Rutherford Plantation, LLC v. Challenge Golf Group of the Carolinas, LLC

ELMORE, Judge.

The Challenge Golf Group of the Carolinas, LLC f/k/a Premier Balsam Builders, LLC (defendant) appeals the trial court’s order granting partial summary judgment in favor of Rutherford Plantation, LLC (plaintiff) and the trial court’s order denying its Rule 59 motion to amend. After careful consideration, we reverse the trial court’s order denying defendant’s Rule 59 motion to amend and remand for further proceedings consistent with this opinion.

Background

On 17 May 2010, plaintiff, former owner and operator of Cleghorn Golf and Country Club (Cleghorn), negotiated an offer to purchase and contract (the contract) with defendant whereby plaintiff agreed to sell and defendant agreed to buy the property and personalty associated with Cleghorn for $4,750,000.00. On 1 June 2010, plaintiff conveyed the property to defendant by a general warranty deed. Pursuant to the contract, defendant paid $750,000.00 at closing and the parties executed a purchase money deed of trust in favor of plaintiff, as beneficiary, for the remaining $4,000,000.00 In return, defendant agreed to pay plaintiff $33,754.27 per month for 60 months. Thereafter, defendant was to make a balloon payment of $3,040,363.94 on 1 June 2015 to satisfy the balance.

Defendant defaulted on its obligation in April 2011, making no subsequent payments to plaintiff. Plaintiff provided defendant with a written notice of default and notice of acceleration of the debt. Defendant failed to cure. As a result of defendant’s continued default, plaintiff initiated this action seeking recovery of the balance due on the promissory note plus attorneys’ fees, or, in the alternative, an order for specific performance.

In its pleadings, defendant raised the affirmative defense of fraud as well as counterclaims for fraud, breach of contract, and unfair and deceptive trade practices. Defendant alleged that plaintiff fraudulently induced it to purchase Cleghom by misrepresenting the financials for the business and by distorting the number of golf rounds played in previous years.

On 17 October 2011, plaintiff moved for summary judgment pursuant to Rule 56 on all claims. The trial court partially granted plaintiff’s motion for summary judgment on 4 November 2011. In its order, the trial court entered a deficiency judgment against defendant for $4,013,549.65, which represented the amount of plaintiff’s claim as appearing in the pleadings, together with additional accrued interest through 31 October 2011. Pursuant to Rule 59, defendant moved to amend the partial summary judgment order. Defendant’s motion was denied and it now appeals.

A. Rule 59 Motion to Amend

In the case sub judice, we need only to address defendant’s second issue on appeal. Defendant argues that the trial court erred in denying its motion to amend the partial summary judgment order. We agree.

We note initially that defendant has appealed from an interlocutory order. Interlocutory orders are, however, subject to appellate review when the order deprives the appellant of a substantial right that would be lost unless immediately reviewed. See Waters v. Qualified Personnel, Inc., 294 N.C. 200, 207, 240 S.E.2d 338, 343 (1978). Moreover, the deprivation of that substantial right must potentially work injury ... if not corrected before appeal from final judgment.” Goldston v. Am. Motors Corp., 326 N.C. 723, 726, 392 S.E.2d 735, 736 (1990).

N.C. Gen. Stat. § 1-278 provides that “upon an appeal from a judgment, the court may review any intermediate order involving the merits and necessarily affecting the judgment.” In Paynter v. Maggiolo, we held that an order granting summary judgment on issue of whether North Carolina’s anti-deficiency statute prohibited the holder of a second purchase money deed of trust from bringing an in personam action affected a substantial right and was immediately appealable. 105 N.C. App. 312, 313-314, 412 S.E.2d 691, 693 (1992). Here, the issue is whether the trial court violated North Carolina’s anti-deficiency statute by granting a monetary judgment on a purchase money note. Such issue on appeal necessarily affects the judgment. Therefore, we conclude that a substantial right is affected, and we will consider the substance of this appeal.

This Court’s “review of a trial judge’s discretionary ruling ... is strictly limited to the determination of whether the record affirmatively demonstrates a manifest abuse of discretion by the judge.” Beneficial Mortg. Co. v. Peterson, 163 N.C. App. 73, 84, 592 S.E.2d 724, 731 (2004) (quoting Worthington v. Bynum, 305 N.C. 478, 482, 290 S.E.2d 599, 602 (1982) (citations and quotations omitted).

Defendant specifically argues that the partial summary judgment order is contrary to law pursuant to N.C. Gen. Stat. § 45-21.38. According to the statute:

[T]he mortgagee or trustee 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: Provided, further, that when said note or notes are prepared under the direction and supervision of the seller or sellers, he, it, or they 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.

N.C. Gen. Stat. §45-21.38 (2012).

Thus, N.C. Gen. Stat. §45-21.38 specifies that the foreclosing party is not entitled to a deficiency judgment if the underlying transaction is a purchase money transaction. In the case sub judice, plaintiff drafted the contract, the purchase money promissory note, and the purchase money deed of trust. The contract specifically provided that the purchase money promissory note was secured by a “purchase money deed of trust which shall be first lien on the Property.” As such, both parties had sufficient notice that the contract was to be construed as a purchase money transaction.

First, we note that defendant’s failure to argue N.C. Gen. Stat. §45-21.38 at the summary judgment hearing does not preclude it from arguing the statute on appeal. The trial court is expected to take judicial notice of public statutes. See Moyle v. Hopkins, 222 N.C. 33, 34, 21 S.E.2d 826, 827 (1942). Second, we recognize that defendant made a scriveners error in its motion to amend, stating that the motion was brought pursuant to Rule 59(a)(8) instead of Rule 59(a)(7). However, such error is not fatal provided the substantive grounds and relief desired are apparent and the nonmovant is not prejudiced thereby. See Garrison v. Garrison, 87 N.C. App. 591, 361 S.E.2d 921 (1987). In its motion to amend, defendant argued that the trial court made an “error of law” in entering the monetary judgment in favor of plaintiff as N.C. Gen. Stat. §45-21.38 states that a mortgagee is not entitled to a monetary judgment when the executed deed of trust is to secure payment of the balance of the purchase price of real property. We conclude that the substantive grounds for relief were apparent and defendant brought its motion pursuant to Rule 59(a)(7). See N.C. Gen. Stat. § 1A-1, Rule 59.

We agree with defendant in that the entry of a deficiency judgment in favor of plaintiff was improper as N.C. Gen. Stat. §45-21.38 prohibits a monetary judgment in this instance.

B. Abuse of Discretion

We must next consider whether the trial court’s denial of defendant’s Rule 59 motion to amend constituted an abuse of discretion. We believe it did.

“Abuse of discretion results where the court’s ruling is manifestly unsupported by reason or is so arbitrary that it could not have been the result of a reasoned decision.” State v. Hennis, 323 N.C. 279, 285, 372 S.E.2d 523, 527 (1988) (citation omitted).

This court has concluded that

the benefits of [N.C. Gen. Stat. §45-21.38] 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 [N.C. Gen. Stat. §45-21.38] offers is afforded to all purchasers of realty who secure any party of the purchase price with a deed of trust on the realty they are purchasing.

Chemical Bank v. Belk, 41 N.C. App. 356, 365, 255 S.E.2d 421, 427, cert. denied, 298 N.C. 293, 259 S.E.2d 911 (1979) (citing (emphasis added); See also Ross Realty Co. v. First Citizens Bank & Trust Co., 296 N.C. 366, 250 S.E.2d 271 (1979). By providing that the statute cannot be waived, the legislature emphasized the importance of protecting buyers in purchase money transactions. In the case at hand, the parties did not attempt to waive N.C. Gen. Stat. § 45-21.38. However, assuming arguendo that they had intended such, the “waiver would defeat the legislative purpose of N.C. Gen. Stats. § 45-21.38 and would attempt, by private action of parties, to confer upon the courts that jurisdiction over the question that was expressly taken away by the enactment of the statute.” Id. at 366, 255 S.E.2d at 428.

As such, we are persuaded that the partial summary judgment order is contrary to N.C. Gen. Stat. § 45-21.38. Accordingly, the trial court abused its discretion by denying defendant’s motion to amend.

Conclusion

In sum, the trial court erred in entering a deficiency judgment against defendant. Thus, the trial court’s denial of defendant’s Rule 59 motion to amend constituted an abuse of discretion. After careful consideration, we reverse the trial court’s order and remand for further proceedings consistent with this opinion.

Reversed and remanded.

Judge BEASLEY concurred prior to 18 December 2012. Judge STROUD dissents by separate opinion.