In re George

• Decision Date: 16 April 2021
• Docket Number: No. 77A19,77A19
• Court: North Carolina Supreme Court
• Parties: In the MATTER OF the Proposed Foreclosure of a Claim of Lien filed on Calmore GEORGE and Hygiena Jennifer George by The Crossings Community Association, Inc. dated August 22, 2016, recorded in Docket No. 16-M-6465 in the Office of the Clerk of Court of Superior Court for Mecklenburg County Registry by Sellers Ayers Dortch & Lyons, P.A., Trustee

377 N.C. 129

856 S.E.2d 483

In the MATTER OF the Proposed Foreclosure of a Claim of Lien filed on Calmore GEORGE and Hygiena Jennifer George by The Crossings Community Association, Inc. dated August 22, 2016, recorded in Docket No. 16-M-6465 in the Office of the Clerk of Court of Superior Court for Mecklenburg County Registry by Sellers Ayers Dortch & Lyons, P.A., Trustee

No. 77A19

Supreme Court of North Carolina.

Filed April 16, 2021

Thurman, Wilson, Boutwell & Galvin, P.A., by James P. Galvin, for petitioner-appellants.

Derek P. Adler, Charlotte, for intervenor-appellee National Indemnity Group.

James, McElroy & Diehl, P.A., Charlotte, by Preston O. Odom, III, for intervenor-appellee KPC Holdings.

No brief for respondent-appellee Sellers, Ayers, Dortch & Lyons, P.A.

Legal Aid of North Carolina, Inc., by Celia Pistolis, Raleigh and Johnnie Larrie, Fayetteville; Karen Fisher Moskowitz, for Charlotte Center, for Legal Advocacy; Jason A. Pikler, for North Carolina Justice Center; and Maria D. McIntyre, for Financial Protection Law Center, amici curiae.

ERVIN, Justice.

¶ 1 This case involves the issue of whether the trial court abused its discretion in concluding that two purchasers, the first of whom bought a tract of property at a nonjudicial foreclosure sale and the second of whom purchased the property from the initial purchaser, were not good faith purchasers for value. After a hearing concerning the issues raised by the property owners’ motion for relief from a foreclosure order, the trial court determined that the transfers to both subsequent purchasers should be declared null and void given that the court lacked jurisdiction over the person of one of the property owners as the result of insufficient notice and deficient service of process. After a separate hearing that was held for the purpose of addressing the purchasers’ motion for relief from the order voiding the initial foreclosure order and the resulting property transfers, the trial court determined that the subsequent purchasers were not entitled to good faith purchaser for value status or to the benefit of the protections afforded to subsequent good faith purchasers for value by N.C.G.S. § 1-108. On appeal, the Court of Appeals held that, even though the initial foreclosure order had been invalid on the grounds of insufficient notice, the property owner had received constitutionally sufficient notice and that both of the subsequent purchasers were entitled to good faith purchaser for value status. After careful consideration of the record in light of the applicable law, we affirm the decision of the Court of Appeals, in part; reverse that decision, in part; and remand this case to the Superior Court, Mecklenburg County, for consideration of the extent, if any, to which an order of restitution should be entered pursuant to the applicable law.

¶ 2 Respondents Calmore George and his wife, Hygiena Jennifer George, owned a house in Charlotte that is located in the Crossings Community subdivision. The Georges decided to purchase the tract of property in question because their "daughters at that time were approaching college age and the first daughter decided that she wanted to come to North Carolina." After three of the Georges’ younger daughters followed their older sister to North Carolina for their college education, the Georges decided to buy a house in which their daughters could live while obtaining their degrees.

¶ 3 The Georges lived in St. Croix in the United States Virgin Islands, where Ms. George worked as a teacher and an accounting clerk while Mr. George performed various jobs, including property maintenance. The couple's combined adjusted gross income in 2016 was $26,420.00. Although the Georges were full-time residents of St. Croix, they typically visited their daughters at the Charlotte property approximately once or twice each year. More specifically, Ms. George would typically visit the Charlotte property for approximately one month during the summertime, when she was on break from her teaching responsibilities, while both Mr. and Ms. George would visit the property for a few weeks around Christmas. The members of the family who lived in the home full-time took care of paying the bills and addressing other issues relating to the property, including paying the water and energy bills that were mailed to the house.

¶ 4 On 22 August 2016, the Crossings Community Association, which served as the homeowners’ association for the development in which the Georges’ house was located, filed a claim of lien against the property relating to unpaid homeowners’ association fees in the amount of $204.75. In its claim of lien, the Association stated that, if the outstanding fees remained unpaid, it would initiate foreclosure proceedings in accordance with the applicable provisions of North Carolina law. However, the Georges did not pay the outstanding homeowners’ association fees.

¶ 5 On 11 October 2016, the trustee for the Association filed a notice of hearing stating that the Association intended to foreclose upon the property for the purpose of collecting the unpaid fees. The Association attempted to serve this notice of foreclosure upon the Georges in a variety of ways, including the use of both regular and certified mail, return receipt requested, directed to the St. Croix address listed on the deed by means of which the Georges had acquired the property and by both regular mail and certified mail directed to the address of the Charlotte property. However, the Association did not successfully effectuate service upon the Georges through the use of the mails because there was no mail receptacle at the St. Croix address and because the receipts for the mailings to the Charlotte address were never returned.

¶ 6 In addition, the Association attempted to effectuate personal service upon the Georges at the Charlotte property. On 12 October 2016, Deputy Sheriff Shakita Barnes of the Mecklenburg County Sheriff's Office personally served the notice of foreclosure upon a woman who identified herself as Hygiena Jennifer George at the Charlotte property and completed returns of service in which she stated that she had personally served Ms. George and that she had served Mr. George by leaving copies with Ms. George, a person of suitable age and discretion who resided at Mr. George's dwelling house or usual place of abode. The person upon whom Deputy Barnes actually effectuated service was, however, the Georges’ eldest daughter, Jeanine George, who had claimed to be Ms. George at the time that she was served with the notice of foreclosure by Deputy Barnes. On 13 October 2016, the trustee filed the returns of service completed by Deputy Barnes and an affidavit indicating that the Crossings Community Association had unsuccessfully attempted to serve the Georges by mail.

¶ 7 On 9 December 2016, the office of the Clerk of Superior Court, Mecklenburg County, entered an order permitting the nonjudicial foreclosure sale to go forward, and scheduling a foreclosure sale relating to the property for 12 January 2017. On 12 January 2017, KPC Holdings purchased the property at auction for $2,650.22. On 3 February 2017, the trustee executed a foreclosure deed transferring ownership of the property to KPC Holdings. On 21 March 2017, KPC Holdings executed a special warranty deed conveying the property to National Indemnity Group, an entity owned by Laura Schoening for property development purposes, with the sale of the property from KPC Holdings to National Indemnity having been secured by a promissory note and deed of trust in the amount of $150,000.00.

¶ 8 The Georges claimed to have had no notice of the unpaid homeowners’ association fees and subsequent foreclosure proceeding until 10 March 2017, when one of their daughters called them for the purpose of reporting that they had been ordered to vacate the property. Upon receiving this information, Ms. George sent an e-mail to the Association's attorney in which she claimed that she and Mr. George did not understand why they were being dispossessed of their property and expressed the belief that she and Mr. George did not have any outstanding mortgage payments or owe any other debts associated with the property.

¶ 9 On 18 April 2017, the Georges filed a motion pursuant to N.C.G.S. § 1A-1, Rule 60(c), in which they sought to have the order of foreclosure and all other related proceedings and transactions declared null and void. In their motion for relief from judgment, the Georges claimed that they had not received the notice that was statutorily required in foreclosure proceedings, that the return of service completed by Deputy Barnes was erroneous, and that the order authorizing the foreclosure sale and the subsequent conveyances should be vacated. On 17 July 2017, the trial court entered an order allowing an intervention motion filed by National Indemnity and making both National Indemnity and KPC Holdings parties to this proceeding.

¶ 10 On 17 July 2017, the trial court held a hearing for the purpose of considering the issues raised by the Georges’ motion for relief from judgment, at which it heard testimony from the Georges and Ms. Schoening, who testified that she had purchased the property from KPC Holdings after having driven past the property and having conducted on-line research that included an inspection of the applicable property tax payment and prior foreclosure records. Among other things, Ms. Schoening testified that she had learned from the public record that the Georges had purchased the property at a previous foreclosure sale for an amount in excess of $130,000.00 and that, at the time of the foreclosure that was at issue in this case, they owned the property free and clear of any indebtedness, with the exception of the $204.75 amount that was allegedly owed to the Association. In addition, Ms. Schoening testified that her purchase of the property had been secured by a note and deed of trust in the amount of...