In Re the Foreclosure by Simpson
211 N.C. App. 483
| N.C. Ct. App. | 2011Background
- Gilbert executed a 2006 adjustable-rate note for $525,000 secured by a deed of trust on 134 West End Road, Ocracoke, Hyde County, with First National Bank of Arizona as lender and Matthew Ragaller as original trustee.
- During 2008 Gilbert and wife stopped paying and attempted a loan modification; a Substitute Trustee (David A. Simpson, P.C.) was substituted in March 2009 with Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 as holder.
- On March 12, 2009, the Substitute Trustee filed a Notice of Hearing under N.C. Gen.Stat. § 45-21.16; the Notice identified Deutsche Bank Trust Company Americas as the current holder.
- Gilbert invoked a TILA rescission claim in April 2009, alleging improper disclosures; the lender denied rescission and the Substitute Trustee proceeded with foreclosure.
- A de novo hearing in August 2009 admitted the Note, Deed of Trust, two affidavits, and the Allonge showing indorsements; the trial court found a valid debt and holder but the record showed disputed possession and improper indorsements.
- The superior court reversed the foreclosure, concluding the petitioner failed to show that it was the holder of Gilbert's note and the record lacked competent evidence of proper indorsements.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Rescission as a defense in 45-21.16 | Gilbert asserts rescission defeats the debt. | Rescission is an equitable defense not admissible in 45-21.16 hearing. | Rescission was not admissible in 45-21.16; equitable defense not considered. |
| Holder and owner of the Note | Petitioner demonstrated holder status via note and allonge. | Petitioner failed to prove holder/ownership due to indorsement issues and possession. | Petitioner failed to prove holder/owner; record lacked competent evidence. |
| Effect of indorsements and possession | Allonge and affidavits show transfers to Deutsche Bank Americas as Trustee. | Indorsements do not show transfer to the petitioner; possession alone insufficient. | Indorsements insufficient; possession not shown; cannot be holder. |
Key Cases Cited
- Connolly v. Potts, 63 N.C.App. 547 (1983) (possession determines holder status under UCC)
- In re Watts, 38 N.C.App. 90 (1978) (existence of valid debt, right to foreclose, and notice as conclusions of law)
- Liles v. Myers, 38 N.C.App. 525 (1978) (holder proof required to prevent inequitable judgments)
- Adams, N.C.App. (2010) (definition of 'holder' under UCC and proof requirements for foreclosure)
- Econo-Travel Motor Hotel Corp. v. Taylor, 301 N.C. 200 (1980) (construction of 'holder' and transfer of negotiable instruments)
- Goforth Props., Inc., 334 N.C. 369 (1993) (watchful scrutiny of foreclosures under power of sale)