In the Matter of The Foreclosure By David A. Simpson
| Decision Date | 03 May 2011 |
| Docket Number | No. COA10–361.,COA10–361. |
| Citation | 74 UCC Rep.Serv.2d 629,711 S.E.2d 165 |
| Parties | In the Matter of the Foreclosure by DAVID A. SIMPSON, P.C., Substitute Trustee, of a Deed of Trust Executed by Rex T. Gilbert, Jr. and Daniela L. Gilbert, Husband and Wife, Dated May 5, 2006 and Recorded on May 10, 2006, in Book 219 at Page 53 of the Hyde County Public Registry. |
| Court | North Carolina Court of Appeals |
OPINION TEXT STARTS HERE
Appeal by Respondents from order entered 18 August 2009 by Judge Marvin K. Blount, III in Hyde County Superior Court. Heard in the Court of Appeals 12 October 2010.
Katherine S. Parker–Lowe, Ocracoke, for respondent-appellants.
The Law Office of John T. Benjamin, Jr., P.A., Raleigh, by John T. Benjamin, Jr. and James R. White for petitioner-appellee.
Respondents Rex T. Gilbert, Jr. and his wife Daniela L. Gilbert, appeal from the trial court's Order authorizing David A. Simpson, P.C., as Substitute Trustee, to proceed with foreclosure under a power of sale in the Deed of Trust recorded in Book 219 at Page 53 in the Hyde County Register of Deeds. We reverse.
On 5 May 2006, Respondent Rex T. Gilbert, Jr. executed an adjustable rate note (“the Note”) to refinance an existing mortgage on his home. According to the terms of the Note, Mr. Gilbert promised to pay a principal amount of $525,000.00 plus interest to First National Bank of Arizona. The Note was secured by a Deed of Trust, executed by Mr. Gilbert and his wife, Daniela L. Gilbert, on real property located at 134 West End Road, Ocracoke, North Carolina. The Deed of Trust identified First National Bank of Arizona as the lender and Matthew J. Ragaller of Casey, Grimsley & Ragaller, PLLC as the trustee.
The record reveals that, during 2008, Respondents ceased making payments on the Note and made an unsuccessful attempt to negotiate a modification of the loan. On 9 March 2009, a Substitution of Trustee was recorded in the Hyde County Register of Deeds, which purports to remove Matthew Ragaller as the trustee of the Deed of Trust and appoint his successor, David A. Simpson, P.C. (“Substitute Trustee”). The Substitution of Trustee identified Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006–QA6 (“Petitioner”) as the holder of the Note and the lien created by the Deed of Trust.
On 12 March 2009, the Substitute Trustee commenced this action by filing a Notice of Hearing on Foreclosure of Deed of Trust with the Hyde County Clerk of Superior Court pursuant to section 45–21.16 of our General Statutes. N.C. Gen.Stat. § 45–21.16 (2009). The Notice of Hearing stated, “the current holder of the foregoing Deed of Trust, and of the debt secured thereby, is: Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006–QA6.”
In a letter dated 5 April 2009, Mr. Gilbert purported to exercise his right to rescind the loan transaction he entered into with the original lender, First National Bank of Arizona, pursuant to the federal Truth in Lending Act, 15 U.S.C. § 1635. As justification for his purported rescission, Gilbert alleged that the Truth in Lending Disclosure Statement provided by First National Bank of Arizona failed to accurately provide all required material disclosures including, inter alia, the correct annual percentage rate and payment schedule. The Substitute Trustee responded with a letter from GMAC ResCap, in which it denied any material disclosure errors were made and refused to rescind the loan transaction.
The foreclosure hearing was held on 2 June 2009 before the Clerk of Superior Court of Hyde County. The Honorable Sharon G. Sadler entered an Order on 17 June 2009, permitting the Substitute Trustee to proceed with the foreclosure. In the Order, the Clerk specifically found, inter alia, that Petitioner was the holder of the Note and Deed of Trust that it sought to foreclose and the Note evidenced a valid debt owed by Mr. Gilbert. Respondents appealed the Order to superior court.
The matter came on for a de novo hearing on 18 August 2009 before the Honorable Marvin K. Blount, III, in Hyde County Superior Court. During the hearing, the trial court admitted into evidence a certified copy of the Note and the Deed of Trust and two affidavits attesting to the validity of Gilbert's indebtedness pursuant to the Note, and that Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006–QA6 is the current owner and holder of the Note. Additionally, Petitioner introduced the original Note and Allonge for the trial court's inspection.
Reviewing the record before this Court, the Allonge contains a series of indorsements evidencing the alleged assignments of the Note, as follows:
[Signature]
AMY HAWKINS, ASSISTANT VICE PRESIDENT
FIRST NATIONAL BANK OF ARIZONA
Pay to the order of:
RESIDENTIAL FUNDING CORPORATION
Without Recourse
FIRST NATIONAL BANK OF NEVADA
By: [Signature]
Deutsche Bank National Trust
Company, F/K/A Bankers Trust
Company of California, N.A.
as Custodian as Attorney in Fact
[Illegible Name and Title]
PAY TO THE ORDER OF
Deutsche Bank Trust Company Americas as Trustee
WITHOUT RECOURSE
Residential Funding Corporation
BY [Signature]
Respondents made two arguments at the hearing. First, Respondents argued that the debt evidenced by the Note no longer existed, as Mr. Gilbert had rescinded the transaction for the loan with First National Bank of Arizona. Petitioner objected to Respondents' rescission argument as being a defense in equity and, as such, inadmissible in a proceeding held pursuant to N.C. Gen.Stat. § 45–21.16. The trial court agreed and refused to let Respondents' expert witness testify as to alleged material errors in the Truth in Lending Disclosure Statement, which Mr. Gilbert alleged permitted him the right to rescind the loan. Second, Respondents argued that Petitioner had not produced sufficient evidence to establish that Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006–QA6 was the holder of the Note.
Based on the preceding evidence, the trial court entered an order on 18 August 2009 in which it found, inter alia: Mr. Gilbert executed the Note and, with his wife, executed a Deed of Trust in favor of First National Bank of Arizona, secured by the real property described in the Deed of Trust; a valid debt exists and is owed by Gilbert to Petitioner; Gilbert is in default under the Note and Deed of Trust; proper notice of the foreclosure hearing was given to all parties as required by N.C. Gen.Stat. § 45–21.16; Petitioner was the current holder of the Note and the Deed of Trust. The trial court concluded as a matter of law that the requirements of N.C. Gen.Stat. § 45–21.16 had been satisfied. Based on these findings and conclusion of law, the trial court authorized the Substitute Trustee to proceed with the foreclosure. Respondents timely entered notice of appeal.
A party seeking permission from the clerk of court to proceed with a foreclosure pursuant to a power of sale contained in a deed of trust must prove the following statutory requirements: (1) the party seeking foreclosure is the holder of a valid debt, (2) default on the debt by the debtor, (3) the deed of trust provides the right to foreclose, (4) proper notice was given to those parties entitled to notice pursuant to section 45–21.16(b). N.C. Gen.Stat. § 45–21.16(d) (2009). The General Assembly added a fifth requirement, which expired 31 October 2010: “that the underlying mortgage debt is not a subprime loan,” or, if it is a subprime loan, “that the pre-foreclosure notice under G.S. 45–102 was provided in all material respects, and that the periods of time established by Article 11 of this Chapter have elapsed[.]” Id. The role of the clerk of court is limited to making a determination on the matters specified by section 45–21.16(d). See Mosler ex rel. Simon v. Druid Hills Land Co., Inc., 199 N.C.App. 293, 295–96, 681 S.E.2d 456, 458 (2009). 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. See id.
The trial court's order authorizing the foreclosure to proceed was a final judgment of the superior court, therefore, this Court has jurisdiction to hear the instant appeal. N.C. Gen.Stat. § 7A–27(b) (2009). Our standard of review for this appeal, where the trial court sat without a jury, is “ ‘whether competent evidence exists to support the trial court's findings of fact and whether the conclusions reached were proper in light of the findings.’ ” In re Adams, ––– N.C.App. ––––, ––––, 693 S.E.2d 705, 708 (2010) (quoting In re Foreclosure of Azalea Garden Bd. & Care, Inc., 140 N.C.App. 45, 50, 535 S.E.2d 388, 392 (2000)).
We note the trial court classified multiple conclusions of law as “findings of fact.” We have previously recognized “[t]he classification of a determination as either a finding of fact or a conclusion of law is admittedly difficult.” In re Helms, 127 N.C.App. 505, 510, 491 S.E.2d 672, 675 (1997). Generally, “any determination requiring the exercise of judgment or the application of legal principles is more properly classified a conclusion of law.” Id. (citations omitted). Any determination made by “ ‘logical reasoning from the evidentiary facts,’ ” however, “is more properly classified a finding of fact.” Id. (quoting Quick v. Quick, 305 N.C. 446, 452, 290 S.E.2d 653, 657–58 (1982)). When this Court determines that findings of fact and conclusions of law have been mislabeled by the trial court, we may reclassify them, where necessary, before applying our standard of review. N.C. State Bar v. Key, 189 N.C.App. 80, 88, 658 S.E.2d 493, 499 (2008) (citing In re Helms, 127 N.C.App. at 510, 491 S.E.2d at 675).
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