Appeal by defendants/third-party plaintiffs from orders
entered 23 July 2004 by Judge Orlando F. Hudson, Jr. in Durham
County Superior Court. Heard in the Court of Appeals 11 May 2005.
Pendergrass Law Firm, PLLC, by James K. Pendergrass, Jr. and
Bernard Richards, Jr., for plaintiff-appellee.
Roberti, Wittenberg, Lauffer & Wicker, P.A., by Samuel
Roberti, for defendants/third-party plaintiff-appellants.
Gary K. Berman, third-party defendant-appellee, pro se.
Ronnie L. Sturdivant and Dianne R. Sturdivant (defendants)
appeal from a grant of summary judgment entered on 23 July 2004 in
favor of Investors Title Insurance Company (plaintiff) and Gary
K. Berman (third-party defendant). The issues before the Court
are whether the trial court's entry of summary judgment was proper
on the issues of: (I) Whether the statute of limitations on thecause had run, (II) whether the debt on the promissory note had
been forgiven and an accord and satisfaction made, and (III)
whether the promissory note was a purchase money note secured by a
purchase money deed of trust. We find the trial court properly
granted summary judgment on all issues.
On 31 December 1986, defendants purchased a parcel of property
located on High Meadow Road in Durham from third-party defendant.
As part of the transaction, defendants signed a promissory note
(Note 1) in the amount of $27,607.77 payable to third-party
defendant in monthly installments, with a final balloon payment on
31 December 1996. The deed of trust securing Note 1 was cancelled
on 13 October 1988. Subsequently, another promissory note (Note
2) was signed which included the identical terms, conditions, and
payment schedule as Note 1. Note 2 bore the same date as Note 1,
but was secured by a deed of trust for property located on Holloway
Street in Durham. Third-party defendant had never owned the
property which secured Note 2.
In March 1991, defendants accused third-party defendant of
legal malpractice regarding third-party defendant's representation
of defendants in an unrelated matter. In a supporting affidavit,
defendant Ronnie Sturdivant alleged he told third-party defendant
he would no longer pay on the note at issue in this action, in
exchange for not pursuing a legal malpractice claim against third-
party defendant. Defendants believed third-party defendant
accepted this resolution and ceased making payments on the note.
Third-party defendant made no efforts to collect delinquentpayments and had no further communications with defendants about
In January 2001, third-party defendant negotiated a sale of
the note to plaintiff. Plaintiff purchased the note and attempted
to collect from defendants, who contended the debt had been
cancelled. Plaintiff filed suit against defendants to collect on
the note on 24 January 2003. Defendants moved to add third-party
defendant to the action on 10 February 2004. Plaintiff and third-
party defendant moved for summary judgment at the close of
discovery, and the trial court granted the motions on 23 July 2004.
In their first and second related assignments of error,
defendants contend the trial court erred in granting summary
judgment for plaintiff and denying summary judgment to defendants,
when the evidence showed the statute of limitations on the cause of
action had run. We disagree.
The standard of review on appeal from summary judgment is
whether there is any genuine issue of material fact and whether
the moving party is entitled to a judgment as a matter of law.
Further, the evidence presented by the parties must be viewed in
the light most favorable to the non-movant. Bruce-Terminix Co. v.
Zurich Ins. Co.
, 130 N.C. App. 729, 733, 504 S.E.2d 574, 577 (1998)
(citations omitted). Summary judgment is properly granted when
the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show thatthere is no genuine issue as to any material fact and that any
party is entitled to a judgment as a matter of law. N.C. Gen.
Stat. § 1A-1, Rule 56(c) (2003).
The statute of frauds for sealed instruments is ten years.
N.C. Gen. Stat. § 1-47(2) (2003). Defendants do not challenge that
the document was under seal. Rather, they contend that the cause
of action accrued in March 1991, when they ceased making payments
to third-party defendant, and not on 31 December 1996, when the
final payment on the installment note was due.
In Vreede v. Koch
, 94 N.C. App. 524, 380 S.E.2d 615 (1989),
this Court noted that the general rule regarding the running of
the statute of limitations for installment contracts is that the
limitations period begins running from the time each individual
installment becomes due. Id
. at 527, 380 S.E.2d at 617. However,
an exception has been recognized to this general rule. Vreede
when an installment contract provided that 'any unpaid balance,
including any unpaid interest, shall be due and payable on the
[final date of the installment contract,]' the limitations period
should not begin to run until the time that final performance was
at 529, 380 S.E.2d at 618. Vreede
distinguished the case of U.S. Leasing Corp. v. Everett, Creech,
Hancock and Herzig
, 88 N.C. App. 418, 363 S.E.2d 665 (1988), which
held the statute of limitations runs against each installment
individually from the time it becomes due, unless the creditor
exercises a contractual option to accelerate the debt, in which
case the statute begins to run from the date the accelerationclause is invoked. Id
. at 426, 363 S.E.2d at 669. 'The exercise
of the option to accelerate maturity of a note should be in a
manner so clear and unequivocal as to leave no doubt as to the
holder's intention.' Vreede
, 94 N.C. App. at 527, 380 S.E.2d at
617 (citation omitted). Vreede
noted that in Everett
, the injured
party had signaled his intention to treat the contract as
repudiated and had made future performance impossible. Id
. at 528-
29, 380 S.E.2d at 617-18.
Here, similar to Vreede
, the installment note provided:
Beginning January 31, 1988, consecutive
monthly payments shall be due on the final day
of each month; each such payment shall be in
the amount of $244.77. A balloon payment of
all remaining principal and interest shall be
due on December 31, 1996, and shall be payable
on that date. . . .
In the event of default in payment of any
installment of principal or interest hereof or
default under the terms of any instrument
securing this note, and if the default is not
made good within fifteen (15) days, the holder
may, without notice, declare the remainder of
the debt at once due and payable. Failure to
exercise this option shall not constitute a
waiver of the right to exercise the same at
any other time. The principal of this note
and any part thereof, and accrued interest, if
any, shall bear interest at the rate of twelve
per cent per annum after default until paid.
Aside from the contractually required increase in interest
upon default, defendants presented no evidence as to an issue of
material fact regarding third-party defendant's election to
accelerate the debt, or of efforts by the third-party defendant to
treat the contract as repudiated. Therefore, as a matter of law,
the statute of limitations on the installment note did not begin torun until the date of the final installment, 31 December 1996.
Plaintiff filed its action for recovery on 20 January 2003, within
the required statutory period of ten years. As no material issues
of fact exist with regards to the statutory period, the trial court
properly decided as a matter of law that plaintiff had brought its
action in a timely manner.
Defendants next contend the trial court erred in granting
summary judgment for plaintiff, as there were material issues of
fact as to whether the debt had been forgiven, an accord and
satisfaction made, or payment made. We disagree.
The installment note that is the subject of this litigation is
a negotiable instrument governed by N.C. Gen. Stat. Ch. 25, Art. 3
(2003), the Uniform Commercial Code (U.C.C.). The Uniform
Commercial Code does not provide for oral cancellation of
negotiable instruments. Wolfe v. Eaker
, 50 N.C. App. 144, 149,
272 S.E.2d 781, 784 (1980), disc. review denied
, 302 N.C. 222, 277
S.E.2d 69 (1981); see also
N.C. Gen. Stat. § 25-3-604 (2003)
(setting forth requirements for discharge by cancellation or
renunciation). Under the provisions of Article 3 of the U.C.C., in
order to show that an accord and satisfaction for a negotiable
instrument has been made, defendants must show that the instrument
or an accompanying written communication contained a conspicuous
statement to the effect that the instrument was tendered as full
satisfaction of the claim. N.C. Gen. Stat. § 25-3-311(b) (2003). Here, defendants argue that an accord and satisfaction
cancelling the note was made between the parties in March 1991, in
consideration for defendants' agreement to not pursue a legal
malpractice claim in an unrelated matter against third-party
defendant. Defendants assert only that an oral agreement was made
to cancel the note, and that the parties' subsequent course of
conduct demonstrates that such an accord and satisfaction occurred.
However, defendants do not assert that a writing showing that full
satisfaction was made exists, as required by N.C. Gen. Stat. §
25-3-311(b). As defendants do not assert a material issue of fact
exists regarding a writing, they may not, as a matter of law, show
the defense of accord and satisfaction. See
N.C. Gen. Stat. . 25-
3-311(b). Therefore, the trial court properly granted summary
judgment as to this issue.
Defendants finally contend the trial court erred in granting
summary judgment for third-party defendant against
defendants/third-party plaintiffs when there were genuine issues of
material fact as to whether the subject matter was a purchase money
note. We disagree.
A deed of trust qualifies as a purchase money deed of trust
which receives the protections of our anti-deficiency statute, N.C.
Gen. Stat. § 45-21.38 (2003), only if it is made as a part of the
same transaction in which the debtor purchases land, embraces the
land so purchased, and secures all or part of its purchase price.
Dobias v. White
, 239 N.C. 409, 412, 80 S.E.2d 23, 26 (1954). OurSupreme Court has held that when the record affirmatively
discloses that the property embraced in the deed of trust was not
the same property purchased by the defendant from plaintiff . . .
the transaction between plaintiff and defendant with respect to the
promissory note was not a purchase money transaction within the
meaning of the statute[.] Management Corp. v. Stanhagen
, 35 N.C.
App. 571, 573, 241 S.E.2d 713, 715 (1978).
Here, defendants contend that a material issue of fact exists
as to whether a new promissory note was signed when the deed of
trust for the High Meadow Road property was cancelled and a new
deed of trust for the property on Holloway Street was executed.
Defendants do not contest that the deed of trust securing the note
that is the subject of this action is for the Holloway Street
property. Further, defendants do not contest that third-party
defendant has never owned the Holloway Street property, or that
this was not the property that was the subject of the original
transaction. See Management Corp
., 35 N.C. App. at 573, 241 S.E.2d
at 714-15. Therefore, as there is no issue of material fact, the
trial court properly granted summary judgment.
As no issues of material fact exist, the trial court's entry
of summary judgment was proper as a matter of law on the issues of:
(I) Whether the statute of limitations on the cause had run, (II)
whether the debt on the promissory note had been forgiven and an
accord and satisfaction made, and (III) whether the promissory note
was a purchase money note. Therefore, we affirm the trial court's
grant of summary judgment. Affirmed.
Judges HUDSON and GEER concur.
Report per Rule 30(e).
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