An unpublished opinion of the North Carolina Court of Appeals does not constitute
controlling legal authority. Citation is disfavored, but may be permitted in accordance
with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure.
NO. COA13-1163
NORTH CAROLINA COURT OF APPEALS
Filed: 15 April 2014
IN THE MATTER OF THE FORECLOSURE
OF A DEED OF TRUST EXECUTED BY
MARY REED and RICHARD A. HOWSE
DATED JULY 16, 2008, AND RECORDED
ON JULY 17, 2008 IN BOOK 2924 AT
PAGE 1680, CATAWBA COUNTY
REGISTRY. SUBSTITUTE TRUSTEE
SERVICES, INC., SUBSTITUTE TRUSTEE
Catawba County
No. 12 SP 582
Appeal by respondents from order entered 12 June 2013 by
Judge Timothy S. Kincaid in Catawba County Superior Court.
Heard in the Court of Appeals 17 February 2014.
HUTCHENS, SENTER, KELLAM & PETTIT, P.A., by Lacey M. Moore,
for petitioner-appellee.
THURMAN, WILSON, BOUTWELL & GALVIN, P.A., by James P.
Galvin, for respondents-appellants.
ELMORE, Judge.
Mary B. Reed and her husband, Richard A. Howse
(respondents), appeal from the trial court’s order authorizing
Bank of America, N.A. (BANA) to proceed with foreclosure under a
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power of sale on the deed of trust recorded in Book 2924 at Page
1680 in the Catawba County Register of Deeds. We affirm.
I. Background
On 16 July 2008, respondents executed a promissory note
(the Note) for the property located at 6965 Navajo Trail,
Sherrills Ford, NC 28673. According to the terms of the Note,
respondents promised to pay a principal amount of $376,000 plus
interest in favor of BANA. The Note was secured by a deed of
trust executed by respondents on 17 July 2008.
On or about 1 November 2009, respondents ceased paying on
the Note. BANA sent a forty-five-day pre-foreclosure notice to
respondents on 28 March 2012. On 8 August 2012, BANA, through
its substitute trustee, filed this foreclosure action after
respondents failed to cure their default and resume making
timely payments.
On 8 November 2012, the matter came on for hearing before
the Catawba County Clerk of Court. The Clerk entered an order
authorizing BANA to foreclose on the subject property pursuant
to N.C. Gen. Stat. § 45-21.16. Respondents appealed.
On 10 June 2013, BANA filed an affidavit in support of the
foreclosure executed by Duane Wells Thomas, Assistant Vice
President for BANA (the Thomas affidavit). Attached to the
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affidavit was a copy of the Note, which did not contain an
indorsement in blank. The matter was heard before Judge Timothy
S. Kincaid during the 10 June 2013 civil session of Catawba
County Superior Court. There is no transcript of this
proceeding. However, the record reflects that Judge Kincaid
considered the evidence presented by the parties, including any
affidavits. Further, the record shows that Judge Kincaid was
presented with the Note that contained a blank indorsement by
BANA. On 12 June 2013, Judge Kincaid entered an order affirming
the Clerk’s order after finding that BANA satisfied N.C. Gen.
Stat. § 45-21.16. Respondents filed timely notice of appeal to
this Court on 1 July 2013.
II. Analysis
A. Note “Holder”
In a foreclosure by power of sale, the trial court shall
enter an order permitting foreclosure upon finding: (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. N.C. Gen. Stat. § 45-21.16(d)
(2013). Here, respondents challenge the first element of N.C.
Gen. Stat. § 45-21.16(d) on the basis that BANA failed to
produce competent evidence that it was the current holder of a
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valid debt. “This issue is a question of law controlled by the
UCC [Uniform Commercial Code], as adopted in Chapter 25 of the
North Carolina General Statutes.” In re Bass, 366 N.C. 464,
467, 738, S.E.2d 173, 175-76 (2013). We conclude that the trial
court did not err.
When determining whether a party is the holder of a valid
debt, we must find (i) competent evidence of a valid debt, and
(ii) that the party seeking to foreclose is the current holder
of the Note. In re Adams, 204 N.C. App. 318, 321, 693 S.E.2d
705, 709 (2010). As respondents concede that a valid debt
exists, we need only discern whether petitioner is the current
note holder. The term “holder” is defined as “[t]he person in
possession of a negotiable instrument that is payable either to
bearer or to an identified person that is the person in
possession.” N.C. Gen. Stat. § 25-1-201(b)(21)(a) (2013). The
term “bearer” is defined as “a person in control of a negotiable
electronic document of title or a person in possession of a
negotiable instrument, negotiable tangible document of title, or
certificated security that is payable to bearer or indorsed in
blank.” N.C. Gen. Stat. § 25-1-201(b)(5) (2013). There is a
strong presumption in favor of the legitimacy of indorsements to
protect the transfer of negotiable instruments “by giving force
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to the information presented on the face of the instrument.”
Bass, 366 N.C. at 468, 738 S.E.2d at 176.
On appeal, the crux of respondents’ argument is that “[i]n
light of conflicting evidence,” BANA “failed to prove, by
sufficient competent evidence, that it was the holder of the
Note” because it presented two different versions of the Note to
the trial court—the original Note bearing a blank indorsement
(the original Note), and a copy (the copy), which was attached
to the Thomas affidavit and was “without such an indorsement[.]”
Further, respondents contend that “there was no evidence
presented that the indorsement was authorized.” As such, they
argue that the blank indorsement on the Note subjects them to
threats of multiple judgments.
We address each of respondents’ arguments in turn. First,
respondents cite no authority to support their position that the
copy somehow nullified the indorsement in blank that appeared on
the face of the original instrument. There is no “conflicting
evidence”—BANA was the original lender with which respondents
executed the Note, and they had discretion to determine whether
and when to indorse the instrument. The fact that the copy did
not bear a blank indorsement is inconsequential on these facts.
Second, BANA was not charged with showing that the indorsement
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was “authorized.” Again, BANA was the original lender and thus
could “authorize” an indorsement at their will. Third,
respondents do not allege that the Note was transferred to a
third party, and there is no evidence to suggest that a
subsequent transfer occurred. Accordingly, respondents’
argument as to the threat of multiple judgments is without
merit.
Generally, whenever this Court has held that possession of
the original promissory note is insufficient to show that the
person in possession is the “holder,” the note was either (i)
not drawn, issued, or indorsed to the party, to bearer, or in
blank, or (ii) the trial court neglected to make a finding in
its order as to which party had possession of the note at the
hearing. See e.g., In re David A. Simpson, P.C., 211 N.C. App.
483, 711 S.E.2d 165 (2011). Neither situation applies in the
present case.
Here, the original Note was presented to the trial court
for inspection. The Note was drawn to the order of BANA and
contained an indorsement in blank by BANA. Respondents concede
that the original Note was indorsed in blank. Further, given
that BANA appeared at the hearing and was the original lender,
an inference can be made that it was BANA who possessed the
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original Note, making it the “bearer.” Thus, BANA satisfied
the definition of note “holder.” See N.C. Gen. Stat. § 25-1-
201(b)(21)(a).
Additionally, BANA offered evidence that it was the note
holder through the Thomas affidavit. The trial court may
exercise its sound discretion in receiving documents into
evidence, and appellate review is limited to a determination of
whether there was a clear abuse of discretion. Id. at 488, 711
S.E.2d at 170. Mr. Thomas testified that based on his personal
knowledge: “BANA is the lender on the Note and the beneficiary
of on the Deed of Trust[,]” and BANA “has possession of the
promissory note[.]” Upon review, we see no reason to find that
the trial court abused its discretion in admitting the Thomas
affidavit. We hold that the trial court did not err in finding
that BANA was the holder of a valid debt.
B. Description of Property
Respondents argue that the legal description of the subject
property in the deed of trust was insufficient to identify the
real property it intended to encumber. We disagree.
Our Supreme Court has held that a deed of trust is “void
unless it contains a description of the land sufficient to
identify it or refers to something extrinsic by which the land
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may be identified with certainty.” Overton v. Boyce, 289 N.C.
291, 293, 221 S.E.2d 347, 349 (1976) (citation omitted). “A
deed of trust containing a defective description of the subject
property is a defective deed of trust and provides no notice,
actual or constructive, under our recordation statutes.” Fifth
Third Mortgage Co. v. Miller, 202 N.C. App. 757, 761, 690 S.E.2d
7, 9-10, (2010), disc. review denied, 364 N.C. 601, 703 S.E.2d
445 (2010) (citation omitted).
To resolve cases in which a deed contains an
ambiguous description, the courts have
formulated various rules of construction and
techniques to locate the boundaries of deeds
whose descriptions are less than ideal. The
most common rule of construction used by the
courts is to gather the intention of the
parties from the four corners of the
instrument. The courts seek to sustain a
deed if possible on the assumption that the
parties intended to convey and receive land
or they would never have been involved in
the first place.
Chicago Title Ins. Co. v. Wetherington, 127 N.C. App. 457, 462,
490 S.E.2d 593, 597 (1997) (internal quotations and citations
omitted), disc. review denied, 347 N.C. 574, 498 S.E.2d 380
(1998); see also Pearson v. Chambers, 18 N.C. App. 403, 406, 197
S.E.2d 42, 44 (1973) (“In the interpretation of the provisions
of a deed, the intention of the grantor must be gathered from
the whole instrument and every part thereof given effect, unless
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it contains conflicting provisions which are irreconcilable, or
a provision which is contrary to public policy or runs counter
to some rule of law.” (quotation omitted)).
Respondents argue: “[I]t is “undisputed that the legal
description in the deed of trust contains an error and
identifies a property address that does not exist in Catawba
County.” However, they do not elaborate or allege a particular
error in the description of the land.
In the deed of trust, the subject property’s street address
is written as “6965 Navahjo Trail” instead of “6965 Navajo
Trail.” Thus, the error is the misspelling of the word
“Navajo.” We cannot allow a scrivener’s error of this kind to
halt the foreclosure action. Here, the deed of trust includes
the tax parcel ID 3697208028820, which is a reference to a
Catawba County tax map that cites to a plat that is recorded at
the Catawba County Register of Deeds at Plat Book 2924, Page
1680. The tax parcel ID corresponds to 6965 Navajo Trail. In
addition, the second home rider describes the subject property
as “BEING ALL OF LOT 15 BLOCK A OF LANDHARBOR DEVELOPMENT
SUBDIVISION AS SHOWN ON MAP BOOK 14 AT PAGE 11 IN THE CATAWBA
COUNTY PUBLIC REGISTRY.” When viewed together, the tax parcel
number and legal description contained in the second home rider
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sufficiently identify the property encumbered by the deed of
trust as 6965 Navajo Trail. The “four corners” test has been
satisfied.
III. Conclusion
In sum, the deed of trust contains a description of the
land sufficient to identify the subject property. Further, the
record contains competent evidence for us to conclude that BANA
was the current holder of a valid debt. Accordingly, the trial
court did not err in ordering BANA to proceed with the
foreclosure pursuant to N.C. Gen. Stat. § 45-21.16 (2013). We
affirm.
Affirmed.
Chief Judge MARTIN and Judge HUNTER, Robert N., concur.
Report per Rule 30(e).