High Point Bank & Trust Co. v. Highmark Properties, LLC

750 S.E.2d 886, 231 N.C. App. 31, 2013 WL 6236752, 2013 N.C. App. LEXIS 1240
CourtCourt of Appeals of North Carolina
DecidedDecember 3, 2013
DocketNo. COA13-331
StatusPublished
Cited by1 cases

This text of 750 S.E.2d 886 (High Point Bank & Trust Co. v. Highmark Properties, LLC) is published on Counsel Stack Legal Research, covering Court of Appeals of North Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
High Point Bank & Trust Co. v. Highmark Properties, LLC, 750 S.E.2d 886, 231 N.C. App. 31, 2013 WL 6236752, 2013 N.C. App. LEXIS 1240 (N.C. Ct. App. 2013).

Opinion

McGEE, Judge.

At all times relevant to this appeal, Highmark Properties, LLC (“Borrower”) was a company involved in real estate development. Mitchell Blevins, Cynthia Blevins, Charles Williams, and Janice Williams (“Guarantors” and, together with Borrower, “Defendants”), were Borrower’s members. High Point Bank and Trust Company (“Plaintiff’) was a financial institution, with its principal place of business in Guilford County, North Carolina. Borrower obtained loans totaling $6,450,000.00 from Plaintiff, through two promissory notes: one executed on 18 January 2007 for $4,700,000.00 (“first note”), and one executed on 2 May 2007 for $1,750,000.00 (“second note”), for the purposes of developing real estate. The two notes were secured by deeds of trust to two parcels of real property (“the property”) owned by Borrower. The first note was secured by the first parcel of real property, and the second note was secured by the second parcel of real property. Contemporaneously with the promissory notes, Plaintiff and Guarantors executed guaranty agreements whereby [33]*33Guarantors “guarantee [d] full and punctual payment and satisfaction of the indebtedness of Borrower to Lender [Plaintiff], and the performance and discharge of all Borrower’s obligations under the Note[s] [.]”

Borrower defaulted with an indebtedness of $3,541,356.00 remaining on the first note, and $1,336,556.00 remaining on the second note. Plaintiff filed a complaint on 19 October 2010 initiating an action against Defendants on the two notes, seeking to recover this outstanding indebtedness.

Plaintiff sold both parcels of the property at foreclosure sales on 8 February 2011. Plaintiff was the sole bidder, and purchased the first parcel for $2,578,070.00 and the second parcel for $720,000.00. Plaintiff filed a motion for summary judgment on 28 July 2011. Plaintiff then voluntarily dismissed Borrower from Plaintiff’s action on 18 August 2011. Guarantors filed a motion on 2 September 2011 to rejoin Borrower as a defendant in the action, and simultaneously filed a motion for leave to file a third-party complaint against Borrower. Plaintiff filed a motion in limine, requesting that the trial court issue an “order excluding all evidence involving or relating ... to the value of the properties foreclosed on[.]” Plaintiff’s motion was in response to its belief that Guarantors intended

to present certain evidence in support of two separate defenses. In particular, the Guarantors are offering evidence relating to . . . the value of the properties foreclosed on in support of the defense under N.C. Gen. Stat. § 45-21.36 that the bid amount at the foreclosure sale was substantially less than the true market value of the property[.]

In its motion, Plaintiff argued that the defense under N.C. Gen. Stat. § 45-21.36, allowing an offset on the amount owed on the notes based on the value of the property, was not available to Guarantors.

The trial court, by order entered 19 September 2011, ruled that joinder of Borrower to the action was “appropriate under N.C.G.S. § 26-12[,]” and that, pursuant to the North Carolina Rules of Civil Procedure, Borrower was a necessary party pursuant to Rule 19, or a permissive party pursuant to Rule 20, “and should be joined.” The trial court further found “that [Borrower] is a going concern; is not in bankruptcy; is not dissolved; and is subject to the jurisdiction of this Court. In fact, [] Plaintiff sued [Borrower], and [Borrower] was a party until August 18, 2011, when Plaintiff filed a Dismissal without prejudice as [34]*34to [Borrower].” The trial court also denied Guarantors’ motion to file a third-party complaint against Borrower.

By order entered 4 October 2011, the trial court entered summary judgment against Guarantors on the issue of liability, and further ruled that “[t]he value of the property securing payment of the Notes and its effect, if any, on the deficiency owed are the sole unresolved issues remaining for trial.” Defendants, now including both Borrower and Guarantors, filed a motion to amend their answer so they could “assert N.C.G.S. § 45-21.36 specifically as a defense.” Plaintiff consented to Defendants’ motion to amend, and leave for Defendants to file an amended answer was granted by consent order entered 18 April 2012. Defendants’ amended answer was filed that same date.

Plaintiff and Defendants stipulated to the following relevant facts by pretrial order entered 18 April 2012: (1) “all parties have been correctly designated, and there is no question as to misjoinder[,]” (2) “[t]he total deficiency on the First Note following the foreclosure sale . . . was . . . $963,286],]” (3) “[t]he total deficiency on the Second Note following the foreclosure sale . . . was . . . $616,556],]” (4) “that the single remaining issue for trial is... Defendants’ affirmative defense under N.C. Gen. Stat. § 45-21.36],]” and (5) this issue included whether the amount paid by Plaintiff at the foreclosure sales for the two parcels of the property “was substantially less than [the] true value.”

Following a trial in which Plaintiff and Defendants submitted evidence related to the fair market value of the real property, the jury decided on 20 April 2012, that the amounts paid by Plaintiff for the parcels of real property at foreclosure were substantially less than the fair market value of the parcels. The jury determined the fair market value of parcel one was $3,723,000.00, and the fair market value of parcel two was $1,034,000.00. Judgment was entered 11 July 2012, in which the trial court ruled that Borrower’s indebtedness on the first note was $0.00, because the jury had determined that the fair market value of the first parcel of the property was greater than Borrower’s remaining debt of $3,541,356.00. The trial court ruled that Borrower’s indebtedness on the second note was reduced to $302,556.00, because the jury had determined the fair market value of parcel two was $1,034,000.00, and Borrower’s remaining debt was $1,336,556.00. The trial court then ruled that Borrower and Guarantors were jointly and severally hable, and ordered Defendants to pay Plaintiff $302,556.00 for the remaining uncollected debt, as well as granting Plaintiff attorney’s fees and interest. Plaintiff appeals.

[35]*35I.

The issues on appeal are whether: (1) reducing the liability of Guarantors based upon N.C. Gen. Stat. § 45-21.36 was improper, (2) N.C. Gen. Stat. § 26-12 “enlarge[d] the scope of available defenses,” and (3) joinder of Borrower as a party-defendant was improper.

II.

“[A] guarantor stands in the shoes of the debtor with respect to liability[.]” Gregory Poole Equipment Co. v. Murray, 105 N.C. App. 642, 646, 414 S.E.2d 563, 566 (1992). Therefore, upon Borrower’s default, Guarantors were responsible to Plaintiff for Borrower’s remaining liability on the first and second notes. Stated otherwise, and to use language from the guaranty agreements drafted by Plaintiff, Guarantors were liable for any remaining “indebtedness of Borrower to Lender [Plaintiff].”

After Plaintiff voluntarily dismissed Borrower from this action, Guarantors moved to re-join Borrower pursuant to, inter alia, N.C. Gen. Stat. § 26-12, which states in relevant part:

Free access — add to your briefcase to read the full text and ask questions with AI

Related

High Point Bank And Trust Company v. Highmark Properties, LLC
776 S.E.2d 838 (Supreme Court of North Carolina, 2015)

Cite This Page — Counsel Stack

Bluebook (online)
750 S.E.2d 886, 231 N.C. App. 31, 2013 WL 6236752, 2013 N.C. App. LEXIS 1240, Counsel Stack Legal Research, https://law.counselstack.com/opinion/high-point-bank-trust-co-v-highmark-properties-llc-ncctapp-2013.