In Re: Foreclosure of Real Property Under Deed of Trust From Garrett
250 N.C. App. 358
| N.C. Ct. App. | 2016Background
- Ian and Susan Garrett executed a deed of trust to Household Realty Corp. on property in a planned community; deed recorded in 2000.
- Wedgewood North HOA filed an association lien foreclosure in 2010, its agent purchased and ultimately HOA conveyed to Household in 2011.
- HOA filed a new claim of lien and foreclosed in 2013; Universal purchased the property and conveyed it to Select Transportation Services, LLC (STS) in June 2013.
- Household separately initiated foreclosure on the Garretts’ deed of trust in May–Aug 2013, held a trustee’s sale in Sept 2013, bid successfully, and received a substitute trustee’s deed to the property in March 2014.
- STS moved under Rule 60(b) in Oct 2014 to set aside Household’s foreclosure (arguing merger and lack of notice); Household moved to set aside the HOA foreclosure in Dec 2014.
- Trial court (1) denied Household’s Rule 60(b) motion to set aside the HOA foreclosure, (2) granted STS’s Rule 60(b) motion to vacate Household’s foreclosure and substitute trustee’s deed, and (3) later awarded STS attorney’s fees; Court of Appeals affirmed in part, vacated and remanded fees order.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether HOA foreclosure was void for improper service (Rule 60(b)(4)) | Household: service to HSBC New York address was improper and not service on an officer/agent; thus foreclosure void | HOA/STS: notice was sent by certified mail to address used in recorded deed and previously used; return receipt obtained | Court: Service was proper; trial court didn’t err in denying Household’s motion; HOA foreclosure also time-barred under N.C. Gen. Stat. § 47F-3-116.1 |
| Whether Household’s foreclosure should be set aside because STS (subsequent owner) lacked notice | STS: Household failed to give notice to subsequent owners (Universal/STS); foreclosure invalid as record owners were not noticed | Household: argued merger or other defenses; disputed standing and applicability of merger doctrine | Court: STS had standing as current owner when Household foreclosed; Household’s foreclosure was invalid for lack of notice to record owner; trial court did not err in granting STS’s motion |
| Whether the PCA validation statute bars post-sale challenges to HOA foreclosures | Household: legislative history and due-process concerns could permit attack despite statute | HOA/STS: §47F-3-116.1 validates nonjudicial association foreclosures commenced before Oct 1, 2013, unless timely challenged | Court: statute unambiguous; Household’s Rule 60(b) challenge was untimely and barred |
| Whether the trial court properly awarded attorney’s fees to STS | Household: STS failed to state particular statutory bases for fees in advance; Rule 7(b)(1) notice and the record do not support award under §6-21.5 or Rule 11 | STS: asserted fees in its Rule 60(b) motion and at hearing | Court: Vacated and remanded the fees award because the record/transcript is unclear about which fee bases were timely and properly pleaded; new hearing required |
Key Cases Cited
- Sink v. Easter, 288 N.C. 183 (N.C. 1975) (Rule 60(b) relief is reviewed for abuse of discretion)
- Clark v. Clark, 301 N.C. 123 (N.C. 1980) (standard for abuse of discretion review)
- Van Engen v. Que Scientific, Inc., 151 N.C. App. 683 (N.C. Ct. App. 2002) (judgment rendered without proper service is void)
- Fulton v. Mickle, 134 N.C. App. 620 (N.C. Ct. App. 1999) (service defective where not certified/registered and not addressed to officer/agent)
- Howell v. Treece, 70 N.C. App. 322 (N.C. Ct. App. 1984) (due process may bar application of a limitations period where no notice of foreclosure was received)