In re the Foreclosure of a Deed of Trust from Draffen
222 N.C. App. 39
| N.C. Ct. App. | 2012Background
- Draffen and Williams purchased an undeveloped lot in Cannonsgate, NC in 2005; Draffen signed a promissory note secured by a deed of trust in favor of BB&T for $215,892 with monthly interest payments.
- In 2010, Draffen and others sued various entities in the EDNC, including BB&T as a lender defendant in a fraud action.
- BB&T initiated foreclosure by power of sale due to Draffen's default after October 2009.
- Clerk of Superior Court conducted the initial foreclosure on June 3, 2010, finding a valid debt, default, trustee’s right, and proper notice.
- An appeal to Superior Court led to a de novo hearing where a stay of foreclosure was entered on February 8, 2011 due to ongoing settlement negotiations.
- On June 21, 2011, the Superior Court lifted the stay, upheld the Clerk’s findings, and allowed the foreclosure to proceed; Draffen appeals.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether foreclosure must be pursued as a compulsory counterclaim in federal court. | Draffen argues Rule 13(a) requires a compulsory counterclaim in federal action. | BB&T contends Rule 13(a) does not compel a state foreclosure action in federal court. | Rule 13(a) does not apply to foreclosure by power of sale in federal court. |
| Whether NC Rule 13(a) controls or federal rules apply to this foreclosure matter. | Draffen asserts NC Rule 13(a) governs as a counterclaim rule. | BB&T argues federal rules govern; Rule 13(a) does not adversely affect state-law foreclosure rights. | Federal Rules govern; 28 U.S.C. § 2072 prevents applying NC Rule 13(a) to this foreclosure. |
| Whether lifting the stay was proper given the absence of a settlement. | Draffen claimed the stay was justified by ongoing federal litigation settlement. | BB&T moved to lift the stay as no settlement was forthcoming. | The stay was properly lifted; foreclosure may proceed. |
Key Cases Cited
- Douglas v. NCNB Tex. Nat’l Bank, 979 F.2d 1128 (5th Cir. 1992) (Rule 13(a) cannot abridge lender’s substantive rights in nonjudicial foreclosure under power of sale)
- In re Foreclosure of Burgess, 47 N.C. App. 599 (NC App. 1980) (notice/hearing provisions do not alter contractual nature of power-of-sale foreclosure)
- United Carolina Bank v. Tucker, 99 N.C. App. 95 (NC App. 1990) (foreclosure by power of sale is a separate remedy from judicial action)
- Brooks v. Rogers, 82 N.C. App. 502 (NC App. 1986) (Rule 13(a) applicability and counterclaim mechanics in NC context)