Court Opinion

ID: 9588011
Source: CourtListenerOpinion
Date Created: 2023-08-21 23:28:51.680553+00
Date Added: 2024-06-11T12:40:57.016903
License: Public Domain

*463Justice Meyer
dissenting.
I must respectfully dissent. Given the fact that Crockett is now the law of this State, I have no difficulty with the conclusion of the majority opinion as being in accord with Crockett so far as it relates to true “due on sale” instruments. I am astonished, however, that the majority has concluded that the language of the instrument before us constitutes “a valid, non-restricted due-on-sale clause which the Association could fully enforce for the purpose of extracting higher interest from potential buyers of the secured residential property.”
In a rather lengthy opinion of some fourteen pages only one paragraph is devoted to an interpretation of the language in the instrument before us. Not a single case is cited bearing the language of the trust instrument in this case. The only case cited is Crockett, which the majority candidly admits does not contain the same, but only “similar” language. Even if one agrees that the decision in Crockett is correct in the context of a commercial loan, or for that matter, even in the context of a residential loan, it should not be controlling here.
I believe it is at least noteworthy that the majority opinion does not set out the precise language in Crockett and compare it in detail with the language of the Bonder trust instrument. The difference is telling:
The Crockett language:
‘[I]f the property herein conveyed is transferred without the written assent of Association, then . . . the full principal sum with all unpaid interest thereon shall at the option of Association, its successors or assigns, become at once due and payable without further notice and irrespective of the date of maturity expressed in said note.’
289 N.C. 620, 631, 224 S.E. 2d 580, 587-88 (1976).
Even if one disagrees with the result in Crockett, at least the foregoing language is clear — sale without consent accelerates maturity at the election of the lender. Both the requirement of consent and the penalty for failing to secure consent are found not only in the same paragraph but also within the same sentence.
*464The Bonder language:
If, however, the parties of the first part . . . shall fail to observe, keep and perform any of the agreements, covenants and conditions herein set out and agreed to be observed, kept and performed by the parties of the first part, then and in any such event the entire amount of such note, loans, advances and any other amounts hereby secured, shall at the option of the holder of the note hereby secured immediately become due and payable ....
The foregoing appears in the middle of a lengthy paragraph on page 3 of the form. Some ten paragraphs later, as if a horse following the cart, there appears the following:
That they will not convey the premises herein described without the consent in writing of the Association, its successor or assigns; and that no sale by the parties of the first part of the premises herein described and no forbearance or extension of time granted by the Association for the payment of the note or other indebtedness from time to time secured hereby to the parties of the first part (or to any other person in whom title to the premises herein described is vested) shall operate to release, modify or affect the liability of the parties of the first part as provided herein, or shall affect the validity or priority of the lien of this deed of trust.
Unlike the plain and concise language of the Crockett instrument, the language of the Bonder instrument requires a patching together of separate parts in order to construct a due-on-sale interpretation. This construction requires too much license and certainly cannot be said to correspond to, the expectations of the parties when the instrument was signed. Before the advent of today’s raging inflation, the traditional notion of circumstances which justified withholding of consent to the transfer and assumption of the mortgage was a sale and assumption which jeopardized the lender’s security interest.
It should be emphasized that the Savings and Loan here did not refuse to permit the assumption of the note and deed of trust by the Bonders — it in fact agreed to it — but only upon the in*465crease of the interest rate from 73/4°/o to 12% per annum.1 It is absolutely clear that the Savings and Loan did not question the creditworthiness of the Bonders. It simply wanted to extract additional interest. I hasten to point out that I would not question that motive so long as it reasonably appears that an enhanced interest rate upon sale was within the contemplation of the parties when the document was executed. The more modern deeds of trust generally include in plain language not only true due-on-sale provisions but more recently, variable interest rate provisions and provisions specifically for increasing the interest rate on sale.
I feel compelled to take issue with two other aspects of the majority opinion. First, unlike the majority, I am totally unwilling to say that “there is no conflict between North Carolina and federal law concerning due-on-sale clauses” without one sentence of analysis. I consider such a statement, without any analysis of the status of the federal law and comparison with our own, reckless and one which will come back to haunt us. The majority’s brief treatment of De La Cuesta certainly does not justify such a statement. That case simply held that the Federal Home Loan Bank Board’s regulation permitting federal savings and loan associations to include due-on-sale clauses in their loan instruments pre-empts conflicting State limitations on the operation and enforcement of such clauses. In the case before us there is no question of possible conflict between federal and state law. In fact, there is not present in the case even any question concerning the validity or enforceability of proper due-on-sale clauses. The only question before us is whether the language of the trust instrument here constitutes a due-on-sale clause. We should not blatantly announce that there is an absence of any conflict between federal and North Carolina law concerning due-on-sale clauses until the question is properly before us, fully briefed, fully researched and fully considered by this Court.
Second, the majority has completely mischaracterized a portion of Justice Lake’s dissent in Crockett as a concession “that the rationale employed by the Court extended to ‘mortgages of typical family residences.’ ” It was the result in the case and not *466the rationale employed by the court to reach that result that Justice Lake interpreted to extend to mortgages of typical family residences. It is crystal clear that Justice Lake felt that the rationale as well as the result, when extended to typical residential loans, would be totally unrealistic.
As I read the majority opinion, it holds that use of a ‘Due-on-Sale Clause’ for the sole purpose of requiring an increase in the rate of interest is reasonable and not oppressive and, therefore, entitled to the protection of the court. In the present case, the mortgaged property is not a single family residence but is a block of apartment houses. The mortgagor and Mrs. Crockett are thus investors in business property. They may, therefore, be on approximately ‘equal footing’ with the defendant. The majority opinion, however, does not rest upon this circumstance. It extends, apparently, to mortgages of typical family residences. When so extended, even if not when applied to the present case, the entire basis for the majority opinion seems to be utterly unrealistic.
289 N.C. at 642, 224 S.E. 2d at 594.
I vote to reverse the decision of the Court of Appeals and remand the case for ultimate dismissal of the foreclosure proceeding.

. Query whether a demand for an increase from 73A°/o to the current rate of 16% or 17% would be “unconscionable,” “inequitable,” or at least “oppressive” and therefore not permissible even under Crockett.