Court Opinion

ID: 2726929
Source: CourtListenerOpinion
Date Created: 2014-09-08 21:10:02.709728+00
Date Added: 2024-06-11T10:03:12.699194
License: Public Domain

NO. COA14-192

                       NORTH CAROLINA COURT OF APPEALS

                                Filed: 5 August 2014

IRIS ENTERPRISES, INC.,
     Plaintiff,

         v.                                       Wake County
                                                  No. 13 CVS 4167
FIVE WINS, LLC,
     Defendant.

         Appeal by defendant from Order entered 18 September 2013 by

Judge Carl R. Fox in Superior Court, Wake County.                     Heard in the

Court of Appeals 4 June 2014.

         Hatch, Little & Bunn, LLP, by John N. McClain, Jr., A.
         Bartlett White, and Justin R. Apple, for plaintiff-
         appellee.

         Morris, Russell, Eagle & Worley,               PLLC,    by    Benjamin   L.
         Worley, for defendant-appellant.

         STROUD, Judge.

         Five Wins, LLC (“defendant”), appeals from an order entered

18 September 2013, requiring the trustee of property encumbered

by   a    deed   of   trust     to    pay   Iris     Enterprises      (“plaintiff”)

$24,291.24       as   surplus    from       the    foreclosure     sale   of   that

property. We affirm.

                                 I.     Background
                                                -2-
      On    8     March       2007,   Greenfield             Durham,     LLC     executed     a

promissory note for $3,959,000.00 in favor of Capital Bank. As

collateral for that loan, plaintiff executed a deed of trust in

favor of Capital on three pieces of real property. Iris is owned

by Massoumeh Valanejad, who is one of two owners of Greenfield.

Greenfield defaulted on the note in 2010. On 31 March 2010,

Capital     sent     Greenfield        a     letter      declaring        a    default      and

accelerating the terms of the loan. Greenfield did not pay the

balance     of      $870,902.84.           As     a    result,         Capital     initiated

foreclosure        proceedings        against          the     encumbered        properties.

Before     the    foreclosure         sale      could    proceed,        Iris     filed     for

Chapter 11 bankruptcy, which stayed the foreclosure proceedings.

The United States Bankruptcy Court for the Eastern District of

North Carolina entered a Chapter 11 Plan that required Iris to

make full payment on or before 5 January 2013. Iris failed to do

so.

      On    8     March       2013,   Capital          sold     Greenfield’s        debt     to

defendant.        Defendant       re-opened           foreclosure        proceedings        and

demanded payment of $971,670.03 in order for Iris to redeem the

property    and     cancel      the    deed       of    trust.     On    26     March     2013,

plaintiff        filed    a    complaint        in     Wake    County     Superior        Court

seeking an injunction to prohibit the foreclosure sale and a
                                  -3-
declaratory judgment on the “payoff on the Note secured by the

Deed of Trust.”     The trial court issued a temporary restraining

order   halting   foreclosure   proceedings   until   it   could   hold   a

hearing.

    On 28 June 2013, the trial court entered its declaratory

judgment. It made a number of findings of fact and concluded

that the “pay-off amount that Iris must pay to Five Wins to

redeem the Property and cancel the Deed of Trust is $894,711.25

as of 6 May 2013 . . . .”        It further concluded that interest

would accrue at $314.08 per day while Iris would “receive credit

for payments in the amount of $356.45 every day until pay-off by

Iris, or Foreclosure by Five Wins.” It therefore decreed:

           The pay-off amount that Iris must pay to
           Five Wins to redeem the Property and cancel
           the Deed of Trust is $894,711.25 as of 6 May
           2013, which includes, in the discretion of
           the Court, “attorneys’ fees” of $43,640.92,
           with that amount decreasing by $42.37 each
           day until pay-off by Iris, or foreclosure by
           Five Wins[.]

    The trial court also permitted Five Wins to move forward

with its foreclosure sale, which it did.          At the foreclosure

sale, Five Wins bid $875,000.00, but WA Venture, LLC made an

upset bid of $918,750.00. WA Venture then assigned its upset bid

to Five Wins.     On 27 August 2013, the trustee of the encumbered

property filed a “Final Report and Account of Foreclosure Sale”
                                       -4-
(original in all caps), which reported various disbursements,

including $856,286.33 as the “Right of Redemption pursuant to

Declaratory     Judgment”    and      $24,105.61   as     going    toward    the

“Secured Obligation(s) (partial)”.            Under the disbursement made

by the trustee, the entire $917,750.00 was                 used, leaving no

surplus.

       Plaintiff believed that these disbursements contravened the

declaratory judgment. So, it noticed a hearing, without filing

an    accompanying   motion,    and    requested   that    the    trial     court

“clarify”   its   previous     declaratory    judgment.     The    trial    court

rejected defendant’s argument that the prior judgment did not

control because “there is a distinction between ‘the payoff on

the    Promissory    Note’      and     the   ‘amount      to     redeem    real

property[.]’”     It entered an order on 18 September 2013, wherein

it concluded that its prior judgment determined the

            amount of the payoff on the Promissory Note
            applicable to Plaintiff, and after payment
            by the Substitute Trustee of the amounts set
            out therein, along with the three (3)
            expenses set out in paragraph 16 above
            [relating to expenses incurred after the
            judgment was entered], there should have
            been surplus funds totaling $24,291.24 to be
            paid   to   Plaintiff   as  owner   of   the
            Collateral.
                                             -5-
The trial court therefore ordered the trustee to pay $24,291.24

to plaintiff as surplus from the foreclosure sale. Defendant

filed written notice of appeal on 25 September 2013.

              II.    Distribution of Foreclosure Sale Assets

      Defendant       argues    that      the   trial    court       invaded    the     sole

province of the trustee by determining that the trustee had

misapplied the funds from the foreclosure sale. We conclude that

defendant lost the opportunity to challenge the trial court’s

decision   when      it   failed     to      appeal    the    declaratory       judgment,

which   determined        the    “pay-off”         amount      and     the     amount     of

attorney’s fees.

      Any error       in the trial court’s 18 September 2013 order

necessarily     follows       from     the      declaratory      judgment.       In     that

order, the trial court determined the attorney’s fees and “pay-

off   amount”       necessary    to       exercise      the    equitable       remedy     of

redemption. Contrary to defendant’s argument, the law of this

state   has    long    been     that    the     right    of    redemption       allows    a

mortgagor “to regain complete title by paying the mortgage debt,

plus any interests and any costs accrued.” James A. Webster,

Jr., Webster’s North Carolina Real Estate Law, § 13.05[1] (6th

ed.   2013).        The   redemption          amount    thus     is    the     amount     of

indebtedness. So, when the trial court concluded that the “pay-
                                     -6-
off” amount was $894,711.25, it was ruling on the amount of the

indebtedness, including accrued interest and fees. Indeed, in

the September order, the trial court specifically concluded that

the June judgment “was intended to set out the amount of the

payoff on the Promissory Note applicable to Plaintiff . . .”

Further, in the prior judgment, the trial court calculated the

amount of interest that would accrue each day and the credit for

payments that Iris would receive until “pay-off by Iris, or

foreclosure by Five Wins.”

    Once these amounts were set, any sale price in excess of

that amount, deducting other reasonable expenses incurred after

entry   of   the   order   and   contemplated   by   that   order,   must   be

considered surplus. See N.C. Gen. Stat. § 45-21.31(b) (2013)

(“Any surplus remaining after the application of the proceeds of

the sale as set out in subsection (a) shall be paid to the

person or persons entitled thereto, if the person who made the

sale knows who is entitled thereto.” (emphasis added)). Once the

trial court determined the amount of the payoff and the per diem

sums of interest which would accrue until paid in full, and that

determination was not appealed, it was the law of the case and

the trustee was required to follow the court’s order.
                                             -7-
       Although we have said that disbursements of proceeds from a

foreclosure          sale     “are    within        the   sole     province       of   the

trustee[,]” in none of the cases cited by defendant has there

been     a     prior      order      from     a    declaratory      judgment       action

determining the relevant amounts. In re Foreclosure of Deed of

Trust Executed by Ferrell Bros. Farm, Inc., 118 N.C. App. 458,

461, 455 S.E.2d 676, 678 (1995). “When an order is not appealed,

it becomes[] the law of the case, and other . . . judges [are]

without authority to enter orders to the contrary.” Kelly v.

Kelly,       167   N.C.     App.   437,     443,    606   S.E.2d   364,    369    (2004).

Certainly if one superior court judge cannot overrule another,

the trustee of a property in foreclosure                         lacks     authority to

overrule a superior court judge. See Cato v. Crown Financial,

Ltd.,    131       N.C.     App.   683,     686,    508   S.E.2d    822,    824    (1998)

(holding that a prior final judgment was the law of the case,

which    the       debtor    corporation’s         receiver   could   not     reduce   or

modify), disc. rev. denied, 350 N.C. 593, 536 S.E.2d 836 (1999).

Even assuming that the declaratory judgment exceeded the trial

court’s authority, defendant cannot now challenge it.1 Defendant

does not argue that the trial court was without jurisdiction to

1
  Plaintiff also argues that the trial court erred in concluding
that defendant was entitled to any attorney’s fees, but
plaintiff similarly failed to appeal the declaratory judgment,
so we have no jurisdiction to address that issue.
                                  -8-
enter the declaratory judgment, so any argument to that effect

has been abandoned. N.C.R. App. P. 28(a). Therefore, we affirm

the   trial   court’s   18   September   2013   order   enforcing   its

unappealed declaratory judgment.

                             III. Conclusion

      For the foregoing reasons, we affirm the order of the trial

court.

      AFFIRMED.

      Judges STEPHENS and MCCULLOUGH concur.