In Re the Foreclosure of a Certain Deed of Trust From Watts

247 S.E.2d 427 (1978) 38 N.C. App. 90

In the Matter of the Foreclosure of a Certain Deed of Trust from Marvin J. WATTS and wife, H. Ruth Watts, to Thomas S. Bennett, Substitute Trustee, for Judith W. Smith.

No. 773SC947.

Court of Appeals of North Carolina.

September 19, 1978.

Taylor and Marquardt by John P. Simpson, Morehead City, for respondent-appellant.

No counsel contra.

CLARK, Judge.

The sole question presented on appeal is whether a Superior Court Judge is authorized to invoke equity jurisdiction in a hearing de novo on appeal pursuant to G.S. 45-21.16(d) or is limited to hearing the same matters in controversy which were before the Clerk of Superior Court.

G.S. 45-21.16 provides that prior to a foreclosure under a power of sale, the mortgagee must notify the mortgagor of the impending sale and must provide notice of a hearing before the Clerk of Superior Court. The Clerk is directed in subsection (d) to find the existence of a "(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 . . .."

The statute was amended in 1977 (effective 1 October 1977) to provide that: "Appeals from said act of the clerk shall be heard de novo."

The respondent contends that the hearing de novo is limited in scope to a hearing on the same four questions at issue before the Clerk, and that therefore the trial judge was not authorized to invoke equitable jurisdiction.

The intent of the legislature controls the interpretation of a statute. In ascertaining this intent the courts should consider the language of the statute and what it sought to accomplish. Stevenson v. Durham, 281 N.C. 300, 188 S.E.2d 281 (1972); Galligan v. Chapel Hill, 276 N.C. 172, 171 S.E.2d 427 (1970). G.S. 45-21.16 was enacted in response to Turner v. Blackburn, 389 F.Supp. 1250 (W.D.N.C.1975). In Turner, the court held that the statutory procedures governing foreclosure under a power of sale did not comport with due process because the procedures did not provide adequate notice or a hearing prior to foreclosure and the mortgagor had not waived notice and hearing. The court noted that the procedures for upset bids and for injunctive relief were not sufficient to protect the mortgagor's property interest because these remedies presuppose that the mortgagor is aware of the threatened foreclosure. The injunctive relief provided by G.S. 45-21.34 is available prior to the confirmation of the foreclosure sale. Certain-teed Products Corp. v. Sanders, 264 N.C. 234, 141 S.E.2d 329 (1965); Whitford v. North Carolina Joint-Stock Land Bank, 207 N.C. 229, 176 S.E. 740 (1934). The court noted that without prior notice, the mortgagor was often unaware of the foreclosure until the purchaser at the foreclosure sale sought possession of the land. Without the notice contemplated by the court in Turner, "the option of seeking equitable relief was . . substantially foreclosed." 389 F.Supp. at 1258, n. 37.

The notice and hearing required by G.S. 45-21.16 were designed to enable the mortgagor to utilize the injunctive relief already available in G.S. 45-21.34. The hearing was not intended to settle all matters in controversy between mortgagor and mortgagee, nor was it designed to provide a second procedure for invoking equitable relief. A power of sale provision in a deed of trust is a means of avoiding lengthy and costly foreclosures by action. 389 F.Supp. at 1258; 10 Thompson on Real Property, § 5175, p. 204 (1957); Note, Power of Sale Foreclosure After Fuentes, 40 U.Chi.L.Rev. 206 (1972). To construe the statute so as to provide a full hearing on matters at issue other than those before the Clerk would make the foreclosure by power of sale as costly and as time-consuming as foreclosure by action, since a mortgagor could obtain a full hearing on all issues merely by appealing to the Superior Court for a hearing de novo. It is clear that the legislature did not intend such a result. The Clerk of Superior Court is limited to making the four findings of fact specified in the statute, and it follows that the Superior Court Judge is similarly limited in the hearing de novo. See G.S. 1-276 which limits appeals to "matters in controversy" before the Clerk.

Although a Superior Court Judge has general equitable jurisdiction, N.C. Const. Art. IV, § 1, Hospital v. Comrs. of Durham, 231 N.C. 604, 58 S.E.2d 696 (1950), a court is without jurisdiction unless the issue is brought before the court in a proper proceeding. Brissie v. Craig, 232 N.C. 701, 62 S.E.2d 330 (1950); Johnston County v. Ellis, 226 N.C. 268, 38 S.E.2d 31 (1946). The proper method for invoking equitable jurisdiction to enjoin a foreclosure sale is by bringing an action in the Superior Court pursuant to G.S. 45-21.34. See, Crain v. Hutchins, 226 N.C. 642, 39 S.E.2d 831 (1946); Sineath v. Katzis, 219 N.C. 434, 14 S.E.2d 418 (1941); Insurance Co. v. Smathers, 211 N.C. 373, 190 S.E. 484 (1937).

The trial judge in the case sub judice exceeded the permissible scope of review at the hearing de novo by invoking equitable jurisdiction to enjoin the foreclosure sale.

Reversed and remanded for proceedings consistent with this opinion.

PARKER and ERWIN, JJ., concur.