In Re the Foreclosure of a Deed of Trust
366 N.C. 464
N.C.2013Background
- Tonya Bass executed an adjustable-rate Note in Oct 2005 for $139,988, with monthly payments; she defaulted.
- The Note was transferred through Mortgage Lenders Network USA, Inc. to Emax Financial Group, LLC, then to Residential Funding Corporation, and finally to U.S. Bank as holder.
- Transfers were evidenced by three stamped indorsements/allonges on page five of the Note; the first stamp attempted to transfer to Emax, the second involved Residential Funding, and a final stamp transferred to U.S. Bank.
- Bass challenged the first transfer stamp as unsigned and asserted that the bank should produce the original Note; the Bank produced the original Note at hearing.
- The trial court concluded the Note was not properly indorsed and transferred to Emax, so Bank lacked standing; the Court of Appeals affirmed; the North Carolina Supreme Court reversed, holding U.S. Bank is the holder and the stamp constitutes a valid indorsement.
- Bass presented bare assertions about lack of authority and forgery but offered no evidence to rebut the presumption of authenticity under the UCC.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether U.S. Bank is the holder of the Note. | Bass argued the Note was not properly indorsed and Bank lacked holder status. | U.S. Bank contends the stamps/indorsements on the Note validly transferred ownership to it. | Yes; U.S. Bank is the holder. |
| Whether the Mortgage Lenders stamp was a valid indorsement to transfer to Emax. | Bass argued the stamp was not a valid indorsement due to lack of an actual signature. | Stamp, bearing present intent to transfer, qualifies as an indorsement under the UCC. | Yes; stamp constitutes a valid indorsement. |
| Who bears the burden to prove authenticity/authorization of signatures on the Note? | Bass contends Bank must prove the indorsement was valid and authorized. | Under the UCC, authenticity is presumed; the defendant must raise evidence to rebut. | Presumption of authenticity applies; Bass must show forged/unauthorized signature, which she did not. |
| What is the governing standard of review for these questions? | Legal questions reviewed de novo; findings of fact by the trial court have the force of a jury verdict if supported by evidence. |
Key Cases Cited
- Knutton v. Cofield, 273 N.C. 355, 160 S.E.2d 29 (1968) (findings of fact by a nonjury trial have verdict-like effect; de novo review of conclusions of law)
- Carolina Power & Light Co. v. City of Asheville, 358 N.C. 512, 597 S.E.2d 717 (2004) (conclusions of law are reviewed de novo; tolerance of evidentiary standards under basic constitutional requirements)
- Econo-Travel Motor Hotel Corp. v. Taylor, 301 N.C. 200, 271 S.E.2d 54 (1980) (indorsements and assignment law prior to modern UCC adoption; context for negotiability and transfers)
- Mayers v. McRimmon, 140 N.C. 640, 53 S.E. 447 (1906) (old standard superseded by modern UCC interpretation, cited as historical reference)