreement, plaintiff promised to convey to defendant Goodson Farms, Inc. all of the outstanding capital stock of Hy-Yield, Inc., a wholly-owned subsidiary of plaintiff, that plaintiff has failed and refused to convey said stock in Hy-Yield to Goodson Farms, Inc., and that plaintiff's failure to do so has resulted in substantial damage to defendant. Defendant introduced materials to substantiate its version of its rights in the counterclaim. Plaintiff responded by asserting that the agreement to convey the stock in Hy-Yield had two conditions: "appropriate consent of Ameribrom, Inc. to the change in ownership of Hy-Yield, shall have been obtained in accordance with the terms of the Joint Venture Agreement between Hy-Yield and Ameribrom, Inc."; and plaintiff "shall have been released from its guarantee of the obligations and duties of Hy-Yield under such joint venture agreement". The material presented to the trial court raises a genuine issue of material fact as to (1) whether the joint venture agreement would in fact require any consent by Ameribrom, Inc. to a change in ownership of Hy-Yield and (2) whether the joint venture agreement had been terminated altogether prior to the institution of this law suit, rendering the guaranty condition of the purchase agreement moot. For these reasons it does not appear that defendant's counterclaim was appropriate for disposition by summary judgment.