In The Matter Of The Foreclosure Of: L.L. Murphrey Co.

NO. COA14-166

NORTH CAROLINA COURT OF APPEALS

Filed: 7 October 2014

IN THE MATTER OF THE FORECLOSURE

of a North Carolina Deed of Trust

executed by L.L. Murphrey Co.,

f/k/a/ L.L. Murphrey Hog Co., Lois

M. Barrow, Larry Barrow, Connie M.

Stocks, Donald Stocks and Doris

Murphrey dated April 23, 1996 and

recorded April 24, 1996 in Book Greene County

489 at Page 620, as modified by No.: 13 SP 61

those certain Modification and

Extension Agreements dated August

30, 1996, Recorded October 7, 1996

in Book 493 at Page 20, dated

April 4, 1997, recorded April 25,

1997 in Book 497, Page 94, dated

May 26, 1998, recorded June 29,

1998 in Book 507, Page 24 and

dated August 21, 1998, recorded

October 2, 1998, all in the Office

of the Greene County Register of

Deeds,

By Kluttz, Reamer, Hayes,

Randolph, Adkins & Carter, L.L.P.

Substitute Trustee.

Appeal by respondents from order entered 31 October 2013 by

Judge Paul L. Jones in Greene County Superior Court. Heard in

the Court of Appeals 27 August 2014.

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Driscoll Sheedy, P.A., by Susan E. Driscoll, for appellee.

WHITE & ALLEN, P.A., by John P. Marshall and Ashley C.

Fillippeli, for appellants.

ELMORE, Judge.

Lois M. Barrow, Larry Barrow, and Doris Murphrey

(respondents) appeal from the Order Denying Motion to Dismiss

and Authorizing Foreclosure entered by Judge Paul L. Jones on 31

October 2013. After careful consideration, we affirm.

I. Background

In the instant case, the particular real estate security

interest being foreclosed was a North Carolina Deed of Trust

entered into on 23 April 1996 by Doris Murphrey, Lois M. Barrow,

Larry Barrow, Connie M. Stocks, Donald Stocks, and L.L. Murphrey

Hog Co. (LLM), a North Carolina corporation, in favor of

Wachovia Bank, N.A., predecessor in interest to D.A.N. Joint

Venture Properties of North Carolina, LLM (DAN). The deed of

trust was recorded in the Greene County Register of Deeds and

the Lenoir County Register of Deeds and amended over time by

certain modification and extension agreements. To secure the

deed of trust, respondents pledged certain items of real

property as collateral. Wachovia also received a security

interest in LLM’s fixtures and items of personal property. The

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deed of trust secures an indebtedness evidenced by five

promissory notes (the Wachovia notes) executed by LLM, the

borrower, in favor of Wachovia between July 1993 and March 1999.

LLM previously filed a voluntary petition for relief under

Chapter 11 of the Bankruptcy Code on 8 June 2000. At that time,

LLM was in default to Wachovia for $12,790,522.36 pursuant to

the Wachovia notes. In LLM’s Chapter 11 case, the Bankruptcy

Court entered an order confirming LLM’s fourth amended plan of

reorganization (“Confirmed Plan” or “the Plan”). Pursuant to

class III of the Confirmed Plan, Wachovia’s claims were divided

into Note A and Note B. Note A is an amortizing note in the

amount of $8,000,000; Note B is a cash flow note in the amount

of $3,500,000. Both Notes remained secured by the collateral

pledged to secure the Wachovia notes. Respondents, LLM’s

principals, guaranteed Note A and Note B, which both listed a

maturity date of 30 September 2011. Upon maturation, the Plan

provided that Note A and Note B would be recapitalized and that

the obligations of the guarantors would be limited to the amount

of recapitalized debt.

The Confirmed Plan also specified:

R. Execution and Delivery of Revised Loan

Documents

The Debtor and Wachovia will enter into

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amended and restated Loan Documents (the

“Wachovia Restated Loan Documents”)

consistent with the provisions of this Plan

of Reorganization. The Debtor shall execute

and

deliver such agreements, instruments and

documents as may be reasonably requested by

Wachovia. The Wachovia Restated Loan

Documents shall contain reasonably and

customary warranties, covenants and other

terms as the Debtor and Wachovia may agree

upon. The following shall constitute events

of default:

(i) Nonpayment as required under [the] terms

of Note A or Note B,

(ii) Material misrepresentation,

(iii) Material breach of warranties of

covenants,

(iv) Subsequent voluntary or involuntary

bankruptcy proceedings, or

(v) Reopening of current bankruptcy

proceedings.

S. Implementation Date

The Implementation Date for Note A and Note

B shall be October 1, 2001, provided that

the following Conditions Precedent have been

met:

(i) Cash shall be available to the Debtor in

an amount sufficient to permit payment in

full of all Administrative Claims,

(ii) Eleven days shall have expired since

the Confirmation Date and no stay of the

Confirmation Order shall be in effect, and

(iii) The Wachovia and MLLC Restated Loan

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Documents [referred to above as the

“Wachovia Restated Loan Documents”] required

by the

Plan of Reorganization shall have been

executed and delivered.

Wachovia did not execute the Restated Loan Documents

referenced in the Confirmed Plan. Nonetheless, LLM made

payments pursuant to the terms of the Confirmed Plan from 1

October 2001 through 2011. Post-confirmation, Wachovia sold the

Wachovia notes to CadleRock Joint Venture, L.P., who later sold

or assigned the Wachovia notes to DAN in 2008. DAN filed the

necessary notices of assignment, amendments, and continuation

statements with the Greene County Register of Deeds, the Lenoir

County Register of Deeds, and the North Carolina Secretary of

State.

Upon maturity of Note A and Note B, LLM and DAN could not

agree to the amount of the recapitalized debt. Seeking a

determination, LLM reopened the Chapter 11 case and filed an

adversary proceeding in Bankruptcy Court. Judge J. Rich

Leonard, United States Bankruptcy Judge for the Eastern District

of North Carolina, ruled that LLM’s total indebtedness due and

owing to DAN was $6,186,362.00. Neither party appealed this

judgment.

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Thereafter, LLM filed a voluntary petition for relief under

Chapter 7 of the Bankruptcy Code on 21 May 2012. After LLM’s

Chapter 7 filing, DAN filed a proof of claim in the amount of

$6,056,645.26. DAN attached a copy of LLM’s fourth amended plan

of reorganization, copies of the requisite security agreements,

and copies of the assignments it filed with the Greene and

Lenoir County Register of Deeds. In January and February 2013,

LLC’s bankruptcy trustee filed motions requesting approval to

conduct a proposed public sale of LLM’s real and personal

property free and clear of liens. The trustee submitted a draft

of a proposed complaint that he anticipated filing in an

adversary proceeding against DAN. The complaint alleged that

the Wachovia notes and the deed of trust were avoidable pursuant

to 11 U.S.C. § 5444(a)(3) (2013).

The real property that was the subject of the proposed

public sale included five tracts of land in Greene County and

one tract of land in Lenoir County. As DAN asserted liens on

all but one of the tracts of real property, it filed an

objection to the trustee’s motion to sell free and clear of

liens. DAN asserted that pursuant to 11 U.S.C. § 363(f)(4), its

interest was not subject to a factual or legal dispute because

LLM: (1) did not file any objection to DAN’s proof of claim, and

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(2) because LLM’s indebtedness was reaffirmed in the bankruptcy

court adversary proceeding. See L.L. Murphrey Co. v. D.A.N.

Joint Venture III, L.P., Adv. No. 11-00139, 2011 WL 6301214

(Bankr. E.D.N.C. Dec. 16, 2011) (calculating the recapitalized

debt under the Confirmed Plan to be $6,168,362.00).

On 6 June 2013, Judge Leonard entered an order (“the

Leonard order”) in the Chapter 7 case. The Leonard order

reviewed the terms of the Confirmed Plan, particularly the

portions that purported to require Wachovia to execute Restated

Loan Documents to reaffirm the loan. Judge Leonard determined

the terms of the Confirmed Plan were “unambiguous and impose[d]

an obligation on the parties, the debtor and Wachovia, to

execute amended and restated agreements, instruments and other

loan documents consistent with the treatment provided therein.”

Judge Leonard further concluded, “[i]n addition to being

explicitly required, the execution and delivery of the amended

and restated loan documents was a condition precedent for

setting the implementation date for Note A and Note B as October

1, 2001.”

Further, Judge Leonard held that in the absence of the Restated

Loan Documents, the description of Note A and Note B and the

recitation of the terms were insufficient to constitute

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negotiable instruments. Accordingly, Judge Leonard found that

the trustee established the existence of a “bona fide dispute”

regarding the validity of DAN’s liens. Judge Leonard authorized

the trustee to sell the real property free and clear of the

liens asserted by DAN. Notably, the Leonard order did not

terminate DAN’s rights to foreclose on the deed of trust—it

merely recognized the existence of a bona fide dispute between

the parties and authorized the trustee to proceed with the sale

of the requisite property.

DAN filed a Notice of Hearing for Foreclosure of Deed of

Trust on 4 September 2013. Based on the Leonard order, LLM

filed a motion to dismiss DAN’s foreclosure action on 2 October

2013. On 31 October 2013, the matter came on for hearing before

Judge Paul L. Jones in Greene County Superior Court. Judge

Jones entered an order denying LLM’s motion to dismiss. He also

authorized the Substitute Trustee for DAN to proceed with the

foreclosure of the subject property pursuant to the power of

sale granted to him under the deed of trust. Judge Jones

entered the following findings of fact:

2. The Deed of Trust secures an indebtedness

evidenced by certain promissory notes

executed by [LLM] in favor of Wachovia

Bank, which were modified over time and

through the Fourth Amended Plan (Confirmed

Plan) filed in [LLM’s] Chapter 11

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Bankruptcy Case[.]

3. The Deed of Trust states that it operates

as security for “any renewals,

modifications or extensions” of the Notes

identified in the Confirmed Plan, as well

as “all present and future obligations of

Grantor[s] to [DAN].” (Deed of Trust,

p.3.)

5. Under the terms of the Confirmed Plan, the

Notes were divided into two tranches: Note

A and Note B were to “remain secured by

that collateral pledged to Wachovia by

[Borrower] prior to the Petition Date”.

[sic] Although the Confirmed Plan

required entry by Borrower and Wachovia

into “amended and restated Loan

Documents”, [sic] it did not specify what

documents were required. Instead, the

Confirmed Plan required that Borrower

“execute and deliver such agreements,

instruments and documents as may be

reasonably requested by Wachovia.” There

was no requirement that the Barrow Family,

Donald Stocks or Connie Murphrey execute

any new documents.

. . .

8. Through the Adversary Proceeding, it was

determined that the amount of the

Recapitalized Debt was $6,186,362.00. (May

10, 2012 Order, Adv. Proc. No.: 11-00139-

8-JRL, p.6.) Instead of paying the

Recapitalized Debt in full or entering

into new loan documents for the amount of

the Recapitalized Debt, Borrower filed for

bankruptcy under Chapter 7 of the United

States Bankruptcy Code, Case No.: 12-

03837-8-JRL. (Chapter 7 Case).

9. D.A.N. Joint Venture Properties of N.C.,

LLC is the current holder of the Notes and

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the Deed of Trust.

Respondents now appeal.

II. Analysis

A. Judge Leonard’s order

Initially, we note that defendant challenges finding of

fact #2, #5, and #9 above as being unsupported by competent

evidence. The forgoing analysis addresses each of these

challenged findings in substance and illustrates how each is, in

fact, supported by competent evidence.

Much of respondents’ argument is premised on the belief

that the Leonard order constituted a final judgment purportedly

affecting the merits of the foreclosure action. We find it

necessary to dispel this argument at the outset of this appeal.

In their brief, respondents advance the following argument:

The issue of whether the language of the

Confirmed Plan, in the absence of Restated

Loan Documents, is sufficient to constitute

negotiable instrument has already been

litigated and determined by the Leonard

Order. The Leonard Order specifically

provides that the Confirmed Plan is

“unambiguous and imposes an obligation on

the parties, the debtor and Wachovia, to

execute [Restated Loan Documents] consistent

with the treatment provided therein.” In

addition, the Leonard Order holds

specifically that “in addition to being

explicitly required, the execution and

delivery of the [Restated Loan Documents]

was a condition precedent for setting the

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implementation date of Note A and Note B as

October 1, 2001.” Finally the Leonard Order

provides that “these provisions appear

mandatory and are not self-executing” and

that “in the absence of [Restated Loan

Documents], the description of Note A and

Note B as well as the recitation of its

terms, obligations and the treatment

provided to Wachovia are insufficient to

constitute negotiable instruments.” DAN does

not and cannot meet the Holder requirement

of N.C.

Gen. Stat. §45-21.16(d).

North Carolina must give full faith and

credit to final judgments of Federal Courts.

. . . An Order of a Bankruptcy Court

avoiding a mortgage lien is a Final Order. .

. . Issue preclusion prevents [DAN] from

re-litigating the issue concerning holder

status.

Respondents are misguided. “In order for collateral

estoppel to apply in this case, the issues to be concluded must

be the same as those in the prior Bankruptcy Court action[.]”

In re Foreclosure Under That Deed of Trust Executed by Azalea

Garden Bd. & Care, Inc., 140 N.C. App. 45, 56, 535 S.E.2d 388,

396 (2000). The Bankruptcy Court did not rule on the merits of

DAN’s foreclosure action, and the Leonard order was not an

adjudication on the merits. For example, the issue of whether

DAN was the holder of a valid debt was not litigated and

determined in the bankruptcy proceeding. Therefore, collateral

estoppel is inapplicable. Respondents’ counsel was aware that

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Judge Leonard’s order did not constitute an adjudication on the

merits of the foreclosure. During the foreclosure hearing

counsel stated, “Judge Leonard’s decision is not an adjudication

. . . but it’s really darn convincing and persuasive argument as

to how it is he was going to rule.” In respondents’ reply

brief, they clarify that their position is not that the Leonard

order constitutes a final order avoiding a mortgage lien;

instead, they aver that it is an order establishing: (1) that

the reorganization plan mandated new loan documents, and (2)

that the failure to execute new loan documents meant that the

payment obligations under the Confirmed Plan were insufficient

to constitute negotiable instruments.

Regardless, as applied to the foreclosure action before us

on appeal, the Leonard order lacks controlling authority. It is

merely a determination that a “bona fide dispute” exists between

LLM and DAN regarding the validity of DAN’s liens. Under 11

U.S.C. §363(f), a trustee has the right to sell property free

and clear of liens if there is a bona fide dispute as to the

validity of the lien. Despite respondents’ arguments to the

contrary, Wachovia was not required to execute Restated Loan

Documents for the Confirmed Plan to be valid and enforceable

against respondents in the foreclosure action. As the trial

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court found in Finding #5, the Confirmed Plan simply provides:

“The debtor shall execute and deliver such agreements,

instruments and documents as may be reasonably requested by

Wachovia.” Thus, the Confirmed Plan allowed Wachovia to

determine what, if any, new loan documents Wachovia required.

Restated Loan Documents were neither required nor a condition

precedent for the Confirmed Plan to bind the parties.

Further, respondents have waived their right to advance the

above argument because the record shows that they made timely

payments pursuant to the terms of the Confirmed Plan for

approximately ten years. Clement v. Clement, 230 N.C. 636, 639,

55 S.E.2d 459, 461 (1949) (holding doctrine of waiver provides

that “[a] person may waive almost any right he has, unless

forbidden by law or public policy.)

B. Foreclosure by Power of Sale

Next, we must consider whether the trial court erred in

authorizing DAN to foreclose on the subject properties. In a

foreclosure by power of sale, the trial court shall enter an

order permitting foreclosure upon finding: (i) a valid debt of

which the party seeking to foreclose is the holder, (ii)

default, (iii) right to foreclose under the instrument, and (iv)

notice to those entitled. N.C. Gen. Stat. § 45-21.16(d)

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(2013). Here, respondents essentially challenge the first and

third elements of N.C. Gen. Stat. § 45-21.16(d) on the basis

that DAN failed to produce competent evidence of a valid debt,

failed to show that it was the current note holder, and was

unable to show that it had a right to foreclose under the deed

of trust. These issues are “question[s] of law controlled by

the UCC [Uniform Commercial Code], as adopted in Chapter 25 of

the North Carolina General Statutes.” In re Bass, 366 N.C. 464,

467, 738 S.E.2d 173, 175-76 (2013). We conclude that the trial

court did not err.

The following documents set out the rights of the parties

in this case: (1) the five Wachovia promissory notes executed

between 1993-1999 by LLM in favor of Wachovia; (2) the deed of

trust securing the notes executed by respondents and amended

over time; (3) LLM’s fourth amended plan of reorganization filed

4 May 2001; (4) the Confirmed Plan effective 13 July 2001; and

(5) the order determining LLM’s indebtedness entered in the

adversary proceeding. L.L. Murphrey Co. v. D.A.N. Joint Venture

III, L.P., Adv. No. 11-00139, 2011 WL 6301214 (Bankr. E.D.N.C.

Dec. 16, 2011) (calculating the recapitalized debt under the

Confirmed Plan to be $6,168,362.00).

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For the reasons set forth above, we decline to address

respondents’ arguments that are premised entirely on the

contention that the Confirmed Plan is not enforceable against

them. However, we will address the following three specific

arguments advanced by respondents: First, respondents aver that

DAN is not the holder of a valid debt because the Confirmed Plan

fails to qualify as a negotiable instrument. Second,

respondents argue that the Confirmed Plan does not contain a

sufficient description of the debt it proposes to secure.

Third, respondents argue that the Confirmed Plan was not

intended to operate as an extension or modification of the deed

of trust.

First, we note that DAN need not prove that it is the

holder of a negotiable instrument in order to satisfy element

one of N.C. Gen. Stat. § 45-21.16(d). When determining whether

a party is the holder of a valid debt, we must find (i)

sufficient competent evidence of a valid debt, and (ii)

sufficient competent evidence that the party seeking to

foreclose is the current holder of the notes that evidence that

debt. In re Adams, 204 N.C. App. 318, 322, 693 S.E.2d 705, 709

(2010). Prong two, whether DAN is the holder of a valid debt,

need not be addressed. Respondents’ argument that DAN is not

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the “holder” of a valid debt is based on the premise that the

Confirmed Plan is a nullity. Accordingly, we must only find

competent evidence of a valid debt. In Azalea, this Court held

that a “valid debt” can be evidenced by several documents

(including a confirmed bankruptcy plan), each modifying the

terms of the other. Azalea, 140 N.C. App. at 53, 535 S.E.2d at

394 (2000) (finding that “the compromise and settlement

agreement and plan of reorganization that were negotiated,

amended and ratified by the parties in this case modified the

original documents[.]”) (emphasis added). Here, the Wachovia

notes were modified by the plan of reorganization, which was

negotiated, amended, and ratified by the parties through the

Confirmed Plan. The Confirmed Plan set forth the maturity date

of the loans, interest rate, and events triggering default. LLM

(at respondents’ direction) made payments under the terms of the

Confirmed Plan for approximately ten years. Upon review, we

hold that the Confirmed Plan evidences a valid debt of which DAN

is the holder.

In addition, the valid debt and DAN’s holder status is

further evidenced in the order entered by Judge Leonard. See

L.L. Murphrey Co. v. D.A.N. Joint Venture III, L.P., Adv. No.

11-00139, 2011 WL 6301214 (Bankr. E.D.N.C. Dec. 16, 2011).

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Judge Leonard calculated LLM’s recapitalized debt under the

Confirmed Plan at $6,168,362.00 and found that DAN became the

holder of this indebtedness in 2008. LLM did not appeal this

order and it is therefore binding on this Court.

Second, the deed of trust and the Confirmed Plan both

adequately describe the indebtedness each secures. In North

Carolina, a deed of trust must identify the obligation secured

so that all subsequent purchasers or lenders are afforded

sufficient notice as to the nature of the obligations secured by

the deed of trust. In re Hall, 210 N.C. App. 409, 413, 708

S.E.2d 174, 177 (2011) (holding “[t]o be a valid lien on real

property, North Carolina law requires a deed of trust to

specifically identify the obligation it secures.”) Here, the

deed of trust provides a detailed description of the obligations

secured, as follows:

(a) Note, dated July 9, 1993, in the

original principal amount of $1,000,000,

executed by Larry Barrow and Lois M. Barrow

and payable to the Beneficiary (which,

together with any and all renewals,

modifications and extensions thereof, is

hereinafter referred to as the “Barrow

Note”).

(b) Note, dated July 9, 1993, in the

original principal amount of $1,000,000,

executed by Donald Stocks and Connie M.

Stocks and payable to the Beneficiary

(which, together with any and all renewals,

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modifications and extensions thereof is

hereinafter referred to as the “Stocks

Note”).

(c) Note, dated July 9, 1993 in the original

principal amount of $1,131,478.94, executed

by the Maker and payable to the Beneficiary

(which, together with any and all renewals,

modifications and extensions thereof, is

hereinafter referred to as the “1993 Company

Note”).

The deed of trust also details the modification of the

Wachovia notes over time, including the decrease in principal

balance and extension of maturity dates. Further, the deed of

trust contains a catchall phrase—stating it operates as security

for “any renewals, modifications or extension” of the Wachovia

notes and “all present and future obligations of [LLM and

respondents] to [DAN].”

The Confirmed Plan specifically describes the obligations

it secures as including:

A. Note #1: Note #1 is a promissory note

dated July 9, 1993 in the original

principal amount of $1,131,478.94. By its

terms, this obligation accrued interest at

the annual rate of 7.15%. It was to be

repaid by monthly principal and interest

payments in the amount of $17,160.40.

This note matured July 10, 1999.

B. Note #17: Note #17 is a promissory note

dated April 23, 1996 in the original

principal amount of $3,500,000.00. By its

terms, this obligation accrued interest at

the annual rate of prime plus .75%. It

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was to be repaid by monthly principal

payments in the amount of $58,334.00 plus

accrued interest. This note matures on

May 1, 2001.

C. Note #18: Note #18 is a Declining

Revolver Note dated April 23, 1996 in the

original principal amount of

$5,420,000.00. By its terms, this

obligation accrued interest at the annual

rate of 9%. It was to be repaid by

quarterly principal payments in the amount

of $250,000.00 plus accrued interest.

This note matured March 15, 2000.

D. Note #19: Note #19 is a Grain Line of

Credit Note dated April 23, 1996 in the

original principal amount of

$2,750,000.00. By its terms, this

obligation accrued interest at the annual

rate of prime plus 1%. It was to be

repaid by monthly interest payments with

principal due and payable at maturity.

This note matured February 25, 1999.

E. Note #22: Note #22 is a future advances

note dated March 16, 1999 in the original

principal amount of $175,000.00. By its

terms, this obligation accrued interest at

the annual rate of prime plus 1.5%. It was

to be repaid by monthly interest payments

with principal due and payable at

maturity. This note matured April 15,

1999.

We conclude that the description of the indebtedness evidenced

in the deed of trust and the Confirmed Plan is sufficient under

North Carolina law to notify creditors of the nature of the

obligations secured by the deed of trust and likewise by the

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Confirmed Plan. Hall, supra.

As to respondents’ third argument, we note that they

advance no specific argument to support their position that the

Confirmed Plan was not intended to act as an extension or

modification of the deed of trust. Our Supreme Court has held

that a deed of trust executed as security for a debt will secure

all renewals of the debt unless a different intent appears.

Wachovia Nat'l Bank v. Ireland, 122 N.C. 571, 29 S.E. 835 (1898)

(“The deed contains a covenant that the charge shall be binding

for all renewals of the debts specified. This would be so

without any agreement, unless a different intent appeared.”).

“Where a note is given merely in renewal of another note and not

in payment thereof, the effect is to extend the time for the

payment of the debt without extinguishing or changing the

character of the obligation, and, in case of default, the holder

may sue upon the original instrument.” Dyer v. Bray, 208 N.C.

248, 180 S.E. 83 (1935).

Where a [subsequent] contract involves the

same subject matter as the first, but where

no recession has occurred, the contracts

must be construed together in identifying

the intent of the parties and in

ascertaining what provisions of the first

contract remain enforceable, and in such

construction the law pertaining to

interpretation of a single contract applies.

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In re Fortescue, 75 N.C. App. 127, 130, 330 S.E.2d 219, 221

(1985) (citation omitted) (applying terms of a loan modification

agreement to find default of promissory note and foreclosure of

deed of trust). “The court’s primary purpose in construing a

contract is to ascertain the intention of the parties.” Id. at

130, 330 S.E.2d at 222; see also In re Foreclosure of Sutton

Investments, 46 N.C. App. 654, 659-60, 266 S.E.2d 686, 689

(1980) (concluding “that proper interpretation of the provisions

in the Note and the Deed of Trust prescribing the conditions of

default requires that the instruments be read together as one

contract rather than as two independent agreements.”)

The modification of the Wachovia notes through the

Confirmed Plan did not eliminate the original debt, as

respondents contend. The plan of reorganization specifies:

“[Note A and Note B] shall remain secured by that collateral

pledged to Wachovia by the Debtor prior to the Petition Date and

guaranties will remain in full force and effect for the Notes

except as adjusted to reflect the amount of Recapitalized Debt,

defined herein” and “[t]he Recapitalized Debt shall remain

secured by the same Pre-Petition Collateral.” The Confirmed

Plan provides: “The guarantors of Wachovia’s Notes A and B as

provided for under the Plan shall be the same as pre-petition,

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with the exception [] [of] Connie S. Murphrey[.]” Notably, the

Confirmed Plan does not provide for a payoff of the Wachovia

notes—it merely reclassifies the preexisting debt. Thus, the

Confirmed Plan “set new, specific requirements that the parties

in this case intended to follow, in addition to any agreements

in the original promissory note and deed of trust, that were not

irreconcilable.” Azalea, 140 N.C. App. at 52, 535 S.E.2d at

393.

The deed of trust also states that it is to operate as

security for “any renewals, modifications or extensions” of the

Wachovia notes as well as “all present and future obligations of

[LLM and the Barrow family] to [DAN].” Based on the language

of the Confirmed Plan and deed of trust, we conclude that the

parties intended for the deed of trust to operate as security

for the Wachovia notes, as modified under the terms of the

Confirmed Plan.

C. Statute of Limitations

Respondents argue that DAN’s foreclosure action is barred

by the applicable statute of limitations set forth in N.C. Gen.

Stat. § 1-47(2) and (3) (2013). We disagree and note that the

crux of the statute of limitations argument hinges on our having

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concluded that the Confirmed Plan is unenforceable against

respondents.

N.C. Gen. Stat. § 1-47(3) (2013) provides:

For the foreclosure of a mortgage, or deed

in trust for creditors with a power of sale,

of real property, where the mortgagor or

grantor has been in possession of the

property, within ten years after the

forfeiture of the mortgage, or after the

power of sale became absolute, or within ten

years after the last payment on the same.

As the statute provides, the statute of limitations does

not run until ten years after a final payment is made on an

obligation. Respondents do not contest the fact that LLM made

payments pursuant to the terms of the Confirmed Plan through

2011. Clearly, DAN is squarely within the requisite time frame

in which it can bring its foreclosure action. We overrule

respondents’ argument.

II. Conclusion

In reviewing the record in its entirety, we hold that DAN

presented competent evidence of: (i) a valid debt of which the

party seeking to foreclose is the holder, (ii) default, (iii)

right to foreclose under the instrument, and (iv) notice to

those entitled as required under N.C. Gen. Stat. § 45-21.16(d).

Accordingly, we affirm the trial court’s order.

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Affirmed.

Judges CALABRIA and STEPHENS concur.