In the Matter of the Foreclosure of the Deed of Trust of A. C. BURGESS, Jr., Single, to L. B. Hollowell, Jr., Trustee, for Gastonia Mutual Savings and Loan Association.
Recorded in the Gaston County Public Registry in Deed of Trust Book 1467 at Page 287.
No. 7927SC1201.
Court of Appeals of North Carolina.
July 15, 1980.*917 James C. Windham, Jr., Gastonia, for petitioner-appellee.
Horace M. DuBose, III, Gastonia, and Robert J. Bernhardt, Charlotte, for respondents-appellants.
PARKER, Judge.
At issue in the present case is the scope of the procedures under G.S. 45-21.16 for hearing prior to the exercise of a power of sale under a deed of trust. G.S. 45-21.16(d), after providing for a hearing before the clerk of court in the county where the land is located, provides:
If the clerk finds the existence of (i) valid debt of which the party seeking to foreclose is the holder, (ii) default, (iii) right to foreclose under the instrument, and (iv) notice to those entitled to such under subsection (b), then the clerk shall further *918 find that the mortgagee or trustee can proceed under the instrument, and the mortgagee or trustee can give notice of and conduct a sale pursuant to the provisions of this Article.
On appeal from a determination by the clerk that the trustee is authorized to proceed, the judge of the district or superior court having jurisdiction is limited to determining the same four issues resolved by the clerk. In re Watts, 38 N.C.App. 90, 247 S.E.2d 427 (1978). Respondents concede that the hearing is so limited, but contend that evidence that the amount due on the note was in dispute and that the mortgagee had been invited, but refused, to intervene in the litigation over the title to the subject property was relevant to a determination under G.S. 45-21.16(d)(iii) of a "right to foreclose under the instrument." Because the court failed to make findings of fact relating to the title litigation or the balance dispute, respondents argue that the requirements of G.S. 45-21.16(d) have not been met and that they have been denied due process of law. We disagree.
Historically, foreclosure under a power of sale has been a private contractual remedy. Brown v. Jennings, 188 N.C. 155, 124 S.E. 150 (1924); Eubanks v. Becton, 158 N.C. 230, 73 S.E. 1009 (1912). The intent of the 1975 General Assembly in enacting the notice and hearing provisions of G.S. 45-21.16 was not to alter the essentially contractual nature of the remedy, but rather to satisfy the minimum due process requirements of notice to interested parties and hearing prior to foreclosure and sale which the district court in Turner v. Blackburn, 389 F. Supp. 1250 (W.D.N.C.1975), held that our then existing statutory procedure lacked. In re Sutton, 46 N.C.App. 654, 266 S.E.2d 686 (1980). In light of this background, we construe G.S. 45-21.16(d)(i) to permit the clerk to find a "valid debt of which the party seeking to foreclose is the holder" if there is competent evidence that the party seeking to foreclose is the holder of some valid debt, irrespective of the exact amount owed. Similarly, we construe G.S. 45-21.16(d)(iii) to permit the clerk to find a "right to foreclose under the instrument" if there is competent evidence that the terms of the deed of trust permit the exercise of the power of sale under the circumstances of the particular case. Thus, the fact that respondents in the present case dispute the balance owed on the note and deed of trust is irrelevant to the required findings under G.S. 45-21.16(d).
The parties' stipulations that Gastonia is the owner and holder of a duly executed note and deed of trust and that there was some amount outstanding on that debt amply supports the court's finding under G.S. 45-21.16(d)(i). It is true that the trial judge in the present case went beyond the required finding of a valid debt to conclude that the balance due and owing as of 28 November 1979 was $43,238.09. Because we hold that the determination of the amount owed on a debt is beyond the scope of the hearing under G.S. 45-21.16, that finding is mere surplusage and should be stricken. Similarly, in light of the express language in the deed of trust authorizing the trustee, upon application of the mortgagee, to sell the encumbered property in the event of default, the court's finding of a "right to foreclose under the instrument" is also fully supported.
Contrary to respondents' contentions, a limited reading of G.S. 45-21.16(d) such as we adopt here neither deprives them of due process of law nor leaves them without remedy to their prejudice. Having received the notice and hearing intended by the statute, respondents are now able to utilize the procedure of G.S. 45-21.34 to enjoin the mortgage sale "upon [any] legal or equitable ground which the court may deem sufficient". If and when respondents choose to apply for injunctive relief, the dispute over the balance due on the note and deed of trust and the manner in which that balance was computed will certainly be relevant to the issue of respondents' right to relief. As to the title dispute, we note that the 12 October 1979 order of superior court declaring the sheriff's deed to DuBose and Bernhardt null and void was reversed by this Court in Spalding v. DuBose, 46 *919 N.C.App. 612, 265 S.E.2d 501 (1980) and the cause was remanded with direction to dismiss the action challenging the validity of that deed.
Respondents have also challenged the setting of bond to cover appeal in the amount of $43,238.09 as excessive. Assuming arguendo that the bond was excessive, respondents have failed to show prejudice. The bond was in fact posted, and the appeal has been heard. As yet no motion has been made or other proceeding instituted to recover on the bond. Only when this is done should the rights and obligations of the several parties to the bond be determined.
The order appealed from authorizing the trustee to proceed with foreclosure under the terms of the power of sale contained in the deed of trust is modified by striking therefrom Finding of Fact No. 5 that "the balance due and owing on said note and deed of trust as of November 28, 1979 is Forty-three thousand two hundred thirty-eight and 09/100 ($43,238.09) Dollars," and as so modified, the order is affirmed.
Modified in part,
Affirmed in part.
HARRY C. MARTIN and HILL, JJ., concur.