NORTH CAROLINA GENERAL ASSEMBLY
1969 SESSION
CHAPTER 736
SENATE BILL 76
AN ACT TO PROVIDE FOR INSTRUMENTS TO SECURE FUTURE ADVANCES AND FUTURE OBLIGATIONS.
The General Assembly of North Carolina do enact:
Section 1. Chapter 45 of the General Statutes, entitled "Mortgages and Deeds of Trust," is hereby amended by adding at the end thereof a new article to read as follows:
"Article 7. Instruments to Secure Future Advances and Future Obligations.
"Sec. 45-67. Definition. As used in this Article, 'security instrument' means a mortgage, deed of trust, or other instrument relating to real property securing an obligation or obligations to a person, firm, or corporation specifically named in such instrument, as distinguished from being included in a class of security holders referred to therein, for the payment of money.
"Sec. 45-68. Requirements. A security instrument, otherwise valid, shall secure future obligations which may from time to time be incurred thereunder so as to give priority thereto as provided in G.S. 45-70. if:
(1) Such security instrument shows:
a. That it is given wholly or partly to secure future obligations which may be incurred thereunder;
b. The amount of present obligations secured, and the maximum amount, including present and future obligations, which may be secured thereby at any one time;
c. The period within which such future obligations may be incurred, which period shall not extend more than ten years beyond the date of the security instrument; and
(2) At the time of incurring any such future obligations, each obligation is evidenced by a written instrument or notation, signed by the obligor and stipulating that such obligation is secured by such security instrument; and
(3) At any time a security instrument securing future advances is transferred or assigned by the owner thereof that the amount, date and due date of each note, bond, or other undertaking for the payment of money representing a future obligation secured by such security instrument be noted in writing thereon.
"Sec. 45-69. Fluctuation of obligations within maximum amount. Unless the security instrument provides to the contrary, if the maximum amount has not been advanced or if any obligation secured thereby is paid or is reduced by partial payment, further obligation may be incurred from time to time within the time limit fixed by the security instrument, provided the unpaid balance of principal outstanding shall never exceed the maximum amount authorized pursuant to G.S. 45-68(1)(b). Such further obligations shall be secured to the same extent as original obligations thereunder, if the provisions of G.S. 45-68(2) and (3) are complied with.
"Sec. 45-70. Priority of security instrument. (a) Any security instrument which conforms to the requirements of this Article and which on its face shows that the making of future advances is obligatory, shall, from the time and date of registration thereof, have the same priority to the extent of all obligatory future advances secured by it, as if all the advances had been made at the time of the execution of the instrument.
"(b) Any security instrument which conforms to the requirements of this Article, which on its face does not show that the making of future advances is obligatory, shall, from the time and date of registration thereof, have the same priority to the extent of all obligations secured by it, as if all the advances had been made at the time of the execution of the instrument, except that when an intervening lienor or encumbrancer gives actual notice as hereinafter provided that an intervening lien or encumbrance has been perfected on the property covered by the security instrument, or is being incurred and when perfected will relate back to the time when incurred, any future advances made subsequent to the receipt of such notice shall not take priority over such intervening perfected lien or encumbrance. Such notice shall be in writing and shall be given to the secured creditor named in the security instrument; but if the security instrument is registered and if any assignment of the security instrument has been noted on the margin of the record showing the name and address of the assignee, such notice shall be given to the last assignee so noted at the address so shown.
"(c) Payments made by the secured creditor for fire and extended coverage insurance, taxes, assessments, or other necessary expenditures for the preservation of the security shall be secured by the security instrument and shall have the same priority as if such payments had been made at the time of the execution of the instrument, whether or not notice has been given as provided in subsection (b) of this Section. The provisions of G.S. 45-68(2) and (3) shall not be applicable to such payments, nor shall such payments be considered in computing the maximum amount which may be secured by the instrument.
"Sec. 45-71. Satisfaction of the security instrument. Upon payment of all the obligations secured by a security instrument which conforms to the requirements of this Article and upon termination of all obligation to make advances, and upon written demand made by the maker of the security instrument, his successor in interest, or anyone claiming under him, the holder of the security instrument is hereby authorized to and shall make a written entry upon the security instrument showing payment and satisfaction of the instrument, which entry he shall date and sign. When the security instrument secures notes, bonds, or other undertakings for the payment of money which have not already been entered on the security instrument as paid, the holder of the security instrument, unless payment was made to him, may require the exhibition of all such evidences of indebtedness secured by the instrument marked paid before making his entry showing payment and satisfaction.
"Sec. 45-72. Termination of future optional advances. (a) The holder of a security instrument conforming to the provisions of this Article, which on its face does not show that the making of future advances is obligatory, shall, at the request of the maker of the security instrument or his successor in title promptly furnish to him a statement duly executed and acknowledged in such form as to meet the requirements for the execution and acknowledgment of deeds, setting forth in substance the following:
'This is to certify that the total outstanding balance of all obligations, the payment of which is secured by that certain instrument executed by___________, dated_________, recorded in book_______at page________in the office of the Register of Deeds of__________County, North Carolina, is $____, of which amount $____________represents principal.
'No future advances will be made under the aforesaid instrument, except such expense as it may become necessary to advance to preserve the security now held.
'This____day of____, 19__.
__________________________
(Signature and Acknowledgment)'
"(b) Such statement, when duly executed and acknowledged, shall be entitled to probate and registration, and upon filing for registration shall be effective from the date of the statement. It shall have the effect of limiting the lien or encumbrance of the holder of the security instrument to the amount therein stated, plus any necessary advances made to preserve the security, and interest on the unpaid principal. It shall bar any further advances under the security instrument therein referred to except such as may be necessary to preserve the security then held as provided in G.S. 45-70(c).
"Sec. 45-73. Cancellation of record; presentation of notes described in security instrument sufficient. The provisions of G.S. 45-37 apply to discharge of record of instruments executed under this Article except that in cases of cancellation by exhibition or presentation under G.S. 45-37(a)(2) or G.S. 45-37(a)(3), only notes or bonds described in the body of the instrument or noted in writing thereon as provided in G.S. 45-68(3) need be exhibited or presented.
"Sec. 45-74. Article not exclusive. The provisions of this Article shall not be deemed exclusive, and no security instrument securing future advances or future obligations which is otherwise valid shall be invalidated by failure to comply with the provisions of this Article."
Sec. 2. All laws and clauses of laws in conflict with this Act are hereby repealed.
Sec. 3. This Act shall become effective October 1, 1969.
In the General Assembly read three times and ratified, this the 9th day of June, 1969.