In re Aldridge

• Court: Court of Appeals of North Carolina
• Decided: September 16, 2014
• Docket: 14-275
• Status: Unpublished

Opinion

An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority.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. COA14-275 NORTH CAROLINA COURT OF APPEALS

Filed: 16 September 2014

IN RE: Union County Foreclosure of Real Property No. 11 SP 578 Under Deed of Trust from GREGORY THOMAS ALDRIDGE, in the original amount of $129,500.00, dated April 2, 2007 and recorded in Book 4515, Page 789, Union County Registry

Appeal by respondent from order entered 19 September 2013

by Judge Kevin M. Bridges in Union County Superior Court. Heard

in the Court of Appeals 28 August 2014.

Brock & Scott, PLLC, by Gregory D. Spink and Graham H. Kidner, for petitioner-appellee Trustee Services of Carolina, LLC and Bank of America, N.A.

Steven D. Starnes, P.A., by Steven D. Starnes, for respondent-appellant Gregory Thomas Aldridge.

Baucom, Claytor, Benton, Morgan & Wood, P.A., by Rex C. Morgan, for third-parties-appellees Phillip Compton, Jeffrey Compton, and Debra Compton.

The Duggan Law Firm, P.C., by Christopher Duggan; and Lewis, Rice & Fingersh, L.C., by Benjamin A. Lipman, for intervenor-appellee Lawyer's Weekly, LLC.

GEER, Judge. -2- Respondent Gregory Thomas Aldridge appeals from an order

denying Mr. Aldridge's motion pursuant to Rule 60(b) of the

Rules of Civil Procedure to set aside a foreclosure sale on the

grounds that the notice of sale was not advertised in a

newspaper published in the county where the property was located

as required by N.C. Gen. Stat. § 45-21.17(1)(b) (2013). We need

not address the majority of Mr. Aldridge's arguments because (1)

we hold that he has failed to demonstrate that any error in

publication was a material irregularity, and (2) the property

was purchased by a bona fide purchaser for value without notice

of any irregularity. The trial court, therefore, properly

concluded that Mr. Aldridge was not entitled to set aside the

foreclosure sale and denied his Rule 60(b) motion.

Facts

On 2 April 2007, Mr. Aldridge executed a deed of trust in

the amount of $129,500.00 for the benefit of Bank of America,

N.A., which was recorded in Book 04515, Page 0789 in the

Register of Deeds of Union County, North Carolina. The real

property described in the deed of trust is located at 2316 Mount

Pleasant Church Road, Monroe, North Carolina, 28112. PRLAP,

Inc. was designated as trustee in the original deed of trust.

On 31 December 2010, Bank of America appointed Trustee Services

of Carolina, LLC as substitute trustee. -3- On 5 April 2011, Trustee Services of Carolina initiated a

proceeding to foreclose on the property in accordance with the

deed of trust. The foreclosure hearing was continued until 31

January 2012. On that date, the clerk entered an order allowing

the foreclosure sale. Mr. Aldridge did not appeal the order. A

notice of the foreclosure sale was published in The Mecklenburg

Times on 10 February and 17 February 2012, and Mr. Aldridge was

served with notice 20 days prior to the sale.

The foreclosure sale was held on 22 March 2012, and Bank of

America was the highest bidder. The bid remained open for 10

days and Bank of America assigned the bid to Federal Home Loan

Mortgage Corporation ("Freddie Mac"). No upset bid was made.

On 20 April 2012, Trustee Services of Carolina prepared the

final report and account of foreclosure sale for submission to

the Assistant Clerk for audit and approval in accordance with

sections 45-21.31 and 45-21.33 of the North Carolina General

Statutes.

The Assistant Clerk audited and recorded the final report

on 26 April 2012. According to the final report, the sale

generated proceeds totaling $152,390.29. The Affidavit of

Publication filed with the final report stated that The

Mecklenburg Times is a newspaper published, issued, and entered

as second-class mail in the City of Charlotte, in Mecklenburg -4- County, and meets all the requirements and qualifications of

N.C. Gen. Stat. § 1-597 to publish legal advertisements.

On 3 August 2012, Freddie Mac sold the property to Phillip

Compton for $129,900.00. On 31 August 2012, Phillip Compton

reconveyed the property to his parents, Jeffrey and Debra

Compton, since they had supplied the funds for the purchase of

the property.

On 22 March 2013, Mr. Aldridge moved under Rule 60(b) to

set aside the foreclosure sale for lack of proper notice of

sale. Judge Kevin M. Bridges heard Mr. Aldridge's motion on 29

July 2013 and entered an order on 20 August 2013 setting aside

the foreclosure sale based upon his finding that The Mecklenburg

Times is not published in Union County, North Carolina, and,

therefore, the publication of the notice of sale was not in

accordance with N.C. Gen. Stat. § 45-21.17 and was wholly

ineffective.

Thereafter, petitioners Trustee Services of Carolina and

Bank of America, the Comptons, and Lawyers Weekly, the owner of

The Mecklenburg Times, filed motions to reconsider pursuant to

Rules 59 and 60 of the Rules of Civil Procedure. On 9 September

2013, the trial court granted Lawyer's Weekly's motion to

intervene and the motions for reconsideration were heard before

Judge Bridges. -5- In an order entered 19 September 2013, the trial court

found that The Mecklenburg Times is a newspaper published in

Union County in accordance with N.C. Gen. Stat. § 45-21.17 and

that the rights of the parties to the foreclosure sale became

fixed on 3 April 2012 in accordance with N.C. Gen. Stat. § 45-

21.29A. It concluded that Mr. Aldridge's Rule 60(b) motion to

set aside the foreclosure sale was not a proper means for

challenging the sale, but rather the only legal or equitable

method available to Mr. Aldridge to enjoin or challenge the

foreclosure sale was to apply to the superior court to enjoin

the sale pursuant to N.C. Gen. Stat. § 45-21.34 prior to the

time the rights of the parties became fixed. The trial court

granted the motions for reconsideration, vacated the 20 August

2013 order setting aside the foreclosure sale, and denied Mr.

Aldridge's 22 March 2013 motion to set aside the foreclosure

sale. Mr. Aldridge timely appealed the order to this Court.

Discussion

On appeal, Mr. Aldridge argues that the trial court erred

in concluding that Rule 60(b) is not a proper mechanism for

moving to set aside a foreclosure sale pursuant to a power of

sale and that his only legal or equitable recourse was to seek

to enjoin or challenge the sale by filing suit under N.C. Gen.

Stat. § 45-21.34 (2013) prior to the time that the rights of the -6- parties to the foreclosure sale became fixed. Further, Mr.

Aldridge contends that the trial court erred in finding that The

Mecklenburg Times is published in Union County. He argues that

because The Mecklenburg Times was not published in Union County,

the advertisement of the sale was ineffective, entitling him to

have the sale set aside. Finally, Mr. Aldridge contends that

even if the property was sold to a bona fide purchaser for

value, he is entitled to have the defective foreclosure set

aside if justice requires it.

This appeal involves a foreclosure by power of sale. "'A

power of sale is a contractual arrangement in a mortgage or a

deed of trust which confer[s] upon the trustee or mortgagee the

power to sell the real property mortgaged without any order of

court in the event of a default.'" In re Foreclosure of Adams,

204 N.C. App. 318, 321, 693 S.E.2d 705, 708 (2010) (emphasis

added) (quoting In re Foreclosure of Michael Weinman Assocs.,

333 N.C. 221, 227, 424 S.E.2d 385, 388 (1993)). It is used as

"'a means of avoiding lengthy and costly foreclosures by

action,' whereby '[t]he parties have agreed to abandon the

traditional foreclosure by judicial action in favor of a private

contractual remedy to foreclose.'" Id. (quoting In re

Foreclosure of Michael Weinman Assocs., 333 N.C. at 227, 424

S.E.2d at 388). A foreclosure pursuant to a power of sale is -7- strictly regulated by Article 2A of Chapter 45 of the General

Statutes. Phil Mech. Constr. Co. v. Haywood, 72 N.C. App. 318,

322, 325 S.E.2d 1, 3 (1985).

Nevertheless, prior to exercising the power to sell the

property, N.C. Gen. Stat. § 45-21.16 (2013) requires notice to

all interested parties, a hearing before the clerk of superior

court, and an order authorizing the sale. "The intent of the

1975 General Assembly in enacting the notice and hearing

provisions of G.S. 45-21.16 was not to alter the essentially

contractual nature of the remedy, but rather to satisfy the

minimum due process requirements of notice to interested parties

and hearing prior to foreclosure and sale which the district

court in Turner v. Blackburn, 389 F. Supp. 1250 (W.D.N.C. 1975),

held that our then existing statutory procedure lacked." In re

Foreclosure of Burgess, 47 N.C. App. 599, 603, 267 S.E.2d 915,

918 (1980).

Consequently, "[b]ecause the hearing under G.S. 45-21.16 is

designed to provide a less timely and expensive procedure than

foreclosure by action, it does not resolve all matters in

controversy between mortgagor and mortgagee." In re Foreclosure

of Helms, 55 N.C. App. 68, 72, 284 S.E.2d 553, 555 (1981).

Rather, any other issues that arise regarding the foreclosure

proceedings should be asserted in a separate action and -8- "equitable defenses to the foreclosure, . . . should be asserted

in an action to enjoin the foreclosure sale under G.S. 45–

21.34." Id.

Once the clerk authorizes the foreclosure sale, the parties

may proceed with the sale in accordance with the statute. After

the sale is held, the rights of the parties to the sale become

fixed automatically if no upset bid is filed within the period

specified by statute. N.C. Gen. Stat. § 45-21.29A (2013).

Significantly, unlike a judicial foreclosure, further judicial

action in the form of an order of confirmation of sale is not

required to complete the sale. As explained in Certain-Teed

Prods. Corp. v. Sanders, 264 N.C. 234, 244, 141 S.E.2d 329, 336

(1965), "[w]here a foreclosure sale is conducted in accordance

with the provisions of Article 2A of Chapter 45 of the General

Statutes, and no upset bid is filed as provided in G.S. 45-

21.27, there is no legal requirement that the clerk either

confirm the sale or direct the execution of a trustee's deed as

a prerequisite to legal consummation of such sale by the

trustee."

Although no confirmation of sale is required, N.C. Gen.

Stat. § 45-21.33 (2013) mandates a final report of the sale and

an audit by the clerk of superior court:

(a) A person who holds a sale of real property pursuant to a power of sale shall -9- file with the clerk of the superior court of the county where the sale is held a final report and account of his receipts and disbursements within 30 days after the receipt of the proceeds of such sale. . . .

(b) The clerk shall audit the account and record it.

(c) The person who holds the sale shall also file with the clerk --

(1) A copy of the notices of sale and resale, if any, which were posted, and

(2) A copy of the notices of sale and resale, if any, which were published in a newspaper, together with an affidavit of publication thereof, if the notices were so published;

(3) Proof as required by the clerk, which may be by affidavit, that notices of hearing, sale and resale were served upon all parties entitled thereto under G.S. 45-21.16, 45-21.17, 45- 21.17A, and 45-21.30. In the absence of an affidavit to the contrary filed with the clerk, an affidavit by the person holding the sale that the notice of sale was posted in the area designated by the clerk of superior court for posting public notices in the county or counties in which the property is situated 20 days prior to the sale shall be proof of compliance with the requirements of G.S. 45- 21.17(1)a. -10-

"[T]he clerk's audit pursuant to section 45–21.33(a) and

(b) is a ministerial act that is limited to determining merely

'whether the entries in the report reflect the actual receipts

and disbursements made by the trustee' in the absence of a grant

of original jurisdiction to determine additional matters." In

re Foreclosure of Vogler Realty, Inc., 365 N.C. 389, 396, 722

S.E.2d 459, 464 (2012) (quoting In re Foreclosure of Webber, 148

N.C. App. 158, 161, 557 S.E.2d 645, 647 (2001)). However, N.C.

Gen. Stat. § 45-21.34 provides that "[a]ny owner of real estate,

or other person, firm or corporation having a legal or equitable

interest therein, may apply to a judge of the superior court,

prior to the time that the rights of the parties to the sale or

resale becoming fixed pursuant to G.S. 45-21.29A to enjoin such

sale, upon the ground that the amount bid or price offered

therefor is inadequate and inequitable and will result in

irreparable damage to the owner or other interested person, or

upon any other legal or equitable ground which the court may

deem sufficient[.]"

Our Supreme Court has held that N.C. Gen. Stat. § 45-21.34

does not affect a party's right to set aside a foreclosure sale

in addition to seeking to enjoin the sale. Swindell v. Overton,

310 N.C. 707, 714, 314 S.E.2d 512, 517 (1984). In Swindell, the

plaintiff brought an action to have a foreclosure sale set aside -11- because the trustee improperly conducted the foreclosure sale by

selling two tracts of land together, which resulted in a sales

price below the fair market value of the properties if sold

separately. Id. at 710, 314 S.E.2d at 515. This Court held

that the plaintiffs could not seek to set aside the foreclosure

sale because their action was not brought until after the sale

was confirmed. Id. at 711, 314 S.E.2d at 515.

The Supreme Court reversed, holding that a power of sale

foreclosure sale may be set aside upon a showing of a material

and prejudicial irregularity in the sale. Id. at 713, 314

S.E.2d at 517. The Court further explained:

Our holding today is not affected by N.C.G.S. 45-21.34, .35. These statutes limit injunctive relief in foreclosure proceedings. Here, we are applying common law equitable principles to set aside a foreclosure sale. These principles are unaffected by these statutes.

Id. at 714, 314 S.E.2d at 517. Thus, a party is not barred from

bringing an independent action to set aside a foreclosure sale

after the rights of the parties to the sale have become fixed.

Id. at 712, 314 S.E.2d at 516.

With respect to an action to set aside a foreclosure sale,

the Court explained:

[I]t is the materiality of the irregularity in such a sale, not mere inadequacy of the purchase price, which is determinative of a decision in equity to set the sale aside. -12- Where an irregularity is first alleged, gross inadequacy of purchase price may then be considered on the question of the materiality of the irregularity. Where inadequacy of purchase price is necessary to establish the materiality of the irregularity, it must also appear that the irregularity or unusual circumstance caused the inadequacy of price.

Id. at 713, 314 S.E.2d at 516 (internal citations omitted).

Thus, "[u]nder Swindell, the trial court [is] required (1) to

evaluate the adequacy of the sales price, (2) to identify

whether any irregularities occurred in connection with the sale,

and (3) to determine if the irregularities were material."

Beneficial Mortg. Co. of N.C. v. Peterson, 163 N.C. App. 73, 80,

592 S.E.2d 724, 728 (2004).

Here, even assuming without deciding, that a party could

proceed under Rule 60(b) rather than through an independent

action, Mr. Aldridge has not shown a material and prejudicial

irregularity sufficient to set aside the sale. He has merely

identified an irregularity in procedure: that notice of sale was

not advertised in a newspaper published in Union County as

required by N.C. Gen. Stat. § 45-21.17. Mr. Aldridge makes no

argument as to how this purported irregularity was material or

that the sales price was inadequate other than making the

conclusory assertion that the defect in publication was a

serious defect. -13- This Court explained in Beneficial Mortgage Company that

"[i]n deciding whether an irregularity is material, we must look

at its natural and probable effect on the sales price.

Potential effect and not actual effect is all that is required

if the ultimate sales price is grossly inadequate: Actuality of

injury is not a prerequisite of relief. The potentialities of

the error, considered in connection with the grossly inadequate

price, compel the conclusion that the irregularity in the sale

was material and prejudicial -- sufficient in nature to justify

the interposition of a court of equity." 163 N.C. App. at 83,

592 S.E.2d at 730 (internal citation and quotation marks

omitted).

Mr. Aldridge has made no attempt to show that the sales

price was grossly inadequate. As a result, he has not shown

that any irregularity in the advertisement of the sale was

material and prejudicial. Without such a showing, he was not

entitled to seek to set aside the sale after the rights of the

parties to the sale had become fixed. Compare id. ("Given the

potential effect that the irregularities had on the sales price

for the Dixes' home combined with the gross inadequacy of the

ultimate sales price, we hold that the trial court did not err

in setting aside the sale."). -14- In addition, our Supreme Court has held that "where the

defect in a foreclosure sale renders the sale voidable . . . the

mortgagor's right of redemption can be cut off if the land is

bought by a bona fide purchaser for value without notice. In

such instances, a plaintiff is left with an action for damages

against the trustee as his only remedy." Swindell, 310 N.C. at

714, 314 S.E.2d at 517. Here, Mr. Aldridge did not move to set

aside the foreclosure until after the property was sold first to

Freddie Mac and then to the Comptons. Mr. Aldridge does not

challenge the trial court's finding that the Comptons are bona

fide purchasers for value without notice of any alleged defects

in the foreclosure sale. Consequently, even assuming the

advertisement of the sale was defective, Mr. Aldridge's right of

redemption was cut off when the Comptons purchased the property.

Mr. Aldridge's only remaining remedy is to sue the trustee for

breach of fiduciary duty.

While Mr. Aldridge argues that the defective advertisement

of the sale was such a serious defect that he should still be

able to proceed notwithstanding the bona fide purchaser for

value, our Supreme Court rejected his argument in Phipps v.

Wyatt, 199 N.C. 727, 155 S.E. 721 (1930). In Phipps, the

appellant argued that an improper advertisement of the sale

combined with a grossly inadequate sales price entitled him to -15- set aside the sale notwithstanding the existence of a bona fide

purchaser for value. Id. at 732, 155 S.E. at 723. The Court

explained that "[w]hile such sale would be set aside as to the

purchaser, a subsequent or remote grantee without notice and in

good faith takes a good title against such defects or

irregularities in the sale of which he had no notice." Id. at

731-32, 155 S.E. at 723.

Based on Swindell and Phipps, we hold that the trial court

properly concluded that Mr. Aldridge did not establish a basis

for setting aside the foreclosure sale. For that reason, the

trial court did not err in denying Mr. Aldridge's Rule 60(b)

motion, and we affirm.

Affirmed.

Judge STEELMAN concurs.

Judge ROBERT N. HUNTER, JR. concurred in this opinion prior

to 6 September 2014.

Report per Rule 30(e).