In re Reed

An unpublished opinion of the North Carolina Court of Appeals does not constitute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).