Court Opinion

ID: 2728958
Source: CourtListenerOpinion
Date Created: 2014-09-08 21:37:49.64243+00
Date Added: 2024-06-11T15:43:43.386875
License: Public Domain

An unpublished opinion of the North Carolina Court of Appeals does not constitute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. COA13-1015
                         NORTH CAROLINA COURT OF APPEALS

                                 Filed: 18 March 2014

In the Matter of the
Foreclosure of a Deed of
Trust Executed by Fabio Lopez
and Kathleen Englund Lopez,
dated November 28, 2007 and
recorded in Book 2878 at Page 1574
in the Catawba County Public
Registry, North Carolina.
                                              Catawba County
                                              No. 11 SP 841

      Appeal by respondents from order entered 29 April 2013 by

Judge   Timothy     S.    Kincaid    in   Catawba      County   Superior    Court.

Heard in the Court of Appeals 21 January 2014.

      SHAPIRO & INGLE, LLP, by Jason K. Purser, for petitioner-
      appellee.

      FERIKES & BLEYANT, PLLC,              by    H.    Gregory    Johnson,     for
      respondents-appellants.

      ELMORE, Judge.

      Fabio     Lopez      and     his    wife     Kathleen       Englund     Lopez

(respondents) appeal from the trial court’s order authorizing

U.S. Bank National Association (petitioner or U.S. Bank), as
                                         -2-
substitute trustee, to proceed with foreclosure under a power of

sale on the deed of trust recorded in Book 2878 at Page 1574 in

the Catawba County Register of Deeds.                 We affirm.

                                   I.     Background

       On 29 November 2007, Fabio Lopez executed an adjustable

rate    promissory    note      (the    Note)    to    purchase    a    second    home

located at 6977 Golden Bay Court, Sherrils Ford, North Carolina

28673.     According to the terms of the Note, Mr. Lopez promised

to pay a principal amount of $527,200.00 plus interest to Wells

Fargo Bank, National Association (Wells Fargo).                        The Note was

secured    by   a   deed   of    trust,    executed      by   respondents        on    28

November 2007.

       On or about 1 May 2011, respondents ceased paying on the

Note.     Wells Fargo sent a forty-five day pre-foreclosure notice

to respondents on 24 July 2011.                 In October 2011, Wells Fargo,

through its substitute trustee, filed this foreclosure action

after respondents failed to make timely payments.                       Prior to the

initial foreclosure proceeding, Wells Fargo sold the loan and

transferred possession of the Note to U.S. Bank.                         Respondents

were     notified    by    Rushmore       Loan        Management       Services       LLC

(Rushmore) that the servicing of their loan had been assigned,
                                   -3-
sold, or transferred from Marix Servicing LLC to Rushmore and

that the new creditor was U.S. Bank effective May 2012.

    On 13 November 2012, the matter came on for hearing before

the Catawba County Clerk of Court.           The Clerk entered an order

authorizing U.S. Bank, as legal title trustee, to foreclose on

the subject property pursuant to N.C. Gen. Stat. § 45-21.16.

Respondents appealed.

    The appeal was originally calendared for a de novo hearing

in Catawba County Superior Court on 25 March 2013.              However,

Judge     Timothy   S.   Kincaid   granted    respondents’   motion   for

continuance and subsequently moved the matter to the 22 April

2013 court session.        On 11 April 2013, Mr. Lopez wrote the

Catawba County Clerk of Court to request a second continuance on

the basis that he had a scheduling conflict.          On 19 April 2013,

the Friday before the hearing, Mr. Lopez wrote directly to Judge

Richard Boner to request a continuance.           There is no evidence

that Judge Boner received the letter and ruled on Mr. Lopez’s

motion.

    Respondents failed to appear at the 22 April hearing.              As

such, there is no transcript of this proceeding.             The record

reflects that counsel for U.S. Bank presented the trial court

with the subject Note, the deed of trust, the appointment of
                                             -4-
substitute trustee, and the affidavit of default executed by

Rose Lara, officer of Rushmore and servicer for U.S. Bank (the

Lara affidavit).          Pursuant to N.C. Gen. Stat. § 45-21.16(d),

Judge    Kincaid      found:      (1)    a     valid     debt,       (2)   default      by

respondents, (3) proper notice of the foreclosure proceeding,

and (4) U.S. Bank was the holder of the Note.                              As such, he

entered an order permitting foreclosure on 29 April 2013.

                                        II. Analysis

  A. Preservation of Appeal

      As a preliminary matter we must determine whether we may

hear respondents’ appeal.               Rule 10(a)(1) of the North Carolina

Rules    of   Appellate       Procedure       generally        requires    a   party    to

object   at   trial      in   order     to    preserve     an     issue    for    appeal.

N.C.R. App. P. 10(a)(1) (2013).                Respondents could not object to

the   entry   of    evidence     at     the    hearing    because      they      were   not

there.    Petitioner argues that a dismissal is warranted because

respondents failed to preserve any error for appeal.                             We agree

that respondents failed to preserve their right to challenge the

entry of specific evidence.              However, Rule 10(a)(1) contains an

exception     for   an    issue       “which       by   rule    or   law   was     deemed

preserved or taken without any such action, including, but not

limited to, whether the judgment is supported by the verdict or
                                 -5-
by the findings of fact and conclusions of law[.]”      N.C.R. App.

P. 10(a)(1).     Thus, we are limited to determining whether error

appears on the face of the record; we will not re-weigh evidence

or address unpreserved issues.

  B. Note “Holder”

    In a foreclosure by power of sale, the trial court shall

enter an order permitting foreclosure upon finding:      “(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[.]”      N.C. Gen. Stat. § 45-21.16(d)

(2013).     Here, respondents challenge the first element of N.C.

Gen. Stat. § 45-21.16(d) on the basis that U.S. Bank failed to

produce competent evidence that it was the current holder of a

valid debt.    “This issue is a question of law controlled by the

UCC [Uniform Commercial Code], as adopted in Chapter 25 of the

North Carolina General Statutes.”       In re Bass, 366 N.C. 464,

___, 738 S.E.2d 173, 176 (2013).        We conclude that the trial

court did not err.

    When determining whether a party 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 Adams, 204 N.C. App. 318, 321-22, 693 S.E.2d
                                         -6-
705,    709    (2010)    (citations       and     quotations     omitted).            As

respondents        concede    that   a   valid    debt    exists,   we    need    only

discern whether petitioner is the current note holder.                     The term

“holder”      is    defined    as    “[t]he      person   in    possession       of    a

negotiable instrument that is payable either to bearer or to an

identified person that is the person in possession.”                      N.C. Gen.

Stat. § 25-1-201(b)(21)(a) (2013).                The term “bearer” is defined

as “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) (2013).             There is a strong presumption in

favor of the legitimacy of indorsements 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

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

       On appeal, the crux of respondents’ argument is that U.S.

Bank failed to supplement the Lara affidavit with documentation

adequately “proving that it was the legal owner and holder” of

the Note.      Respondents aver that “a party must prove that it is

both the owner and holder of the promissory note” before it has

the right to foreclose on a negotiable instrument.                       Respondents
                                            -7-
ask:    “Was the note sold or transferred to US [sic] Bank?                      Or to

US Bank as legal title trustee?                And, if as legal title trustee,

for what trust?           Does that trust have the legal capacity to hold

this note and deed of trust?                Does the legal title trustee have

the legal authority to pursue the foreclosure?”                        Respondents

conclude:      “Nothing in the Lara affidavit or attached exhibits

address these essential legal questions.”                    Further, respondents

challenge the indorsement on the Note, namely because the face

of   the   instrument        shows     a    blank   indorsement    that    has    been

crossed      out    or     voided,     leaving      a   second,   undated,       blank

indorsement.         Respondents contend, “[t]hese [i]ndorsements fail

to demonstrate when the alleged sale or transfer occurred and to

whom   the    transfer       was     intended.”     Finally,   respondents       aver:

“There is no evidence in the record that the original note was

in fact presented to the trial court at any appeal hearing.”

       We briefly address each of these concerns in turn.                        First,

there is no statutory requirement that the note holder must also

demonstrate        that    he   is    the   note    “owner.”      Accordingly,      we

disregard      any        argument     pertaining       to   whether      U.S.    Bank

“purchased” the Note or “owns” it as such argument is irrelevant

to this issue.        Second, this Court is not charged with answering

rhetorical questions unnecessarily.                 We note that Rule 10(a)(1)
                                         -8-
prohibits respondents from challenging the sufficiency of the

Lara affidavit because the issue was not preserved by objection

at the hearing.       See N.C. App. P. Rule 10(a)(1) (2013).                Third,

respondents cite no authority to support their position that the

indorsement in blank that is not marked through is a nullity

because a voided indorsement in blank also appears on the face

of the instrument.         Although respondents could have raised this

issue at the hearing, they did not.            Finally, the 29 April 2013

order    permitting    foreclosure       explicitly    states     that    “various

documents were provided including the subject Promissory Note[]

[and] the Deed of Trust[.]”              Thus, respondents’ argument that

the trial court was never presented with the Note is without

merit.

  C. Review of the Record

    Generally, whenever this Court has held that possession of

the original promissory note is insufficient to show that the

person in possession is the “holder,” 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.      See e.g. In re David A. Simpson, P.C., 211 N.C. App.
                                      -9-
483, 485, 711 S.E.2d 165, 168 (2011).             Neither situation applies

in the present case.

    Here, respondents concede that the Note was endorsed in

blank.     Further, given that U.S. Bank was the only party who

made an appearance at the hearing, and because the trial judge

received the Note into evidence, an inference can be made that

U.S. Bank was in possession of the Note, making it the “bearer.”

Thus, U.S. Bank satisfied the definition of “holder.”               See N.C.

Gen. Stat. § 25-1-201(b)(21)(a).

    Additionally, U.S. Bank offered evidence that it was the

Note holder through the Lara affidavit.               The trial court may

exercise     its   sound   discretion       in   receiving   documents   into

evidence, and appellate review is limited to a determination of

whether there was a clear abuse of discretion.               Id. at 488, 711

S.E.2d at 170.       Ms. Lara testified that based on her personal

knowledge:     “The Note bears an [i]ndorsement from Wells Fargo to

blank[;]” “Wells Fargo sold the Loan and transferred possession

of the Note to U.S. Bank[;]” and “U.S. Bank has remained in

possession of the Note.” Upon review, we see no reason to find

that the trial court abused its discretion in admitting the Lara

affidavit.

                                II.     Conclusion
                                      -10-
    We    are   satisfied      that    the    record   contains    competent

evidence to support the trial court’s conclusion that U.S. Bank

was the current holder of a valid debt.             Accordingly, the trial

court   did   not   err   in   ordering      U.S.   Bank   to   proceed   with

foreclosure pursuant to N.C. Gen. Stat. § 45-21.16(d) (2013).

We affirm.

    Affirmed.

    Judges McGEE and HUNTER, Robert C., concur.

    Report per Rule 30(e).