An unpublished opinion of the North Carolina Court of Appeals does not constitute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. COA13-1015
NORTH CAROLINA COURT OF APPEALS
Filed: 18 March 2014
In the Matter of the
Foreclosure of a Deed of
Trust Executed by Fabio Lopez
and Kathleen Englund Lopez,
dated November 28, 2007 and
recorded in Book 2878 at Page 1574
in the Catawba County Public
Registry, North Carolina.
Catawba County
No. 11 SP 841
Appeal by respondents from order entered 29 April 2013 by
Judge Timothy S. Kincaid in Catawba County Superior Court.
Heard in the Court of Appeals 21 January 2014.
SHAPIRO & INGLE, LLP, by Jason K. Purser, for petitioner-
appellee.
FERIKES & BLEYANT, PLLC, by H. Gregory Johnson, for
respondents-appellants.
ELMORE, Judge.
Fabio Lopez and his wife Kathleen Englund Lopez
(respondents) appeal from the trial court’s order authorizing
U.S. Bank National Association (petitioner or U.S. Bank), as
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substitute trustee, to proceed with foreclosure under a power of
sale on the deed of trust recorded in Book 2878 at Page 1574 in
the Catawba County Register of Deeds. We affirm.
I. Background
On 29 November 2007, Fabio Lopez executed an adjustable
rate promissory note (the Note) to purchase a second home
located at 6977 Golden Bay Court, Sherrils Ford, North Carolina
28673. According to the terms of the Note, Mr. Lopez promised
to pay a principal amount of $527,200.00 plus interest to Wells
Fargo Bank, National Association (Wells Fargo). The Note was
secured by a deed of trust, executed by respondents on 28
November 2007.
On or about 1 May 2011, respondents ceased paying on the
Note. Wells Fargo sent a forty-five day pre-foreclosure notice
to respondents on 24 July 2011. In October 2011, Wells Fargo,
through its substitute trustee, filed this foreclosure action
after respondents failed to make timely payments. Prior to the
initial foreclosure proceeding, Wells Fargo sold the loan and
transferred possession of the Note to U.S. Bank. Respondents
were notified by Rushmore Loan Management Services LLC
(Rushmore) that the servicing of their loan had been assigned,
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sold, or transferred from Marix Servicing LLC to Rushmore and
that the new creditor was U.S. Bank effective May 2012.
On 13 November 2012, the matter came on for hearing before
the Catawba County Clerk of Court. The Clerk entered an order
authorizing U.S. Bank, as legal title trustee, to foreclose on
the subject property pursuant to N.C. Gen. Stat. § 45-21.16.
Respondents appealed.
The appeal was originally calendared for a de novo hearing
in Catawba County Superior Court on 25 March 2013. However,
Judge Timothy S. Kincaid granted respondents’ motion for
continuance and subsequently moved the matter to the 22 April
2013 court session. On 11 April 2013, Mr. Lopez wrote the
Catawba County Clerk of Court to request a second continuance on
the basis that he had a scheduling conflict. On 19 April 2013,
the Friday before the hearing, Mr. Lopez wrote directly to Judge
Richard Boner to request a continuance. There is no evidence
that Judge Boner received the letter and ruled on Mr. Lopez’s
motion.
Respondents failed to appear at the 22 April hearing. As
such, there is no transcript of this proceeding. The record
reflects that counsel for U.S. Bank presented the trial court
with the subject Note, the deed of trust, the appointment of
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substitute trustee, and the affidavit of default executed by
Rose Lara, officer of Rushmore and servicer for U.S. Bank (the
Lara affidavit). Pursuant to N.C. Gen. Stat. § 45-21.16(d),
Judge Kincaid found: (1) a valid debt, (2) default by
respondents, (3) proper notice of the foreclosure proceeding,
and (4) U.S. Bank was the holder of the Note. As such, he
entered an order permitting foreclosure on 29 April 2013.
II. Analysis
A. Preservation of Appeal
As a preliminary matter we must determine whether we may
hear respondents’ appeal. Rule 10(a)(1) of the North Carolina
Rules of Appellate Procedure generally requires a party to
object at trial in order to preserve an issue for appeal.
N.C.R. App. P. 10(a)(1) (2013). Respondents could not object to
the entry of evidence at the hearing because they were not
there. Petitioner argues that a dismissal is warranted because
respondents failed to preserve any error for appeal. We agree
that respondents failed to preserve their right to challenge the
entry of specific evidence. However, Rule 10(a)(1) contains an
exception for an issue “which by rule or law was deemed
preserved or taken without any such action, including, but not
limited to, whether the judgment is supported by the verdict or
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by the findings of fact and conclusions of law[.]” N.C.R. App.
P. 10(a)(1). Thus, we are limited to determining whether error
appears on the face of the record; we will not re-weigh evidence
or address unpreserved issues.
B. 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 U.S. Bank failed to
produce competent evidence that it was the current holder of a
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,
___, 738 S.E.2d 173, 176 (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 (1) competent evidence of a valid debt, and
(2) that the party seeking to foreclose is the current holder of
the Note. In re Adams, 204 N.C. App. 318, 321-22, 693 S.E.2d
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705, 709 (2010) (citations and quotations omitted). 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 to the information
presented on the face of the instrument.” Bass, 366 N.C. at
___, 738 S.E.2d at 176.
On appeal, the crux of respondents’ argument is that U.S.
Bank failed to supplement the Lara affidavit with documentation
adequately “proving that it was the legal owner and holder” of
the Note. Respondents aver that “a party must prove that it is
both the owner and holder of the promissory note” before it has
the right to foreclose on a negotiable instrument. Respondents
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ask: “Was the note sold or transferred to US [sic] Bank? Or to
US Bank as legal title trustee? And, if as legal title trustee,
for what trust? Does that trust have the legal capacity to hold
this note and deed of trust? Does the legal title trustee have
the legal authority to pursue the foreclosure?” Respondents
conclude: “Nothing in the Lara affidavit or attached exhibits
address these essential legal questions.” Further, respondents
challenge the indorsement on the Note, namely because the face
of the instrument shows a blank indorsement that has been
crossed out or voided, leaving a second, undated, blank
indorsement. Respondents contend, “[t]hese [i]ndorsements fail
to demonstrate when the alleged sale or transfer occurred and to
whom the transfer was intended.” Finally, respondents aver:
“There is no evidence in the record that the original note was
in fact presented to the trial court at any appeal hearing.”
We briefly address each of these concerns in turn. First,
there is no statutory requirement that the note holder must also
demonstrate that he is the note “owner.” Accordingly, we
disregard any argument pertaining to whether U.S. Bank
“purchased” the Note or “owns” it as such argument is irrelevant
to this issue. Second, this Court is not charged with answering
rhetorical questions unnecessarily. We note that Rule 10(a)(1)
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prohibits respondents from challenging the sufficiency of the
Lara affidavit because the issue was not preserved by objection
at the hearing. See N.C. App. P. Rule 10(a)(1) (2013). Third,
respondents cite no authority to support their position that the
indorsement in blank that is not marked through is a nullity
because a voided indorsement in blank also appears on the face
of the instrument. Although respondents could have raised this
issue at the hearing, they did not. Finally, the 29 April 2013
order permitting foreclosure explicitly states that “various
documents were provided including the subject Promissory Note[]
[and] the Deed of Trust[.]” Thus, respondents’ argument that
the trial court was never presented with the Note is without
merit.
C. Review of the Record
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 (1)
not drawn, issued, or indorsed to the party, to bearer, or in
blank, or (2) 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.
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483, 485, 711 S.E.2d 165, 168 (2011). Neither situation applies
in the present case.
Here, respondents concede that the Note was endorsed in
blank. Further, given that U.S. Bank was the only party who
made an appearance at the hearing, and because the trial judge
received the Note into evidence, an inference can be made that
U.S. Bank was in possession of the Note, making it the “bearer.”
Thus, U.S. Bank satisfied the definition of “holder.” See N.C.
Gen. Stat. § 25-1-201(b)(21)(a).
Additionally, U.S. Bank offered evidence that it was the
Note holder through the Lara 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. Ms. Lara testified that based on her personal
knowledge: “The Note bears an [i]ndorsement from Wells Fargo to
blank[;]” “Wells Fargo sold the Loan and transferred possession
of the Note to U.S. Bank[;]” and “U.S. Bank has remained in
possession of the Note.” Upon review, we see no reason to find
that the trial court abused its discretion in admitting the Lara
affidavit.
II. Conclusion
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We are satisfied that the record contains competent
evidence to support the trial court’s conclusion that U.S. Bank
was the current holder of a valid debt. Accordingly, the trial
court did not err in ordering U.S. Bank to proceed with
foreclosure pursuant to N.C. Gen. Stat. § 45-21.16(d) (2013).
We affirm.
Affirmed.
Judges McGEE and HUNTER, Robert C., concur.
Report per Rule 30(e).