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All opinions are subject to modification and technical correction prior to official publication in the North Carolina Reports and North Carolina Court of Appeals Reports. In the event of discrepancies between the electronic version of an opinion and the print version appearing in the North Carolina Reports and North Carolina Court of Appeals Reports, the latest print version is to be considered authoritative.
PHIL JACKSON FERGUSON and wife, MARTHA J. FERGUSON, Plaintiffs,
v. LYLE W. COFFEY and wife, ELEANOR COFFEY and JOHN D. KINSLAND,
Filed: 21 November 2006
Interest_simple or compound_installment sale of property_contract silent
The trial court did not err by calculating the balance and interest due on the installment
sale of property by using simple rather than compound interest where the contract did not have an
express provision for compound interest.
Appeal by defendants from judgment entered 18 August 2005 by
Judge Danny E. Davis in Haywood County District Court. Heard in
the Court of Appeals 30 October 2006.
McLean Law Firm, P.A., by Russell L. McLean, III, for
Gina L. Norwood, for defendants-appellants.
Lyle W. and Eleanor Coffey and John D. Kinsland (defendants)
appeal from judgment entered computing the amount Phil Jackson and
Martha J. Ferguson (plaintiffs) owe to them on an installment
land sale contract or contract for deed. We affirm.
On 8 November 1971, plaintiffs entered into an installment
sales contract with defendants to purchase real property located in
Haywood County, North Carolina (the property). Plaintiffs agreed
to pay defendants $12,100.00 plus interest at seven percent.
Plaintiffs agreed to pay $78.50 per month beginning 1 December
1971. Plaintiffs also agreed to maintain fire insurance and paythe ad valorum property taxes. Defendants agreed to place the deed
in escrow with Northwestern Bank. Upon plaintiffs' completion of
payments to release the deed to plaintiffs.
Plaintiffs made payments for a period of time and in 1995
demanded the deed to be released by defendants. Defendants
contended plaintiffs had ceased payments in 1987 and even if
plaintiffs had continued to make payments on the loan, the
principal was amortized over a thirty-two year period which had not
yet expired. Defendants refused to release the deed. Plaintiffs
commenced suit on 29 August 2000 and demanded delivery of the deed
At trial, all causes of action were dismissed except for
plaintiffs' equity of redemption. The only issue submitted to the
jury was the date of plaintiffs' last loan payment. The jury
determined plaintiffs' last payment occurred in October 1987. The
trial court entered judgment that plaintiffs were entitled to
redeem their equity in the property by paying the outstanding
balance and all taxes on the property. Upon receipt of this
payment, defendants were ordered to convey title of the property to
Plaintiffs paid $16,634.12 into the Haywood County Clerk of
Superior Court's Office. Defendants disputed the accuracy of this
amount and moved for a judicial determination of the amount
plaintiffs owed. Plaintiffs and defendants each had their
respective accountants to prepare and submit affidavits along with
their payoff calculations. Plaintiffs' certified public accountant, Michael Kennedy
(Kennedy), based his calculations on simple interest and
concluded the total principal due would be $8,544.82 and the total
interest due would be $5,852.73. Thomas J. Sheehan (Sheehan),
defendants' accountant, prepared an amortization schedule based
upon compounded interest and calculated the principal and accrued
interest balance as of 1 October 1987 to be $9,488.70 and the
balance due to be $32,853.93 as of 1 July 1995.
The trial court accepted Kennedy's calculations based upon
simple interest. The trial court made findings of fact and
conclusions of law and entered judgment that [p]laintiff pay the
sum of $8,544.82 with interest of $6,670.87 as of August 15, 2005
and a daily rate of $1.62 per day until satisfied in full.
Defendants contend the trial court erred in calculating the
balance and interest due defendants by using simple interest
instead of compound interest.
III. Standard of Review
This Court has stated:
In an appeal from a judgment entered in a
non-jury trial, our standard of review is
whether competent evidence exists to support
the trial court's findings of fact, and
whether the findings support the conclusions
of law. The trial judge acts as both judge
and jury and considers and weighs all the
competent evidence before him. The trial
court's findings of fact are binding on appeal
as long as competent evidence supports them,
despite the existence of evidence to the
contrary. When competent evidence supportsthe trial court's findings of fact and the
findings of fact support its conclusions of
law, the judgment should be affirmed in the
absence of an error of law.
Resort Realty of the Outer Banks, Inc. v. Brandt, 163 N.C. App.
114, 116, 593 S.E.2d 404, 407-408 (internal citations and
quotations omitted) (emphasis in original), disc. rev. denied, 358
N.C. 236, 595 S.E.2d 154 (2004).
We review the trial court's conclusions of law de novo.
Starco, Inc. v. AMG Bonding and Ins. Services, 124 N.C. App. 332,
336, 477 S.E.2d 211, 215 (1996).
IV. Balance and Interest Due
Defendants argue the trial court erroneously used simple
interest to calculate the unpaid balance and determine plaintiffs'
payoff amount. Defendants contend they are entitled to compound
interest. Simple interest is defined as Interest paid on the
principal only and not on accumulated interest. Black's Law
Dictionary 830 (8th ed. 2004). Compound interest is defined as
Interest paid on both the principal and the previously accumulated
Plaintiffs' and defendants' respective accountants prepared
and submitted affidavits and amortization schedules to the trial
court in support of their payoff calculations. The trial court:
(1) accepted plaintiffs' accountant's calculations; (2) found that
[s]imple interest is the sum calculated on the unpaid balance;
(3) calculated plaintiffs payoff amount using simple interest; and
(4) ordered that [p]laintiff pay the sum of $8,544.82 withinterest of $6,670.87 as of August 15, 2005 and a daily rate of
$1.62 per day until satisfied in full.
A. Redemption of Equity
The right to redeem under the law of mortgages . . . also
[applies] to installment land contracts, even if [the buyers] have
surrendered the property and are behind in mortgage payments.
Lamberth v. McDaniel, 131 N.C. App. 319, 321, 506 S.E.2d 295, 297
(1998) (citing Brannock v. Fletcher, 271 N.C. 65, 73, 155 S.E.2d
532, 540-41 (1967)), cert. denied, 356 N.C. 614, 574 S.E.2d 681
(2002). The buyer of property through an installment sales
contract is entitled to redeem the property by paying to the seller
the total amount due under the contract plus accrued interest. See
id. at 322, 506 S.E.2d at 297 ([Buyers] are entitled to redeem the
property by the payment to the [sellers] of the balance due of the
purchase price, plus interest and ad valorem taxes.); see also
James A. Webster, Jr., Webster's Real Estate Law in North Carolina
§ 13-5, at 543 (Patrick K. Hetrick & James B. McLaughlin, Jr. eds.,
5th ed. 1999) (Since a mortgage is intended only for security for
an indebtedness, if the total indebtedness is paid at any time
before foreclosure is complete, plus interest and costs, although
not within the time limited, the object of the transaction will be
attained and the creditor-mortgagee will have no complaint.).
Here, the installment sales contract provides plaintiffs will:
(1) pay in full the payments as set forth in the attached bank
payment book for ($12,100.00 & 7% interest payable at $78.50
monthly beginning December 1, 1971.); (2) keep fire insurance onthe house in force for enough to cover the indebtedness on the
house; and (3) keep . . . county taxes on this house paid each
year beginning with the 1972 taxes due and payable Dec. 1972. The
attached bank payment book referred to in the contract is not
included in the record on appeal.
B. Simple or Compound Interest
The installment sales contract contains no express provision
for plaintiffs to pay compounded interest. 'If [a] contract is
clearly expressed, it must be enforced as it is written, and the
court may not disregard the plainly expressed meaning of its
language.' McClure Lumber Co. v. Helmsman Constr., Inc., 160 N.C.
App. 190, 197, 585 S.E.2d 234, 238 (2003) (quoting Catawba
Athletics v. Newton Car Wash, 53 N.C. App. 708, 712, 281 S.E.2d
676, 679 (1981)). If defendants and plaintiffs had bargained for
compound interest to accrue on the balance due, interest upon
unpaid interest would be added to the principal balance owed under
the note. The land sales contract is silent on whether defendants
may demand compounded interest from plaintiffs. In the absence of
an agreement to the contrary, [e]quity dictates that a party
should not be forced to pay interest on interest. NCNB v.
Robinson, 80 N.C. App. 154, 157, 341 S.E.2d 364, 366 (1986).
Current statutes governing interest expressly state whether a
creditor or seller may require compounded interest. Compare N.C.
Gen. Stat. § 24-14 (2005) (For loans secured by secondary or junior
mortgages, interest may not be compounded.), with N.C. Gen. Stat.
§ 24-1.1A (2005) (Parties to a home loan $10,000.00 or more maycontract for the payment of interest as agreed upon by the
North Carolina appellate courts have not addressed the
question of whether compound or simple interest should be used to
calculate the payoff amount for a buyer exercising their right of
redemption in the absence of any provision in the agreement. The
Supreme Court of Alabama specifically addressed this issue in
Bockman v. WCH, L.L.C., ___ Ala. ___, ___, ___ So. 2d ___, ___
(Ala. May 19, 2006). In Bockman, the express terms of the note
provided the debtor promised to pay compounded interest. ___ Ala.
at ___, ___ So. 2d at ___. Bockman argued simple interest should
be applied to the outstanding balance. Id. The Alabama Supreme
Court disagreed and stated compound interest could be applied to
the debt owed on the note because the mortgagor and the mortgagee
expressly agreed to allow interest to be compounded. Id.
Plaintiffs' accountants' affidavit supported the trial court's
finding of fact that, simple interest is the sum calculated on the
unpaid balance. This finding of fact supported the trial court's
conclusion of law computing plaintiffs' payoff amount due. When
competent evidence supports the trial court's findings of fact and
the findings of fact support its conclusions of law, the judgment
should be affirmed in the absence of an error of law. Resort
Realty of the Outer Banks, Inc., 163 N.C. App. at 116, 593 S.E.2d
at 408. We find no error of law in the trial court's judgment.
The parties' contract did not require plaintiffs to pay
compounded interest. The trial court's findings of fact are
supported by competent evidence. The trial court's findings of
fact supported its conclusions of law. The trial court's judgment
Chief Judge MARTIN and Judge CALABRIA concur.
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