In re: Clayton , 2017 N.C. App. LEXIS 630 ( 2017 )

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA16-960
Filed: 1 August 2017
Henderson County, No. 14 SP 187
IN RE: Foreclosure of Real Property under Deed of Trust from Melvin R. Clayton
and Jackie B. Clayton, in the original amount of $165,000.00 and dated June 13,
2008 and recorded on June 18, 2008 in Book 2083 at Page 506, Henderson County
Registry
Trustee Services of Carolina, LLC, Substitute Trustee
Appeal by respondent from order entered 17 March 2016 by Judge William H.
Coward in Henderson County Superior Court. Heard in the Court of Appeals 5 April
2017.
Womble Carlyle Sandridge & Rice, LLP, by B. Chad Ewing, for petitioner-
appellee.
Pisgah Legal Services, by William J. Whalen; and Adams, Hendon, Carson,
Crow & Saenger, P.A., by Matthew S. Roberson, for respondent-appellant.
ELMORE, Judge.
Ms. Jackie B. Clayton (respondent), a widowed spouse of a homeowner who
entered into a reverse-mortgage agreement with Wells Fargo (petitioner), appeals an
order authorizing Wells Fargo to foreclose under a power-of-sale provision contained
within the deed of trust on the property that secured her late husband’s promissory
note. The deed of trust and the note contained provisions empowering Wells Fargo
to accelerate the maturity of the note’s debt upon a borrower’s death, provided the
IN RE CLAYTON
Opinion of the Court
property did not remain the principal residence of a “surviving borrower,” and to
exercise its contractual foreclosure right in the event of default in payment. Although
respondent was not listed as a borrower to the promissory note her husband executed,
she and her husband both signed the deed of trust securing the note as a “borrower.”
After respondent’s husband’s death, Wells Fargo accelerated the maturity of
the note, and then sought to foreclose on the property due to default in payment by
initiating the instant nonjudicial foreclosure proceeding. The clerk of superior court
dismissed the case on the basis that Wells Fargo had no right to foreclose because
respondent signed as a borrower to the deed of trust, and the property remained her
principal residence. Wells Fargo appealed to the superior court, which concluded that
respondent’s husband “was the only borrower for this loan per the terms of the Note
and Deed of Trust” and thus entered an order authorizing foreclosure. Respondent
appealed this order.
On appeal, respondent argues the superior court erred by authorizing
foreclosure because (1) Wells Fargo never formally proffered any evidence at the
hearing from which its order arose, thereby rendering the order void for want of
competent evidence; and (2) Wells Fargo had no right under the deed of trust to
accelerate the maturity of the note, and thus no right to foreclose due to any resulting
default, since respondent signed the deed of trust as a borrower, and the property
remained her principal residence.
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Opinion of the Court
Because evidentiary rules are relaxed in nonjudicial power-of-sale foreclosure
proceedings, we hold Wells Fargo’s binder of relevant documents it supplied during
the hearing, in conjunction with the parties’ stipulations, provided sufficient
competent evidence to support the superior court’s foreclosure order. Additionally,
although respondent signed the deed of trust as a borrower, a proper interpretation
of its terms and her husband’s simultaneously executed note and loan agreement, in
conjunction with respondent’s statutory ineligibility to qualify as a reverse-mortgage
borrower, excludes respondent as a “surviving borrower” as contemplated by the deed
of trust’s acceleration provision. We thus hold the superior court properly authorized
the foreclosure sale of the property and affirm its order.
I. Background
On 13 June 2008, respondent’s husband, Melvin Clayton, executed a home
equity conversion note (Note), commonly known as a reverse mortgage, with Wells
Fargo in the principal amount of $110,000.00, and up to a maximum amount of
$165,000.00. That same day, to secure Melvin’s obligation to Wells Fargo under the
Note, Melvin and respondent executed an adjustable rate home equity conversion
deed of trust (Deed of Trust), which was recorded with the Henderson County
Register of Deeds on 18 June 2008. The Note and Deed of Trust contained
acceleration provisions empowering Wells Fargo to demand immediate payment of
the debt under the Note when “[a] Borrower dies and the Property is not the principal
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Opinion of the Court
residence of at least one surviving Borrower.” Although respondent was not old
enough to qualify as a reverse-mortgage borrower and was thus not a party to the
Note, respondent signed the Deed of Trust as a borrower. After Mr. Clayton’s death
on 6 December 2013, Wells Fargo accelerated the maturity of the debt, and
respondent continued to live on the property.
On 30 April 2014, Trustee Services of Carolina, LLC, acting as substitute
trustee under the Deed of Trust, initiated this nonjudicial foreclosure proceeding
pursuant to N.C. Gen. Stat. § 45-21.16(d) based on the power-of-sale provision in the
Deed of Trust due to failure to make payments under the Note. After a 9 June 2015
hearing before the Clerk of Henderson County Superior Court, the clerk dismissed
the power-of-sale foreclosure proceeding, concluding that Wells Fargo failed to prove
it had a right to foreclose under the terms of the Deed of Trust because respondent
signed the instrument as a borrower and the property remained her principle
residence, thereby prohibiting Wells Fargo from accelerating the maturity of the
Note. Wells Fargo appealed to superior court. After a 13 July 2015 hearing, the
superior court entered an order on 17 March 2016 authorizing the foreclosure sale.
The superior court concluded that Melvin was the sole borrower under the Note and
the Deed of Trust, thereby permitting Wells Fargo to accelerate the debt, and that
the power-of-sale provision of the Deed of Trust gave Wells Fargo the right to foreclose
on the property upon default of payment on the Note. Respondent appeals.
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Opinion of the Court
II. Analysis
On appeal, respondent contends the superior court erred by authorizing the
nonjudicial foreclosure under power of sale because (1) Wells Fargo never presented
evidence at the de novo hearing before the superior court, thereby rendering the order
void for want of competent evidence; and (2) Wells Fargo had no right to foreclose
under the Deed of Trust because its terms prohibited the acceleration of the maturity
of the Note so long as the property remained respondent’s principal residence. We
disagree.
A. Standard of Review
When an appellate court reviews the decision of a trial
court sitting without a jury, findings of fact have the force
and effect of a verdict by a jury and are conclusive on
appeal if there is evidence to support them, even though
the evidence might sustain a finding to the contrary.
Conclusions of law drawn by the trial court from its
findings of fact are reviewable de novo on appeal.
In re Bass, 366 N.C. 464, 467, 738 S.E.2d 173, 175 (2013) (citations and quotation
marks omitted).
B. Sufficiency of Evidence
As an initial matter, we reject respondent’s contention that the superior court’s
order should be reversed because Wells Fargo never formally proffered the Deed of
Trust and the Note or any other relevant documents into evidence at the hearing.
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Opinion of the Court
N.C. Gen. Stat. § 45-21.16(d) (2015) requires that before a clerk of superior
court may authorize a nonjudicial power-of-sale foreclosure, the creditor must
establish the following six findings:
(i) a valid debt, (ii) default, (iii) the right to foreclose, (iv)
notice, and (v) “home loan” classification and applicable
pre-foreclosure notice, and (vi) that the sale is not barred
by the debtor’s military service.
In re Lucks, ___ N.C. ___, ___, 794 S.E.2d 501, 505 (2016) (interpreting N.C. Gen.
Stat. § 45-21.16(d)). “If the clerk’s order is appealed to superior court, that court’s de
novo hearing is limited to making a determination on the same issues as the clerk of
court.” In re David A. Simpson, P.C., 211 N.C. App. 483, 487, 711 S.E.2d 165, 169
(2011).
Because “[n]on-judicial foreclosure by power of sale arises under contract and
is not a judicial proceeding,” In re Lucks, ___ N.C. at ___, 794 S.E.2d at 504 (citing In
re Foreclosure of Michael Weinman Assocs. Gen. P’ship, 333 N.C. 221, 227, 424 S.E.2d
385, 388 (1993)), “the evidentiary requirements under non-judicial foreclosure
proceedings are relaxed,” id. at ___, 794 S.E.2d at 507. Significantly here, “[t]he
evidentiary rules are the same when the trial court conducts a de novo hearing on an
appeal from the clerk’s decision.” Id. at ___, 794 S.E.2d at 505. In the context of a
superior court’s de novo hearing on nonjudicial foreclosure under power of sale, “ ‘[t]he
competency, admissibility, and sufficiency of the evidence is a matter for the [trial]
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Opinion of the Court
court to determine.’ ” Id. at ___, 794 S.E.2d at 506 (quoting Queen City Coach Co. v.
Lee, 218 N.C. 320, 323, 11 S.E.2d 341, 343 (1940)).
Here, the transcript of the superior court hearing reveals that Wells Fargo gave
the judge a binder of the documents it provided to the clerk at the prior hearing,
which contained, inter alia, the Note and Deed of Trust, and the parties referred to
these documents throughout the proceeding. Because the evidentiary rules are
relaxed in power-of-sale foreclosure proceedings, the superior court was permitted to
accept this binder of documents as competent evidence to consider whether Wells
Fargo satisfied its burden of proving the six statutorily required findings, despite
Wells Fargo never formally introducing or admitting these documents into evidence.
Additionally, the transcript reveals that the parties stipulated to the existence
of five of the six statutorily required findings: a debt that Wells Fargo held, a default,
and notice, see N.C. Gen. Stat. § 45-21.16(d)(i)–(iii), and that two of the three
remaining subsections were inapplicable because this was a reverse mortgage and
neither party served in the military, see id. § 45-21.16(d)(v)–(vi). “[S]tipulations are
judicial admissions and are therefore binding in every sense, . . . relieving the other
party of the necessity of producing evidence to establish an admitted fact.” Thomas
v. Poole, 54 N.C. App. 239, 241, 282 S.E.2d 515, 517 (1981). The superior court thus
had authority to find the existence of those five stipulated criteria based upon the
parties’ stipulations alone. See, e.g., In re Burgess, 47 N.C. App. 599, 603–04, 267
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Opinion of the Court
S.E.2d 915, 918 (“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).”), appeal
dismissed, 301 N.C. 90 (1980). Indeed, as respondent concedes in her brief, “the only
issue in contention between the parties [was] whether . . . Wells Fargo was entitled
to foreclose under the terms of the . . . Deed of Trust, as required under N.C. Gen.
Stat. § 45-21.16(d)(iii).”
Accordingly, based on the binder of relevant documents and the parties’
stipulations, the court was supplied evidence from which it could determine whether
Wells Fargo proved the existence of the six statutorily required criteria before
authorizing the nonjudicial power-of-sale foreclosure. We thus reject respondent’s
challenge.
C. Right to Foreclose under Deed of Trust
Respondent’s main contention is that the superior court erred by authorizing
the nonjudicial foreclosure under power of sale because Wells Fargo failed to prove it
had a right to foreclose under the Deed of Trust as required by N.C. Gen. Stat. § 45-
21.16(d)(iii) (requiring proof of a right to foreclose under security instrument). We
disagree.
“The right to foreclose exists ‘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
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Opinion of the Court
the particular case.’ ” In re Michael Weinman Assocs. Gen. P’ship, 103 N.C. App. 756,
759, 407 S.E.2d 288, 290 (1991) (quoting In re Burgess, 47 N.C. App. at 603, 267
S.E.2d at 918), aff’d, 333 N.C. 221, 424 S.E.2d 385 (1993). Here, the Deed of Trust
contained the following power-of-sale foreclosure provision:
Foreclosure Procedure. If Lender requires immediate
payment in full under Paragraph 9, Lender may invoke the
power of sale and any other remedies permitted by
applicable law.
Paragraph 9 contains the challenged acceleration provision and empowered Wells
Fargo to accelerate the maturity of the Note and demand payment in full if “[a]
Borrower dies and the Property is not the principal residence of at least one surviving
Borrower.”
Based on this acceleration provision, respondent contends that although she
was not a borrower to the Note, because she signed the Deed of Trust as a borrower,
she is a “surviving [b]orrower.” Thus, Wells Fargo was barred from accelerating the
debt and, consequently, foreclosing on the property so long as it remained her
principal residence. Wells Fargo concedes that both Melvin and respondent signed
the Deed of Trust as a borrower but asserts that other language contained within the
Deed of Trust, as well as the Note and loan agreement simultaneously executed by
Melvin alone, in conjunction with respondent’s statutory ineligibility to be a reverse-
mortgage borrower, makes clear that respondent, a non-borrower to the reverse
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Opinion of the Court
mortgage, was not intended to be a “surviving [b]orrower” as contemplated by the
acceleration provision. We agree.
Because a power of sale is a contractual arrangement, we interpret power-of-
sale provisions of a deed of trust under ordinary rules of contract interpretation. In
re Sutton Investments, Inc., 46 N.C. App. 654, 659, 266 S.E.2d 686, 688–89, disc.
review denied, appeal dismissed, 301 N.C. 90 (1980). When interpreting contracts, “
‘all contemporaneously executed written instruments between the parties, relating to
the subject matter of the contract, are to be construed together in determining what
was undertaken.’ ” In re Hall, 210 N.C. App. 409, 416, 708 S.E.2d 174, 178–79 (2011)
(quoting Self-Help Ventures Fund v. Custom Finish, 199 N.C. App. 743, 747, 682
S.E.2d 746, 749 (2009)). “ ‘Thus, where a note and a deed of trust are executed
simultaneously and each contains references to the other, the documents are to be
considered as one instrument and are to be read and construed as such to determine
the intent of the parties.’ ” Id. at 416, 708 S.E.2d at 178–79 (quoting In re Foreclosure
of Sutton Investments, 46 N.C. App. at 659, 266 S.E.2d at 689). We review issues of
contract interpretation de novo. Price & Price Mech. of N.C., Inc. v. Milken Corp., 191
N.C. App. 177, 179, 661 S.E.2d 775, 777 (2008). Here, the Deed of Trust, the Note,
and the loan agreement underlying the Note, were given to the superior court for
consideration. Because these documents were executed simultaneously and reference
each other, we interpret these documents together to determine whether respondent
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Opinion of the Court
was a “surviving borrower” as contemplated by the acceleration provision of the Deed
of Trust.
Under the Note and the loan agreement, Melvin was the only contemplated
borrower to the reverse-mortgage agreement, as he alone executed these documents
and was obligated under them. The Note defined “borrower” as each person who
signed the Note, which only Melvin signed. Under its terms, Melvin, and not
respondent, agreed to repay any advances made by Wells Fargo. The Note contained
a similar acceleration provision and empowered Wells Fargo to “require immediate
payment in full . . . if (I) A Borrower dies and the property is not the principal
residence of at least one surviving Borrower.”
The Note references the loan agreement, which Melvin signed as the sole
borrower, and which evidences again that Melvin alone had the right to receive the
advanced funds and the obligation to repay those funds. The loan agreement defines
the Note as follows: “[T]he promissory note signed by Borrower together with this
Loan Agreement and given to Lender to evidence Borrower’s promises to repay . . .
Loan Advances by Lender.” (Emphasis added.) Additionally, the loan agreement
defines “Principal Residence” as “the dwelling where the Borrower maintains his or
her permanent place of abode.” (Emphasis added.) This indicates that the “principal
residence” contemplated by the agreement was that of a borrower to the Note, not a
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Opinion of the Court
non-borrower to the Note. Respondent neither executed, signed, nor was identified
as a borrower to the Note or loan agreement.
Turning to the Deed of Trust, although both Melvin and respondent signed this
security instrument as a borrower, its other provisions that reference and describe
“borrower” indicate that Melvin was the only borrower actually contemplated by the
reverse-mortgage agreement. For instance, its first paragraph provides: “Borrower
has agreed to repay to Lender amounts which Lender is obligated to advance,
including future advances, under the terms of the [loan agreement].” It provides
further that “[t]his agreement to repay is evidenced by Borrower’s Note dated the
same date as this Security Instrument.” As the sole obligor under the Note and loan
agreement, these provisions make clear that Melvin was the only “surviving
borrower” contemplated by the Deed of Trust’s acceleration provision. Additionally,
that respondent was not old enough to qualify as a reverse-mortgage borrower when
Melvin executed the reverse-mortgage agreement with Wells Fargo, see N.C. Gen.
Stat. § 53-257(2) (2015) (defining a “borrower” as one “62 years of age or older”),
further supports the interpretation that respondent was not intended to be a
“surviving borrower” under the acceleration provision.
Accordingly, that Melvin was the only borrower under the Note and loan
agreement, that the Deed of Trust’s descriptions of “borrower” indicate that term was
intended to refer only to the obligor of the reverse-mortgage agreement, and that
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Opinion of the Court
respondent was statutory ineligible to qualify as a reverse-mortgage borrower, yield
the inevitable conclusion that respondent was not intended to be a “surviving
borrower” as contemplated by the acceleration provision, despite her having signed
the Deed of Trust as a borrower.
Therefore, we hold that the Deed of Trust empowered Wells Fargo to accelerate
the maturity of the Note upon Melvin’s death and, consequently, to foreclose on the
property due to default in payment. We thus hold the superior court properly
authorized the nonjudicial foreclosure under a power of sale and affirm its order.
III. Conclusion
Although Wells Fargo never formally introduced evidence at the de novo
hearing before the superior court, its delivery of the binder it presented to the clerk,
which contained all the relevant documents it intended to use to prove its power-of-
sale foreclosure right, in conjunction with the parties’ stipulations, provided sufficient
evidence from which the superior court could properly determine whether Wells
Fargo satisfied its burden of proving the six statutorily required criteria before
authorizing the nonjudicial foreclosure sale of the property.
Additionally, although respondent signed the Deed of Trust as a borrower,
when considering its other provisions describing “borrower” as the obligor of the Note
and loan agreement, the terms of the Note and loan agreement that Melvin alone
signed as a borrower, and respondent’s statutory ineligibility to qualify as a reverse-
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Opinion of the Court
mortgage borrower, it is readily apparent that Melvin was the only “surviving
borrower” contemplated by the Deed of Trust’s acceleration provision. Respondent’s
signature on the Deed of Trust had no bearing on Wells Fargo’s contractual right to
accelerate the debt upon Melvin’s death and to foreclose upon default of payment
under the terms of the contract it executed with Melvin. Accordingly, we hold the
trial court properly authorized the foreclosure sale and affirm its order.
AFFIRMED.
Judges INMAN and BERGER concur.
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