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In re foreclosure of a North Carolina Deed of Trust

Court of Appeals of North Carolina

October 7, 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 489 at Page 620, as modified by 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

Heard in the Court of Appeals August 27, 2014

Page 222

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. Judges CALABRIA and STEPHENS concur.

Page 223

Appeal by respondents from order entered 31 October 2013 by Judge Paul L. Jones in Greene County Superior Court, No. 13 SP 61.

OPINION

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 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:

Page 224

R. Execution and Delivery of Revised Loan Documents
The Debtor and Wachovia will enter into 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 Documents [referred to above as the " Wachovia Restated Loan ...

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