In re: RadcliffÂ

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA18-419
Filed: 18 December 2018
Iredell County, No. 17 SP 252
IN THE MATTER OF THE FORECLOSURE OF A DEED OF TRUST EXECUTED
BY MICHAEL D. RADCLIFF AND MARGENE K. RADCLIFF DATED MAY 23, 2003
AND RECORDED IN BOOK 1446 AT PAGE 2024 AND RERECORDED IN BOOK
1472 AT PAGE 2465 IN THE IREDELL COUNTY PUBLIC REGISTRY, NORTH
CAROLINA.
Appeal by Michael Johnson from order entered 2 January 2018 by Judge Casey
M. Viser in Iredell County Superior Court. Heard in the Court of Appeals 15 October
2018.
Scarbrough & Scarbrough, PLLC, by John F. Scarbrough, James E.
Scarbrough, and Madeline J. Trilling, for appellant Michael Johnson.
Horack, Talley, Pharr & Lowndes, PA, by Amy P. Hunt, for appellee Wells
Fargo Bank, N.A.
ELMORE, Judge.
Michael Johnson appeals from an order granting the motion of Wells Fargo
Bank, N.A., to reopen the upset bid period in a power-of-sale foreclosure action on the
basis that Wells Fargo never received notice of Johnson’s upset bid, and that if it had,
Wells Fargo would have placed an additional upset bid prior to the period’s
expiration. On appeal, Johnson contends the trial court lacked subject matter
jurisdiction to reopen the upset bid period because the rights of the parties had
already become fixed pursuant to N.C. Gen. Stat. § 45-21.29A. Johnson further
IN RE: RADCLIFF
Opinion of the Court
contends the trial court abused its discretion in granting Wells Fargo’s motion
pursuant to N.C. Gen. Stat. § 45-21.27(h).
For the reasons stated herein, we affirm.
I. Background
This appeal arises out of a special proceeding by a mortgagee to foreclose on a
deed of trust given by Michael and Margene Radcliff in 2003 to secure a promissory
note in the amount of $1,000,000.00. The collateral real property was encumbered
by two junior deeds of trust for the benefit of Wells Fargo: one given by Margene
Radcliff in 2005 to secure future advances of as much as $1,000,000.00 under the
terms of a business equity line promissory note, and another given by Margene
Radcliffas trustee of the Margene Radcliff Revocable Trustin 2007 to secure
future advances of up to $820,000.00 under a home equity line of credit.
The substitute trustee under the first deed of trust initiated this action by
filing a notice of hearing on 18 May 2017. On 20 July, the clerk of court entered an
order permitting the substitute trustee to proceed with a foreclosure sale. At the 31
August sale, Affinity Capital, LLC, was the high bidder at $970,073.69. The
substitute trustee thereafter filed a report setting forth the high bid and indicating
that the 10-day statutory period for upset bids would expire on 11 September.
On 6 September 2017, Wells Fargo placed and filed a notice of upset bid in the
amount of $1,018,577.37, and the upset bid period was renewed until 18 September.
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Opinion of the Court
On 15 September, Johnsonan individual third-party bidderfiled his upset bid in
the amount of $1,069,506.24, and the upset bid period was renewed until 25
September. On 28 September, Wells Fargo filed a “motion to extend upset period.”
The motion requested that the upset bid period be reopened and extended for an
additional ten days on the basis that Wells Fargo had not received notice of Johnson’s
15 September upset bid, and that if it had, Wells Fargo would have placed an
additional upset bid prior to 25 September.
Wells Fargo’s motion was first heard by the clerk of court on 17 October 2017,
and on 31 October, the clerk entered an order denying the motion and concluding that
Johnson’s 15 September upset bid was the high and final bid. Wells Fargo then
appealed to the trial court, which granted the motion and reopened the upset bid
period in an order dated 2 January 2018. In its order, the trial court made the
following relevant findings of fact and conclusions of law1:
5. [Wells Fargo] never received notice of the September 15,
2017 upset bid as required, or contemplated, by G.S. § 45-
21.27(e), and Wells Fargo was prepared to tender an
additional upset bid had it known an upset bid had been
filed on September 15, 2017.
6. Wells Fargo has interests in the collateral real property
that stand to be eliminated by this foreclosure proceeding.
Without limitation, Wells Fargo is the beneficiary of (i) that
certain Deed of Trust securing the original principal
amount of $1,000,000 recorded on June 1, 2005 in Deed
1 The trial court failed to distinguish between its findings of fact and conclusions of law in the
order.
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Opinion of the Court
Book 1650, Page 1540, and (ii) that certain Open-End Deed
of Trust securing advances up to the original principal
amount of $820,000 recorded on August 29, 2007 in Deed
Book 1879, Page 1853, both of the Iredell County Registry.
7. The Court has the authority pursuant to G.S. [§] 45-
21.27(h) to “make all such orders as may be just and
necessary to safeguard the interests of all parties” and has
the inherent authority to remedy issues that may arise in
foreclosure sales.
8. Michael Johnson has incurred attorney’s fees in defense
of Wells Fargo’s motion . . . which the Court finds to be
reasonable and should be borne by Wells Fargo.
Based on its findings and conclusions, the trial court ordered that
A. The upset period in this matter is reopened for ten (10)
days, starting with the date this order is filed;
B. The September 15, 2017 upset bid is presently the high
bid subject to upset pursuant to the provisions of Chapter
45 of the General Statutes and the terms of this Order, and
this matter is remanded to the Clerk; [and]
C. Wells Fargo will pay Michael Johnson the sum of
$2,175.00, being the reasonable attorney’s fees he incurred
in defense of the motion before the Court[.]
On 4 January 2018, Wells Fargo placed an upset bid in the amount of
$1,122,981.56. Instead of placing an additional upset bid within the 10-day period,
Johnson filed notice of appeal on 10 January from the trial court’s order granting
Wells Fargo’s motion to reopen the upset bid period.
II. Discussion
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Opinion of the Court
On appeal, Johnson contends that because the rights of the parties had already
become fixed pursuant to N.C. Gen. Stat. § 45-21.29A, the trial court lacked subject
matter jurisdiction to reopen the upset bid period. He further contends the trial court
abused its discretion in granting Wells Fargo’s motion pursuant to N.C. Gen. Stat. §
45-21.27(h) because the trial court’s findings of fact and conclusions of law were not
supported by the evidence.
In response to Johnson’s appeal, Wells Fargo contends the trial court had
subject matter jurisdiction pursuant to N.C. Gen. Stat. § 45-21.27(h), and that as a
third-party bidder with no interest in the collateral real property, Johnson’s “rights”
were not fixed. Wells Fargo emphasizes that Johnson is not a party the foreclosure
statutes seek to protect, that the trial court properly reopened the upset bid period
based on the evidence presented, and that the plain language of N.C. Gen. Stat. § 45-
21.27(h) supports the trial court’s order.
Each assignment of error is addressed in turn.
A. The trial court had subject matter jurisdiction to reopen the upset bid
period.
“In reviewing a question of subject matter jurisdiction, our standard of review
is de novo.” In re Cornblum, 220 N.C. App. 100, 102, 727 S.E.2d 338, 340 (2012)
(citation omitted).
In contending that the trial court lacked subject matter jurisdiction to reopen
the upset bid period, Johnson quotes Cumberland Cty. Hosp. Sys., Inc. v. N.C. Dep’t
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Opinion of the Court
of Health & Human Servs., 242 N.C. App. 524, 528, 776 S.E.2d 329, 333 (2015), for
the proposition that “a moot claim is not justiciable, and a trial court does not have
subject matter jurisdiction over a non-justiciable claim[.]” He then cites to N.C. Gen.
Stat. § 45-21.29A (2017), which provides that “[i]f an upset bid is not filed following a
sale, resale, or prior upset bid within the period specified in this Article, the rights of
the parties to the sale or resale become fixed.” Johnson asserts that “[t]his Court has
consistently held that once the upset bid period in a foreclosure proceeding has
expired, and the rights of the parties are fixed under N.C. Gen. Stat. § 45-21.29A, any
action by a party seeking to prevent the sale from becoming final is moot and subject
to dismissal.” He relies primarily on Goad v. Chase Home Fin., LLC, 208 N.C. App.
259, 704 S.E.2d 1 (2010), to support his argument.
In Goad, the plaintiff borrower sought to have a foreclosure sale enjoined. In
affirming the trial court’s denial of the plaintiff’s request, this Court held that
absent sufficient action by a party seeking to avoid a
foreclosure sale to prevent the sale from becoming final,
any attempt to enjoin such a sale which has not been heard
and decided by the date for the submission of upset bids
becomes moot and subject to dismissal at that time.
Id. at 264, 704 S.E.2d at 5. Similarly, in the case of In re Hackley, 212 N.C. App. 596,
713 S.E.2d 119 (2011), this Courtrelying on its holding in Goadheld that where
the appellant borrower did not obtain a stay of the foreclosure sale pending appeal,
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Opinion of the Court
and the foreclosure sale was consummated and the rights of the parties fixed, the
case was moot and the appeal subject to dismissal. Id. at 60506, 713 S.E.2d at 125.
The cases cited by Johnson are distinguishable as they each address a situation
in which a borrower was attempting to delay or halt a foreclosure sale. That is simply
not the case here, where the dispute does not involve a borrower but rather two
bidders, one of which has interests in the collateral real property that stand to be
eliminated by the foreclosure sale. That bidder, Wells Fargo, was not seeking to avoid
a foreclosure sale altogether, but to reopen the upset bid period on the basis that it
did not receive proper notice of Johnson’s 15 September upset bid. Wells Fargo
correctly asserts that “[t]he present case is an attempt to cure a procedural defect in
the foreclosure statutes, to obtain a high bid, and to enhance the rights of the parties
to the foreclosure.”
In contending that the trial court had subject matter jurisdiction to reopen the
upset bid period, Wells Fargo relies on N.C. Gen. Stat. § 45-21.27(h) (2017), which
provides as follows:
The clerk of superior court shall make all such orders as
may be just and necessary to safeguard the interests of all
parties, and shall have the authority to fix and determine
all necessary procedural details with respect to upset bids
in all instances in which this Article fails to make definite
provisions as to that procedure.
The procedural defect here refers to the vague notice requirements contained in N.C.
Gen. Stat. § 45-21.27(e1), discussed in more detail below. As for the trial court’s
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Opinion of the Court
authority to fix that procedural defect, we conclude that under these circumstances,
the trial court had subject matter jurisdiction pursuant to N.C. Gen. Stat. § 45-
21.27(h) to reopen and extend the upset bid period for an additional ten days. This
assignment of error is therefore overruled.
B. The trial court did not abuse its discretion in reopening the upset bid period.
In his second and final argument on appeal, Johnson contends the trial court’s
order reopening the upset bid period was not supported by competent evidence. We
disagree.
Pursuant to N.C. Gen. Stat. § 45-21.27(h), it is within the trial court’s
discretion to “make all such orders as may be just and necessary to safeguard the
interests of all parties.” “Where matters are left to the discretion of the trial court,
appellate review is limited to a determination of whether there was a clear abuse of
discretion.” In re Brown, 156 N.C. App. 477, 485, 577 S.E.2d 398, 403 (2003).
N.C. Gen. Stat. § 45-21.27(e) (2017) provides that “[a]t the same time that an
upset bid on real property is submitted to the court . . . the upset bidder shall
simultaneously file with the clerk a notice of upset bid.” N.C. Gen. Stat. § 45-
21.27(e1) (2017) requires that the clerk then “notify the trustee or mortgagee who
shall thereafter mail a written notice of upset bid by first-class mail to the last known
address of the last prior bidder and the current record owner(s) of the property.” Of
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Opinion of the Court
particular significance to the instant case, subsection (e1) does not provide a deadline
by which the trustee must give notice of an upset bid to the last prior bidder.
Here, Wells Fargo moved to reopen the upset bid period on the basis that it did
not receive adequate notice as required, or contemplated, by N.C. Gen. Stat. § 45-
21.27(e1). In support of its motion, counsel for Wells Fargo emphasized the following
timeline of events:
6 September 2017 Wells Fargo placed an upset bid.
6 September 2017 The clerk notified the substitute
trustee of Wells Fargo’s upset
bid via email.
6 September 2017 The substitute trustee mailed
notice of Wells Fargo’s upset bid
to the last prior bidder.
15 September 2017 Johnson placed an upset bid.
15 September 2017 The clerk notified the substitute
trustee of Johnson’s upset bid
via email.
20 September 2017 The substitute trustee mailed
notice of Johnson’s upset bid to
the last prior bidder (i.e., Wells
Fargo).
25 September 2017 The upset bid period expired.
28 September 2017 Wells Fargo served its motion
requesting an extension of the
upset bid period.
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As the timeline illustrates, there was an inexplicable five-day delay between the
substitute trustee’s receipt of notice from the clerk of Johnson’s upset bid and its
mailing of notice of the same to Wells Fargo.
On appeal, Wells Fargo concedes that “[t]he substitute trustee technically
acted in accord with [N.C. Gen. Stat. § 45-21.27(e1), which does not specify when a
trustee must give notice of an upset bid to the last prior bidder]; however, the statute
did not contemplate the impact of delayed notice by the substitute trustee when there
is a party (like [Wells Fargo]) bidding to protect a property interest in the collateral.”
We agree and hold that under the circumstances of the instant case, the trial court
did not abuse its discretion in reopening and extending the upset bid period to
safeguard the interests of all parties as permitted by N.C. Gen. Stat. § 45-21.27(h).
III. Conclusion
Where Wells Fargo, as the last prior bidder with interests in the collateral real
property that stood to be eliminated by the foreclosure proceeding, did not receive
notice of a third-party’s upset bid in sufficient time to protect its interests, the trial
court properly reopened and extended the upset bid period for an additional ten days.
Accordingly, the order of the trial court is hereby:
AFFIRMED.
Chief Judge McGEE and Judge ARROWOOD concur.
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