Five Oaks Recreational Ass'n, Inc. v. Horn

• Decision Date: 06 March 2012
• Docket Number: No. COA11–1053.,COA11–1053.
• Citation: 724 S.E.2d 98,77 UCC Rep.Serv.2d 80
• Parties: In the Matter of the Foreclosure of a Lien by FIVE OAKS RECREATIONAL ASSOCIATION, INC., a North Carolina Corporation against, Martin J. Horn, Owner.
• Court: North Carolina Court of Appeals

724 S.E.2d 98

77 UCC Rep.Serv.2d 80

In the Matter of the Foreclosure of a Lien by FIVE OAKS RECREATIONAL ASSOCIATION, INC., a North Carolina Corporation against, Martin J. Horn, Owner.

No. COA11–1053.

Court of Appeals of North Carolina.

March 6, 2012.

Appeal by Respondent from order entered 2 June 2011 by Judge Orlando F. Hudson, Jr. in Durham County Superior Court. Heard in the Court of Appeals 25 January 2012.

Hatch, Little, & Bunn, LLP, Raleigh, by Tina Frazier Pace and Justin R. Apple, for Petitioner-appellee.

The Law Offices of Martin J. Horn, PLLC, Durham, by Martin J. Horn, for Respondent-appellant.

HUNTER, JR., ROBERT N., Judge.

Martin J. Horn (“Respondent”) appeals from the trial court's amended order granting summary judgment in favor of Five Oaks Recreational Association, Inc. (“Petitioner”) and authorizing Petitioner to proceed with foreclosure of Respondent's property. After careful review, we affirm.

I. Factual & Procedural Background

Petitioner is a North Carolina non-profit corporation located in Durham. Petitioner maintains recreational facilities for the use and benefit of its members, which generally consist of property owners in the Five Oaks Community. Respondent owns property located at 4302 Pin Oak Drive in Durham—within the Five Oaks Community—and is a member of Petitioner. As a member, Respondent and his property are subject to the terms of Petitioner's Declaration of Covenants, Conditions, and Restrictions (“the Declaration”) as recorded in Book 432, Page 306, of the Durham County Register of Deeds.

Pursuant to the Declaration, Respondent has agreed to pay dues, or “assessments,” to Petitioner to cover the costs of maintaining and operating Petitioner's recreational facilities. Article X Section 3 of the Declaration provides that the “assessments, together with interest, costs, and reasonable attorney's fees for the collection thereof shall be a charge and lien upon the lot of the respective Owners thereof, and the same shall be a continuing lien upon the lot against which each such assessment is made.” The Declaration further provides that if an assessment is not paid within thirty days of its due date, Petitioner has the power to “foreclose the lien against the lot, and interest, costs, and reasonable attorney's fees of any such action for collection thereof shall be added to the amount of such assessment.”

Petitioner's records indicate that Respondent fell behind on his assessment payments in April 2009 and that he has maintained a past due balance ever since. On 13 August 2010, Petitioner notified Respondent by letter that Respondent owed $458.00 in unpaid assessments. Petitioner cautioned Respondent that it would exercise its power under the Declaration to file a claim of lien against Respondent's property—and possibly institute foreclosure proceedings—if Respondent failed to arrange for payment of his past due balance within fifteen days.

Petitioner received no response from Respondent and retained counsel to assist in Petitioner's debt collection efforts. By letter dated 21 September 2010, Petitioner's counsel informed Respondent of his statutory obligation to pay Petitioner's attorney's fees incurred through collection of Respondent's debt in addition to the debt itself. Petitioner indicated that Respondent's debt, including attorney's fees, totaled $533.00, and, moreover, that any payments made by Respondent would be applied “in the following order: (1) to any fines accrued upon [Respondent's] assessment account; (2) attorneys fees incurred in the collection of those fines or in the collection of [Respondent's] past due assessments; (3) costs, including administrative costs; (4) late fees; and (5) past due assessments.” The letter directed Respondent to tender all payments through Petitioner's counsel.

As of 11 October 2010, Petitioner had not received a response from Respondent. Petitioner sent Respondent a copy of the claim of lien that it was in the process of filing against Respondent's property pursuant to its authority under the Declaration. Petitioner indicated the claim of lien was for $611.00 in past due assessments and $225.00 in attorney's fees for a total amount of $836.00. Petitioner filed the claim of lien against Respondent's property in Durham County District Court on 15 October 2010.

On 5 November 2010, Petitioner's counsel received a check from Respondent for $611.00. The check, as reflected in the record, bears a handwritten message on the “MEMO” line in the lower left-hand corner of the instrument. Although it is difficult to decipher the handwriting, Respondent asserts in his affidavit that the message reads “full payment.” However, Brittany Van Zille, the office assistant who processed the check, states in her affidavit that the check “was not accompanied by any note or correspondence indicating it was for payment in full.” Ms. Van Zille further states that she knows not to process checks designated “payment in full,” and, even if she had noticed the message, she “would not have been able to tell that the writing therein indicated that it was for ‘full payment.’ ”

Bank records indicate that Petitioner's counsel indorsed and processed Respondent's check on 9 November 2010. That same day, Petitioner commenced foreclosure proceedings by filing a petition and notice of foreclosure hearing in Durham County Superior Court.¹ The petition described Respondent's debt as comprised of $611.00 in past due assessments, $625.00 in attorney's fees, and $180.00 in court costs.

On 12 April 2011, a foreclosure hearing based upon foreclosure of the claim of lien was held before the Honorable Archie L. Smith, III, Clerk of Superior Court of Durham County. Respondent—representing himself pro se—asserted that the notation on the check and subsequent processing of the check by Petitioner's counsel constituted accord and satisfaction, thereby satisfying his debt and precluding foreclosure. The clerk of court disagreed, concluding as a matter of law “[t]hat the tendered check did not constitute accord and satisfaction as it was illegible and insufficient to notify [Petitioner] that it was tendered as payment in full.” The clerk of court authorized Petitioner to proceed with foreclosure and ordered Respondent to pay Petitioner's attorney's fees and court costs totaling $1,680.00. On 27 April 2011, Respondent appealed the clerk of court's order to Durham County Superior Court pursuant to N.C. Gen.Stat. § 45–21.16(d1) (2011).

On 10 May 2011, Petitioner filed a motion for summary judgment with the trial court. In support of its motion, Petitioner offered the affidavits of Ms. Van Zille and Petitioner's counsel, an affidavit of debt, a certified claim of lien, and a certified copy of the Declaration. Respondent countered by filing his own motion for summary judgment on 18 May 2011, offering his sworn affidavit in support of the motion.

In a summary judgment order entered 24 May 2011, the trial court found, inter alia, that the notation on the check was “illegible,” that there was no evidence of a dispute over the amount of the debt, and that the amount demanded by Petitioner for the debt owed was for a “sum certain.” The trial court concluded there had not been accord and satisfaction as a matter of law because: (1) “the notation on the check was illegible and was therefore insufficient to notify [Petitioner] that it was tendered as payment in full,” (2) “the debt was neither disputed nor unliquidated,” and (3) “there was no ‘meeting of the minds' and no agreement between [Respondent] and [Petitioner] to pay and accept less than the amount claimed.” The trial court's order authorized Petitioner to proceed with foreclosure of Respondent's property, and, in addition, ordered Respondent to pay Petitioner's attorney's fees and court costs totaling $5,739.50. The trial court entered an amended order of summary judgment on 2 June 2011. The amended order omits the trial court's factual findings but is otherwise identical to the original summary judgment order. Respondent timely filed his notice of appeal from the 2 June 2011 order with this Court on 21 June 2011.

II. Analysis

Chapter 47F of our General Statutes, entitled the “North Carolina Planned Community Act,” (“the Act”) governs the operation of North Carolina homeowners associations such as Petitioner. See N.C. Gen.Stat. § 47F–1–102(a) (2011). We note the Act generally applies only to homeowners associations created on or after 1 January 1999, see id., and, according to the Declaration, Petitioner was created on or about 9 December 1975. However, some of the Act's provisions—and the only provisions relevant to the matter sub judice—apply regardless of the association's date of inception. See N.C. Gen.Stat. § 47F–1–102(c) (2011). Thus, the provisions of the Act cited herein control.

With respect to collection of delinquent assessments, the Act provides that “[a]ny assessment levied against a lot remaining unpaid for a period of 30 days or longer shall constitute a lien on that lot when a claim of lien is filed of record in the office of the clerk of superior court of the county in which the lot is located.” N.C. Gen.Stat. § 47F–3–116(a) (2011). Moreover, the Act vests the association holding the claim of lien with authority to “foreclose the claim of lien in like manner as a mortgage on real estate under power of sale under Article 2A of Chapter 45 of the General Statutes.” Id.

N.C. Gen.Stat. § 45–21.16(d) delineates the procedure for a foreclosure hearing held before the clerk of court. See N.C. Gen.Stat. § 45–21.16(d) (2011). At the hearing, the party seeking foreclosure must establish four statutorily required elements: (1) a valid debt exists and the foreclosing party is the holder of the debt; (2) the debtor has defaulted on the debt; (3) the instrument evidencing the debt permits foreclosure; and (4) proper notice has been afforded to all entitled parties. See id.; In re Adams, 204 N.C.App. 318, 321–23, 693...