An unpublished opinion of the North Carolina Court of Appeals does not constitute 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. COA13-1396

NORTH CAROLINA COURT OF APPEALS

Filed: 2 September 2014

IN THE MATTER OF THE FORECLOSURE OF A 

DEED OF TRUST EXECUTED BY CLARENCE L. 

GIBBS AND DEBORAH B. GIBBS IN THE 

ORIGINAL AMOUNT OF $1,280,000.00 DATED 

MAY 16, 2006, RECORDED IN BOOK 1686, 

PAGE 322, DARE COUNTY REGISTRY

SUBSTITUTE TRUSTEE SERVICES, INC., 

SUBSTITUTE TRUSTEE

Dare County

No. 09 SP 380

Appeal by respondents from order entered 15 July 2013 by 

Judge John E. Nobles, Jr., in Dare County Superior Court. Heard 

in the Court of Appeals 23 April 2014.

The Law Office of John T. Benjamin, Jr., P.A., by John T. 

Benjamin, Jr., and James R. White, for Petitioner-Appellee.

Phillip H. Hayes for Respondents-Appellants.

ERVIN, Judge.

Respondents Clarence L. Gibbs and Deborah B. Gibbs appeal 

from a 15 July 2013 order allowing a foreclosure sale to 

proceed. On appeal, Respondents challenge several of the trial 

court’s findings of fact and conclusions of law on the grounds 

that Petitioner U.S. Bank National Association, as Trustee for 

Citigroup Mortgage Loan Trust, Inc. 2006-AR7, Mortgage-Backed 
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Notes, Series 2006-AR7, had failed to establish that it was the 

holder of the note evidencing Respondents’ indebtedness and

could not, for that reason, foreclose upon their property. 

After careful consideration of Respondents’ challenges to the 

trial court’s order in light of the record and the applicable 

law, we conclude that the trial court’s order should remain 

undisturbed.

I. Factual Background

Respondents own a house and lots located at 130 Fort Hugar 

Way in Manteo. On 16 May 2006, First Independent Mortgage 

Company loaned Respondents $1,280,000.00, with the resulting 

debt being evidenced by a note and secured by a deed of trust 

recorded at Book 1686, Page 322, in the office of the Register 

of Deeds of Dare County. According to the note and related deed 

of trust, Respondents were required to make monthly payments of 

principal and interest, with any failure to make these payments

sufficient to constitute an act of default.

As a result of Respondents’ failure to make the monthly 

payments required under the terms of the note and deed of trust,

Substitute Trustee Services, Inc., acting in its capacity as

substitute trustee under the deed of trust, initiated 

foreclosure proceedings on 8 June 2009. Although they entered 

into a forbearance agreement with the lender on 20 October 2009, 
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that agreement was terminated when Respondents failed to make 

required payments. After entering into a second forbearance 

agreement with the lender on 4 October 2010, Respondents failed 

to comply with the terms of that agreement as well. According 

to the language contained in these forbearance agreements, 

efforts to foreclose under the deed of trust were authorized 

following termination of the agreement.

On 7 June 2011, the substitute trustee filed an amended 

notice of hearing prior to foreclosure sale.

1 The foreclosure 

proceeding came on for hearing on 4 May 2012 before Anita C. 

Simpson, Assistant Clerk of Superior Court for Dare County. At 

the conclusion of that hearing, the Assistant Clerk entered an 

order allowing the substitute trustee to conduct a foreclosure 

sale in accordance with the terms of the deed of trust. On 11 

May 2012, Respondents noted an appeal to the Dare County 

Superior Court from the Assistant Clerk’s order.

Respondents’ appeal came on for hearing at the 15 July 2013 

civil session of the Dare County Superior Court. At the 

hearing, Petitioner introduced the affidavit of Kimberly 

Mueggenberg, the vice president of loan documentation for Wells 

Fargo Bank, N.A., which established that Wells Fargo was the 

 

1In the initial notice of sale, the petitioner was named as 

Citigroup Global Markets Realty Corp., care of Wells Fargo Bank, 

N.A. The amended petition named Petitioner as the lender 

instead of Citigroup.
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servicing agent associated with the underlying loan and 

maintained custody of the business records associated with 

Respondents’ account. According to those records, which were 

made in the regular course of Wells Fargo’s business at or near 

the time of the events recorded in those records and which were

based upon the personal knowledge of the person making the 

entries reflected in those records, First Independent Mortgage 

Company indorsed Respondents’ note to American Home Mortgage 

Corporation prior to 11 September 2006, while American Home 

Mortgage Corporation indorsed the note “in blank” prior to 24 

April 2009. Subsequently, Respondents’ note was specifically 

indorsed to Petitioner,2 who currently possessed the original 

note and had indorsed it “in blank.” A number of exhibits were 

attached to Ms. Mueggenberg’s affidavit, including a copy of the 

note and deed of trust. In addition to Ms. Mueggenberg’s 

affidavit, Petitioner introduced the original note into evidence 

at the hearing. Although Respondents conceded the existence of

a valid debt, that they had received notice of the proceeding, 

and that they were in default, they objected to the legal 

conclusions contained in Ms. Mueggenberg’s affidavit concerning

 

2The conversion of an indorsement in blank to a specific 

endorsement is specifically authorized by N.C. Gen. Stat. § 25-

3-205(c).
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Petitioner’s status as the holder of the note and as to the 

legal effectiveness of the indorsements reflected on the note.

On 15 July 2013, the trial court entered an order allowing 

the substitute trustee to proceed with the foreclosure sale. In 

its order, the trial court found as fact that the note had been

indorsed by First Independent Mortgage to American Home Mortgage

prior to 11 September 2006, had been indorsed “in blank” by 

American Home Mortgage prior to 24 April 2009, had been

specifically indorsed by American Home Mortgage to Petitioner,

and had then been indorsed by Petitioner “in blank.” Based on 

these findings and the other evidence contained in the record, 

the trial court concluded that the note evidenced a valid debt 

owed by Respondents, that Petitioner was the holder of the note, 

that Respondents were in default under the note and deed of 

trust, that the deed of trust contained a power of sale 

provision authorizing Petitioner to foreclose in the event of a 

default, and that the proposed foreclosure sale was not barred 

by N.C. Gen. Stat. § 45–21.12A. As a result, the trial court 

authorized the substitute trustee to proceed with the 

foreclosure sale in accordance with the terms set out in the 

deed of trust. Respondents noted an appeal to this Court from 

the trial court’s order.

II. Substantive Legal Analysis
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On appeal, Respondents argue that the trial court erred in 

the course of determining that Petitioner was the holder of the 

note that evidenced their indebtedness. More specifically,

Respondents challenged the sufficiency of the evidence to 

support the trial court’s findings of fact relating to the 

validity of the indorsements on the note and the trial court’s 

conclusion of law that Petitioner held Respondents’ note and was

entitled to proceed with a foreclosure sale pursuant to N.C. 

Gen. Stat. § 45-21.16. Respondents’ arguments lack merit.

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.’” In re Bass, 366 N.C. 

464, 467, 738 S.E.2d 173, 175 (2013) (quoting Knutton v. 

Cofield, 273 N.C. 355, 359, 160 S.E.2d 29, 33 (1968)). 

“‘Conclusions of law drawn by the trial court from its findings 

of fact are reviewable de novo on appeal.’” Id. (quoting 

Carolina Power & Light Co. v. City of Asheville, 358 N.C. 512, 

517, 597 S.E.2d 717, 721 (2004)). We will now utilize the 

applicable standard of review to evaluate the validity of 

Respondents’ challenges to the trial court’s order.
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B. Analysis of the Trial Court’s Order

1. Challenges to the Trial Court’s Findings

As an initial matter, Respondents argue that the trial 

court made several findings of fact concerning the indorsements

that had been made with respect to the note on the grounds that 

the record was devoid of sufficient competent evidence to 

establish that the various indorsements had been made by 

individuals with the authority to act in that manner and at the 

time specified in the trial court’s findings. More 

specifically, Respondents contend that the record did not 

contain sufficient evidence to establish that the note had been

indorsed by First Independent Mortgage to American Home 

Mortgage, that American Home Mortgage indorsed the note in 

blank, that the note was subsequently indorsed to Petitioner,

that Petitioner indorsed the note in blank, and that any of 

these indorsements had been made at any particular point in 

time. Respondents’ arguments lack merit.

“An indorsement is ‘a signature . . . that alone or 

accompanied by other words is made on an instrument for the 

purpose of . . . negotiating the instrument.’” Bass, 366 N.C. 

at 468, 738 S.E.2d at 176 (quoting N.C. Gen. Stat. § 25–3–

204(a)). “If an indorsement is made by the holder of an 

instrument, whether payable to an identified person or payable 
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to bearer, and the indorsement identifies a person to whom it 

makes the instrument payable, it is a ‘special indorsement’.” 

N.C. Gen. Stat. § 25–3–205(a). “If an indorsement is made by 

the holder of an instrument and it is not a special indorsement, 

it is a ‘blank indorsement.’ When indorsed in blank, an 

instrument becomes payable to bearer and may be negotiated by 

transfer of possession alone until specially indorsed.” N.C. 

Gen. Stat. § 25–3–205(b). According to well-established North 

Carolina law, there is a strong presumption in favor of the 

legitimacy of indorsements in order 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 

468, 738 S.E.2d at 176.

In its order, the trial court found as a fact that the note 

had been indorsed by First Independent Mortgage to American Home 

Mortgage prior to 11 September 2006; that the note had been

indorsed “in blank” by American Home Mortgage Corporation prior 

to 24 April 2009; that the note had subsequently been

specifically indorsed to Petitioner; and that Petitioner had

indorsed the note “in blank.” Respondents challenge the

sufficiency of the evidentiary support for these findings on the 

grounds that Ms. Mueggenberg’s affidavit did not contain any 

information explaining the specific basis for the assertion that
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the indorsements were authentic, that they had been made by 

individuals who were properly authorized to act in that manner, 

and that they were made at the time indicated in the affidavit

concerning the authenticity of the indorsements. In support of 

this series of assertions, Respondents rely upon this Court’s 

decision in In re Bass, 217 N.C. App. 244, 253-55, 720 S.E.2d 

18, 25-27 (2011), in which we stated that “an indorsement does 

not prove itself, but must be established . . . by proper 

testimony[,]” and that, when a party challenges a signature, the 

burden of proving the validity of the signature, and in this 

case, the indorsement is on the Petitioner, and held that “the 

burden properly remained upon Petitioner to prove [the] validity 

[of the indorsements].”

Unfortunately for Respondents, however, the Supreme Court 

overruled our decision in Bass, expressly rejecting the 

contention that the petitioner bore the burden of proving the

validity of the indorsement and stating, instead, that “[a]

signature[, or indorsement, on a Note] is presumed to be 

authentic and authorized . . . until some evidence is introduced 

which would support a finding that the signature is forged or 

unauthorized.” Bass, 366 N.C. at 470, 738 S.E.2d at 177

(citations omitted). Based upon that logic, the Supreme Court 

held that, “[u]ntil the defendant produces such evidence, the 
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plaintiff is not required to prove that [the signature] is 

valid,” with the defendant being “required to make some 

sufficient showing of the grounds for the denial before the 

plaintiff is required to introduce evidence.” Id. (citation 

omitted). In support of this determination, the Supreme Court 

noted that “[t]he UCC drafters’ strong presumption in favor of 

the legitimacy of indorsements protects the transfer of 

negotiable instruments by giving force to the information 

presented on the face of the instrument.” Id. at 468, 738 

S.E.2d at 176. As a result, Respondents were required to elicit 

evidence calling the validity of the indorsements into question 

before Petitioner had any obligation to establish their 

authenticity and validity.

The original note presented by Petitioner at the hearing 

evidenced the following indorsements: First Independent 

Mortgage to American Home Mortgage; American Home Mortgage 

Corporation to Petitioner; and Petitioner “in blank.” A careful 

examination of the record reveals the presence of no evidence

that casts any doubt upon the authenticity or validity of the 

indorsements shown on the original note or indicates that the 

indorsements were not made at the time specified in Ms. 

Mueggenberg’s affidavit. In light of the Supreme Court’s 

holding in Bass that an indorsement on a note is “presumed to be 
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authentic and authorized . . . until some evidence is introduced 

which would support a finding that the signature is forged or 

unauthorized” and the fact that Respondents have not introduced 

any evidence tending to show that the indorsements were neither 

authentic nor authorized, we conclude that Respondents’

challenges to the trial court’s order based on the absence of 

evidence tending to show the validity and authenticity of the 

indorsements lack merit. Bass, 366 N.C. at 470, 738 S.E.2d at 

177 (stating that the respondent’s “bare assertions, with no 

supporting evidence, did not amount to a sufficient showing of 

the grounds for the denial”) (citation omitted).

In addition, Respondents contend that the trial court 

erroneously concluded that Petitioner had proved that it, as 

Trustee, was authorized to hold the note. In support of this 

argument, Respondents argue that Ms. Mueggenberg’s affidavit 

does not contain any assertion that she had reviewed the 

relevant pooling agreement to determine whether Petitioner was, 

in fact, entitled to proceed with the foreclosure process. N.C. 

Gen. Stat. § 25-3-110(c)(2) provides, however, that, “[i]f an 

instrument is payable to . . . a trust, an estate, or a person 

described as trustee or representative of a trust or estate, the 

instrument is payable to the trustee, the representative, or a 

successor of either, whether or not the beneficiary or estate is 
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also named[.]” As we have already noted, the note at issue here 

was specifically indorsed to Petitioner U.S. Bank National 

Association, as Trustee for Citigroup Mortgage Loan Trust, Inc. 

2006-AR7, Mortgage-Backed Notes, Series 2006-AR7, before being

indorsed “in blank.” As a result, contrary to Respondents’

contention, trustees like Petitioner are authorized to hold the 

note in a foreclosure proceeding without any necessity for the 

affidavit to address the pooling agreement.

Finally, Respondents argue that the fact that Petitioner 

had indorsed the note in blank suggested that Petitioner 

intended to transfer the note to a third party, a fact that 

effectively precluded the trial court from concluding that 

Petitioner held the note. However, N.C. Gen. Stat. § 25-3-

205(b) provides that, “[w]hen indorsed in blank, an instrument 

becomes payable to bearer and may be negotiated by transfer of

possession alone until specially indorsed.” Thus, given that

the existence of an indorsement in blank does not establish that 

a note has been transferred and that Petitioner was in 

possession of the note at the time of the hearing, Respondents’ 

argument is devoid of legal or factual support. As a result, 

none of Respondents’ challenges to the trial court’s findings 

relating to Petitioner’s status as the holder of Respondents’ 

note have merit.
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2. Challenges to the Trial Court’s Conclusions

In addition to challenging the trial court’s findings of 

fact relating to the issue of whether Petitioner held 

Respondents’ note, Respondents argue that the trial court 

erroneously concluded that Petitioner was the holder of 

Respondents’ note. Once again, we conclude that Respondents’ 

contention has no merit.

A trustee under a deed of trust is entitled to foreclose 

upon a tract of real property in the event that there is “(i) 

[a] valid debt of which the party seeking to foreclose is the 

holder, (ii) default, (iii) [a] right to foreclose under the 

instrument, [and] (iv) notice to those entitled to such . . . .” 

Bass, 366 N.C. at 467, 738 S.E.2d at 175; N.C. Gen. Stat. § 45-

21.16(d). “In order to find that there is sufficient evidence 

that the party seeking to foreclose 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 Manning, __ N.C. App. __, __, 747 S.E.2d 286, 

291 (2013). The extent to which a particular party is the 

holder of a note is a question of law controlled by the Uniform 

Commercial Code, as adopted and codified in Chapter 25 of the 

North Carolina General Statutes. Bass, 366 N.C. at 467, 738 

S.E.2d at 175-76.
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The holder of a negotiable instrument is “the person in 

possession of a negotiable instrument that is payable either to 

bearer or to an identified person that is the person in 

possession[.]”3 N.C. Gen. Stat. § 25-1-201(b)(21)(a). “[I]n 

determining whether a person is a holder[,] [i]t is the fact of 

possession which is significant . . . and the absence of 

possession defeats that status.” Connolly v. Potts, 63 N.C. 

App. 547, 550, 306 S.E.2d 123, 125 (1983). “‘[M]ere possession’ 

of a note by a party to whom the note has neither been indorsed 

nor made payable ‘does not suffice to prove ownership or holder 

status.’” In re Adams, 204 N.C. App. 318, 323, 693 S.E.2d 705, 

710 (2010) (quoting Econo-Travel Motor Hotel Corp. v. Taylor, 

301 N.C. 200, 203, 271 S.E.2d 54, 57 (1980)). However, “[w]hen 

indorsed in blank, an instrument becomes payable to bearer and 

may be negotiated by transfer of possession alone until 

specially indorsed.” N.C. Gen. Stat. § 25–3–205(b).

According to the undisputed record evidence, Petitioner was 

in possession of the original note at the time of the hearing.

As a general proposition, the instances in which this Court has 

 

3The term “‘[p]erson’ means an individual, corporation, . . 

. or any other legal or commercial entity,” N.C. Gen. Stat. § 

25–1–201(b)(27), while the term “bearer” is “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).
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held that possession of the original note did not suffice to 

show that the person in possession is the “holder” involved 

situations in which 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.” Manning, __ 

N.C. App. at __, 747 S.E.2d at 292; see e.g., In re David A. 

Simpson, P.C., 211 N.C. App. 483, 492, 711 S.E.2d 165, 172

(2011). Neither of these factual patterns is present in this 

case. Instead, consistent with the trial court’s findings, the

record reflects that Petitioner presented the original note to 

the trial court for inspection at the hearing. In addition, as 

Respondents concede, the note contained an indorsement in blank

executed by Petitioner. As a result, given that Petitioner was 

in possession of the original note and that the note in question 

had been indorsed in blank, the record sufficed to support the 

trial court’s conclusion that Petitioner was the holder of the 

note. Manning, __ N.C. App. at __, 747 S.E.2d at 292 (holding 

that the petitioner’s presentation of the original note, which 

had been properly indorsed in blank, to the trial court 

sufficiently supported the trial court’s finding that the 

petitioner was the present note holder).
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In addition, Ms. Mueggenberg’s affidavit contained 

additional evidence tending to show that Petitioner held 

Respondents’ note. In her affidavit, Ms. Mueggenberg stated 

that, based upon her review of the mortgage loan account’s 

business records, she had personal knowledge that “[Petitioner] 

has indorsed the subject note ‘in blank,’” and that 

“[Petitioner] currently has possession of the subject note.” 

After carefully reviewing the record, we see no basis for 

determining that the trial court abused its discretion by

admitting the Mueggenberg affidavit into evidence. Simpson at 

488, 711 S.E.2d at 170 (holding that the trial court is entitled 

to exercise its sound discretion in receiving documents into 

evidence at a foreclosure proceeding, with appellate review of 

such decisions being limited to determining whether there was a 

clear abuse of discretion). As a result, for all of these 

reasons, we are satisfied that the record adequately supports

the trial court’s conclusion that Petitioner was the current 

holder of Respondents’ note.

4

 

4In a recent case addressing a similar issue, this Court 

stated that, “[w]here petitioner, at a foreclosure hearing 

before the trial court, produced the original mortgage loan note 

reflecting a blank indorsement and an affidavit stating that the 

lienholder was in possession of the Note, such was sufficient to 

establish the lienholder as the holder of the Note.” In re 

Cornish, __ N.C. App. __, __, 757 S.E.2d 526, 526 (2014) 

(unpublished). Although we are not bound by our prior 

unpublished decisions, see United Services Automobile Assn. v. 
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Finally, Respondents argue that the trial court erred by 

finding as a fact that the original note had continuously been 

in Petitioner’s physical possession since prior to 15 April 2009 

on the grounds that Petitioner introduced evidence that another 

entity held the note after that date. In support of this 

contention, Respondents point out that the record contained 

information tending to show that, on 4 May 2009, Citigroup 

Global Markets Realty Corporation held Respondents’ note. 

Although the information upon which Respondents rely in 

advancing this assertion does appear in the record, the 

Mueggenberg affidavit stated, and the trial court found, that 

Petitioner had maintained physical possession of the note since 

prior to 15 April 2009. As a result, given that the trial 

court’s findings “are conclusive on appeal if there is evidence 

to support them, even though the evidence might sustain a 

finding to the contrary,” Bass, 366 N.C. at 467, 738 S.E.2d at 

175, and the fact that the challenged finding has adequate 

evidentiary support, the existence of the inconsistency in the 

record upon which Respondents’ argument rests is of no 

 

Simpson, 126 N.C. App. 393, 396, 485 S.E.2d 337, 339, disc. 

review denied, 347 N.C. 141, 492 S.E.2d 37 (1997) (holding that 

this Court is not bound by a prior unpublished decision made by 

another panel of this Court), we believe that Cornish sheds 

additional light on our decision that the record contains 

sufficient evidence to establish that Petitioner held 

Respondents’ note.
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consequence. Moreover, even if the trial court erred in the 

course of making this finding, any such error would clearly be

harmless given the trial court’s finding that Petitioner 

possessed the original note, which had been indorsed in blank,

at the time of the hearing. Manning, __ N.C. App. at __, 747 

S.E.2d at 292; In re T.M., 180 N.C. App. 539, 547, 638 S.E.2d 

236, 240-41 (2006) (stating that, in the event that other 

findings support the trial court’s decision, the presence of one 

or more unsupported or erroneous findings constitutes harmless 

error). As a result, Respondents are not entitled to relief 

from the trial court’s judgment on the basis of their challenge 

to the trial court’s conclusion that Petitioner held 

Respondents’ note.

III. Conclusion

Thus, for the reasons set forth above, we conclude that

none of Respondents’ challenges to the trial court’s order have 

merit. As a result, the trial court’s order should be, and 

hereby is, affirmed.

AFFIRMED.

Judges GEER and STEPHENS concur.

Report per Rule 30(e).