In re Clayton

• Decision Date: 01 August 2017
• Docket Number: No. COA16-960,COA16-960
• Court: North Carolina Court of Appeals
• Parties: IN RE: Foreclosure of Real Property under Deed of Trust from Melvin R. CLAYTON and Jackie B. Clayton, in the original amount of $165,000.00 and dated June 13, 2008 and recorded on June 18, 2008 in Book 2083 at Page 506, Henderson County Registry Trustee Services of Carolina, LLC, Substitute Trustee

802 S.E.2d 920

IN RE: Foreclosure of Real Property under Deed of Trust from Melvin R. CLAYTON and Jackie B. Clayton, in the original amount of $165,000.00 and dated June 13, 2008 and recorded on June 18, 2008 in Book 2083 at Page 506, Henderson County Registry Trustee Services of Carolina, LLC, Substitute Trustee

No. COA16-960

Court of Appeals of North Carolina.

Filed: August 1, 2017

Womble Carlyle Sandridge & Rice, LLP, Charlotte, by B. Chad Ewing, for petitioner-appellee.

Pisgah Legal Services, by William J. Whalen; and Adams, Hendon, Carson, Crow & Saenger, P.A., Asheville, by Matthew S. Roberson, for respondent-appellant.

ELMORE, Judge.

Ms. Jackie B. Clayton (respondent), a widowed spouse of a homeowner who entered into a reverse-mortgage agreement with Wells Fargo (petitioner), appeals an order authorizing Wells Fargo to foreclose under a power-of-sale provision contained within the deed of trust on the property that secured her late husband's promissory note. The deed of trust and the note contained provisions empowering Wells Fargo to accelerate the maturity of the note's debt upon a borrower's death, provided the property did not remain the principal residence of a "surviving borrower," and to exercise its contractual foreclosure right in the event of default in payment. Although respondent was not listed as a borrower to the promissory note her husband executed, she and her husband both signed the deed of trust securing the note as a "borrower."

After respondent's husband's death, Wells Fargo accelerated the maturity of the note, and then sought to foreclose on the property due to default in payment by initiating the instant nonjudicial foreclosure proceeding. The clerk of superior court dismissed the case on the basis that Wells Fargo had no right to foreclose because respondent signed as a borrower to the deed of trust, and the property remained her principal residence. Wells Fargo appealed to the superior court, which concluded that respondent's husband "was the only borrower for this loan per the terms of the Note and Deed of Trust" and thus entered an order authorizing foreclosure. Respondent appealed this order.

On appeal, respondent argues the superior court erred by authorizing foreclosure because (1) Wells Fargo never formally proffered any evidence at the hearing from which its order arose, thereby rendering the order void for want of competent evidence; and (2) Wells Fargo had no right under the deed of trust to accelerate the maturity of the note, and thus no right to foreclose due to any resulting default, since respondent signed the deed of trust as a borrower, and the property remained her principal residence.

Because evidentiary rules are relaxed in nonjudicial power-of-sale foreclosure proceedings, we hold Wells Fargo's binder of relevant documents it supplied during the hearing, in conjunction with the parties' stipulations, provided sufficient competent evidence to support the superior court's foreclosure order. Additionally, although respondent signed the deed of trust as a borrower, a proper interpretation of its terms and her husband's simultaneously executed note and loan agreement, in conjunction with respondent's statutory ineligibility to qualify as a reverse-mortgage borrower, excludes respondent as a "surviving borrower" as contemplatedby the deed of trust's acceleration provision. We thus hold the superior court properly authorized the foreclosure sale of the property and affirm its order.

I. Background

On 13 June 2008, respondent's husband, Melvin Clayton, executed a home equity conversion note (Note), commonly known as a reverse mortgage, with Wells Fargo in the principal amount of $110,000.00, and up to a maximum amount of $165,000.00. That same day, to secure Melvin's obligation to Wells Fargo under the Note, Melvin and respondent executed an adjustable rate home equity conversion deed of trust (Deed of Trust), which was recorded with the Henderson County Register of Deeds on 18 June 2008. The Note and Deed of Trust contained acceleration provisions empowering Wells Fargo to demand immediate payment of the debt under the Note when "[a] Borrower dies and the Property is not the principal residence of at least one surviving Borrower." Although respondent was not old enough to qualify as a reverse-mortgage borrower and was thus not a party to the Note, respondent signed the Deed of Trust as a borrower. After Mr. Clayton's death on 6 December 2013, Wells Fargo accelerated the maturity of the debt, and respondent continued to live on the property.

On 30 April 2014, Trustee Services of Carolina, LLC, acting as substitute trustee under the Deed of Trust, initiated this nonjudicial foreclosure proceeding pursuant to N.C. Gen. Stat. § 45-21.16(d) based on the power-of-sale provision in the Deed of Trust due to failure to make payments under the Note. After a 9 June 2015 hearing before the Clerk of Henderson County Superior Court, the clerk dismissed the power-of-sale foreclosure proceeding, concluding that Wells Fargo failed to prove it had a right to foreclose under the terms of the Deed of Trust because respondent signed the instrument as a borrower and the property remained her principle residence, thereby prohibiting Wells Fargo from accelerating the maturity of the Note. Wells Fargo appealed to superior court. After a 13 July 2015 hearing, the superior court entered an order on 17 March 2016 authorizing the foreclosure sale. The superior court concluded that Melvin was the sole borrower under the Note and the Deed of Trust, thereby permitting Wells Fargo to accelerate the debt, and that the power-of-sale provision of the Deed of Trust gave Wells Fargo the right to foreclose on the property upon default of payment on the Note. Respondent appeals.

II. Analysis

On appeal, respondent contends the superior court erred by authorizing the nonjudicial foreclosure under power of sale because (1) Wells Fargo never presented evidence at the de novo hearing before the superior court, thereby rendering the order void for want of competent evidence; and (2) Wells Fargo had no right to foreclose under the Deed of Trust because its terms prohibited the acceleration of the maturity of the Note so long as the property remained respondent's principal residence. We disagree.

A. Standard of Review

When an appellate court reviews the decision of a trial court sitting without a jury, findings of fact have the force and effect of a verdict by a jury and are conclusive on appeal if there is evidence to support them, even though the evidence might sustain a finding to the contrary. Conclusions of law drawn by the trial court from its findings of fact are reviewable de novo on appeal.

In re Bass , 366 N.C. 464, 467, 738 S.E.2d 173, 175 (2013) (citations and quotation marks omitted).

B. Sufficiency of Evidence

As an initial matter, we reject respondent's contention that the superior court's order should be reversed because Wells Fargo never formally proffered the Deed of Trust and the Note or any other relevant documents into evidence at the hearing.

N.C. Gen. Stat. § 45-21.16(d) (2015) requires that before a clerk of superior court may authorize a nonjudicial power-of-sale foreclosure, the creditor must establish the following six findings:

(i) a valid debt, (ii) default, (iii) the right to foreclose, (iv) notice, and (v) "home loan" classification and applicable pre-foreclosure notice, and (vi) that the sale is not barred by the debtor's military service.

In re Lucks , 369 N.C. ––––, ––––, 794 S.E.2d 501, 505 (2016) (interpreting N.C. Gen. Stat. § 45-21.16(d) ). "If the clerk's order is appealed to superior court, that court's de novo hearing is limited to making a determination on the same issues as the clerk of court." In re David A. Simpson, P.C. , 211 N.C.App. 483, 487, 711 S.E.2d 165, 169 (2011).

Because "[n]on-judicial foreclosure by power of sale arises under contract and is not a judicial proceeding," In re Lucks , 369 N.C. at ––––, 794 S.E.2d at 504 (citing In re Foreclosure of Michael Weinman Assocs. Gen. P'ship , 333 N.C. 221, 227, 424 S.E.2d 385, 388 (1993) ), "the evidentiary requirements under non-judicial foreclosure proceedings are relaxed," id. at ––––, 794 S.E.2d at 507. Significantly here, "[t]he evidentiary rules are the same when the trial court conducts a de novo hearing on an appeal from the clerk's decision." Id. at ––––, 794 S.E.2d at 505. In the context of a superior court's de novo hearing on nonjudicial foreclosure under power of sale, " ‘[t]he competency, admissibility, and sufficiency of the evidence is a matter for the [trial] court to determine.’ " Id. at ––––, 794 S.E.2d at 506 (quoting Queen City Coach Co. v. Lee , 218 N.C. 320, 323, 11 S.E.2d 341, 343 (1940) ).

Here, the transcript of the superior court hearing reveals that Wells Fargo gave the judge a binder of the documents it provided to the clerk at the prior hearing, which contained, inter alia , the Note and Deed of Trust, and the parties referred to these documents throughout the proceeding. Because the evidentiary rules are relaxed in power-of-sale foreclosure proceedings, the superior court was permitted to accept this binder of documents as competent evidence to consider whether Wells Fargo satisfied its burden of proving the six statutorily required findings, despite Wells Fargo never formally introducing or admitting these documents into evidence.

Additionally, the transcript reveals that the parties stipulated to the existence of five of the six statutorily required findings: a debt that Wells Fargo held, a default, and notice, see N.C. Gen. Stat. § 45-21.16(d)(i)–(iii), and that two of the three remaining subsections were inapplicable because this was a reverse mortgage and neither party served in the military, see id. § 45-21.16(d)(v)–(vi). "[S]tipulations are judicial admissions and are therefore binding in every sense, ... relieving the other party of the necessity of producing evidence to establish an...