Article 1. Chattel Securities. [Repealed]

§§ 45-1 through 45-3.1. [Repealed]

Repealed by Sessions Laws 1967, c. 562, s. 2.

Article 2. Right to Foreclose or Sell under Power.

§ 45-4. Representative succeeds on death of mortgagee or trustee in deeds of trust; parties to action.

When the mortgagee in a mortgage, or the trustee in a deed in trust, executed for the purpose of securing a debt, containing a power of sale, dies before the payment of the debt secured in such mortgage or deed in trust, all the title, rights, powers and duties of such mortgagee or trustee pass to and devolve upon the executor or administrator or collector of such mortgagee or trustee, including the right to bring an action of foreclosure in any of the courts of this State as prescribed for trustees or mortgagees, and in such action it is unnecessary to make the heirs at law of such deceased mortgagee or trustee parties thereto.

History. 1887, c. 147; 1895, c. 431; 1901, c. 186; 1905, c. 425; Rev., s. 1031; C.S., s. 2578; 1933, c. 199.

CASE NOTES

Power of Sale Vests in Executor of Mortgagee. —

When a power of sale in a mortgage is given to the mortgagee, his executors, etc., upon default, and the mortgagee dies leaving a will under which his executors qualify, the power of sale vests in the executors by virtue of this section and the contract in the mortgage. Scott v. Blades Lumber Co., 144 N.C. 44, 56 S.E. 548, 1907 N.C. LEXIS 104 (1907).

Even Absent Stipulation to That Effect. —

The executor of a mortgagee may exercise the power of sale contained in the mortgage when the deed in terms confers such power upon the mortgagee and his executors. This section was intended to confer the power of sale upon executors and administrators when such power is not given in the deed. Yount v. Morrison, 109 N.C. 520, 13 S.E. 892, 1891 N.C. LEXIS 258 (1891).

Joint Exercise of Power of Sale by Executors of Mortgagee. —

While the executors of a deceased mortgagee may exercise the power of sale in the mortgage, where there are two executors of the deceased mortgagee the power must be exercised by them jointly. Combs v. Porter, 231 N.C. 585, 58 S.E.2d 100, 1950 N.C. LEXIS 337 (1950).

When Objection to Foreclosure to Be Raised. —

If the foreclosure proceeding was not authorized for any reason or if it was irregularly conducted (e.g., the notice was incorrect or inadequate in certain respects; the affidavit of default was based on hearsay), it was incumbent on the mortgagor to raise that issue in that proceeding either by objection or motion in the cause. Douglas v. Pennamco, Inc., 75 N.C. App. 644, 331 S.E.2d 298, 1985 N.C. App. LEXIS 3671 (1985).

Collateral Attack Not Permitted. —

The law does not permit a collateral attack on a foreclosure proceeding and judgment. Douglas v. Pennamco, Inc., 75 N.C. App. 644, 331 S.E.2d 298, 1985 N.C. App. LEXIS 3671 (1985).

§ 45-5. Foreclosures by representatives validated.

In all actions which were brought or prosecuted prior to the fourth day of March, 1905, for the foreclosure of any mortgage or deed in trust by any executor or administrator of any deceased mortgagee or trustee where the heirs of the mortgagee were duly made parties and regular and orderly decrees of foreclosure entered by the court and sale had by a commissioner appointed by the court for that purpose and deed made after confirmation, the title so conveyed to purchaser at such judicial sale shall be deemed and held to be vested in such purchaser, whether the heir of such deceased mortgagee or trustee was a party to such foreclosure proceeding or not, and such heir of any deceased mortgagee is estopped to bring or prosecute any further action against such purchaser for the recovery of such property or foreclosure of such mortgage or deed in trust.

History. 1905, c. 425, s. 2; Rev., s. 1032; C.S., s. 2579.

§ 45-6. Renunciation by representative; clerk appoints trustee.

The executor or administrator of any deceased mortgagee or trustee in any mortgage or deed of trust heretofore or hereafter executed may renounce in writing, before the clerk of the superior court before whom he qualifies, the trust under the mortgage or deed of trust at the time he qualifies as executor or administrator, or at any time thereafter before he intermeddles with or exercises any of the duties under said mortgage or deed of trust, except to preserve the property until a trustee can be appointed. In every such case of renunciation the clerk of the superior court of any county wherein the said mortgage or deed of trust is registered has power and authority, upon proper proceedings instituted before him, as in other cases of special proceedings, to appoint some person to act as trustee and execute said mortgage or deed of trust. The clerk, in addition to recording his proceedings in his book of orders and decrees, shall record a separate instrument, as required by G.S. 161-14.1, containing the name of the substituted trustee or mortgagee, with the register of deeds of said county.

History. 1905, c. 128; Rev., s. 1038; C.S., s. 2580; 1991, c. 114, s. 5; 2011-246, s. 1.

Cross References.

As to resignation, removal and renunciation of trustees, and appointment of successors, see G.S. 36A-22.

As to appointment of successor to incompetent trustee, see G.S. 45-9.

Effect of Amendments.

Session Laws 2011-246, s. 1, effective October 1, 2011, substituted “substituted trustee or mortgagee, with the register of deeds of said county” for “substituted trustee or mortgagee and may enter the name of the substituted trustee or mortgagee on the margin of the deed in trust or the mortgage in the book of the office of the register of deeds of said county” at the end of the last sentence.

§ 45-7. Agent to sell under power may be appointed by parol.

All sales of real property, under a power of sale contained in any mortgage or deed of trust to secure the payment of money, by any mortgagee or trustee, through an agent or attorney for that purpose, appointed orally or in writing by such mortgagee or trustee, whether such writing has been or shall be registered or not, shall be valid, whether or not such mortgagee or trustee was or shall be present at such sale.

History. 1895, c. 117; Rev., s. 1035; C.S., s. 2581; 1967, c. 562, s. 2.

CASE NOTES

Recitals in Deed Prima Facie Correct. —

Recitals in a trustee’s deed that the trustee made the sale in pursuance of the power contained in the deed of trust are taken as prima facie correct. Hayes v. Ferguson, 206 N.C. 414, 174 S.E. 121, 1934 N.C. LEXIS 196 (1934).

§ 45-8. Survivorship among donees of power of sale.

In all mortgages and deeds of trust of real property wherein two or more persons, as trustees or otherwise, are given power to sell the property therein conveyed or embraced, and one or more of such persons dies, any one of the persons surviving having such power may make sale of such property in the manner directed in such deed, and execute such assurances of title as are proper and lawful under the power so given; and the act of such person, in pursuance of said power, shall be as valid and binding as if the same had been done by all the persons on whom the power was conferred.

History. 1885, c. 327, s. 2; Rev., s. 1033; C.S., s. 2582; 1967, c. 562, s. 2.

Legal Periodicals.

See 13 N.C.L. Rev. 93 (1935).

CASE NOTES

Execution of Power by Survivor Trustee in Mortgage. —

Where one of two trustees in a power of sale mortgage dies, the survivor may execute the trust, this being a trust coupled with an interest. Cawfield v. Owens, 129 N.C. 286, 40 S.E. 62, 1901 N.C. LEXIS 71 (1901).

§ 45-9. Clerk appoints successor to incompetent trustee.

When the sole or last surviving trustee named in a will or deed of trust dies, removes from the county where the will was probated or deed executed and/or recorded and from the State, or in any way becomes incompetent to execute the said trust, or is a nonresident of this State, or has disappeared from the community of his residence and his whereabouts remains unknown in such community for a period of three months and cannot, after diligent inquiry be ascertained, the clerk of the superior court of the county wherein the will was probated or deed of trust was executed and/or recorded is authorized and empowered, in proceedings to which all persons interested shall be made parties, to appoint some discreet and competent person to act as trustee and execute the trust according to its true intent and meaning, and as fully as if originally appointed: Provided, that in all actions or proceedings had under this section prior to January 1, 1900, before the clerks of the superior court in which any trustee was appointed to execute a deed of trust where any trustee of a deed of trust has died, removed from the county where the deed was executed and from the State, or in any way become incompetent to execute the said trust, whether such appointment of such trustee by order or decree, or otherwise, was made upon the application or petition of any person or persons ex parte, or whether made in proceedings where all the proper parties were made, are in all things confirmed and made valid so far as regards the parties to said actions and proceedings to the same extent as if all proper parties had originally been made in such actions or proceedings.

History. 1869-70, c. 188; 1873-4, c. 126; Code, s. 1276; 1901, c. 576; Rev., s. 1037; C.S., s. 2583; 1933, c. 493.

CASE NOTES

Upon the death of a trustee, the clerk of the superior court may appoint another under this section, who may proceed to execute the trust according to the terms of the deed. Wright v. Fort, 126 N.C. 615, 36 S.E. 113, 1900 N.C. LEXIS 285 (1900).

As to appointment of trustees upon the death of the last survivor of a board of trustees, see Thornton v. Harris, 140 N.C. 498, 53 S.E. 341, 1906 N.C. LEXIS 33 (1906).

Appointment upon Appeal to Superior Court. —

Where the clerk of the superior court, for want of jurisdiction, dismisses a proceeding for the appointment of a trustee, on appeal the judge of the superior court may make such appointment. Roseman v. Roseman, 127 N.C. 494, 37 S.E. 518, 1900 N.C. LEXIS 116 (1900).

Section Inapplicable to Active Express Trust. —

The provisions of this section may not be held applicable to an active express trust. Cheshire v. First Presbyterian Church, 221 N.C. 205, 19 S.E.2d 855, 1942 N.C. LEXIS 432 (1942).

Where a trustee is substituted in accordance with the method expressed in a deed of trust, no proceedings are necessary under this section; and a deed made by the substitute trustee passes the title to the purchaser at a foreclosure sale. Thompson v. State, 223 N.C. 340, 26 S.E.2d 902, 1943 N.C. LEXIS 265 (1943).

Deed from Substituted Trustee Passes Title at Foreclosure Sale. —

Where the terms as to foreclosure in a deed of trust on lands to secure borrowed money have been complied with as to the substitution of the trustee, the method expressed for this purpose is contractual and does not arise under this section requiring certain proceedings to be taken in the courts; and a deed made by a substituted trustee in accordance with the agreement passes the title to the purchaser at the foreclosure sale. Raleigh Real Estate & Trust Co. v. Padgett, 194 N.C. 727, 140 S.E. 714, 1927 N.C. LEXIS 193 (1927).

Succession of Administrator C.T.A. To Trusteeship. —

Where an executor named in a will is thereby also appointed a trustee and renounces or dies, the administrator cum testamento annexo appointed in his stead succeeds to the trusteeship; and hence an appointment by the clerk of the court, under this section, of a trustee in place of the executor is void and clothes the appointee with no power. State ex rel. Clark v. Peebles, 120 N.C. 31, 26 S.E. 924, 1897 N.C. LEXIS 9 (1897).

Title of New Trustee. —

Under this section, when a trustee dies, all of the parties in interest may join in a petition to the superior court to have a new trustee appointed, and upon the passing of the decree the substituted trustee holds the legal title upon the same trusts as the original trustee, so far as it is competent for the court to confer them. McAfee v. Green, 143 N.C. 411, 55 S.E. 828, 1906 N.C. LEXIS 365 (1906).

Meaning of “All Persons Interested”. —

“All persons interested,” in a proceeding for the removal of a trustee and the appointment of a substitute trustee under this section, include only the trustor, the trustee or trustees, and all of the cestuis que trustent whose interests are secured by the deed of trust in which the trustee or trustees are sought to be removed and another substituted. Thompson v. State, 223 N.C. 340, 26 S.E.2d 902, 1943 N.C. LEXIS 265 (1943).

All “Persons Interested” Must Be Made Parties. —

The appointment of a trustee in cases where the former trustee has died, removed from the county, or become incompetent cannot be done on an ex parte motion or petition. The application for such appointment is in the nature of a civil action, and all “persons interested” must be made parties and have full time and opportunity to set up their respective claims. Guion v. Melvin, 69 N.C. 242, 1873 N.C. LEXIS 219 (1873).

Personal Powers of Original Trustee Cannot Be Transferred. —

Where the powers to be exercised by the original trustee are of a personal nature depending upon his discretion, such powers cannot be conferred upon the appointed trustee. Young v. Young, 97 N.C. 132, 2 S.E. 78, 1887 N.C. LEXIS 125 (1887).

Bond of Substituted Trustee Unnecessary. —

It is not necessary in substituting one trustee for another in pursuance of this section to require a bond of the substituted trustee. Strayhorn v. Green, 92 N.C. 119, 1885 N.C. LEXIS 164 (1885).

§ 45-10. Substitution of trustees in mortgages and deeds of trust.

  1. In addition to the rights and remedies now provided by law, the noteholders may, in their discretion, substitute a trustee whether the trustee then named in the instrument is the original or a substituted trustee or a holder or owner of any or all of the obligations secured thereby, by the execution of a written document properly recorded pursuant to Chapter 47 of the North Carolina General Statutes. An attorney who serves as the trustee or substitute trustee shall not represent either the noteholders or the interests of the borrower while initiating a foreclosure proceeding. Notwithstanding this restriction, an attorney may serve as the trustee in a foreclosure proceeding while simultaneously representing the noteholders on unrelated matters and others within the attorney’s firm may also continue to represent the noteholders on unrelated matters. Additionally, an attorney who has as trustee initiated a foreclosure proceeding may resign as trustee after the foreclosure is contested and act as counsel to the noteholders.
  2. If the name of a trustee is omitted from an instrument that appears on its face to be intended to be a deed of trust, the instrument shall be deemed to be a deed of trust, the owner or owners executing the deed of trust and granting an interest in the real property shall be deemed to be the constructive trustee or trustees of record for the secured party or parties named in the instrument, and a substitution of trustee may be undertaken under subsection (a) of this section. However, no such constructive trustee shall have the authority or power to take any of the following actions without the consent and joinder of the holders or owners of a majority in amount of the obligations secured by the deed of trust: (i) effect a substitution of trustee, (ii) effect the satisfaction of the deed of trust, (iii) release any property or any interest therein from the lien of the deed of trust, or (iv) modify or amend the terms of the deed of trust. Any substitute trustee named under the authority of subsection (a) of this section shall succeed to all the rights, titles, authority, and duties of the trustee under the terms of the deed of trust without regard to the limitations imposed by this subsection on the authority of a constructive trustee.
  3. If the trustee named in a deed of trust is also the beneficiary named in that deed of trust, the instrument shall be deemed to be a deed of trust, and any substitute trustee named under the authority of subsection (a) of this section shall succeed to all the rights, titles, authority, and duties of the trustee under the terms of the deed of trust.
  4. In this section, the term “noteholders” means the holders or owners of a majority in the amount of the indebtedness, notes, bonds, or other instruments evidencing a promise to pay money and secured by mortgages, deeds of trust, or other instruments conveying real property, or creating a lien thereon.

History. 1931, c. 78, ss. 1, 2; 1935, c. 227; 1943, c. 543; 1967, c. 562, s. 2; 1975, c. 66; 1985, c. 320; c. 689, s. 14; 2009-176, s. 1; 2011-312, s. 2; 2017-206, s. 6.

Editor’s Note.

Session Laws 2009-176, s. 1, which designated the previously existing provisions as subsection (a), and added subsection (b), was effective June 26, 2009, and applicable to all instruments recorded before, on, or after that date.

Effect of Amendments.

Session Laws 2009-176, s. 1, effective June 26, 2009, and applicable to all instruments recorded before, on, or after that date, designated the previously existing provisions as subsection (a), and added subsection (b).

Session Laws 2011-312, s. 2, effective October 1, 2011, inserted “or a holder or owner of any or all of the obligations secured thereby” near the end of subsection (a); and added subsection (c).

Session Laws 2017-206, s. 6, effective August 30, 2017, in subsection (a) substituted “the noteholders” for “the holders or owners of a majority in amount of the indebtedness, notes, bonds, or other instruments evidencing a promise or promises to pay money and secured by mortgages, deeds of trust, or other instruments conveying real property, or creating a lien thereon,” and added the last three sentences; and added subsection (d).

Legal Periodicals.

As to the effect of the 1943 amendment, see 9 N.C.L. Rev. 402 (1931).

CASE NOTES

Section Becomes Part of Contract. —

Where a deed of trust is executed after the effective date of this section, the provisions of this section enter into and become a part of the contract, and a later statute providing a more economical and expeditious procedure for such substitution, so long as the rights of the parties, especially those of the cestui que trust, are not injuriously affected, does not violate the constitutional provisions. Bateman v. Sterrett, 201 N.C. 59, 159 S.E. 14, 1931 N.C. LEXIS 180 (1931).

Trustee’s Right to Foreclose. —

Court of Appeals erred in reversing the trial court’s foreclosure order because, while the trial court erroneously entered a “dismissal with prejudice,” it properly refused to authorize the bank to proceed with the non-judicial foreclosure by power of sale where the bank failed to establish a substitute trustee’s authority to foreclose the deed of trust due to the significant internal inconsistencies in the power of attorney at issue, and the bank did not effectuate any of ways to overcome the inconsistencies. In re Foreclosure of a Deed of Trust Executed by Lucks, 369 N.C. 222, 794 S.E.2d 501, 2016 N.C. LEXIS 1161 (2016).

A substituted trustee succeeds to all the rights, titles and duties of the original trustee, and has the power to foreclose the instrument according to its terms upon default. Pearce v. Watkins, 219 N.C. 636, 14 S.E.2d 653, 1941 N.C. LEXIS 118 (1941).

A sale of the property by the substituted trustee in accordance with the terms of the instrument is valid, the appointment of a substitute trustee not being a conveyance of any interest in land. North Carolina Mtg. Corp. v. Morgan, 208 N.C. 743, 182 S.E. 450, 1935 N.C. LEXIS 119 (1935).

Substitute Trustee May Execute Deed to Purchaser. —

A trustee, duly substituted for the original trustee under the provisions of the deed of trust and the statute, may execute a deed to the purchaser at a sale duly conducted by the original trustee. Pendergrast v. Home Mtg. Co., 211 N.C. 126, 189 S.E. 118, 1937 N.C. LEXIS 21 (1937); Pearce v. Watkins, 219 N.C. 636, 14 S.E.2d 653, 1941 N.C. LEXIS 118 (1941).

Notice of Substitution of Trustee. —

The substitute trustee at the time of a hearing being a different trustee than the trustee identified in the notice of hearing did not require that the hearing be re-noticed, or prevent the trial court from correctly concluding that the substitute trustee at the time of the hearing was authorized to foreclose. In re Forclosure of a Deed of Trust Executed by Worsham, 267 N.C. App. 401, 833 S.E.2d 239, 2019 N.C. App. LEXIS 762 (2019).

§ 45-11. Appointment of substitute trustee upon application of subsequent or prior lienholders; effect of substitution.

When any person, firm, corporation, county, city or town holding a lien on real property upon which there is a subsequent or prior lien created by a mortgage, deed of trust or other instrument, the mortgagee or trustee therein named being dead or having otherwise become incompetent to act, files a written application with the clerk of the superior court of the county in which said property is located, setting forth the facts showing that said mortgagee or trustee is then dead or has become incompetent to act, the said clerk of the superior court, upon a proper finding of fact that said mortgagee or trustee is dead or has become incompetent to act, shall enter an order appointing some suitable and competent person, firm or corporation as substitute trustee upon whom service of process may be made, and said substitute trustee shall thereupon be vested with full power and authority to defend any action instituted to foreclose said property as fully as if he had been the original mortgagee or trustee named; but the substitute trustee shall have no power to cancel said mortgage or deed of trust without the joinder of the holder of the notes secured thereby. Said application shall not be made prior to the expiration of 30 days from the date the original mortgagee or trustee becomes incompetent to act.

History. 1941, c. 115, s. 1; 1967, c. 562, s. 2.

Legal Periodicals.

For comment on this section, see 19 N.C.L. Rev. 507 (1941).

§ 45-12. [Repealed]

Repealed by Session Laws 1973, c. 1208.

§ 45-13. [Repealed]

Repealed by Session Laws 1981, c. 599, s. 12.

§ 45-14. Acts of trustee prior to removal not invalidated.

If any such trustee who has been substituted as provided in G.S. 45-10 or in G.S. 45-11 shall have performed any functions as such trustee and shall thereafter be removed as provided in G.S. 45-10 to 45-17, such removal shall not invalidate or affect the validity of such acts insofar as any purchaser or third person shall be affected or interested, and any conveyances made by such trustee before removal if otherwise valid, shall be and remain valid and effectual to all intents and purposes, but if any trustee upon such hearing is declared to have been wrongfully removed, he shall have his right of action against the substituted trustee for any compensation that he would have received in case he had not been wrongfully removed from such trust.

History. 1931, c. 78, s. 5; 1941, c. 115, s. 3.

§ 45-15. Registration of substitution constructive notice.

The registration of such paper-writing designating a new trustee under G.S. 45-10 or under G.S. 45-11 shall be from and after registration, constructive notice to all persons, and no appeal or other proceedings shall be instituted to contest the same after one year from and after such registration.

History. 1931, c. 78, s. 6; 1941, c. 115, s. 4.

§ 45-16. [Repealed]

Repealed by Session Laws 2012-18, s. 1.2, effective July 1, 2012.

History. 1931, c. 78, s. 7; 1991, c. 114, s. 6; 1993, c. 425, s. 2; repealed by 2012-18, s. 1.2, effective July 1, 2012.

Editor’s Note.

Former G.S. 45-16 pertained to the register of deeds to make marginal entry of substituted trustee.

§ 45-17. Substitution made as often as justifiable.

The powers set out in G.S. 45-10 and in G.S. 45-11 may be exercised as often and as many times as the right to make such substitution may arise under the terms of such section, and all the privileges and requirements and rights to contest the same as set out in G.S. 45-10 to 45-17 shall apply to each deed of trust or mortgage and to each substitution.

History. 1931, c. 78, s. 8; 1941, c. 115, s. 5.

CASE NOTES

Effect of Substitution of Trustee. —

The substitute trustee at the time of a hearing being a different trustee than the trustee identified in the notice of hearing did not require that the hearing be re-noticed, or prevent the trial court from correctly concluding that the substitute trustee at the time of the hearing was authorized to foreclose. In re Forclosure of a Deed of Trust Executed by Worsham, 267 N.C. App. 401, 833 S.E.2d 239, 2019 N.C. App. LEXIS 762 (2019).

§ 45-18. Validation of certain acts of substituted trustees.

Whenever before January 1, 1979, a trustee has been substituted in a deed of trust in the manner provided by G.S. 45-10 to 45-17, but the instrument executed by the holder and/or owners of all or a majority in amount of the indebtedness, notes, bonds, or other instruments secured by said deed of trust, has not been registered as provided by said sections until after the substitute trustee has exercised some or all of the powers conferred by said deed of trust upon the trustee therein, including the advertising of the property conveyed by said deed of trust for sale, the sale thereof, and the execution of a deed by such substituted trustee to the purchaser at such sale, all such acts of said substituted trustee shall be deemed valid and effective in the same manner and to the same extent as if said instrument substituting said trustee, had been registered prior to the performance by said substituted trustee of any one or more of said acts, or other acts authorized by such deed of trust.

History. 1939, c. 13; 1963, c. 241; 1967, c. 945; 1969, c. 477; 1971, c. 57; 1973, c. 20; 1979, c. 580.

§ 45-19. Mortgage to guardian; powers pass to succeeding guardian.

When a guardian to whom a mortgage has been executed dies or is removed or resigns before the payment of the debt secured in such mortgage, all the rights, powers and duties of such mortgagee shall devolve upon the succeeding guardian.

History. 1905, c. 433; Rev., s. 1034; C.S., s. 2584.

§ 45-20. Sales by mortgagees and trustees confirmed.

All sales of real property made prior to February 10, 1905, by mortgagees and trustees under powers of sale contained in any mortgage or deed of trust in compliance with the powers, terms, conditions and advertisement set forth and required in any such mortgage or deed of trust, are hereby in all respects ratified and confirmed.

History. Ex. Sess. 1920, c. 27; C.S., s. 2584(a).

§ 45-20.1. Validation of trustees’ deeds where seals omitted.

All deeds executed prior to January 1, 1991, by any trustee or substitute trustee in the exercise of the power of sale vested in him under any deed, deed of trust, mortgage, will, or other instrument in which the trustee or substitute trustee has omitted to affix his seal after his signature are validated.

History. 1943, c. 171; 1981, c. 183, s. 1; 1983, c. 398, s. 1; 1985, c. 70, s. 1; 1987, c. 277, s. 1; 1989, c. 390, s. 1; 1991, c. 489, s. 1.

§ 45-20.2. [Repealed]

Repealed by Session Laws 1981, c. 183, s. 2.

Cross References.

For present section incorporating the provisions pertaining to validation of trustees’ deeds where seals omitted, see G.S. 45-20.1.

§ 45-20.3. Validation of deeds where seal omitted on power of attorney.

All deeds and other conveyances executed prior to January 1, 1991, by any attorney-in-fact in the exercise of a power of attorney are valid even though the signature of the principal was not affixed under seal on the instrument creating the power of attorney.

History. 1991, c. 489, s. 1.1.

§ 45-21. Validation of appointment of and conveyances to corporations as trustees.

In all deeds of trust made prior to March 15, 1941, wherein property has been conveyed to corporations as trustees to secure indebtedness, the appointment of said corporations as trustees, the conveyances to said corporate trustees, and the action taken under the powers of such deeds of trust by said corporate trustees are hereby confirmed and validated to the same extent as if such corporate trustees had been individual trustees.

History. 1941, c. 245, s. 1.

Legal Periodicals.

For comment on this section, see 19 N.C.L. Rev. 507 (1941).

§ 45-21.01. Foreclosure of deeds of trust and mortgages on property affected by boundary certification.

  1. Foreclosure actions initiated on real property encumbered by a security instrument recorded in South Carolina wherein the real property is situated, in whole or in part, within the certified North Carolina boundaries shall be governed by the terms of the security instrument sought to be enforced for that portion of real property recognized as being in a different state. If the security instrument contains a power of sale clause, the party seeking to enforce the terms of the security instrument may initiate a foreclosure action in the county where the real property is situated pursuant to this Chapter. A party seeking to enforce the terms of the security instrument may also resort to judicial foreclosure, pursuant to Article 29A of Chapter 1 of the General Statutes, in accordance with the terms within the security instrument. Judgments or orders of foreclosure entered by courts of this State are binding and effective only with respect to the portion of real property situated within this State. Prior to initiating an action to enforce a security instrument, the security instrument or a certified copy shall be recorded in the office of the register of deeds for the county where the subject property is situated. The provisions of G.S. 45-10(a) shall apply with regard to the appointment or substitution of a trustee for any mortgage or deed of trust foreclosed pursuant to this section.
  2. Notwithstanding any other provision of law to the contrary, for mortgages foreclosed pursuant to subsection (a) of this section, a mortgagee or its successors or assigns shall be entitled to bid at a foreclosure sale conducted pursuant to a judgment or order of foreclosure entered by the courts of this State.

History. 2016-23, s. 4(a), (b).

Editor’s Note.

Session Laws 2016-23, s. 4(a), (b), effective June 22, 2016, was codified as this section at the direction of the Revisor of Statutes.

Session Laws 2016-23, s. 12(a), is a severability clause.

Article 2A. Sales Under Power of Sale.

Part 1. General Provisions.

§ 45-21.1. Definitions; construction.

  1. The following definitions apply in this Article:
    1. “Resale” means a resale of real property or a resale of any leasehold interest created by a lease of real property held pursuant to G.S. 45-21.30.
    2. “Sale” means a sale of real property or a sale of any leasehold interest created by a lease of real property pursuant to (i) an express power of sale contained in a mortgage, deed of trust, leasehold mortgage, or leasehold deed of trust or (ii) a “power of sale”, under this Article, authorized by other statutory provisions.
  2. The following constructions apply in this Article:
    1. The terms “mortgage” or “deed of trust” include leasehold mortgages or leasehold deeds of trust.
    2. The terms “mortgagee” or “trustee” include any person or entity exercising a power of sale pursuant to this Article.
    3. The terms “real property” or “property” include any leasehold interest created by a lease of real property.

History. 1949, c. 720, s. 1; 1967, c. 562, s. 2; 1991, c. 255, s. 1; 1993, c. 305, s. 1.

Cross References.

As to judicial sales, see G.S. 1-339.1 et seq.

As to execution sales, see G.S. 1-339.41 et seq.

Legal Periodicals.

For discussion of this Article, see 27 N.C.L. Rev. 479 (1949).

For comment discussing changes in North Carolina’s foreclosure law, see 54 N.C.L. Rev. 903 (1976).

CASE NOTES

Editor’s Note. —

Some of the cases below were decided prior to the 1993 amendments to Articles 2A and 2B, which clarified the procedure for foreclosure under power of sale and established a new upset bid procedure.

Subject Matter Jurisdiction. —

Plaintiff sought a strict foreclosure, which was no longer recognized in North Carolina, and by not pursuing a foreclosure sale, plaintiff was not seeking a foreclosure procedure allowed under either of the foreclosure statutes; plaintiff failed to invoke the trial court’s subject matter jurisdiction, and thus the default judgment order, to the extent it ordered the conveyance of defendant’s real property, and the subsequent order of divestiture, were void for lack of jurisdiction. Banks v. Hunter, 251 N.C. App. 528, 796 S.E.2d 361, 2017 N.C. App. LEXIS 27 (2017).

Two methods of foreclosure were possible in North Carolina: Foreclosure by action and foreclosure by power of sale. Phil Mechanic Constr. Co. v. Haywood, 72 N.C. App. 318, 325 S.E.2d 1, 1985 N.C. App. LEXIS 3073 (1985).

This Article and G.S. 1-339.1 through 1-339.40 Provide Exclusive Means of Foreclosure. —

Foreclosure may be by judicial sale pursuant to G.S. 1-339.1 through 1-339.40, or, if expressly provided in the deed or mortgage, by power of sale under this Article. These statutes provide the exclusive means for foreclosure in North Carolina, and it was error for the trial court to provide for foreclosure in any other manner. Wolfe v. Wolfe, 64 N.C. App. 249, 307 S.E.2d 400, 1983 N.C. App. LEXIS 3280 (1983).

Foreclosure pursuant to a power of sale is strictly regulated by this Article, which requires a hearing before the clerk of superior court to determine four issues. If the clerk determines the existence of each item, the clerk then authorizes the trustee to proceed with the sale pursuant to the power of sale contained in the mortgage instrument itself. This procedure enables the trustee or mortgagee to conduct the foreclosure sale with a level of judicial involvement somewhat less than that required in a foreclosure by action. If the mortgage contains a power of sale, the mortgagee or trustee may elect to proceed under this Article or may choose to proceed under foreclosure by action. Phil Mechanic Constr. Co. v. Haywood, 72 N.C. App. 318, 325 S.E.2d 1, 1985 N.C. App. LEXIS 3073 (1985).

This Article is not pursuant to judicial action; the article does not affect any right to foreclosure by action in court, and is not applicable to any such action. United Carolina Bank v. Tucker, 99 N.C. App. 95, 392 S.E.2d 410, 1990 N.C. App. LEXIS 490 (1990).

Proceedings Under Article Are Special Proceedings. —

Since rights sought to be enforced under this Article are instituted by filing notice instead of a complaint and summons and are prosecuted without regular pleadings, they are properly characterized as “special proceedings.” Phil Mechanic Constr. Co. v. Haywood, 72 N.C. App. 318, 325 S.E.2d 1, 1985 N.C. App. LEXIS 3073 (1985).

Order Construing Validity of Debt and Right to Foreclose May Be Res Judicata. —

An order entered by the clerk of superior court construing the validity of the debt and the trustee’s right to foreclose, pursuant to this Article may be res judicata as to a subsequent action based on the issues decided in the clerk’s order. Phil Mechanic Constr. Co. v. Haywood, 72 N.C. App. 318, 325 S.E.2d 1, 1985 N.C. App. LEXIS 3073 (1985).

Foreclosure by action requires formal judicial proceedings initiated by summons and complaint in the county where the property is located and culminating in a judicial sale of the foreclosed property if the mortgagee prevails. Phil Mechanic Constr. Co. v. Haywood, 72 N.C. App. 318, 325 S.E.2d 1, 1985 N.C. App. LEXIS 3073 (1985).

This Article does not apply to or prevent bringing of foreclosure by action. However, when a mortgagee or trustee elects to proceed under G.S. 45-21.1 et seq., issues decided thereunder as to the validity of the debt and the trustee’s right to foreclose are res judicata and cannot be relitigated in an action for strict judicial foreclosure. Phil Mechanic Constr. Co. v. Haywood, 72 N.C. App. 318, 325 S.E.2d 1, 1985 N.C. App. LEXIS 3073 (1985).

Requirement of Resale After Lifting of Automatic Stay. —

If a bankruptcy petition is filed (1) after the notice and hearing provided for in G.S. 45-21.16 has been completed and (2) after the clerk of superior court has authorized the foreclosure and (3) prior to the expiration of the upset bid period, then if the automatic stay of 11 U.S.C.S. § 362 is subsequently lifted with respect to the foreclosure, the foreclosing trustee need not comply with the notice and hearing procedure again, but, pursuant to G.S. 45-21.22(c), may proceed to readvertise the property and sell it in accordance with G.S. 45-21.1 and G.S. 45-21.17A; thus, where the debtors filed for an automatic stay after a mortgagee had started foreclosure proceedings but before the 10 day upset period, once the stay was annulled by the bankruptcy judge, the foreclosing trustee was required to pursue foreclosure again by readvertising and selling the property in accordance with the provisions of G.S. 45-21.16A, 45-21.17, and 45-21.17A. Beneficial Mortg. Co. of N.C. Inc. v. Barrington & Jones Law Firm, P.A., 164 N.C. App. 41, 595 S.E.2d 705, 2004 N.C. App. LEXIS 727 (2004).

No Redemption Period for Junior Lien Holders. —

Because North Carolina has no redemption statute, in the sense that a debtor or junior lien holder has no special right to repurchase property from a buyer after the completion of a foreclosure sale, and instead deals with the power of sale foreclosures within 10 days of a public auction pursuant to G.S. 45-21.27, the government had to rely on the language in 26 U.S.C.S. § 7526(d)(1) which stated that the Secretary could redeem within 120 days from the date of sale, and not the language referring to redemption under state law. Ellis v. United States, 2005 U.S. Dist. LEXIS 16090 (M.D.N.C. July 22, 2005).

§ 45-21.2. Article not applicable to foreclosure by court action.

This Article does not affect any right to foreclosure by action in court, and is not applicable to any such action.

History. 1949, c. 720, s. 1.

Legal Periodicals.

For comment, “Out of Luck: The Effect of the North Carolina Supreme Court’s Decision in In re Lucks and its Impact on the Law of Foreclosures,” see 41 Campbell L. Rev. 253 (2019).

§ 45-21.3. [Repealed]

Repealed by Session Laws 1993, c. 305, s. 2, effective October 1, 1993, and applicable to instruments recorded prior to, on, or after that date.

§ 45-21.4. Place of sale of real property.

  1. Every sale of real property shall be held in the county where the property is situated unless the property consists of a single tract situated in two or more counties.
  2. A sale of a single tract of real property situated in two or more counties may be held in any one of the counties in which any part of the tract is situated. As used in this section, a “single tract” means any tract which has a continuous boundary, regardless of whether parts thereof may have been acquired at different times or from different persons, or whether it may have been subdivided into other units or lots, or whether it is sold as a whole or in parts.
  3. When a mortgage or deed of trust with power of sale of real property designates the place of sale within the county, the sale shall be held at the place so designated.
  4. When a mortgage or deed of trust with power of sale of real property confers upon the mortgagee or trustee the right to designate the place of sale, the sale shall be held at the place designated by the notice of sale, which place shall be either on the premises to be sold or as follows:
    1. Property situated wholly within a single county shall be sold at the courthouse door of the county in which the land is situated.
    2. A single tract of property situated in two or more counties may be sold at the courthouse door of any one of the counties in which some part of the real property is situated.
  5. When a mortgage or deed of trust with power of sale of real property does not designate, or confer upon the mortgagee or trustee the right to designate, the place of sale, or when it designates as the place of sale some county in which no part of the property is situated, such real property shall be sold as follows:
    1. Property situated wholly within a single county shall be sold at the courthouse door of the county in which the land is situated.
    2. A single tract of property situated in two or more counties may be sold at the courthouse door of any one of the counties in which some part of the real property is situated.

History. 1949, c. 720, s. 1; 1975, c. 57, s. 1.

§§ 45-21.5, 45-21.6. [Repealed]

Repealed by Session Laws 1967, c. 562, s. 2.

§ 45-21.7. Sale of separate tracts in different counties.

  1. When the property to be sold consists of separate tracts of real property situated in different counties, there shall be a separate advertisement, sale and report of sale of the property in each county. The report of sale for the property in any one county shall be filed with the clerk of the superior court of the county in which such property is situated. The sale of each such tract shall be subject to separate upset bids. The clerk of the superior court of the county where the property is situated has jurisdiction with respect to upset bids of property situated within his county. To the extent the clerk deems necessary, the sale of each separate tract within his county, with respect to which an upset bid is received, shall be treated as a separate sale for the purpose of determining the procedure applicable thereto.
  2. The exercise of the power of sale with respect to a separate tract of property in one county does not extinguish or otherwise affect the right to exercise the power of sale with respect to tracts of property in another county to satisfy the obligation secured by the mortgage or deed of trust.

History. 1949, c. 720, s. 1; 1993, c. 305, s. 3.

§ 45-21.8. Sale as a whole or in parts.

  1. When the instrument pursuant to which a sale is to be held contains provisions with respect to whether the property therein described is to be sold as a whole or in parts, the terms of the instrument shall be complied with.
  2. When the instrument contains no provisions with respect to whether the property therein described is to be sold as a whole or in parts, the person exercising the power of sale may, in his discretion, subject to the provisions of G.S. 45-21.9, sell the property as a whole or in such parts or parcels thereof as are separately described in the instrument, or he may offer the property for sale by each method and sell the property by the method which produces the highest price.
  3. When real property is sold in parts, the sale of any such part is subject to a separate upset bid; and, to the extent the clerk of superior court having jurisdiction deems advisable, the sale of each such part shall thereafter be treated as a separate sale for the purpose of determining the procedure applicable thereto.
  4. This section does not affect the equitable principle of marshaling assets.

History. 1949, c. 720, s. 1; 1993, c. 305, s. 4.

§ 45-21.9. Amount to be sold when property sold in parts; sale of remainder if necessary.

  1. When a person exercising a power of sale sells property in parts pursuant to G.S. 45-21.8 he shall sell as many of such separately described units and parcels as in his judgment seems necessary to satisfy the obligation secured by the instrument pursuant to which the sale is being made, and the costs and expenses of the sale.
  2. If the proceeds of a sale of only a part of the property are insufficient to satisfy the obligation secured by the instrument pursuant to which the sale is made and the costs and expenses of the sale, the person authorized to exercise the power of sale may readvertise the unsold property and may sell as many additional units or parcels thereof as in his judgment seems necessary to satisfy the remainder of the secured obligation and the costs and expenses of the sale. As to any such sale, it shall not be necessary to comply with the provisions of G.S. 45-21.16 but the requirements of G.S. 45-21.17 relating to notices of sale shall be complied with.
  3. When the entire obligation has been satisfied by a sale of only a part of the property with respect to which a power of sale exists, the lien on the part of the property not so sold is discharged.
  4. The fact that more property is sold than is necessary to satisfy the obligation secured by the instrument pursuant to which the power of sale is exercised does not affect the validity of the title of any purchaser of property at any such sale.

History. 1949, c. 720, s. 1; 1975, c. 492, s. 15.

§ 45-21.9A. Simultaneous foreclosure of two or more instruments.

When two or more mortgages or deeds of trust held by the same person are secured in whole or in part by the same property, and there are no intervening liens, except for ad valorem taxes, between such mortgages or deeds of trust, the obligations secured by such mortgages or deeds of trust may be combined and the property sold once to satisfy the combined obligations if (i) powers of sale are provided in all such instruments; (ii) there is no provision in any such instrument which would not permit such a procedure; (iii) all the terms of all such instruments requiring compliance by the lender in connection with foreclosure sales are complied with; and (iv) all requirements of this Chapter governing power of sale foreclosures are met with respect to all such instruments. The proceeds of any sale shall be applied as provided in this Chapter. As between the combined obligations being foreclosed, proceeds shall be applied in the order of priority of the instruments securing them, and any deficiencies shall be determined accordingly.

History. 1985, c. 515, s. 1; 1993, c. 305, s. 5.

§ 45-21.10. Requirement of cash deposit at sale.

  1. If a mortgage or deed of trust contains provisions with respect to a cash deposit at the sale, the terms of the instrument shall be complied with.
  2. If the instrument contains no provision with respect to a cash deposit at the sale, the mortgagee or trustee may require the highest bidder immediately to make a cash deposit not to exceed the greater of five percent (5%) of the amount of the bid or seven hundred fifty dollars ($750.00).
  3. If the highest bidder fails to make the required deposit, the person holding the sale may at the same time and place immediately reoffer the property for sale.

History. 1949, c. 720, s. 1; 1993, c. 305, s. 6.

CASE NOTES

Trustee’s Discretion as to Whether Cash Deposit Required. —

A trustee’s advertisement for a foreclosure sale which states that the “highest bidder will be required to make a cash deposit” does not eliminate the trustee’s exercise of discretion as to whether he will require the cash deposit when the terms of the deed of trust do not require a cash deposit. White v. Lemon Tree Inn, 35 N.C. App. 117, 239 S.E.2d 878, 1978 N.C. App. LEXIS 2877 (1978).

§ 45-21.11. Application of statute of limitations to serial notes.

When a series of notes maturing at different times is secured by a mortgage or deed of trust and the exercise of the power of sale for the satisfaction of one or more of the notes is barred by the statute of limitations, that fact does not bar the exercise of the power of sale for the satisfaction of indebtedness represented by other notes of the series not so barred.

History. 1949, c. 720, s. 1; 1967, c. 562, s. 2.

§ 45-21.12. Power of sale barred when foreclosure barred.

  1. Except as provided in subsection (b), no person shall exercise any power of sale contained in any mortgage or deed of trust, or provided by statute, when an action to foreclose the mortgage or deed of trust, is barred by the statute of limitations.
  2. If a sale pursuant to a power of sale contained in a mortgage or deed of trust, or provided by statute, is commenced within the time allowed by the statute of limitations to foreclose such mortgage or deed of trust, the sale may be completed although such completion is effected after the time when commencement of an action to foreclose would be barred by the statute. For the purpose of this section, a sale is commenced when the notice of hearing or the notice of sale is first filed, given, served, posted, or published, whichever occurs first, as provided by this Article or by the terms of the instrument pursuant to which the power of sale is being exercised.

History. 1949, c. 720, s. 1; 1967, c. 562, s. 2; 1969, c. 984, s. 1; 1977, c. 359, s. 1.

Cross References.

As to statute of limitations on foreclosure, see G.S. 1-47(3).

Legal Periodicals.

For comment on application of statute of limitations to promise of grantee assuming mortgage or deed of trust, see 43 N.C.L. Rev. 966 (1965).

CASE NOTES

Editor’s Note. —

Many of the cases cited below were decided under repealed G.S. 45-26, which was somewhat similar to this section.

Former G.S. 45-26 was not a mere statute of limitation, and was not required to be pleaded by a party whose rights might be affected. It simply destroyed, by direct prohibition, the authority of any power of sale made in the mortgage contract or conveyance. Spain v. Hines, 214 N.C. 432, 200 S.E. 25, 1938 N.C. LEXIS 369 (1938). See also, 17 N.C.L. Rev. 448 (1939).

Construction Against Exercise of Power. —

Where reasonable doubt existed as to the interpretation of former G.S. 45-26, it was required to be strictly construed against the exercise of the power of foreclosure and doubt would be resolved in favor of the holder of the equitable title. Spain v. Hines, 214 N.C. 432, 200 S.E. 25, 1938 N.C. LEXIS 369 (1938).

As to applicability of statute to contracts in existence at effective date, see Graves v. Howard, 159 N.C. 594, 75 S.E. 998, 1912 N.C. LEXIS 346 (1912).

Exercise of Power in Mortgage Subject to 10-Year Limitation. —

While formerly there was no bar to the execution of a power of sale contained in a mortgage of lands, by former G.S. 45-26 mortgages then executed were made subject to the 10-year statute. Jenkins v. Griffin, 175 N.C. 184, 95 S.E. 166, 1918 N.C. LEXIS 29 (1918).

The holding in Cone v. Hyatt, 132 N.C. 810, 44 S.E. 678 (1903) that the power of sale in a deed of trust or mortgage was not barred by the statute of limitation, though an action for foreclosure thereon was barred, was changed by former G.S. 45-26. Lester Piano Co. v. Loven, 207 N.C. 96, 176 S.E. 290, 1934 N.C. LEXIS 389 (1934).

The provisions of G.S. 1-47(3), relating to the bar of actions to foreclose mortgages of real property, were required to be read into former G.S. 45-26; and it appears that a power of sale contained in a mortgage becomes inoperative and unenforceable when not exercised within 10 years after the forfeiture of the mortgage, or after the power of sale becomes absolute, or within 10 years after the last payment on the same “where the mortgagor or grantor has been in possession of the property.” Ownbey v. Parkway Properties, Inc., 222 N.C. 54, 21 S.E.2d 900, 1942 N.C. LEXIS 20 (1942).

Ten-Year Period Runs from Maturity of Note or Notes Secured. —

The right to exercise any power of sale contained in a deed of trust is barred after 10 years from the maturity of any note or notes secured thereby, where no payments have been made thereon extending the statute. Lowe v. Jackson, 263 N.C. 634, 140 S.E.2d 1, 1965 N.C. LEXIS 1344 (1965).

Or from Last Payment Thereon. —

The power referred to in this section must be exercised within the 10-year period following the maturity of the note, or from the last payment thereon. Lowe v. Jackson, 263 N.C. 634, 140 S.E.2d 1, 1965 N.C. LEXIS 1344 (1965).

Statute Does Not Commence Running until Debt Is Due. —

The statute of limitations does not begin to run against the principal of a mortgage of lands until it is due, and the power of sale contained in the mortgage may be exercised within 10 years after the maturity of the principal. Scott v. Blades Lumber Co., 144 N.C. 44, 56 S.E. 548, 1907 N.C. LEXIS 104 (1907).

As to limitation when power of sale for default of interest is optional, see Scott v. Blades Lumber Co., 144 N.C. 44, 56 S.E. 548, 1907 N.C. LEXIS 104 (1907).

As to notes in series, with acceleration clause, see E.H. & J.A. Meadows Co. v. Bryan, 195 N.C. 398, 142 S.E. 487, 1928 N.C. LEXIS 102 (1928). See also G.S. 45-21.11 .

Restraint of Foreclosure. —

Where notes secured by a mortgage were barred by the statute of limitations, and the power of sale contained in the instrument was barred by the lapse of over 10 years from the date of the last payment on the notes, the trustee’s contention that the mortgagor would have to pay the amount of the notes in order to be entitled to the equitable relief of restraining the foreclosure, on the principle that he who seeks equity must do equity, was unavailing. Serls v. Gibbs, 205 N.C. 246, 171 S.E. 56, 1933 N.C. LEXIS 519 (1933).

Foreclosure Deed Held Voidable. —

A foreclosure deed executed pursuant to a sale held after the power of sale was barred by former G.S. 45-26 was held voidable and not void. Edwards v. Hair, 215 N.C. 662, 2 S.E.2d 859, 1939 N.C. LEXIS 335 (1939).

Burden of Proof on Attack of Foreclosure Deed. —

An instruction that the burden was on defendant, the purchaser at the sale, to prove that the power of sale was not barred by former G.S. 45-26 at the time of foreclosure, was error, the burden being upon plaintiff to prove that the foreclosure deed, attacked by her, was inoperative. Edwards v. Hair, 215 N.C. 662, 2 S.E.2d 859, 1939 N.C. LEXIS 335 (1939).

§ 45-21.12A. Power of sale barred during periods of military service.

  1. Power of Sale Barred. —  A mortgagee, trustee, or other creditor shall not exercise a power of sale contained in a mortgage or deed of trust, or provided by statute, during, or within 90 days after, a mortgagor’s, trustor’s, or debtor’s period of military service. The clerk of court shall not conduct a hearing pursuant to G.S. 45-21.16(d) unless the mortgagee, trustee or other creditor seeking to exercise a power of sale under a mortgage or deed of trust, or provided by statute, files with the clerk a certification that the hearing will take place at a time that is not during, or within 90 days after, a period of military service for the mortgagor, trustor or debtor. This subsection applies only to mortgages and deeds of trust that originated before the mortgagor’s or trustor’s period of military service.
  2. Waiver. —  This section shall not apply if the mortgagor, trustor, or debtor waives his or her rights under this section pursuant to a written agreement of the parties executed during or after the mortgagor’s, trustor’s, or debtor’s period of military service, as an instrument separate from the obligation or liability to which the waiver applies. Any waiver in writing of a right or protection provided by this section must be in at least 12 point type and shall specify the legal instrument creating the obligation or liability to which the waiver applies.
  3. Purpose. —  The purpose of this section is to supplement and complement the provisions of the Servicemembers Civil Relief Act, 50 U.S.C. App. § 501, et seq., and to afford greater peace and security for persons in federal active duty.
  4. Definitions. —  The following definitions apply in this section:
    1. Military service. —
      1. In the case of a member of the United States Army, Navy, Air Force, Marine Corps, or Coast Guard:
        1. Active duty, as defined in 10 U.S.C. § 101(d)(1), and
        2. In the case of a member of the National Guard, includes service under a call to active service authorized by the President or the Secretary of Defense for a period of more than 30 consecutive days under 32 U.S.C. § 502(f), for purposes of responding to a national emergency declared by the President and supported by federal funds.
      2. In the case of a servicemember who is a commissioned officer of the Public Health Service or the National Oceanic and Atmospheric Administration, active service, and
      3. Any period during which a servicemember is absent from duty on account of sickness, wounds, leave, or other lawful cause.
    2. Period of military service. — The period beginning on the date on which a servicemember enters military service and ending on the date on which the servicemember is released from military service or dies while in military service.
    3. Servicemember. — A member of the  United States Army, Navy, Air Force, Marine Corps, Coast Guard, the commissioned corps of the National Oceanic and Atmospheric Administration, or the commissioned corps of the Public Health Service.

History. 2010-190, s. 1; 2011-183, s. 127(b).

Editor’s Note.

Session Laws 2010-190, s. 4, made this section effective January 1, 2011, and applicable to foreclosures initiated on or after that date.

Session Laws 2010-190, s. 1, which enacted this section, provided: “Part 2 of Article 2A of Chapter 45 of the General Statutes is amended by adding a new section to read.” G.S. 45-21.12A has instead been placed in Part 1 of Article 2A of Chapter 45 at the direction of the Revisor of Statutes.

Effect of Amendments.

Session Laws 2011-183, s. 127(b), effective June 20, 2011, inserted “United States” in sub-subdivision (d)(1)a. and subdivision (d)(3) and capitalized the names of the branches of the armed forces immediately following that term.

§ 45-21.13. [Repealed]

Repealed by Session Laws 1967, c. 562, s. 2.

§ 45-21.14. Clerk’s authority to compel report or accounting; contempt proceeding.

Whenever any person fails to file any report or account, as provided by this Article, or files an incorrect or incomplete report or account, the clerk of the superior court having jurisdiction on his own motion or the motion of any interested party, may issue an order directing such person to file a correct and complete report or account within 20 days after service of the order on him. If such person fails to comply with the order, the clerk may issue an attachment against him for contempt, and may commit him to jail until he files such correct and complete report or account.

History. 1949, c. 720, s. 1.

Cross References.

As to preliminary report of sale of real property, see G.S. 45-21.26.

§ 45-21.15. Trustee’s fees.

  1. When a sale has been held, the trustee is entitled to such compensation, if any, as is stipulated in the instrument.
  2. When no sale has actually been held, compensation for a trustee’s services is determined as follows:
    1. If no compensation for the trustee’s services in holding a sale is provided for in the instrument, the trustee is not entitled to any compensation;
    2. If compensation is specifically provided for the trustee’s services when no sale is actually held, the trustee is entitled to such compensation;
    3. If the instrument provides for compensation for the trustee’s services in actually holding a sale, but does not provide compensation for the trustee’s services when no sale is actually held, the trustee is entitled to compensation as follows: (i) one-fourth of the completed sale compensation before the trustee files the notice of hearing; (ii) one-half after the filing of the notice of hearing; and (iii) three-fourths after the hearing.
    4. Repealed by Session Laws 1993, c. 305, s. 7.

History. 1949, c. 720, s. 1; 1993, c. 305, s. 7.

Legal Periodicals.

For comment, “Out of Luck: The Effect of the North Carolina Supreme Court’s Decision in In re Lucks and its Impact on the Law of Foreclosures,” see 41 Campbell L. Rev. 253 (2019).

CASE NOTES

Amount Held Proper. —

Under the express provisions of the deed of trust instrument, where foreclosure was “commenced, but not completed,” trustee was entitled to a “partial commission” computed as five percent of the outstanding indebtedness or the minimum stated in the deed of trust (whichever was greater), and where mortgagor exercised his right of redemption, five percent of that amount was the proper trustee’s commission to be paid. In re Newcomb, 112 N.C. App. 67, 434 S.E.2d 648, 1993 N.C. App. LEXIS 1007 (1993).

Part 2. Procedure for Sale.

§ 45-21.16. Notice and hearing.

  1. The mortgagee or trustee granted a power of sale under a mortgage or deed of trust who seeks to exercise such power of sale shall file with the clerk of court a notice of hearing in accordance with the terms of this section. After the notice of hearing is filed, the notice of hearing shall be served upon each party entitled to notice under this section. The notice shall specify a time and place for the hearing before the clerk of court and shall be served not less than 10 days prior to the date of such hearing. The notice shall be served and proof of service shall be made in any manner provided by the Rules of Civil Procedure for service of summons, including service by registered mail or certified mail, return receipt requested. However, in those instances that publication would be authorized, service may be made by posting a notice in a conspicuous place and manner upon the property not less than 20 days prior to the date of the hearing, and if service upon a party cannot be effected after a reasonable and diligent effort in a manner authorized above, notice to such party may be given by posting the notice in a conspicuous place and manner upon the property not less than 20 days prior to the date of hearing. Service by posting may run concurrently with any other effort to effect service. The notice shall be posted by the sheriff. In the event that the service is obtained by posting, an affidavit shall be filed with the clerk of court showing the circumstances warranting the use of service by posting.If any party is not served or is not timely served prior to the date of the hearing, the clerk shall order the hearing continued to a date and time certain, not less than 10 days from the date scheduled for the original hearing. All notices already timely served remain effective. The mortgagee or trustee shall satisfy the notice requirement of this section with respect to those parties not served or not timely served with respect to the original hearing. Any party timely served, who has not received actual notice of the date to which the hearing has been continued, shall be sent the order of continuance by first-class mail at his last known address.
  2. Notice of hearing shall be served in a manner authorized in subsection (a) upon:
    1. Any person to whom the security interest instrument itself directs notice to be sent in case of default.
    2. Any person obligated to repay the indebtedness against whom the holder thereof intends to assert liability therefor, and any such person not notified shall not be liable for any deficiency remaining after the sale.
    3. Every record owner of the real estate whose interest is of record in the county where the real property is located at the time the notice of hearing is filed in that county. The term “record owner” means any person owning a present or future interest in the real property, which interest is of record at the time that the notice of hearing is filed and would be affected by the foreclosure proceeding, but does not mean or include the trustee in a deed of trust or the owner or holder of a mortgage, deed of trust, judgment, mechanic’s or materialman’s lien, or other lien or security interest in the real property. Tenants in possession under unrecorded leases or rental agreements shall not be considered record owners.
  3. Notice shall be in writing and shall state in a manner reasonably calculated to make the party entitled to notice aware of the following:
    1. The particular real estate security interest being foreclosed, with such a description as is necessary to identify the real property, including the date, original amount, original holder, and book and page of the security instrument.
    2. The name and address of the holder of the security instrument at the time that the notice of hearing is filed.
    3. The nature of the default claimed.
    4. The fact, if such be the case, that the secured creditor has accelerated the maturity of the debt.
    5. Any right of the debtor to pay the indebtedness or cure the default if such is permitted.
    6. The holder has confirmed in writing to the person giving the notice, or if the holder is giving the notice, the holder shall confirm in the notice, that, within 30 days of the date of the notice, the debtor was sent by first-class mail at the debtor’s last known address a detailed written statement of the amount of principal, interest, and any other fees, expenses, and disbursements that the holder in good faith is claiming to be due as of the date of the written statement, together with a daily interest charge based on the contract rate as of the date of the written statement. Nothing herein is intended to authorize any fees, charges, or methods of charging interest which is not otherwise permitted under contract between the parties and other applicable law.
    7. To the knowledge of the holder, or the servicer acting on the holder’s behalf, whether in the two years preceding the date of the statement any requests for information have been made by the borrower to the servicer pursuant to G.S. 45-93 and, if so, whether such requests have been complied with. If the time limits set forth in G.S. 45-93 for complying with any such requests for information have not yet expired as of the date of the notice, the notice shall so state. If the holder is not giving the notice, the holder shall confirm in writing to the person giving the notice the information required by this subsection to be stated in the notice.
    8. Repealed by Session Laws 1977, c. 359, s. 7.
    9. The right of the debtor (or other party served) to appear before the clerk of court at a time and on a date specified, at which appearance he shall be afforded the opportunity to show cause as to why the foreclosure should not be allowed to be held. The notice shall contain all of the following:
      1. A statement that if the debtor does not intend to contest the creditor’s allegations of default, the debtor does not have to appear at the hearing and that the debtor’s failure to attend the hearing will not affect the debtor’s right to pay the indebtedness and thereby prevent the proposed sale, or to attend the actual sale, should the debtor elect to do so.
      2. A statement that the trustee, or substitute trustee, is a neutral party and, while holding that position in the foreclosure proceeding, may not advocate for the secured creditor or for the debtor in the foreclosure proceeding.
      3. A statement that the debtor has the right to apply to a judge of the superior court pursuant to G.S. 45-21.34 to enjoin the sale, upon any legal or equitable ground that the court may deem sufficient prior to the time that the rights of the parties to the sale or resale become fixed, provided that the debtor complies with the requirements of G.S. 45-21.34.
      4. A statement that the debtor has the right to appear at the hearing and contest the evidence that the clerk is to consider under G.S. 45-21.16(d), and that to authorize the foreclosure the clerk must find the existence of: (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 to notice.
      5. A statement that if the debtor fails to appear at the hearing, the trustee will ask the clerk for an order to sell the real property being foreclosed.
      6. A statement that the debtor has the right to seek the advice of an attorney and that free legal services may be available to the debtor by contacting Legal Aid of North Carolina or other legal services organizations.
    10. That if the foreclosure sale is consummated, the purchaser will be entitled to possession of the real estate as of the date of delivery of his deed, and that the debtor, if still in possession, can then be evicted.
    11. The name, address, and telephone number of the trustee or mortgagee.
    12. That the debtor should keep the trustee or mortgagee notified in writing of his address so that he can be mailed copies of the notice of foreclosure setting forth the terms under which the sale will be held, and notice of any postponements or resales.
    13. If the notice of hearing is intended to serve also as a notice of sale, such additional information as is set forth in G.S. 45-21.16A.
    14. That the hearing may be held on a date later than that stated in the notice and that the party will be notified of any change in the hearing date.
    15. That if the debtor is currently on military duty the foreclosure may be prohibited by G.S. 45-21.12A.
  4. The person giving the notice of hearing, if other than the holder, may rely on the written confirmation received from the holder under subdivisions (c)(5a) and (c)(5b) of this section and is not liable for inaccuracies in the written confirmation.
  5. In any foreclosure filed on or after November 1, 2010, where the underlying mortgage debt is a home loan as defined in G.S. 45-101(1b), the notice required by subsection (b) of this section shall contain a certification by the filing party that the pre-foreclosure notice and information required by G.S. 45-102 and G.S. 45-103 were provided in all material respects and that the periods of time established by Article 11 of this Chapter have elapsed.
  6. The hearing provided by this section shall be held before the clerk of court in the county where the land, or any portion thereof, is situated. In the event that the property to be sold consists of separate tracts situated in different counties or a single tract in more than one county, only one hearing shall be necessary. However, prior to that hearing, the mortgagee or trustee shall file the notice of hearing in any other county where any portion of the property to be sold is located. Upon such hearing, the clerk shall consider the evidence of the parties and may consider, in addition to other forms of evidence required or permitted by law, affidavits and certified copies of documents. If the clerk finds the existence of (i) valid debt of which the party seeking to foreclose is the holder, (ii) default, (iii) right to foreclose under the instrument, (iv) notice to those entitled to such under subsection (b), (v) that the underlying mortgage debt is not a home loan as defined in G.S. 45-101(1b), or if the loan is a home loan under G.S. 45-101(1b), that the pre-foreclosure notice under G.S. 45-102 was provided in all material respects, and that the periods of time established by Article 11 of this Chapter have elapsed, and (vi) that the sale is not barred by G.S. 45-21.12A, then the clerk shall authorize the mortgagee or trustee to proceed under the instrument, and the mortgagee or trustee can give notice of and conduct a sale pursuant to the provisions of this Article. A certified copy of any authorization or order by the clerk shall be filed in any other county where any portion of the property to be sold is located before the mortgagee or trustee may proceed to advertise and sell any property located in that county. In the event that sales are to be held in more than one county, the provisions of G.S. 45-21.7 apply.
  7. The act of the clerk in so finding or refusing to so find is a judicial act and may be appealed to the judge of the district or superior court having jurisdiction at any time within 10 days after said act. Appeals from said act of the clerk shall be heard de novo. If an appeal is taken from the clerk’s findings, the appealing party shall post a bond with sufficient surety as the clerk deems adequate to protect the opposing party from any probable loss by reason of appeal; and upon posting of the bond the clerk shall stay the foreclosure pending appeal. If the appealing party owns and occupies the property to be sold as his or her principal residence, the clerk shall require a bond in the amount of one percent (1%) of the principal balance due on the note or debt instrument, provided that the clerk, in the clerk’s discretion, may require a lesser amount in cases of undue hardship or for other good cause shown; and further provided that the clerk, in the clerk’s discretion, may require a higher bond if there is a likelihood of waste or damage to the property during the pendency of the appeal or for other good cause shown.
  8. In the event of an appeal, either party may demand that the matter be heard at the next succeeding term of the court to which the appeal is taken which convenes 10 or more days after the hearing before the clerk, and such hearing shall take precedence over the trial of other cases except cases of exceptions to homesteads and appeals in summary ejectment actions, provided the presiding judge may in his discretion postpone such hearing if the rights of the parties or the public in any other pending case require that such case be heard first. In those counties where no session of court is scheduled within 30 days from the date of hearing before the clerk, either party may petition any regular or special superior court judge resident in a district or assigned to hold courts in a district where any part of the real estate is located, or the chief district judge of a district where any part of the real estate is located, who shall be authorized to hear the appeal. A certified copy of any order entered as a result of the appeal shall be filed in all counties where the notice of hearing has been filed.
  9. Waiver of the right to notice and hearing provided herein shall not be permitted except as set forth herein. In any case in which the original principal amount of indebtedness secured was one hundred thousand dollars ($100,000), or more, any person entitled to notice and hearing may waive after default the right to notice and hearing by written instrument signed and duly acknowledged by such party. In all other cases, at any time subsequent to service of the notice of hearing provided above, the clerk, upon the request of the mortgagee or trustee, shall mail to all other parties entitled to notice of such hearing a form by which such parties may waive their rights to the hearing. Upon the return of the forms to the clerk bearing the signatures of each such party and that of a witness to each such party’s signature (which witness shall not be an agent or employee of the mortgagee or trustee), the clerk in his discretion may dispense with the necessity of a hearing and proceed to issue the order authorizing sale as set forth above.
  10. Any notice, order, or other papers required by this Article to be filed in the office of the clerk of superior court shall be filed in the same manner as a special proceeding.

History. 1975, c. 492, s. 2; 1977, c. 359, ss. 2-10; 1983, c. 335, s. 1; 1983 (Reg. Sess., 1984), c. 1108, ss. 1, 2; 1993, c. 305, s. 8; 1995, c. 509, s. 135.1(g); 1999-137, ss. 1, 2; 2007-351, s. 4; 2008-226, ss. 2, 3; 2009-573, s. 2; 2010-168, ss. 2, 3, 9; 2010-190, ss. 2, 3; 2012-79, s. 2.17(g).

Editor’s Note.

The Rules of Civil Procedure, referred to in subsection (a), are codified at G.S. 1A-1.

Session Laws 2009-573, s. 1, provides: “This act shall be known and may be cited as the ‘Consumer Economic Protection Act of 2009.’ ”

Session Laws 2008-226, s. 6, as amended by Session Laws 2010-168, s. 9, and Session Laws 2012-79, s. 2.17(g), made amendments to this section by Session Laws 2008-226, ss. 2 and 3, effective November 1, 2008. Session Laws 2012-79, s. 2.17(g), deleted the sunset provision and thus subsection (c2) and the amendment to subsection (d) of this section will not expire May 31, 2013.

Effect of Amendments.

Session Laws 2007-351, s. 4, effective April 1, 2008, rewrote subdivision (c)(5a); added subdivision (c)(5b); in subdivision (c)(7), rewrote the last sentence and added (c)(7)a. through f.; in subsection (c1), substituted “subdivisions (c)(5a) and (c)(5b)” for “subdivision (c)(5a)” in the first sentence and deleted the former last sentence which read: “Any dispute concerning the mailing or accuracy of the written statement described in subdivision (c)(5a) of this section shall not be considered in a hearing under this section.”

Session Laws 2008-226, ss. 2 and 3, as amended by Session Laws 2010-168, s. 9, effective November 1, 2008, and expiring May 31, 2013, added subsection (c2); and in the fifth sentence of subsection (d), inserted clause (v), and made related stylistic changes. Session Laws 2012-79, s. 2.17(g) deleted the May 31, 2013 expiration date.

Session Laws 2010-168, ss. 2 and 3, effective November 1, 2010, in subsection (c2), substituted “November 1, 2010” for “November 15, 2008” and “home loan as defined in G.S. 45-101(1b)” for “subprime loan as defined in G.S. 45-101(4)”; and in the fifth sentence in subsection (d), twice substituted “home loan” for “subprime loan” and “G.S. 45-101(1b)” for “G.S. 45-101(4).”

Session Laws 2010-190, s. 3, effective January 1, 2011, and applicable to foreclosures initiated on or after that date, in the fifth sentence in the first version of subsection (d), added “and (vi) that the sale is not barred by G.S. 45-21.12A” and made a related grammatical change; and in the fifth sentence in the second version of subsection (d), added “and (v) that the sale is not barred by G.S. 45-21.12A.”

Legal Periodicals.

For comment discussing changes in North Carolina’s foreclosure law, see 54 N.C.L. Rev. 903 (1976).

For survey of 1978 property law, see 57 N.C.L. Rev. 1103 (1979).

For survey of 1980 property law, see 59 N.C.L. Rev. 1209 (1981).

For comment, “‘A Topsy-Turvy World’: High Point Bank & Trust Co. v. Highmark Properties, LLC and the Modern Application of the Fair Market Value Offset Defense,” see 95 N.C.L. Rev. 857 (2017).

For comment, “Out of Luck: The Effect of the North Carolina Supreme Court’s Decision in In re Lucks and its Impact on the Law of Foreclosures,” see 41 Campbell L. Rev. 253 (2019).

CASE NOTES

Editor’s Note. —

Some of the cases below were decided prior to the 1993 amendments to Articles 2A and 2B, which clarified the procedure for foreclosure under power of sale and established a new upset bid procedure.

Construction With Other Statutes. —

G.S. 1-301.1(a) specifically states that if it conflicts with a specific provision of the General Statutes, that specific provision of the General Statutes controls. Accordingly, if the enactment of G.S. 1-301.1(c) created any conflict between it and the jurisdictional provisions in the foreclosure statutes, G.S. 45-21.16 and G.S. 45-21.34, the latter control in foreclosure actions. Mosler v. Druid Hills Land Co., 199 N.C. App. 293, 681 S.E.2d 456, 2009 N.C. App. LEXIS 1370 (2009).

Court of Appeals erred in affirming an order dismissing a bank’s judicial foreclosure action for failure to state a claim upon which relief could be granted because it applied the requirements applicable to non-judicial foreclosure by power of sale, and not the notice-pleading standard applicable to judicial foreclosures, the bank adequately pled its claim for judicial foreclosure and provided adequate notice of the claim, the bank’s attachment of additional exhibits in support of its claim did not deprive borrower of adequate notice of foreclosure by judicial action, and the absence of an endorsement did not deprive the bank of the right to enforce the instrument. United States Bank Nat'l Ass'n v. Pinkney, 369 N.C. 723, 800 S.E.2d 412, 2017 N.C. LEXIS 401 (2017).

Legislative Intent. —

This section was intended by the legislature to meet minimum due process requirements, not to engraft upon the procedure for foreclosure under a power of sale all the requirements of a formal civil action. In re Foreclosure of Deed of Trust, 46 N.C. App. 654, 266 S.E.2d 686, 1980 N.C. App. LEXIS 2922, dismissed, In re Foreclosure of Sutton Inv., 301 N.C. 90, 1980 N.C. LEXIS 1261 (1980).

The intent of the General Assembly in enacting the notice and hearing provisions of this section was not to alter the essentially contractual nature of the remedy of foreclosure under a power of sale, but rather to satisfy the minimum due process requirements of notice to interested parties and hearing prior to foreclosure and sale. In re Burgess, 47 N.C. App. 599, 267 S.E.2d 915, 1980 N.C. App. LEXIS 3159, dismissed, In re Foreclosure of Burgess, 301 N.C. 90, 1980 N.C. LEXIS 1260 (1980).

Minimum Due Process Requirements. —

The previous foreclosure statute was declared unconstitutional because it did not provide adequate notice of foreclosure and did not provide a foreclosure hearing, but this section was enacted to satisfy these minimum due process requirements. Fleet Nat'l Bank v. Raleigh Oaks Joint Venture, 117 N.C. App. 387, 451 S.E.2d 325, 1994 N.C. App. LEXIS 1256 (1994).

Scope of Section. —

Inasmuch as this section was the first legislation enacted which affected foreclosure proceedings after the decision in Turner v. Blackburn, 389 F. Supp. 1250 (W.D.N.C. 1975), which held the then existing procedures before the clerk unconstitutional, it is safe to assume that the legislature was responding to the due process requirements set out in that case. This section, therefore, would be concerned solely with procedures taking place before the clerk of court and appeals therefrom to the district or superior court, not with the more traditional and constitutionally permissible procedures for appeal from the district court or the superior court to the Court of Appeals. In re Simon, 36 N.C. App. 51, 243 S.E.2d 163, 1978 N.C. App. LEXIS 2404 (1978).

Subject Matter Jurisdiction. —

In twelve consolidated power of sale actions, a trial court erred in submitting the mortgagee’s foreclosure actions commenced pursuant to G.S. 45-21.16 to arbitration because the trial court was limited to making the findings contained in G.S. 45-21.16(d) and lacked subject matter jurisdiction to consider and confirm the arbitration award. In re Foreclosure of the Nine Deeds of Trust of Marshall & Madeline Cornblum, 220 N.C. App. 100, 727 S.E.2d 338, 2012 N.C. App. LEXIS 524, cert. denied, 366 N.C. 404, 734 S.E.2d 865, 2012 N.C. LEXIS 1190 (2012).

Trial court properly denied the borrowers’ motion to reconsider the dismissal of their appeal because they were not aggrieved and the trial court did not have subject matter jurisdiction to grant their motion for permanent injunctive relief where the lender’s foreclosure action was dismissed and the record contained no order dismissing or denying the borrowers’ motion for sanctions. In re Foreclosure of a Deed of Trust Executed by Foster, 239 N.C. App. 308, 768 S.E.2d 870, 2015 N.C. App. LEXIS 67 (2015).

Guaranty Agreements. —

By their terms, this section and G.S. 45-21.17 (the anti-deficiency statute) govern only the relationship between mortgagors and mortgagees, and are designed to protect interests in the property to be sold. Contract rights such as those in guaranty agreements do not fall within the coverage of those sections. Private third party guarantors of loans are not required by this section to give notice to those whose obligations they guarantee before seeking indemnity from them. Any notice requirement in such a situation is imposed by the contract between the parties, not by the antideficiency statute. Boley v. Principi, 144 F.R.D. 305, 1992 U.S. Dist. LEXIS 17553 (E.D.N.C. 1992), aff'd, 10 F.3d 218, 1993 U.S. App. LEXIS 29577 (4th Cir. 1993).

Trustees Necessary Parties. —

Trustees are necessary parties to proceedings pursuant to G.S. 45-21.16 and G.S. 45-21.34 because the trustee is the party tasked with facilitating the process. Greene v. Tr. Servs. of Carolina, LLC, 244 N.C. App. 583, 781 S.E.2d 664, 2016 N.C. App. LEXIS 57 (2016).

Veterans Administration Subrogation and Indemnification Rights. —

When pursuing its subrogation rights, the Veterans Administration must stand in the shoes of the private lender and meet any applicable state law requirements for recovery, but indemnity is an independent right arising under federal law, and is unaffected by state law. Boley v. Brown, 10 F.3d 218, 1993 U.S. App. LEXIS 29577 (4th Cir. 1993).

Accord and Satisfaction. —

Trial court did not err in granting summary judgment in favor of a homeowner’s association in a foreclosure action, G.S. 45-21.16(d), against a property owner for unpaid assessments, pursuant to the North Carolina Planned Community Act, G.S. 47F-3-116(a), because the owner’s notation on his check’s memo line of “full payment” was not sufficient evidence to constitute a dispute for purposes of accord and satisfaction; the owner failed to introduce any evidence demonstrating the existence of a dispute at any time prior to tendering the check to the association. In re Foreclosure of a Lien by Five Oaks Rec. Ass'n, 219 N.C. App. 321, 724 S.E.2d 98, 2012 N.C. App. LEXIS 327 (2012).

The term “record owner” in this section was intended to refer to either the original mortgagor of the property or a present owner who has purchased property subject to a mortgage. Seashore Properties, Inc. v. East Fed. Sav. & Loan Ass'n, 47 N.C. App. 675, 267 S.E.2d 693, 1980 N.C. App. LEXIS 3152 (1980).

The definition of “holder” in G.S. 25-1-201(20) is applicable to this section. In re Cooke, 37 N.C. App. 575, 246 S.E.2d 801, 1978 N.C. App. LEXIS 2805 (1978).

Insufficient Evidence that Party Seeking to Foreclose Was Holder. —

Party seeking to foreclose did not show that it was the current holder of a note under G.S. 25-1-201(21) as although the photocopies of the note and deed of trust established the required elements under G.S. 45-21.16(d) since the debtors did not dispute that they were correct copies, the photocopies indicated that the original holder of both instruments was not the party seeking to foreclose; the photocopies did not indicate that the original holder negotiated, indorsed, or transferred the note to the party seeking to foreclose. In re Foreclosure of a Deed of Trust Executed by Hannia M. Adams & H. Clayton Adams, 204 N.C. App. 318, 693 S.E.2d 705, 2010 N.C. App. LEXIS 945 (2010).

Sufficient Evidence of Holder. —

Petitioner was the holder of a note as it had physical possession of the note at the hearing and submitted a copy of that note, and a Non-Home Loan Certificate that stated that petitioner was successor by merger to the mortgagee was not challenged; because of the merger, petitioner had all the rights and powers the mortgagee had before the merger under G.S. 53-17. As the mortgagee was the indorser of the note in blank, petitioner received those rights in the merger. In re Yopp, 217 N.C. App. 488, 720 S.E.2d 769, 2011 N.C. App. LEXIS 2609 (2011).

Bank was a holder under G.S. 25-1-201(b)(21) of a note entitled to foreclose under G.S. 45-21.16(d) where: (1) a challenged stamp was a signature and an indorsement; (2) the presumption in favor of the validity of the signature prevailed; (3) the mortgagor was in default; and (4) the indorsements on the note unambiguously indicated an intent to transfer the note under G.S. 25-3-201(b) from each lender to the next, and finally to the bank. In re Foreclosure of a Deed of Trust Executed by Bass, 366 N.C. 464, 738 S.E.2d 173, 2013 N.C. LEXIS 269 (2013).

Trial court did not err in authorizing a substitute trustee to proceed with a foreclosure sale of property a buyer purchased at an execution sale because an assignee was the holder of the promissory note; the assignee produced the original note indorsed in blank, and that was sufficient to support the trial court’s conclusion that it was the holder of the note. In re Foreclosure of a Deed of Trust Executed by Rawls, 243 N.C. App. 316, 777 S.E.2d 796, 2015 N.C. App. LEXIS 815 (2015).

Bankruptcy court was precluded by the Rooker-Feldman doctrine from considering a Chapter 11 debtor’s claim that a bank and LLC that held a note and loan documents the debtor signed were not allowed to enforce the note because there were defects in the chain of custody; the Clerk of Court for the Wake County Superior Court, North Carolina, had entered an order allowing the LLC to foreclose on the debtor’s note, and G.S. 45-21.16 provided that the act of a North Carolina clerk of court in issuing a foreclosure order was a judicial act. Burcam Capital II, LLC v. U.S. Bank N.A., 2015 Bankr. LEXIS 3232 (Bankr. E.D.N.C. Sept. 24, 2015).

Superior court properly authorized a bank to proceed with foreclosure on property a purchaser bought at a foreclosure sale because the bank was the holder of the promissory note secured by the deed of trust encumbering the property; the note was indorsed in blank, and the bank had possession of the note. Greene v. Tr. Servs. of Carolina, LLC, 244 N.C. App. 583, 781 S.E.2d 664, 2016 N.C. App. LEXIS 57 (2016).

Trial court did not err in finding that an assignee was entitled to enforce a note under G.S. 25-3-309 where the assignee offered affidavit testimony that it was in possession at the time the original note was lost or destroyed, it was unable to locate the note after a good faith, thorough, and diligent manual search, and the loss of possession was not the result of transfer, and the borrowers offered no credible evidence that any other entity was the holder of the debt. In re Foreclosure of a Deed of Trust Executed by Frucella, 261 N.C. App. 632, 821 S.E.2d 249, 2018 N.C. App. LEXIS 996 (2018).

Subsection (d) of this section does not authorize redetermination of matters that have been finally adjudicated before the clerk. In re Williams, 88 N.C. App. 395, 363 S.E.2d 380, 1988 N.C. App. LEXIS 29 (1988).

Ownership is not indispensable to holdership. In re Cooke, 37 N.C. App. 575, 246 S.E.2d 801, 1978 N.C. App. LEXIS 2805 (1978).

Collateral Estoppel. —

The trial court was not prevented by collateral estoppel from “hearing evidence concerning . . . whether the debtor had performed its obligations under the compromise and settlement agreement executed by the parties,” where the bankruptcy court, while determining that the debtor was not in compliance with the plan of reorganization, had no jurisdiction over the foreclosure action, could not have granted a decree of foreclosure, and therefore did not litigate that issue. In re Trust of Azalea Garden Bd. & Care, Inc., 140 N.C. App. 45, 535 S.E.2d 388, 2000 N.C. App. LEXIS 1094 (2000).

Although a bank was barred from bringing a third action for foreclosure by power of sale due to the application of the two dismissal rule, collateral estoppel was not applicable because a final judgment was not reached; the nature of foreclosure by power of sale, judicial foreclosure, and money judgment actions are such that these actions, and the issues raised in each, differ. Lifestore Bank v. Mingo Tribal Preservation Trust Dated January 4, 1993, 235 N.C. App. 573, 763 S.E.2d 6, 2014 N.C. App. LEXIS 900 (2014).

Collateral estoppel did not apply in a foreclosure action because a bankruptcy order lacked controlling authority; the bankruptcy order was merely a determination that a bona fide dispute existed between a corporation and an assignee regarding the validity of the assignee’s liens. In re Foreclosure of a N.C. Deed of Trust, 236 N.C. App. 544, 764 S.E.2d 221, 2014 N.C. App. LEXIS 1038 (2014).

When mortgagors sued mortgagees for not accepting the mortgagors’ late payments and foreclosing, the mortgagors’ claims for breach of contract, negligent misrepresentation, tortious interference with contracts and business expectancy, and quantum meruit were collaterally estopped because (1) the claims were contingent upon the mortgagors not having defaulted on the mortgages, and (2) prior foreclosure proceedings found the mortgagors’ default, and those findings were not appealed, fixing the parties’ rights, before which the claims could have been raised. Funderburk v. JPMorgan Chase Bank, N.A., 241 N.C. App. 415, 775 S.E.2d 1, 2015 N.C. App. LEXIS 508 (2015).

Borrowers were collaterally estopped from raising claims seeking a declaratory judgment that the foreclosure was a nullity and asserting mutual mistake and unjust enrichment as the claims were are premised upon an alleged mistake in the property’s description in the deed of trust, and those issues were previously determined in the clerk’s order. Gray v. Fannie Mae, 264 N.C. App. 642, 830 S.E.2d 652, 2019 N.C. App. LEXIS 296 (2019).

Beneficiaries of Deed of Trust as Holders. —

There was ample evidence that the beneficiaries of a deed of trust were holders of a valid debt where the notes secured by the deed of trust were payable to the beneficiaries on order, the notes were not endorsed, and the notes were in the possession of the original beneficiary-payees. In re Cooke, 37 N.C. App. 575, 246 S.E.2d 801, 1978 N.C. App. LEXIS 2805 (1978).

The hearing provided for in this section was not intended to settle all matters in controversy between the parties; the appropriate means for invoking equity jurisdiction is an action pursuant to G.S. 45-21.34. Golf Vistas, Inc. v. Mortgage Investors, 39 N.C. App. 230, 249 S.E.2d 815, 1978 N.C. App. LEXIS 2364 (1978).

The notice and hearing required by this section were designed to enable the mortgagor to utilize the injunctive relief already available in this section. 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. In re Watts, 38 N.C. App. 90, 247 S.E.2d 427, 1978 N.C. App. LEXIS 2089 (1978).

Issues to Be Determined by Clerk and on Hearing De Novo. —

Under this section, there are only four issues before the clerk at a foreclosure hearing: the existence of a valid debt of which the party seeking to foreclose is the holder, the existence of default, the trustee’s right to foreclose, and the sufficiency of notice to the record owners of the hearing. The clerk’s findings are appealable to the superior court within 10 days for a hearing de novo, but the court’s authority is likewise limited. In re Helms, 55 N.C. App. 68, 284 S.E.2d 553, 1981 N.C. App. LEXIS 2966 (1981).

Upon appeal from an order of the clerk authorizing the trustee to proceed with sale, the judge is limited upon the hearing de novo to determining the same four issues resolved by the clerk. Those issues are: (1) the existence of a valid debt of which the party seeking to foreclose is the holder; (2) default; (3) the right to foreclose under the instrument; and (4) notice to those entitled to such. In re Foreclosure of Deed of Trust, 46 N.C. App. 654, 266 S.E.2d 686 (1980). In accord with second paragraph in the main volume. See In re Fortescue, 75 N.C. App. 127, 330 S.E.2d 219, 1985 N.C. App. LEXIS 3604 (1985).

Trial court did not exceed its authority by examining the underlying validity of the loan documents in a foreclosure proceeding, because such an inquiry related to the finding of a “valid debt” under G.S. 45-21.16; the trial court properly found that the debt claimed by the lender pursuant to the note was not valid. In re Hudson, 182 N.C. App. 499, 642 S.E.2d 485, 2007 N.C. App. LEXIS 689 (2007).

Allowance of a power of sale foreclosure of the borrowers’ home to proceed was appropriate because the borrowers ceased making payments on a valid debt, the trial court found that a bank was then in possession of the original promissory note and that the note contained a chain of valid and complete indorsements from the original lender to the bank, and the authorized appointment of a substitute trustee after the decision by the clerk of court to allow foreclosure to proceed was appropriate. In re Forclosure of a Deed of Trust Executed by Worsham, 267 N.C. App. 401, 833 S.E.2d 239, 2019 N.C. App. LEXIS 762 (2019).

Findings of Fact. —

Superior court’s order allowing a foreclosure to proceed was reversed where G.S. 45-21.16(d1) required it to conduct a de novo hearing and not just a de novo review, as a result G.S. 1A-1, N.C. R. Civ. P. 52(a), required it to make its own findings of fact as to each of the statutorily-required factors set forth in G.S. 45-21.16(d), and the superior court had not done so. In re Foreclosure of a Deed of Trust Executed by Garvey, 241 N.C. App. 260, 772 S.E.2d 747, 2015 N.C. App. LEXIS 452 (2015).

Limitation on Findings of Fact. —

The clerk of superior court is limited to making the four findings of fact specified in this section, and it follows that the superior court judge is similarly limited in the hearing de novo. In re Watts, 38 N.C. App. 90, 247 S.E.2d 427, 1978 N.C. App. LEXIS 2089 (1978).

The determination of the amount owed on a debt is beyond the scope of the hearing under this section. In re Burgess, 47 N.C. App. 599, 267 S.E.2d 915, 1980 N.C. App. LEXIS 3159, dismissed, In re Foreclosure of Burgess, 301 N.C. 90, 1980 N.C. LEXIS 1260 (1980).

A superior court judge is not authorized to invoke equity jurisdiction in a hearing de novo on appeal pursuant to subsection (d) of this section. He is limited to hearing the same matters in controversy which were before the clerk of superior court. In re Watts, 38 N.C. App. 90, 247 S.E.2d 427, 1978 N.C. App. LEXIS 2089 (1978).

A judge of the superior court cannot enjoin foreclosure upon any ground other than the ones stated in this section. In re Helms, 55 N.C. App. 68, 284 S.E.2d 553, 1981 N.C. App. LEXIS 2966 (1981).

The defense set forth in this section constitutes an affirmative defense within the meaning of Fed.R.Civ.P., Rule 8(c). Resolution Trust Corp. v. Southwest Dev. Co., 807 F. Supp. 375, 1992 U.S. Dist. LEXIS 17520 (E.D.N.C. 1992), modified, 837 F. Supp. 122, 1992 U.S. Dist. LEXIS 21842 (E.D.N.C. 1992), aff'd in part and rev'd in part, 14 F.3d 596, 1993 U.S. App. LEXIS 37127 (4th Cir. 1993).

Equitable Defenses May Be Asserted in Action Under G.S. 45-21.34. —

Because the hearing under this section 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. If respondents feel that they have equitable defenses to the foreclosure, they should be asserted in an action to enjoin the foreclosure sale under G.S. 45-21.34. In re Helms, 55 N.C. App. 68, 284 S.E.2d 553, 1981 N.C. App. LEXIS 2966 (1981).

How Equitable Defenses Raised. —

Equitable defenses, such as the acceptance of late payments, may not be raised in a foreclosure hearing pursuant to this section, but must instead be asserted in an action to enjoin the foreclosure sale under G.S. 45-21.34. In re Fortescue, 75 N.C. App. 127, 330 S.E.2d 219, 1985 N.C. App. LEXIS 3604 (1985).

The trial court erred in considering an equitable defense to foreclosure in a hearing held pursuant to this section, because the debtor had to pursue such a defense through an action to enjoin the foreclosure pursuant to G.S. 45-21.34. In re Trust of Azalea Garden Bd. & Care, Inc., 140 N.C. App. 45, 535 S.E.2d 388, 2000 N.C. App. LEXIS 1094 (2000).

Borrowers could not raise the equitable defense of merger based on their filing of a quitclaim deed to prevent foreclosure in an action for foreclosure under power of sale pursuant to G.S. 45-21.16 when the existence of all the conditions required under the statute was undisputed. Mosler v. Druid Hills Land Co., 199 N.C. App. 293, 681 S.E.2d 456, 2009 N.C. App. LEXIS 1370 (2009).

Trial court exceeded its authority in considering the equitable estoppel defense asserted by the mortgagors’ in a power of sale foreclosure action. In re Young, 227 N.C. App. 502, 744 S.E.2d 476, 2013 N.C. App. LEXIS 603 (2013).

Defense that the mortgagor was incompetent to execute the deed of trust was not available in a pre-foreclosure hearing either before the clerk or before the superior court on appeal; however, such defense could be raised by bringing an action to enjoin the foreclosure under G.S. 45-21.34. In re Godwin, 121 N.C. App. 703, 468 S.E.2d 811, 1996 N.C. App. LEXIS 150 (1996).

Trial Court Properly Refused To Consider Rescission Defense. —

Trial court did not err in refusing to consider mortgagors’ defense that the debt a substitute trustee sought to foreclose was not a valid debt because the trial court properly concluded that the mortgagors’ argument that they had rescinded the loan transaction, invaliding the debt the trustee sought to foreclose, was an equitable defense and not properly before the trial court. In re Foreclosure by David A. Simpson, P.C., 211 N.C. App. 483, 711 S.E.2d 165, 2011 N.C. App. LEXIS 836 (2011).

Bankruptcy court had the power to hear Chapter 13 debtors’ claim that a deed they signed should be reformed because it encumbered a larger tract of land than the debtors agreed to encumber when they borrowed money from a home loan company. A clerk that reviewed a bank’s foreclosure request under G.S. 45-21.16 did not make findings of fact concerning the accuracy of the property’s description, so the debtors’ claim for reformation was not barred by the Rooker-Feldman doctrine, the debtors’ request was timely under G.S. 45-21.27, and G.S. 45-21.34 allowed courts to enjoin a sale upon the ground that the amount bid or price offered was inadequate and inequitable and would result in irreparable damage to the owner. Hinson v. Countrywide Home Loans, Inc., 481 B.R. 364, 2012 Bankr. LEXIS 1678 (Bankr. E.D.N.C. 2012).

Evidence of legal defenses was admissible and proper for consideration in a hearing pursuant to this section where a lender used a deed of trust on residential real property which prohibited conveyance without his consent and provided for acceleration of extract enhanced interest upon conveyance of the security property. In re Foreclosure of Deed of Trust, 55 N.C. App. 373, 285 S.E.2d 615, 1982 N.C. App. LEXIS 2198, aff'd, 306 N.C. 451, 293 S.E.2d 798, 1982 N.C. LEXIS 1488 (1982).

Valid Debt Must Be Shown. —

A party seeking to go forward with foreclosure under a power of sale must establish by competent evidence the existence of a valid debt of which he is the holder. Connolly v. Potts, 63 N.C. App. 547, 306 S.E.2d 123, 1983 N.C. App. LEXIS 3143 (1983).

Evidence of Valid Debt. —

The introduction of a promissory note, along with evidence of execution and delivery, in the absence of probative evidence to the contrary, will support the finding of a valid debt in a proceeding to foreclose under a power of sale. In re Cooke, 37 N.C. App. 575, 246 S.E.2d 801, 1978 N.C. App. LEXIS 2805 (1978).

Subdivision (d)(i) of this section permits the clerk to find a valid debt of which the party seeking to foreclose is a holder if there is competent evidence that the party seeking to foreclose is the holder of some valid debt, irrespective of the exact amount owed. In re Burgess, 47 N.C. App. 599, 267 S.E.2d 915, 1980 N.C. App. LEXIS 3159, dismissed, In re Foreclosure of Burgess, 301 N.C. 90, 1980 N.C. LEXIS 1260 (1980).

Evidence of a repurchase agreement, whereby seller agrees with the lender that seller will repurchase goods sold to debtor in the event of default by debtor on the loan used to finance the sale, is proper evidence of the existence of a valid debt and the right to foreclose. Hofler v. Hill, 58 N.C. App. 201, 293 S.E.2d 238, 1982 N.C. App. LEXIS 2749 (1982), modified, 311 N.C. 325, 317 S.E.2d 670, 1984 N.C. LEXIS 1738 (1984).

In an action by a lender to foreclose a deed of trust securing a note, where the borrower failed to refute the presumption of consideration for a note under seal, there was no competent evidence to support a conclusion that a valid debt did not exist. In re Blue Ridge Holdings Ltd. Partnership, 129 N.C. App. 534, 500 S.E.2d 446, 1998 N.C. App. LEXIS 645 (1998).

Trial court did not err by ordering a foreclosure sale under G.S. 45-21.16 based on a finding that respondent was the holder of the note sought to be foreclosed and the note evidenced a valid debt petitioners owed. They failed to prove that two individuals who advised them as to their rights and obligations under the mortgage at closing engaged in the unauthorized practice of law so as to render the debt invalid. In re Gray, 225 N.C. App. 46, 741 S.E.2d 888, 2013 N.C. App. LEXIS 57 (2013).

Pertinent parts of an estate order were void and had no legal effect on a foreclosure action because the clerk of court had no jurisdiction over the property which was not part of an estate and a court erred in ordering that a deed of trust, which secured property outside the estate, was cancelled. In re Foreclosure of the Deed of Trust from Manning, 228 N.C. App. 591, 747 S.E.2d 286, 2013 N.C. App. LEXIS 813 (2013).

Bank presented sufficient evidence to establish all the required elements of G.S. 45-21.16, because the bank showed that it was the holder of a promissory note through a corporate merger, and a default on the debt. In re Foreclosure of the Deed of Trust from Manning, 228 N.C. App. 591, 747 S.E.2d 286, 2013 N.C. App. LEXIS 813 (2013).

In a foreclosure by power of sale, the trial court shall enter an order permitting foreclosure upon finding: (i) a 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. A corporation’s plan of reorganization (confirmed plan) evidenced a valid debt, and the deed of trust and confirmed plan adequately described the indebtedness each secured, which was sufficient to notify creditors of the nature of the obligations. In re Foreclosure of a N.C. Deed of Trust, 236 N.C. App. 544, 764 S.E.2d 221, 2014 N.C. App. LEXIS 1038 (2014).

Valid Debt Not Shown. —

Where defendants executed a promissory note and deed of trust with the understanding that photo processing equipment would be assigned to them, but authorization for the assignment was never obtained, and the defendants did not have possession of the equipment there was a failure of consideration and no valid debt was created between the parties. In re Land Covered By Certain Deed of Trust, 123 N.C. App. 133, 472 S.E.2d 369, 1996 N.C. App. LEXIS 562 (1996).

Where all parties to an appeal agreed that the defendants’ signatures on a loan application were forged and the president of the bank, a long-time friend of one defendant’s father, accepted his representation of the signatures as authentic, the superior court correctly found that there was no “valid debt” for plaintiff/bank to enforce, that the loans were not ratified because the loan maker did not act as defendants’ agent, and defendants did not receive, directly or indirectly, any of the loan proceeds; foreclosure under power of sale was properly denied. Espinosa v. Martin, 135 N.C. App. 305, 520 S.E.2d 108, 1999 N.C. App. LEXIS 1060 (1999), cert. denied, 351 N.C. 353, 543 S.E.2d 126, 2000 N.C. LEXIS 220 (2000).

No Valid Debt and No Default. —

Where person executed notes and deed of trust based upon the understanding and for the specific consideration that no criminal proceedings would be instituted against her and criminal proceedings subsequently were instituted, the notes and deed of trust were without consideration, and the lower court was correct in finding (1) no valid debt existed and (2) there was no default on the notes or deed of trust, thereby properly disallowing the foreclosure proceeding. In re Kitchens, 113 N.C. App. 175, 437 S.E.2d 511, 1993 N.C. App. LEXIS 1301 (1993).

Possession is significant in determining whether a person is the holder of a valid debt, and the absence of possession defeats that status. Connolly v. Potts, 63 N.C. App. 547, 306 S.E.2d 123, 1983 N.C. App. LEXIS 3143 (1983).

Failure to Contradict Evidence of Possession and Past Due Note. —

If the respondent in a proceeding to foreclose under a power of sale fails to offer any evidence to contradict evidence of possession and of a past due note when it is introduced in a foreclosure proceeding, the trial court’s finding of default will not be disturbed on appeal. In re Cooke, 37 N.C. App. 575, 246 S.E.2d 801, 1978 N.C. App. LEXIS 2805 (1978).

Failure To Determine Holder Of Adjustable Rate Note. —

Assuming that production of a mortgagor’s adjustable rate note was evidence of a transfer of the note pursuant to the Uniform Commercial Code and that a substitute trustee was in possession of the note, that was not sufficient evidence that the trustee was the “holder” of the note under the UCC, G.S. 25-1-201(b)(21); the note was not indorsed to the trustee or to bearer, a prerequisite to confer upon the trustee the status of holder under G.S. 25-1-201(b)(21). In re Foreclosure by David A. Simpson, P.C., 211 N.C. App. 483, 711 S.E.2d 165, 2011 N.C. App. LEXIS 836 (2011).

Failure To Determine Holder Of Adjustable Rate Note. —

Trial court erred in permitting a substitute trustee to proceed with foreclosure proceedings under G.S. 45-21.16(d) because there was no competent evidence that the trustee was the owner and holder of a mortgagor’s adjustable rate note and deed of trust, and production of an original note at trial did not, in itself, establish that the note was transferred to the party presenting the note with the purpose of giving that party the right to enforce the instrument; the trial court’s findings of fact did not address who had possession of the mortgagor’s note at the time of the de novo hearing, and without a determination of who had physical possession of the note, the trial court could determine, under the Uniform Commercial Code, G.S. 25-1-201(b)(21), the entity that was the holder of the note. In re Foreclosure by David A. Simpson, P.C., 211 N.C. App. 483, 711 S.E.2d 165, 2011 N.C. App. LEXIS 836 (2011).

Insufficient Evidence Of Holder Of Adjustable Rate Note. —

Substitute trustee did not offer sufficient evidence that a bank, as trustee, was the holder of a mortgagor’s adjustable rate note and, thus, the party entitled to proceed with a foreclosure action under G.S. 45-21.16(d) because pursuant to the Uniform Commercial Code, G.S. 25-3-110(c), the note was payable to the bank as trustee; the note was clearly indorsed to the bank as trustee. In re Foreclosure by David A. Simpson, P.C., 211 N.C. App. 483, 711 S.E.2d 165, 2011 N.C. App. LEXIS 836 (2011).

Surviving Corporation Was Holder of Note. —

Lender’s successor’s evidence, including a letter from the Comptroller of the Currency officially certifying a merger between the successor and the lender, was sufficient to establish the merger. The successor, as the surviving corporation after the merger, succeeded by operation of law to the lender’s status as holder of a note, pursuant to G.S. 55-11-06(a)(2). In re Foreclosure of N.C. Deed of Trust by Carver Pond I L.P., 217 N.C. App. 352, 719 S.E.2d 207, 2011 N.C. App. LEXIS 2488 (2011).

Affiant’s conclusion that petitioner was the holder of a note and a deed of trust petitioner sought to foreclose was a legal conclusion and was disregarded; whether an entity was a holder under G.S. 25-1-201(b)(21) was a legal conclusion that was to be determined by a court on the basis of factual allegations. In re Yopp, 217 N.C. App. 488, 720 S.E.2d 769, 2011 N.C. App. LEXIS 2609 (2011).

Determining which property is legally secured by a deed of trust is a proper issue and element of proof before the Clerk of Superior Court. Therefore, if a party contends that the property is not secured, or should no longer be secured by the deed of trust, such contention may be raised as a defense to the four requisite findings under this section. In re Michael Weinman Assocs., 333 N.C. 221, 424 S.E.2d 385, 1993 N.C. LEXIS 13 (1993).

Foreclosure under a power of sale in a mortgage is not favored in the law, and its exercise by the mortgagee will be watched with jealousy. In re Michael Weinman Assocs., 333 N.C. 221, 424 S.E.2d 385, 1993 N.C. LEXIS 13 (1993).

Duty of Court to Consider All Relevant Documents. —

The trial court’s denial of the creditor’s right to foreclose was in error where the court determined the rights of the parties under the deed of trust only, and failed to apply the provisions of the original promissory note, modified by the compromise and settlement agreement and the amended plan of reorganization. In re Trust of Azalea Garden Bd. & Care, Inc., 140 N.C. App. 45, 535 S.E.2d 388, 2000 N.C. App. LEXIS 1094 (2000).

Trustee’s Right to Foreclose. —

Court of Appeals erred in reversing the trial court’s foreclosure order because, while the trial court erroneously entered a “dismissal with prejudice,” it properly refused to authorize the bank to proceed with the non-judicial foreclosure by power of sale where the bank failed to establish a substitute trustee’s authority to foreclose the deed of trust due to the significant internal inconsistencies in the power of attorney at issue, and the bank did not effectuate any of ways to overcome the inconsistencies. In re Foreclosure of a Deed of Trust Executed by Lucks, 369 N.C. 222, 794 S.E.2d 501, 2016 N.C. LEXIS 1161 (2016).

Substitute Trustee. —

The substitute trustee at the time of a hearing being a different trustee than the trustee identified in the notice of hearing did not require that the hearing be re-noticed, or prevent the trial court from correctly concluding that the substitute trustee at the time of the hearing was authorized to foreclose. In re Forclosure of a Deed of Trust Executed by Worsham, 267 N.C. App. 401, 833 S.E.2d 239, 2019 N.C. App. LEXIS 762 (2019).

Evidence of Right to Foreclose. —

Subdivision (d)(iii) of this section permits the clerk to find a right to foreclose under the instrument if there is competent evidence that the terms of the deed of trust permit the exercise of the power of sale under the circumstances of the particular case. In re Burgess, 47 N.C. App. 599, 267 S.E.2d 915, 1980 N.C. App. LEXIS 3159, dismissed, In re Foreclosure of Burgess, 301 N.C. 90, 1980 N.C. LEXIS 1260 (1980).

Because evidentiary rules were relaxed in nonjudicial power-of-sale foreclosure proceedings, the binder of relevant documents supplied by the lender, which included the promissory note and deed of trust, along with the parties’ stipulations, provided sufficient competent evidence of the existence of the statutorily required criteria to support a superior court’s foreclosure order. In re Foreclosure of Real Prop. Under Deed of Trust from Clayton, 254 N.C. App. 661, 802 S.E.2d 920, 2017 N.C. App. LEXIS 630 (2017), cert. denied, 370 N.C. 223, 809 S.E.2d 866, 2018 N.C. LEXIS 137 (2018).

Foreclosure under Original Deed of Trust Where Second Deed of Trust Invalid. —

Where second deed of trust was given by respondents as security for second loan, which was used to pay off first loan, the parties intending the second note and deed of trust to replace and be substituted for the original note and deed of trust, but failure of the respondents to affix the proper signatures to the second deed of trust caused it to be invalid and amounted to substantial failure of consideration for the second loan agreement, the second loan agreement was rendered a nullity, and the parties’ duties under the original loan agreement were revived. Thus, where respondents were in default under the original debt petitioner had a right to foreclose under the original deed of trust. Bowers v. Bowers, 74 N.C. App. 708, 329 S.E.2d 725, 1985 N.C. App. LEXIS 3561 (1985).

The statutory scheme set forth in this section and G.S. 45-21.17 applies directly to the Department of Veterans Affairs (VA) when it exercises its subrogation rights under state law to recover amounts paid to cover deficiencies after defaults on VA guaranteed loans. Under a subrogation theory, the VA’s rights are the same as those of the lender who foreclosed, and thus are governed by state foreclosure law such as the North Carolina antideficiency statute. The VA therefore lost its right to subrogation against plaintiff-borrower when bank-lender failed to comply with the statutory notice requirements. Boley v. Principi, 144 F.R.D. 305, 1992 U.S. Dist. LEXIS 17553 (E.D.N.C. 1992), aff'd, 10 F.3d 218, 1993 U.S. App. LEXIS 29577 (4th Cir. 1993).

Nature of Foreclosure by Power of Sale. —

Order granting bank’s motion to lift the stay of foreclosure proceedings against an owner was proper because the foreclosure action was not a compulsory counterclaim in a separate federal action. G.S. 1A-1, N.C. R. Civ. P. 13(a) did not compel the bank to pursue its foreclosure in the federal action; pursuant to 28 U.S.C.S § 2072, Fed. R. Civ. P. 13(a) did not apply to the bank’s foreclosure by power of sale and thus, did not require the bank to file the foreclosure action as a compulsory counterclaim in the federal action. The notice and hearing provisions in G.S. 45-21.16 do not alter the contractual nature of a foreclosure by power of sale in North Carolina. In re Foreclosure of a Deed of Trust from Draffen, 222 N.C. App. 39, 731 S.E.2d 435, 2012 N.C. App. LEXIS 933 (2012).

Arbitration Issue. —

Trial court properly refused to rule on the owners’ motion to compel arbitration in a foreclosure action because, as the substitute trustee initiated the foreclosure under a power of sale, both the clerk’s and the trial court’s scope of review was limited to issues related to the six findings specified in G.S. 45-21.16; the owners’ argument concerning their right to arbitration was not pertinent to the six required findings. The owners should have raised their right to arbitrate in a motion to enjoin pursuant to G.S. 45-21.34, which granted the trial court statutory authority and jurisdiction to issue a stay and enforce the arbitration agreement contained in the deed of trust. In re Foreclosure of a Deed of a N.C. Deed of Trust, 219 N.C. App. 370, 725 S.E.2d 22, 2012 N.C. App. LEXIS 336 (2012).

No trial by jury is required in hearings conducted under this section. In re Foreclosure of Deed of Trust, 46 N.C. App. 654, 266 S.E.2d 686, 1980 N.C. App. LEXIS 2922, dismissed, In re Foreclosure of Sutton Inv., 301 N.C. 90, 1980 N.C. LEXIS 1261 (1980).

Denial of a co-owner’s motion for a jury trial in his appeal from a clerk’s order allowing a foreclosure was proper because, inter alia, G.S. 45-21.16 did not guarantee a right to a jury determination of the type of issues to be resolved by a hearing pursuant to G.S. 45-21.16. In re Foreclosure of Elkins, 193 N.C. App. 226, 667 S.E.2d 259, 2008 N.C. App. LEXIS 1756 (2008).

Measure of Damages. —

The language of this section is considerably broader than the language under either G.S. 45-21.34 or G.S. 1-292. It must be concluded, therefore, that the legislature intended that the courts have great latitude in measuring damages under this section. In re Simon, 36 N.C. App. 51, 243 S.E.2d 163, 1978 N.C. App. LEXIS 2404 (1978).

Interest accruing on the indebtedness during the pendency of a stay would be a proper measure of damages under a bond conforming to the language of this section. In re Simon, 36 N.C. App. 51, 243 S.E.2d 163, 1978 N.C. App. LEXIS 2404 (1978).

Request for Equitable Relief Denied. —

Superior court correctly declined to address the plaintiff/bank’s argument for equitable relief, as such an action would have exceeded its permissible scope of review in a foreclosure action. Espinosa v. Martin, 135 N.C. App. 305, 520 S.E.2d 108, 1999 N.C. App. LEXIS 1060 (1999), cert. denied, 351 N.C. 353, 543 S.E.2d 126, 2000 N.C. LEXIS 220 (2000).

Testimony of Trustee Held Proper. —

Where the debtors challenged the trial court’s jurisdiction on the grounds that the trustee’s service of the notice of hearing was inadequate, the trial court properly allowed the foreclosing creditor to rebut the debtors’ assertion by calling the trustees as witness and inquiring as to his efforts to serve the debtors, since the trustee had a statutory duty to effect valid service of process and did not adversely affect his proper status as a “disinterested third party” in the deed of trust relationship. In re Foreclosure of Real Prop. Under Deed of Trust from Brown, 156 N.C. App. 477, 577 S.E.2d 398, 2003 N.C. App. LEXIS 179 (2003).

Admission of Affidavit Held Proper. —

Necessity for expeditious procedure in foreclosure actions substantially outweighed any concerns about the efficacy of allowing a loan servicer’s employee, who lived out of state, to testify by affidavit, and the trial court properly admitted her affidavit into evidence. In re Foreclosure of Real Prop. Under Deed of Trust from Brown, 156 N.C. App. 477, 577 S.E.2d 398, 2003 N.C. App. LEXIS 179 (2003).

Proof of Service. —

Homeowners were entitled to attack foreclosure proceeding either by a motion in the cause or by an independent action where the officer’s return was insufficient on its face to show service upon homeowner husband in that the return did not show the place where the papers were left. Hassell v. Wilson, 301 N.C. 307, 272 S.E.2d 77, 1980 N.C. LEXIS 1166 (1980).

Although an officer’s return was insufficient to show service upon plaintiff husband in mortgage foreclosure proceedings because it did not show the place where the papers were left, such defect was not necessarily fatal to the foreclosure proceedings; the matter would be remanded for the trial judge to determine, within his discretion, whether the sheriff’s return ought to be amended so as to comport with facts regarding the place and manner of service. Hassell v. Wilson, 301 N.C. 307, 272 S.E.2d 77, 1980 N.C. LEXIS 1166 (1980).

Service by Posting. —

This section allows service upon a party by posting the notice only in those instances where the party’s name and address are not reasonably ascertainable; otherwise, posting will suffice only when “supplemented” by notice mailed to the party’s last known address or by personal service. Federal Land Bank v. Lackey, 94 N.C. App. 553, 380 S.E.2d 538, 1989 N.C. App. LEXIS 558 (1989), aff'd, 326 N.C. 478, 390 S.E.2d 138, 1990 N.C. LEXIS 158 (1990).

Under this section, service by posting may run concurrently with any other effort to effect service; therefore, when the notice was posted on the property concurrent with the attempt to serve defendants by mail, the notice requirement was satisfied. McArdle Corp. v. Patterson, 115 N.C. App. 528, 445 S.E.2d 604, 1994 N.C. App. LEXIS 713 (1994), aff'd, 340 N.C. 356, 457 S.E.2d 596, 1995 N.C. LEXIS 254 (1995).

Mortgagor was properly served with process by posting because such service was proper when service by publication, under G.S. 1A-1, N.C. R. Civ. P. 4(j1), was allowed, and Rule 4(j1) was interpreted in the disjunctive, so a mortgagee did not have to try all other methods of service listed in the Rule. In re Powell, 237 N.C. App. 441, 768 S.E.2d 133, 2014 N.C. App. LEXIS 1242 (2014).

Mortgagee exercised due diligence in attempting to serve a mortgagor with notice of a foreclosure hearing, authorizing service by posting, since service by publication was authorized, because the mortgagee not only unsuccessfully attempted service by certified mail, return receipt requested, which would have sufficed, but the mortgagor also unsuccessfully attempted service by personal delivery. In re Powell, 237 N.C. App. 441, 768 S.E.2d 133, 2014 N.C. App. LEXIS 1242 (2014).

Original Obligor Entitled to Notice. —

Where original obligors negotiated a deed of trust with trustee, and second obligors assumed the loan but original obligors were not released and remained personally liable for the debt, trial court erred in granting summary judgment to trustee since original obligor was not properly served with notice; though second obligors assumed the original obligor’s loan, original obligor remained personally liable for the debt and accordingly, he was entitled to notice of any foreclosure hearing. Federal Land Bank v. Lackey, 94 N.C. App. 553, 380 S.E.2d 538, 1989 N.C. App. LEXIS 558 (1989), aff'd, 326 N.C. 478, 390 S.E.2d 138, 1990 N.C. LEXIS 158 (1990).

Subordinate Lienholder Entitled to Notice. —

If a trustee owed a fiduciary duty to the subordinate lienholder, the trustee conceivably would be compelled to give the subordinate lienholder notice of the foreclosure sale so that the subordinate lienholder could enforce its rights, and this result is appropriate because it is incumbent upon a subordinate lienholder to contemplate the risk associated with subordinating its right to payment to that of a higher priority lienholder; the subordinate lienholder is not left without recourse because it has an adequate means to compensate for this risk by charging a higher interest rate on the debt, and therefore, in the context of a foreclosure sale, only a foreclosing lienholder may bring a claim for breach of fiduciary duty against the trustee of a deed of trust being foreclosed upon. In re Foreclosure of the Deed of Trust of Vogler Realty, Inc., 365 N.C. 389, 722 S.E.2d 459, 2012 N.C. LEXIS 27 (2012).

Requirements of Notice. —

Subsection (c) lists the information the notice of hearing must contain and does not include a requirement that the notice contain the names of the parties entitled to notice, nor is such a requirement implied by the statute as a whole. McArdle Corp. v. Patterson, 115 N.C. App. 528, 445 S.E.2d 604, 1994 N.C. App. LEXIS 713 (1994), aff'd, 340 N.C. 356, 457 S.E.2d 596, 1995 N.C. LEXIS 254 (1995).

Notice Held Sufficient. —

In a foreclosure action, a loan servicer’s efforts to serve the debtors prior to posting the property by mailing notice to the address of the subject real property (though the debtors no longer lived there) were “reasonable and diligent” within the meaning of G.S. 45-21.16(a), in light of the fact that the debtors had actual notice of the hearing. In re Foreclosure of Real Prop. Under Deed of Trust from Brown, 156 N.C. App. 477, 577 S.E.2d 398, 2003 N.C. App. LEXIS 179 (2003).

Superior court properly found that a bank met the notice criteria of the statute because the purchaser of the property and the sellers received proper notice of the initial hearing before the clerk of court; the sellers did not appeal the clerk of court’s decision, and the purchaser made no showing on appeal regarding how he had been prejudiced by or how he had standing to contest the adequacy of the notice to the sellers of the hearing on his appeal. Greene v. Tr. Servs. of Carolina, LLC, 244 N.C. App. 583, 781 S.E.2d 664, 2016 N.C. App. LEXIS 57 (2016).

It was no error to deny a mortgagee’s motion to set aside a homeowners’ association’s foreclosure because (1) the mortgagee had notice mailed to an address the mortgagee gave in prior communications, and (2) the mortgagee did not timely object within one year. In re Foreclosure of Real Prop. Under Deed of Trust from Garrett, 250 N.C. App. 358, 795 S.E.2d 1, 2016 N.C. App. LEXIS 1156 (2016).

Notice Held Insufficient. —

The clerk of court erred in permitting a foreclosure sale of property pursuant to a deed of trust where the debtor was not given notice of the foreclosure hearing in a manner prescribed by subsection (a) of this section, a letter to and telephone conservation with the debtor being insufficient and the debtor’s actual knowledge of the hearing being irrelevant. PMB, Inc. v. Rosenfeld, 48 N.C. App. 736, 269 S.E.2d 748, 1980 N.C. App. LEXIS 3302 (1980).

Original obligor’s name and address were reasonably ascertainable, and the trustee testified he had original obligor’s name and address in his files; therefore, where plaintiff gave notice to original obligor of the foreclosure hearing by posting notice on the property, plaintiff’s failure to supplement constructive notice with notice by mail failed to comply with the minimum due process requirements. Federal Land Bank v. Lackey, 94 N.C. App. 553, 380 S.E.2d 538, 1989 N.C. App. LEXIS 558 (1989), aff'd, 326 N.C. 478, 390 S.E.2d 138, 1990 N.C. LEXIS 158 (1990).

Where plaintiff’s sole attempt at personal service of notice consisted of a certified letter mailed to the business address of a partnership, a postal box number, this solitary venture constituted neither application of “due diligence” as required by Rule 4(j1) nor a “reasonable and diligent effort” as required by subsection (a). Barclays American/Mortgage Corp. v. BECA Enters., 116 N.C. App. 100, 446 S.E.2d 883, 1994 N.C. App. LEXIS 857 (1994).

Trial court correctly determined a foreclosure sale was void due to lack of personal jurisdiction over the homeowner because the foreclosure trustee failed to serve all record owners of the property; the attempted service of the notice of foreclosure upon the homeowner by leaving a copy at the property was inadequate because the property was not his dwelling house or usual place of abode. In re Proposed Foreclosure of Claim of Lien Filed on George, 264 N.C. App. 38, 825 S.E.2d 19, 2019 N.C. App. LEXIS 156 (2019), rev'd in part, aff'd, 377 N.C. 129, 856 S.E.2d 483, 2021- NCSC-35, 2021 N.C. LEXIS 325 (2021).

Notice Not Fatally Defective. —

Notice of a foreclosure hearing before the clerk of court was not fatally defective in that the notice, dated December 8, 1978, stated that the hearing would be held on January 3, 1978, rather than 1979. Lovell v. Rowan Mut. Fire Ins. Co., 46 N.C. App. 150, 264 S.E.2d 743, 1980 N.C. App. LEXIS 2815 (1980), rev'd, 302 N.C. 150, 274 S.E.2d 170, 1981 N.C. LEXIS 1027 (1981).

Notice Not Required. —

The plaintiff-city had no obligation to provide the defendant with notice of the foreclosure proceeding, as mandated by this section, where the foreclosure never progressed to a hearing before the clerk of the superior court. Investors Title Ins. Co. v. Montague, 142 N.C. App. 696, 543 S.E.2d 527, 2001 N.C. App. LEXIS 171 (2001).

Mortgage company, not a purchaser in a foreclosure sale, was not a party protected by G.S. 45-21.21 and was entitled to notice under G.S. 45-21.16 only if it filed a request for notice under G.S. 45-21.17A, which it did not; because the mortgage company was not entitled to notice of sale, it had no standing to dispute the adequacy of that notice on appeal nor did it have standing to argue that the sale was held on a holiday in contravention of G.S. 45-21.23. Beneficial Mortg. Co. v. Hamidpour, 155 N.C. App. 641, 574 S.E.2d 163, 2002 N.C. App. LEXIS 1571 (2002).

If a bankruptcy petition is filed (1) after the notice and hearing provided for in G.S. 45-21.16 has been completed and (2) after the clerk of superior court has authorized the foreclosure and (3) prior to the expiration of the upset bid period, then if the automatic stay of 11 U.S.C.S. § 362 is subsequently lifted with respect to the foreclosure, the foreclosing trustee need not comply with the notice and hearing procedure again, but, pursuant to G.S. 45-21.22(c), may proceed to readvertise the property and sell it in accordance with G.S. 45-21.1 and G.S. 45-21.17A; thus, where the debtors filed for an automatic stay after a mortgagee had started foreclosure proceedings but before the 10 day upset period, once the stay was annulled by the bankruptcy judge, the foreclosing trustee was required to pursue foreclosure again by readvertising and selling the property in accordance with the provisions of G.S. 45-21.16A, 45-21.17, and 45-21.17A. Beneficial Mortg. Co. of N.C. Inc. v. Barrington & Jones Law Firm, P.A., 164 N.C. App. 41, 595 S.E.2d 705, 2004 N.C. App. LEXIS 727 (2004).

Waiver of Notice. —

Where a party to a foreclosure hearing argued that he received no notice of the hearing, but the record on appeal showed that he was present at the hearing and participated in it, the party would be held to have waived notice of the foreclosure hearing. In re Norton, 41 N.C. App. 529, 255 S.E.2d 287, 1979 N.C. App. LEXIS 2649 (1979).

Failure to Act When Actual Notice Received. —

Because defendant received actual notice of the foreclosure hearing and could have taken advantage of the relief provided in G.S. 45-21.34, assuming he had grounds, or he could have objected to the method of service, but instead chose to sit on his rights and allow the foreclosure to proceed, he may not argue now that service on him was inadequate. Fleet Nat'l Bank v. Raleigh Oaks Joint Venture, 117 N.C. App. 387, 451 S.E.2d 325, 1994 N.C. App. LEXIS 1256 (1994).

Interest Not Extinguished by Foreclosure Where There Was No Notice. —

The City of Durham and N.C. Department of Transportation’s property interest in dedicated portion of boulevard was not extinguished by the foreclosure proceedings where they did not receive notice. Tower Dev. Partners v. Zell, 120 N.C. App. 136, 461 S.E.2d 17, 1995 N.C. App. LEXIS 695 (1995).

Assignment Between Notice and Hearing. —

This section does not prohibit an assignment or negotiation of the debt instrument during the interval between the date notice is issued and the time of the hearing, and it is silent as to whether additional notification is necessary when an assignment takes place. In re Fortescue, 80 N.C. App. 297, 341 S.E.2d 757 (1986), upholding notice which named the original and present holder of the note and deed of trust where the note and deed were subsequently assigned to another individual, where mortgagor had over nine months actual notice before the trial court’s de novo hearing of the assignment.

Second Proceeding Set Aside Where Debt Satisfied in Prior Proceeding. —

The mortgage indebtedness that a substitute trustee sought to collect in a foreclosure proceeding instituted in Davidson County, upon a tract of land located partly in Davidson and Randolph counties, was paid off in full during a prior foreclosure in Randolph County. Thus, this second foreclosure was without foundation and the order of the trial court authorizing the foreclosure was set aside. In re Rollins, 75 N.C. App. 656, 331 S.E.2d 303, 1985 N.C. App. LEXIS 3669 (1985).

Payment Delinquent Where One Day Past Due. —

The 30-day grace period contained in the original promissory note was contained in the clause governing the lender’s right to accelerate the debt, and the loan modification agreement contained a new acceleration clause, which provided that the lender could accelerate the debt in the event one monthly payment became “delinquent.” The judge properly gave the word “delinquent” its plain meaning, i.e., overdue or late. Consequently, it was clear that the debtor became delinquent in making his payment one day after the agreement provided it was due. In re Fortescue, 75 N.C. App. 127, 330 S.E.2d 219, 1985 N.C. App. LEXIS 3604 (1985).

Mortgagors, by joining in consent order, not only waived their right to appeal from final adjudication based thereon, but also left the case with no unresolved issue to appeal, even though their appeal to the judge was not from the consent order but from the clerk’s follow-up order authorizing foreclosure, since the consent order established that the foreclosure issue would be finally set at rest by the subsequent order, and the parties, in effect, agreed and consented to the subsequent order as well. In re Williams, 88 N.C. App. 395, 363 S.E.2d 380, 1988 N.C. App. LEXIS 29 (1988).

Bonds on Appeal. —

This section governs only the bond covering the appeal from the clerk to the trial court; bonds for appeals from the traditional trial courts to the Court of Appeals in foreclosure actions are governed by G.S. 1-292. In re Simon, 36 N.C. App. 51, 243 S.E.2d 163, 1978 N.C. App. LEXIS 2404 (1978).

In foreclosure proceedings a clerk may require a bond by an appealing respondent pursuant to subsection (d) of this section, and a superior court judge may require a bond upon appeal from that court pursuant to G.S. 1-292, and if the bond is not posted, the trustee may proceed with the foreclosure; however, neither statute gives the clerk or the judge the power to make the posting of a bond a condition to the appeal, and it is error for the superior court to dismiss an appeal from that court when the bond required by the court is not posted. In re Coley Properties, Inc., 50 N.C. App. 413, 273 S.E.2d 738, 1981 N.C. App. LEXIS 2125 (1981).

With respect to debtors’ objection to creditors’ secured claim, res judicata did not bar debtors from litigating validity of Note and Deed of Trust underlying claim because state court foreclosure judgment was on appeal, meaning that judgment was not final, and failure to post bond did not affect validity of appeal. Huff v. Gallagher, 521 B.R. 107, 2014 Bankr. LEXIS 4920 (Bankr. E.D.N.C. 2014).

Payment of Bond to Bank. —

Because the superior court correctly found that all six elements of the statute were satisfied, it properly ordered the bond paid to the bank. Greene v. Tr. Servs. of Carolina, LLC, 244 N.C. App. 583, 781 S.E.2d 664, 2016 N.C. App. LEXIS 57 (2016).

Finding of No Default Proper. —

Trial court’s judgment denying foreclosure was proper because an owner’s testimony that the mortgage company returned the owners’ payment check to the owners and failed to respond to the owners’ attempts to communicate with it supported the trial court’s finding of fact that there was no default. In re Foreclosure of Bigelow, 185 N.C. App. 142, 649 S.E.2d 10, 2007 N.C. App. LEXIS 1736 (2007).

Order Authorizing Foreclosure is Final Judgment. —

Trial court’s order authorizing a foreclosure to proceed under G.S. 45-21.16(d) was a final judgment of the superior court, and, therefore, the court of appeals had jurisdiction to hear the mortgagor’s appeal pursuant to G.S. 7A-27(b). In re Foreclosure by David A. Simpson, P.C., 211 N.C. App. 483, 711 S.E.2d 165, 2011 N.C. App. LEXIS 836 (2011).

Res Judicata Applied to Federal Action. —

Court found that the borrowers failed to appeal the order of foreclosure to the superior court within the requisite time period. The borrowers also failed to file a separate action in superior court to enjoin the foreclosure sales on equitable grounds; as such, res judicata prevented relitigation of the order permitting foreclosure of the property. Mixon v. Wells Fargo Home Mortg., 2012 U.S. Dist. LEXIS 52141 (W.D.N.C. Apr. 13, 2012), dismissed, 2012 U.S. Dist. LEXIS 56362 (W.D.N.C. Apr. 23, 2012).

Two Dismissal Rule Not Applicable. —

Trial court erred in finding that a bank’s claim for judicial foreclosure was barred under the “two dismissal rule” because a judicial foreclosure was not a type of special proceeding limited in scope and jurisdiction; the bank could not have brought a claim for judicial foreclosure in the same action as its claims for foreclosure by power of sale because a judicial foreclosure could be pursued by a creditor after a foreclosure by power of sale failed. Lifestore Bank v. Mingo Tribal Preservation Trust Dated January 4, 1993, 235 N.C. App. 573, 763 S.E.2d 6, 2014 N.C. App. LEXIS 900 (2014).

Nonjudicial Foreclosure Sale Under Reverse Mortgage. —

Nonjudicial foreclosure sale of property for failure to make payments under a promissory note was authorized, under a reverse mortgage, based on the power-of-sale provision in a deed of trust, because, although the borrower’s widow signed the deed of trust as a borrower, the terms of the borrower’s note and loan agreement, in conjunction with the widow’s statutory ineligibility to qualify as a reverse-mortgage borrower, excluded the widow as a surviving borrower as contemplated by the deed of trust’s acceleration provision. In re Foreclosure of Real Prop. Under Deed of Trust from Clayton, 254 N.C. App. 661, 802 S.E.2d 920, 2017 N.C. App. LEXIS 630 (2017), cert. denied, 370 N.C. 223, 809 S.E.2d 866, 2018 N.C. LEXIS 137 (2018).

Statute of Limitations. —

Assignee was squarely within the requisite time frame in which it could bring its foreclosure action because the statute of limitations did not run until ten years after a final payment was made on an obligation, and a corporation made payments pursuant to the terms of a reorganization plan. In re Foreclosure of a N.C. Deed of Trust, 236 N.C. App. 544, 764 S.E.2d 221, 2014 N.C. App. LEXIS 1038 (2014).

Effect of Remand to Trial Court. —

Appellate court’s earlier remand to the trial court to make the findings and conclusions required by statute did not prevent the trial court from making those required findings and conclusions, even if no new default was shown. In re Forclosure of a Deed of Trust Executed by Worsham, 267 N.C. App. 401, 833 S.E.2d 239, 2019 N.C. App. LEXIS 762 (2019).

§ 45-21.16A. Contents of notice of sale.

  1. Except as provided in subsection (b) of this section, the notice of sale shall include all of the following:
    1. Describe the instrument pursuant to which the sale is held, by identifying the original mortgagors and recording data. If the record owner is different from the original mortgagors, the notice shall also list the record owner of the property, as reflected on the records of the register of deeds not more than 10 days prior to posting the notice. The notice may also reflect the owner not reflected on the records if known.
    2. Designate the date, hour and place of sale consistent with the provisions of the instrument and this Article.
    3. Describe the real property to be sold in a manner that is reasonably calculated to inform the public as to what is being sold. The description may be in general terms and may incorporate by reference the description used in the instrument containing the power of sale. Any property described in the instrument containing the power of sale which is not being offered for sale should also be described in a manner to enable prospective purchasers to determine what is and what is not being offered for sale.
    4. Repealed by Session Laws 1967, c. 562, s. 2.
    5. State the terms of the sale provided for by the instrument pursuant to which the sale is held, including the amount of the cash deposit, if any, to be made by the highest bidder at the sale.
    6. Include any other provisions required by the instrument to be included.
    7. State that the property will be sold subject to taxes and special assessments if it is to be so sold.
    8. State whether the property is being sold subject to or together with any subordinate rights or interests provided those rights and interests are sufficiently identified.
  2. In addition to the requirements contained in subsection (a) of this section, the notice of sale of residential real property with less than 15 rental units shall also state all of the following:
    1. That an order for possession of the property may be issued pursuant to G.S. 45-21.29 in favor of the purchaser and against the party or parties in possession by the clerk of superior court of the county in which the property is sold.
    2. Any person who occupies the property pursuant to a rental agreement entered into or renewed on or after October 1, 2007, may, after receiving the notice of sale, terminate the rental agreement by providing written notice of termination to the landlord, to be effective on a date stated in the notice that is at least 10 days, but no more than 90 days, after the sale date contained in the notice of sale, provided that the mortgagor has not cured the default at the time the tenant provides the notice of termination. The notice shall also state that upon termination of a rental agreement, the tenant is liable for rent due under the rental agreement prorated to the effective date of the termination.

History. 1949, c. 720, s. 1; 1951, c. 252, s. 1; 1967, c. 562, s. 2; 1975, c. 492, s. 1; 1987, c. 493; 1993, c. 305, s. 9; 2007-353, s. 1; 2015-178, s. 1(c).

Cross References.

As to contents of notice of judicial sales, see G.S. 1-339.15.

As to contents of notice of executive sales, see G.S. 1-339.51.

As to validation of certain foreclosure sales when provisions of subdivision (3) of this section are not complied with, see G.S. 45-21.49.

Editor’s Note.

Session Laws 1975, c. 492, which enacted this section, provides in s. 14: “The words clerk of court as used in this act shall be deemed to include assistant clerk of court.”

Effect of Amendments.

Session Laws 2007-353, s. 1, effective October 1, 2007, and applicable to notices of sale issued on or after that date, rewrote subsection (a); in subdivision (a)(3), inserted “by reference” preceding “the description” and substituted “sale” for “sale by reference thereto” in the second sentence; added subsection (b); and made minor stylistic changes throughout.

Session Laws 2015-178, s. 1(c), effective October 1, 2015, rewrote subdivision (b)(2). For applicability, see editor’s note.

Legal Periodicals.

For comment discussing changes in North Carolina’s foreclosure law, see 54 N.C.L. Rev. 903 (1976).

CASE NOTES

Editor’s Note. —

Some of the cases below were decided prior to the 1993 amendments to Articles 2A and 2B, which clarified the procedure for foreclosure under power of sale and established a new upset bid procedure.

Constitutionality. —

For case holding the statutes providing procedure for real property mortgage foreclosure, sale, and eviction, as they read prior to the amendment of this Article in 1975, unconstitutional as applied, see Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975).

Foreclosure and sale pursuant to the statutory scheme of this Article as it read prior to amendment in 1975 was prospectively unlawful and void unless the power of sale was determined by the clerk to be a knowing, voluntary, and intelligent waiver of due process rights under U.S. Const., Amend. XIV, or the clerk determined that there had been adequate and timely notice to the mortgagor, coupled with opportunity for a hearing, before any rights were lost. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975).

State Action. —

Direct participation by the clerk in the procedure by which plaintiff was deprived of ownership and threatened to be deprived of possession of her property under this Article as it read prior to amendment in 1975 constituted State action. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975).

As to sufficiency of description under former G.S. 45-25, see Douglas v. Rhodes, 188 N.C. 580, 125 S.E. 261, 1924 N.C. LEXIS 130 (1924); Blount v. Basnight, 209 N.C. 268, 183 S.E. 405, 1936 N.C. LEXIS 447 (1936); Peedin v. Oliver, 222 N.C. 665, 24 S.E.2d 519, 1943 N.C. LEXIS 400 (1943).

Bank’s notice of a foreclosure sale complied with the requirements of G.S. 45-21.16A where the metes and bounds description of the property at issue was identical to that contained in the deed of trust, that description plainly indicated that the property was on three different streets, and there was a reference to a county condo book that showed the exact location and dimension of the property. In re Wiley Brown & Assocs., LLC, 2006 Bankr. LEXIS 2851 (Bankr. M.D.N.C. Oct. 11, 2006).

Renotice Required After Lifting of Automatic Stay. —

If a bankruptcy petition is filed (1) after the notice and hearing provided for in G.S. 45-21.16 has been completed and (2) after the clerk of superior court has authorized the foreclosure and (3) prior to the expiration of the upset bid period, then if the automatic stay of 11 U.S.C.S. § 362 is subsequently lifted with respect to the foreclosure, the foreclosing trustee need not comply with the notice and hearing procedure again, but, pursuant to G.S. 45-21.22(c), may proceed to readvertise the property and sell it in accordance with G.S. 45-21.1 and G.S. 45-21.17A; thus, where the debtors filed for an automatic stay after a mortgagee had started foreclosure proceedings but before the 10 day upset period, once the stay was annulled by the bankruptcy judge, the foreclosing trustee was required to pursue foreclosure again by readvertising and selling the property in accordance with the provisions of G.S. 45-21.16A, 45-21.17, and 45-21.17A. Beneficial Mortg. Co. of N.C. Inc. v. Barrington & Jones Law Firm, P.A., 164 N.C. App. 41, 595 S.E.2d 705, 2004 N.C. App. LEXIS 727 (2004).

§ 45-21.16B. [Repealed]

Repealed by Session Laws 2013-412, s. 7, effective August 23, 2013.

History. 2008-228, s. 18; repealed by 2013-412, s. 7, effective August 23, 2013.

Editor’s Note.

Former G.S. 45-21.16B pertained to suspension of foreclosure proceedings.

§ 45-21.16C. Opportunity for parties to resolve foreclosure of owner-occupied residential property.

  1. At the commencement of the hearing, the clerk shall inquire as to whether the debtor occupies the real property at issue as his or her principal residence. If it appears that the debtor does currently occupy the property as a principal residence, the clerk shall further inquire as to the efforts the mortgagee, trustee, or loan servicer has made to communicate with the debtor and to attempt to resolve the matter voluntarily before the foreclosure proceeding. The clerk’s inquiry shall not be required if the mortgagee or trustee has submitted, at or before the hearing, an affidavit briefly describing any efforts that have been made to resolve the default with the debtor and the results of any such efforts.
  2. The clerk shall order the hearing continued if the clerk finds that there is good cause to believe that additional time or additional measures have a reasonable likelihood of resolving the delinquency without foreclosure. In determining whether to continue the hearing, the clerk may consider (i) whether the mortgagee, trustee, or loan servicer has offered the debtor an opportunity to resolve the foreclosure through forbearance, loan modification, or other commonly accepted resolution plan appropriate under the circumstances, (ii) whether the mortgagee, trustee, or loan servicer has engaged in actual responsive communication with the debtor, including telephone conferences or in-person meetings with the debtor or other actual two-party communications, (iii) whether the debtor has indicated that he or she has the intent and ability to resolve the delinquency by making future payments under a foreclosure resolution plan, and (iv) whether the initiation or continuance of good faith voluntary resolution efforts between the parties may resolve the matter without a foreclosure sale. Where good cause exists to continue the hearing, the clerk shall order the hearing continued to a date and time certain not more than 60 days from the date scheduled for the original hearing. Nothing in this part shall limit the authority of the clerk to continue a hearing for other good cause shown.

History. 2009-573, s. 3.

Editor’s Note.

Session Laws 2009-573, s. 1, provides: “This act shall be known and may be cited as the ‘Consumer Economic Protection Act of 2009.’ ”

Session Laws 2009-573, s. 11, made this section effective October 1, 2009, and applicable to foreclosures initiated, debt collection activities undertaken, and actions filed on or after that date.

§ 45-21.17. Posting and publishing notice of sale of real property.

In addition to complying with such provisions with respect to posting or publishing notice of sale as are contained in the security instrument,

  1. Notice of sale of real property shall
    1. Be posted, in the area designated by the clerk of superior court for posting public notices in the county in which the property is situated, at least 20 days immediately preceding the sale.
    2. And in addition thereto,
      1. The notice shall be published once a week for at least two successive weeks in a newspaper published and qualified for legal advertising in the county in which the property is situated.
      2. If no such newspaper is published in the county, then notice shall be published once a week for at least two successive weeks in a newspaper having a general circulation in the county.
      3. In addition to the required newspaper advertisement, the clerk may in his discretion, on application of any interested party, authorize such additional advertisement as in the opinion of the clerk will serve the interest of the parties, and permit the charges for such further advertisement to be taxed as a part of the costs of the foreclosure.
  2. When the notice of sale is published in a newspaper,
    1. The period from the date of the first publication to the date of the last publication, both dates inclusive, shall not be less than seven days, including Sundays, and
    2. The date of the last publication shall be not more than 10 days preceding the date of the sale.
  3. When the real property to be sold is situated in more than one county, the provisions of subdivisions (1) and (2) shall be complied with in each county in which any part of the property is situated.
  4. The notice of sale shall be mailed by first-class mail at least 20 days prior to the date of sale to each party entitled to notice of the hearing provided by G.S. 45-21.16 whose address is known to the trustee or mortgagee and in addition shall also be mailed by first-class mail to any party desiring a copy of the notice of sale who has complied with G.S. 45-21.17A. If the property is residential and contains less than 15 rental units, including single-family residential real property, the notice of sale shall also be mailed to any person who occupies the property pursuant to a residential rental agreement by name, if known, at the address of the property to be sold. If the name of the person who occupies the property is not known, the notice shall be sent to “occupant” at the address of the property to be sold. Notice of the hearing required by G.S. 45-21.16 shall be sufficient to satisfy the requirement of notice under this section provided such notice contains the information required by G.S. 45-21.16A.
  5. Repealed by Session Laws 1993, c. 305, s. 10.
  6. Any time periods relating to notice of hearing or notice of sale that are provided in the security instrument may commence with and run concurrently with the time periods provided in G.S. 45-21.16, 45-21.17, or 45-21.17A.

History. 1949, c. 720, s. 1; 1965, c. 41; 1967, c. 979, s. 3; 1975, c. 492, s. 3; 1977, c. 359, ss. 11-14; 1985, c. 567, s. 1; 1993, c. 305, s. 10; 2007-353, s. 2; 2015-178, s. 1(a).

Editor’s Note.

Session Laws 1975, c. 492, which rewrote this section, provides in s. 14: “The words clerk of court as used in this act shall be deemed to include assistant clerk of court.”

Effect of Amendments.

Session Laws 2007-353, s. 2, effective October 1, 2007, and applicable to notices of sale issued on or after that date, added the second and third sentences in subdivision (4).

Session Laws 2015-178, s. 1(a), effective October 1, 2015, inserted “including single-family residential real property” in the second sentence of subdivision (4). For applicability, see editor’s note.

Legal Periodicals.

For survey of 1972 case law on notice requirements of the nonjudicial foreclosure sale, see 51 N.C.L. Rev. 1110 (1973).

For comment discussing changes in North Carolina’s foreclosure law, see 54 N.C.L. Rev. 903 (1976).

For article discussing installment land contracts in North Carolina, see 3 Campbell L. Rev. 29 (1981).

For comment, “Out of Luck: The Effect of the North Carolina Supreme Court’s Decision in In re Lucks and its Impact on the Law of Foreclosures,” see 41 Campbell L. Rev. 253 (2019).

CASE NOTES

Editor’s Note. —

Many of the cases below were decided prior to the 1993 amendments to Articles 2A and 2B, which clarified the procedure for foreclosure under power of sale and established a new upset bid procedure.

Constitutionality. —

For case holding the statutes providing procedure for real property mortgage foreclosure, sale, and eviction under this Article as it read prior to amendment in 1975 unconstitutional as applied, see Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975).

Foreclosure and sale pursuant to the statutory scheme of this Article as it read prior to amendment in 1975 was prospectively unlawful and void unless the power of sale was determined by the clerk to be a knowing, voluntary, and intelligent waiver of due process rights under U.S. Const., Amend. XIV, or the clerk determined that there had been adequate and timely notice to the mortgagor, coupled with opportunity for a hearing, before any rights were lost. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975).

Minimum Required by Due Process. —

At a minimum, due process requires the trustee to make an initial showing before the clerk or similar neutral official that the mortgagor is in default under the obligation; the mortgagor must of course be afforded the opportunity to rebut and defend the charges. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975) (decided under this Article as it read prior to amendment in 1975).

The clerk of the court is barred by U.S. Const., Amend. XIV from working a deprivation of the mortgagor’s property without prior notice and an opportunity for a timely hearing, unless it is clear that those rights have been expressly waived. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975) (decided under this Article as it read prior to amendment in 1975).

Absent express waiver, plaintiff is entitled to a good-faith attempt to notify her by means reasonably calculated to inform her of imminent foreclosure. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975) (decided under this Article as it read prior to amendment in 1975).

Where neither trustee nor bank knew grantor’s current Florida address, the trustee had no obligation to mail notice of sale to her by first-class mail. Williamson v. Savage, 104 N.C. App. 188, 408 S.E.2d 754, 1991 N.C. App. LEXIS 1004 (1991) (decided prior to 1993 amendment) .

Purpose of Notice. —

The principal object in publishing notice of sale of mortgaged property in the exercise of a power of sale is not so much to notify the grantor or mortgagor as it is to inform the public generally, so that bidders may be present at the sale and a fair price may be obtained. Huggins v. Dement, 13 N.C. App. 673, 187 S.E.2d 412, 1972 N.C. App. LEXIS 2309, cert. denied, 409 U.S. 1071, 93 S. Ct. 677, 34 L. Ed. 2d 659, 1972 U.S. LEXIS 178 (1972) (decided under this Article as it read prior to amendment in 1975).

Both Posting and Publication Required. —

This section, read as a whole, requires both publishing and posting for full notice. Albemarle Realty & Mtg. Co. v. Peoples Bank, 34 N.C. App. 481, 238 S.E.2d 622, 1977 N.C. App. LEXIS 1723 (1977).

The legislature intended to meet the requirements of due process by demanding both posting and publication under this section. Albemarle Realty & Mtg. Co. v. Peoples Bank, 34 N.C. App. 481, 238 S.E.2d 622, 1977 N.C. App. LEXIS 1723 (1977).

Parties May Agree on Notice Procedure. —

Compliance with the notice procedure agreed upon by the parties, if strictly complied with, is sufficient to give notice of foreclosure by sale. Huggins v. Dement, 13 N.C. App. 673, 187 S.E.2d 412, 1972 N.C. App. LEXIS 2309, cert. denied, 409 U.S. 1071, 93 S. Ct. 677, 34 L. Ed. 2d 659, 1972 U.S. LEXIS 178 (1972) (decided under this Article as it read prior to amendment in 1975).

Guaranty Agreements. —

By their terms, G.S. 45-21.16 and this section (the anti-deficiency statute) govern only the relationship between mortgagors and mortgagees, and are designed to protect interests in the property to be sold. Contract rights such as those in guaranty agreements do not fall within the statute’s coverage. Private third party guarantors of loans are not required by the statute to give notice to those whose obligations they guarantee before seeking indemnity from them. Any notice requirement in such a situation is imposed by the contract between the parties, not by the antideficiency statute. Boley v. Principi, 144 F.R.D. 305, 1992 U.S. Dist. LEXIS 17553 (E.D.N.C. 1992), aff'd, 10 F.3d 218, 1993 U.S. App. LEXIS 29577 (4th Cir. 1993).

Veterans Administration Subrogation and Indemnification Rights. —

When pursuing its subrogation rights, the Veterans Administration must stand in the shoes of the private lender and meet any applicable state law requirements for recovery, but indemnity is an independent right arising under federal law, and is unaffected by state law. Boley v. Brown, 10 F.3d 218, 1993 U.S. App. LEXIS 29577 (4th Cir. 1993).

Advertisement Gives Mortgagor Required Notice. —

The mortgagor is always entitled to notice of sale under foreclosure, but notice is given when the advertisement required by this section is made. Woodell v. Davis, 261 N.C. 160, 134 S.E.2d 160, 1964 N.C. LEXIS 425 (1964) (decided under this Article as it read prior to amendment in 1975).

For case in which notice of foreclosure by sale was held sufficient to meet minimum due process requirements, see Huggins v. Dement, 13 N.C. App. 673, 187 S.E.2d 412, 1972 N.C. App. LEXIS 2309, cert. denied, 409 U.S. 1071, 93 S. Ct. 677, 34 L. Ed. 2d 659, 1972 U.S. LEXIS 178 (1972) (decided under this Article as it read prior to amendment in 1975).

Proof That Date on Notice Was Not Date of Posting. —

As long as minimum due process is met, there is no reason to preclude proof that the date on the face of the notice was not the actual date of posting. Albemarle Realty & Mtg. Co. v. Peoples Bank, 34 N.C. App. 481, 238 S.E.2d 622, 1977 N.C. App. LEXIS 1723 (1977).

Effect of Notice to Discontinue Publication of Notice of Sale. —

A notice from the trustee in a mortgage or deed of trust, directed to a person authorized by him to advertise a sale of the property thereunder, to withhold or discontinue publication of the notice of sale, withdraws from such person any authority to advertise or sell the property and breaks the continuity of publication of notice required by former G.S. 1-325, and no subsequent renewal of authority can bridge the gap or restore the publication to its original status. Smith v. Bank of Pinehurst, 223 N.C. 249, 25 S.E.2d 859, 1943 N.C. LEXIS 249 (1943) (decided under former provisions).

A hearing prior to foreclosure and sale is essential. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975) (decided under this Article as it read prior to amendment in 1975).

The provisions of subdivision (4) of this section do not apply to a tax foreclosure sale. City of Durham v. Keen, 40 N.C. App. 652, 253 S.E.2d 585, 1979 N.C. App. LEXIS 2348, cert. denied, 297 N.C. 608, 257 S.E.2d 217, 1979 N.C. LEXIS 1490 (1979).

The statutory scheme set forth in G.S. 45-21.16 and this section applies directly to the Department of Veterans Affairs (VA) when it exercises its subrogation rights under state law to recover amounts paid to cover deficiencies after defaults on VA guaranteed loans. Under a subrogation theory, the VA’s rights are the same as those of the lender who foreclosed, and thus are governed by state foreclosure law such as the North Carolina antideficiency statute. The VA therefore lost its right to subrogation against plaintiff-borrower was lost when bank-lender failed to comply with the statutory notice requirements. Boley v. Principi, 144 F.R.D. 305, 1992 U.S. Dist. LEXIS 17553 (E.D.N.C. 1992), aff'd, 10 F.3d 218, 1993 U.S. App. LEXIS 29577 (4th Cir. 1993).

Entitled to Notice. —

Mortgage company, not a purchaser in a foreclosure sale, was not a party protected by G.S. 45-21.21 and was entitled to notice under G.S. 45-21.16 only if it filed a request for notice under G.S. 45-21.17A, which it did not; because the mortgage company was not entitled to notice of sale, it had no standing to dispute the adequacy of that notice on appeal nor did it have standing to argue that the sale was held on a holiday in contravention of G.S. 45-21.23. Beneficial Mortg. Co. v. Hamidpour, 155 N.C. App. 641, 574 S.E.2d 163, 2002 N.C. App. LEXIS 1571 (2002).

Renotice Required After Lifting of Automatic Stay. —

If a bankruptcy petition is filed (1) after the notice and hearing provided for in G.S. 45-21.16 has been completed and (2) after the clerk of superior court has authorized the foreclosure and (3) prior to the expiration of the upset bid period, then if the automatic stay of 11 U.S.C.S. § 362 is subsequently lifted with respect to the foreclosure, the foreclosing trustee need not comply with the notice and hearing procedure again, but, pursuant to G.S. 45-21.22(c), may proceed to readvertise the property and sell it in accordance with G.S. 45-21.1 and G.S. 45-21.17A; thus, where the debtors filed for an automatic stay after a mortgagee had started foreclosure proceedings but before the 10 day upset period, once the stay was annulled by the bankruptcy judge, the foreclosing trustee was required to pursue foreclosure again by readvertising and selling the property in accordance with the provisions of G.S. 45-21.16A, 45-21.17, and 45-21.17A. Beneficial Mortg. Co. of N.C. Inc. v. Barrington & Jones Law Firm, P.A., 164 N.C. App. 41, 595 S.E.2d 705, 2004 N.C. App. LEXIS 727 (2004).

§ 45-21.17A. Requests for copies of notice.

  1. Any person desiring a copy of any notice of sale may, at any time subsequent to the recordation of the security instrument and prior to the filing of notice of hearing provided for in G.S. 45-21.16, cause to be filed for record in the office of the register of deeds of each county where all or any part of the real property is situated, a duly acknowledged request for a copy of such notice of sale. This request shall be a separate instrument entitled “Request for Notice” and shall be signed and acknowledged by the party making the request, shall specify the name and address of the party to whom the notice is to be mailed, shall identify the deed of trust or mortgage by stating the names of the parties thereto, the date of recordation, and the book and page where the same is recorded, and shall be in substantially the following form:
  2. Register of Deeds’ Duties. —  Upon the filing for record of such request, the register of deeds shall index in the general index of grantors the names of the trustors (mortgagors) recited therein, and the names of the persons requesting copies, with a reference in the index of the book and page of the recorded security instrument to which the request refers.
  3. Mailing Notice. —  The mortgagee, trustee, or other person authorized to conduct the sale shall at least 20 days prior to the date of the sale cause to be deposited in the United States mail an envelope with postage prepaid containing a copy of the notice of sale, addressed to each person whose name and address are set forth in the Request for Notice, and directed to the address designated in such request.
  4. Effect of Request on Title. —  No request for a copy of any notice filed pursuant to this section nor any statement or allegation in any such request nor any record thereof shall affect the title to real property, or be deemed notice to any person that the person requesting copies of notice has any claim or any right, title or interest in, or lien or charge upon, the property described in the deed of trust or mortgage referred to therein.
  5. Evidence of Compliance. —  The affidavit of the mortgagee, trustee, or other person authorized to conduct the sale that copies of the notice of sale have been mailed to all parties filing requests for the same hereunder shall be deemed prima facie true. If on hearing it is proven that a party seeking to have the foreclosure sale set aside or seeking damages resulting from the foreclosure sale was mailed notice in accordance with this section or had actual notice of the sale before it was held (or if a resale was involved, prior to the date of the last resale), then the party shall not prevail. Costs, expenses, and reasonable attorneys’ fees incurred by the prevailing party in any action to set aside the foreclosure sale or for damages resulting from the foreclosure sale shall be allowed as of course to the prevailing party.
  6. Action to Set Foreclosure Sale Aside for Failure to Comply. —  A person entitled to notice of sale by virtue of this section shall not bring any action to set the sale aside on grounds that he was not mailed the notice of sale unless such action is brought prior to the filing of the final report and account as provided in G.S. 45-21.33, if the property was purchased by someone other than the secured party; or if brought by the secured party, unless such action is brought within six months of the date of such filing and prior to the time the secured party sells the property to a bona fide purchaser for value, if the property was purchased by the secured party. In either event, the party bringing such an action shall also tender an amount exceeding the reported sale price or the amount of the secured party’s interest in the property, including all expenses and accrued interest, whichever is greater. Such tender shall be irrevocable pending final adjudication of the action.
  7. Action for Damages from Foreclosure Sale for Failure to Comply. —  A person entitled to notice of sale by virtue of this section shall not bring any action for damages resulting from the sale on grounds that he was not mailed the notice unless such action is brought within six months of the date of the filing of the final report and account as provided in G.S. 45-21.33. The party bringing such an action shall also deposit with the clerk a cash or surety bond approved by the clerk and in such amount as the clerk deems adequate to secure the party defending the action for such costs, expenses, and reasonable attorneys’ fees to be incurred in the action.

“REQUEST FOR NOTICE” In accordance with the provisions of , request is hereby made that a copy of any notice of sale under the deed of trust (mortgage) recorded on , , in Book , page , records of County, North Carolina, executed by as trustor (mortgagor), in which is named as beneficiary (mortgagee), and as trustee, be mailed to at the following address: . G.S. 45-21.17A Signature: [Acknowledgement]

Click to view

History. 1993, c. 305, s. 11; 1999-456, s. 59; 2011-246, s. 2; 2012-18, s. 1.3.

Effect of Amendments.

Session Laws 2011-246, s. 2, effective October 1, 2011, substituted “with a reference in the index” for “with a marginal entry in the index” near the middle of subsection (b).

Session Laws 2012-18, s. 1.3, effective July 1, 2012, deleted “or upon the filing for record of such request, the register of deeds may, instead of indexing such request on the general index of grantors, stamp upon the face of the security instrument referred to in the request the book and page of each request for notice thereunder” from the end of subsection (b).

CASE NOTES

Requirement to Readvertise After Lifting of Automatic Stay. —

If a bankruptcy petition is filed (1) after the notice and hearing provided for in G.S. 45-21.16 has been completed and (2) after the clerk of superior court has authorized the foreclosure and (3) prior to the expiration of the upset bid period, then if the automatic stay of 11 U.S.C.S. § 362 is subsequently lifted with respect to the foreclosure, the foreclosing trustee need not comply with the notice and hearing procedure again, but, pursuant to G.S. 45-21.22(c), may proceed to readvertise the property and sell it in accordance with G.S. 45-21.1 and G.S. 45-21.17A; thus, where the debtors filed for an automatic stay after a mortgagee had started foreclosure proceedings but before the 10 day upset period, once the stay was annulled by the bankruptcy judge, the foreclosing trustee was required to pursue foreclosure again by readvertising and selling the property in accordance with the provisions of G.S. 45-21.16A, 45-21.17, and 45-21.17A. Beneficial Mortg. Co. of N.C. Inc. v. Barrington & Jones Law Firm, P.A., 164 N.C. App. 41, 595 S.E.2d 705, 2004 N.C. App. LEXIS 727 (2004).

Not Requested. —

Mortgage company, not a purchaser in a foreclosure sale, was not a party protected by G.S. 45-21.21 and was entitled to notice under G.S. 45-21.16 only if it filed a request for notice under G.S. 45-21.17A, which it did not; because the mortgage company was not entitled to notice of sale, it had no standing to dispute the adequacy of that notice on appeal nor did it have standing to argue that the sale was held on a holiday in contravention of G.S. 45-21.23. Beneficial Mortg. Co. v. Hamidpour, 155 N.C. App. 641, 574 S.E.2d 163, 2002 N.C. App. LEXIS 1571 (2002).

Foreclosure sale on a mortgage without notice to a junior lienholder or its trustee was proper where neither had filed a request for notice of foreclosure sale as provided in G.S. 45-21.17A(a). In re Foreclosure of Lien by Ridgeloch Homeowners Ass'n, 182 N.C. App. 464, 642 S.E.2d 532, 2007 N.C. App. LEXIS 653 (2007).

§§ 45-21.18, 45-21.19. [Repealed]

Repealed by Session Laws 1967, c. 562, s. 2.

§ 45-21.20. Satisfaction of debt after publishing or posting notice, but before completion of sale.

A power of sale is terminated if, prior to the time fixed for a sale, or prior to the expiration of the time for submitting any upset bid after a sale or resale has been held, payment is made or tenderedof —

  1. The obligation secured by the mortgage or deed of trust, and
  2. The expenses incurred with respect to the sale or proposed sale, which in the case of a deed of trust also include compensation for the trustee’s services under the conditions set forth in G.S. 45-21.15.

History. 1949, c. 720, s. 1; 1967, c. 562, s. 2.

CASE NOTES

Payment of Mortgage Within 10-Day Period. —

The last and highest bidder at a foreclosure sale of a mortgage on lands is but a proposed purchaser acquiring no right until the statutory provision of 10 days has expired, and the payment of the full mortgage indebtedness to the mortgagee within that time cancels the instrument and all rights arising thereunder. In such case no recovery of damages can be had by the bidder against the mortgagor or a purchaser from him to whom the equity of redemption has been conveyed. Cherry v. Gilliam, 195 N.C. 233, 141 S.E. 594, 1928 N.C. LEXIS 51 (1928). See G.S. 45-21.27 .

The one who is the last and highest bidder at the foreclosure of a mortgage or deed of trust on lands is but a proposed purchaser within the 10 days before confirmation, and where the mortgagee has become such purchaser and within the 10 days allowed by statute for an increase bid a third person pays the mortgage debt and has the notes and mortgage assigned to him, such person has the right of lien and foreclosure under the terms of the mortgage securing the note. Davis v. Central Life Ins. Co., 197 N.C. 617, 150 S.E. 120, 1929 N.C. LEXIS 315 (1929). See G.S. 45-21.27 .

Attorney’s Fees Upheld. —

When a trustee of a deed of trust who is also a licensed attorney performed such extraordinary services as described in G.S. 32-51 in connection with a foreclosure proceeding, counsel was entitled under this section to an award of attorney’s fees as an “expense[ ] incurred with respect to the sale or proposed sale . . . .” In re Newcomb, 112 N.C. App. 67, 434 S.E.2d 648, 1993 N.C. App. LEXIS 1007 (1993).

§ 45-21.21. Postponement of sale; notice of cancellation.

  1. Any person exercising a power of sale may postpone the sale to a day certain not later than 90 days, exclusive of Sunday, after the original date for the sale —
    1. When there are no bidders, or
    2. When, in his judgment, the number of prospective bidders at the sale is substantially decreased by inclement weather or by any casualty, or
    3. When there are so many other sales advertised to be held at the same time and place as to make it inexpedient and impracticable, in his judgment, to hold the sale on that day, or
    4. When he is unable to hold the sale because of illness or for other good reason, or
    5. When other good cause exists.
  2. Upon postponement of a sale, the person exercising the power of sale shall personally, or through his agent or attorney —
    1. At the time and place advertised for the sale, publicly announce the postponement thereof;
    2. On the same day, attach to or enter on the original notice of sale or a copy thereof, posted at the courthouse door, as provided by G.S. 45-21.17, a notice of the postponement; and
    3. Give written or oral notice of postponement to each party entitled to notice of sale under G.S. 45-21.17.
  3. The posted notice of postponement shall —
    1. State that the sale is postponed,
    2. State the hour and date to which the sale is postponed,
    3. State the reason for the postponement, and
    4. Be signed by the person authorized to hold the sale, or by his agent or attorney.
  4. If a sale is not held at the time fixed therefor and is not postponed as provided by this section, or if a postponed sale is not held at the time fixed therefor or within 90 days of the date originally fixed for the sale, then prior to such sale taking place the provisions of G.S. 45-21.16 need not be complied with but the provisions of G.S. 45-21.16A, 45-21.17, and 45-21.17A shall be again complied with, or if on appeal, the appellate court orders the sale to be held, as to such sale so authorized the provisions of G.S. 45-21.16 need not be complied with again but those of G.S. 45-21.16A, 45-21.17, and 45-21.17A shall be.
  5. A sale may be postponed more than once provided the final postponed sale date is not later than 90 days, exclusive of Sunday and legal holidays when the courthouse is closed for transactions, after the original date for the sale.
  6. Repealed by Session Laws 2019-243, s. 26(a), effective November 6, 2019.
  7. If it is determined that the sale cannot be held in accordance with this section or is postponed pursuant to this section, then the person exercising the power of sale shall, immediately upon determining that the sale will not occur and prior to the scheduled time of the sale, deliver a written notice to the Clerk of Superior Court that is to include all of the following:
    1. The case number assigned by the Clerk.
    2. The mortgagor(s) and record owner(s) name(s).
    3. The United States Postal Service address of the property or, if no address has been assigned, a brief description of the location of the property.
    4. The originally scheduled date and time for the sale.
    5. A statement that the foreclosure sale has been withdrawn, rescheduled for a specific date and time, or postponed with no date yet set, as appropriate.
  8. If the notice required by subsection (g) of this section is not received by the Clerk prior to the scheduled time of the sale, then the person exercising the power of sale shall personally, or through his or her agent or attorney, do all of the following:
    1. At the time and place advertised for the sale, publicly announce the cancellation thereof;
    2. On the same day, attach to or enter on the original notice of sale or a copy thereof, posted at the courthouse door, as provided by G.S. 45-21.17, a notice of the cancellation;
    3. Give written or oral notice of cancellation to each party entitled to notice of sale under G.S. 45-21.17; and
    4. Hand-deliver the written notice required under subdivision (2) of this subsection to the Clerk’s office.
  9. So that the notice required by subsection (g) of this section may be delivered in the time frame required therein, the Clerk’s office shall, upon request, provide to the person exercising the power of sale an e-mail address and/or fax telephone number to use for delivery of said notices.
  10. Should the Clerk’s office be unexpectedly closed on the day of the sale, the requirements of this subsection shall be delayed until the next day the Clerk’s office is open for transactions.
  11. All notices of a scheduled foreclosure sale, withdrawal of a scheduled sale, or postponement of a scheduled sale shall, on the day of receipt by the Clerk, be posted by the person exercising the power of sale in the location at the county courthouse normally used for the posting of public notices. If a scheduled sale has been withdrawn, that notice shall remain in that location for no less than 30 days. If the sale has been postponed, that notice shall remain in that location until it is replaced by a notice of a rescheduled sale or of a withdrawn sale.
  12. The delivery of notices required by this section in no way removes any responsibility of any party to file documents with the Clerk as required elsewhere by law.
  13. A clerk of superior court may report habitual noncompliance with this subsection to the Administrative Office of the Courts.

The person exercising a power of sale may postpone the sale more than once whenever any of the above conditions are met, so long as the sale is held not later than 90 days after the original date for the sale.

History. 1949, c. 720, s. 1; 1967, c. 562, s. 2; 1975, c. 492, ss. 4-6; 1983, c. 335, s. 2; 1989, c. 257; 1991 (Reg. Sess., 1992), c. 777, s. 1; 1993, c. 305, s. 12; 1995, c. 509, s. 25; 2003-337, s. 3; 2018-40, s. 11.1; 2018-145, s. 16; 2019-243, s. 26(a).

Editor’s Note.

Session Laws 2018-40, s. 11.1, which amended this section, is located in Part XI of Session Laws 2018-40. Section 11.2 of that act provides, “This section becomes effective July 1, 2018, and applies to foreclosure sales noticed on or after that date.” The reference to “This section” in Section 11.2 appears to have been in error and “This Part” was apparently the intended wording. Section 15 of the act provides that except as otherwise provided, the act is effective when it becomes law.

Session Laws 2018-40, s. 14, is a severability clause.

Effect of Amendments.

Session Laws 2018-40, s. 11.1, in the section heading, added “notice of cancellation”; and added subsections (f) through (m). For effective date and applicability, see editor’s note.

Session Laws 2018-145, s. 16, effective December 27, 2018, in subsections (h) and (i), substituted “subsection (g)” for “subsection (b)” preceding “of this section”; and in subsection (i), substituted “notice” for “notices” preceding “required by.”

Session Laws 2019-243, s. 26(a), effective November 6, 2019, deleted subsection (f), which read: “A sale shall begin at the time designated in the notice of sale or as soon thereafter as practicable, but not later than one hour after the time fixed therefor unless it is delayed by other sales held at the same place. The sale shall be held between the hours of 10:00 A.M. and 4:00 P.M. on any day on which the Clerk’s office is normally open for transactions.”

Legal Periodicals.

For comment discussing changes in North Carolina’s foreclosure law, see 54 N.C.L. Rev. 903 (1976).

For survey of 1981 property law, see 60 N.C.L. Rev. 1420 (1982).

CASE NOTES

Editor’s Note. —

Some of the cases below were decided prior to the 1993 amendments to Articles 2A and 2B, which clarified the procedure for foreclosure under power of sale and established a new upset bid procedure.

Persons Protected by Section. —

This section provides procedural protections for a mortgagor, not for the purchaser of property, who acts at his own risk and has no basis to assert a sale is invalid because it is postponed in a manner inconsistent with this section. Gore v. Hill, 52 N.C. App. 620, 279 S.E.2d 102, 1981 N.C. App. LEXIS 2452 (1981).

Mortgage company, not a purchaser in a foreclosure sale, was not a party protected by G.S. 45-21.21 and was entitled to notice under G.S. 45-21.16 only if it filed a request for notice under G.S. 45-21.17A, which it did not; because the mortgage company was not entitled to notice of sale, it had no standing to dispute the adequacy of that notice on appeal nor did it have standing to argue that the sale was held on a holiday in contravention of G.S. 45-21.23. Beneficial Mortg. Co. v. Hamidpour, 155 N.C. App. 641, 574 S.E.2d 163, 2002 N.C. App. LEXIS 1571 (2002).

Discretion of Trustee. —

The trustee has substantial discretion in discharging his responsibilities, which are to attempt to satisfy the debt while getting the highest price for the mortgagor and protecting the mortgagor’s rights and equity. As long as the trustee does not violate the fiduciary duty of the office, and does not give unfair advantages to any party, the exercise of that discretion is not reviewable by the courts. Sprouse v. North River Ins. Co., 81 N.C. App. 311, 344 S.E.2d 555, 1986 N.C. App. LEXIS 2313, writ denied, 347 S.E.2d 33, 1986 N.C. LEXIS 2439 (1986).

§ 45-21.22. Procedure upon dissolution of order restraining or enjoining sale, or upon debtor’s bankruptcy before completion of sale.

  1. When, before the date fixed for a sale, a judge dissolves an order restraining or enjoining the sale, he may, if the required notice of sale has been given, provide by order that the sale shall be held without additional notice at the time and place originally fixed therefor, or he may, in his discretion, make an order with respect thereto as provided in subsection (b).
  2. When, after the date fixed for a sale, a judge dissolves an order restraining or enjoining the sale, he shall by order fix the time and place for the sale to be held upon notice to be given in such manner and for such length of time as he deems advisable.
  3. When, after the entry of any authorization or order by the clerk of superior court pursuant to G.S. 45-21.16 and before the expiration of the 10-day upset bid period, the foreclosure sale is stayed pursuant to 11 U.S.C. § 105 or 362, and thereafter the stay is lifted, terminated, or dissolved, the trustee or mortgagee shall not be required to comply with the provisions of G.S. 45-21.16, but shall advertise and hold the sale in accordance with the provisions of G.S. 45-21.16A, 45-21.17, and 45-21.17A.
  4. In the event that completion of the foreclosure sale is stayed pursuant to 11 U.S.C. § 105 or 362, before the expiration of the 10-day upset bid period:
    1. The clerk of superior court who received a deposit from an upset bidder shall release any deposits held on behalf of the upset bidder to the upset bidder upon receipt of a certified copy of an order or notice from the bankruptcy court indicating that the debtor has filed a bankruptcy petition; or
    2. The trustee or mortgagee who received a cash deposit from the high bidder at the foreclosure sale, upon notification of the bankruptcy stay, shall release any deposits held on behalf of the high bidder to the high bidder.

History. 1949, c. 720, s. 1; 1993, c. 305, s. 13; 2011-204, s. 1.

Effect of Amendments.

Session Laws 2011-204, s. 1, effective October 1, 2011, in the section catchline, substituted “or upon debtor’s bankruptcy before completion of sale” for “or upon lifting of automatic bankruptcy stay”; in subsection (c), substituted “foreclosure sale is stayed pursuant to 11 U.S.C. § 105 or 362” for “foreclosure is stayed by the debtor filing a bankruptcy petition” and inserted “terminated, or dissolved”; and added subsection (d).

CASE NOTES

Effect of Automatic Bankruptcy Stay on Upset Period. —

Automatic stay provision of 11 U.S.C.S. § 362 of the Bankruptcy Code has the effect of preventing the expiration of the 10-day upset bid period provided for in G.S. 45-21.22, when the debtor files for bankruptcy within that period, thereby preventing the fixing of any rights as to any subject real property protected by a stay as the upset bid period has not run; therefore, where a first mortgagee was the last and highest bidder of a foreclosure trustee’s public sale of the debtors’ property but the debtors filed for Chapter 13 bankruptcy and stayed the foreclosure, the sale could not be completed and no parties rights as to the property under the foreclosure action were yet “fixed” under G.S. 45-21.27. Beneficial Mortg. Co. of N.C. Inc. v. Barrington & Jones Law Firm, P.A., 164 N.C. App. 41, 595 S.E.2d 705, 2004 N.C. App. LEXIS 727 (2004).

Debtor retained its rights in real property when it filed a chapter 11 bankruptcy petition during the 10-day upset bid period of G.S. 45-21.27, subject to a lifting of the stay under 11 U.S.C.S. § 362(d). Under G.S. 45-21.22(c), a lift of stay effectively nullified the original foreclosure sale, making it necessary for the trustee to resell the property; thus, because North Carolina law no longer fixed the period within which the debtor had to cure its default, 11 U.S.C.S. § 108(b) inapplicable. In re Lordship Dev., LLC, 403 B.R. 772, 2008 Bankr. LEXIS 2773 (Bankr. E.D.N.C. 2008).

Lifting of Automatic Stay. —

If a bankruptcy petition is filed (1) after the notice and hearing provided for in G.S. 45-21.16 has been completed and (2) after the clerk of superior court has authorized the foreclosure and (3) prior to the expiration of the upset bid period, then if the automatic stay of 11 U.S.C.S. § 362 is subsequently lifted with respect to the foreclosure, the foreclosing trustee need not comply with the notice and hearing procedure again, but, pursuant to G.S. 45-21.22(c), may proceed to readvertise the property and sell it in accordance with G.S. 45-21.1 and G.S. 45-21.17A; thus, where the debtors filed for an automatic stay after a mortgagee had started foreclosure proceedings but before the 10 day upset period, once the stay was annulled by the bankruptcy judge, the foreclosing trustee was required to pursue foreclosure again by readvertising and selling the property in accordance with the provisions of G.S. 45-21.16A, 45-21.17, and 45-21.17A. Beneficial Mortg. Co. of N.C. Inc. v. Barrington & Jones Law Firm, P.A., 164 N.C. App. 41, 595 S.E.2d 705, 2004 N.C. App. LEXIS 727 (2004).

Term “lifted” in G.S. 45-21.22(c) incorporates “terminating, annulling, modifying, or conditioning,” words all used to reference creditors’ relief from the automatic stay. Beneficial Mortg. Co. of N.C. Inc. v. Barrington & Jones Law Firm, P.A., 164 N.C. App. 41, 595 S.E.2d 705, 2004 N.C. App. LEXIS 727 (2004).

Court Should Have Set New Sale Date and Period for Notice. —

Whether by stating that the temporary restraining order was “dissolved” or by denying the motion for a preliminary injunction, the state court judge effectively “dissolved an order restraining or enjoining the sale” and he should have set a new sale date and period for notice. G.S 45-21.22(b) (and, similarly, G.S. 45.21.22(c), which applies when a bankruptcy petition is filed during the upset bid period and the automatic stay is subsequently terminated) contemplates that a new sale will be conducted with some notice period, not that the upset bid period will resume for whatever time was remaining when the injunction was entered, after an injunction is issued and dissolved; here, because no new sale date was set, the property was still owned by debtor. In re Highway 751 Partners, LLC, 2009 Bankr. LEXIS 3967 (Bankr. E.D.N.C. Dec. 3, 2009).

§ 45-21.23. Time of sale.

A sale shall begin at the time designated in the notice of sale or as soon thereafter as practicable, but not later than one hour after the time fixed therefor unless it is delayed by other sales held at the same place. The sale shall be held between the hours of 10:00 A.M. and 4:00 P.M. on any day when the clerk’s office is normally open for transactions.

History. 1949, c. 720, s. 1; 1993, c. 305, s. 14; 2003-337, s. 4; 2019-243, s. 26(b).

Effect of Amendments.

Session Laws 2019-243, s. 26(b), effective November 6, 2019, substituted “when the clerk’s office is normally open for transactions” for “other than Sunday or a legal holiday when the courthouse is closed for transactions” in the second sentence.

CASE NOTES

Objection to Sale on a Holiday. —

Mortgage company, not a purchaser in a foreclosure sale, was not a party protected by G.S. 45-21.21 and was entitled to notice under G.S. 45-21.16 only if it filed a request for notice under G.S. 45-21.17A, which it did not; because the mortgage company was not entitled to notice of sale, it had no standing to dispute the adequacy of that notice on appeal nor did it have standing to argue that the sale was held on a holiday in contravention of G.S. 45-21.23. Beneficial Mortg. Co. v. Hamidpour, 155 N.C. App. 641, 574 S.E.2d 163, 2002 N.C. App. LEXIS 1571 (2002).

§ 45-21.24. Continuance of uncompleted sale.

A sale commenced but not completed within the time allowed by G.S. 45-21.23 shall be continued by the person holding the sale to a designated time between 10:00 o’clock A.M. and 4:00 o’clock P.M. the next following day, other than Sunday or a legal holiday when the courthouse is closed for transactions. In case such continuance becomes necessary, the person holding the sale shall publicly announce the time to which the sale is continued.

History. 1949, c. 720, s. 1; 1993, c. 305, s. 15; 2003-337, s. 5.

§ 45-21.25. [Repealed]

Repealed by Session Laws 1967, c. 562, s. 2.

§ 45-21.26. Preliminary report of sale of real property.

  1. The person exercising a power of sale of real property, shall, within five days after the date of the sale, file a report thereof with the clerk of the superior court of the county in which the sale was had.
  2. The report shall be signed by the person authorized to hold the sale, or by his agent or attorney, and shall show —
    1. The authority under which the person making the sale acted;
    2. The name of the mortgagor or grantor;
    3. The name of the mortgagee or trustee;
    4. The date, time and place of the sale;
    5. A reference to the book and page in the office of the register of deeds, where the instrument is recorded or, if not recorded, a description of the property sold, sufficient to identify it, and, if sold in parts, a description of each part so sold;
    6. The name or names of the person or persons to whom the property was sold;
    7. The price at which the property, or each part thereof, was sold, and that such price was the highest bid therefor;
    8. The name of the person making the report; and
    9. The date of the report.

History. 1949, c. 720, s. 1; 1951, c. 252, s. 2.

Legal Periodicals.

For comment, “Out of Luck: The Effect of the North Carolina Supreme Court’s Decision in In re Lucks and its Impact on the Law of Foreclosures,” see 41 Campbell L. Rev. 253 (2019).

CASE NOTES

Constitutionality. —

For case holding the statutes providing procedure for real property mortgage foreclosure, sale, and eviction under this Article as it read prior to amendment in 1975 unconstitutional as applied, see Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975).

Foreclosure and sale pursuant to the statutory scheme under this Article as it read prior to amendment in 1975 was prospectively unlawful and void unless the power of sale was determined by the clerk to be a knowing, voluntary, and intelligent waiver of due process rights under U.S. Const., Amend. XIV, or the clerk that determined there had been adequate and timely notice to the mortgagor, coupled with opportunity for a hearing, before any rights were lost. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975).

The clerk of the court is barred by U.S. Const., Amend. XIV from working a deprivation of the mortgagor’s property without prior notice and an opportunity for a timely hearing, unless it is clear that those rights have been expressly waived. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975) (decided under this Article as it read prior to amendment in 1975).

Verification of Essentials by Clerk. —

While the State has left to the trustee the functions of giving notice and conducting the public auction, the essentials thereof are subject to explicit verification by the clerk under this section. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975) (decided under this Article as it read prior to amendment in 1975).

The filing of a valid report is a necessary precondition to the trustee’s power to convey to the highest bidder at the auction. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975) (decided under this Article as it read prior to amendment in 1975).

Failure to Report Within Five Days. —

If a trustee fails to report within the five days directed by this section, the clerk may compel a report under G.S. 45-21.14. When the clerk assumes jurisdiction and orders a resale based on a raised bid, his orders are not void. Gallos v. Lucas, 252 N.C. 480, 113 S.E.2d 923, 1960 N.C. LEXIS 586 (1960) (decided under this Article as it read prior to amendment in 1975).

If a trustee fails to report a foreclosure sale within the five days as directed by this section, the clerk is authorized to compel such report. Certain-Teed Prods. Corp. v. Sanders, 264 N.C. 234, 141 S.E.2d 329, 1965 N.C. LEXIS 1161 (1965) (decided under this Article as it read prior to amendment in 1975).

§ 45-21.27. Upset bid on real property; compliance bonds.

  1. An upset bid is an advanced, increased, or raised bid whereby any person offers to purchase real property theretofore sold, for an amount exceeding the reported sale price or last upset bid by a minimum of five percent (5%) thereof, but in any event with a minimum increase of seven hundred fifty dollars ($750.00). Subject to the provisions of subsection (b) of this section, an upset bid shall be made by delivering to the clerk of superior court, with whom the report of sale or last notice of upset bid was filed, a deposit in cash or by certified check or cashier’s check satisfactory to the clerk in an amount greater than or equal to five percent (5%) of the amount of the upset bid but in no event less than seven hundred fifty dollars ($750.00). The deposit required by this section shall be filed with the clerk of the superior court, with whom the report of the sale or the last notice of upset bid was filed by the close of normal business hours on the tenth day after the filing of the report of the sale or the last notice of upset bid, and if the tenth day shall fall upon a Sunday or legal holiday when the courthouse is closed for transactions, or upon a day in which the office of the clerk is not open for the regular dispatch of its business, the deposit may be made and the notice of upset bid filed on the day following when said office is open for the regular dispatch of its business. Subject to the provisions of G.S. 45-21.30, there shall be no resales; rather, there may be successive upset bids each of which shall be followed by a period of 10 days for a further upset bid. When an upset bid is not filed following a sale, resale, or prior upset bid within the time specified, the rights of the parties to the sale or resale become fixed.
  2. The clerk of the superior court may require an upset bidder or the highest bidder at a resale held pursuant to G.S. 45-21.30 also to deposit with the clerk a cash bond, or, in lieu thereof at the option of the bidder, a surety bond, approved by the clerk. The compliance bond shall be in such amount as the clerk deems adequate, but in no case greater than the amount of the bid of the person being required to furnish the bond, less the amount of any required deposit. The compliance bond shall be payable to the State of North Carolina for the use of the parties in interest and shall be conditioned on the principal obligor’s compliance with the bid.
  3. , (d)Repealed by Session Laws 1993, c. 305, s. 16.
  4. At the same time that an upset bid on real property is submitted to the court as provided for in subsection (a) above, together with a compliance bond if one is required, the upset bidder shall simultaneously file with the clerk a notice of upset bid. The notice of upset bid shall:
    1. State the name, address, and telephone number of the upset bidder;
    2. Specify the amount of the upset bid;
    3. Provide that the sale shall remain open for a period of 10 days after the date on which the notice of upset bid is filed for the filing of additional upset bids as permitted by law; and
    4. Be signed by the upset bidder or the attorney or the agent of the upset bidder.
  5. When an upset bid is made as provided in this section, the clerk shall notify the trustee or mortgagee who shall thereafter mail a written notice of upset bid by first-class mail to the last known address of the last prior bidder and the current record owner(s) of the property.
  6. When an upset bid is made as provided in this section, the last prior bidder, regardless of how the bid was made, shall be released from any further obligation on account of the bid and any deposit or bond provided by him shall be released.
  7. Any person offering to purchase real property by upset bid as permitted in this Article shall be subject to and bound by the terms of the original notice of sale except as modified by court order or the provisions of this Article.
  8. The clerk of superior court shall make all such orders as may be just and necessary to safeguard the interests of all parties, and shall have the authority to fix and determine all necessary procedural details with respect to upset bids in all instances in which this Article fails to make definite provisions as to that procedure.

History. 1949, c. 720, s. 1; 1963, c. 377; 1967, c. 979, s. 3; 1993, c. 305, s. 16; 2003-337, s. 6.

Legal Periodicals.

As to former G.S. 45-28, which was similar to G.S. 45-21.27 to 45-21.29 and 45-21.30, see 13 N.C.L. Rev. 15, 300 (1935).

For comment, “Out of Luck: The Effect of the North Carolina Supreme Court’s Decision in In re Lucks and its Impact on the Law of Foreclosures,” see 41 Campbell L. Rev. 253 (2019).

CASE NOTES

Editor’s Note. —

Many of the cases cited below were decided under former G.S. 45-28, which was similar to this section and former G.S. 45-21.28, and G.S. 45-21.29 and 45-21.30, and under this Article as it read prior to amendment in 1975. It should be noted that former G.S. 45-28 applied to foreclosure by order of court, to execution sales, and to sales by personal representatives and sales by any person pursuant to a power contained in a will, as well as to sales under power of sale contained in a mortgage or deed of trust. Many of the cases below were decided prior to the 1993 amendments to Articles 2A and 2B, which clarified the procedure for foreclosure under power of sale and established a new upset bid procedure.

Constitutionality. —

As to constitutionality of provisions under this Article as it read prior to amendment in 1975 regarding procedure for real property mortgage foreclosure, sale, and eviction, see Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975).

This section exists primarily to protect the mortgagor’s equity. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975).

Legislative Intent. —

Former G.S. 45-28 was intended for the protection of mortgagors where sales were made under a power of sale without a decree of foreclosure by the court. In the latter cases there was always an equity to decree a resale when a substantial raise in the bid, usually 10%, had been deposited in court. There being no such protection as to mortgages with power of sale, this statute was passed to extend to mortgagors, whose property had been sold under power of sale without a decree of foreclosure, the same opportunity of a resale. Pringle v. Winston-Salem Bldg. & Loan Ass'n, 182 N.C. 316, 108 S.E. 914, 108 S.E. 917, 1921 N.C. LEXIS 223 (1921).

The intent is to extend to private foreclosure sales an effective equivalent of an equity court’s power to decree a resale upon the filing of a substantial raised bid. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975).

Liberal Construction. —

Under former G.S. 45-28 it was held that, while the clerk of the superior court is without authority to order a resale of lands foreclosed under a mortgage without an increase bid filed with him and the payment of the deposit required, the provisions of the statute relating thereto are to be liberally construed to effectuate its intent to protect the mortgagor. Clayton Banking Co. v. Green, 197 N.C. 534, 149 S.E. 689, 1929 N.C. LEXIS 290 (1929).

This section is to be liberally construed to give the mortgagor the full benefit of the intended protection. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975).

A hearing prior to foreclosure and sale is essential. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975).

The right to submit an upset bid is obviously not a hearing. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975).

Incorporation of Statute in Mortgages and Deeds of Trust. —

The provisions of former G.S. 45-28, concerning the sale of land under a power contained in a mortgage or deed of trust, entered into and controlled the sale under such instruments. In re Sermon's Land, 182 N.C. 122, 108 S.E. 497, 1921 N.C. LEXIS 194 (1921).

The provisions of former G.S. 45-28 were, by operation of law, incorporated in all mortgages and deeds of trust and would enter into and control any sale under such instruments. Foust v. Gate City Sav. & Loan Ass'n, 233 N.C. 35, 62 S.E.2d 521, 1950 N.C. LEXIS 653 (1950).

This section is by operation of law incorporated into all deeds of trust. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975).

Status of Mortgage and Deed of Trust Sales. —

Under former G.S. 45-28 a sale of land under power and a mortgage or deed of trust was given the same status as if made under a judgment or decree of court. Pringle v. Winston-Salem Bldg. & Loan Ass'n, 182 N.C. 316, 108 S.E. 914, 108 S.E. 917, 1921 N.C. LEXIS 223 (1921).

Power of Court over Judicial Sales Not Affected. —

There was nothing in former G.S. 45-28 which deprived the court of its power to prescribe the terms upon which land or other property should be sold under its orders, judgments or decrees. Koonce v. Fort, 204 N.C. 426, 168 S.E. 672, 1933 N.C. LEXIS 156 (1933). See G.S. 45-21.2 .

Advanced Bids by Mortgagor or Trustor. —

Under former G.S. 45-28, the mortgagor or trustor was entitled to procure resales through advanced bids made in conformity with the statute. In re Sharpe, 230 N.C. 412, 53 S.E.2d 302, 1949 N.C. LEXIS 650 (1949).

Procurement of Repeated Resales by Trustor. —

The fact that the trustor repeatedly procured resales through the making of advanced bids in compliance with former G.S. 45-28 worked no legal wrong upon the cestui and was within the trustor’s right, even though he procured such upset bids for the purpose of delaying foreclosure and the recovery by the cestui of the indebtedness. In re Sharpe, 230 N.C. 412, 53 S.E.2d 302, 1949 N.C. LEXIS 650 (1949). See G.S. 45-21.29 .

As to discretion of clerk, see Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975).

Supervisory Powers of Clerk. —

The supervisory powers invested in the clerk of the court over sales under a mortgage, deed of trust, etc., by former G.S. 45-28 were not those of general control as exercised by the courts in case of an ordinary judicial sale, but were confined by the statute to sales and resales under the power of sale contained in the instruments, and in accordance with the directions of the statute. Lawrence v. Beck, 185 N.C. 196, 116 S.E. 424, 1923 N.C. LEXIS 51 (1923).

Under former G.S. 45-28 it was held that the clerk of the court acquired supervisory power of the sale of land under power contained in a mortgage or deed of trust from the time of an advanced bid paid into his hands, which continued until after the final sale under foreclosure. Lawrence v. Beck, 185 N.C. 196, 116 S.E. 424, 1923 N.C. LEXIS 51 (1923).

As to the supervisory powers given the clerks of the superior courts by former G.S. 45-28, the statute was to be strictly complied with. Redfern v. McGrady, 199 N.C. 128, 154 S.E. 3, 1930 N.C. LEXIS 68 (1930).

Under former G.S. 45-28 the jurisdiction of the clerk vested at the moment an upset bid was filed with him. Thereafter he had supervisory power over the sale which continued until after the final sale and confirmation thereof. Foust v. Gate City Sav. & Loan Ass'n, 233 N.C. 35, 62 S.E.2d 521, 1950 N.C. LEXIS 653 (1950).

Supervisory authority conferred by this section relates to resales and does not arise until an upset bid has been filed with the clerk as provided therein. Certain-Teed Prods. Corp. v. Sanders, 264 N.C. 234, 141 S.E.2d 329, 1965 N.C. LEXIS 1161 (1965).

Power of a clerk to set aside his initial approval is inherent in subsection (b) of this section, and is also authorized by G.S. 45-21.29(j). In re Miller, 72 N.C. App. 494, 325 S.E.2d 490, 1985 N.C. App. LEXIS 3108 (1985).

Authority of Clerk to Order Resale. —

Former G.S. 45-28 controlled as to ordering a resale of lands sold under a power of sale contained in a mortgage or deed of trust, and conferred no power on the clerk to make such order, unless within the 10 days allowed there had been an increased bid, etc., and did not extend to instances wherein a material loss had been sustained by destruction of a house on the lands within the stated period. In re Sermon's Land, 182 N.C. 122, 108 S.E. 497, 1921 N.C. LEXIS 194 (1921).

The only authority conferred by former G.S. 45-28 on the clerk is to order a resale of the property where the bid has been raised as therein prescribed. In re Bauguess, 196 N.C. 278, 145 S.E. 395, 1928 N.C. LEXIS 348 (1928). See also, In re Mortgage Sale of Ware Property, 187 N.C. 693, 122 S.E. 660, 1924 N.C. LEXIS 374 (1924).

New Hearing Improper. —

Trial court erred in allowing trustee to hold a new hearing and sale in foreclosure proceeding which added a new deficiency debtor, after the assistant clerk had held a foreclosure hearing and sale, and the sale of the property had been confirmed by passage of the upset bid period. In re Earl L. Pickett Enters., Inc., 114 N.C. App. 489, 442 S.E.2d 101, 1994 N.C. App. LEXIS 385 (1994).

Report of Sale. —

Former G.S. 45-28 did not require that the sale of land under mortgage or deed of trust be reported to the clerk of the court until an advanced bid had been properly made. Pringle v. Winston-Salem Bldg. & Loan Ass'n, 182 N.C. 316, 108 S.E. 914, 108 S.E. 917, 1921 N.C. LEXIS 223 (1921). See also In re Sermon's Land, 182 N.C. 122, 108 S.E. 497, 1921 N.C. LEXIS 194 (1921); Dillingham v. Gardner, 219 N.C. 227, 13 S.E.2d 478, 1941 N.C. LEXIS 296 (1941); Peedin v. Oliver, 222 N.C. 665, 24 S.E.2d 519, 1943 N.C. LEXIS 400 (1943). See G.S. 45-21.26 .

Statutory Period for Filing Upset Bid. —

This section provides that an upset bid may be filed with the clerk of superior court at any time within 10 days after the filing of the report of sale. Obviously, if no report of sale has been filed, the 10-day limitation has not begun to run. The trial court committed error in ordering the substitute trustee to convey the properties in accordance with the foreclosure proceedings thus far. The sales should remain open for an upset bid for a period of 10 days from the date this opinion is certified to the clerk of superior court. Carlisle v. Commodore Corp., 15 N.C. App. 650, 190 S.E.2d 703, 1972 N.C. App. LEXIS 1999 (1972).

The issuance and service of the temporary restraining order on the substitute trustee halted all proceedings under the foreclosure and tolled the running of the statutory period of 10 days for filing an upset bid. Only nine days elapsed between the date of the sale and the date the substitute trustee was restrained. If the report of sale had been filed on the day of the sale, one day of the statutory 10-day period for filing an upset bid would remain. If the report of sale had been filed on the fifth day after the sale, the maximum time allowed under G.S. 45-21.26, five days of the statutory period of 10 days for filing an upset bid would remain. Carlisle v. Commodore Corp., 15 N.C. App. 650, 190 S.E.2d 703, 1972 N.C. App. LEXIS 1999 (1972).

Real property that was sold at a foreclosure sale was not part of a Chapter 13 debtor’s bankruptcy estate because title to the property passed to the buyer by operation of G.S. 45-21.27 at 5:00 p.m. on August 3, 2009, one minute before the debtor filed his bankruptcy petition at 5:01 p.m. on August 3, 2009, and the automatic stay that was imposed under 11 U.S.C.S. § 362 when the debtor declared bankruptcy did not affect the buyer’s title. In re Figured, 2009 Bankr. LEXIS 2580 (Bankr. E.D.N.C. Aug. 31, 2009).

Because the upset period of G.S. 45-21.27 had expired before a Chapter 13 debtor’s bankruptcy petition was filed, the property sold at foreclosure was not property of the estate under 11 U.S.C.S. § 541(a)(1), and the creditor’s act of recording the deed after the petition was filed was not a violation of 11 U.S.C.S. § 362(a)(3). The debtor was precluded from attempting to cure any default in the Chapter 13 plan pursuant to 11 U.S.C.S. § 1322 because the foreclosure sale was final. In re Monroe, 2011 Bankr. LEXIS 4417 (Bankr. E.D.N.C. Nov. 7, 2011).

Where the automatic stay never went into effect when a Chapter 13 debtor filed his third case in a one year period, a foreclosure sale that took place prior to the date he filed his current petition and that was completed after he filed the petition upon expiration of the 10-day North Carolina statutory upset bid period became fixed and could not be set aside even though the bankruptcy court reimposed the stay as to all other creditors. In re Gatlin, 2014 Bankr. LEXIS 645 (Bankr. E.D.N.C. Feb. 18, 2014).

Mortgagor’s claim of “fraud upon the court” failed because, inter alia, the mortgagor did not timely seek equitable relief after rights of the parties were fixed. Wilson v. SunTrust Bank, 257 N.C. App. 237, 809 S.E.2d 286, 2017 N.C. App. LEXIS 1053 (2017), cert. denied, 139 S. Ct. 2674, 204 L. Ed. 2d 1069, 2019 U.S. LEXIS 3810 (2019).

Government’s Redemption Was Untimely and Property Went to Upset Bidder. —

Title was quieted pursuant to 28 U.S.C.S. § 2409a in the plaintiff to whom title was transferred after he made an upset bid, pursuant to G.S. 45.21-27, because the government’s redemption was untimely under 26 U.S.C.S. § 7425(d)(1) since the “date of sale” was the date of the public auction, based on the plain language of 26 C.F.R. § 301.7425-2(b), and not when he made the bid nor when the property was transferred. Ellis v. United States, 2005 U.S. Dist. LEXIS 16090 (M.D.N.C. July 22, 2005).

Effect of Automatic Bankruptcy Stay on Redemption Period. —

Although the stay created by the filing of a bankruptcy petition is not the same as an injunction granted pursuant to G.S. 45-21.34, the filing of an upset bid in North Carolina is prohibited by the automatic stay of § 362 of the Bankruptcy Code. Since the running of the period during which a debtor may redeem property in North Carolina is tied to the running of the upset bid period, the automatic stay prevents the running of the redemption period as well. In other words, even though the automatic bankruptcy stay does not directly suspend the running of the state statutory redemption period, it indirectly has that effect by preventing the expiration of the ten-day upset bid period. In re DiCello, 80 B.R. 769, 1987 Bankr. LEXIS 1983 (Bankr. E.D.N.C. 1987).

Bankruptcy court found that because March 25 was Greek Independence Day and was a holiday under G.S. 103-4(3a), the 10-day upset period had not expired under G.S. 45-21.27(a) when the debtor filed bankruptcy after the close of business on March 25, which would otherwise have been the 10th day; thus the bankruptcy court vacated its prior order granting the creditors relief from the automatic stay. In re Country Lake Enters., 284 B.R. 223, 2002 Bankr. LEXIS 1161 (Bankr. E.D.N.C. 2002).

Automatic stay provision of 11 U.S.C.S. § 362 of the Bankruptcy Code has the effect of preventing the expiration of the 10-day upset bid period provided for in G.S. 45-21.22, when the debtor files for bankruptcy within that period, thereby preventing the fixing of any rights as to any subject real property protected by a stay as the upset bid period has not run; therefore, where a first mortgagee was the last and highest bidder of a foreclosure trustee’s public sale of the debtors’ property but the debtors filed for Chapter 13 bankruptcy and stayed the foreclosure, the sale could not be completed and no parties rights as to the property under the foreclosure action were yet “fixed” under G.S. 45-21.27. Beneficial Mortg. Co. of N.C. Inc. v. Barrington & Jones Law Firm, P.A., 164 N.C. App. 41, 595 S.E.2d 705, 2004 N.C. App. LEXIS 727 (2004).

Debtor retained its rights in real property when it filed a chapter 11 bankruptcy petition during the 10-day upset bid period of G.S. 45-21.27, subject to a lifting of the stay under 11 U.S.C.S. § 362(d). Under G.S. 45-21.22(c), a lift of stay effectively nullified the original foreclosure sale, making it necessary for the trustee to resell the property; thus, because North Carolina law no longer fixed the period within which the debtor had to cure its default, 11 U.S.C.S. § 108(b) inapplicable. In re Lordship Dev., LLC, 403 B.R. 772, 2008 Bankr. LEXIS 2773 (Bankr. E.D.N.C. 2008).

Bankruptcy court had the power to hear Chapter 13 debtors’ claim that a deed they signed should be reformed because it encumbered a larger tract of land than the debtors agreed to encumber when they borrowed money from a home loan company. A clerk that reviewed a bank’s foreclosure request under G.S. 45-21.16 did not make findings of fact concerning the accuracy of the property’s description, so the debtors’ claim for reformation was not barred by the Rooker-Feldman doctrine, the debtors’ request was timely under G.S. 45-21.27, and G.S. 45-21.34 allowed courts to enjoin a sale upon the ground that the amount bid or price offered was inadequate and inequitable and would result in irreparable damage to the owner. Hinson v. Countrywide Home Loans, Inc., 481 B.R. 364, 2012 Bankr. LEXIS 1678 (Bankr. E.D.N.C. 2012).

Sale Not Consummated until Expiration of 10 Days. —

A last and highest bidder at a foreclosure sale is but a proposed purchaser or preferred bidder during the 10 days allowed by statute for an increase in the bid, and the sale cannot be consummated until after the expiration of 10 days after the public auction. Shelby Bldg. & Loan Ass'n v. Black, 215 N.C. 400, 2 S.E.2d 6, 1939 N.C. LEXIS 273 (1939).

In North Carolina, a property has not been “sold at foreclosure sale” under 11 U.S.C. § 1322(c)(1) until all of the state procedural requirements for completion of the sale, including the expiration of the upset bid period, have been met. In re Barham, 193 B.R. 229, 1996 Bankr. LEXIS 225 (Bankr. E.D.N.C. 1996).

Chapter 13 debtor had no right of redemption and no right to cure under 11 U.S.C.S. § 1322 because he filed his bankruptcy petition after 5 p.m. on the last day of the upset bid period in G.S. 45-21.27. The creditor, as the successful bidder, was entitled to obtain and record a deed to the property and to recover its possession under G.S. 45-21.29. In re Sarver, 2010 Bankr. LEXIS 2988 (Bankr. M.D.N.C. Sept. 1, 2010).

Interest of Highest Bidder. —

The bidder at the sale during the period of 10 days allowed for the filing of upset bids acquires no interest in the property itself, but only a position similar to a bidder at a judicial sale, before confirmation. He is only considered as a preferred bidder, his right depending upon whether there is an increased bid and a resale of the land ordered under the provisions of the statute. In re Sermon's Land, 182 N.C. 122, 108 S.E. 497, 1921 N.C. LEXIS 194 (1921). See also, Richmond County v. Simmons, 209 N.C. 250, 183 S.E. 282, 1936 N.C. LEXIS 439 (1936).

No Specific Performance When Sale Reopened. —

The principle upon which specific performance of a binding contract to convey lands is enforceable has no application to the successful bidder at a sale under the power contained in a mortgage or deed of trust of lands during the 10 days allowed for the filing of upset bids, for, within that time, there is no binding contract of purchase, and the bargain is incomplete. In re Sermon's Land, 182 N.C. 122, 108 S.E. 497, 1921 N.C. LEXIS 194 (1921).

Assignment of Bid. —

While the last and highest bidder at a sale under a mortgage acquires no title until the expiration of the 10-day period, he is a preferred bidder and may assign his bid, but his assignee takes only such interest as he had. Creech v. Wilder, 212 N.C. 162, 193 S.E. 281, 1937 N.C. LEXIS 258 (1937), limited, Morehead v. Harris, 262 N.C. 330, 137 S.E.2d 174, 1964 N.C. LEXIS 653 (1964).

For case in which land was conveyed before expiration of statutory time, see Wise v. Short, 181 N.C. 320, 107 S.E. 134, 1921 N.C. LEXIS 69 (1921).

Revocation of Order for Deed. —

It is the duty of the clerk of the superior court to readvertise and resell the mortgaged property as often as the statute is complied with, and the last and highest bidder at a prior sale acquires no rights in the property until his bid has finally been accepted and the order made for the deed to be made to him; and such order having been made by the clerk prematurely, it is proper for him to make an entry revoking it and order a resale, and an injunction will not lie to restrain the resale where the order has been thus revoked and the statute complied with. Hanna v. Carolina Mtg. Co., 197 N.C. 184, 148 S.E. 31, 1929 N.C. LEXIS 184 (1929).

Payment of Mortgage Within 10-Day Period. —

The last and highest bidder at a foreclosure sale of a mortgage on lands is but a proposed purchaser under this section acquiring no right until the statutory provision of 10 days has expired, and the payment of the full mortgage indebtedness to the mortgagee within that time cancels the instrument and all rights arising thereunder. In such case no recovery of damages can be had by the bidder against the mortgagor or a purchaser from him to whom the equity of redemption has been conveyed. Cherry v. Gilliam, 195 N.C. 233, 141 S.E. 594, 1928 N.C. LEXIS 51 (1928). See G.S. 45-21.20 .

The one who is the last and highest bidder at the foreclosure of a mortgage or deed of trust on lands is but a proposed purchaser within the 10 days before confirmation, and where the mortgagee has become such purchaser and within the 10 days allowed by statute for an increase bid a third person pays the mortgage debt and has the notes and mortgage assigned to him, such person has the right of lien and foreclosure under the terms of the mortgage securing the note. Davis v. Central Life Ins. Co., 197 N.C. 617, 150 S.E. 120, 1929 N.C. LEXIS 315 (1929).

Where an assignee, under a mistaken impression of ownership as the highest bidder at a foreclosure sale, satisfied a first deed of trust, there was no legal or equitable obligation on a subsequent purchaser by way of an upset bid to repay the assignee for satisfaction of the first deed of trust. HOMEQ v. Watkins, 154 N.C. App. 731, 572 S.E.2d 871, 2002 N.C. App. LEXIS 1527 (2002).

No Redemption Period for Junior Lien Holders. —

Because North Carolina has no redemption statute, in the sense that a debtor or junior lien holder has no special right to repurchase property from a buyer after the completion of a foreclosure sale, and instead deals with the power of sale foreclosures within 10 days of a public auction pursuant to G.S. 45-21.27, the government had to rely on the language in 26 U.S.C.S. § 7526(d)(1) which stated that the Secretary could redeem within 120 days from the date of sale, and not the language referring to redemption under state law. Ellis v. United States, 2005 U.S. Dist. LEXIS 16090 (M.D.N.C. July 22, 2005).

Deposit of Advanced Bid with Clerk. —

Under the facts, in case presenting the question of a valid resale of mortgaged land under the provisions of former G.S. 45-28, objection that only 2% of the proposed advanced bid was deposited with the clerk was untenable. Briggs v. Asheville Developers, 191 N.C. 784, 133 S.E. 3, 1926 N.C. LEXIS 177 (1926).

Clerk Cannot Require Larger Deposit Than That Required by Statute. —

Under former G.S. 45-28, it was held that the clerk had no authority to require a cash deposit for an upset bid in excess of that prescribed by the statute, or to require a person desirous of making an advance bid to deposit 15% of such bid in cash or certified or cashier’s check. In re Sharpe, 230 N.C. 412, 53 S.E.2d 302, 1949 N.C. LEXIS 650 (1949).

Time of Making Deposit. —

Under repealed G.S. 45-28 it was held that when, within the statutory time limit, the offerer had communicated with the clerk of the court by telephone and offered to come from an adjacent town and make a sufficient deposit and was informed by the clerk that it would be sufficient to send a cashier’s check by mail on that day, and a good cashier’s check was accordingly mailed, a substantial compliance with the statute was made, though the check was received by the clerk after the expiration of the time limit of the statute. Clayton Banking Co. v. Green, 197 N.C. 534, 149 S.E. 689, 1929 N.C. LEXIS 290 (1929).

Rights of Owner of Equity of Redemption. —

Where lands had been many times resold under former G.S. 45-28 and the owner of the equity of redemption had not protected himself at the sales, he could not have the deed at the final sale set aside for irregularity when the last purchaser was an innocent purchaser for value in good faith. Brown v. Sheets, 197 N.C. 268, 148 S.E. 233, 1929 N.C. LEXIS 209 (1929). See also, Phipps v. Wyatt, 199 N.C. 727, 155 S.E. 721, 1930 N.C. LEXIS 233 (1930).

As to sale not subject to collateral attack, see First Carolina's Joint-Stock Land Bank v. Stewart, 208 N.C. 139, 179 S.E. 463, 1935 N.C. LEXIS 343 (1935).

Effect of Recitals in Deed as to Compliance with Statute. —

Where the question in controversy in a suit for specific performance against the purchaser is whether there has been a compliance with former G.S. 45-28 as to a resale under a mortgage upon the raise of a bid at a prior sale, the recitals relating thereto in the deed tendered by the mortgagor are only prima facie evidence of such facts, and standing alone are insufficient to sustain the judgment. Briggs v. Asheville Developers, 191 N.C. 784, 133 S.E. 3, 1926 N.C. LEXIS 177 (1926).

As to commissions allowed under former G.S. 45-28, see Pringle v. Winston-Salem Bldg. & Loan Ass'n, 182 N.C. 316, 108 S.E. 914, 108 S.E. 917, 1921 N.C. LEXIS 223 (1921); In re Sale of E. Hollowell Land, 194 N.C. 222, 139 S.E. 169, 1927 N.C. LEXIS 51 (1927); Tidewater Brokerage Co. v. Southern Trust Co., 203 N.C. 182, 165 S.E. 353, 1932 N.C. LEXIS 341 (1932). See G.S. 45-21.15 .

Jurisdiction of Judge on Appeal. —

The discretion vested in the superior court judge on appeal from the clerk, under G.S. 1-276 [see now G.S. 1-301.1 et seq.], to hear and determine the matter in controversy, cannot confer jurisdiction on the judge to pass upon the reasonableness of the price of land sold under the power of sale in a mortgage, for the clerk has no authority to further pass thereon in the absence of an increased bid. In re Mortgage Sale of Ware Property, 187 N.C. 693, 122 S.E. 660, 1924 N.C. LEXIS 374 (1924).

Dismissal of Request to Enjoin Foreclosure Not Error. —

Trial court did not err by dismissing as untimely and moot plaintiff’s request to enjoin a foreclosure under G.S. 45-21.34 because given that no upset bid was filed by the expiration of the ten-day period prescribed in G.S. 45-21.27 and that plaintiff did not obtain injunctive relief by the time that the upset bid period expired, the rights of the parties to the sale became fixed, rendering plaintiff’s application moot; given that the foreclosure sale became final before plaintiff obtained any sort of injunctive relief, plaintiff was left without the ability to prevent the consummation of the foreclosure on the property, since a court could not restrain the doing of an act which already had been consummated. Goad v. Chase Home Fin., LLC, 208 N.C. App. 259, 704 S.E.2d 1, 2010 N.C. App. LEXIS 2418 (2010).

Irregularity Requiring Vacation of Confirmation and Deed. —

After upset bid under former G.S. 45-28, the property in suit, having a market value of from $5,500.00 to $6,000.00, was actually sold for $825.00. The trustee erroneously reported the bid as $6,400.00, which report was on record in the clerk’s office from the date of the sale until confirmation. It was held that the irregularity was of such substantial nature as to require a court of equity to vacate the confirmation and the deed pursuant thereto without requiring the trustors to prove that anyone was misled or failed to file an upset bid by reason of the erroneous report. Foust v. Gate City Sav. & Loan Ass'n, 233 N.C. 35, 62 S.E.2d 521, 1950 N.C. LEXIS 653 (1950).

Mootness of Appeal. —

Property owner’s and the secured creditor’s rights in the subject real property were fixed and the owner’s appeal was moot because the subject real property was sold and the trustee’s deed was recorded. There was no indication in the record that the owner paid a bond to stay the foreclosure sale, under G.S. 1-292; nor was there an upset bid during the 10 day period pursuant to G.S. 45-21.29A, or any indication in the record that the owner obtained a temporary restraining order or preliminary injunction prior to the end of the ten-day upset bid period. In re Foreclosure of the Deed of Trust of Hackley, 212 N.C. App. 596, 713 S.E.2d 119, 2011 N.C. App. LEXIS 1229 (2011).

Upset Bid Period Properly Reopened. —

Superior court properly granted a junior lender’s motion to reopen the upset bid period in a power-of-sale foreclosure action and extended the upset bid period for an additional 10 days because the lender, as the last prior bidder with interests in the collateral real property that stood to be eliminated by the foreclosure proceeding, did not receive notice of a third-party’s upset bid in sufficient time to protect its interests. In re Foreclosure of a Deed of Trust Executed by Radcliff Dated May 23, 2003, 263 N.C. App. 165, 822 S.E.2d 889, 2018 N.C. App. LEXIS 1243 (2018).

§ 45-21.28. [Repealed]

Repealed by Session Laws 1993, c. 305, s. 17, effective October 1, 1993, and applicable to instruments recorded prior to, on, or after that date.

§ 45-21.29. Orders for possession.

  1. through (j) Repealed by Session Laws 1993, c. 305, s. 18.
  2. Orders for possession of real property sold pursuant to this Article, in favor of the purchaser and against any party or parties in possession at the time of application therefor, may be issued by the clerk of the superior court of the county in which the property is sold if all of the following apply:
    1. The property has been sold in the exercise of the power of sale contained in any mortgage, deed of trust, leasehold mortgage, leasehold deed of trust, or a power of sale authorized by any other statutory provisions.
    2. Repealed by Session Laws 1993, c. 305, s. 18.
    3. The provisions of this Article have been complied with.
    4. The sale has been consummated, and the purchase price has been paid.
    5. The purchaser has acquired title to and is entitled to possession of the real property sold.
    6. Ten days’ notice has been given to the party or parties who remain in possession at the time application is made, or, in the case of residential property containing 15 or more rental units, 30 days’ notice has been given to the party or parties who remain in possession at the time the application is made.
    7. Repealed by Session Laws 2019-243, s. 26(c), effective November 6, 2019.
    8. Application is made by petition to the clerk by the mortgagee, the trustee, the purchaser of the property, or any authorized representative of the mortgagee, trustee, or purchaser of the property.
  3. An order for possession issued pursuant to G.S. 45-21.29(k) shall be directed to the sheriff and shall authorize the sheriff to remove all occupants and their personal property from the premises and to put the purchaser in possession, and shall be executed in accordance with the procedure for executing a writ or order for possession in a summary ejectment proceeding under G.S. 42-36.2. The purchaser shall have the same rights and remedies in connection with the execution of an order for possession and the disposition of personal property following execution as are provided to a landlord under North Carolina law, including Chapters 42 and 44A of the General Statutes.
  4. When the real property sold is situated in more than one county, the provisions of subsection (l) of this section shall be complied with in each county in which any part of the property is situated.

History. 1949, c. 720, s. 1; 1951, c. 252, s. 3; 1965, c. 299; 1967, c. 979, s. 3; 1975, c. 492, ss. 7-9; 1987, c. 627, s. 3; 1993, c. 305, s. 18; 2007-353, s. 4; 2015-178, s. 2(a); 2019-53, s. 1; 2019-243, s. 26(c).

Editor’s Note.

Session Laws 2019-53, s. 3, made the rewriting of subdivision (k)(5a) of this section by Session Laws 2019-53, s. 1, effective October 1, 2019, and applicable to petitions filed on or after that date.

Effect of Amendments.

Session Laws 2007-353, s. 4, effective October 1, 2007, substituted “sold if all of the following apply” for “sold, when” at the end of the introductory paragraph of subsection (k); rewrote subdivision (k)(5); substituted “the sheriff” for “him” in the first sentence of subsection ( l ); and made minor stylistic changes throughout.

Session Laws 2015-178, s. 2(a), effective October 1, 2015, added subdivision (k)(5a). For applicability, see editor’s note.

Session Laws 2019-53, s. 1, rewrote subdivision (k)(5a), which formerly read: “If the property is single-family residential and occupied pursuant to a lease, written or oral, the provisions of G.S. 45-21.33A have been satisfied. Any occupant subject to the provisions of G.S. 45-21.33A must additionally receive notice as required by subdivision (5) of this subsection.” For effective date and applicability, see editor’s note.

Session Laws 2019-243, s. 26(c), effective November 6, 2019, deleted subdivision (k)(5a), which read: “If the property is covered by the federal Protecting Tenants at Foreclosure Act (PTFA), Pub. L. 111-22, Title VII, Sections 701 through 703, as amended, the provisions of PTFA have been satisfied.”

Legal Periodicals.

For survey of 1972 case law on notice requirements of the nonjudicial foreclosure sale, see 51 N.C.L. Rev. 1110 (1973).

For comment discussing changes in North Carolina’s foreclosure law, see 54 N.C.L. Rev. 903 (1976).

CASE NOTES

Editor’s Note. —

Many of the cases were decided under repealed G.S. 45-28, which was similar to G.S. 45-21.27, former G.S. 45-21.28, this section and G.S. 45-21.30, and under this Article as it read prior to amendment in 1975. Most of the cases below were decided prior to the 1993 amendments to Articles 2A and 2B, which clarified the procedure for foreclosure under power of sale and established a new upset bid procedure.

Constitutionality. —

For case holding the statutes providing procedure for real property mortgage foreclosure, sale, and eviction under this Article as it read prior to amendment in 1975 are unconstitutional as applied, see Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975).

Foreclosure and sale pursuant to the statutory scheme of this Article as it read prior to amendment in 1975 was prospectively unlawful and void unless the power of sale was determined by the clerk to be a knowing, voluntary, and intelligent waiver of due process rights under U.S. Const., Amend. XIV, or the clerk determined that there had been adequate and timely notice to the mortgagor, coupled with opportunity for a hearing, before any rights were lost. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975).

Clerk of the court is barred by U.S. Const., Amend. XIV from working a deprivation of the mortgagor’s property without prior notice and an opportunity for a timely hearing, unless it is clear that those rights have been expressly waived. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975).

Minimum Requirements of Due Process. —

At a minimum, due process requires the trustee to make an initial showing before the clerk or similar neutral official that the mortgagor is in default under the obligation; the mortgagor must of course be afforded the opportunity to rebut and defend the charges. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975).

Both Posting and Publication Required. —

The legislature intended to meet the requirements of due process by demanding both posting and publication under this section. Albemarle Realty & Mtg. Co. v. Peoples Bank, 34 N.C. App. 481, 238 S.E.2d 622, 1977 N.C. App. LEXIS 1723 (1977).

Statutory Provisions Incorporated. —

Statutory provisions are, by operation of law, incorporated in all mortgages and deeds of trusts and control any sale under such instruments. In re Register, 5 N.C. App. 29, 167 S.E.2d 802, 1969 N.C. App. LEXIS 1278 (1969); Huggins v. Dement, 13 N.C. App. 673, 187 S.E.2d 412, 1972 N.C. App. LEXIS 2309, cert. denied, 409 U.S. 1071, 93 S. Ct. 677, 34 L. Ed. 2d 659, 1972 U.S. LEXIS 178 (1972).

The jurisdiction of the clerk vests at the moment an upset bid is filed with him. In re Register, 5 N.C. App. 29, 167 S.E.2d 802, 1969 N.C. App. LEXIS 1278 (1969).

Clerk May Not Make Orders Abrogating Rights Conferred by Statute. —

The provision of former G.S. 45-28 that the clerk should make such orders as might be just and necessary to safeguard the interests of all parties did not authorize him to enter orders abrogating rights conferred by the statute. In re Sharpe, 230 N.C. 412, 53 S.E.2d 302, 1949 N.C. LEXIS 650 (1949).

The provision of this section that on the resale of real property the clerk shall make all such orders as may be just and necessary to safeguard the interests of all parties extends to orders securing the rights of the parties as defined by statute, but not to orders abrogating or abridging such rights. In re Register, 5 N.C. App. 29, 167 S.E.2d 802, 1969 N.C. App. LEXIS 1278 (1969).

Power of a clerk to set aside his initial approval is inherent in G.S. 45-21.27(b), and is also authorized by subsection (j) of this section. In re Miller, 72 N.C. App. 494, 325 S.E.2d 490, 1985 N.C. App. LEXIS 3108 (1985).

Clerk to Order Resale After Each Upset Bid. —

Under former G.S. 45-28 it was held that the clerk of the superior court was required to order a resale of property foreclosed under power contained in a deed of trust each time an advance bid was made in accordance with the statute, regardless of how often an upset bid might be placed. In re Sale of Land of Sharpe, 230 N.C. 412, 53 S.E.2d 302 (1949). See note to G.S. 45-21.27 .

Where a resale is ordered the bidder at the first sale is released from any and all obligation by reason of his bid. Richmond County v. Simmons, 209 N.C. 250, 183 S.E. 282, 1936 N.C. LEXIS 439 (1936).

Keeping Resale Open for 10 Days. —

Under the provisions of former G.S. 45-28 as to resale of mortgaged lands upon a raised bid, it was required that the matter be kept open by the clerk for 10 days thereafter. Briggs v. Asheville Developers, 191 N.C. 784, 133 S.E. 3, 1926 N.C. LEXIS 177 (1926).

Effect of Automatic Bankruptcy Stay on Redemption Period. —

Although the stay created by the filing of a bankruptcy petition is not the same as an injunction granted pursuant to G.S. 45-21.34, the filing of an upset bid in North Carolina is prohibited by the automatic stay of § 362 of the Bankruptcy Code. Since the running of the period during which a debtor may redeem property in North Carolina is tied to the running of the upset bid period, the automatic stay prevents the running of the redemption period as well. In other words, even though the automatic bankruptcy stay does not directly suspend the running of the state statutory redemption period, it indirectly has that effect by preventing the expiration of the ten-day upset bid period. In re DiCello, 80 B.R. 769, 1987 Bankr. LEXIS 1983 (Bankr. E.D.N.C. 1987).

Striking Out Order for Resale. —

Where, on account of an upset bid, an order for a resale has been entered, it is error 11 days thereafter to strike out such order and declare the sale final, in prejudice of further rights of mortgagors. Virginia Trust Co. v. Powell, 189 N.C. 372, 127 S.E. 242, 1925 N.C. LEXIS 320 (1925).

Inadequacy of Purchase Price. —

Mere inadequacy of the purchase price realized at a foreclosure sale, standing alone, is not sufficient to upset a sale duly and regularly made in strict conformity with the power of sale. In re Register, 5 N.C. App. 29, 167 S.E.2d 802, 1969 N.C. App. LEXIS 1278 (1969).

Where there is an irregularity in the sale, gross inadequacy of purchase price may be considered on the question of the materiality of the irregularity. In re Register, 5 N.C. App. 29, 167 S.E.2d 802, 1969 N.C. App. LEXIS 1278 (1969).

Gross inadequacy of consideration, when coupled with any other inequitable element, even though neither, standing alone, may be sufficient for the purpose, will induce a court of equity to interpose and do justice between the parties. In re Register, 5 N.C. App. 29, 167 S.E.2d 802, 1969 N.C. App. LEXIS 1278 (1969).

The order of the clerk to deliver title required by former G.S. 45-28 was merely ministerial in its nature, and its omission, when in fact the trustee had, after complying with all the terms of the power of sale, made title to the purchaser, did not invalidate the foreclosure or render the title acquired by the purchaser as grantee in the deed of the trustee void. Cheek v. Squires, 200 N.C. 661, 158 S.E. 198, 1931 N.C. LEXIS 408 (1931). See also, Lawrence v. Beck, 185 N.C. 196, 116 S.E. 424, 1923 N.C. LEXIS 51 (1923).

The law presumes regularity in the execution of the power of sale in a deed of trust duly executed and regular upon its face. Huggins v. Dement, 13 N.C. App. 673, 187 S.E.2d 412, 1972 N.C. App. LEXIS 2309, cert. denied, 409 U.S. 1071, 93 S. Ct. 677, 34 L. Ed. 2d 659, 1972 U.S. LEXIS 178 (1972).

Burden on Attacking Party. —

If there is any failure to advertise a sale properly, the burden is on the attacking party to show it. Huggins v. Dement, 13 N.C. App. 673, 187 S.E.2d 412, 1972 N.C. App. LEXIS 2309, cert. denied, 409 U.S. 1071, 93 S. Ct. 677, 34 L. Ed. 2d 659, 1972 U.S. LEXIS 178 (1972).

Insurable Interest of Mortgagor. —

In a foreclosure, until the purchase price is paid and the deed is delivered, the mortgagor retains some interests in the property. These interests constitute some sufficient risk of pecuniary loss and chance of benefit that the mortgagor has an insurable interest in the property. Sprouse v. North River Ins. Co., 81 N.C. App. 311, 344 S.E.2d 555, 1986 N.C. App. LEXIS 2313, writ denied, 347 S.E.2d 33, 1986 N.C. LEXIS 2439 (1986).

Entitlement to Automatic Stay. —

Chapter 13 debtor had no right of redemption and no right to cure under 11 U.S.C.S. § 1322 because he filed his bankruptcy petition after 5 p.m. on the last day of the upset bid period in G.S. 45-21.27. The creditor, as the successful bidder, was entitled to obtain and record a deed to the property and to recover its possession under G.S. 45-21.29. In re Sarver, 2010 Bankr. LEXIS 2988 (Bankr. M.D.N.C. Sept. 1, 2010).

Conversion Not Found. —

Where the evidence sufficiently demonstrated that defendant obtained plaintiff’s personal property in accord with statutorily mandated procedures under this section and G.S. 42-36.2(b), it did not convert plaintiff’s property by removing and storing it. Smithers v. Tru-Pak Moving Sys., 121 N.C. App. 542, 468 S.E.2d 410, 1996 N.C. App. LEXIS 113 (1996).

§ 45-21.29A. No necessity for confirmation of sale.

No confirmation of sales or resales of real property made pursuant to this Article shall be required. If an upset bid is not filed following a sale, resale, or prior upset bid within the period specified in this Article, the rights of the parties to the sale or resale become fixed.

History. 1967, c. 979, s. 3; 1993, c. 305, s. 19.

CASE NOTES

Editor’s Note. —

Some of the cases below were decided prior to the 1993 amendments to Articles 2A and 2B, which clarified the procedure for foreclosure under power of sale and established a new upset bid procedure.

The rights fixed by this section are solely contractual in nature and do not involve any transfer of title. Sprouse v. North River Ins. Co., 81 N.C. App. 311, 344 S.E.2d 555, 1986 N.C. App. LEXIS 2313, writ denied, 347 S.E.2d 33, 1986 N.C. LEXIS 2439 (1986).

The rights fixed by this section are subject to the provisions of G.S. 39-39. Sprouse v. North River Ins. Co., 81 N.C. App. 311, 344 S.E.2d 555, 1986 N.C. App. LEXIS 2313, writ denied, 347 S.E.2d 33, 1986 N.C. LEXIS 2439 (1986).

The only rights that are “fixed” under this section upon expiration of the 10-day period are the contractual rights of the high bidder to delivery of the deed upon tender of the purchase price and of the trustee to hold the bidder liable for that price. The rights of other parties, including those in possession, are not necessarily affected. Sprouse v. North River Ins. Co., 81 N.C. App. 311, 344 S.E.2d 555, 1986 N.C. App. LEXIS 2313, writ denied, 347 S.E.2d 33, 1986 N.C. LEXIS 2439 (1986).

Rights Not “Fixed” Where Defendants Allowed to Litigate Anew. —

If defendants were allowed to litigate anew the issues of whether there was a debt and whether there was a default, then the rights of the parties were far from “fixed” at the end of the upset bid period, as dictated by G.S. 45-21.29A. SunTrust Mortg., Inc. v. Busby, 2010 U.S. Dist. LEXIS 107562 (W.D.N.C. Oct. 5, 2010), aff'd, 469 Fed. Appx. 205, 2012 U.S. App. LEXIS 5779 (4th Cir. 2012).

Orders confirming foreclosure sales are not required in North Carolina unless the sale is a resale necessitated by an upset bid. In re Adams, 86 B.R. 867, 1988 Bankr. LEXIS 903 (Bankr. E.D.N.C. 1988).

In North Carolina, a property has not been “sold at foreclosure sale” under 11 U.S.C. § 1322(c)(1) until all of the state procedural requirements for completion of the sale, including the expiration of the upset bid period, have been met. In re Barham, 193 B.R. 229, 1996 Bankr. LEXIS 225 (Bankr. E.D.N.C. 1996).

Nothing in this section shifts the risk of loss prior to closing to the high bidder. In fact, the high bidder cannot compel relinquishment of the premises until the price has been paid in full, and the morgtagor remains subject to personal liability on the note until then. Sprouse v. North River Ins. Co., 81 N.C. App. 311, 344 S.E.2d 555, 1986 N.C. App. LEXIS 2313, writ denied, 347 S.E.2d 33, 1986 N.C. LEXIS 2439 (1986).

Insurable Interest of Mortgagor. —

In a foreclosure, until the purchase price is paid and the deed is delivered, the mortgagor retains some interests in the property. These interests constitute some sufficient risk of pecuniary loss and chance of benefit that the mortgagor has an insurable interest in the property. Sprouse v. North River Ins. Co., 81 N.C. App. 311, 344 S.E.2d 555, 1986 N.C. App. LEXIS 2313, writ denied, 347 S.E.2d 33, 1986 N.C. LEXIS 2439 (1986).

Where no upset bid is filed, confirmation of the sale is not required. Britt v. Smith, 6 N.C. App. 117, 169 S.E.2d 482, 1969 N.C. App. LEXIS 1148 (1969).

Application To Enjoin Foreclosure Sale Must Be Filed Before Upset Bid Period Expires. —

Trial court did not err by dismissing as untimely and moot plaintiff’s request to enjoin a foreclosure under G.S. 45-21.34 because given that no upset bid was filed by the expiration of the ten-day period prescribed in G.S. 45-21.27 and that plaintiff did not obtain injunctive relief by the time that the upset bid period expired, the rights of the parties to the sale became fixed, rendering plaintiff’s application moot; given that the foreclosure sale became final before plaintiff obtained any sort of injunctive relief, plaintiff was left without the ability to prevent the consummation of the foreclosure on the property, since a court could not restrain the doing of an act which already had been consummated. Goad v. Chase Home Fin., LLC, 208 N.C. App. 259, 704 S.E.2d 1, 2010 N.C. App. LEXIS 2418 (2010).

When Right to Equity of Redemption Is Lost. —

In nonjudicial foreclosures where no upset bid is filed, the rights of the parties to the foreclosure sale, i.e., the rights of the trustee under the deed of trust being foreclosed (as seller) and the rights of the purchaser, become fixed at the expiration of the 10-day period for the filing of upset bids. It is at this point that the debtor loses his rights to the equity of redemption he had in the real estate. Cooper v. Smith, 24 B.R. 19, 1982 Bankr. LEXIS 3837 (Bankr. W.D.N.C. 1982), disapproved, In re Bundles, 856 F.2d 815, 1988 U.S. App. LEXIS 12271 (7th Cir. 1988).

It was undisputed that ten days passed after the report of the November 12, 2004 foreclosure sale was filed without any upset bids being submitted. Thus, when this case was filed on November 23, 2004, debtor had no right of redemption under North Carolina law with respect to the property and had no right to cure with respect to the indebtedness of the creditor under federal bankruptcy law. In re Holt, 2005 Bankr. LEXIS 3371 (Bankr. M.D.N.C. June 3, 2005).

As, under North Carolina law, legal ownership of debtor’s property passed to purchaser when foreclosure sale upset bid closed, adequate grounds and good cause existed to grant purchaser relief from automatic stay. In re Daniel, 2016 Bankr. LEXIS 4744 (Bankr. M.D.N.C. July 11, 2016).

Bankruptcy debtor was not entitled to cure a default under a note and deed of trust against the debtor’s real property in the debtor’s plan, since a foreclosure sale of the property was completed under state law regardless of whether a trustee’s deed was delivered, and the debtor’s right of redemption expired before the bankruptcy case was filed. In re Dillard, 2000 Bankr. LEXIS 2245 (Bankr. M.D.N.C. Aug. 22, 2000).

Equitable Relief Not Timely Sought. —

Mortgagor’s claim of “fraud upon the court” failed because, inter alia, the mortgagor did not timely seek equitable relief after rights of the parties were fixed. Wilson v. SunTrust Bank, 257 N.C. App. 237, 809 S.E.2d 286, 2017 N.C. App. LEXIS 1053 (2017), cert. denied, 139 S. Ct. 2674, 204 L. Ed. 2d 1069, 2019 U.S. LEXIS 3810 (2019).

Mootness of Appeal. —

Property owner’s and the secured creditor’s rights in the subject real property were fixed and the owner’s appeal was moot because the subject real property was sold and the trustee’s deed was recorded. There was no indication in the record that the owner paid a bond to stay the foreclosure sale, under G.S. 1-292; nor was there an upset bid during the 10 day period pursuant to G.W. 45-21.29A, or any indication in the record that the owner obtained a temporary restraining order or preliminary injunction prior to the end of the ten-day upset bid period. In re Foreclosure of the Deed of Trust of Hackley, 212 N.C. App. 596, 713 S.E.2d 119, 2011 N.C. App. LEXIS 1229 (2011).

Mortgagors’ argument attacking the consummation of foreclosure by power sale proceeding was moot because the mortgagors did not apply for a temporary stay or injunction, pursuant to G.S. 45-21.34, on the ground that the superior court lacked subject matter jurisdiction to authorize the sale; thus; the foreclosure sale was consummated, and the parties’ rights in the real property were fixed, in accordance with G.S. 45-21.29A. In re Foreclosure of the Nine Deeds of Trust of Marshall & Madeline Cornblum, 220 N.C. App. 100, 727 S.E.2d 338, 2012 N.C. App. LEXIS 524, cert. denied, 366 N.C. 404, 734 S.E.2d 865, 2012 N.C. LEXIS 1190 (2012).

§ 45-21.30. Failure of bidder to make cash deposit or to comply with bid; resale.

  1. If the terms of a sale of real property require the highest bidder to make a cash deposit at the sale, and he fails to make such required deposit, the person holding the sale shall at the same time and place again offer the property for sale.
  2. Repealed by Session Laws 1967, c. 562, s. 2.
  3. When the highest bidder at a sale or resale or any upset bidder fails to comply with his bid upon tender to him of a deed for the real property or after a bona fide attempt to tender such a deed, the clerk of superior court may, upon motion, enter an order authorizing a resale of the real property. The procedure for such resale shall be the same in every respect as is provided by this Article in the case of an original sale of real property except that the provisions of G.S. 45-21.16 are not applicable to the resale.
  4. A defaulting bidder at any sale or resale or any defaulting upset bidder is liable on his bid, and in case a resale is had because of such default, he shall remain liable to the extent that the final sale price is less than his bid plus all the costs of the resale. Any deposit or compliance bond made by the defaulting bidder shall secure payment of the amount, if any, for which the defaulting bidder remains liable under this section.
  5. Nothing in this section deprives any person of any other remedy against the defaulting bidder.

History. 1949, c. 720, s. 1; 1967, c. 562, s. 2; 1975, c. 492, s. 10; 1977, c. 359, s. 15; 1993, c. 305, s. 20.

Legal Periodicals.

For comment discussing changes in North Carolina’s foreclosure law, see 54 N.C.L. Rev. 903 (1976).

CASE NOTES

Editor’s Note. —

Some of the cases below were decided prior to the 1993 amendments to Articles 2A and 2B, which clarified the procedure for foreclosure under power of sale and established a new upset bid procedure.

A judgment creditor lacks standing to bring an action against a defaulting bidder as that term was used under this section prior to the 1993 amendment. Union Grove Milling & Mfg. Co. v. Faw, 109 N.C. App. 248, 426 S.E.2d 476, 1993 N.C. App. LEXIS 227, aff'd, 335 N.C. 165, 436 S.E.2d 131, 1993 N.C. LEXIS 531 (1993).

Deposit When No Upset Bid Is Made. —

Under the provisions of former G.S. 45-28, the last and highest bidder at a foreclosure sale obtained no interest in the land until the elapse of the 10-day period for the filing of an increased bid, and although the mortgagee or trustee might, in fixing the terms of the sale, require a reasonable cash deposit to cover the cost of the sale and insure completion of the sale by the purchaser if no upset bid was made, the reasonableness of such deposit might be determined by analogy to the deposit required for an upset bid, and a demand for a cash deposit at the sale amounting to 25% of the bid was unreasonable. Alexander v. Boyd, 204 N.C. 103, 167 S.E. 462, 1933 N.C. LEXIS 330 (1933) (decided under former G.S. 45-28).

Recovery of Deposit When Resale Is Ordered. —

Where the last and highest bidder at a sale of lands has been required to deposit a certain percentage of his bid in cash to show his good faith, he is entitled to receive his deposit back upon the placing of an advanced bid and cash deposit by another and the entering of an order of resale by the clerk. Koonce v. Fort, 204 N.C. 426, 168 S.E. 672, 1933 N.C. LEXIS 156 (1933) (decided under former G.S. 45-28).

The deposit required by former G.S. 45-28 was to guarantee against loss in a resale of land under foreclosure sale of a mortgage, and where the clerk of the superior court required of a person placing an advanced bid a deposit representing a 5% increase bid, and in addition a deposit to guarantee compliance with the bid, and the lands were resold and bought in by the one making the advanced bid, and he refused to pay the amount because of threatened litigation, and the lands were again resold and brought a surplus over that of the prior resale, there was no loss occasioned by the first resale, and the person making the deposit therefor was entitled to received it back as against the claim therefor of one holding a note secured by a junior mortgage on the same property. Harris v. American Bank & Trust Co., 198 N.C. 605, 152 S.E. 802, 1930 N.C. LEXIS 426 (1930) (decided under G.S. 45-28).

Trial court erred in holding a defaulting bidder liable for the costs of resale because the bidder was statutorily entitled to a refund of its entire deposit where the final sale price clearly exceeded the bidder’s defaulting bid plus the costs of resale. Glass v. Zaftrin, LLC, 239 N.C. App. 154, 768 S.E.2d 612, 2015 N.C. App. LEXIS 63 (2015).

Discretion of Trustee. —

The trustee has substantial discretion in discharging his responsibilities, which are to attempt to satisfy the debt while getting the highest price for the mortgagor and protecting the mortgagor’s rights and equity. As long as the trustee does not violate the fiduciary duty of the office, and does not give unfair advantages to any party, the exercise of that discretion is not reviewable by the courts. Sprouse v. North River Ins. Co., 81 N.C. App. 311, 344 S.E.2d 555, 1986 N.C. App. LEXIS 2313, writ denied, 347 S.E.2d 33, 1986 N.C. LEXIS 2439 (1986).

New Hearing Improper. —

Trial court erred in allowing trustee to hold a new hearing and sale in foreclosure proceeding which added a new deficiency debtor, after the assistant clerk had held a foreclosure hearing and sale, and the sale of the property had been confirmed by passage of the upset bid period. In re Earl L. Pickett Enters., Inc., 114 N.C. App. 489, 442 S.E.2d 101, 1994 N.C. App. LEXIS 385 (1994).

Insurable Interest of Mortgagor. —

In a foreclosure, until the purchase price is paid and the deed is delivered, the mortgagor retains some interests in the property. These interests constitute some sufficient risk of pecuniary loss and chance of benefit that the mortgagor has an insurable interest in the property. Sprouse v. North River Ins. Co., 81 N.C. App. 311, 344 S.E.2d 555, 1986 N.C. App. LEXIS 2313, writ denied, 347 S.E.2d 33, 1986 N.C. LEXIS 2439 (1986).

Withdrawal of Upset Bid for Mistake Held Error. —

Order permitting an individual to withdraw his upset bid and requiring a resale of foreclosed property, based on the court’s finding that he made his bid in the mistaken belief, due to negligently failing to inform himself as to the land that he was bidding on, that he was bidding on all three parcels of land covered by deed of trust, rather than just two, was in error, as there was no equitable basis for allowing him to withdraw it. When the bid was accepted by the trustee as the last and highest, a contract was made, and the mere mistake of one party alone is not sufficient to avoid a contract. In re Allan & Warmbold Constr. Co., 88 N.C. App. 693, 364 S.E.2d 723, 1988 N.C. App. LEXIS 201 (1988).

Disbursement of Defaulting Bid Deposit. —

Trial court did not err in ordering that a bid deposit made by a defaulting bidder in a foreclosure proceeding be disbursed to a bank, which made the winning bid, when the defaulting bidder chose to lower its opening bid in a resale of the foreclosed property. In re Foreclosure of Real Prop. under Deed of Trust from Ballard, 246 N.C. App. 241, 782 S.E.2d 922, 2016 N.C. App. LEXIS 287 (2016).

§ 45-21.31. Disposition of proceeds of sale; payment of surplus to clerk.

  1. The proceeds of any sale shall be applied by the person making the sale, in the following order, to the payment of —
    1. Costs and expenses of the sale, including the trustee’s commission, if any, and a reasonable auctioneer’s fee if such expense has been incurred, and reasonable counsel fees for an attorney serving as a trustee if allowed pursuant to subsection (a1) of this section;
    2. Taxes due and unpaid on the property sold, as provided by G.S. 105-385, unless the notice of sale provided that the property be sold subject to taxes thereon and the property was so sold;
    3. Special assessments, or any installments thereof, against the property sold, which are due and unpaid, as provided by G.S. 105-385, unless the notice of sale provided that the property be sold subject to special assessments thereon and the property was so sold;
    4. The obligation secured by the mortgage, deed of trust or conditional sale contract.
  2. The clerk of the superior court of the county where the sale was had may exercise discretion to allow reasonable counsel fees to an attorney serving as a trustee (in addition to the compensation allowed to the attorney as a trustee) where the attorney, on behalf of the trustee, renders professional services as an attorney that are different from the services normally performed by a trustee and of a type which would reasonably justify the retention of legal counsel by a trustee who is not licensed to practice law. Counsel fees are presumed reasonable if in compliance with G.S. 6-21.2(1) and (2). Nothing in this section, however, shall preclude the clerk of superior court from deeming a higher fee reasonable.
  3. 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. Otherwise, the surplus shall be paid to the clerk of the superior court of the county where the sale was had —
    1. In all cases when the owner of the property sold is dead and there is no qualified and acting personal representative of his estate, and
    2. In all cases when he is unable to locate the persons entitled thereto, and
    3. In all cases when the mortgagee, trustee or vendor is, for any cause, in doubt as to who is entitled to such surplus money, and
    4. In all cases when adverse claims thereto are asserted.
  4. Such payment to the clerk discharges the mortgagee, trustee or vendor from liability to the extent of the amount so paid.
  5. The clerk shall receive such money from the mortgagee, trustee or vendor and shall execute a receipt therefor.
  6. The clerk is liable on his official bond for the safekeeping of money so received until it is paid to the party or parties entitled thereto, or until it is paid out under the order of a court of competent jurisdiction.

History. 1949, c. 720, s. 1; 1951, c. 252, s. 1; 1967, c. 562, s. 2; 1981, c. 682, s. 10; 2013-104, s. 1.

Effect of Amendments.

Session Laws 2013-104, s. 1, effective June 12, 2013, added “and reasonable counsel fees for an attorney serving as a trustee if allowed pursuant to subsection (a1) of this section” at the end of subdivision (a)(1); and added subsection (a1).

CASE NOTES

Trustee’s Authority to Make Disbursements. —

Chapter 45, Article 2A contains no language that suggests the trustee must seek or obtain approval from either the clerk of the superior court or the court prior to making the disbursements permitted in subsection (a), and where the instrument giving rise to foreclosure grants no one the right to contest the disbursements, the disbursements made pursuant to subsection (a) are within the sole province of the trustee. In re Deed of Trust, 118 N.C. App. 458, 455 S.E.2d 676, 1995 N.C. App. LEXIS 236 (1995).

Application of the proceeds of a foreclosure sale were within the sole province of the trustee, who was not required to receive pre-approval from the clerk of the superior court, or the superior court, regarding the application of the proceeds. In re Foreclosure of Webber, 148 N.C. App. 158, 557 S.E.2d 645, 2001 N.C. App. LEXIS 1272 (2001).

Surplus money arising upon a sale of land under a decree of foreclosure stands in place of the land itself in respect to liens thereon or vested rights therein. It is constructively, at least, real property, and belongs to the mortgagor or his assigns. In re Castillian Apts., Inc., 281 N.C. 709, 190 S.E.2d 161, 1972 N.C. LEXIS 1163 (1972).

Obligation to Pay Costs and Expenses. —

Payment of costs and expenses required by subsection (a) is not the obligation of a purchase money debtor whose deed of trust is being foreclosed; nor is it, strictly speaking, the obligation of the buyer at the foreclosure sale. Instead, these statutory costs and expenses, including the trustee’s commission, are simply obligations arising from the foreclosure sale which must be paid by the trustee before the remainder of the proceeds may be distributed. Merritt v. Ridge, 323 N.C. 330, 372 S.E.2d 559 (1988). In accord with the 1990 Cumulative Supplement, see Whitley v. Griffin, 737 F. Supp. 345, 1990 U.S. Dist. LEXIS 5665 (E.D.N.C. 1990).

Statutory costs and expenses, including the trustee’s commission, were simply obligations arising from the foreclosure sale which had to be paid by the trustee before the remainder of the proceeds could be distributed. In re Foreclosure of Webber, 148 N.C. App. 158, 557 S.E.2d 645, 2001 N.C. App. LEXIS 1272 (2001).

Payment of Surplus to Clerk of Superior Court. —

A trustee, upon completion of foreclosure on entirety property, is authorized by this section to pay the surplus to the clerk of superior court. Koob v. Koob, 283 N.C. 129, 195 S.E.2d 552, 1973 N.C. LEXIS 926 (1973).

Liability of Trustee for Failure to Pay Over Surplus to Clerk. —

Under subdivision (b)(4) of this section, the trustee or mortgagee must pay into the hands of the clerk of the superior court the surplus remaining after foreclosure in all cases where adverse claims to the funds are asserted, and trustee who pays such funds into the hands of the administrator of deceased trustor remains liable therefor until they are paid into the hands of the clerk as provided by law. Lenoir County v. Outlaw, 241 N.C. 97, 84 S.E.2d 330, 1954 N.C. LEXIS 555 (1954).

There is no limit to the amount of funds that may be paid to the clerk of a superior court under the provisions of this section, the limitation of the amount payable to the clerk under the provisions of former G.S. 28-68 not being applicable to the surplus realized upon the foreclosure of a mortgage or deed of trust. Lenoir County v. Outlaw, 241 N.C. 97, 84 S.E.2d 330, 1954 N.C. LEXIS 555 (1954).

The clerk holds surplus money for safekeeping only, having no interest therein other than to protect himself from liability on his official bond. Koob v. Koob, 283 N.C. 129, 195 S.E.2d 552, 1973 N.C. LEXIS 926 (1973); In re Foreclosure of Deed of Trust, 20 N.C. App. 610, 202 S.E.2d 318, 1974 N.C. App. LEXIS 2504 (1974).

Surplus from Foreclosure Sale Not Held by the Entirety. —

Since a foreclosure sale of realty under a deed of trust after default is not involuntary, surplus funds so created are not held by the entirety. In re Foreclosure of Deed of Trust, 303 N.C. 514, 279 S.E.2d 566, 1981 N.C. LEXIS 1185 (1981).

Alternatives of Mortgagee. —

Where the owner of lands mortgaged the same as tracts numbered 1 and 2, and later conveyed tract No. 2 to a purchaser in fee simple, and devised tract No. 1 for life with remainder over, it was held under former G.S. 45-29, which was similar in subject matter to this section, that the mortgagee should hold the proceeds of the sale after the satisfaction of his mortgage for the life tenant and remaindermen, who might determine whether the surplus should be invested in accordance with their equities, or the interest of the life tenant be paid in cash under the provisions of G.S. 8-47, or the mortgagee might relieve himself of liability by paying the fund into court pursuant to former G.S. 45-29. Brown v. Jennings, 188 N.C. 155, 124 S.E. 150, 1924 N.C. LEXIS 30 (1924).

Payment of Foreclosure Tax. —

Where at foreclosure sale the lender was the highest bidder and purchaser, the federal agency was named in the foreclosure deed only through assignment of the lender’s bid, and the trustee was required by subsection (a) of this section to pay the foreclosure tax which is simply an obligation of the trustee that must be paid from the proceeds of the foreclosure sale, therefore the foreclosure sales were not instances in which the ultimate burden of paying the tax fell upon the United States or its agencies and thus the tax was collectible. Whitley v. Griffin, 737 F. Supp. 345, 1990 U.S. Dist. LEXIS 5665 (E.D.N.C. 1990).

The auctioneer’s fee was formerly payable out of trustee’s commissions. See Duffy v. Smith, 132 N.C. 38, 43 S.E. 501, 1903 N.C. LEXIS 223 (1903).

Payment of Attorney’s Fees. —

Although subsection (a) does not have specific reference to attorneys’ fees, to the extent the instrument provides for the payment of such fees, they become an “obligation secured by” the instrument, thus, any entitlement to and the amount of attorneys’ fees required for the conduct of the sale is also controlled by the instrument and subject to deduction from the sale proceeds. In re Deed of Trust, 118 N.C. App. 458, 455 S.E.2d 676, 1995 N.C. App. LEXIS 236 (1995).

Court clerk auditing a final report of a foreclosure sale pursuant to G.S. 45-21.33 did not have the authority to make determinations about the reasonableness of attorney fees sought by a trustee under G.S. 45-21.31(a), as the proper remedy for a lienholder was a separate proceeding against the trustee for breach of a fiduciary duty. In re Vogler Realty, Inc., 208 N.C. App. 212, 703 S.E.2d 159, 2010 N.C. App. LEXIS 2416 (2010), aff'd, 365 N.C. 389, 722 S.E.2d 459, 2012 N.C. LEXIS 27 (2012).

Clerk of the superior court exceeded his statutory authority in reducing the attorney’s fees of a trustee because the clerk should have limited his audit to determining only whether the entries in the report reflected the actual receipts and disbursements made by the trustee pursuant to G.S. 45-21.33; a trustee’s attorney’s fee provided for in the deed of trust is a cost and expense of the sale and therefore, must be paid by the trustee, G.S. 45-21.31(a)(1), and G.S. 45-21.33 does not authorize the clerk to review the distribution of attorney’s fees for reasonableness. In re Foreclosure of the Deed of Trust of Vogler Realty, Inc., 365 N.C. 389, 722 S.E.2d 459, 2012 N.C. LEXIS 27 (2012).

§ 45-21.32. Special proceeding to determine ownership of surplus.

  1. A special proceeding may be instituted before the clerk of the superior court by any person claiming any money, or part thereof, paid into the clerk’s office under G.S. 45-21.31, to determine who is entitled thereto.
  2. All other persons who have filed with the clerk notice of their claim to the money or any part thereof, or who, as far as the petitioner or petitioners know, assert any claim to the money or any part thereof, shall be made defendants in the proceeding.
  3. If any answer is filed raising issues of fact as to the ownership of the money, the proceeding shall be transferred to the civil issue docket of the superior court for trial. When a proceeding is so transferred, the clerk may require any party to the proceeding who asserts a claim to the fund by petition or answer to furnish a bond for costs in the amount of two hundred dollars ($200.00) or otherwise comply with the provisions of G.S. 1-109.
  4. The court may, in its discretion, allow a reasonable attorney’s fee for any attorney appearing in behalf of the party or parties who prevail, to be paid out of the funds in controversy, and shall tax all costs against the losing party or parties who asserted a claim to the fund by petition or answer.

History. 1949, c. 720, s. 1.

Cross References.

As to special proceedings generally, see G.S. 1-393 et seq.

CASE NOTES

Transfer to Superior Court for Trial. —

When respondent files an answer raising issues of fact as to the ownership of money on deposit with the clerk, the proceeding should be transferred to the civil issue docket of the superior court for trial. In re Foreclosure of Deed of Trust, 20 N.C. App. 610, 202 S.E.2d 318, 1974 N.C. App. LEXIS 2504 (1974).

Jurisdiction of Superior Court. —

The superior court had no jurisdiction of a special proceeding under this section brought by judgment creditors to determine the ownership of surplus funds remaining after a foreclosure sale, where the matter was simply put on the calendar for hearing in the superior court and there was no appeal from an order of the clerk by an aggrieved party. Journeys Int'l, Inc. v. Corbett, 53 N.C. App. 124, 280 S.E.2d 5, 1981 N.C. App. LEXIS 2517 (1981).

Determination of Priority of Payment of Surplus Claims. —

Where there are adverse claims against the surplus realized upon the foreclosure of a deed of trust after the death of the trustor, and a proceeding is instituted pursuant to this section to determine who is entitled to such funds, it is the clerk and not the administrator who determines the priority of payments, although the administrator claiming the funds is a necessary party. Lenoir County v. Outlaw, 241 N.C. 97, 84 S.E.2d 330, 1954 N.C. LEXIS 555 (1954).

Special Proceeding Not Necessary. —

The federal government, which sought to enforce an administrative levy served in connection with the collection of federal taxes, was not required under the law to commence a special proceeding in state court in order to determine the ownership of surplus funds from the foreclosure of property which taxpayer and her husband owned as tenants by the entirety or to recover the funds belonging to the taxpayer. United States v. Mauney, 642 F. Supp. 1097, 1986 U.S. Dist. LEXIS 21008 (W.D.N.C. 1986).

As to pleading the statute of limitations, see In re Gibbs, 205 N.C. 312, 171 S.E. 55, 1933 N.C. LEXIS 542 (1933).

§ 45-21.33. Final report of sale of real property.

  1. A person who holds a sale of real property pursuant to a power of sale shall 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. Such report shall show whether the property was sold as a whole or in parts and whether all of the property was sold. The report shall also show whether all or only a part of the obligation was satisfied with respect to which the power of sale of property was exercised.
  2. The clerk shall audit the account and record it.
  3. 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.
  4. The clerk’s fee for auditing and recording the final account is a part of the expenses of the sale, and the person holding the sale shall pay the clerk’s fee as part of such expenses.

History. 1949, c. 720, s. 1; 1975, c. 492, s. 11; 1983, c. 799; 1993, c. 305, s. 21; 1995, c. 509, s. 26.

Editor’s Note.

Session Laws 1975, c. 492, which amended this section, provides in s. 14: “The words clerk of court as used in this act shall be deemed to include assistant clerk of court.”

Legal Periodicals.

For comment discussing changes in North Carolina’s foreclosure law, see 54 N.C.L. Rev. 903 (1976).

CASE NOTES

Editor’s Note. —

Some of the cases below were decided prior to the 1993 amendments to Articles 2A and 2B, which clarified the procedure for foreclosure under power of sale and established a new upset bid procedure.

Constitutionality. —

For case holding the statutes providing procedure for real property mortgage foreclosure, sale, and eviction under this Article as it read prior to amendment in 1975 are unconstitutional as applied, see Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975).

Foreclosure and sale pursuant to the statutory scheme of this Article as it read prior to amendment in 1975 was prospectively unlawful and void unless the power of sale was determined by the clerk to be a knowing, voluntary, and intelligent waiver of due process rights under U.S. Const., Amend. XIV, or the clerk determined that there had been adequate and timely notice to the mortgagor, coupled with opportunity for a hearing, before any rights were lost. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975).

Clerk of the court is barred by U.S. Const., Amend. XIV from working a deprivation of the mortgagor’s property without prior notice and an opportunity for a timely hearing, unless it is clear that those rights have been expressly waived. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975) (decided under this Article as it read prior to amendment in 1975).

Minimum Requirements of Due Process. —

At a minimum, due process requires the trustee to make an initial showing before the clerk or similar neutral official that the mortgagor is in default under the obligation; the mortgagor must of course be afforded the opportunity to rebut and defend the charges. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975) (decided under this Article as it read prior to amendment in 1975).

The purpose of this section is to have in the files of the clerk proof that the foreclosure sale was properly conducted and that the notice was published. Britt v. Britt, 26 N.C. App. 132, 215 S.E.2d 172, 1975 N.C. App. LEXIS 1989, cert. denied, 288 N.C. 238, 217 S.E.2d 678, 1975 N.C. LEXIS 901 (1975).

Clerk’s Authority in Conducting Audit. —

In conducting the “audit” under this section the clerk is merely authorized to determine whether the entries in the report reflect the actual receipts and disbursements made by the trustee. In re Deed of Trust, 118 N.C. App. 458, 455 S.E.2d 676, 1995 N.C. App. LEXIS 236 (1995).

During the audit the clerk is not authorized to review the trustee-attorney’s payment of attorney’s fees to himself or herself for reasonableness, as this action would involve an improper exercise of judicial discretion, but instead, the clerk’s audit pursuant to G.S. 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; as a result, the trustee is responsible for distributing the appropriate amount of attorney’s fees in accordance with the provisions of the deed of trust. In re Foreclosure of the Deed of Trust of Vogler Realty, Inc., 365 N.C. 389, 722 S.E.2d 459, 2012 N.C. LEXIS 27 (2012).

Clerk of the superior court exceeded his statutory authority in reducing the attorney’s fees of a trustee because the clerk should have limited his audit to determining only whether the entries in the report reflected the actual receipts and disbursements made by the trustee pursuant to G.S. 45-21.33; a trustee’s attorney’s fee provided for in the deed of trust is a cost and expense of the sale and therefore, must be paid by the trustee, G.S. 45-21.31(a)(1), and G.S. 45-21.33 does not authorize the clerk to review the distribution of attorney’s fees for reasonableness. In re Foreclosure of the Deed of Trust of Vogler Realty, Inc., 365 N.C. 389, 722 S.E.2d 459, 2012 N.C. LEXIS 27 (2012).

The fact that a properly signed publisher’s affidavit was not filed within 30 days of the sale does not invalidate the sale. Britt v. Britt, 26 N.C. App. 132, 215 S.E.2d 172, 1975 N.C. App. LEXIS 1989, cert. denied, 288 N.C. 238, 217 S.E.2d 678, 1975 N.C. LEXIS 901 (1975).

§ 45-21.33A. [Repealed]

Repealed by Session Laws 2019-53, s. 2, effective October 1, 2019, and applicable to petitions filed on or after that date.

History. 2015-178, s. 2(b); repealed by 2019-53, s. 2, effective October 1, 2019, and applicable to petitions filed on or after that date.

Editor’s Note.

Former G.S. 45-21.33A pertained to the effect of foreclosure on a preexisting tenancy.

Session Laws 2019-53, s. 3, made the repeal of this section by Session Laws 2019-53, s. 2, effective October 1, 2019, and applicable to petitions filed on or after that date.

Article 2B. Injunctions; Deficiency Judgments.

§ 45-21.34. Enjoining mortgage sales on equitable grounds.

Any 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: Provided, that the court or judge enjoining such sale, whether by a temporary restraining order or injunction to the hearing, shall, as a condition precedent, require of the plaintiff or applicant such bond or deposit as may be necessary to indemnify and save harmless the mortgagee, trustee, cestui que trust, or other person enjoined and affected thereby against costs, depreciation, interest and other damages, if any, which may result from the granting of such order or injunction: Provided further, that in other respects the procedure shall be as is now prescribed by law in cases of injunction and receivership, with the right of appeal to the appellate division from any such order or injunction.

History. 1933, c. 275, s. 1; 1949, c. 720, s. 3; 1969, c. 44, s. 50; 1993, c. 305, s. 22.

Legal Periodicals.

For review of former G.S. 45-32, which was transferred to this section by Session Laws 1949, c. 720, s. 3, see 11 N.C.L. Rev. 240 (1933).

For survey of 1978 property law, see 57 N.C.L. Rev. 1103 (1979).

For survey of 1980 property law, see 59 N.C.L. Rev. 1209 (1981).

For comment, “Out of Luck: The Effect of the North Carolina Supreme Court’s Decision in In re Lucks and its Impact on the Law of Foreclosures,” see 41 Campbell L. Rev. 253 (2019).

CASE NOTES

Editor’s Note. —

Most of the cases below were decided prior to the 1993 amendments to Articles 2A and 2B, which clarified the procedure for foreclosure under power of sale and established a new upset bid procedure.

Constitutionality. —

This section does not violate any provision of the Constitution of the United States or of this State by which limitations are imposed upon the legislative power of the General Assembly. It does not impair the obligation of the contract entered into by and between the parties to a mortgage or deed of trust; it does not deprive either party of property without due process of law; nor does it confer upon mortgagors or grantors in deeds of trust any exclusive privilege. Woltz v. Asheville Safe Deposit Co., 206 N.C. 239, 173 S.E. 587, 1934 N.C. LEXIS 151 (1934).

This section is constitutional and valid. Hopkins v. Swain, 206 N.C. 439, 174 S.E. 409, 1934 N.C. LEXIS 203 (1934).

Construction With Other Statutes. —

G.S. 1-301.1(a) specifically states that if it conflicts with a specific provision of the General Statutes, that specific provision of the General Statutes controls. Accordingly, if the enactment of G.S. 1-301.1(c) created any conflict between it and the jurisdictional provisions in the foreclosure statutes, G.S. 45-21.16 and G.S. 45-21.34, the latter control in foreclosure actions. Mosler v. Druid Hills Land Co., 199 N.C. App. 293, 681 S.E.2d 456, 2009 N.C. App. LEXIS 1370 (2009).

This section and G.S. 45-21.35 must be considered in pari materia with G.S. 1A-1, Rules 2, 3, and 65. Swindell v. Overton, 62 N.C. App. 160, 302 S.E.2d 841, 1983 N.C. App. LEXIS 2833 (1983), aff'd in part and rev'd in part, 310 N.C. 707, 314 S.E.2d 512, 1984 N.C. LEXIS 1696 (1984).

Applicability. —

This section is applicable to a sale made after its enactment under a power of sale contained in a mortgage or deed of trust executed prior to its enactment. Woltz v. Asheville Safe Deposit Co., 206 N.C. 239, 173 S.E. 587, 1934 N.C. LEXIS 151 (1934).

This section is remedial only, and is valid for that purpose. Woltz v. Asheville Safe Deposit Co., 206 N.C. 239, 173 S.E. 587, 1934 N.C. LEXIS 151 (1934).

Common-law equitable principles to set aside a foreclosure sale are not affected by this section and G.S. 45-21.35, which limit injunctive relief in foreclosure proceedings. Swindell v. Overton, 310 N.C. 707, 314 S.E.2d 512, 1984 N.C. LEXIS 1696 (1984).

Effect of Automatic Bankruptcy Stay on Redemption Period. —

Although the stay created by the filing of a bankruptcy petition is not the same as an injunction granted pursuant to this section, the filing of an upset bid in North Carolina is prohibited by the automatic stay of § 362 of the Bankruptcy Code. Since the running of the period during which a debtor may redeem property in North Carolina is tied to the running of the upset bid period, the automatic stay prevents the running of the redemption period as well. In other words, even though the automatic bankruptcy stay does not directly suspend the running of the state statutory redemption period, it indirectly has that effect by preventing the expiration of the ten-day upset bid period. In re DiCello, 80 B.R. 769, 1987 Bankr. LEXIS 1983 (Bankr. E.D.N.C. 1987).

Right of Bankrupt to Cure Default Held Terminated. —

Although under this section a debtor may still seek to permanently enjoin a foreclosure after the sale has been held, and can raise defenses such as that the right to foreclose was waived or that there was no default under the deed of trust, the foreclosure sale may nevertheless become final without any further action by the lender or the trustee on the deed of trust. Thus, where Chapter 13 debtor filed her petition after foreclosure sale had been held, there had been sufficiently serious alterations of the security holder’s rights so that her right to cure the default under 11 U.S.C. § 1322(b)(5) was terminated. In re DiCello, 80 B.R. 769, 1987 Bankr. LEXIS 1983 (Bankr. E.D.N.C. 1987).

Bankruptcy court had the power to hear Chapter 13 debtors’ claim that a deed they signed should be reformed because it encumbered a larger tract of land than the debtors agreed to encumber. —

when they borrowed money from a home loan company. A clerk that reviewed a bank’s foreclosure request under G.S. 45-21.16 did not make findings of fact concerning the accuracy of the property’s description, so the debtors’ claim for reformation was not barred by the Rooker-Feldman doctrine, the debtors’ request was timely under G.S. 45-21.27, and G.S. 45-21.34 allowed courts to enjoin a sale upon the ground that the amount bid or price offered was inadequate and inequitable and would result in irreparable damage to the owner. Hinson v. Countrywide Home Loans, Inc., 481 B.R. 364, 2012 Bankr. LEXIS 1678 (Bankr. E.D.N.C. 2012).

Proper Method for Invoking Equity Jurisdiction. —

The proper method for invoking equitable jurisdiction to enjoin a foreclosure sale is by bringing an action in the superior court pursuant to this section. In re Watts, 38 N.C. App. 90, 247 S.E.2d 427, 1978 N.C. App. LEXIS 2089 (1978).

The hearing provided for in G.S. 45-21.16 was not intended to settle all matters in controversy between the parties, and the appropriate means for invoking equity jurisdiction is an action pursuant to this section. Golf Vistas, Inc. v. Mortgage Investors, 39 N.C. App. 230, 249 S.E.2d 815, 1978 N.C. App. LEXIS 2364 (1978).

Because 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. If respondents feel that they have equitable defenses to the foreclosure, they should be asserted in an action to enjoin the foreclosure sale under this section. In re Helms, 55 N.C. App. 68, 284 S.E.2d 553, 1981 N.C. App. LEXIS 2966 (1981).

Mortgagors should not have been allowed to raise their equitable estoppel defense in a hearing brought pursuant to G.S. 45-21.16 as the trial court’s consideration of the defense in that hearing was in excess of its authority. The proper method for asserting the defense was by an action for injunction under this statute. In re Young, 227 N.C. App. 502, 744 S.E.2d 476, 2013 N.C. App. LEXIS 603 (2013).

When mortgagors sued mortgagees for not accepting the mortgagors’ late payments and foreclosing, the mortgagors’ claims for breach of contract, negligent misrepresentation, tortious interference with contracts and business expectancy, and quantum meruit were collaterally estopped because (1) the claims were contingent upon the mortgagors not having defaulted on the mortgages, and (2) prior foreclosure proceedings found the mortgagors’ default, and those findings were not appealed, fixing the parties’ rights, before which the claims could have been raised. Funderburk v. JPMorgan Chase Bank, N.A., 241 N.C. App. 415, 775 S.E.2d 1, 2015 N.C. App. LEXIS 508 (2015).

Defendants sought foreclosure through the power of sale, the statutory prerequisites were found and upheld on appeal, and foreclosure was ordered to proceed; although plaintiffs’ declaratory judgment claims were an impermissible collateral attack, plaintiffs’ complaint was sufficient to invoke the trial court’s equitable jurisdiction to argue the equitable grounds upon which the foreclosure sale should have been enjoined. Howse v. Bank of Am., N.A., 255 N.C. App. 22, 804 S.E.2d 552, 2017 N.C. App. LEXIS 672 (2017).

Mortgagor’s claim of “fraud upon the court” failed because, inter alia, the mortgagor did not timely seek equitable relief after rights of the parties were fixed. Wilson v. SunTrust Bank, 257 N.C. App. 237, 809 S.E.2d 286, 2017 N.C. App. LEXIS 1053 (2017), cert. denied, 139 S. Ct. 2674, 204 L. Ed. 2d 1069, 2019 U.S. LEXIS 3810 (2019).

How Equitable Defenses Raised. —

Equitable defenses, such as the acceptance of late payments, may not be raised in a foreclosure hearing pursuant to G.S. 45-21.16, but must instead be asserted in an action to enjoin the foreclosure sale under this section. In re Fortescue, 75 N.C. App. 127, 330 S.E.2d 219, 1985 N.C. App. LEXIS 3604 (1985).

The trial court erred in considering an equitable defense to foreclosure in a hearing held pursuant to G.S. 45-21.16, because the debtor has to pursue such a defense through an action to enjoin the foreclosure pursuant to this section. In re Trust of Azalea Garden Bd. & Care, Inc., 140 N.C. App. 45, 535 S.E.2d 388, 2000 N.C. App. LEXIS 1094 (2000).

Trial court did not err by ordering a foreclosure sale under G.S. 45-21.16 based on a finding that respondent was the holder of the note sought to be foreclosed and the note evidenced a valid debt petitioners owed; they failed to prove that two individuals who advised them as to their rights and obligations under the mortgage at closing engaged in the unauthorized practice of law so as to render the debt invalid. If petitioners had equitable defenses to the foreclosure, they could be asserted in an action to enjoin the foreclosure sale under G.S. 45-21.34. In re Gray, 225 N.C. App. 46, 741 S.E.2d 888, 2013 N.C. App. LEXIS 57 (2013).

Application To Enjoin Foreclosure Sale Must Be Filed Before Upset Bid Period Expires. —

Application to enjoin a foreclosure sale which remains undecided at the time that the parties’ rights have become fixed is nothing more than a request that that which has already been consummated be restrained; thus, absent sufficient action by a party seeking to avoid a foreclosure sale to prevent the sale from becoming final, any attempt to enjoin such a sale which has not been heard and decided by the date for the submission of upset bids becomes moot and subject to dismissal at that time. Goad v. Chase Home Fin., LLC, 208 N.C. App. 259, 704 S.E.2d 1, 2010 N.C. App. LEXIS 2418 (2010).

“Confirmation” Means Confirmation Required for Consummation. —

“Confirmation,” as used in this section, refers only to a foreclosure sale where confirmation is required for consummation in accordance with law. Certain-Teed Prods. Corp. v. Sanders, 264 N.C. 234, 141 S.E.2d 329, 1965 N.C. LEXIS 1161 (1965).

Confirmation of Sale Under Power Is Not Required If No Upset Bid Is Filed. —

Where a foreclosure sale is conducted in accordance with the provisions of Article 2A, G.S. 45-21.1 et seq., of this Chapter, 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. Certain-Teed Prods. Corp. v. Sanders, 264 N.C. 234, 141 S.E.2d 329, 1965 N.C. LEXIS 1161 (1965).

Injunctive Relief Is Available Prior to Confirmation. —

The injunctive relief provided by this section is available prior to the confirmation of the foreclosure sale. In re Watts, 38 N.C. App. 90, 247 S.E.2d 427, 1978 N.C. App. LEXIS 2089 (1978).

This and following sections have no application after confirmation of a foreclosure sale under power contained in the instrument. Whitford v. North Carolina Joint Stock Land Bank, 207 N.C. 229, 176 S.E. 740, 1934 N.C. LEXIS 426 (1934).

A hearing prior to foreclosure and sale is essential. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975).

The extraordinary injunctive relief available under this section does not suffice as an opportunity for hearing because (1) the burden of proof is clearly on the mortgagor; (2) he most likely must show irreparable damage, as by inadequacy of the bid; and (3) a condition precedent to relief is a bond providing for full indemnification. Turner v. Blackburn, 389 F. Supp. 1250, 1975 U.S. Dist. LEXIS 13878 (W.D.N.C. 1975).

The trustor in a deed of trust is entitled to restrain foreclosure if the note secured by the instrument is not in default. Princeton Realty Corp. v. Kalman, 272 N.C. 201, 159 S.E.2d 193, 1967 N.C. LEXIS 999 (1967).

An executor could not restrain foreclosure of a deed of trust executed by his testator prior to his death upon the executor’s petition for sale of the lands to make assets, when by the terms of the deed of trust the trustee was authorized to advertise and sell the lands, the right of the trustee to sell the lands being contractual, and the sale by the trustee being subject to the provisions of this and the following sections. Miller v. Shore, 206 N.C. 732, 175 S.E. 133, 1934 N.C. LEXIS 295 (1934).

As to continuance of restraining order to final hearing, see Princeton Realty Corp. v. Kalman, 272 N.C. 201, 159 S.E.2d 193, 1967 N.C. LEXIS 999 (1967).

Defense that the mortgagor was incompetent to execute the deed of trust was not available in a pre-foreclosure hearing pursuant to G.S. 45-21.16 before either the clerk or the superior court on appeal; however, such defense could be raised by bringing an action to enjoin the foreclosure. In re Godwin, 121 N.C. App. 703, 468 S.E.2d 811, 1996 N.C. App. LEXIS 150 (1996).

Injunction Properly Continued. —

Where a mortgagor or trustor instituted suit to enjoin the consummation of a foreclosure sale had under the terms of the instrument, and filed bond to indemnify the mortgagee or cestui que trust against loss, the temporary injunction granted in the cause was properly continued to the hearing upon the court’s finding that serious controversy existed between the parties and that plaintiff was entitled to a jury trial upon the issues of fact raised by the pleadings. Little v. Wachovia Bank & Trust Co., 208 N.C. 726, 182 S.E. 491, 1935 N.C. LEXIS 111 (1935).

Dissolution of Restraining Order Upheld. —

Where the parties expressly waived a jury trial, and the trial court found that the amount bid at the sale represented the fair market value of the lands, and that there was no assurance that a larger sum would be offered if the lands were resold, the findings supported the court’s judgment dissolving the temporary order restraining consummation of the sale. Barringer v. Wilmington Sav. & Trust Co., 207 N.C. 505, 177 S.E. 795, 1935 N.C. LEXIS 184 (1935).

Discretion of Court to Require Bond. —

The condition that plaintiff file bond to indemnify defendant against any loss by reason of delay is within the court’s discretionary equitable power, the provisions of this section being constitutional and valid. Whitaker v. Chase, 206 N.C. 335, 174 S.E. 225, 1934 N.C. LEXIS 178 (1934); Little v. Wachovia Bank & Trust Co., 208 N.C. 726, 182 S.E. 491, 1935 N.C. LEXIS 111 (1935).

Where the mortgagee or cestui que trust is not satisfied with the bond given by the mortgagor or trustor, as provided by this section, his remedy is by motion that plaintiffs be required to increase the penal sum of the bond and give additional sureties, and he may not attack the validity of the order restraining the consummation of the sale upon the ground that the bond is inadequate. Woltz v. Asheville Safe Deposit Co., 206 N.C. 239, 173 S.E. 587, 1934 N.C. LEXIS 151 (1934).

Dismissal of Request to Enjoin Foreclosure Not Error. —

Trial court did not err by dismissing as untimely and moot plaintiff’s request to enjoin a foreclosure under G.S. 45-21.34 because given that no upset bid was filed by the expiration of the ten-day period prescribed in G.S. 45-21.27 and that plaintiff did not obtain injunctive relief by the time that the upset bid period expired, the rights of the parties to the sale became fixed, rendering plaintiff’s application moot; given that the foreclosure sale became final before plaintiff obtained any sort of injunctive relief, plaintiff was left without the ability to prevent the consummation of the foreclosure on the property, since a court could not restrain the doing of an act which already had been consummated. Goad v. Chase Home Fin., LLC, 208 N.C. App. 259, 704 S.E.2d 1, 2010 N.C. App. LEXIS 2418 (2010).

Determination of Adequacy of Bid. —

Where, in a suit to enjoin the consummation of a foreclosure sale, the issue of whether the bid at the sale was grossly inadequate is raised by the pleadings, the parties are not entitled as a matter of law to have the issue determined by a jury, but the court may hear evidence and determine the issue, and should dismiss the action if it finds that the amount of the bid is the fair value of the land or enjoin the consummation of the sale if it finds that the bid is grossly inadequate. Smith v. Bryant, 209 N.C. 213, 183 S.E. 276, 1936 N.C. LEXIS 427 (1936).

Where plaintiffs, trustors in a deed of trust, sought to enjoin the consummation of a foreclosure sale had under the power contained in the instrument, and alleged that the price bid at the sale was grossly inadequate, which allegation was denied in the answer, it was error for the court to grant defendants’ motion for nonsuit, plaintiffs being entitled to a hearing and a determination of the issue under the provisions of this section. Smith v. Bryant, 209 N.C. 213, 183 S.E. 276, 1936 N.C. LEXIS 427 (1936).

Mere Inadequacy of Price Is Insufficient to Upset Sale. —

Mere inadequacy of the purchase price realized at a foreclosure sale, standing alone, is not sufficient to upset a sale, duly and regularly made in strict conformity with the power of sale. Certain-Teed Prods. Corp. v. Sanders, 264 N.C. 234, 141 S.E.2d 329, 1965 N.C. LEXIS 1161 (1965).

Mere inadequacy of the bid at foreclosure is not sufficient, standing alone, to set the sale aside. Britt v. Britt, 26 N.C. App. 132, 215 S.E.2d 172, 1975 N.C. App. LEXIS 1989, cert. denied, 288 N.C. 238, 217 S.E.2d 678, 1975 N.C. LEXIS 901 (1975).

Court Will Interpose Where Gross Inadequacy Is Coupled with Other Inequity. —

Gross inadequacy of consideration, when coupled with any other inequitable element, even though neither, standing alone, may be sufficient for the purpose, will induce a court of equity to interpose and do justice between the parties. Certain-Teed Prods. Corp. v. Sanders, 264 N.C. 234, 141 S.E.2d 329, 1965 N.C. LEXIS 1161 (1965).

Gross Inadequacy May Be Considered in Weighing Materiality of Irregularity. —

Where there is an irregularity in the sale, gross inadequacy of purchase price may be considered on the question of the materiality of the irregularity. Certain-Teed Prods. Corp. v. Sanders, 264 N.C. 234, 141 S.E.2d 329, 1965 N.C. LEXIS 1161 (1965).

Motion for Resale After Action for Specific Performance. —

Where the last and highest bidder at the sale instituted an action for specific performance, and the personal representative of the deceased mortgagee gave notice in apt time that he would make application to the resident judge of the district out of term and out of the county for an order restraining the consummation of the sale made by him under the mortgage on the grounds of inadequacy of the bid, and for an order for a resale, the court had authority to hear the motion. Hopkins v. Swain, 206 N.C. 439, 174 S.E. 409, 1934 N.C. LEXIS 203 (1934).

Failure to Seek Relief After Actual Notice. —

Because defendant received actual notice of the foreclosure hearing and could have taken advantage of the relief provided in this section, assuming he had grounds, or he could have objected to the method of service, but instead chose to sit on his rights and allow the foreclosure to proceed, he may not argue now that service on him was inadequate. Fleet Nat'l Bank v. Raleigh Oaks Joint Venture, 117 N.C. App. 387, 451 S.E.2d 325, 1994 N.C. App. LEXIS 1256 (1994).

Application To Enjoin Foreclosure Sale Must Be Filed Before Upset Bid Period Expires. —

Application seeking to enjoin a foreclosure sale must be heard and decided, as well as filed, prior to the date upon which the rights of the parties to the sale became fixed in order for the superior court to retain the authority to enjoin a foreclosure sale; given that temporary restraining orders may be issued on a ex parte basis in appropriate instances, and given that “apply” can be defined as to make a formal request or motion, an interpretation of G.S. 45-21.34 that requires the applicant to seek and obtain the requested injunction before the point at which the upset bid period expires is completely consistent with the literal language and the underlying purpose sought to be achieved through the relevant statutory provision. Goad v. Chase Home Fin., LLC, 208 N.C. App. 259, 704 S.E.2d 1, 2010 N.C. App. LEXIS 2418 (2010).

Claim Dismissed By Virtue Of Consent Order. —

Trial court properly granted defendants’ motion for summary judgment as to plaintiffs equitable challenges to a foreclosure under G.S. 45-21.34 because plaintiffs’ claim was effectively dismissed without prejudice by virtue of a consent order; plaintiffs’ complaint sought an injunction pursuant to G.S. 45-21.34, the trial court issued a temporary restraining order in accordance with that statute, and the consent order subsequently disposed of that claim. Harty v. Underhill, 211 N.C. App. 546, 710 S.E.2d 327, 2011 N.C. App. LEXIS 840 (2011).

Trial Court Properly Refused To Consider Rescission Defense. —

Trial court did not err in refusing to consider mortgagors’ defense that the debt a substitute trustee sought to foreclose was not a valid debt because the trial court properly concluded that the mortgagors’ argument that they had rescinded the loan transaction, invaliding the debt the trustee sought to foreclose, was an equitable defense and not properly before the trial court. In re Foreclosure by David A. Simpson, P.C., 211 N.C. App. 483, 711 S.E.2d 165, 2011 N.C. App. LEXIS 836 (2011).

Arbitration Issue. —

Trial court properly refused to rule on the owners’ motion to compel arbitration in a foreclosure action because, as the substitute trustee initiated the foreclosure under a power of sale, both the clerk’s and the trial court’s scope of review was limited to issues related to the six findings specified in G.S. 45-21.16; the owners’ argument concerning their right to arbitration was not pertinent to the six required findings. The owners should have raised their right to arbitrate in a motion to enjoin pursuant to G.S. 45-21.34, which granted the trial court statutory authority and jurisdiction to issue a stay and enforce the arbitration agreement contained in the deed of trust. In re Foreclosure of a Deed of a N.C. Deed of Trust, 219 N.C. App. 370, 725 S.E.2d 22, 2012 N.C. App. LEXIS 336 (2012).

Mootness of Appeal. —

Property owner’s and the secured creditor’s rights in the subject real property were fixed and the owner’s appeal was moot because the subject real property was sold and the trustee’s deed was recorded. There was no indication in the record that the owner paid a bond to stay the foreclosure sale, under G.S. 1-292; nor was there an upset bid during the 10 day period pursuant to G.S. 45-21.29A, or any indication in the record that the owner obtained a temporary restraining order or preliminary injunction prior to the end of the ten-day upset bid period. In re Foreclosure of the Deed of Trust of Hackley, 212 N.C. App. 596, 713 S.E.2d 119, 2011 N.C. App. LEXIS 1229 (2011).

Res Judicata Barred Federal Action. —

Court found that the borrowers failed to appeal the order of foreclosure to the superior court within the requisite time period. The borrowers also failed to file a separate action in superior court to enjoin the foreclosure sales on equitable grounds; as such, res judicata prevented relitigation of the order permitting foreclosure of the property. Mixon v. Wells Fargo Home Mortg., 2012 U.S. Dist. LEXIS 52141 (W.D.N.C. Apr. 13, 2012), dismissed, 2012 U.S. Dist. LEXIS 56362 (W.D.N.C. Apr. 23, 2012).

Mortgagors’ argument attacking the consummation of foreclosure by power sale proceeding was moot because the mortgagors did not apply for a temporary stay or injunction, pursuant to G.S. 45-21.34, on the ground that the superior court lacked subject matter jurisdiction to authorize the sale; thus; the foreclosure sale was consummated, and the parties’ rights in the real property were fixed, in accordance with G.S. 45-21.29A. In re Foreclosure of the Nine Deeds of Trust of Marshall & Madeline Cornblum, 220 N.C. App. 100, 727 S.E.2d 338, 2012 N.C. App. LEXIS 524, cert. denied, 366 N.C. 404, 734 S.E.2d 865, 2012 N.C. LEXIS 1190 (2012).

Collateral Proceeding. —

Equitable defenses to foreclosure may only be considered through a proceeding pursuant to the statute, and such an action is not a collateral proceeding attacking a valid judgment. Howse v. Bank of Am., N.A., 255 N.C. App. 22, 804 S.E.2d 552, 2017 N.C. App. LEXIS 672 (2017).

§ 45-21.35. Ordering resales; receivers for property; tax payments.

The court or judge granting such order or injunction, or before whom the same is returnable, shall have the right before, but not after, the rights of the parties to the sale or resale becoming fixed pursuant to G.S. 45-21.29A to order a resale by the mortgagee, trustee, commissioner, or other person authorized to make the same in such manner and upon such terms as may be just and equitable: Provided, the rights of all parties in interest, or who may be affected thereby, shall be preserved and protected by bond or indemnity in such form and amount as the court may require, and the court or judge may also appoint a receiver of the property or the rents and proceeds thereof, pending any sale or resale, and may make such order for the payment of taxes or other prior lien as may be necessary, subject to the right of appeal to the appellate division in all cases.

History. 1933, c. 275, s. 2; 1949, c. 720, s. 3; 1969, c. 44, s. 51; 1993, c. 305, s. 23.

CASE NOTES

Editor’s Note. —

The cases below were decided prior to the 1993 amendments to Articles 2A and 2B, which clarified the procedure for foreclosure under power of sale and established a new upset bid procedure.

G.S. 45-21.34 and this section must be considered in pari materia with G.S. 1A-1, Rules 2, 3 and 65. Swindell v. Overton, 62 N.C. App. 160, 302 S.E.2d 841, 1983 N.C. App. LEXIS 2833 (1983), aff'd in part and rev'd in part, 310 N.C. 707, 314 S.E.2d 512, 1984 N.C. LEXIS 1696 (1984).

Common-law equitable principles to set aside a foreclosure sale are not affected by this section and G.S. 45-21.34, which limit injunctive relief in foreclosure proceedings. Swindell v. Overton, 310 N.C. 707, 314 S.E.2d 512, 1984 N.C. LEXIS 1696 (1984).

§ 45-21.36. Right of mortgagor to prove in deficiency suits reasonable value of property by way of defense.

When any sale of real estate has been made by a mortgagee, trustee, or other person authorized to make the same, at which the mortgagee, payee or other holder of the obligation thereby secured becomes the purchaser and takes title either directly or indirectly, and thereafter such mortgagee, payee or other holder of the secured obligation, as aforesaid, shall sue for and undertake to recover a deficiency judgment against the mortgagor, trustor or other maker of any such obligation whose property has been so purchased, it shall be competent and lawful for the defendant against whom such deficiency judgment is sought to allege and show as matter of defense and offset, but not by way of counterclaim, that the property sold was fairly worth the amount of the debt secured by it at the time and place of sale or that the amount bid was substantially less than its true value, and, upon such showing, to defeat or offset any deficiency judgment against him, either in whole or in part: Provided, this section shall not affect nor apply to the rights of other purchasers or of innocent third parties, nor shall it be held to affect or defeat the negotiability of any note, bond or other obligation secured by such mortgage, deed of trust or other instrument: Provided, further, this section shall not apply to foreclosure sales made pursuant to an order or decree of court nor to any judgment sought or rendered in any foreclosure suit nor to any sale made and confirmed prior to April 18, 1933.

History. 1933, c. 275, s. 3; 1949, c. 720, s. 3; 1967, c. 562, s. 2.

Legal Periodicals.

For note, “Relief During the Depression,” see 12 N.C.L. Rev. 366 (1934).

For note on anti-deficiency judgment statute, see 58 N.C.L. Rev. 855 (1980).

For survey of 1980 civil procedure, see 59 N.C.L. Rev. 1053 (1981).

For survey of 1981 property law, see 60 N.C.L. Rev. 1420 (1982).

For comment, “‘A Topsy-Turvy World’: High Point Bank & Trust Co. v. Highmark Properties, LLC and the Modern Application of the Fair Market Value Offset Defense,” see 95 N.C.L. Rev. 857 (2017).

CASE NOTES

Constitutionality. —

This section is constitutional and valid. Richmond Mtg. & Loan Corp. v. Wachovia Bank & Trust Co., 210 N.C. 29, 185 S.E. 482, 1936 N.C. LEXIS 5 (1936), aff'd, 300 U.S. 124, 57 S. Ct. 338, 81 L. Ed. 552, 1937 U.S. LEXIS 66 (1937).

This section has merely restricted the exercise of the contractual remedy to provide a procedure which, to some extent, renders the remedy by a trustee’s sale consistent with that in equity. This does not impair the obligation of the contract. Richmond Mtg. & Loan Corp. v. Wachovia Bank & Trust Co., 300 U.S. 124, 57 S. Ct. 338, 81 L. Ed. 552, 1937 U.S. LEXIS 66 (1937).

Legislative Intent. —

The General Assembly’s intention to limit the protection of the statute to those who hold a property interest in the mortgaged property is clear. Raleigh Fed. Sav. Bank v. Godwin, 99 N.C. App. 761, 394 S.E.2d 294, 1990 N.C. App. LEXIS 807 (1990).

The protection of this section is only available to those parties who hold a property interest in the mortgaged property and is not applicable to other parties liable on the underlying debt. Resolution Trust Corp. v. Southwest Dev. Co., 807 F. Supp. 375, 1992 U.S. Dist. LEXIS 17520 (E.D.N.C. 1992), modified, 837 F. Supp. 122, 1992 U.S. Dist. LEXIS 21842 (E.D.N.C. 1992), aff'd in part and rev'd in part, 14 F.3d 596, 1993 U.S. App. LEXIS 37127 (4th Cir. 1993).

The General Assembly has twice amended Chapter 45 to clarify that foreclosures of leasehold interests are governed by the procedural guidelines in Article 2A and on neither occasion did the General Assembly make changes indicating an intention to include leasehold interests within the coverage of Article 2B. The General Assembly’s silence on this subject is convincing proof that defendants, as lessees, lacked standing to assert the defense in this section. Fleet Nat'l Bank v. Raleigh Oaks Joint Venture, 117 N.C. App. 387, 451 S.E.2d 325, 1994 N.C. App. LEXIS 1256 (1994).

Public Policy. —

While the statute is an equitable method of debt calculation as opposed to a traditional defense that is subject to waiver, because anti-deficiency legislation is so narrowly tailored to address specific instances of the public’s vulnerability to lender overreach, waiver of this statutory protection as a prerequisite to receipt of a mortgage or as a condition of a guaranty agreement would violate public policy. High Point Bank & Trust Co. v. Highmark Props., LLC, 368 N.C. 301, 776 S.E.2d 838, 2015 N.C. LEXIS 936 (2015).

This section is not “emergency legislation,” nor is its purpose to provide a “moratorium” for debtors during a temporary period of depression. Richmond Mtg. & Loan Corp. v. Wachovia Bank & Trust Co., 210 N.C. 29, 185 S.E. 482, 1936 N.C. LEXIS 5 (1936), aff'd, 300 U.S. 124, 57 S. Ct. 338, 81 L. Ed. 552, 1937 U.S. LEXIS 66 (1937).

This section is designed to protect mortgagors from mortgagees who purchase at sales they have conducted or initiated pursuant to the power of sale in their mortgage contracts with the mortgagors. Northwestern Bank v. Weston, 73 N.C. App. 162, 325 S.E.2d 694, 1985 N.C. App. LEXIS 3190, cert. denied, 314 N.C. 117, 332 S.E.2d 483, 1985 N.C. LEXIS 1903 (1985).

This section recognizes the obligation of a debtor who has secured the payment of his debt by a mortgage or deed of trust to pay his debt in accordance with his contract, and does not impair such obligation. Richmond Mtg. & Loan Corp. v. Wachovia Bank & Trust Co., 210 N.C. 29, 185 S.E. 482, 1936 N.C. LEXIS 5 (1936), aff'd, 300 U.S. 124, 57 S. Ct. 338, 81 L. Ed. 552, 1937 U.S. LEXIS 66 (1937).

Section recognizes the validity of powers of sale contained in mortgages or deeds of trust, but regulates the exercise of such powers by the application of well-settled principles of equity. It provides for judicial supervision of sales made and conducted by creditors whose debts are secured by mortgages or deeds of trust, and thereby provides protection for debtors whose property has been sold and purchased by their creditors for a sum which was not a fair value of the property at the time of the sale. Richmond Mtg. & Loan Corp. v. Wachovia Bank & Trust Co., 210 N.C. 29, 185 S.E. 482, 1936 N.C. LEXIS 5 (1936), aff'd, 300 U.S. 124, 57 S. Ct. 338, 81 L. Ed. 552, 1937 U.S. LEXIS 66 (1937).

This section alters and modifies one of the existing remedies for realization of the value of the security, but cannot fairly be said to do more than restrict the mortgagee to that for which he contracted, namely, payment in full. It recognizes the obligation of his contract and his right to its full enforcement, but limits that right so as to prevent his obtaining more than his due. Richmond Mtg. & Loan Corp. v. Wachovia Bank & Trust Co., 300 U.S. 124, 57 S. Ct. 338, 81 L. Ed. 552, 1937 U.S. LEXIS 66 (1937).

This section has no application to foreclosure sales made pursuant to an order or decree of court. In re Otter Pond In v. Group, Ltd., 79 N.C. App. 664, 339 S.E.2d 854, 1986 N.C. App. LEXIS 2105 (1986).

This section applies only to foreclosure under powers of sale and not to actions to foreclose, and only to instances where the creditor bids in the property, directly or indirectly, and not to instances where the property is bid in by independent third persons. Richmond Mtg. & Loan Corp. v. Wachovia Bank & Trust Co., 210 N.C. 29, 185 S.E. 482, 1936 N.C. LEXIS 5 (1936), aff'd, 300 U.S. 124, 57 S. Ct. 338, 81 L. Ed. 552, 1937 U.S. LEXIS 66 (1937).

Section Applies to Mortgagee Who Holds Obligation Securing Property for Sale. —

This section does not say that it applies to any mortgagee or to a mortgagee who holds an obligation secured by the property for sale. Rather, it applies to the mortgagee, payee or other holder, who holds the obligation thereby secured, i.e., the obligation secured by the property for sale, and under which the sale is held. Northwestern Bank v. Weston, 73 N.C. App. 162, 325 S.E.2d 694, 1985 N.C. App. LEXIS 3190, cert. denied, 314 N.C. 117, 332 S.E.2d 483, 1985 N.C. LEXIS 1903 (1985).

Section Inapplicable. —

Where the maker of a note assigned a judgment in its favor to the payee as security and the judgment was sold under order of court and purchased by the payee, who thereafter realized upon the judgment an amount in excess of the sale price, it was held that the note was properly credited with the sale price and not the amount realized by the payee upon the judgment, and that since the bidding at the sale was open to all and the sale was under order of court, the endorser on the note could not assert this section as a defense to his liability, the statute, by the express language of its proviso, not being applicable. Briggs v. Lassiter, 220 N.C. 761, 18 S.E.2d 419, 1942 N.C. LEXIS 546 (1942).

Where an action is not one to recover from the estate of a deceased a balance due upon an indebtedness secured by a deed of trust, but is an action to establish the rights of the parties with respect to the proceeds of a life insurance policy assigned by the deceased as security for the debt, the statutory principle of law regulating the recovery of deficiency judgments embodied in this section has no application. Thompson v. Pilot Life Ins. Co., 234 N.C. 434, 67 S.E.2d 444, 1951 N.C. LEXIS 488 (1951).

Section Inapplicable to a Lease. —

By its own terms this section applies only to sales of real estate and because a lease is a species of personal property, it is outside the scope of this section. Fleet Nat'l Bank v. Raleigh Oaks Joint Venture, 117 N.C. App. 387, 451 S.E.2d 325, 1994 N.C. App. LEXIS 1256 (1994).

Burden of Proof. —

This section does not relieve the mortgagor of its debt. It simply limits the plaintiff to what it bargained for — repayment in full plus interest. Defendants still must produce evidence that the properties sold were fairly worth the amount of the debt at the time and place of sale, or at least that they were worth substantially more than was bid. NCNB Nat'l Bank v. O'Neill, 102 N.C. App. 313, 401 S.E.2d 858, 1991 N.C. App. LEXIS 316 (1991).

Defendants failed to offer evidence to support a claim for set off under G.S. 45-21.36 because defendant’s witness was never qualified as an expert witness and his testimony as merely an elaborate authentication of the public records reflecting the county’s assessments of the properties. SunTrust Mortg., Inc. v. Busby, 2010 U.S. Dist. LEXIS 107562 (W.D.N.C. Oct. 5, 2010), aff'd, 469 Fed. Appx. 205, 2012 U.S. App. LEXIS 5779 (4th Cir. 2012).

Court of appeals erred in reversing an order granting summary judgment in favor of a bank in its action to collect a deficiency because the borrowers failed to forecast substantial competent evidence sufficient to create a genuine issue of material fact as to the foreclosed property’s “true value”; merely reciting the statutory language or asserting an unsubstantiated opinion regarding the foreclosed property’s value is insufficient. United Cmty. Bank (Ga.) v. Wolfe, 369 N.C. 555, 799 S.E.2d 269, 2017 N.C. LEXIS 280 (2017).

Defense of Mortgagor. —

Upon foreclosure under a deed of trust, where the mortgaged property is purchased by the mortgagee, the provisions of this section allow a mortgagor to show, as a defense to an action by the mortgagee for a deficiency, that the purchase price was less than the land’s fair market value. Raleigh Fed. Sav. Bank v. Godwin, 99 N.C. App. 761, 394 S.E.2d 294, 1990 N.C. App. LEXIS 807 (1990).

This section is not available as a defense to nonmortgagor defendants in an action to recover the balance due on a promissory note. Only a party with an interest in the mortgaged property may assert this section as a bar to the action. First Citizens Bank & Trust Co. v. Martin, 44 N.C. App. 261, 261 S.E.2d 145, 1979 N.C. App. LEXIS 3266 (1979).

In an action to recover on a note for the purchase of land, where the defendant-buyer did not hold a property interest in the land, there was no merit to defendants’ contention that they were comakers under the note and as such were entitled to the protection against deficiency judgments provided by this section, since the protection of this section is limited to persons who hold a property interest in mortgaged property. American Foods, Inc. v. Goodson Farms, Inc., 50 N.C. App. 591, 275 S.E.2d 184, 1981 N.C. App. LEXIS 2171, aff'd, 304 N.C. 386, 283 S.E.2d 517, 1981 N.C. LEXIS 1350 (1981).

Defense Not Available to Guarantors. —

Even though one defendant owned 77% of the capital stock of the corporation, and pledged his own assets and extended his own personal credit in order to pay off creditors, defendant guarantors did not possess a property interest in the mortgaged property since title to that property was held solely in the name of the corporation; defendants, therefore, could not assert the defense contained in this section. Borg-Warner Acceptance Corp. v. Johnston, 97 N.C. App. 575, 389 S.E.2d 429, 1990 N.C. App. LEXIS 203 (1990), cert. denied, 333 N.C. 254, 424 S.E.2d 918, 1993 N.C. LEXIS 33 (1993).

The defense set out in this section is not available to guarantors — even when they are also property owners — if they are sued to enforce their duties as a guarantor. Poughkeepsie Sav. Bank v. Harris, 833 F. Supp. 551, 1993 U.S. Dist. LEXIS 14351 (W.D.N.C. 1993).

In a bank’s deficiency action against a guarantor, wherein the guarantor claimed a right of offset pursuant to G.S. 45-21.36, summary judgment in favor of the bank was appropriate because the offset defense under G.S. 45-21.36 was not available to non-mortgagor defendants; although the guarantor received an interest in the property, the guarantor did not assume any of the borrower’s obligations to the bank under the promissory note. Wells Fargo Bank, N.A. v. Arlington Hills of Mint Hill, LLC, 226 N.C. App. 174, 742 S.E.2d 201, 2013 N.C. App. LEXIS 287 (2013).

Applicability to Guarantors’ Liability. —

When a bank sought a deficiency judgment, following foreclosure, against a borrower and guarantors, a trial court did not improperly reduce the guarantors’ liability pursuant to G.S. 45-21.36 by allowing the guarantors to re-join the borrower after the bank dismissed the borrower, when a jury found the fair market value of the foreclosed property was more than the bank paid for the property at foreclosure, because the guarantors were only liable for the debt of the borrower, which could legitimately claim an offset pursuant to the jury’s fair market value determination. High Point Bank & Trust Co. v. Highmark Props., LLC, 231 N.C. App. 31, 750 S.E.2d 886, 2013 N.C. App. LEXIS 1240 (2013), aff'd in part, modified, 368 N.C. 301, 776 S.E.2d 838, 2015 N.C. LEXIS 936 (2015).

Trial court erred in granting a bank summary judgment in its action against a guarantor to collect the deficiency remaining on a loan debt because the guarantor was entitled to the statute’s defense/offset even though the borrower had been dismissed from the action; the guaranty agreement made no mention of a waiver of the guarantor’s potential defense/offset. Branch Banking & Trust Co. v. Smith, 239 N.C. App. 293, 769 S.E.2d 638, 2015 N.C. App. LEXIS 73 (2015).

Just as a guarantor may raise this defense, he similarly is entitled to its benefits should it be determined that the property’s fair market value exceeded the purchase price paid by the creditor at the trustee’s foreclosure sale; a guarantor is protected by the provision of the statute that provides for a judicial method of determining the indebtedness, and as the guarantors only guaranteed the repayment of the indebtedness, the amount of the indebtedness was calculated pursuant to the statute, and it was not the type of defense or offset that was subject to waiver. High Point Bank & Trust Co. v. Highmark Props., LLC, 368 N.C. 301, 776 S.E.2d 838, 2015 N.C. LEXIS 936 (2015).

Statute simply allows guarantors the right to a judicial method of debt calculation that accounts for the fair market value of the property at the time of a foreclosure sale; accordingly, notwithstanding the waiver language contained in the guaranty agreements, guarantors did not waive their right to the protection of the statute. High Point Bank & Trust Co. v. Highmark Props., LLC, 368 N.C. 301, 776 S.E.2d 838, 2015 N.C. LEXIS 936 (2015).

Defense to Claim for Deficiency Judgment Filed Against Debtor’s Bankruptcy Estate. —

Chapter 11 debtors who agreed to allow a bank that held mortgages on improved and unimproved real property the debtors owned to conduct a private foreclosure sale of the property were allowed under 11 U.S.C.S. § 502 and G.S. 45-21.36 to contest the amount of a deficiency claim the bank filed against the debtors’ bankruptcy estate after the property was sold, and the court sustained the debtors’ objection to the bank’s claim in the amount of $104,917 because the evidence showed that the winning bid of $205,200 which the bank placed at the foreclosure sale was substantially less than the true value of the debtors’ property. In reStutts, 2013 Bankr. LEXIS 5089 (Bankr. M.D.N.C. Dec. 3, 2013).

Waiver. —

Statute establishes an equitable method of calculating the indebtedness, and therefore it is not a defense in the usual sense that can be waived; a guaranty, as it operates here, is a promise to repay the indebtedness, and the statute protects a debtor by calculating the debt based upon the fair market value of the collateral instead of the amount bid by the creditor at the trustee’s sale. High Point Bank & Trust Co. v. Highmark Props., LLC, 368 N.C. 301, 776 S.E.2d 838, 2015 N.C. LEXIS 936 (2015).

When a mortgagee purchases at its own foreclosure sale, its ability to successfully maintain a deficiency action is governed by this section regardless of whether it brings the deficiency action to collect on its second mortgage. NCNB Nat'l Bank v. O'Neill, 102 N.C. App. 313, 401 S.E.2d 858, 1991 N.C. App. LEXIS 316 (1991).

Protection of Partners. —

Each partner, though certainly not enjoying the traditional rights of owners, holds a property interest sufficient to invoke the protection of this section. If it were otherwise, mortgagees could avoid the requirements of this section when foreclosing on property owned by a partnership simply by suing the partners for a deficiency. NCNB Nat'l Bank v. O'Neill, 102 N.C. App. 313, 401 S.E.2d 858, 1991 N.C. App. LEXIS 316 (1991).

This section does not forbid the holder of the note secured by a deed of trust to purchase the property at a foreclosure sale conducted pursuant to the power of sale contained in the deed of trust. Wachovia Realty Invs. v. Housing, Inc., 292 N.C. 93, 232 S.E.2d 667, 1977 N.C. LEXIS 1045 (1977).

This section does not entitle debtor to have credited upon the note whatever profit purchaser may realize upon subsequent sale of the property. There is no principle of law, apart from this section, which entitles the debtor to such credit simply by reason of such subsequent sale of the property at a price greater than the bid at the foreclosure sale. Wachovia Realty Invs. v. Housing, Inc., 292 N.C. 93, 232 S.E.2d 667, 1977 N.C. LEXIS 1045 (1977).

But a sale subsequent to the foreclosure sale would be a circumstance indicating the fair value of the property at the time of the foreclosure, the weight to be given it depending upon other circumstances, such as the lapse of time between the foreclosure and the subsequent sale and the known probability, at the time of the foreclosure sale, that such subsequent sale could be made. Wachovia Realty Invs. v. Housing, Inc., 292 N.C. 93, 232 S.E.2d 667, 1977 N.C. LEXIS 1045 (1977).

Amount Bid Is Not Conclusive as to Value. —

The amount bid by the creditor at the sale, and applied by him as a payment on the debt, is not conclusive as to the value of the property. Richmond Mtg. & Loan Corp. v. Wachovia Bank & Trust Co., 210 N.C. 29, 185 S.E. 482, 1936 N.C. LEXIS 5 (1936), aff'd, 300 U.S. 124, 57 S. Ct. 338, 81 L. Ed. 552, 1937 U.S. LEXIS 66 (1937).

“Substantially Less”. —

Although mortgagors argued a mortgagee violated G.S. 45-21.36 by bidding “substantially less” than the property was worth, the nine percent difference between the appraised value of the property and the mortgagee’s bid may have been “less” than true value but was not “substantially less” than true value; the mortgagee bid $100,000 for the property, the appraised value was $109,000, and the property ultimately sold for $110,000. Blue Ridge Sav. Bank, Inc. v. Mitchell, 218 N.C. App. 410, 721 S.E.2d 322, 2012 N.C. App. LEXIS 207, aff'd, 366 N.C. 331, 734 S.E.2d 572, 2012 N.C. LEXIS 997 (2012).

Bank’s proof of claim to recover a deficiency was not barred or reduced because, although the debtors’ expert appraiser disagreed, the bank’s expert appraisers testified that the bank’s bid at a foreclosure sale of the debtors’ property was not substantially less than the true value of the debtors’ property at the time of the foreclosure sale. In re Greco, 2014 Bankr. LEXIS 1114 (Bankr. M.D.N.C. Mar. 21, 2014).

When Proof of Value of Foreclosed Property May Be Made. —

This section permits proof that foreclosed property acquired by creditors was worth the sum that was owed them only in a suit against a mortgagor, trustor or other maker for a deficiency judgment. In re Otter Pond In v. Group, Ltd., 79 N.C. App. 664, 339 S.E.2d 854, 1986 N.C. App. LEXIS 2105 (1986).

Summary Judgment Inappropriate. —

In a deficiency action, summary judgment was inappropriately granted to a bank because an affidavit produced by two debtors constituted substantial evidence that their property was worth the amount of the debt that was owed at the time of the foreclosure. Even though a bank’s appraiser valued the property at the bank’s foreclosure bid (far below the debt amount) and the bank ultimately sold the property for far less than its bid, the debtors put forth evidence regarding the value of the property which was at odds with the bank’s evidence. United Cmty. Bank (Ga.) v. Wolfe, 242 N.C. App. 245, 775 S.E.2d 677, 2015 N.C. App. LEXIS 581 (2015), rev'd, 369 N.C. 555, 799 S.E.2d 269, 2017 N.C. LEXIS 280 (2017).

Sufficient evidence supported the trial court’s finding, under this section, that the foreclosed property was worth far more than the plaintiff bid for it and that the defendant was, therefore, not indebted to plaintiff in any amount. First Citizens Bank & Trust Co. v. Cannon, 138 N.C. App. 153, 530 S.E.2d 581, 2000 N.C. App. LEXIS 549 (2000).

Where defendants, makers of note, were held to have no property interest in mortgaged property, upon default they were not entitled under this section to show that the property was worth the amount of the debt secured by it or that the amount bid was substantially less than its true value. Raleigh Fed. Sav. Bank v. Godwin, 99 N.C. App. 761, 394 S.E.2d 294, 1990 N.C. App. LEXIS 807 (1990).

For case holding this section available to defendant in deficiency action, see United Carolina Bank v. Tucker, 99 N.C. App. 95, 392 S.E.2d 410, 1990 N.C. App. LEXIS 490 (1990).

A deficiency judgment is an imposition of personal liability on the mortgagor for the unpaid balance of the mortgage debt after foreclosure has failed to yield the full amount of debt due. Hyde v. Taylor, 70 N.C. App. 523, 320 S.E.2d 904, 1984 N.C. App. LEXIS 3722 (1984).

Appeal. —

Guarantor did not waive his right to argue the G.S. 45-21.36 defense/ooffset because his counsel raised the statute as a defense during argument at the summary judgment hearing; the guarantor also raised the defense in his pleading, which was before the trial court, and the trial court considered that ground in its questioning of counsel. Branch Banking & Trust Co. v. Smith, 239 N.C. App. 293, 769 S.E.2d 638, 2015 N.C. App. LEXIS 73 (2015).

How to Invoke Court’s Equitable Jurisdiction. —

Defendants sought foreclosure through the power of sale, the statutory prerequisites were found and upheld on appeal, and foreclosure was ordered to proceed; although plaintiffs’ declaratory judgment claims were an impermissible collateral attack, plaintiffs’ complaint was sufficient to invoke the trial court’s equitable jurisdiction to argue the equitable grounds upon which the foreclosure sale should have been enjoined. Howse v. Bank of Am., N.A., 255 N.C. App. 22, 804 S.E.2d 552, 2017 N.C. App. LEXIS 672 (2017).

§ 45-21.37. Certain sections not applicable to tax suits.

Sections 45-21.34 through 45-21.36 do not apply to tax foreclosure suits or tax sales.

History. 1933, c. 275, s. 4; 1949, c. 720, s. 3.

§ 45-21.38. Deficiency judgments abolished where mortgage represents part of purchase price.

In all sales of real property by mortgagees and/or trustees under powers of sale contained in any mortgage or deed of trust executed after February 6, 1933, or where judgment or decree is given for the foreclosure of any mortgage executed after February 6, 1933, to secure to the seller the payment of the balance of the purchase price of real property, the mortgagee or trustee or holder of the notes secured by such mortgage or deed of trust shall not be entitled to a deficiency judgment on account of such mortgage, deed of trust or obligation secured by the same: Provided, said evidence of indebtedness shows upon the face that it is for balance of purchase money for real estate: Provided, further, that when said note or notes are prepared under the direction and supervision of the seller or sellers, he, it, or they shall cause a provision to be inserted in said note disclosing that it is for purchase money of real estate; in default of which the seller or sellers shall be liable to purchaser for any loss which he might sustain by reason of the failure to insert said provisions as herein set out.

History. 1933, c. 36; 1949, c. 720, s. 3; c. 856; 1961, c. 604; 1967, c. 562, s. 2.

Cross References.

For provision that spouse need not join in purchase-money mortgage, see G.S. 39-13.

Legal Periodicals.

As to the effect of this section, see 11 N.C.L. Rev. 219 (1933).

For article, “Transferring North Carolina Real Estate Part I: How the Present System Functions,” see 49 N.C.L. Rev. 413 (1971).

For survey of 1978 property law, see 57 N.C.L. Rev. 1103 (1979).

For note on purchase-money mortgages and suit on the note, see 15 Wake Forest L. Rev. 822 (1979).

For note on anti-deficiency judgment statute, see 58 N.C.L. Rev. 855 (1980).

For survey of 1980 property law, see 59 N.C.L. Rev. 1209 (1981).

For article on installment land contracts in North Carolina, see 3 Campbell L. Rev. 29 (1981).

For survey of 1981 property law, see 60 N.C.L. Rev. 1420 (1982).

For note discussing North Carolina’s Anti-Deficiency Statute and whether suing on the note is a lost option, in light of 313 N.C. 565, 330 S.E.2d 600 (1985), see 22 Wake Forest L. Rev. 389 (1987).

For note, “Real Estate Finance—Subordination Causes: North Carolina Subordinates Substance to Form—MCB Ltd. v. McGowan,” 23 Wake Forest L. Rev. 575 (1988).

For article, “North Carolina Extends Its Anti-Deficiency Statute: Merritt v. Edwards Ridge,” see 67 N.C.L. Rev. 1446 (1989).

For article, “Legislative Kudzu and the New Millennium: An Opportunity for Reflection and Reform,” see 23 Campbell L. Rev. 157 (2001).

For comment, “‘A Topsy-Turvy World’: High Point Bank & Trust Co. v. Highmark Properties, LLC and the Modern Application of the Fair Market Value Offset Defense,” see 95 N.C.L. Rev. 857 (2017).

CASE NOTES

Analysis

I.General Consideration

The purpose of the anti-deficiency statute is to prevent oppression of a purchase money debtor by a purchase money creditor. The purchase money debtor has both an equitable and statutory right to redeem. Baker v. Independent Fire Ins. Co., 103 N.C. App. 424, 405 S.E.2d 779, 1991 N.C. App. LEXIS 809, cert. denied, 330 N.C. 116, 409 S.E.2d 590, 1991 N.C. LEXIS 685 (1991).

Legislative Intent. —

The unique features of this section manifest the legislative intent that the statute as originally enacted should apply only to purchase-money mortgages and deeds of trust given by the vendee to the vendor, and that its application to third parties be limited to assignees of the seller. Childers v. Parker's, Inc., 274 N.C. 256, 162 S.E.2d 481, 1968 N.C. LEXIS 756 (1968).

This section was obviously designed to protect a vendor’s assignee, who would not know the nature of the transaction. Childers v. Parker's, Inc., 274 N.C. 256, 162 S.E.2d 481, 1968 N.C. LEXIS 756 (1968).

The manifest intention of the legislature in this section was to limit the creditor to the property conveyed when the note and mortgage or deed of trust are executed to the seller of the real estate and the securing instruments state that they are for the purpose of securing the balance of the purchase price. Ross Realty Co. v. First Citizens Bank & Trust Co., 296 N.C. 366, 250 S.E.2d 271, 1979 N.C. LEXIS 1153 (1979); Reavis v. Ecological Dev., Inc., 53 N.C. App. 496, 281 S.E.2d 78, 1981 N.C. App. LEXIS 2620 (1981).

The legislature intended to take away from creditors the option of suing upon the note in a purchase-money mortgage transaction. Ross Realty Co. v. First Citizens Bank & Trust Co., 296 N.C. 366, 250 S.E.2d 271, 1979 N.C. LEXIS 1153 (1979).

This section seeks to protect the purchaser of real property in those instances where the seller also financed the sale. In re Gulledge, 17 B.R. 311, 1982 Bankr. LEXIS 4944 (Bankr. M.D.N.C. 1982).

At foreclosure, the holder of a purchase money mortgage or deed of trust is limited to the recovery of the security or to the proceeds from the sale of the security. The holder is prohibited from ignoring his security and bringing an in personam action against the mortgagor on the note secured by the deed of trust. The holder is, also, prohibited from bringing an in personam suit after foreclosure to recover a deficiency. In fact, the State’s Supreme Court has stated, unequivocally, that the manifest intention of the Legislature in codifying this section was to limit the creditor to the property conveyed when the note and mortgage or deed of trust are executed to the seller of the real estate. Blanton v. Sisk, 70 N.C. App. 70, 318 S.E.2d 560, 1984 N.C. App. LEXIS 3601 (1984).

The legislative intent behind this section is to limit recovery by purchase money mortgagees to the property conveyed. Underlying this intent is a desire to discourage oppressive overpricing at sale and underpricing at foreclosure. Sink v. Egerton, 76 N.C. App. 526, 333 S.E.2d 520, 1985 N.C. App. LEXIS 4239 (1985).

The enactment of this section was intended to benefit and protect purchasers of real property. Adams v. Cooper, 114 N.C. App. 459, 442 S.E.2d 141, 1994 N.C. App. LEXIS 400 (1994), rev'd, 340 N.C. 242, 460 S.E.2d 120, 1995 N.C. LEXIS 240 (1995).

A deficiency judgment is an imposition of personal liability on a mortgagor for the unpaid balance of the mortgage debt after foreclosure has failed to yield the full amount of debt due. Hyde v. Taylor, 70 N.C. App. 523, 320 S.E.2d 904, 1984 N.C. App. LEXIS 3722 (1984).

Effect of Section. —

This section limits the seller who finances the purchase of real property to those funds which he obtains from a foreclosure upon the property. In re Gulledge, 17 B.R. 311, 1982 Bankr. LEXIS 4944 (Bankr. M.D.N.C. 1982).

This section bars an action against the guarantors of a purchase money note to recover the debt for the balance of the purchase price represented by the note. Adams v. Cooper, 456 S.E.2d 514 (1995).

The 1961 amendment did not change the original meaning of this section; it merely made specific that which had theretofore been implicit. Childers v. Parker's, Inc., 274 N.C. 256, 162 S.E.2d 481, 1968 N.C. LEXIS 756 (1968).

The benefits of this section cannot be waived; it effects the broad public purpose of abolishing deficiency judgments in purchase money transactions if foreclosure on the security yields an insufficient fund to satisfy the indebtedness secured, and the protection it offers is afforded to all purchasers of realty who secure any part of the purchase price with a deed of trust on the realty they are purchasing. Chemical Bank v. Belk, 41 N.C. App. 356, 255 S.E.2d 421, 1979 N.C. App. LEXIS 2691, cert. denied, 298 N.C. 293, 259 S.E.2d 911, 1979 N.C. LEXIS 1565 (1979).

The protection of the anti-deficiency judgment statute was designed for the benefit of the general public and was not intended to be merely a right which could be waived, or which purchasers could be compelled to waive as a prerequisite for obtaining financing. Chemical Bank v. Belk, 41 N.C. App. 356, 255 S.E.2d 421, 1979 N.C. App. LEXIS 2691, cert. denied, 298 N.C. 293, 259 S.E.2d 911, 1979 N.C. LEXIS 1565 (1979).

Doctrine of estoppel will not deprive a defendant of his right to assert this section in his defense to a deficiency proceeding; were a purchaser able, either by his action or by contract, to deny to himself the protection afforded him by the legislature, it would be to allow by indirection that which was directly forbidden. Chemical Bank v. Belk, 41 N.C. App. 356, 255 S.E.2d 421, 1979 N.C. App. LEXIS 2691, cert. denied, 298 N.C. 293, 259 S.E.2d 911, 1979 N.C. LEXIS 1565 (1979).

Purchase Money Debtor Cannot Be Forced to Elect. —

Except for ad valorem taxes, property assessments and property insurance premiums paid by the purchase money creditor on behalf of the purchase money debtor, a purchase money debtor cannot be forced to elect between paying an amount in excess of the balance purchase price secured by a purchase money deed of trust or forfeiting the property at foreclosure. Baker v. Independent Fire Ins. Co., 103 N.C. App. 424, 405 S.E.2d 779, 1991 N.C. App. LEXIS 809, cert. denied, 330 N.C. 116, 409 S.E.2d 590, 1991 N.C. LEXIS 685 (1991).

Right of Redemption Cannot Be Conditioned on Payment of Additional Moneys. —

A purchase money debtor’s exercise of his right of redemption cannot be conditioned on the payment of additional moneys not secured by the purchase money deed of trust. To hold otherwise would be to make the purchase money debtor personally liable, a consequence the anti-deficiency statute prohibits. Baker v. Independent Fire Ins. Co., 103 N.C. App. 424, 405 S.E.2d 779, 1991 N.C. App. LEXIS 809, cert. denied, 330 N.C. 116, 409 S.E.2d 590, 1991 N.C. LEXIS 685 (1991).

This section was obviously designed to protect a vendor’s assignee, who would not know the nature of the transaction. Childers v. Parker's, Inc., 274 N.C. 256, 162 S.E.2d 481, 1968 N.C. LEXIS 756 (1968).

Applicability to Mortgages, etc., Executed in Another State on Foreign Realty. —

This section operates to deprive our courts of jurisdiction to enter the deficiency judgments proscribed, and the section applies to all such deficiency judgments, including those predicated upon notes secured by mortgages or deeds of trust executed in another state upon realty lying therein. Bullington v. Angel, 220 N.C. 18, 16 S.E.2d 411, 1941 N.C. LEXIS 455 (1941).

For case holding that this section did not limit the jurisdiction of the federal district court in an action by a nonresident for a deficiency judgment amounting to $3,000.00 where the land mortgaged was in Virginia and the deed of trust signed by defendant was a Virginia contract securing notes signed by defendant and made payable at a bank in Roanoke, Virginia, see Bullington v. Angel, 56 F. Supp. 372 (W.D.N.C. 1944), aff’d, Angel v. Bullington, 150 F.2d 679 (4th Cir. 1945), rev’d, 330 U.S. 183, 67 S. Ct. 657, 91 L. Ed. 557 (1947), on the ground that the decision of the North Carolina Supreme Court denying a deficiency judgment in a previous suit on the same contract was res judicata. For article criticizing the decision in Angel v. Bullington, 1947 U.S. LEXIS 2649, 330 U.S. 183, 67 S. Ct. 657, 91 L. Ed. 832 (1947) (see 26 N.C.L. Rev. 29 (1948). For further comment on this case, see 26 N.C.L. Rev. 60 (1948)) .

Commercial Transactions Not Excluded. —

The 1933 General Assembly of North Carolina did not intend any special exclusion of commercial transactions, such as by “sophisticated business people,” from this section. Barnaby v. Boardman, 313 N.C. 565, 330 S.E.2d 600, 1985 N.C. LEXIS 1560 (1985).

II.Business property

A defendant’s guaranty of the obligations of a corporation under a lease/purchase agreement will not remove him from the protection of the anti-deficiency statute and make him liable for the entire face amount of the note, where the option to purchase was assigned to defendant personally, and defendant exercised it by taking title to the property in himself and personally signing the note and deed of trust; all of the obligations and promises merged in defendant who became an ordinary purchaser of realty who financed his acquisition of the property by a purchase money note and deed of trust. Chemical Bank v. Belk, 41 N.C. App. 356, 255 S.E.2d 421, 1979 N.C. App. LEXIS 2691, cert. denied, 298 N.C. 293, 259 S.E.2d 911, 1979 N.C. LEXIS 1565 (1979).

Commercial Transactions Not Excluded. —

The 1933 General Assembly of North Carolina did not intend any special exclusion of commercial transactions, such as by “sophisticated business people,” from this section. Barnaby v. Boardman, 313 N.C. 565, 330 S.E.2d 600, 1985 N.C. LEXIS 1560 (1985).

III.Recovery of Damages

Purchaser Suffers No Loss until Payment or Rendition of Judgment. —

Where there has been a foreclosure and the proceeds are insufficient to pay the amount called for in the note, the purchaser has not sustained a loss as contemplated by this section until he has been compelled to pay or judgment has been rendered fixing his liability. Childers v. Parker's, Inc., 259 N.C. 237, 130 S.E.2d 323, 1963 N.C. LEXIS 529 (1963).

This section prohibited plaintiff from recovering interest on a purchase money note, where the interest was part of the debt secured by the purchase money deed of trust. Burnette Indus., Inc. v. Danbar of Winston-Salem, Inc., 80 N.C. App. 318, 341 S.E.2d 754, 1986 N.C. App. LEXIS 2178 (1986).

Noteholder Could Recover Debt Only from Property Conveyed. —

The holder of a promissory note given by a buyer to a seller for the purchase of land and secured by a deed of trust embracing the land could not release his security and sue on the note, but had to look exclusively to the property conveyed in seeking to recover any balance owed. Barnaby v. Boardman, 313 N.C. 565, 330 S.E.2d 600, 1985 N.C. LEXIS 1560 (1985).

When the purchase money debtor defaults, the purchase money creditor is limited strictly to the property conveyed in all cases in which the note and mortgage or deed of trust are executed to the seller of the real estate and the securing instruments state that they are for the purpose of securing the balance of the purchase price. Merritt v. Ridge, 323 N.C. 330, 372 S.E.2d 559, 1988 N.C. LEXIS 602 (1988).

Fees of Attorneys of Purchase Money Creditor Not Secured. —

Where a promissory note states on its face that it is “given as purchase money, and is secured by a purchase money deed of trust,” and the note is incorporated by reference into the deed of trust, attorneys’ fees are not part of the purchase price. Hence, even if the trustee were to foreclose on the purchase money deed of trust, the purchase money creditor’s attorneys’ fees would not be a secured obligation. Baker v. Independent Fire Ins. Co., 103 N.C. App. 424, 405 S.E.2d 779, 1991 N.C. App. LEXIS 809, cert. denied, 330 N.C. 116, 409 S.E.2d 590, 1991 N.C. LEXIS 685 (1991).

Holder Barred from Recovering Costs and Attorneys’ Fees. —

This section bars the holder of a purchase money promissory note, given by a buyer of real property to the seller and secured by a purchase money deed of trust embracing the property, from recovering the costs of foreclosure of the deed of trust and sale of the property and related attorneys’ fees. Merritt v. Ridge, 323 N.C. 330, 372 S.E.2d 559, 1988 N.C. LEXIS 602 (1988) (distinguishing) Reavis v. Ecological Dev., Inc., 53 N.C. App. 496, 281 S.E.2d 78, 1981 N.C. App. LEXIS 2620 (1981).

Effect of G.S. 6-21.2. —

Section 6-21.2 deals in general and comprehensive terms with the propriety of attorneys’ fees arising from the collection of indebtedness and, therefore, was not controlling in a case in which a seller of real property had accepted a purchase money deed of trust from his buyer and then sought recovery upon default; this section deals with just such a particular situation. Merritt v. Ridge, 323 N.C. 330, 372 S.E.2d 559, 1988 N.C. LEXIS 602 (1988).

Duty to Mitigate Damages. —

Plaintiffs were required to take only reasonable efforts to mitigate their damages; they were not required to attempt enforcement of either the note or the guaranty when a reasonable person would have concluded such efforts would be futile. Smith v. Childs, 112 N.C. App. 672, 437 S.E.2d 500, 1993 N.C. App. LEXIS 1258 (1993).

Purchase Money Creditor Limited to Recovery of Property. —

A purchase money deed of trust creditor cannot bring an action on the note to recover the purchase price either before or after foreclosure and is strictly limited to the property which was conveyed for purposes of securing the balance of the purchase price. Baker v. Independent Fire Ins. Co., 103 N.C. App. 424, 405 S.E.2d 779, 1991 N.C. App. LEXIS 809, cert. denied, 330 N.C. 116, 409 S.E.2d 590, 1991 N.C. LEXIS 685 (1991).

North Carolina’s anti-deficiency statute prevents an action for personal judgment on note and limits the creditor to the property conveyed in deed of trust. Adams v. Cooper, 340 N.C. 242, 460 S.E.2d 120, 1995 N.C. LEXIS 240 (1995).

IV.Application

Variance Between Prices Obtained. —

The objective of the anti-deficiency statute is threatened and this section is properly applicable where there is a wide variance between the purchase prices obtained by the claimant and the amounts obtained upon foreclosure of the properties. In re Gulledge, 17 B.R. 311, 1982 Bankr. LEXIS 4944 (Bankr. M.D.N.C. 1982).

Where the subsequent purchase price of property at least equaled that amount paid for the property, the objective of this anti-deficiency statute, to protect purchasers from the potentially oppressive tactics of vendors who finance the sale of real property, is not threatened. In re Gulledge, 17 B.R. 311, 1982 Bankr. LEXIS 4944 (Bankr. M.D.N.C. 1982).

So long as the debt of the purchaser of property is secured by a deed of trust on the property or part of it given by the purchaser to secure payment of the purchase price, the deed of trust is a purchase money deed of trust. Burnette Indus., Inc. v. Danbar of Winston-Salem, Inc., 80 N.C. App. 318, 341 S.E.2d 754, 1986 N.C. App. LEXIS 2178 (1986).

Complaint Properly Dismissed As Premature. —

Trial court did not err in dismissing pursuant to G.S. 1A-1-12(b)(6) plaintiffs’ complaint alleging that defendants violated G.S. 45-21.38 because the action was prematurely brought; plaintiffs admitted that defendants had neither instituted foreclosure proceedings against them nor commenced any action to enforce an adjustable rate balloon note. Poole v. Bahamas Sales Assoc., LLC, 209 N.C. App. 136, 705 S.E.2d 13, 2011 N.C. App. LEXIS 62 (2011).

Sale and Purchase of Real Estate. —

Anti-deficiency statute did not apply to the sale and purchase of certain real estate where neither the deed of trust nor the promissory note contained language indicating that they were purchase money instruments. Brumley v. Mallard, L.L.C., 154 N.C. App. 563, 575 S.E.2d 35, 2002 N.C. App. LEXIS 1513 (2002), aff'd, 357 N.C. 247, 580 S.E.2d 691, 2003 N.C. LEXIS 597 (2003).

Defaulting purchaser and guarantor could not claim, under the anti-deficiency statute, that a seller who sued them for defaulting on a promissory note related to the sale of certain real estate was obligated to indemnify them because purchase money language was deleted from the promissory note and deed of trust, as these amendments were done by their attorney, and were not supervised by the seller. Brumley v. Mallard, L.L.C., 154 N.C. App. 563, 575 S.E.2d 35, 2002 N.C. App. LEXIS 1513 (2002), aff'd, 357 N.C. 247, 580 S.E.2d 691, 2003 N.C. LEXIS 597 (2003).

Sale of Land Under Prior Mortgage. —

This section is not available as a defense to an action on a purchase-money note secured by a second mortgage when the land has been sold under the first mortgage for a sum sufficient to pay only the notes secured by the first mortgage, assumed by the purchaser as a part of the purchase price. Brown v. Kirkpatrick, 217 N.C. 486, 8 S.E.2d 601, 1940 N.C. LEXIS 268 (1940).

Leasehold Interest Is Outside Scope of Section. —

The protection provided by this section only applies to transactions involving the sale of real property; where there was no sale of real property, but only an assignment for valuable consideration of a leasehold interest, the protection provided by this section does not apply. Kavanau Real Estate Trust v. Debnam, 41 N.C. App. 256, 254 S.E.2d 638, 1979 N.C. App. LEXIS 2435 (1979), aff'd, 299 N.C. 510, 263 S.E.2d 595, 1980 N.C. LEXIS 946 (1980).

Section does not prohibit an in personam action based upon an underlying obligation secured by a mortgage on a leasehold interest. Kavanau Real Estate Trust v. Debnam, 41 N.C. App. 256, 254 S.E.2d 638, 1979 N.C. App. LEXIS 2435 (1979), aff'd, 299 N.C. 510, 263 S.E.2d 595, 1980 N.C. LEXIS 946 (1980).

Purchase Money Instruments. —

Where the deed of trust and promissory note were held to be a purchase money instrument, pursuant to this section, plaintiffs were not entitled to a deficiency judgment. Friedlmeier v. Altman, 93 N.C. App. 491, 378 S.E.2d 217, 1989 N.C. App. LEXIS 217 (1989).

The fact that the land sale transaction occurred as part of an agreement settling a dispute between the parties did not prevent its categorization as a purchase money transaction since the existence of additional promises not directly arising out of the land sale transaction did not remove this deed of trust and promissory note from the definition of a purchase money instrument. Friedlmeier v. Altman, 93 N.C. App. 491, 378 S.E.2d 217, 1989 N.C. App. LEXIS 217 (1989).

Where property to be sold at foreclosure under a supplemental deed of trust was not the property conveyed for which a purchase money note and purchase money deed of trust were given, yet the debt to be satisfied was that reflected by the purchase money note, the provisions of supplemental deed of trust purporting to provide additional security for the purchase money note were unenforceable under this section. Goforth Properties, Inc. v. Birdsall, 334 N.C. 369, 432 S.E.2d 855, 1993 N.C. LEXIS 336 (1993).

Because G.S. 45-21.38 specified that the foreclosing party was not entitled to a deficiency judgment if the underlying transaction was a purchase money transaction, the former owner drafted the contract, the purchase money promissory note, and the purchase money deed of trust, and the contract specifically provided that the purchase money promissory note was secured by a “purchase money deed of trust which shall be first lien on the Property,” thus, both parties had sufficient notice that the contract was to be construed as a purchase money transaction, and the buyer should have been allowed to amend as the benefits of G.S. 45-21.38 could not be waived and the trial court improperly granted partial summary judgment. Rutherford Plantation, LLC v. Challenge Golf Group of the Carolinas, LLC, 225 N.C. App. 79, 737 S.E.2d 409, 2013 N.C. App. LEXIS 64 (2013), aff'd, 367 N.C. 197, 753 S.E.2d 152, 2014 N.C. LEXIS 22 (2014).

Courts will not apply this section unless deed of trust, on its face, indicates that it is for purchase money for sale of real property. Bigley v. Lombardo, 90 N.C. App. 79, 367 S.E.2d 389, 1988 N.C. App. LEXIS 378 (1988).

Evidence of Indebtedness Must Show Debt Is for Purchase Money. —

A strict reading of this section reveals that this statute does not apply unless the “evidence of indebtedness, ” i.e., the note and deed of trust, shows on its face that the debt is for the purchase money for real property. Gambill v. Bare, 32 N.C. App. 597, 232 S.E.2d 870, 1977 N.C. App. LEXIS 2005, cert. denied, 292 N.C. 640, 235 S.E.2d 61, 1977 N.C. LEXIS 1150 (1977).

Generally, the failure to disclose the character of the instruments renders this section inapplicable. In re Gulledge, 17 B.R. 311, 1982 Bankr. LEXIS 4944 (Bankr. M.D.N.C. 1982).

Where, in partial payment for land, respondents signed a promissory note secured by a deed of trust covering not only the two parcels of land being purchased but an additional tract of land already owned by respondents, the language of the statute did not limit petitioners to foreclosure on the land actually sold by them to respondents; this section was not applicable as there was no indication on the face of either the promissory note or the deed of trust that the debt was incurred for the purchase of the property secured. In re Fuller, 94 N.C. App. 207, 380 S.E.2d 120, 1989 N.C. App. LEXIS 420 (1989).

Where a note and deed of trust cross-refer to each other, and incorporate each other by reference, and only one of the documents clearly indicates the purchase-money nature of the transaction, the other document may be deemed to include the same language indicating the nature of the transaction; therefore, a note which has been executed but not marked as a “purchase-money note” may still conform to the statutory prerequisites for asserting this section as a defense. Chemical Bank v. Belk, 41 N.C. App. 356, 255 S.E.2d 421, 1979 N.C. App. LEXIS 2691, cert. denied, 298 N.C. 293, 259 S.E.2d 911, 1979 N.C. LEXIS 1565 (1979).

Protection Not Afforded Absent Purchase Money Deed of Trust. —

Suit on the second of two separate and distinct notes, secured by a security interest in a 1983 Mazda automobile, not “a deed of trust on the property or part of it, ” and executed not at the same time defendant and his partners bought the property, but only when he wanted to buy out his partners a year later, where the security agreement did not secure any portion of the original purchase of real property, but secured a loan of money from plaintiffs to defendant made so that defendant could “buy out ” his business partners, was not a purchase money deed of trust, and the protection afforded under this section was not available. Bigley v. Lombardo, 90 N.C. App. 79, 367 S.E.2d 389, 1988 N.C. App. LEXIS 378 (1988).

Liability of Seller If Note and Security Do Not Disclose They Are for Purchase Money. —

This section makes the seller liable for losses which the purchaser sustains because of seller’s failure to insert a statement that debt is for purchase money in a note and deed of trust prepared by it or under its supervision. Childers v. Parker's, Inc., 259 N.C. 237, 130 S.E.2d 323, 1963 N.C. LEXIS 529 (1963).

This section does not apply to a holder of a second purchase money deed of trust or mortgage whose security has been destroyed as a result of foreclosure by a holder of a first purchase money mortgage or deed of trust. Blanton v. Sisk, 70 N.C. App. 70, 318 S.E.2d 560, 1984 N.C. App. LEXIS 3601 (1984).

This section does not by its terms prohibit the holder of a note, though secured by a second deed of trust, from obtaining judgment on the note when the property has been sold under another deed of trust having priority of lien. Hyde v. Taylor, 70 N.C. App. 523, 320 S.E.2d 904, 1984 N.C. App. LEXIS 3722 (1984).

Notwithstanding the anti-deficiency statute, a creditor could sue on the purchase money note he held where he had lost the opportunity to foreclose due to an earlier foreclosure by another creditor. Hyde v. Taylor, 70 N.C. App. 523, 320 S.E.2d 904, 1984 N.C. App. LEXIS 3722 (1984).

In Personam Actions Not Barred for Unsecured Notes. —

This statute does not act to bar an in personam action where the promissory note is unsecured. Wilkinson v. SRW/Cary Assocs., 112 N.C. App. 846, 437 S.E.2d 3, 1993 N.C. App. LEXIS 1244 (1993).

The anti-deficiency statute does not apply to actions by unsecured creditors. Blanton v. Sisk, 70 N.C. App. 70, 318 S.E.2d 560, 1984 N.C. App. LEXIS 3601 (1984).

Obligations Under Notes and Deeds of Trust as “Antecedent Debts”. —

Purchasers of real property who execute purchase money notes and deeds of trust have no personal liability for the underlying indebtedness and the seller’s remedy is to foreclose the deed of trust. This does not, however, render the debtors’ obligations under the notes and deeds of trust any less an “antecedent debt.” Carter v. Homesley (In re Strom), 46 B.R. 144, 1985 Bankr. LEXIS 6785 (Bankr. E.D.N.C. 1985).

Section Held Inapplicable. —

Where the deed of trust covered land other than that purchased from the plaintiffs by the defendants, it could not qualify as a purchase-money deed of trust under this section. This was true because a deed of trust is a purchase-money deed of trust only if it is made as a part of the same transaction in which the debtor purchases land, embraces the land so purchased, and secures all or part of its purchase price. Dobias v. White, 239 N.C. 409, 80 S.E.2d 23, 1954 N.C. LEXIS 379 (1954).

A deed of trust given by a vendee to his vendor to secure the purchase price of lands other than those described in the security instrument cannot qualify as a purchase-money deed of trust under this section. This is true because a deed of trust is a purchase-money deed of trust only if it is made as a part of the same transaction in which the debtor purchases the land, embraces the land so purchased, and secures all or part of its purchase price. Childers v. Parker's, Inc., 274 N.C. 256, 162 S.E.2d 481, 1968 N.C. LEXIS 756 (1968).

Even if the promissory note and deed of trust contained language indicating that they were purchase money instruments, this section was not applicable to limit petitioners to foreclose on land actually sold by them to respondents; petitioners sought to foreclose on property conveyed under a deed of trust, and this section only prohibits a mortgagee or trustee in a purchase money situation from obtaining a deficiency judgment. In re Fuller, 94 N.C. App. 207, 380 S.E.2d 120, 1989 N.C. App. LEXIS 420 (1989).

Where the underlying obligation represented by note was still valid, and the anti-deficiency judgment statute did not apply because the bank was not a seller/purchase-money mortgagee, the trial court was correct in awarding plaintiff a monetary judgment in the amount of the outstanding debt balance, plus interest and late fees. G.E. Capital Mtg. Servs. v. Neely, 135 N.C. App. 187, 519 S.E.2d 553, 1999 N.C. App. LEXIS 971 (1999).

Anti-deficiency statute did not apply to a lease agreement with an option to purchase, containing a liquidated damages provision, where none of the transaction documents purported to be an instrument of debt or securing instrument, and none of the documents stated that the subject property served as security for the balance of its purchase price. Green Park Inn, Inc. v. Moore, 149 N.C. App. 531, 562 S.E.2d 53, 2002 N.C. App. LEXIS 287 (2002).

Borrower’s counterclaim against a lender under the North Carolina Anti-Deficiency Judgment Act, G.S. 45-21.38, did not survive challenge under Fed. R. Civ. P. 12(b)(6) where there was no plausible claim of a joint venture between the bank and the property developer/seller, such that the Act was inapplicable; it did not apply where the buyer received financing from the third-party lender and a purchase money mortgage was not involved. Synovus Bank v. Coleman, 887 F. Supp. 2d 659, 2012 U.S. Dist. LEXIS 114918 (W.D.N.C. 2012).

G.S. 45-21.38 (1967) did not supply the acceptance necessary for completion of the pre-petition transfer from the creditor to the Chapter 11 debtor where the creditor, in filing a claim in the debtor’s bankruptcy case was neither attempting to foreclose on any of the debtor’s property nor seeking a deficiency judgment. In re Bate Land & Timber, 2013 Bankr. LEXIS 5091 (Bankr. E.D.N.C. Dec. 4, 2013).

Court rejected debtor’s argument that North Carolina’s anti-deficiency statute prevented a creditor from having a claim extending beyond the value of the property, as the statute did not apply where there had been no foreclosure. Hurlburt v. Black, 2016 Bankr. LEXIS 4150 (Bankr. E.D.N.C. Dec. 5, 2016).

Unsecured Note with Endorsers. —

This section has no application to an unsecured note with endorsers, given by the purchaser of land in addition to a cash payment and a purchase money note secured by deed of trust on the property. Brown v. Owens, 251 N.C. 348, 111 S.E.2d 705, 1959 N.C. LEXIS 604 (1959).

Holder of Subordinate Deed of Trust Cannot Bring In Personam Action. —

A seller, who is the holder of a subordinate purchase money deed of trust and whose security has been eroded by foreclosure of a senior deed of trust, cannot bring an in personam action for the debt. Sink v. Egerton, 76 N.C. App. 526, 333 S.E.2d 520, 1985 N.C. App. LEXIS 4239 (1985).

Anti-deficiency statute prohibits the holder of a second purchase money deed of trust from bringing an in personam action on the note for the debt even though the security has been “destroyed” by foreclosure of the first deed of trust. Paynter v. Maggiolo, 105 N.C. App. 312, 412 S.E.2d 691, 1992 N.C. App. LEXIS 50 (1992).

§ 45-21.38A. Deficiency judgments abolished where mortgage secured by primary residence.

  1. As used in this section, the term “nontraditional mortgage loan” means a loan in which all of the following apply:
    1. The borrower is a natural person.
    2. The debt is incurred by the borrower primarily for personal, family, or household purposes.
    3. The principal amount of the loan does not exceed the conforming loan size for a single family dwelling as established from time to time by Fannie Mae.
    4. The loan is secured by: (i) a security interest in a manufactured home, as defined in G.S. 143-145, in the State that is or will be occupied by the borrower as the borrower’s principal dwelling; (ii) a mortgage or deed of trust on real property in the State upon which there is located an existing structure designed principally for occupancy of from one to four families that is or will be occupied by the borrower as the borrower’s principal dwelling; or (iii) a mortgage or deed of trust on real property in the State upon which there is to be constructed using the loan proceeds a structure or structures designed principally for occupancy of from one to four families that, when completed, will be occupied by the borrower as the borrower’s principal dwelling.
    5. The terms of the loan: (i) permit the borrower as a matter of right to defer payment of principal or interest; and (ii) allow or provide for the negative amortization of the loan balance.
  2. Except as provided in subdivision (6) of subsection (c) of this section, this section applies only to the following loans:
    1. A loan originated on or after January 1, 2005, that was at the time the loan was originated a rate spread home loan as defined in G.S. 24-1.1F.
    2. A loan secured by the borrower’s principal dwelling, which loan was modified after January 1, 2005, and became at the time of such modification and as a consequence of such modification a rate spread home loan.
    3. A loan that was a nontraditional mortgage loan at the time the loan was originated.
    4. A loan secured by the borrower’s principal dwelling, which loan was modified and became at the time of such modification and as a consequence of such modification a nontraditional mortgage loan.
  3. This section does not apply to any of the following:
    1. A home equity line of credit as defined in G.S. 45-81(a).
    2. A construction loan as defined in G.S. 24-10(c).
    3. A reverse mortgage as defined in G.S. 53-257 that complies with the provisions of Article 21 of Chapter 53 of the General Statutes.
    4. A bridge loan with a term of 12 months or less, such as a loan to purchase a new dwelling where the borrower plans to sell his or her current dwelling within 12 months.
    5. A loan made by a natural person who makes no more than one loan in a 12-month period and is not in the business of lending.
    6. A loan secured by a subordinate lien on the borrower’s principal dwelling, unless the loan was made contemporaneously with a rate spread home loan or a nontraditional mortgage loan that is subject to the provisions of this section.
  4. In addition to any statutory or common law prohibition against deficiency judgments, the following shall apply to the foreclosure of mortgages and deeds of trust that secure loans subject to this section:
    1. For mortgages and deeds of trust recorded before January 1, 2010, the holder of the obligation secured by the foreclosed mortgage or deed of trust shall not be entitled to any deficiency judgment against the borrower for any balance owing on such obligation if: (i) the real property encumbered by the lien of the mortgage or deed of trust being foreclosed was sold by a mortgagee or trustee under a power of sale contained in the mortgage or deed of trust; and (ii) the real property sold was, at the time the foreclosure proceeding was commenced, occupied by the borrower as the borrower’s principal dwelling.
    2. For mortgages and deeds of trust recorded on or after January 1, 2010, the holder of the obligation secured by the foreclosed mortgage or deed of trust shall not be entitled to any deficiency judgment against the borrower for any balance owing on such obligation if: (i) the real property encumbered by the lien of the mortgage or deed of trust being foreclosed was sold as a consequence of a judicial proceeding or by a mortgagee or trustee under a power of sale contained in the mortgage or deed of trust; and (ii) the real property sold was, at the time the judicial or foreclosure proceeding was commenced, occupied by the borrower as the borrower’s principal dwelling.
  5. The court may, in its discretion, award to the borrower the reasonable attorneys’ fees actually incurred by the borrower in the defense of an action for deficiency if: (i) the borrower prevails in an action brought by the holder of the obligation secured by the foreclosed mortgage or deed of trust to recover a deficiency judgment following the foreclosure of a loan to which this section applies; and (ii) the court rules that the holder of the obligation secured by the foreclosed mortgage or deed of trust is not entitled to a deficiency judgment under the provisions of this section. The amount of attorneys’ fees to be awarded shall be determined without regard to the provisions of the loan documents, the provisions of G.S. 6-21.2, or any statutory presumption as to the amount of such attorneys’ fees.

History. 2009-441, s. 1.

Editor’s Note.

Session Laws 2009-441, s. 3, made this section effective October 1, 2009, and applicable to actions filed on or after that date.

Legal Periodicals.

For article, “The Morality of Jingle Mail: Moral Myths about Strategic Default,” see 46 Wake Forest L. Rev. 123 (2011).

§ 45-21.38B.

Reserved for future codification purposes.

§ 45-21.38C. Severability.

The provisions of this Article shall be severable, and if any phrase, clause, sentence, or provision is declared to be unconstitutional or otherwise invalid or is preempted by federal law or regulation, the validity of the remainder of this Article shall not be affected thereby.

History. 2009-441, s. 2.

Editor’s Note.

Session Laws 2009-441, s. 3, made this section effective October 1, 2009, and applicable to actions filed on or after that date.

Article 2C. Validating Sections; Limitation of Time for Attacking Certain Foreclosures.

§ 45-21.39. Limitation of time for attacking certain foreclosures on ground trustee was agent, etc., of owner of debt.

  1. No action or proceeding shall be brought or defense or counterclaim pleaded later than one year after March 14, 1941, in which a foreclosure sale which occurred prior to January 1, 1941, under a deed of trust conveying real estate as security for a debt is attacked or otherwise questioned upon the ground that the trustee was an officer, director, attorney, agent or employee of the owner of the whole or any part of the debt secured thereby, or upon the ground that the trustee and the owner of the debt or any part thereof have common officers, directors, attorneys, agents or employees.
  2. This section shall not be construed to give or create any cause of action where none existed before March 14, 1941, nor shall the limitation provided in subsection (a) hereof have the effect of barring any cause of action based upon grounds other than those mentioned in said subsection, unless the grounds set out in subsection (a) are an essential part thereof.
  3. This section shall not be construed to enlarge the time in which to bring any action or proceeding or to plead any defense or counterclaim; and the limitation hereby created is in addition to all other limitations now existing.

History. 1941, c. 202; 1949, c. 720, s. 4.

§ 45-21.40. Real property; validation of deeds made after expiration of statute of limitations where sales made prior thereto.

In all cases where sales of real property have been made under powers of sale contained in mortgages or deeds of trust and such sales have been made within the times which would have been allowed by the statute of limitations for the commencement of actions to foreclose such mortgages or deeds of trust, and the execution and delivery of deeds in consummation of such sales have been delayed until after the expiration of the period which would have been allowed by the statute of limitations for the commencement of actions to foreclose such mortgages or deeds of trust as a result of the filing of raised or increased bids, such deeds in the exercise of the power of sale are hereby validated and are declared to have the same effect as if they had been executed and delivered within the period allowed by the statute of limitations for the commencement of actions to foreclose such mortgages or deeds of trust.

History. 1943, c. 16, s. 2; 1949, c. 720, s. 4.

§ 45-21.41. Orders signed on days other than first and third Mondays validated; force and effect of deeds.

In all actions for the foreclosure of any mortgage or deed of trust which has heretofore been instituted and prosecuted before the clerk of the superior court of any county in North Carolina, wherein the judgment confirming the sale made by the commissioner appointed in said action, and ordering the said commissioner to execute a deed to the purchaser, was signed by such clerk on a day other than the first or third Monday of a month, such judgment of confirmation shall be and is hereby declared to be valid and of the same force and effect as though signed and docketed on the first or third Monday of any month, and any deed made by any commissioner or commissioners in any such action where the confirmation of sale was made on a day other than a first or third Monday of the month shall be and is hereby declared to have the same force and effect as if the same were executed and delivered pursuant to a judgment of confirmation properly signed and docketed by the clerk of the superior court on a first or third Monday of the month.

History. 1923, c. 53, s. 1; C.S., s. 2593(a); 1949, c. 720, s. 4.

§ 45-21.42. Validation of deeds where no order or record of confirmation can be found.

In all cases prior to the first day of March, 1974, where sales of property have been made under the power of sale contained in any deed of trust, mortgage or other instrument conveying property to secure a debt or other obligation, or where such sales have been made pursuant to an order of court in foreclosure proceedings and deeds have been executed by any trustee, mortgagee, commissioner, or person appointed by the court, conveying the property, or security, described therein, and said deed, or other instrument so executed, containing the property described therein, to the highest bidder or purchaser of said sale and such deed, or other instrument, contains recitals to the effect that said sale was reported to the clerk of the superior court, or to the court, and/or such sale was duly confirmed by the clerk of the superior court, or court, then and in that event all such deeds, conveyances, or other instruments, containing such recitals are declared to be lawful, valid and binding upon all parties to the proceedings, or parties named in such deeds of trust, mortgages, or other orders or instruments, and are hereby declared to be effective and valid to pass title for the purpose of transferring title to the purchasers at such sales with the same force and effect as if an order of confirmation had been filed in the office of the clerk of the superior court, or with the court, together with necessary reports and other decrees and to the same effect as if a record had been made in the minutes of the court of such orders, decrees and confirmations, provided that nothing contained in this section shall be construed as applicable to or affecting pending litigation.

History. 1945, c. 984; 1949, c. 720, s. 4; 1957, c. 505; 1979, c. 242.

§ 45-21.43. Validation of certain foreclosure sales.

In all cases where mortgages or deeds of trust on real estate with power of sale have been foreclosed pursuant to said power by proper advertisement and sale in the county where such real estate is located, notwithstanding the wording of such mortgages or deeds of trust providing for advertisement or sale, or both, in some other county, or at some other particular place in the county in which the real estate is located, which place was in fact designated in the notice of sale, all such sales are hereby fully validated, ratified and confirmed and shall be as effective to pass title to the real estate described therein as fully and to the same extent as if such mortgages or deeds of trust had provided for advertisement and sale in the county where such real estate is actually situate.

History. 1951, c. 220; 1961, c. 537.

§ 45-21.44. Validation of foreclosure sales when provisions of G.S. 45-21.17(2) not complied with.

In all cases prior to May 1, 1990, where mortgages or deeds of trust on real estate with power of sale have been foreclosed pursuant to said power by proper advertisement except that the date of the last publication was from seven to 20 days preceding the date of sale, all such sales are fully validated, ratified, and confirmed and shall be as effective to pass title to the real estate described therein as fully and to the same extent as if the provisions of G.S. 45-21.17(2) had been fully complied with.

History. 1959, c. 52; 1963, c. 1157; 1971, c. 879, s. 1; 1975, c. 454, s. 2; 1985, c. 689, s. 15; 1989 (Reg. Sess., 1990), c. 1024, s. 11.1.

§ 45-21.45. Validation of foreclosure sales where notice and hearing not provided.

In all cases where mortgages or deeds of trust on real estate with power of sale have been foreclosed pursuant to said power by proper advertisement and sale, but the mortgagor or grantor under such mortgage or deed of trust did not receive actual notice of such foreclosure or have the opportunity of a hearing prior to such foreclosure, all such sales are hereby fully validated, ratified and confirmed and shall be as effective to pass title to the real estate described therein as fully and to the same extent as if such notice and opportunity for hearing had been given, unless an action to set aside such foreclosure is commenced within one year from June 6, 1975.

History. 1975, c. 492, s. 12.

Legal Periodicals.

For comment discussing changes in North Carolina’s foreclosure law, see 54 N.C.L. Rev. 903 (1976).

§ 45-21.46. Validation of foreclosure sales where posting and publication not complied with.

  1. In all cases of foreclosure of mortgages or deeds of trust secured by real estate pursuant to power of sale which foreclosures were commenced on or subsequent to June 6, 1975, and consummated prior to June 1, 1983, in which foreclosure sales the requirements for posting and publication of notice of sale set forth in G.S. 45-21.17 were complied with but the requirements of the mortgage or deed of trust as to posting and publication of notice of sale were not complied with, are validated, ratified and confirmed and shall be effective to pass title to real estate to the same extent as though all requirements of the mortgage or deed of trust respecting posting and publication of notice of sale were complied with; unless an action to set aside such foreclosure is commenced before January 1, 1984.
  2. All foreclosures of mortgages or deeds of trust secured by real estate pursuant to power of sale, which foreclosures were commenced on or subsequent to June 1, 1983, and consummated prior to April 1, 1985, in which foreclosure sales the requirements for posting and publication of notice of sale set forth in G.S. 45-21.17 were complied with but the requirements of the mortgage or deed of trust as to posting and publication of notice of sale were not complied with, are validated, ratified and confirmed and shall be effective to pass title to real estate to the same extent as though all requirements of the mortgage or deed of trust respecting posting and publication of notice of sale were complied with; unless an action to set aside such foreclosure is commenced in the period beginning January 1, 1984, and ending January 1, 1986.

History. 1983, c. 582, s. 1; c. 738, s. 1; 1985, c. 341.

CASE NOTES

Determination of Effect of Deed of Trust. —

While the parties are before the clerk of court, the clerk should have the authority to determine not only whether there is a power of sale in the deed of trust, but also whether the property sought to be sold under foreclosure is still legally secured by the deed of trust. In re Michael Weinman Assocs., 333 N.C. 221, 424 S.E.2d 385, 1993 N.C. LEXIS 13 (1993).

§ 45-21.47. Validation of foreclosure sales when trustee is officer of owner of debt.

All sales of real property made prior to January 1, 1991, under a power of sale contained in a mortgage or deed of trust for which the trustee was an officer, director, attorney, agent, or employee of the owner of all or part of the debt secured by the mortgage or deed of trust are validated and have the same effect as if the trustee had not been an officer, director, attorney, agent, or employee of the owner of the debt unless an action to set aside the foreclosure is commenced within one year after January 1, 1991.

History. 1983, c. 582, s. 1; 1985, c. 604; 1987, c. 277, s. 10; 1989, c. 390, s. 10; 1991, c. 489, s. 10.

§ 45-21.48. Validation of certain foreclosure sales that did not comply with posting requirement.

A sale of real property made on or before July 2, 1985, under a power of sale contained in a mortgage or deed of trust, for which a notice of the sale was not posted at the courthouse door for 20 days immediately preceding the sale, as required by G.S. 45-21.17(1), but was posted at the courthouse door for at least 15 days immediately preceding the sale, is declared to be a valid sale to the same extent as if the notice of the sale had been posted for 20 days; unless an action to set aside the foreclosure sale is not barred by the statute of limitations and is commenced on or before October 1, 1985.

History. 1985, c. 567, s. 2.

§ 45-21.49. Validation of foreclosure sales when provisions of G.S. 45-21.16A(a)(3) not complied with.

  1. Whenever any real property was sold under a power of sale as provided in Article 2A of Chapter 45, and the notice of sale did not describe the improvements on the property to be sold, as required under G.S. 45-21.16A(a)(3), the sale shall not be invalidated because of such omission.
  2. This section shall apply to all sales completed prior to June 1, 1987.

History. 1987, c. 277, s. 10a.

Editor’s Note.

The references in the section catchline and subsection (a) to G.S. 45-21.16A(3) were changed to refer to G.S. 45-21.16A(a)(3) at the direction of the Revisor of Statutes. Session Laws 2007-353, s. 1, inserted the subsection (a) designation in G.S. 45-21.16A.

Article 3. Mortgage Sales. [Repealed]

§ 45-22. [Transferred]

Transferred to G.S. 45-21.39 by Session Laws 1949, c. 720, s. 4.

§§ 45-23 through 45-26. [Repealed]

Repealed by Session Laws 1949, c. 720, s. 5.

§ 45-26.1. [Transferred]

Transferred to G.S. 45-21.40 by Session Laws 1949, c. 720, s. 4.

§§ 45-27 through 45-30. [Repealed]

Repealed by Session Laws 1949, c. 720, s. 5.

§ 45-31. [Transferred]

Transferred to G.S. 45-21.41 by Session Laws 1949, c. 720, s. 4.

§§ 45-32 through 45-36. [Transferred]

Transferred to G.S. 45-21.34 to 45-21.38 by Session Laws 1949, c. 720, s. 3.

§ 45-36.1. [Transferred]

Transferred to G.S. 45-21.42 by Session Laws 1949, c. 720, s. 4.

Article 4. Satisfaction.

§ 45-36.2. Obligation of good faith.

Every action or duty within this Article imposes an obligation of good faith in its performance or enforcement.

History. 1953, c. 848; 2005-123, s. 1.

Effect of Amendments.

Session Laws 2005-123, s. 1, effective October 1, 2005, rewrote the Article 4 heading and the heading and text of this section.

§ 45-36.3. Notification by mortgagee of satisfaction of provisions of deed of trust or mortgage, or other instrument; civil penalty.

  1. After the satisfaction of the provisions of any deed of trust or mortgage, or other instrument intended to secure with real property the payment of money or the performance of any other obligation and registered as required by law, the holder of the evidence of the indebtedness, if it is a single instrument, or a duly authorized agent or attorney of such holder shall within 60 days:
    1. Discharge and release of record such documents and forward the cancelled documents to the grantor, trustor or mortgagor; or,
    2. Alternatively, the holder of the evidence of the indebtedness or a duly authorized agent or attorney of such holder, at the request of the grantor, trustor or mortgagor, shall forward said instrument and the deed of trust or mortgage instrument, with payment and satisfaction acknowledged in accordance with the requirements of G.S. 45-37, to the grantor, trustor or mortgagor.
  2. Any person, institution or agent who fails to comply with this section may be required to pay a civil penalty of not more than one thousand dollars ($1,000) in addition to reasonable attorneys’ fees and any other damages awarded by the court to the grantor, trustor or mortgagor, or to a subsequent purchaser of the property from the grantor, trustor or mortgagor. A five hundred dollar ($500.00) civil penalty may be recovered by the grantor, trustor or mortgagor, and a five hundred dollar ($500.00) penalty may be recovered by the purchaser of the property from the grantor, trustor or mortgagor. If that purchaser of the property consists of more than a single grantee, then the civil penalty will be divided equally among all of the grantees. A petitioner may recover damages under this section only if he has given the mortgagee, obligee, beneficiary or other responsible party written notice of his intention to bring an action pursuant to this section. Upon receipt of this notice, the mortgagee, obligee, beneficiary or other responsible party shall have 30 days, in addition to the initial 60-day period, to fulfill the requirements of this section.
  3. Should any person, institution or agent who is not the present holder of the evidence of indebtedness be required to pay a civil penalty, attorneys’ fees, or other damages under this section, they will have an action against the holder of the evidence of indebtedness for all sums they were required to pay.
  4. This section applies only if the provisions of the deed of trust, mortgage, or other instrument are satisfied before October 1, 2005.

History. 1979, c. 681, s. 1; 1987, c. 662, ss. 1-3; 2005-123, s. 1.

Effect of Amendments.

Session Laws 2005-123, s. 1, effective October 1, 2005, added subsection (d).

CASE NOTES

Jurisdiction of Court. —

Because a successor judge’s summary judgment order was vacated and as a prior judge ruled that an investor’s alleged violation of G.S. 45-36.3 was an issue for the jury, the successor judge erred in awarding a civil penalty and attorney fees to the home buyers for the investor’s failure to cancel a deed in that the successor judge was without authority to make the awards. Cail v. Cerwin, 185 N.C. App. 176, 648 S.E.2d 510, 2007 N.C. App. LEXIS 1684 (2007).

§ 45-36.4. Definitions.

As used in this Article, the following terms mean:

  1. Address for giving a notification. — For the purpose of a particular type of notification, the most recent address provided in a document by the intended recipient of the notification to the person giving the notification, unless the person giving the notification knows of a more accurate address, in which case the term means that address.
  2. Borrower. — A person primarily liable for payment or performance of the obligation secured by the real property described in a security instrument.
  3. Credit suspension directive. — A notification given to a secured creditor pursuant to G.S. 45-36.7A directing the secured creditor to suspend temporarily a borrower’s right and ability to obtain additional credit advances in anticipation of the imminent sale of, or the imminent making of a new loan to be secured by, real property then encumbered by an existing security instrument when the anticipated transaction will involve either the satisfaction of the existing security instrument or the release of the real property from the lien of the existing security instrument.
  4. Day. — Calendar day.
  5. Document. — Information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
  6. Electronic. — Relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.
  7. Entitled person. — A person who:
    1. Is a borrower;
    2. Is a landowner;
    3. Has contracted to purchase real property encumbered by an existing security instrument;
    4. Has made or has committed to make a loan that is secured or is to be secured by real property encumbered by an existing security instrument;
    5. Is a title insurance company authorized pursuant to Article 26 of Chapter 58 of the General Statutes to issue title insurance policies in the State of North Carolina that has insured or has committed to insure title to real property encumbered by an existing security instrument;
    6. Is the foreclosing trustee or the high bidder in a foreclosure sale involving real property encumbered by an existing security instrument;
    7. Is a qualified lien holder; or
    8. Is an attorney licensed to practice law in the State of North Carolina or a bank, savings and loan association, savings bank, or credit union, but only when:
      1. The attorney, bank, savings and loan association, savings bank, or credit union is or will be responsible for the disbursement of funds in connection with the sale of, or a new loan secured by, property then encumbered by an existing security instrument; and
      2. A requirement of the sale or new loan transaction is or will be that the property be conveyed or encumbered free and clear of the lien of the existing security instrument.
  8. Good faith. — Honesty in fact and the observance of reasonable commercial standards of fair dealing.
  9. Landowner. — A person that, before foreclosure, has the right of redemption in the real property described in a security instrument. The term does not include a person that holds only a lien on the real property or the trustee under a deed of trust.
  10. Notification. — A document containing information required under this Article and signed by the person required to provide the information.
  11. Original parties. — With respect to a security instrument, each person named as a party to the security instrument on the face thereof as originally recorded. In identifying the original parties to a deed of trust for purposes of this Article, it is not necessary to include the original trustee or trustees named therein.
  12. Payoff amount. — The sum necessary to satisfy a secured obligation.
  13. Payoff statement. — A document containing the information specified in G.S. 45-36.7(e).
  14. Person. — An individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, public corporation, government, or governmental subdivision, agency, or instrumentality, or any other legal or commercial entity.
  15. Qualified lien holder. — A person who holds or is the beneficiary of a security interest in or lien on real property encumbered by an existing security instrument, but only if that person’s security interest in or lien on the real property arises from a mortgage or deed of trust that is subordinate in priority to the lien of the existing security instrument. The term does not include a trustee under a deed of trust.
  16. Recording data. — The book and page number or document number that indicates where a document is recorded in the office of the register of deeds.
  17. Register of deeds. — Includes the register of deeds, assistant register of deeds, or deputy register of deeds.
  18. Satisfy. — With respect to a security instrument, to terminate the effectiveness of the security instrument.
  19. Secured creditor. — A person that holds or is the beneficiary of a security interest or that is authorized both to receive payments on behalf of a person that holds a security interest and to record a satisfaction of the security instrument upon receiving full performance of the secured obligation. The term does not include a trustee under a security instrument.
  20. Secured obligation. — An obligation the payment or performance of which is secured by a security interest.
  21. Security instrument. — An agreement, however denominated, that creates or provides for an interest in real property to secure payment or performance of an obligation, whether or not it also creates or provides for a lien on personal property. The term includes a deed of trust and a mortgage.
  22. Security interest. — An interest in real property created by a security instrument.
  23. Short-pay amount. — The sum necessary to obtain the release of all or a specific portion of the real property from the lien of a security instrument without satisfying the secured obligation in full.
  24. Short-pay statement. — A document containing the information specified in G.S. 45-36.7(e1).
  25. Sign. — With present intent to authenticate or adopt a document:
    1. To execute or adopt a tangible symbol; or
    2. To attach to or logically associate with the document an electronic sound, symbol, or process.
  26. State. — A state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.
  27. Submit for recording. — To deliver, with required fees and taxes, a document sufficient to be recorded under this Article to the register of deeds in the county in which the real property described in the related security instrument is located.
  28. Trustee. — The trustee or substitute then serving as such under the terms of a deed of trust.

History. 2005-123, s. 1; 2011-312, s. 3.

Effect of Amendments.

Session Laws 2011-312, s. 3, effective October 1, 2011, added subdivisions (1a) and (1b); rewrote subdivision (5), which formerly read: “Entitled person. — A person liable for payment or performance of the obligation secured by the real property described in a security instrument, or the landowner”; added “or the trustee under a deed of trust” at the end of subdivision (7); updated the section reference in subdivision (11); and added subdivisions (12a), (19a), (19b), and (23).

§ 45-36.5. Notification: manner of giving and effective date.

  1. A person gives a notification by any of the following:
    1. Depositing it with the United States Postal Service with first-class postage paid or with a commercially reasonable delivery service with cost of delivery provided, properly addressed to the recipient’s address for giving a notification.
    2. Sending it by facsimile transmission, electronic mail, or other electronic transmission to the recipient’s address for giving a notification, but only if the recipient agreed to receive notification in that manner.
    3. Causing it to be received at the address for giving a notification within the time that it would have been received if given pursuant to subdivision (1) of this subsection.
  2. A notification is effective on any of the following:
    1. The day after it is deposited with a commercially reasonable delivery service for overnight delivery.
    2. Three days after it is deposited with the United States Postal Service, first-class mail with postage prepaid, or with a commercially reasonable delivery service for delivery other than by overnight delivery.
    3. The day it is given, if given pursuant to subdivision (a)(2) of this section.
    4. The day it is received, if given by a method other than as provided in subdivision (a)(1) or (a)(2) of this section.
  3. If this Article or a notification given pursuant to this Article requires performance on or by a certain day and that day is a Saturday, Sunday, or legal holiday under the laws of this State or the United States, the performance is sufficient if performed on the next day that is not a Saturday, Sunday, or legal holiday.

History. 2005-123, s. 1.

§ 45-36.6. Document of rescission: effect; liability for wrongful recording.

  1. Definitions. —  The following definitions apply in this section:
    1. Document of rescission. — A document that rescinds either (i) a release that was recorded in error or (ii) the erroneous satisfaction of a security instrument.
    2. Release. — A document that either (i) releases property from the lien of a security instrument or (ii) indicates that an obligation is no longer secured by a security instrument.
  2. If a release is recorded in error or a security instrument is erroneously satisfied of record, then the secured creditor or the person who caused the release to be recorded in error or the security instrument to be erroneously satisfied of record may execute and record a document of rescission. The document of rescission must be duly acknowledged before an officer authorized to make acknowledgments. Upon recording, the document of rescission either (i)  rescinds a release that was recorded in error and deprives the release of any effect or (ii) rescinds the erroneous satisfaction of record of the security instrument and reinstates the security instrument.
  3. A recorded document of rescission has no effect on the rights of a person that:
    1. Records an interest in the real property described in a security instrument after the recording of a release that was recorded in error or the erroneous satisfaction of record of the security instrument and before the recording of the document of rescission; and
    2. Would otherwise have priority over or take free of the lien created by the security instrument as reinstated under Chapter 47 of the General Statutes.
  4. A person that erroneously or wrongfully records a document of rescission is liable to any person injured thereby for the actual loss caused by the recording and reasonable attorneys’ fees and costs.
  5. A document is a document of rescission if it does all of the following:
    1. Identifies the related security instrument, including the type of security instrument, the original parties to the security instrument, the recording data for the security instrument, and the office in which the security instrument is recorded.
    2. If the document of rescission is intended to rescind a release that was recorded in error, (i) identifies the release that was recorded in error by its recording data and the office in which it is recorded, (ii) states that the release was recorded in error, and (iii) states that the release is rescinded.
    3. If the document of rescission is intended to rescind the erroneous satisfaction of record of a security instrument, (i) identifies the satisfaction document that was recorded in error by its recording data and the office in which it is recorded, (ii) states that the security instrument was erroneously satisfied of record, and (iii) states that the satisfaction of the security instrument is rescinded and the security instrument reinstated.
    4. States that the person signing the document of rescission is either (i) the secured creditor or (ii) the person who caused the release to be recorded in error or the security instrument to be erroneously satisfied of record.
    5. Is signed and acknowledged as required by law for a conveyance of an interest in real property.
  6. The register of deeds shall accept a document of rescission for recording unless one of the following applies:
    1. The document is submitted by a method or in a medium not authorized for registration by the register of deeds under applicable law.
    2. The required recording fee is not paid.
    3. The document is not signed and acknowledged as required by law for a conveyance of an interest in real property by either the secured creditor or the person who caused the release to be recorded in error or the security instrument to be erroneously satisfied of record. The register of deeds shall not be required to verify or make inquiry concerning (i) the truth of the matters stated in any document of rescission or (ii) the authority of the person executing any document of rescission to do so.
  7. No particular phrasing is required for a document of rescission that rescinds a release that was recorded in error. The following form, when properly completed, is sufficient to satisfy the requirements of subsection (e) of this section:
  8. No particular phrasing is required for a document of rescission that rescinds the erroneous satisfaction of a security instrument. The following form, when properly completed, is sufficient to satisfy the requirements of G.S. 45-36.6(e):

‘‘DOCUMENT OF RESCISSION () G.S. 45-36.6(e) The security instrument to which this Document of Rescission relates is identified as follows: Type of Security Instrument: (identify type of security instrument, such as deed of trust or mortgage) Original Grantor(s): (identify original grantor(s), trustor(s), or mortgagor(s)) Original Secured Party(ies): (identify the original beneficiary(ies), mortgagee(s), or secured party(ies) in the security instrument) Recording Data: The security instrument is recorded in Book at Page or as document number in the office of the Register of Deeds for County, North Carolina. This Document of Rescission rescinds the release recorded in Book at Page or as document number in the office of the Register of Deeds for County, North Carolina. The release was recorded in error, is hereby rescinded, and is declared to be of no effect. The undersigned is: (check applicable box) The secured creditor in the security instrument identified above. The person who caused the release to be recorded in error. Date: Signature of secured creditor or person who caused the release to be recorded in error [Acknowledgment before officer authorized to take acknowledgments]’’

Click to view

“DOCUMENT OF RESCISSION () G.S. 45-36.6(e) The security instrument to which this Document of Rescission relates is identified as follows: Type of Security Instrument: (identify type of security instrument, such as deed of trust or mortgage) Original Grantor(s): (identify original grantor(s), trustor(s), or mortgagor(s)) Original Secured Party(ies): (identify the original beneficiary(ies), mortgagee(s), or secured party(ies) in the security instrument) Recording Data: The security instrument is recorded in Book at Page or as document number in the office of the Register of Deeds for County, North Carolina. The security instrument was erroneously satisfied of record by that satisfaction document recorded in Book at Page or as document number in the office of the Register of Deeds for County, North Carolina. The satisfaction of the security instrument is hereby rescinded, the security instrument is reinstated, and the security instrument is declared to be in full force and effect. The undersigned is: (check applicable box) The secured creditor in the security instrument identified above. The person who caused the security instrument to be satisfied of record erroneously. Date: Signature of secured creditor or person who caused the security instrument to be satisfied of re- cord erroneously [Acknowledgment before officer authorized to take acknowledgments]”.

Click to view

History. 2005-123, s. 1; 2006-259, s. 52(b); 2006-264, s. 40(a); 2011-312, s. 4.

Effect of Amendments.

Session Laws 2006-264, s. 40(a), as amended by 2006-259, s. 52(b), effective October 1, 2006, added the second sentence in subsection (b).

Session Laws 2011-312, s. 4, effective October 1, 2011, rewrote subsections (a) and (b); in subdivision (c)(1), substituted “recording of a release that was recorded in error” for “recording of the satisfaction or affidavit of satisfaction of the security instrument” and deleted “by other means” following “security instrument”; and added subsections (e) through (h).

CASE NOTES

Construction. —

Court of Appeals of North Carolina is constrained to hold that an instrument erroneously satisfied of record under G.S. 45-36.6(b) is one for which the certificate of satisfaction was erroneously or mistakenly filed for any reason, even a unilateral mistake having nothing to do with whether the underlying obligation actually was fully paid off. Wells Fargo Bank, N.A. v. Am. Nat'l Bank & Trust Co., 250 N.C. App. 280, 791 S.E.2d 906, 2016 N.C. App. LEXIS 1104 (2016).

Recession of Erroneously Recorded Satisfaction. —

Bank was not entitled to surplus funds from foreclosure sale because bank had mistakenly recorded certificate of satisfaction, and a title search on day of upset bid would have indicated that bank’s deed of trust had been cancelled. Later rescission had no effect on rights of upset bid purchaser pursuant to G.S. 45-36.6(c)(1). Branch Banking & Trust Co. v. Schiphof (In re Schiphof), 192 N.C. App. 696, 666 S.E.2d 497, 2008 N.C. App. LEXIS 1663 (2008).

Summary Judgment Inappropriate. —

Court of Appeals of North Carolina is constrained to hold that an instrument erroneously satisfied of record under G.S. 45-36.6(b) is one for which the certificate of satisfaction was erroneously or mistakenly filed for any reason, even a unilateral mistake having nothing to do with whether the underlying obligation actually was fully paid off. Wells Fargo Bank, N.A. v. Am. Nat'l Bank & Trust Co., 250 N.C. App. 280, 791 S.E.2d 906, 2016 N.C. App. LEXIS 1104 (2016).

§ 45-36.7. Payoff and short-pay statements; request and content.

  1. An entitled person, or an agent authorized by an entitled person to request a payoff or a short-pay statement, may give to the secured creditor a notification requesting a payoff statement or a short-pay statement. The notification must contain all of the following:
    1. The entitled person’s name.
    2. If given by a person other than an entitled person, the name of the person giving the notification and a statement that the person is an authorized agent of the entitled person.
    3. A direction whether the statement is to be sent to the entitled person or that person’s authorized agent.
    4. The address to which the creditor must send the statement.
    5. Sufficient information to enable the creditor to identify the secured obligation and the real property encumbered by the security interest.
    6. Whether the request is for a payoff statement or a short-pay statement.
    7. If the request is for a payoff statement, the specified payoff date, which may not be more than 30 days after the notification is given.
    8. If the request is for a short-pay statement, (i) the specified short-pay date, which may not be more than 30 days after the notification is given, (ii) a clear statement as to whether the request is for the short-pay amount required to release all of the real property described in the security instrument or only a portion of that property, and (iii) if the request is for the short-pay amount required to release only a portion of the real property described in the security instrument, a description of the specific real property to be released upon payment of the short-pay amount.
  2. If a notification under subsection (a) of this section directs the secured creditor to send the payoff statement or a short-pay statement to a person identified as an authorized agent of the entitled person, the secured creditor must send the statement to the agent, unless the secured creditor knows that the entitled person has not authorized the request.
  3. A person who gives to a secured creditor a notification requesting a payoff statement or a short-pay statement thereby represents that the person is an entitled person or the authorized agent of an entitled person. A secured creditor may rely on that representation in providing a payoff statement or a short-pay statement unless the secured creditor knows that the requesting person is neither an entitled person nor the authorized agent of an entitled person. A secured creditor has no duty to make inquiry as to whether, or to verify that, the person requesting a payoff statement or a short-pay statement is an entitled person or the authorized agent of an entitled person.
  4. Within 10 days after the effective date of a notification that complies with subsection (a) of this section, the secured creditor shall issue a payoff statement or a short-pay statement and send it as directed pursuant to subdivision (a)(3) of this section in the manner prescribed in G.S. 45-36.5 for giving a notification. A secured creditor that sends a payoff statement or a short-pay statement to the entitled person or the authorized agent may not claim that the notification did not satisfy subsection (a) of this section. If the person to whom the notification is given once held an interest in the secured obligation but has since assigned that interest, the person need not send a payoff statement or a short-pay statement but shall give (i) a notification of the assignment to the person to whom the payoff statement or a short-pay statement otherwise would have been sent, providing the name and address of the assignee, or (ii) a notification to the person to whom the payoff statement or a short-pay statement otherwise would have been sent, stating that the recipient claims no interest in the security instrument or the secured obligation, that the secured obligation was assigned, but that the identity and address of the assignee is not known.
  5. A payoff statement must contain:
    1. The date on which it was prepared and the payoff amount as of that date, including the amount by type of each fee, charge, or other sum included within the payoff amount;
    2. The information reasonably necessary to calculate the payoff amount as of the requested payoff date, including the per diem interest amount; and
    3. The payment cutoff time, if any, the address or place where payment must be made, and any limitation as to the authorized method of payment.
  6. A short-pay statement must contain:
    1. The information reasonably necessary to calculate the short-pay amount as of the requested short-pay date, including the per diem interest amount, if any;
    2. The payment cutoff time, if any, the address or place where payment of the short-pay amount must be made, and any limitation as to the authorized method of payment;
    3. Any conditions precedent that must be satisfied to obtain the release of the property identified in the request for the short-pay statement from the lien of the security instrument; and
    4. Confirmation of the specific real property to be released from the lien of the security instrument upon receipt of the timely payment of the short-pay amount and satisfaction of the other conditions precedent to the release of that property.Unless the short-pay statement expressly provides otherwise, all persons liable for payment or performance of the obligations secured by the security instrument will remain liable for the secured obligations to the extent the short-pay amount is not sufficient to satisfy the secured obligations in full.
  7. A payoff statement or a short-pay statement may contain the amount of any fees authorized under this section not included in the payoff amount. A secured creditor may require the payment in full of any fees authorized under this section before issuing a payoff statement or a short-pay statement.
  8. A secured creditor may not qualify a payoff amount or state that it is subject to change before the payoff date unless the payoff statement provides information sufficient to permit the entitled person or the person’s authorized agent to request an updated payoff amount at no charge and to obtain that updated payoff amount during the secured creditor’s normal business hours on the payoff date or the immediately preceding business day. A secured creditor may not qualify a short-pay amount or state that it is subject to change before the short-pay date unless the short-pay statement provides information sufficient to permit the entitled person or the person’s authorized agent to request an updated short-pay amount at no charge and to obtain that updated short-pay amount during the secured creditor’s normal business hours on the short-pay date or the immediately preceding business day.
  9. A secured creditor must provide upon request one payoff statement or one short-pay statement without charge during any six-month period. A secured creditor may charge a fee of twenty-five dollars ($25.00) for each additional payoff statement and one hundred dollars ($100.00) for each additional short-pay statement requested during that six-month period. However, a secured creditor may not charge a fee for providing an updated payoff amount or short-pay amount under subsection (g) of this section or a corrected payoff statement or short-pay statement under G.S. 45-36.8(a).
  10. Unless the security instrument provides otherwise, a secured creditor is not required to send a payoff statement or a short-pay statement by means other than first-class mail. If the creditor agrees to send a statement by another means, it may charge a reasonable fee for complying with the requested manner of delivery.
  11. Except as otherwise provided in G.S. 45-36.12, if a secured creditor to which a notification has been given pursuant to subsection (a) of this section does not send a timely payoff statement that substantially complies with subsection (e) of this section or a short-pay statement that substantially complies with subsection (e1) of this section, the creditor is liable to the entitled person for any actual damages caused by the failure, but not punitive damages. A creditor that does not pay the damages provided in this subsection within 30 days after receipt of a notification demanding payment shall also be liable for reasonable attorneys’ fees and costs.
  12. This section does not apply unless (i) the notification requesting a payoff statement is given on or after October 1, 2005, and (ii) the notification requesting a short-pay statement is given on or after October 1, 2011.

History. 2005-123, s. 1; 2011-312, s. 5.

Effect of Amendments.

Session Laws 2011-312, s. 5, effective October 1, 2011, in the section catchline, substituted “Payoff and short-pay statements” for “Payoff statement”; throughout the section, inserted “or a short-pay statement”; in the introductory paragraph of subsection (a), in the first sentence, deleted “statement” following “payoff” and “for a specified payoff date not more than 30 days after the notification is given” following “payoff statement”; added subdivisions (a)(6) through (a)(8); added subsection (e1); in subsection (g), added the last sentence; in subsection (h), in the first sentence, inserted “or one short-pay statement,” in the second sentence, inserted “and one hundred dollars ($100.00) for each additional short-pay statement,” and in the last sentence, inserted “or short-pay amount” and updated the internal reference; in the first sentence of subsection (j), substituted “subsection (e) of this section” for “subsection (d) of this section” and inserted “or a short-pay statement that substantially complies with subsection (e1) of this section”; and in subsection (k), inserted the designation “(i)” and added “and (ii) the notification requesting a short-pay statement is given on or after October 1, 2011.”

CASE NOTES

Applicability. —

G.S. 45-36.7(g) was not applicable to a matter in which a trial court granted summary judgment in favor of a bank on its conversion claim against a real estate firm because the firm contended that the bank’s instruction in a payoff statement that no funds be disbursed to the seller constituted an improper qualification of the payoff amount under G.S. 45-36.7(g), but it did not cite to any North Carolina case authority in support of its argument, and there was no reason for construing the bank’s proscription on disbursements of funds to the seller as a qualification of the payoff amount. Trey Inman & Assocs., P.C. v. Bank of Am., N.A., 306 Ga. App. 451, 702 S.E.2d 711, 2010 Ga. App. LEXIS 963 (2010).

§ 45-36.7A. Credit suspension directives.

  1. A credit suspension directive may be given to a secured creditor by any of the following:
    1. Any borrower.
    2. The legal representative of any borrower.
    3. The attorney for any borrower.
    4. An attorney licensed to practice law in the State of North Carolina or a bank, savings and loan association, savings bank, or credit union, but only when (i) the attorney, bank, savings and loan association, savings bank, or credit union is responsible for the disbursement of funds in connection with the sale of, or a new loan secured by, real property then encumbered by an existing security instrument; (ii) a requirement of the sale or new loan transaction is that the property be conveyed or encumbered free and clear of the lien of the existing security instrument; and (iii) the credit suspension directive is given to the secured creditor contemporaneously with a notification requesting a payoff statement or a short-pay statement in anticipation of and in preparation for the imminent settlement of the sale or new loan transaction.
  2. A credit suspension directive must contain all of the following:
    1. The name and authority of the person giving the directive.
    2. Sufficient information to enable the creditor to identify the secured obligation, the identity of the borrower, and the real property encumbered by the security interest.
    3. The specified payoff date, which may not be more than 30 days after the notification is given.
    4. A clear and unambiguous directive to the secured creditor to suspend through and including the payoff date the borrower’s right and ability to obtain any additional credit advances which, if made, would be secured by the security instrument.
  3. If the person who gives a credit suspension directive to a secured creditor is a person listed in subdivision (a)(4) of this section, that person shall also (i) give a copy of the credit suspension directive to the borrower and (ii) provide an additional notification to the borrower that provides substantially as follows:
  4. Upon receipt of a credit suspension directive, a secured creditor shall:
    1. Subject to subsection (e) of this section, suspend the borrower’s right and ability to obtain credit advances which, if made, would be secured by the security instrument. The period of suspension shall continue through and including the payoff date stated in the credit suspension directive.
    2. Apply all sums subsequently paid during the period of suspension by or on behalf of the borrower in connection with the secured obligation, including sums paid to the secured creditor by a person responsible for the disbursement of funds in connection with the sale of, or a new loan secured by, real property then encumbered by a security instrument, to the satisfaction of the secured obligation, regardless of whether the amount or amounts paid are sufficient to pay the secured obligation and other sums secured by the security instrument in full. Sums paid to the secured creditor in excess of the amount required to pay the secured obligation and other sums secured by the security instrument in full shall be refunded by the secured creditor to or at the direction of the person who paid the excess amount.
  5. Notwithstanding a secured creditor’s receipt of a credit suspension directive, a secured creditor may do any of the following, all of which shall be secured by the security instrument:
    1. The secured creditor may advance sums and incur expenses (i) for insurance, taxes, and assessments, (ii) to protect the secured creditor’s interest under the security instrument, (iii) to preserve and protect the value or condition of the real property encumbered by the security instrument, or (iv) to complete the construction of improvements on the real property encumbered by the security instrument.
    2. The secured creditor may permit the borrower to obtain a credit advance, but only if the credit advance was initiated or approved before the secured creditor received the credit suspension directive.
  6. If the person giving a credit suspension directive is not a borrower, then the person giving a credit suspension directive shall be conclusively deemed the borrower’s agent acting with full authority from the borrower to issue the credit suspension directive on the borrower’s behalf.
  7. A credit suspension directive may be withdrawn at any time by the person who gave the directive. If the person who gives a credit suspension directive to a secured creditor is a person listed in subdivision (a)(4) of this section, that person shall promptly notify the secured creditor that the credit suspension directive is withdrawn (i) if instructed by the borrower at any time to withdraw the directive or (ii) if the anticipated sale or new loan transaction is cancelled. Upon receipt of a notice from the person who originally gave the credit suspension directive that the credit suspension directive is withdrawn, the secured creditor may reinstate the borrower’s right and ability to obtain credit advances.

“NOTICE TO BORROWER

You have a loan with (name of lender) secured by a mortgage or deed of trust on real property located at (address of property).

We will be responsible for disbursing funds in connection with a scheduled sale of the property or a new loan that will be secured by the property. A requirement of the sale or new loan transaction is that the property be conveyed or encumbered free and clear of the existing mortgage or deed of trust that secures your loan.

As permitted by North Carolina law, we are sending the (enclosed/attached/following/foregoing) notification to your lender directing that it temporarily suspend your right and ability to obtain credit advances in anticipation of the settlement of the sale or loan. The notification accompanies a request asking the amount that must be sent to your lender to pay your loan in full and cancel the mortgage or deed of trust that secures your loan (or, if your loan will not be paid in full, to release the property from the mortgage or deed of trust that secures your loan). The information your lender provides us may be inaccurate if you obtain additional credit advances before the scheduled settlement date of the sale or new loan transaction.

When your lender receives our directive, it will temporarily suspend your right and ability to obtain credit advances. The period of suspension will continue through and including (anticipated payoff date), the anticipated payoff date, regardless of whether the settlement of the sale or new loan transaction occurs as scheduled. The suspension will not affect your responsibility to continue making payments to your lender during the suspension period. You should not attempt to obtain additional credit advances from your lender during the suspension period.

You may instruct us at any time during the suspension period to withdraw the credit suspension directive we are sending your lender, and we are required by law to comply. However, if you do so, you may jeopardize the settlement of the sale or new loan transaction because the payoff or release information provided by your lender may become inaccurate.

When proceeds from a sale or new loan transaction are used to pay an existing loan in full, lenders typically close the loan account, thereby terminating their borrower’s ability to obtain additional credit advances. You should contact your lender to determine whether you will be able to obtain additional credit advances after the settlement of the sale or new loan transaction.

If you have questions about this notice or our action, please contact (name of contact person or department) by calling us at (phone number) or writing to us at (mailing address).

(Name of attorney, bank, savings and loan association, savings bank, or credit union)”

History. 2011-312, s. 6.

§ 45-36.8. Understated payoff statement or short-pay statement: correction; effect.

  1. If a secured creditor determines that the payoff amount it provided in a payoff statement or the short-pay amount it provided in a short-pay statement was understated, the creditor may send a corrected payoff or short-pay statement. If the entitled person or the person’s authorized agent receives and has a reasonable opportunity to act upon a corrected payoff statement or short-pay statement before making payment, the corrected statement supersedes an earlier statement.
  2. A secured creditor that sends a payoff statement containing an understated payoff amount or a short-pay statement containing an understated short-pay amount may not deny the accuracy of the payoff amount or short-pay amount as against any person that reasonably and detrimentally relies upon the understated payoff amount or short-pay amount.
  3. This Article does not:
    1. Affect the right of a secured creditor to recover any sum that it did not include in a payoff amount or a short-pay amount from any person liable for payment of the secured obligation; or
    2. Limit any claim or defense that a person liable for payment of a secured obligation may have under law other than this Article.

History. 2005-123, s. 1; 2011-312, s. 7.

Effect of Amendments.

Session Laws 2011-312, s. 7, effective October 1, 2011, in the section catchline, substituted “payoff statement or short-pay statement” for “payoff statement”; in subsection (a), in the first sentence, inserted “or the short-pay amount it provided in a short-pay statement” and substituted “payoff or short-pay statement” for “payoff statement,” and in the last sentence, inserted “or short-pay statement”; in subsection (b), inserted “or a short-pay statement containing an understated short-pay amount” and twice added “or short-pay amount”; and in subdivision (c)(1), inserted “or a short-pay amount.”

CASE NOTES

Applicability. —

G.S. 45-36.8(b) was not applicable to a matter in which a trial court granted summary judgment in favor of a bank on its conversion claim against a real estate firm because the payoff amount provided in the bank’s payoff statement was not understated, and the bank had never denied its accuracy; rather, the bank’s clear instructions were that it was to receive the net sale proceeds if those proceeds were greater than the stated payoff amount, which they were. Trey Inman & Assocs., P.C. v. Bank of Am., N.A., 306 Ga. App. 451, 702 S.E.2d 711, 2010 Ga. App. LEXIS 963 (2010).

§ 45-36.9. Secured creditor to submit satisfaction or release for recording; liability for failure.

  1. A secured creditor shall submit for recording a satisfaction of a security instrument within 30 days after the creditor receives full payment or performance of the secured obligation. If a security instrument secures a line of credit or future advances, the secured obligation is fully performed only if, in addition to full payment, the secured creditor has received (i) a notification requesting the creditor to terminate the line of credit, (ii) a credit suspension directive, or (iii) a notification containing a clear and unambiguous statement sufficient to terminate the effectiveness of the provision for future advances in the security instrument including, but not limited to, a request to terminate an equity line of credit given pursuant to G.S. 45-82.2 or a notice regarding future advances given pursuant to G.S. 45-82.3.
  2. If the conditions stated in a short-pay statement are fully satisfied on or before the short-pay date stated in the short-pay statement, including the payment in full of the short-pay amount and the satisfaction of all other conditions precedent to the release set forth in the short-pay statement, then within 30 days after the short-pay date the secured creditor shall release the property which is the subject of the short-pay statement from the lien of the security instrument. The release of the property may be accomplished by a deed of release, an instrument of full or partial reconveyance, a partial release recorded pursuant to G.S. 45-36.22, the satisfaction of record of the security instrument by any of the means authorized in G.S. 45-37(a), or by any other lawful means.
  3. Except as otherwise provided in G.S. 45-36.12, a secured creditor that is required to submit a satisfaction of a security instrument or a release for recording pursuant to this section and does not do so by the end of the period specified in subsection (a) or (a1) of this section is liable to the landowner for any actual damages caused by the failure, but not punitive damages.
  4. Except as otherwise provided in subsection (d) of this section and in G.S. 45-36.12, a secured creditor that is required to submit a satisfaction of a security instrument or a release for recording pursuant to this section and does not do so by the end of the period specified in subsection (a) or (a1) of this section is also liable to the landowner for one thousand dollars ($1,000) and any reasonable attorneys’ fees and court costs incurred if, after the expiration of the period specified in subsection (a) or (a1) of this section, all of the following occur:
    1. The landowner gives the secured creditor a notification, by any method authorized by G.S. 45-36.5 that provides proof of receipt, demanding that the secured creditor submit a satisfaction or release for recording.
    2. The secured creditor does not submit a satisfaction or release for recording within 30 days after the secured creditor’s receipt of the notification.
    3. The security instrument is not satisfied of record by any of the methods provided in G.S. 45-37(a) or the release is not filed within 30 days after the secured creditor’s receipt of the notification.
  5. Subsection (c) of this section does not apply if the secured creditor received full payment or performance of the secured obligation before October 1, 2005.
  6. Repealed by Session Laws 2011-246, s. 3, effective October 1, 2011.

The right to receive the additional one thousand dollars ($1,000) is personal to the landowner who gives the secured creditor notification under this subsection and may not be assigned.

History. 2005-123, s. 1; 2011-246, s. 3; 2011-312, s. 8; 2013-204, s. 2.1.

Effect of Amendments.

Session Laws 2011-246, s. 3, effective October 1, 2011, repealed subsection (e).

Session Laws 2011-312, s. 8, effective October 1, 2011, in the section catchline, inserted “or release”; in the last sentence of subsection (a), inserted “(i),” “(ii) a credit suspension directive,” “(iii) a notification” and “a clear and unambiguous,” and added “including, but not limited to, a request to terminate an equity line of credit given pursuant to G.S. 45-82.2 or a notice regarding future advances given pursuant to G.S. 45-82.3”; and added subsection (a1).

Session Laws 2013-204, s. 2.1, effective June 26, 2013, in subsections (b) and (c), added “or a release,” “pursuant to this section” and “or (a1)”; added “or release” in subdivisions (c)(1) and (c)(2); and added “or the release is not filed” in subdivision (c)(3).

CASE NOTES

Subsequent Deed of Trust. —

Where creditors recorded a new deed of trust but failed to record the cancellation of the old deed of trust, the court determined in an adversary proceeding pursuant to 11 U.S.C.S. § 506 that they nonetheless had a secured claim based on the new deed of trust, as there was no state law requirement that conditioned the validity of the subsequent deed of trust on the filing of the cancellation of the prior deed of trust; although G.S. 45-36.9 provides a right to sue for actual damages for late recordings of satisfactions, it did not invalidate such satisfactions or subsequent deeds of trust for untimely recording. Naeem Ahsan v. Yasir Syed, 2011 Bankr. LEXIS 1093 (Bankr. E.D.N.C. Mar. 29, 2011).

No Cause of Action. —

In a dispute over a home equity line of credit, a complaint failed to state a claim on which relief could have been granted under this statute because it did not allege any point at which the line of credit had a zero balance and the debtors requested that the bank record a satisfaction. Perry v. Bank of Am., N.A., 251 N.C. App. 776, 796 S.E.2d 799, 2017 N.C. App. LEXIS 40 (2017).

§ 45-36.10. Content and effect of satisfaction.

  1. A document is a satisfaction of a security instrument if it does all of the following:
    1. Identifies the type of security instrument, the original parties to the security instrument, the recording data for the security instrument, and the office in which the security instrument is recorded.
    2. States that the person signing the satisfaction is the secured creditor.
    3. Reserved.
    4. Contains language terminating the effectiveness of the security instrument.
    5. Is signed by the secured creditor and acknowledged as required by law for a conveyance of an interest in real property.
  2. The register of deeds shall accept for recording a satisfaction of a security instrument, unless one of the following applies:
    1. The document is submitted by a method or in a medium not authorized for registration by the register of deeds under applicable law.
    2. The document is not signed by the secured creditor and acknowledged as required by law for a conveyance of an interest in real property. The register of deeds shall not be required to verify or make inquiry concerning (i) the truth of the matters stated in any satisfaction document, or (ii) the authority of the person executing any satisfaction document to do so.
  3. Unless the satisfaction expressly states that the underlying obligation secured by the security instrument has been extinguished and the underlying note or other instrument evidencing the obligation has been cancelled, the recording of a satisfaction of a security instrument does not by itself extinguish any liability of a person for payment or performance of the secured obligation.

History. 2005-123, s. 1; 2015-56, s. 1.

Effect of Amendments.

Session Laws 2015-56, s. 1, effective June 4, 2015, substituted “Unless the satisfaction expressly states that the underlying obligation secured by the security instrument has been extinguished and the underlying note or other instrument evidencing the obligation has been cancelled, the” for “The” at the beginning of subsection (c).

§ 45-36.11. Satisfaction: form.

  1. Standard Form. —  No particular phrasing is required for a satisfaction of a security instrument. The following form, when properly completed, is sufficient to satisfy the requirements of G.S. 45-36.10(a):

“SATISFACTION OF SECURITY INSTRUMENT

(G.S. 45-36.10; G.S. 45-37(a)(7)) The undersigned is now the secured creditor in the security instrument identified as follows:Type of Security Instrument: (identify type of security instrument, such as deed of trust or mortgage)Original Grantor(s): (Identify original grantor(s), trustor(s), or mortgagor(s))Original Secured Party(ies): (Identify the original beneficiary(ies), mortgagee(s), or secured party(ies) in the security instrument)Recording Data: The security instrument is recorded in Book _______________ at Page _______________ or as document number _______________ in the office of the Register of Deeds for _______________ County, North Carolina.This satisfaction terminates the effectiveness of the security instrument.

Date: (Signature of secured creditor) [Acknowledgment before officer authorized to take acknowledgments]” (b) A secured creditor who would like to indicate that the underlying obligation secured by the instrument has been extinguished may use the following form, which, when properly completed, is also sufficient to satisfy the requirements of : G.S. 45-36.10(a) “SATISFACTION OF SECURITY INSTRUMENT (; ) G.S. 45-36.10 G.S. 45-37(a)(7) The undersigned is now the secured creditor in the security instrument identified as follows: Type of Security Instrument: (identify type of security instrument, such as deed of trust or mortgage) Original Grantor(s): (Identify original grantor(s), trustor(s), or mortgagor(s)) Original Secured Party(ies): (Identify the original beneficiary(ies), mortgagee(s), or secured party(ies) in the security instrument) Recording Data: The security instrument is recorded in Book at Page or as document number in the office of the Register of Deeds for County, North Carolina. This satisfaction terminates the effectiveness of the security instrument and extinguishes the underlying obligation secured by the instrument. Date: (Signature of secured creditor) [Acknowledgment before officer authorized to take acknowledgments]’’.

Click to view

History. 2005-123, s. 1; 2012-150, s. 1.

Effect of Amendments.

Session Laws 2012-150, s. 1, effective October 1, 2012, added the subsection (a) designation and added subsection (b); and inserted “Standard Form” at the beginning of subsection (a). For applicability, see editor’s note.

§ 45-36.12. Limitation of secured creditor’s liability.

A secured creditor is not liable under this Article if it:

  1. Established a reasonable procedure to achieve compliance with its obligations under this Article;
  2. Complied with that procedure in good faith; and
  3. Was unable to comply with its obligations because of circumstances beyond its control.

History. 2005-123, s. 1.

§ 45-36.13. Eligibility to serve as satisfaction agent.

No person other than an attorney licensed to practice law in the State of North Carolina may serve as a satisfaction agent under this Article.

History. 2005-123, s. 1.

§ 45-36.14. Affidavit of satisfaction: notification to secured creditor.

  1. If a secured creditor has not submitted for recording a satisfaction of a security instrument and the security instrument has not been satisfied of record by any of the methods provided by G.S. 45-37(a) within the period specified in G.S. 45-36.9(a), a satisfaction agent acting for and with authority from the landowner may give the secured creditor a notification that the satisfaction agent intends to submit for recording an affidavit of satisfaction of the security instrument. The notification must include all of the following:
    1. The identity and mailing address of the satisfaction agent.
    2. Identification of the security instrument for which a recorded satisfaction is sought, including the names of the original parties to, and the recording data for, the security instrument.
    3. A statement that the satisfaction agent has reasonable grounds to believe that:
      1. The person to whom the notification is being given is the secured creditor; and
      2. The secured creditor has received full payment or performance of the secured obligation.
    4. A statement that the security instrument has not been satisfied of record.
    5. A statement that the satisfaction agent, acting with the authorization of the owner of the real property described in the security instrument, intends to sign and submit for recording an affidavit of satisfaction of the security instrument unless, within 30 days after the effective date of the notification:
      1. The secured creditor submits a satisfaction of the security instrument for recording;
      2. The satisfaction agent receives from the secured creditor a notification stating that the secured obligation remains unsatisfied;
      3. The satisfaction agent receives from the secured creditor a notification stating that the secured creditor has assigned the security instrument and identifying the name and address of the assignee; or
      4. The security instrument is satisfied of record by any of the methods provided in G.S. 45-37(a).
  2. A notification under subsection (a) of this section must be sent by a method authorized by G.S. 45-36.5 that provides proof of receipt to the secured creditor’s address for giving a notification for the purpose of requesting a payoff statement or, if the satisfaction agent cannot ascertain that address, to the secured creditor’s address for notification for any other purpose.
  3. This Article does not require a person to agree to serve as a satisfaction agent.
  4. A satisfaction agent does not have to give the notification described in this section if (i) the secured creditor has authorized the satisfaction agent to sign and submit an affidavit of satisfaction; (ii) the satisfaction agent has in his or her possession the instruments described in G.S. 45-36.15(a)(3), (a)(4), or (a)(5); or (iii) after diligent inquiry, the satisfaction agent has been unable to determine the identity of the secured creditor because, for example, the last known secured creditor no longer exists and the satisfaction agent has been unable to identify any successor-in-interest to the last known secured creditor.

History. 2005-123, s. 1; 2013-204, s. 2.2.

Effect of Amendments.

Session Laws 2013-204, s. 2.2, effective June 26, 2013, added subsection (d).

CASE NOTES

Remedies. —

Bank could not obtain under G.S. 45-36.14 cancellation or subordination of an equity line of credit deed of trust due to the equity line of credit lender’s failure to cancel the deed of trust after the bank transmitted a portion of its loan funds to the lender to pay the balance of the line of credit because, even though a full payment may have been made in the past, a balance existed at present. Cooper v. First Bank, 2013 Bankr. LEXIS 2985 (Bankr. E.D.N.C. July 25, 2013), aff'd, 2014 U.S. Dist. LEXIS 60107 (E.D.N.C. Apr. 3, 2014).

§ 45-36.15. Affidavit of satisfaction: authorization to submit for recording.

  1. Subject to subsections (b) and (c) of this section, a satisfaction agent may sign and submit for recording an affidavit of satisfaction of a security instrument complying with G.S. 45-36.16 if the satisfaction agent has reasonable grounds to believe that the secured creditor has received full payment or performance of the secured obligation and one or more of the following apply:
    1. The secured creditor has not, to the knowledge of the satisfaction agent, submitted for recording a satisfaction of a security instrument or otherwise caused the security instrument to be satisfied of record pursuant to any of the methods provided in G.S. 45-37(a) within 30 days after the effective date of a notification complying with G.S. 45-36.14(a).
    2. The secured creditor has authorized the satisfaction agent to sign and submit for recording an affidavit of satisfaction.
    3. The satisfaction agent has in his or her possession the original security instrument and the original bond, note, or other instrument secured thereby, with an endorsement of payment and satisfaction appearing thereon made by one or more of the following: (i) the secured creditor; (ii) the trustee or substitute trustee, if the security instrument is a deed of trust; (iii) an assignee of the secured creditor; or (iv) any bank, savings and loan association, savings bank, or credit union chartered under the laws of North Carolina or any other state or the United States having an office or branch in North Carolina, when so endorsed in the name of the institution by an officer thereof.
    4. The satisfaction agent has in his or her possession the original security instrument intended to secure the payment of money or the performance of any other obligation, together with the original bond, note, or other instrument secured, or the original security instrument alone if the security instrument itself sets forth the obligation secured or other obligation to be performed and does not call for or recite any note, bond, or other instrument secured by it if, at the time the affidavit of satisfaction is to be signed and submitted, all such instruments are more than 10 years old counting from the maturity date of the last obligation secured. If the instrument or instruments secured by the security instrument have an endorsement of partial payment, satisfaction, performance, or discharge within the period of 10 years, the period of 10 years shall be counted from the date of the most recent endorsement.
    5. The satisfaction agent has in his or her possession the original security instrument given to secure the bearer or holder of any negotiable instruments transferable solely by delivery, together with all the evidences of indebtedness secured thereby, marked paid and satisfied in full and signed by the bearer or holder thereof.
    6. After diligent inquiry, the satisfaction agent has been unable to determine the identity of the secured creditor because, for example, the last known secured creditor no longer exists and the satisfaction agent has been unable to identify any successor-in-interest to the last known secured creditor.
  2. A satisfaction agent may not sign and submit for recording an affidavit of satisfaction of a security instrument if it has received a notification under G.S. 45-36.14(a)(5)b. stating that the secured obligation remains unsatisfied.
  3. Unless the satisfaction agent has in his or her possession the instruments described in subdivision (a)(3), (a)(4), or (a)(5) of this section or the satisfaction agent is unable to determine the identity of the secured creditor because, for example, the last known assignee of the security instrument no longer exists and the satisfaction agent has been unable to identify any successor-in-interest to the last known assignee, a satisfaction agent who receives a notification under G.S. 45-36.14(a)(5)c. stating that the security instrument has been assigned may not submit for recording an affidavit of satisfaction of the security instrument without first:
    1. Giving a notification of intent to submit for recording an affidavit of satisfaction to the identified assignee at the identified address; and
    2. Complying with G.S. 45-36.14 with respect to the identified assignee.

History. 2005-123, s. 1; 2013-204, s. 2.3.

Effect of Amendments.

Session Laws 2013-204, s. 2.3, effective June 26, 2013, added “the satisfaction agent has reasonable grounds to believe that the secured creditor has received full payment or performance of the secured obligation and one or more of the following apply” at the end of the introductory language of subsection (a); substituted a period for “; or” at the end of subdivision (a)(1); in subdivision (a)(2), substituted “has authorized” for “authorizes” and “sign and submit for recording an affidavit of satisfaction” for “do so”; added subdivisions (a)(3) through (a)(6); and rewrote (c).

§ 45-36.16. Affidavit of satisfaction: content.

An affidavit of satisfaction of a security instrument must comply with all of the following:

  1. Identify the type of security instrument, the original parties to the security instrument, the secured creditor, the recording data for the security instrument, and the office in which the security instrument is recorded.
  2. State the basis upon which the person signing the affidavit is a satisfaction agent.
  3. Reserved.
  4. State that the person signing the affidavit has reasonable grounds to believe that the secured creditor has received full payment or performance of the secured obligation.
  5. Reserved.
  6. Reserved.
  7. State one or more of the following, as applicable:
    1. The person signing the affidavit, acting with the authority of the owner of the real property described in the security instrument, gave notification to the secured creditor in the manner prescribed by G.S. 45-36.14 of his or her intention to sign and submit for recording an affidavit of satisfaction. More than 30 days have elapsed since the effective date of that notification, and the person signing the affidavit (i) has no knowledge that the secured creditor has submitted a satisfaction for recording and (ii) has not received a notification that the secured obligation remains unsatisfied.
    2. The secured creditor authorized the person signing the affidavit to sign and record an affidavit of satisfaction.
    3. The person signing the affidavit has in his or her possession the original security instrument and the original bond, note, or other instrument secured thereby, with an endorsement of payment and satisfaction appearing thereon made by one or more of the following: (i) the secured creditor; (ii) the trustee or substitute trustee, if the security instrument is a deed of trust; (iii) an assignee of the secured creditor; or (iv) a bank, savings and loan association, savings bank, or credit union chartered under the laws of North Carolina or any other state or the United States having an office or branch in North Carolina, endorsed in the name of the institution by an officer thereof.
    4. The person signing the affidavit has in his or her possession the original security instrument intended to secure the payment of money or the performance of any other obligation together with the original bond, note, or other instrument secured thereby, or the original security instrument alone if the security instrument itself sets forth the obligation secured or other obligation to be performed and does not call for or recite any note, bond, or other instrument secured by it. All such instruments are more than 10 years old counting from the maturity date of the last obligation secured. If the instrument or instruments secured by the security instrument have an endorsement of partial payment, satisfaction, performance, or discharge within the period of 10 years, the period of 10 years has been counted from the date of the most recent endorsement.
    5. The person signing the affidavit has in his or her possession the original security instrument given to secure the bearer or holder of any negotiable instruments transferable solely by delivery, together with all the evidences of indebtedness secured thereby, marked paid and satisfied in full and signed by the bearer or holder thereof.
    6. After diligent inquiry, the person signing the affidavit has been unable to determine the identity of the secured creditor.
  8. , (7) Repealed by Session Laws 2013-204, s. 2.4, effective June 26, 2013.
  9. Be signed and (i) acknowledged as required by law for a conveyance of an interest in real property or (ii) sworn to or affirmed before an officer authorized to administer oaths and affirmations.
  10. Copies of all or any part or parts of the instruments described in subdivision (5) of this section may be attached to and recorded with the affidavit of satisfaction.

History. 2005-123, s. 1; 2013-204, s. 2.4.

Effect of Amendments.

Session Laws 2013-204, s. 2.4, effective June 26, 2013, added subdivisions (4a) and (4b); rewrote subdivision (5); deleted subdivisions (6) and (7); in subdivision (8), added “(i)” and “or (ii) sworn to or affirmed before an officer authorized to administer oaths and affirmations”; and added subdivision (9).

§ 45-36.17. Affidavit of satisfaction: form.

No particular phrasing of an affidavit of satisfaction is required. The following form of affidavit, when properly completed, is sufficient to satisfy the requirements of G.S. 45-36.16:

“AFFIDAVIT OF SATISFACTION (, , ) G.S. 45-36.16 45-36.17 45-36.18 (Date of Affidavit) The undersigned hereby states as follows: 1. I am an attorney licensed to practice law in the State of North Carolina. 2. I am signing this Affidavit of Satisfaction to evidence full payment or performance of the obligations secured by real property covered by the following security instrument (the “security instrument”), which I believe is currently or was most recently held by (the “secured creditor”): Type of security instrument: Original Grantor(s): Original Secured Party(ies): Recording Data: The security instrument is recorded in Book at Page or as document number in the Office of the Register of Deeds for County, North Carolina. 3. I have reasonable grounds to believe that the secured creditor has received full payment or performance of the balance of the obligations secured by the security instrument. 4. [Check appropriate box] [ ] Acting with authorization from the owner of the real property described in the security instrument, I gave notification to the secured creditor in the manner prescribed by of my intention to sign and record an affidavit of satisfaction of the security instrument if, within 30 days after the effective date of the notification, the secured creditor did not submit a satisfaction of the security interest for recording or give notification that the secured obligation remains unsatisfied. The 30-day period has elapsed. I have no knowledge that the secured creditor has submitted a satisfaction for recording, and I have not received notification that the secured obligation remains unsatisfied. G.S. 45-36.14 [ ] I have been authorized by the secured creditor to execute and record this Affidavit of Satisfaction. [ ] I have in my possession the original security instrument and the original bond, note, or other instrument secured thereby, with an endorsement of payment and satisfaction appearing thereon made by one or more of the following: (i) the secured creditor; (ii) the trustee or substitute trustee, if the security instrument is a deed of trust; (iii) an assignee of the secured creditor; or (iv) a bank, savings and loan association, savings bank, or credit union chartered under the laws of North Carolina or any other state or the United States having an office or branch in North Carolina, endorsed in the name of the institution by an officer thereof. [ ] I have in my possession the original security instrument together with the original bond, note, or other instrument secured thereby, or the original security instrument alone if the security instrument itself sets forth the obligation secured or other obligation to be performed and does not call for or recite any note, bond, or other instrument secured by it. All such instruments are more than 10 years old counting from the maturity date of the last obligation secured. If the instrument or instruments secured by the security instrument have an endorsement of partial payment, satisfaction, or performance or discharge within the period of 10 years, the period of 10 years has been counted from the date of the most recent endorsement. [ ] I have in my possession the original security instrument given to secure the bearer or holder of any negotiable instruments transferable solely by delivery, together with all the evidences of indebtedness secured thereby, marked paid and satisfied in full and signed by the bearer or holder thereof. [ ] After diligent inquiry, I have been unable to determine the identity of the secured creditor. 5. (If applicable) Attached to and filed with this Affidavit of Satisfaction are copies of all or part(s) of the following instruments: (Describe attached copies) This Affidavit of Satisfaction constitutes a satisfaction of the security instrument pursuant to . G.S. 45-36.18 (Signature of Satisfaction Agent) [Acknowledgment, oath, or affirmation before officer authorized to take acknowledgments and administer oaths and affirmations]”

Click to view

History. 2005-123, s. 1; 2013-204, s. 2.5.

Effect of Amendments.

Session Laws 2013-204, s. 2.5, effective June 26, 2013, rewrote the affidavit.

§ 45-36.18. Affidavit of satisfaction: effect.

  1. Upon recording, an affidavit substantially complying with the requirements of G.S. 45-36.16 constitutes a satisfaction of the security instrument described in the affidavit.
  2. The recording of an affidavit of satisfaction of a security instrument does not by itself extinguish any liability of a person for payment or performance of the secured obligation.
  3. The register of deeds may not refuse to accept for recording an affidavit of satisfaction of a security instrument unless:
    1. The affidavit is submitted by a method or in a medium not authorized for registration by the register of deeds under applicable law; or
    2. The affidavit is not signed by the satisfaction agent and either (i) acknowledged as required by law for a conveyance of an interest in real property or (ii) sworn to or affirmed before an officer authorized to administer oaths and affirmations. The register of deeds shall not be required to verify or make inquiry concerning (i) the truth of the matters stated in any affidavit of satisfaction, or (ii) the authority of the person executing any affidavit of satisfaction to do so.

History. 2005-123, s. 1; 2013-204, s. 2.6.

Effect of Amendments.

Session Laws 2013-204, s. 2.6, effective June 26, 2013, in subdivision (c)(2), added “either (i)” and “or (ii) sworn to or affirmed before an officer authorized to administer oaths and affirmations.”

§ 45-36.19. Liability of satisfaction agent.

  1. Except as otherwise provided in subsection (b) of this section, a satisfaction agent or any person purporting to be a satisfaction agent that records or submits for recording an affidavit of satisfaction of a security instrument erroneously or with knowledge that the statements contained in the affidavit are false is liable to the secured creditor for any actual damages caused by the recording and reasonable attorneys’ fees and costs.
  2. A satisfaction agent that records or submits for recording an affidavit of satisfaction of a security instrument erroneously is not liable if the agent properly complied with this Article, gave notification to the secured creditor in the manner prescribed by G.S. 45-36.14, and the secured creditor did not respond in a timely manner to the notification pursuant to G.S. 45-36.14(a)(5).
  3. If a satisfaction agent or any person purporting to be a satisfaction agent records or submits for recording an affidavit of satisfaction of a security instrument with knowledge that the statements contained in the affidavit are false, this section does not preclude any of the following:
    1. A court from awarding punitive damages on account of the conduct.
    2. The secured creditor from proceeding against the satisfaction agent or person purporting to be a satisfaction agent under law of this State other than this Article.
    3. The enforcement of any criminal statute prohibiting the conduct.

History. 2005-123, s. 1; 2013-204, s. 2.7.

Effect of Amendments.

Session Laws 2013-204, s. 2.7, effective June 26, 2013, added “gave notification to the secured creditor in the manner prescribed by G.S. 45-36.14” in subsection (b).

§ 45-36.20. Trustee’s satisfaction of deed of trust: content and effect.

  1. Upon recording, a trustee’s satisfaction substantially complying with the requirements of this section constitutes a satisfaction of the deed of trust described in the trustee’s satisfaction.
  2. The recording of a trustee’s satisfaction does not by itself extinguish any liability of a person for payment or performance of the secured obligation.
  3. This section applies only if the security instrument is a deed of trust. This section is not exclusive. Deeds of trust may also be satisfied of record by methods other than the filing of a trustee’s satisfaction.
  4. Document is a trustee’s satisfaction of a deed of trust if it complies with all of the following:
    1. Identifies the original parties to the deed of trust, the recording data for the deed of trust, and the office in which the deed of trust is recorded.
    2. States that the person signing the trustee’s satisfaction is then serving as trustee or substitute trustee under the terms of the deed of trust.
    3. Contains language terminating the effectiveness of the deed of trust.
    4. Is signed by the trustee or substitute trustee then serving under the terms of the deed of trust and acknowledged as required by law for a conveyance of an interest in real property.
  5. The register of deeds shall accept for recording a trustee’s satisfaction of a deed of trust, unless:
    1. The trustee’s satisfaction is submitted by a method or in a medium not authorized for registration by the register of deeds under applicable law; or
    2. The trustee’s satisfaction is not signed by the trustee or substitute trustee and acknowledged as required by law for a conveyance of an interest in real property. The register of deeds shall not be required to verify or make inquiry concerning (i) the truth of the matters stated in any trustee’s satisfaction, or (ii) the authority of the person executing any trustee’s satisfaction to do so.

History. 2005-123, s. 1.

§ 45-36.21. Trustee’s satisfaction of deed of trust: form.

  1. Standard Form. —  No particular phrasing is required for a trustee’s satisfaction of a deed of trust. The following form, when properly completed, is sufficient to satisfy the requirements of G.S. 45-36.20:

‘‘TRUSTEE’S SATISFACTION OF DEED OF TRUST (; ) G.S. 45-36.20 G.S. 45-37(a)(7) The undersigned is now serving as the trustee or substitute trustee under the terms of the deed of trust identified as follows: Original Grantor(s): (Identify original grantor(s) or trustor(s)) Original Secured Party(ies): (Identify the original beneficiary(ies) or secured party(ies) in the deed of trust) Recording Data: The deed of trust is recorded in Book at Page or as document number in the office of the Register of Deeds for County, North Carolina. This satisfaction terminates the effectiveness of the deed of trust. Date: (Signature of trustee or substitute trustee) [Acknowledgment before officer authorized to take acknowledgments]’’ (b) — A trustee and secured creditor who would like to indicate that the underlying obligation secured by the deed of trust has been extinguished may use the following form, which, when properly completed, is also sufficient to satisfy the requirements of G.S. 45-36.20: Alternate Form. ‘‘TRUSTEE’S SATISFACTION OF DEED OF TRUST AND CREDITOR’S RELEASE (; ) G.S. 45-36.20 G.S. 45-37(a)(7) The undersigned is now serving as the trustee or substitute trustee under the terms of the deed of trust identified as follows: Original Grantor(s): (Identify original grantor(s) or trustor(s)) Original Secured Party(ies): (Identify the original beneficiary(ies) or secured party(ies) in the deed of trust) Recording Data: The deed of trust is recorded in Book at Page or as document number in the office of the Register of Deeds for County, North Carolina. This satisfaction terminates the effectiveness of the deed of trust. Date: (Signature of trustee or substitute trustee) [Acknowledgment before officer authorized to take acknowledgments]’’ The obligation secured by the deed of trust has been extinguished. Date: (Signature of trustee or substitute trustee)

Click to view

History. 2005-123, s. 1; 2012-150, s. 2.

Effect of Amendments.

Session Laws 2012-150, s. 2, effective October 1, 2012, added the subsection (a) designation; added subsection (b); and inserted “Standard Form” at the beginning of subsection (a). For applicability, see editor’s note.

§ 45-36.22. Partial release: content and effect; form.

  1. A document is a partial release if it does all of the following:
    1. Identifies the type of security instrument, the original parties to the security instrument, the recording data for the security instrument, and the office in which the security instrument is recorded.
    2. States that the person signing the partial release is the secured creditor or, if the security instrument is a deed of trust, that the person or persons signing the partial release is or are the secured creditor, the trustee, or both the secured creditor and the trustee.
    3. Contains language releasing property or an interest in property from the lien of the security instrument.
    4. Is signed and acknowledged as required by law for a conveyance of an interest in real property by the secured creditor or, if the security instrument is a deed of trust, by the secured creditor, the trustee, or both the secured creditor and the trustee.
  2. The register of deeds shall accept a partial release for recording unless one of the following applies:
    1. The document is submitted by a method or in a medium not authorized for registration by the register of deeds under applicable law.
    2. The required recording fee is not paid.
    3. The document is not signed and acknowledged as required by law for a conveyance of an interest in real property by the secured creditor or, if the security instrument is a deed of trust, by the secured creditor, the trustee, or both the secured creditor and the trustee. The register of deeds shall not be required to verify or make inquiry concerning the truth of the matters stated in any partial release or the authority of the person executing any partial release to do so.
  3. Upon recording, a partial release shall release from the lien of the security instrument the property or interest in property as is expressly described and released. With respect only to the specific property or interest in property identified and released by a partial release, the partial release shall (i) operate and have the same effect as a duly executed and recorded deed of release or reconveyance of the property or interest in the property; (ii) release and discharge all of the secured creditor’s interest in the property or property interest arising from the security instrument; and (iii) if the security instrument is a deed of trust, release and discharge all the interest of the trustee in the property or property interest arising from the deed of trust. The security instrument shall otherwise remain in full force and effect, and the remainder of the property and interests in property described in and encumbered by the security instrument shall remain subject to the lien of the security instrument.
  4. The recording of a partial release does not by itself extinguish any liability of a person for payment or performance of the secured obligation.
  5. The provisions of this section are not exclusive. Property and interests in property may be released from the lien of a security instrument by methods other than the filing of a partial release.
  6. Unless the deed of trust provides otherwise, the trustee in a deed of trust is not a necessary party to a partial release.
  7. No particular phrasing is required for a partial release. The following form, when properly completed, is sufficient to satisfy the requirements of G.S. 45-36.22(a):

‘‘PARTIAL RELEASE () G.S. 45-36.22 The security instrument that is the subject of this Partial Release is identified as follows: Type of Security Instrument: (identify type of security instrument, such as deed of trust or mortgage) Original Grantor(s): (identify original grantor(s), trustor(s), or mort- gagor(s)) Original Secured Party(ies): (identify the original beneficiary(ies), mortgagee(s), or secured party(ies) in the security instrument) Recording Data: The security instrument is recorded in Book at Page or as document number in the office of the Register of Deeds for County, North Carolina. The person or persons signing this Partial Release is/are: (check appropriate box) [ ] The secured creditor. [ ] The trustee or substitute trustee. [ ] The secured creditor and the trustee or substitute trustee. The following described property or interest in property (and no other) is released from the lien of the security instrument: (identify legal description of property or interest in property to be released) Date: Signature of secured creditor or person who caused the release to be recorded in error [Acknowledgment before officer authorized to take acknowledgments]’’.

Click to view

History. 2011-312, s. 9.

§ 45-36.23. Obligation release: content and effect.

  1. A document is an obligation release if it does all of the following:
    1. Identifies the type of security instrument, the original parties to the security instrument, the recording data for the security instrument, and the office in which the security instrument is recorded.
    2. States that the person signing the obligation release is the owner and holder of the obligation or obligations to be released.
    3. Identifies one or more of the specific obligations that are secured by the security instrument and contains language confirming that, with respect to each such secured obligation, the obligation is no longer secured by the security instrument.
    4. Is signed and acknowledged as required by law for a conveyance of an interest in real property by the owner and holder of the specific obligation or obligations to be released.
  2. The register of deeds shall accept an obligation release for recording unless one of the following applies:
    1. The document is submitted by a method or in a medium not authorized for registration by the register of deeds under applicable law.
    2. The required recording fee is not paid.
    3. The document is not signed and acknowledged as required by law for a conveyance of an interest in real property by the owner and holder of the obligation or obligations to be released. The register of deeds shall not be required to verify or make inquiry concerning (i) the truth of the matters stated in any obligation release or (ii) the authority of the person executing any obligation release to do so.
  3. From and after the date an obligation release is recorded, the obligation or obligations specifically identified and released in the obligation release (and only such obligation or obligations) shall no longer be secured by the security instrument, without regard to whether the obligation has been paid in full and satisfied. Unless the obligation release states that the secured obligation has been paid in full and satisfied, the recording of an obligation release does not by itself extinguish any liability of a person for payment or performance of the obligation or obligations released.
  4. Secured obligations that are not specifically identified and released in an obligation release remain secured by the security instrument, and the recording of an obligation release does not extinguish any liability of a person for payment or performance of the remaining secured obligation or obligations. The recording of an obligation release has no effect on the lien of the security instrument on the real property described in the security instrument.
  5. Unless the deed of trust provides otherwise, the trustee in a deed of trust is not a necessary party to an obligation release.
  6. No particular phrasing is required for an obligation release. The following form, when properly completed, is sufficient to satisfy the requirements of G.S. 45-36.23(a):

“OBLIGATION RELEASE () G.S. 45-36.23 The undersigned is now the owner and holder of the obligation(s) to be released by this instrument. As used in this release, the term “Security Instrument” refers to the security instrument identified as follows: Type of Security Instrument: (identify type of security instrument, such as deed of trust or mortgage) Original Grantor(s): (identify original grantor(s), trustor(s), or mortgagor(s)) Original Secured Party(ies): (identify the original beneficiary(ies), mortgagee(s), or secured party(ies) in the security instrument) Recording Data: The security instrument is recorded in Book at Page or as document number in the office of the Register of Deeds for County, North Carolina. Secured obligations that are no longer secured. Each of the following obligations is no longer secured by the Security Instrument, without regard to whether the obligation has been paid in full and satisfied: (identify with particularity each secured obligation that will no longer be secured by the Security Instrument) (Optional provision which may be used in addition to or in lieu of the paragraph above:) Secured obligations that have been paid in full and satisfied. Each of the following obligations has been paid in full and satisfied and is consequently no longer secured by the Security Instrument: (identify with particularity each secured obligation that has been paid in full and satisfied and is consequently no longer secured by the Security Instrument) Date: Signature of owner and holder of the obligation(s) to be released [Acknowledgment before officer authorized to take acknowledgments]”.

Click to view

History. 2011-312, s. 10.

§ 45-36.24. Expiration of lien of security instrument.

  1. Maturity Date. —  For purposes of this section:
    1. If a secured obligation is for the payment of money:
      1. If all remaining sums owing on the secured obligation are due and payable in full on a date specified in the secured obligation, the maturity date of the secured obligation is the date so specified. If no such date is specified in the secured obligation, the maturity date of the secured obligation is the last date a payment on the secured obligation is due and payable under the terms of the secured obligation.
      2. If all remaining sums owing on the secured obligation are due and payable in full on demand or on a date specified in the secured obligation, whichever first occurs, the maturity date of the secured obligation is the date so specified. If all sums owing on the secured obligation are due and payable in full on demand and no alternative date is specified in the secured obligation for payment in full, the maturity date of the secured obligation is the date of the secured obligation.
      3. The maturity date of the secured obligation is “stated” in a security instrument if (i) the maturity date of the secured obligation is specified as a date certain in the security instrument, (ii) the last date a payment on the secured obligation is due and payable under the terms of the secured obligation is specified in the security instrument, or (iii) the maturity date of the secured obligation or the last date a payment on the secured obligation is due and payable under the terms of the secured obligation can be ascertained or determined from information contained in the security instrument, such as, for example, from a payment schedule contained in the security instrument.
    2. If the secured obligation is for the performance of some obligation other than the payment of money:
      1. If the secured obligation is required to be performed by a date specified in the secured obligation, the maturity date of the secured obligation is the date so specified.
      2. If the obligation is to be performed on demand or before a date specified in the secured obligation, whichever first occurs, the maturity date of the secured obligation is the date so specified. If the obligation is to be performed on demand and no alternative date for performance is specified in the secured obligation, the maturity date of the secured obligation is the date of the secured obligation.
      3. The maturity date of the secured obligation is “stated” in a security instrument if (i) the maturity date of the secured obligation is specified as a date certain in the security instrument or (ii) the maturity date of the secured obligation can be ascertained or determined from information contained in the security instrument.
  2. Automatic Lien Expiration. —  Except as provided in subsection (g) of this section, unless the lien of a security instrument has been extended in the manner prescribed in subsection (c), (d), or (e) of this section, the security instrument has been foreclosed, or the security instrument has been satisfied of record pursuant to G.S. 45-37, the lien of a security instrument automatically expires, and the security instrument is conclusively deemed satisfied of record pursuant to G.S. 45-37, at the earliest of the following times:
    1. If the security instrument was first recorded before October 1, 2011:
      1. If the maturity date of the secured obligation is stated in the security instrument, 15 years after the maturity date.
      2. If the maturity date of the secured obligation is not stated in the security instrument, 35 years after the date the security instrument was recorded in the office of the register of deeds.
      3. Without regard to whether the maturity date of the secured obligation is stated in the security instrument, 15 years from whichever of the following occurs last:
        1. The date when the conditions of the security instrument were required by its terms to have been performed.
        2. The date of maturity of the last installment of debt or interest secured thereby.
        3. The date an affidavit or separate instrument was recorded pursuant to the provisions of G.S. 45-37(b), if any such affidavit or separate instrument was recorded before October 1, 2011, and before the lien of the security instrument expired.
    2. If the security instrument was first recorded on or after October 1, 2011:
      1. If the maturity date of the secured obligation is stated in the security instrument, 15 years after the maturity date.
      2. If the maturity date of the secured obligation is not stated in the security instrument, 35 years after the date the security instrument was recorded in the office of the register of deeds.
  3. Methods To Extend a Lien. —  The lien of a recorded security instrument may be extended one or more times by recording (i) a lien maturity extension agreement or (ii) a notice of maturity date. If more than one lien maturity extension agreement or notice of maturity date is recorded, the most recently recorded lien maturity extension agreement or notice of maturity date controls in determining when the lien of a security instrument expires. A lien maturity extension agreement or notice of maturity date is ineffective unless recorded before the lien expires. The lien of the original security instrument may not be extended to a date more than 50 years after the date the security instrument was originally recorded in the office of the register of deeds without the written agreement of the then owner of the property encumbered by the lien of the security instrument.
  4. Lien Maturity Extension Agreement. —
    1. The lien of a recorded security instrument may be extended to a date specified in a lien maturity extension agreement, provided the lien maturity extension agreement is recorded before the lien expires. When a lien maturity extension agreement has been duly recorded, the lien of the security instrument will expire on the date specified in the lien maturity extension agreement.
    2. A document (including any document that modifies, amends, or restates a security instrument) is a lien maturity extension agreement if it does all of the following:
      1. Identifies the type of security instrument, the original parties to the security instrument, the recording data for the security instrument, and the office in which the security instrument is recorded.
      2. States the date to which the lien of the security instrument is extended.
      3. Is signed and acknowledged as required by law for a conveyance of an interest in real property by the secured creditor and the then owner of the property encumbered by the lien of the security instrument.
    3. No particular phrasing is required for a lien maturity extension agreement. The following form, when properly completed, is sufficient to satisfy the requirements for a lien maturity extension agreement:
  5. Notice of Maturity Date. —
    1. The lien of a recorded security instrument may be extended by a notice of maturity date, provided the notice of maturity date is recorded before the lien expires.
    2. When a notice of maturity date signed only by the secured creditor has been duly recorded, the lien of the security instrument will expire at the earliest of the following times: (i) 15 years after the maturity of the secured obligation as stated in the notice of maturity date or (ii) 50 years after the date the security instrument was originally recorded in the office of the register of deeds. A document signed only by the secured creditor is a notice of maturity date if it does all of the following:
      1. Identifies the type of security instrument, the original parties to the security instrument, the recording data for the security instrument, and the office in which the security instrument is recorded.
      2. States that the person signing the notice of maturity date is the secured creditor.
      3. States the maturity date of the secured obligation.
      4. Is signed and acknowledged as required by law for a conveyance of an interest in real property by the secured creditor.
    3. When a notice of maturity date signed by the secured creditor and by the then owner of the property encumbered by the lien of the security instrument has been duly recorded, the lien of the security instrument will expire 15 years after the maturity date of the secured obligation as stated in the notice of maturity. A document (including any document that modifies, amends, or restates a security instrument) signed by the secured creditor and by the then owner of the property encumbered by the lien of the security instrument is a notice of maturity date if it:
      1. Identifies the type of security instrument, the original parties to the security instrument, the recording data for the security instrument, and the office in which the security instrument is recorded.
      2. States the maturity date of the secured obligation.
      3. Is signed and acknowledged as required by law for a conveyance of an interest in real property by the secured creditor and the then owner of the property encumbered by the lien of the security instrument.
    4. No particular phrasing is required for a notice of maturity date. The following form, when properly completed, is sufficient to satisfy the requirements for a notice of maturity date signed only by the secured creditor:
  6. Exception. —  The register of deeds shall accept a lien maturity extension agreement or a notice of maturity date for recording and index the document as a subsequent instrument in accordance with G.S. 161-14.1, unless one of the following applies:
    1. The document is submitted by a method or in a medium not authorized for registration by the register of deeds under applicable law.
    2. The required recording fee is not paid.
    3. The document is not signed and acknowledged as required by law for a conveyance of an interest in real property. The register of deeds shall not be required to verify or make inquiry concerning (i) the truth of the matters stated in the document, (ii) whether the parties to the document are in fact the secured creditor and the then owner of the real property encumbered by the lien of the security instrument, or (iii) the authority of any person executing the document to do so.
  7. Foreclosure Proceedings. —  No proceeding may be commenced to foreclose the lien of a security instrument unless the proceeding is commenced prior to the date on which the lien of the security instrument expires. However, if a proceeding to foreclose the lien of a security instrument is commenced before the lien of the security instrument expires, the lien created by the security instrument shall continue until final disposition of the proceeding. This provision shall not be construed as extending the lien or the right to bring or maintain any action for which a shorter period may be provided by law.
  8. No Shortening of Lien Without Secured Creditor’s Consent. —  Subject to the provisions of G.S. 45-37, the duration of the lien of a security instrument may not be shortened without the consent of the secured creditor.
  9. No Release or Satisfaction Necessary. —  No release, satisfaction, or other instrument is necessary to discharge the lien of a security instrument that has expired; however, nothing in this section shall be construed as affecting or preventing the execution and recordation of any such release, satisfaction, or other document.
  10. Trustee in a Deed of Trust. —  For purposes of this section, the trustee or substitute trustee in a deed of trust (i) shall not be considered the owner of the property encumbered by the lien of the deed of trust and (ii) shall not be a necessary party to a lien maturity extension agreement or notice of maturity date.
  11. Applicability. —  This section applies to all security instruments, whether recorded before, on, or after October 1, 2011, except the following:
    1. Any security instrument securing the payment of money or securing the performance of any other obligation or obligations conclusively presumed to have been fully paid and performed pursuant to the provisions of G.S. 45-37(b) prior to October 1, 2011.
    2. Any security instrument made or given by any railroad company, or any agreement of conditional sale, equipment trust agreement, lease, chattel mortgage, or other instrument relating to the sale, purchase, or lease of railroad equipment or rolling stock, or of other personal property.

“LIEN MATURITY EXTENSION AGREEMENT () G.S. 45-36.24(d) is now the secured creditor under the security instrument identified as follows: Type of Security Instrument: (identify type of security instrument, such as deed of trust or mortgage) Original Grantor(s): (identify original grantor(s), trustor(s), or mortgagor(s)) Original Secured Party(ies): (identify the original beneficiary(ies), mortgagee(s), or secured party(ies) in the security instrument) Recording Data: The security instrument is recorded in Book at Page or as document number in the office of the Register of Deeds for County, North Carolina. is now the owner of the real property encumbered by the lien of the security instrument. Pursuant to G.S. 45-36.24(d), the lien of the security instrument is extended to and including (specify date). Date: Signature of Current Owner Signature of Secured Creditor Owner of Real Property [Acknowledgments before officer authorized to take acknowledgments]”

Click to view

“NOTICE OF MATURITY DATE (( G.S. 45-36.24(e) The undersigned is now the secured creditor under the security instrument identified as follows: Type of Security Instrument: (identify type of security instrument, such as deed of trust or mortgage) Original Grantor(s): (identify original grantor(s), trustor(s), or mortgagor(s)) Original Secured Party(ies): (identify the original beneficiary(ies), mortgagee(s), or secured party(ies) in the security instrument) Recording Data: The security instrument is recorded in Book at Page or as document number in the office of the Register of Deeds for County, North Carolina. The maturity date of the secured obligation is (specify date). Date: Signature(s) of secured creditor [Acknowledgment before officer authorized to take acknowledgments]”

Click to view

History. 2011-312, s. 11; 2013-204, s. 2.8.

Effect of Amendments.

Session Laws 2013-204, s. 2.8, effective June 26, 2013, in sub-subdivision (b)(1)b., added “of the secured obligation” and deleted “or acknowledged as required by law for a conveyance of an interest in real property, whichever is later” following “register of deeds”; and deleted “or October 1, 2011, whichever is later” following “register of deeds” in sub-subdivision (b)(2)b.

CASE NOTES

Retroactive Application. —

Where the retroactive application of G.S. 45-36.24 would have caused a trust’s lien on property to automatically expire to the benefit of all subsequently acquired interests in the property fifteen years after the maturity date of the trust’s security instrument, the retroactive application of G.S. 45-36.24(b) violated N.C. Const. Art. I, § 19 because the trust’s interest vested before G.S. 45-36.24 was enacted and application of G.S. 45-36.24 would have retroactively impaired the trust’s vested rights. Falk v. Mae, 225 N.C. App. 685, 738 S.E.2d 404, 2013 N.C. App. LEXIS 232 (2013), rev'd, 367 N.C. 594, 766 S.E.2d 271, 2014 N.C. LEXIS 948 (2014).

Creditor’s Lien Attached to Proceeds. —

Although a creditor might be barred under North Carolina law from seeking collection under the terms of a promissory note, which was a sealed instrument, for debtor to defeat the creditor’s claim of a secured interest in the proceeds of the property, he had to attack the related deed of trust (DOT) and the lien it secured on the property. Creditor’s lien attached to the proceeds of a sale of the property, as the lien created by the DOT would not expire until 15 years after the note’s maturity date, and no evidence was presented that the note was accelerated prior to that date. In re Merritt, 2018 Bankr. LEXIS 4148 (Bankr. E.D.N.C. Sept. 21, 2018).

§ 45-37. Satisfaction of record of security instruments.

  1. Subject to the provisions of G.S. 45-36.9(a) and G.S. 45-73 relating to security instruments which secure future advances, any security instrument intended to secure the payment of money or the performance of any other obligation registered as required by law may be satisfied of record and thereby discharged and released of record in the following manner:
    1. Security instruments satisfied of record prior to October 1, 2005, pursuant to this subdivision as it was in effect prior to October 1, 2005, shall be deemed satisfied of record, discharged, and released.
    2. Security instruments satisfied of record prior to October 1, 2011, pursuant to this subdivision as it was in effect prior to October 1, 2011, shall be deemed satisfied of record, discharged, and released.
    3. Security instruments satisfied of record prior to October 1, 2011, pursuant to this subdivision as it was in effect prior to October 1, 2011, shall be deemed satisfied of record, discharged, and released.
    4. Security instruments satisfied of record prior to October 1, 2011, pursuant to this subdivision as it was in effect prior to October 1, 2011, shall be deemed satisfied of record, discharged, and released.
    5. Security instruments satisfied of record prior to October 1, 2005, pursuant to this subdivision as it was in effect prior to October 1, 2005, shall be deemed satisfied of record, discharged, and released.
    6. Security instruments satisfied of record prior to October 1, 2005, pursuant to this subdivision as it was in effect prior to October 1, 2005, shall be deemed satisfied of record, discharged, and released.
    7. By recording:
      1. A satisfaction document that satisfies the requirements of G.S. 45-36.10,
      2. An affidavit of satisfaction that satisfies the requirements of G.S. 45-36.16, or
  2. It shall be conclusively presumed that the conditions of any security instrument recorded before October 1, 2011, securing the payment of money or securing the performance of any other obligation or obligations have been complied with or the debts secured thereby paid or obligations performed, as against creditors or purchasers for valuable consideration from the mortgagor or grantor, from and after the expiration of 15 years from whichever of the following occurs last:
    1. The date when the conditions of the security instrument were required by its terms to have been performed, or
    2. The date of maturity of the last installment of debt or interest secured thereby;
    3. The amount of debt unpaid, which is secured by the security instrument; or
    4. In what respect any other condition thereof shall not have been complied with; or
    5. Any payments that have been made on the indebtedness or other obligation secured by the security instrument including the date and amount of payments and
    6. The amount still due or obligations not performed under the security instrument.
  3. Repealed by Session Laws 1991, c. 114, s. 4.
  4. Repealed by Session Laws 2005-123, s. 1.
  5. Any transaction subject to the provisions of the Uniform Commercial Code, Chapter 25 of the General Statutes, is controlled by the provisions of that act and not by this section.
  6. Whenever this section requires a signature or endorsement, that signature or endorsement shall be followed by the name of the person signing or endorsing the document printed, stamped, or typed so as to be clearly legible.
  7. The satisfaction of record of a security instrument pursuant to this section shall operate and have the same effect as a duly executed and recorded deed of release or reconveyance of the property described in the security instrument and shall release and discharge (i) all the interest of the secured creditor in the real property arising from the security instrument and, (ii) if the security instrument is a deed of trust, all the interest of the trustee or substitute trustee in the real property arising from the deed of trust.

A trustee’s satisfaction that satisfies the requirements of G.S. 45-36.20, but only if the security instrument is a deed of trust.

The register of deeds shall not be required to verify or make inquiry concerning (i) the truth of the matters stated in any satisfaction document, affidavit of satisfaction, or trustee’s satisfaction, or (ii) the authority of the person executing any satisfaction document, affidavit, or trustee’s satisfaction to do so.

provided that on or before October 1, 2011, and before the lien has expired pursuant to this subsection, the holder of the indebtedness secured by the security instrument or party secured by any provision thereof may file an affidavit with the register of deeds which affidavit shall specifically state:

may record a separate instrument signed by the secured creditor and witnessed by the register of deeds stating:

The effect of the filing of the affidavit or the recording of a separate instrument made as herein provided shall be to postpone the effective date of the conclusive presumption of satisfaction to a date 15 years from the filing of the affidavit or from the recording of the separate instrument. There shall be only one postponement of the effective date of the conclusive presumption provided for herein. The register of deeds shall record and index the affidavit provided for herein or the separate instrument made as herein provided as a subsequent instrument in accordance with G.S. 161-14.1. This subsection shall not apply to any security instrument made or given by any railroad company, or to any agreement of conditional sale, equipment trust agreement, lease, chattel mortgage or other instrument relating to the sale, purchase or lease of railroad equipment or rolling stock, or of other personal property.The lien of any security instrument that secured the payment of money or the performance of any other obligation or obligations and that was conclusively presumed to have been fully paid and performed prior to October 1, 2011, pursuant to the provisions of this subsection is conclusively deemed to have expired and shall be of no further force or effect. No release, satisfaction, or other instrument is necessary to discharge the lien of a security instrument that has expired; however, nothing in this section shall be construed as affecting or preventing the execution and recordation of any such release, satisfaction, or other document.This subsection shall apply only to security instruments securing the payment of money or securing the performance of any other obligation or obligations that were conclusively presumed pursuant to this subsection to have been fully paid and performed prior to October 1, 2011. All other security instruments shall be subject to the provisions of G.S. 45-36.24.

History. 1870-1, c. 217; Code, s. 1271; 1891, c. 180; 1893, c. 36; 1901, c. 46; Rev., s. 1046; 1917, c. 49, s. 1; c. 50, s. 1; C.S., s. 2594; 1923, c. 192, s. 1; c. 195; 1935, c. 47; 1945, c. 988; 1947, c. 880; 1951, c. 292, s. 1; 1967, c. 765, ss. 1-5; 1969, c. 746; 1975, c. 305; 1985, c. 219; 1987, c. 405, s. 1; c. 620, s. 1; 1989, c. 434, s. 1; 1991, c. 114, s. 4; 1995, c. 292, ss. 1, 2, 5; 1995 (Reg. Sess., 1996), c. 604, s. 1; 2005-123, s. 1; 2006-226, s. 12; 2006-259, ss. 2, 3; 2006-264, s. 40(b); 2011-246, s. 4; 2011-312, s. 12.

Local Modification.

Dare: 1957, c. 464.

Cross References.

As to requirement of registration for mortgages, deeds of trust, etc., see G.S. 47-20.

Effect of Amendments.

Session Laws 2005-123, s. 1, effective October 1, 2005, rewrote this section.

Session Laws 2006-226, s. 12, effective August 10, 2006, inserted “prior to October 1, 2005” the first time it appears in subdivisions (a)(1), (a)(5), and (a)(6).

Session Laws 2006-264, s. 40(b), effective October 10, 2005, inserted “prior to October 1, 2005” the first time it appears in subdivisions (a)(1), (a)(5), and (a)(6).

Session Laws 2011-246, s. 4, effective October 1, 2011, rewrote subdivisions (a)(2) through (a)(4). See Editor’s note for former provisions.

Session Laws 2011-312, s. 12, effective October 1, 2011, in subsection (b), in the introductory paragraph, inserted “recorded before October 1, 2011,” in the paragraph following the first subdivision (b)(2), inserted “on or before October 1, 2011, and before the lien has expired pursuant to his subsection,” and added the last two paragraphs.

Legal Periodicals.

For brief comment on the 1947 amendment, see 25 N.C.L. Rev. 407 (1947).

For brief comment on the 1951 amendment, see 29 N.C.L. Rev. 408 (1951).

For article concerning the quest for clear land titles in North Carolina, see 44 N.C.L. Rev. 89 (1965).

CASE NOTES

Constitutionality. —

For case holding the 1945 amendment constitutional as applied to preexisting mortgages, see Gregg v. Williamson, 246 N.C. 356, 98 S.E.2d 481, 1957 N.C. LEXIS 446 (1957).

As to the history of this section, see Gregg v. Williamson, 246 N.C. 356, 98 S.E.2d 481, 1957 N.C. LEXIS 446 (1957).

Purpose. —

The primary purpose sought to be accomplished by subdivision (5) of this section as it stood prior to the 1969 amendment (see now subsection (b)) was to promote freer marketability in cases where old and unsatisfied mortgages and deeds of trust, securing debts, were hampering real estate transactions; and this economic purpose is adequately accomplished by furnishing protection to parties who extend credit or purchase for a valuable consideration “from and after” the expiration of the 15-year period. Smith v. Davis, 228 N.C. 172, 45 S.E.2d 51, 1947 N.C. LEXIS 590 (1947).

The first clause of the caption or title of the act from which subdivision (5) of this section as it stood prior to the 1969 amendment (see now subsection (b)) was derived indicates the primary purpose of the act, that is, to facilitate the examination of titles. Smith v. Davis, 228 N.C. 172, 45 S.E.2d 51, 1947 N.C. LEXIS 590 (1947).

Construction of Section. —

This section will be construed to effectuate the legislative intent as gathered from its language, by harmonizing its various parts when this can reasonably be done. Richmond Guano Co. v. Walston, 187 N.C. 667, 122 S.E. 663, 1924 N.C. LEXIS 370 (1924).

Retroactivity. —

As to the non-retroactive effect of this section prior to the 1945 amendment, which provided for retroactivity, see Roberson v. Matthews, 200 N.C. 241, 156 S.E. 496, 1931 N.C. LEXIS 290 (1931); Dixie Grocery Co. v. Hoyle, 204 N.C. 109, 167 S.E. 469, 1933 N.C. LEXIS 331 (1933).

As to the retroactive effect of subdivision (5) of this section as it stood prior to the 1969 amendment (see now subsection (b)), see Hicks v. Kearney, 189 N.C. 316, 127 S.E. 205, 1925 N.C. LEXIS 310 (1925); Humphrey v. Stephens, 191 N.C. 101, 131 S.E. 383, 1926 N.C. LEXIS 14 (1926); Thomas v. Myers, 229 N.C. 234, 49 S.E.2d 478, 1948 N.C. LEXIS 468 (1948).

Applicability to Deeds of Trust and Mortgages. —

This section, giving to the marginal entry of satisfaction the effect of a reconveyance, applies only to discharge of trust deeds and mortgages. Smith v. King, 107 N.C. 273, 12 S.E. 57, 1890 N.C. LEXIS 51 (1890).

Presumption of Expiration. —

Trust’s lien on real property remained valid, enforceable, and superior to another creditor’s lien because the trust’s interest was recorded first and the other creditor acquired its interest before the statutory presumption in G.S. 45-37(b)(1)(2) concerning the expiration of the trust’s lien took effect. Falk v. Mae, 225 N.C. App. 685, 738 S.E.2d 404, 2013 N.C. App. LEXIS 232 (2013), rev'd, 367 N.C. 594, 766 S.E.2d 271, 2014 N.C. LEXIS 948 (2014).

Modes of Release. —

A mortgage can only be released so as to affect purchasers at a sale under the mortgage by a cancellation on the margin of the registration thereof under this section, or by a reconveyance of the mortgaged property duly recorded. Barber v. Wadsworth, 115 N.C. 29, 20 S.E. 178, 1894 N.C. LEXIS 177 (1894).

The mortgagee acknowledges the satisfaction and discharge of the mortgage in the presence of the register of deeds, and he enters satisfaction on the margin of the record of the mortgage, and this entry is signed by the mortgagee; and this, done as required by this section, will operate as a deed of release, or reconveyance of the land embraced by the mortgagee. Otherwise, the mortgagee must reconvey the land by proper deed. Walker v. Mebane, 90 N.C. 259, 1884 N.C. LEXIS 211 (1884).

Form and Validity of Cancellation. —

This section must be strictly complied with in order to secure the grantee in a subsequent conveyance of the locus in quo against the prior encumbrance, and where this is done, upon exhibit of the cancelled conveyance and notes marked paid, the entry should recite correctly the name of the beneficiary and payment of the note, notes or bonds, as the case may be, by the payee thereof. Mills v. Kemp, 196 N.C. 309, 145 S.E. 557, 1928 N.C. LEXIS 358 (1928).

Trustee’s objection to the secured status asserted in a proof of claim was allowed, as the cancellation of a deed of trust not only eradicated perfection but also constituted satisfaction of the underlying debt and reconveyance of any rights that a bank had in property to debtor under North Carolina law. The statute of limitations did not bar trustee’s assertion of his strong-arm powers defensively, as a basis for objecting to the bank’s secured proof of claim; further, the bank’s claim had to be disallowed if the claim would be avoidable, as opposed to avoided. In re McCowan, 2018 Bankr. LEXIS 2549 (Bankr. E.D.N.C. Aug. 24, 2018).

Marginal Entry as Evidence of Payment of Debt. —

It is competent to introduce as evidence of payment of an indebtedness secured by mortgage the entry of “satisfied” on the margin of the record signed by the mortgagee and witnessed by the register of deeds. Robinson v. Sampson, 121 N.C. 99, 28 S.E. 189, 1897 N.C. LEXIS 175 (1897).

Marginal Entry Not Necessary as Between Parties. —

When a mortgage debt has been discharged, the mortgage is no longer operative between the parties, even though it is not marked “satisfied of record.” Blake v. Broughton, 107 N.C. 220, 12 S.E. 127, 1890 N.C. LEXIS 44 (1890).

Irregular Cancellation as Notice to Subsequent Grantee or Mortgagee. —

Where an entry of cancellation was made of record by the register of deeds in cancelling a mortgage under this section, reciting another name as mortgagee, trustee or cestui que trust than that appearing in the registration of the instrument, and stating that the “bond” was marked paid, when the instrument recited four bonds maturing in series, it was sufficient to set a later grantee or mortgagee upon inquiry as to whether the register of deeds had made a mistake in cancelling the mortgage, and fix him with notice of all facts which a reasonable inquiry would have revealed. Mills v. Kemp, 196 N.C. 309, 145 S.E. 557, 1928 N.C. LEXIS 358 (1928).

Effect of Forged Cancellation. —

When the attorney for the owner of the land agreed to have a mortgage cancelled of record, and thereafter surreptitiously obtained the cancellation stamp of the register of deeds and forged his signature so that it appeared that the mortgage was cancelled under the provisions of subdivision (2) of this section as it stood prior to the 1969 amendment, and relying thereon the proposed purchaser accepted the deed and paid the consideration, it was held that the supposed cancellation of the mortgage was void as against the mortgagee, who had no notice thereof until immediately before bringing his action to have the supposed cancellation declared void. Union Cent. Life Ins. Co. v. Cates, 193 N.C. 456, 137 S.E. 324, 1927 N.C. LEXIS 377 (1927).

As against the mortgagee of a third mortgage given on the same lands, wrongful cancellation by a forged entry on the margin in the registration book is a nullity, and the lien continues until the payment of the debt it secures, as prior to that of the third mortgage, when the second mortgage lien has lawfully been cancelled of record. Swindell v. Stephens, 193 N.C. 474, 137 S.E. 420, 1927 N.C. LEXIS 381 (1927).

Effect of Prior Fraud on Subsequent Mortgagees. —

Where the register of deeds has entered “satisfaction” of a deed of trust, and thereupon subsequent mortgagees, etc., have acted in good faith, the prior fraud or collusion of the parties to the cancelled instrument will not affect the rights of the subsequent mortgagees, when such mortgagees were unaware of or had not participated in the fraud. Richmond Guano Co. v. Walston, 187 N.C. 667, 122 S.E. 663, 1924 N.C. LEXIS 370 (1924).

Who May Cancel. —

Only the mortgagee or his duly authorized agent or representative was entitled to have mortgage cancelled on the book in the office of the register of deeds under subdivision (1) of this section as it stood prior to the 1969 amendment; and when the mortgagee canceled the instrument in person, under subdivision (1), it was a complete release and discharge of the mortgage, for in such case the statute did not require the exhibition of the mortgage and the note it secured. First Nat'l Bank v. Sauls, 183 N.C. 165, 110 S.E. 865, 1922 N.C. LEXIS 229 (1922).

Where a note secured by a mortgage was assigned and pledged as collateral by the mortgagee to his own note, without an assignment of the mortgage conveying title for the purpose of the security, but only with the surrender of the instrument to the payee of his note, the legal title to the lands remained in the mortgagee, who alone was authorized to cancel the mortgage. First Nat'l Bank v. Sauls, 183 N.C. 165, 110 S.E. 865, 1922 N.C. LEXIS 229 (1922).

Under subdivision (2) of this section as it stood prior to the 1969 amendment, no authority was given to the register of deeds to enter cancellation of record upon the cancellation thereof by the mortgagor. Faircloth v. Johnson, 189 N.C. 429, 127 S.E. 346, 1925 N.C. LEXIS 329 (1925).

Payee or Mortgagee To Be Sui Juris. —

In order to constitute a valid cancellation under subdivision (2) of this section as it stood prior to the 1969 amendment, this section contemplated a payee or mortgagee who was sui juris. Faircloth v. Johnson, 189 N.C. 429, 127 S.E. 346, 1925 N.C. LEXIS 329 (1925).

Cancellation by Attorney and Ratification Thereof. —

While an attorney at law has no power to cancel or discharge a deed of mortgage without authority conferred by his client, nevertheless, where such attorney informed his client that he was unable to complete an arrangement agreed upon with the debtor for obtaining a new mortgage and the sale of a stock of goods upon which the creditor had a lien, unless a cancellation of an old mortgage was made, and that he would cancel the old mortgage by a day named, unless directed not to do so, and the attorney, receiving no such direction, cancelled the old mortgage, and forwarded to his client the new mortgage and power of sale, and the new mortgage was returned without objection to be registered, this was held to be a ratification by the client of the act of cancellation of the old mortgage. Christian v. Yarborough, 124 N.C. 72, 32 S.E. 383, 1899 N.C. LEXIS 19 (1899).

Authority of Trustee to Cancel. —

Possession of the papers by the trustee raises a presumption of his authority to cancel deed of trust of record. Williams v. Williams, 220 N.C. 806, 18 S.E.2d 364, 1942 N.C. LEXIS 551 (1942).

This section only empowers the trustee to “acknowledge satisfaction of the provisions of such trust, etc.,” the entry operating as a reconveyance. It was never contemplated that the trustee could by this means release from an unsatisfied trust specified parts of the land. However, the creditor could be estopped, under certain circumstances, from enforcing his claim against that part of the land undertaken to be released by the trustee if the release was done with the creditor’s consent and authority was properly shown. Woodcock v. Merrimon, 122 N.C. 731, 30 S.E. 321, 1898 N.C. LEXIS 337 (1898). See also, Browne v. Davis, 109 N.C. 23, 13 S.E. 703, 1891 N.C. LEXIS 155 (1891).

Even if an attempted release is under seal it is ineffectual, as the statute authorizing such mode of release confers no power upon a trustee to release specific parts of the property conveyed, and especially where the secured debt remains unsatisfied. Browne v. Davis, 109 N.C. 23, 13 S.E. 703, 1891 N.C. LEXIS 155 (1891).

Cancellation by First Mortgagee. —

The legal title to mortgaged lands is conveyed by the instrument to the mortgagee, and remains in him until it is transferred or assigned, for the purpose of the security or the cancellation of the instrument, under this section; and where the mortgagor has afterwards conveyed the fee simple title to another, and receives a mortgage back to secure a note for the balance of the purchase price, of which the same mortgagee becomes the holder, his personal cancellation of the first mortgage, without producing it or the note it secures, is a complete discharge or release of the lien thereof; and where he borrows money after such cancellation, and hypothecates the note of the second mortgage as collateral to his own, the lender for the purposes of the security, acting in good faith, has a prior lien on the lands. First Nat'l Bank v. Sauls, 183 N.C. 165, 110 S.E. 865, 1922 N.C. LEXIS 229 (1922).

As to unauthorized cancellation of deed of trust, see Monteith v. Welch, 244 N.C. 415, 94 S.E.2d 345, 1956 N.C. LEXIS 431 (1956).

Removal of Deed of Trust as Cloud on Title. —

Where a deed of trust was executed subsequent to the effective date of subdivision (5) of this section as it stood prior to the 1969 amendment (see now subsection (b), and the note thereby secured fell due more than 15 years prior to plaintiffs’ purchase of the property, and no affidavit was filed nor was any marginal entry made on the record by the register of deeds as required by the statute, plaintiffs were entitled to have the deed of trust removed insofar as it constituted a cloud on their title. Thomas v. Myers, 229 N.C. 234, 49 S.E.2d 478, 1948 N.C. LEXIS 468 (1948) (decided prior to the 1951 amendment) .

Registration of Collateral Instrument Not Notice to Purchaser. —

A purchaser is presumed to have examined each recorded deed or instrument in his line of title and to know its contents. He is not required to take notice of and examine recorded collateral instruments and documents which are not muniments of his title and are not referred to by the instruments in his chain of title. Vitiating facts must appear in deraigning title, on the face of deeds in the chain of title, and in one of the muniments of title. Morehead v. Harris, 4 N.C. App. 235, 166 S.E.2d 476, 1969 N.C. App. LEXIS 1473 (1969).

Expiration of Lien. —

North Carolina life of lien statute allowed creditors or purchasers for value from a grantor to benefit from the conclusive presumption that prior liens expired after fifteen years irrespective of when those creditors obtained their interest. Accordingly, the statute acted to terminate a trust deed and permitted the Federal National Mortgage Association in 2011 to foreclose on the property unencumbered. Falk v. Fannie Mae, 367 N.C. 594, 766 S.E.2d 271, 2014 N.C. LEXIS 948 (2014).

OPINIONS OF ATTORNEY GENERAL

An attorney is not required to present a written authorization or instrument agency in recordable form in order to acknowledge satisfaction of the provisions of a deed of trust. See opinion of Attorney General to Mr. R. Wendell Hutchins, Counsel to the Commissioners for the County of Washington, 54 N.C. Op. Att'y Gen. 71 (1985).

§ 45-37.1. Validation of certain entries of cancellation made by beneficiary or assignee instead of trustee.

In all cases where, prior to January 1, 1930, it appears from the margin or face of the record in the office of the register of deeds of any county in this State that the original beneficiary named in any deed of trust, trust indenture, or other instrument intended to secure the payment of money and constituting a lien on real estate, or his assignee of record, shall have made an entry purporting to fully satisfy and discharge the lien of such instrument, and such entry has been signed by the original payee and beneficiary in said deed of trust, or other security instrument, or by his assignee of record, or by his or their properly constituted officer, agent, attorney, or legal representatives, and has been duly witnessed by the register of deeds or his deputy, all such entries of cancellation and satisfaction are hereby validated and made full, sufficient and complete to release, satisfy and discharge the lien of such instrument, and shall have the same effect as if such entry had been made and signed by the trustee named in said deed of trust, or other security instrument, or by his duly appointed successor or substitute.

History. 1945, c. 986.

§ 45-37.2. Indexing satisfactions and other documents relating to security instruments.

  1. The register of deeds shall record and index the following instruments in accordance with G.S. 161-14.1:
    1. A substitution of trustee.
    2. A document of rescission recorded pursuant to G.S. 45-36.6.
    3. A deed of release or reconveyance.
    4. A partial release recorded pursuant to G.S. 45-36.22.
    5. An obligation release recorded pursuant to G.S. 45-36.23.
    6. A satisfaction document, affidavit of satisfaction, or trustee’s satisfaction recorded pursuant to G.S. 45-37(a)(7).
    7. A lien maturity extension agreement or notice of maturity date recorded pursuant to G.S. 45-36.24.No fee shall be charged by the register of deeds for recording a satisfaction document, affidavit of satisfaction, or a trustee’s satisfaction.
  2. G.S. 161-14.1

History. 1963, c. 1021, s. 1; 1967, c. 765, s. 6; 1987, c. 620, s. 2; 1991, c. 114, s. 2; 1993, c. 425, s. 3; 1995, c. 292, s. 6; 2005-123, s. 1; 2011-246, s. 5; 2011-312, s. 13.

Editor’s Note.

This section was amended by Session Laws 2011-246, s. 5 and by Session Laws 2011-312, s. 13, in the coded bill drafting format provided by G.S. 120-20.1. Session Laws 2011-246, s. 5, effective October 1, 2011, deleted subsection (b), but failed to account for the changes made by Session Laws 2011-312, s. 13, which updated a section reference in subsection (b). Subsection (b) has been set out in the form above at the direction of the Revisor of Statutes.

Effect of Amendments.

Session Laws 2005-123, s. 1, effective October 1, 2005, rewrote the heading and text of the section.

Session Laws 2011-246, s. 5, effective October 1, 2011, in the section catchline, substituted “Indexing” for “Recording”; deleted the subsection (a) designation; and deleted subsection (b), which pertained to security instruments and contained the “Record of Satisfaction” form.

Session Laws 2011-312, s. 13, effective October 1, 2011, rewrote the section catchline, which formerly read: “Recording satisfactions of security instruments”; rewrote the first paragraph of subsection (a), which formerly read: “When a satisfaction document, affidavit of satisfaction, or trustee’s satisfaction is recorded pursuant to G.S. 45-37(a)(7), the register of deeds shall record and index the instrument in accordance with G.S. 161-14.1”; added subdivisions (a)(1) through (a)(7); and corrected a section reference in subsection (b).

§ 45-38. Recording of foreclosure.

In case of foreclosure of any deed of trust, or mortgage, the trustee, mortgagee, or the trustee’s or mortgagee’s attorney shall record a notice of foreclosure that includes the date when, and the person to whom, a conveyance was made by reason of the foreclosure. In the event the entire obligation secured by a mortgage or deed of trust is satisfied by a sale of only a part of the property embraced within the terms of the mortgage or deed of trust, the trustee, mortgagee, or the trustee’s or mortgagee’s attorney shall indicate in the notice of foreclosure which property was sold.

A notice of foreclosure shall consist of a separate instrument, or that part of the original deed of trust or mortgage rerecorded, reciting the information required hereinabove, the names of the original parties to the original instrument foreclosed, and the recording data for the instrument foreclosed. A notice of foreclosure shall be indexed by the register of deeds in accordance with G.S. 161-14.1.

History. 1923, c. 192, s. 2; C.S., s. 2594(a); 1949, c. 720, s. 2; 1963, c. 1021, s. 2; 1971, c. 985; 1991, c. 114, s. 3; 1993, c. 305, s. 24; 2005-123, s. 1; 2006-226, s. 13.

Effect of Amendments.

Session Laws 2005-123, s. 1, effective October 1, 2005, rewrote the section.

Session Laws 2006-226, s. 13, effective August 10, 2006, substituted “foreclosure” for “forfeiture,” and “G.S. 161-14.1” for “G.S. 161.14.1” in the last sentence of the second paragraph.

Legal Periodicals.

For brief comment on the 1949 amendment, see 27 N.C.L. Rev. 479 (1949).

For article, “The Paper Chase: Securization, Foreclosure, and the Uncertainty of Mortgage Title,” see 63 Duke L. J. 637 (2013).

CASE NOTES

Failure of Trustee to Comply Does Not Afford Constructive Notice of Fraud. —

The purchaser of lands at a foreclosure sale made in conformity with a deed of trust upon lands is not afforded constructive notice of fraud by the omission of the trustee to comply with the provisions of this or the following section. Cheek v. Squires, 200 N.C. 661, 158 S.E. 198, 1931 N.C. LEXIS 408 (1931).

Cancellation Without Knowledge of Cestui. —

Where the trustor paid the trustee the amount of the mortgage debt, and the trustee entered a cancellation of the deed of trust on the records under this section, without the knowledge of the cestui que trust, the cancellation was held valid. Parham v. Hinnant, 206 N.C. 200, 173 S.E. 26, 1934 N.C. LEXIS 140 (1934).

§ 45-39. [Repealed]

Repealed by Session Laws 1949, c. 720, s. 5.

§ 45-40. [Repealed]

Repealed by Session Laws 2005-123, s. 1, effective October 1, 2005.

§ 45-41. Recorded deed of release of mortgagee’s representative.

The personal representative of any mortgagee or trustee in any mortgage or deed of trust which has heretofore or which may hereafter be registered in the manner required by the laws of this State may satisfy of record, discharge and release the same and all property thereby conveyed by deed of quitclaim, release or conveyance executed, acknowledged and recorded as is now prescribed by law for the execution, acknowledgment and registration of deeds and mortgages in this State.

History. 1909, c. 283, s. 1; C.S., s. 2596; 2005-123, s. 1.

Cross References.

For provisions regarding probate and registration of deeds and mortgages, etc., see G.S. 47-1 et seq.

Effect of Amendments.

Session Laws 2005-123, s. 1, effective October 1, 2005, inserted “satisfy of record” near the middle of the section.

§ 45-42. Satisfaction of corporate mortgages by corporate officers.

All security instruments executed to a corporation may be satisfied and so marked of record as by law provided for the satisfaction of security instruments, by any officer of the corporation indicating the office held. For the purposes of recordation and satisfaction, such signature shall be deemed to be a certification by the signer that he is an officer and is authorized to execute the satisfaction on behalf of such corporation. Where security instruments were marked “satisfied” on the records before the twenty-third day of February, 1909, by any president, secretary, treasurer or cashier of any corporation by such officer writing his own name and affixing thereto the title of his office in such corporation, such satisfaction is validated, and is as effective to all intents and purposes as if a deed of release duly executed by such corporation had been made, acknowledged and recorded.

History. 1909, c. 283, ss. 2, 3; C.S., s. 2597; 1935, c. 271; 1963, c. 193; 1991, c. 647, s. 6; 2005-123, s. 1.

§ 45-42.1. Corporate cancellation of lost mortgages by register of deeds.

Upon affidavit of the secretary and treasurer of a corporation showing that the records of such corporation show that such corporation has fully paid and satisfied all of the notes secured by a security instrument executed by such corporation and such payment and satisfaction was made more than 25 years ago, and that such security instrument was made to a corporation which ceased to exist more than 25 years ago, and such affidavit shall further state that the records of such corporation show that no payments have been made on such secured obligation by the corporation executing such security instrument for 25 years, the register of deeds of the county in which such security instrument is recorded is authorized to record the affidavit. The register of deeds shall index the affidavit according to G.S. 161-22 using the names of parties stated in the affidavit and shall make reference to the recording data of the original security instrument as stated in the affidavit opposite the name of each party so indexed. Upon recording such affidavit, the said security instrument shall be deemed to be cancelled and satisfied of record: Provided, that this section shall not apply to any mortgagor corporation except those in which the State of North Carolina owns more than a majority of the capital stock and shall not apply to any security instrument in which the principal amount secured thereby exceeds the sum of fifteen thousand dollars ($15,000): Provided, such cancellation shall not bar any action to foreclose such security instrument instituted within 90 days after the same is cancelled.

History. 1945, c. 1090; 1991, c. 114, s. 7; 2005-123, s. 1.

Effect of Amendments.

Session Laws 2005-123, s. 1, substituted “security instrument” for “mortgage or deed of trust” throughout the section; substituted “secured obligation” for “mortgage” in the first sentence; inserted the present second sentence; and rewrote the introductory language preceding the proviso in the present third sentence.

§ 45-42.2.

Reserved for future codification purposes.

§ 45-42.3. Automatic release of real property from ancillary security instruments.

  1. The following definitions shall apply in this section:
    1. Ancillary security instrument. — An assignment of leases with respect to the real property, an assignment of rents from or arising out of the real property, a financing statement covering fixtures on the real property that is filed in the office of the register of deeds in the county in which the real property is located, and any other document or instrument that assigns, or creates a lien on, an interest in the real property.
    2. Real property. — The real property described in and encumbered by the lien of a security instrument.
  2. Except as provided in subsection (c) of this section, (i) the expiration of the lien of a security instrument pursuant to G.S. 45-36.24 or the satisfaction of a security instrument of record pursuant to G.S. 45-37 shall be deemed automatically to release the real property from the operation of all ancillary security instruments that secure the same obligation or obligations secured by the security instrument and (ii) the recording of a partial release pursuant to G.S. 45-36.22 or the recording of a deed of release shall be deemed automatically to release the real property described in the partial release or deed of release from the operation of all ancillary security instruments that secure the same obligation or obligations secured by the security instrument.
  3. Subsection (b) of this section shall not apply to an ancillary security instrument if (i) the ancillary security instrument secures obligations other than, or in addition to, the obligation or obligations secured by the security instrument; (ii) the security instrument, the ancillary security instrument, or the document recorded in the office of the register of deeds to satisfy the security instrument of record expressly states that the satisfaction of the security instrument of record shall not release the real property from the operation of that particular ancillary security instrument or from ancillary security instruments in general; or (iii) the security instrument, the ancillary security instrument, the partial release, or the deed of release expressly states that the partial release or deed of release shall not release real property from the operation of that particular ancillary security instrument or ancillary security instruments in general.

History. 2011-312, s. 14.

Article 5. Miscellaneous Provisions.

§ 45-43. Real estate mortgage loans; commissions.

Any individual or corporation authorized by law to do a real estate mortgage loan business may make or negotiate loans of money on notes secured by mortgages or deeds of trust on real estate bearing legal interest payable semiannually at maturity or otherwise, and in addition thereto, may charge, collect and receive such commission or fee as may be agreed upon for making or negotiation of any such loan, not exceeding, however, an amount equal to one and one-half percent (11/2%) of the principal amount of the loan for each year over which the repayment of the said loan is extended: Provided, however, the repayment of such loan shall be in annual installments extending over a period of not less than three nor more than 15 years, and that no annual installment, other than the last, shall exceed thirty-three and one-third percent (331/3%) of the principal amount of loans which are payable in installments extending over a period of as much as three years and less than four years, twenty-five percent (25%) of the principal amount of loans which are payable in installments extending over a period of not less than four years nor more than five years, and fifteen percent (15%) of the principal amount of loans which are payable in installments extending over a period of more than five years and not more than 15 years. This section shall only apply to the counties of Ashe, Buncombe, Caldwell, Forsyth, Gaston, Henderson, McDowell, Madison, Rutherford, Watauga, and Yancey.

History. Ex. Sess. 1924, c. 35; 1925, cc. 28, 209; Pub. Loc. 1925, c. 592, modified by 1927, c. 5; Pub. Loc. 1927, c. 187.

§§ 45-43.1 through 45-43.5. [Repealed]

Repealed by Session Laws 1971, c. 1229, s. 1.

Cross References.

For provisions similar to the repealed sections, see G.S. 24-12 et seq.

§ 45-44. Mortgages held by insurance companies, banks, building and loan associations, or other lending institutions.

A mortgage or deed of trust held by an insurance company, bank, building and loan association, or other lending institution shall be deemed, for the purposes of any regulatory statute applicable to such institutions, to be a first lien on the property despite the existence of prior mortgages or other liens on the same property in all cases where sufficient funds for the discharge of such prior mortgages or other liens shall have been deposited with such lending institution in trust solely for such purpose. Such funds may be deposited either in cash or in obligations of the State of North Carolina or of the United States maturing in sufficient amount on or before the date or dates that the indebtedness secured by such prior mortgages or other liens is to be paid.

History. 1957, c. 1350.

§ 45-45. Spouse of mortgagor included among those having right to redeem real property.

Any married person has the right to redeem real property conveyed by his or her spouse’s mortgages, deeds of trust and like security instruments and upon such redemption, to have an assignment of the security instrument and the uncancelled obligation secured thereby.

History. 1959, c. 879, s. 13.

CASE NOTES

Allegations of defendant that her husband conveyed property to a trustee without her joinder for the purpose of defeating her right to protect the property from a prior deed of trust, which contained her joinder, failed to state facts constituting a defense or counterclaim in an action in ejectment, since the husband’s conveyance without her joinder did not prevent her from exercising her right to redemption from the prior deed of trust. Peoples Oil Co. v. Richardson, 271 N.C. 696, 157 S.E.2d 369, 1967 N.C. LEXIS 1266 (1967).

§ 45-45.1. Release of mortgagor by dealings between mortgagee and assuming grantee.

Except where otherwise provided in the mortgage or deed of trust or in the note or other instrument secured thereby, or except where the mortgagor, or grantor of a deed of trust otherwise consents:

  1. Whenever real property which is encumbered by a mortgage or deed of trust is sold and the grantee assumes and agrees to pay such mortgage or deed of trust, and thereafter the mortgagee or secured creditor under the deed of trust gives the grantee a legally binding extension of time, or releases the grantee from liability on the obligation, the mortgagor or grantor of the deed of trust is released from any further liability on the obligation.
  2. Whenever real property which is encumbered by a mortgage or deed of trust is sold and the grantee assumes and agrees to pay such mortgage or deed of trust, and thereafter the mortgagee or secured creditor under the deed of trust or trustee acting in his behalf releases any of the real property included in the mortgage or deed of trust, the mortgagor or grantor of the deed of trust is released to the extent of the value of the property released, which shall be the value at the time of the release or at the time an action is commenced on the obligation secured by the mortgage or deed of trust, whichever value is the greater.
  3. Whenever real property which is encumbered by a mortgage or deed of trust is sold expressly subject to the mortgage or deed of trust, but the grantee does not assume the same, and thereafter the mortgagee or secured creditor under the deed of trust makes a binding extension of time of the mortgage or deed of trust, the mortgagor or grantor of the deed of trust is released to the extent of the value of the property at the time of the extension agreement.
  4. Whenever real property which is encumbered by a mortgage or deed of trust is sold expressly subject to the mortgage or deed of trust, but the grantee does not assume the same, and thereafter the mortgagee or secured creditor under the deed of trust, or trustee acting in his behalf, releases any of the real property included in the mortgage or deed of trust, the mortgagor or grantor of the deed of trust is released to the extent of the value of the property released, which shall be the value at the time of the release or at the time an action is commenced on the obligation secured by the mortgage or deed of trust, whichever value is the greater.

History. 1961, c. 356.

Legal Periodicals.

For comment on application of statute of limitations to promise of grantee assuming mortgage or deed of trust, see 43 N.C.L. Rev. 966 (1965).

CASE NOTES

Subdivision (4) contemplates a sale or transfer of encumbered property to a grantee who does not assume the mortgage, and a release of the secured property by the mortgagee along with an attempt to hold the mortgagor personally liable on the note. Walker v. First Fed. Sav. & Loan Ass'n, 93 N.C. App. 528, 378 S.E.2d 583, 1989 N.C. App. LEXIS 241 (1989).

This section had no application to a transaction in which the mortgagor transferred encumbered property to the grantee and the mortgagee released the part of the tract which was encumbered from the note, and the trial court committed no error by refusing to reduce plaintiff’s indebtedness under the note encumbering the remaining acres and by refusing to conclude that plaintiff’s default on the note was cured by defendant’s unilateral release of property. Walker v. First Fed. Sav. & Loan Ass'n, 93 N.C. App. 528, 378 S.E.2d 583, 1989 N.C. App. LEXIS 241 (1989).

Assignment of Deed Required for Collection. —

An assignee of a note and deed of trust, who seeks to collect from the mortgagor, is required to assign the deed of trust to the mortgagor as a condition of collecting on the note. Investors Title Ins. Co. v. Montague, 142 N.C. App. 696, 543 S.E.2d 527, 2001 N.C. App. LEXIS 171 (2001).

§ 45-45.2. Transfer taxes not applicable.

Notwithstanding any other provision of law, no excise tax on instruments conveying an interest in real property, except that levied by Article 8E of Chapter 105 of the General Statutes, shall apply to instruments conveying an interest in property as the result of foreclosure or in lieu of foreclosure to the holder of the security interest being foreclosed or subject to being foreclosed.

History. 1987, c. 685, s. 1.

§ 45-45.3. Trustee in a deed of trust.

  1. The following definitions apply in this section:
    1. Secured creditor. — The holder, owner, or assignee of the obligation secured by a deed of trust.
    2. Trustee. — The trustee or substitute trustee then serving as such under the terms of a deed of trust.
  2. Unless the deed of trust provides otherwise, all of the following may be done without the knowledge, consent, or joinder of the trustee:
    1. Pursuant to G.S. 45-36.23, an obligation may be declared by the owner and holder of the obligation to be no longer secured by the deed of trust.
    2. Property may be released from the lien of a deed of trust by the secured creditor.
    3. The lien of a deed of trust may be released or subordinated by the secured creditor.
    4. The terms of a deed of trust may be modified by the secured creditor and the then record owner of the property encumbered by the lien of the deed of trust.
    5. The deed of trust may be satisfied of record by the secured creditor.
  3. Except in matters relating to the foreclosure of the deed of trust or the exercise of a power of sale under the terms of the deed of trust, the trustee is neither a necessary nor a proper party to any civil action or proceeding involving (i) title to the real property encumbered by the lien of the deed of trust or (ii) the priority of the lien of the deed of trust. Examples of civil actions or proceedings in which the trustee is neither a necessary nor a proper party include, but are not limited to, civil actions or proceedings relating to:
    1. Condemnation.
    2. Bankruptcy.
    3. The establishment or correction of title to real property, including, but not limited to, actions to quiet title, reform land records, or resolve boundary line disputes.
    4. Fraudulent conveyances.
    5. The creation or enforcement of an attachment or judgment lien.
    6. The foreclosure of a lien other than the lien of the deed of trust, regardless of whether the lien is superior or subordinate to the lien of the deed of trust, including, but not limited to, the foreclosure of mortgages, other deeds of trust, tax liens, and assessment liens.
    7. The establishment, perfection, or enforcement of a mechanic’s or materialman’s lien.
    8. The creation or enforcement of a constructive trust, resulting trust, or equitable lien relating to the property.
    9. The partition of real property.
    10. The interpretation or enforceability of a will, trust, or estate.
    11. A subrogation claim or other equitable claim or defense involving the priority or enforceability of a deed of trust.
    12. Determination or enforcement of rights and obligations involving easements or restrictive covenants.
  4. If a trustee is improperly joined as a party to an action or proceeding when this section provides that the trustee is neither a necessary nor a proper party to that action or proceeding, then:
    1. Upon motion duly made by any party to the action or proceeding, the trustee shall be dismissed from the action or proceeding;
    2. Regardless of whether the trustee makes an appearance in the action or proceeding, no entry of a default or default judgment shall be entered against the trustee; and
    3. If the trustee makes an appearance in the action or proceeding, each person who improperly joined the trustee as a party to the action or proceeding shall be jointly and severally liable to the trustee for all the expenses and costs incurred by the trustee in the defense of the action or proceeding or in obtaining the trustee’s dismissal from the action or proceeding, including the reasonable attorneys’ fees actually incurred by the trustee.
  5. Except as expressly provided in this section, this section is not in derogation of case law and statutory provisions that vest legal title to property conveyed by a deed of trust in the trustee named therein.

History. 2011-312, s. 15.

CASE NOTES

Trustee Improper Party In Quiet Title Action. —

Substituted trustee was an improper party to join as a defendant in a purchaser’s action to quiet title because there were no statutory duties for the trustee to fulfill, and his participation in the proceeding served no purpose. Greene v. Tr. Servs. of Carolina, LLC, 244 N.C. App. 583, 781 S.E.2d 664, 2016 N.C. App. LEXIS 57 (2016).

Construction. —

Subsection (c) modifies and creates an exception to the general rule stated in the latter part of the first sentence: that the trustee is not a proper party to any civil action or proceeding involving title to real property encumbered by the lien on the deed of trust or the priority of the lien on the deed of trust; the second sentence, however, provides examples of the types of cases where the exception to the general rule would not apply. Greene v. Tr. Servs. of Carolina, LLC, 244 N.C. App. 583, 781 S.E.2d 664, 2016 N.C. App. LEXIS 57 (2016).

“Examples” listed in the statute are cases that do not relate to the foreclosure of the deed of trust or the exercise of a power of sale under the terms of the deed of trust; “matters relating to the foreclosure of the deed of trust or the exercise of a power of sale under the terms of the deed of trust,” refers to foreclosure special proceedings pursuant to G.S. 45-21.16(d) and to actions to enjoin a foreclosure sale. Greene v. Tr. Servs. of Carolina, LLC, 244 N.C. App. 583, 781 S.E.2d 664, 2016 N.C. App. LEXIS 57 (2016).

Trustees are necessary parties to proceedings pursuant to G.S. 45-21.16 and G.S. 45-21.34 because the trustee is the party tasked with facilitating the process. Greene v. Tr. Servs. of Carolina, LLC, 244 N.C. App. 583, 781 S.E.2d 664, 2016 N.C. App. LEXIS 57 (2016).

Article 6. Uniform Trust Receipts Act. [Repealed]

§§ 45-46 through 45-66. [Repealed]

Repealed by Session Laws 1965, c. 700, s. 2.

Article 7. Instruments to Secure Future Advances and Future Obligations.

§ 45-67. Definitions.

The following definitions apply in this Article:

  1. Advance. — A disbursement of funds or other action that increases the outstanding principal balance owing on an obligation for the payment of money.
  2. Security instrument. — A mortgage, deed of trust, or other instrument relating to real property securing an obligation or obligations to a person, firm, or corporation specifically named in such instrument for the payment of money.

History. 1969, c. 736, s. 1; 1989, c. 496, s. 1; 2009-197, s. 1.

Editor’s Note.

Session Laws 2009-197, which in s. 1, rewrote the section, in s. 5, provides: “This act applies to all security instruments, whether registered before, after, or on the effective date of this act [October 1, 2009]. Any security instrument registered before the effective date of this act shall be conclusively presumed to comply with the provisions of G.S. 45-68, as enacted by this act, if the security instrument either (i) complies with the provisions of G.S. 45-68, as enacted by this act, or (ii) complied with the provisions of G.S. 45-68 in effect prior to the effective date of this act.”

Effect of Amendments.

Session Laws 2009-197, s. 1, effective October 1, 2009, rewrote this section. For applicability, see Editor’s note.

Legal Periodicals.

For article, “Future Advances Lending in North Carolina,” see 13 Wake Forest L. Rev. 297 (1977).

§ 45-68. Requirements.

A security instrument, otherwise valid, shall secure the following so as to give priority as provided in G.S. 45-70:

  1. Recodified as subdivision (1b).
  2. Existing obligations that are specifically or generally identified, described, or referenced in the security instrument as being secured thereby, and all advances made at or prior to the registration of the security instrument.
  3. Future advances and future obligations that are specifically or generally identified, described, or referenced in the security instrument as being secured thereby that may from time to time be made or incurred, but only if the security instrument shows all of the following:
    1. That the security instrument is given wholly or partly to secure future advances and/or future obligations.
    2. The maximum principal amount that may be secured by the security instrument at any one time.
    3. The period within which future advances may be made and future obligations may be incurred, which period shall not extend more than 30 years beyond the date of the security instrument or, if the security agreement is not dated, the date the security instrument is registered.
  4. , (3) Repealed by Session Laws 2009-197, s. 2, effective October 1, 2009.

History. 1969, c. 736, s. 1; 1985, c. 457; 1989, c. 496, s. 2; 2009-197, s. 2; 2011-312, s. 16.

Editor’s Note.

Session Laws 2009-197, which, in s. 2, rewrote the section, in s. 5, provides: “This act applies to all security instruments, whether registered before, after, or on the effective date of this act [October 1, 2009]. Any security instrument registered before the effective date of this act shall be conclusively presumed to comply with the provisions of G.S. 45-68, as enacted by this act, if the security instrument either (i) complies with the provisions of G.S. 45-68, as enacted by this act, or (ii) complied with the provisions of G.S. 45-68 in effect prior to the effective date of this act.”

Effect of Amendments.

Session Laws 2009-197, s. 2, effective October 1, 2009, rewrote this section. See Editor’s note for applicability.

Session Laws 2011-312, s. 16, effective October 1, 2011, in subdivision (1a), substituted “Existing obligations that are specifically or generally identified, described, or referenced in the security instrument as being secured thereby” for “Existing obligations identified in the security instrument”; in the introductory paragraph of subdivision (1b), inserted “are specifically or generally identified, described, or referenced in the security instrument as being secured thereby that” and deleted “under the security instrument” following “incurred”; and in sub-subdivision (1b)a., deleted “that may be made or incurred under the security instrument” from the end.

Legal Periodicals.

For article, “Future Advances Lending in North Carolina,” see 13 Wake Forest L. Rev. 297 (1977).

For article, “Future Advances and Title Insurance Coverage,” see 15 Wake Forest L. Rev. 329 (1979).

CASE NOTES

The purpose of the 1985 amendment to this section was to require the written instrument or notation for future obligations only when the parties agreed to require it. Yates Constr. Co. v. Greenleaf Corp., 99 N.C. App. 489, 393 S.E.2d 563, 1990 N.C. App. LEXIS 537 (1990).

Reference in Promissory Note to Security Agreement. —

Unlike the situation where a deed of trust is involved, there is no requirement that a promissory note evidencing a future obligation contain any reference to the previously executed security agreement. The only requirement is that the obligation be covered by the security agreement. In re Mills, 39 B.R. 564, 1984 Bankr. LEXIS 5701 (Bankr. E.D.N.C. 1984).

Effect of Agreement to Extend. —

Where, under the explicit terms of savings and loan’s deed of trust, the period within which owner’s future obligations could be incurred expired on March 3, 1988, under the provisions of this section the only obligations incurred by the owner that related back to the recording date of the deed of trust were those incurred through March 3, 1988, and the obligations incurred after that date did not have seniority over plaintiff’s intervening mechanic’s lien. The agreement later made by owner and savings and loan to extend the term in which obligations could be incurred did not affect plaintiff’s rights under the deed of trust as recorded. McNeary's Arborists, Inc. v. Carley Capital Group, 103 N.C. App. 650, 406 S.E.2d 644, 1991 N.C. App. LEXIS 863 (1991).

Future Advances Retaining Priority of Original Instrument. —

Under G.S. 45-70, all advances made under a future advances deed of trust meeting the conditions provided in this section retain the priority of the original security instrument from the recording date thereof, and subsequent liens, even though recorded or filed prior to certain advances, are junior to all advances under the future advances deed of trust. Perry v. Carolina Bldrs. Corp., 128 N.C. App. 143, 493 S.E.2d 814, 1997 N.C. App. LEXIS 1281 (1997).

Deed of trust was a future advance deed of trust, as defined by G.S. 45-68, where it specifically provided it was given wholly or partly to secure future obligations which may be incurred, the present obligations secured, and the maximum principal amount, including present and future obligations, and that the future obligations did not extend beyond 15 years. Furthermore, circumstances where future advances occurred had been defined as where parties entered into a present mortgage even though some portion of the loan funds was not to be advanced to the mortgagor until some future date. Den-Mark Constr., Inc. v. Wachovia Bank N.A., 398 B.R. 842, 2008 Bankr. LEXIS 3742 (Bankr. E.D.N.C. 2008).

Motion to Dismiss. —

Chapter 11 trustee’s claim that a deed of trust a corporate debtor gave a bank did not meet the requirements of G.S. 45-68 raised a plausible claim with respect to the validity and extent of the deed and was not dismissed; however, there was no merit to the trustee’s allegation that the bank committed unfair and deceptive trade practices, in violation of G.S. 75-16, when it allowed the corporation to carry a substantial loan balance without any repayment of principal, allowed the corporation to make interest only payments after it became insolvent, allowed the corporation to make late loan payments without accelerating the debt it owed or demanding payment, and allowed the corporation to incur more trade debt while simultaneously depleting its assets. Burns v. First Bank, 452 B.R. 170, 2011 Bankr. LEXIS 2759 (Bankr. M.D.N.C. 2011).

§ 45-69. Fluctuation of obligations within maximum amount.

Unless the security instrument provides to the contrary, if the maximum amount secured by the security instrument has not been advanced or if any obligation secured thereby is paid or is reduced by partial payment, further advances may be made and additional obligations secured by the security instrument may be incurred from time to time within the time limit fixed by the security instrument. Such further advances and obligations, together with interest thereon, shall be secured to the same extent as original advances and obligations under the security instrument, if the provisions of G.S. 45-68 are complied with.

History. 1969, c. 736, s. 1; 2009-197, s. 3; 2011-312, s. 17.

Editor’s Note.

Session Laws 2009-197, which, in s. 3, rewrote the section, in s. 5, provides: “This act applies to all security instruments, whether registered before, after, or on the effective date of this act [October 1, 2009]. Any security instrument registered before the effective date of this act shall be conclusively presumed to comply with the provisions of G.S. 45-68, as enacted by this act, if the security instrument either (i) complies with the provisions of G.S. 45-68, as enacted by this act, or (ii) complied with the provisions of G.S. 45-68 in effect prior to the effective date of this act.”

Effect of Amendments.

Session Laws 2009-197, s. 3, effective October 1, 2009, rewrote the section.

Session Laws 2011-312, s. 17, effective October 1, 2011, in the last sentence, inserted “together with interest thereon,” and deleted the former last sentence, which read: “However, if at any time the aggregate outstanding principal balance of the obligation or obligations secured by the security instrument exceeds the maximum principal amount that may be secured by the security instrument at any one time, then the excess shall not be secured by the security instrument.”

Legal Periodicals.

For article, “Future Advances Lending in North Carolina,” see 13 Wake Forest L. Rev. 297 (1977).

§ 45-70. Priority of security instrument.

  1. Subject to subsections (a1), (c), and (d) of this section, any security instrument that conforms to the requirements of this Article shall, from the time and date of registration thereof, have the same priority to the extent of all future advances and future obligations secured by it, and all interest accruing thereon, as if all the advances had been made, all the obligations incurred, and all the interest accrued at the time the security instrument was registered.
  2. Subject to subsections (c) and (d) of this section, if at any time the aggregate outstanding principal balance of the obligation or obligations secured by a security instrument that conforms to the requirements of this Article exceeds the maximum principal amount that may be secured by the security instrument at any one time, then, unless the security instrument provides otherwise, the amount in excess and the interest accrued on the amount in excess shall be secured by the security instrument, but (i) the amount in excess and the interest accrued on the amount in excess shall not be afforded the priority provided in subsection (a) of this section and (ii) the priority of the lien of the security instrument with respect to the amount in excess and the interest accrued on the amount in excess shall be determined by other applicable law.
  3. Repealed by Session Laws 1989, c. 496, s. 3.
  4. All payments made, sums advanced, and expenses incurred by the secured creditor (i) for insurance, taxes, and assessments, (ii) to protect the secured creditor’s interest under the security instrument, or (iii) to preserve and protect the value or condition of the real property encumbered by the security instrument shall be secured by the security instrument and shall have the same priority as if they had been paid, advanced, or incurred at the time the security instrument was registered. The provisions of G.S. 45-68 shall not be applicable to such payments, advances, or expenses, nor shall accrued interest or such payments, advances, or expenses be considered in computing the principal amount that is secured by the security instrument at any one time.
  5. Notwithstanding any other provision of this Article, any security instrument hereafter executed which secures an obligation or obligations of an electric or telephone membership corporation incorporated or domesticated in North Carolina to the United States of America or any of its agencies, or to any other financing institution, or of an electric or gas utility operating in North Carolina, shall from the time and date of registration of said security instrument have the same priority to the extent of (i) all future obligations incurred by the membership corporation or utility to any mortgagee or beneficiary named in the security instrument, together with interest thereon, (ii) all future advances secured by it, together with interest thereon, and (iii) all payments made, sums advanced, and expenses incurred by the secured creditor of the types described in subsection (c) of this section, as if they all had been accrued, paid, made, advanced, and incurred at the time of the registration of the security instrument, regardless of whether the security instrument meets the requirements of G.S. 45-68.

History. 1969, c. 736, s. 1; 1971, c. 565; 1979, c. 594; 1989, c. 496, s. 3; 2009-197, s. 4; 2011-312, s. 18.

Editor’s Note.

Session Laws 2009-197, s. 5, provides: “This act applies to all security instruments, whether registered before, after, or on the effective date of this act [October 1, 2009]. Any security instrument registered before the effective date of this act shall be conclusively presumed to comply with the provisions of G.S. 45-68, as enacted by this act, if the security instrument either (i) complies with the provisions of G.S. 45-68, as enacted by this act, or (ii) complied with the provisions of G.S. 45-68 in effect prior to the effective date of this act.”

Effect of Amendments.

Session Laws 2009-197, s. 4, effective October 1, 2009, in subsection (a), substituted “that” for “which,” inserted “and future obligations” and substituted “and all the obligations incurred at the time the security instrument was registered” for “at the time of the execution of the instrument”; and in subsection (c), substituted “the security instrument was registered” for “of the execution of the instrument” in the first sentence, and substituted “G.S. 45-68” for “G.S. 45-68(2) and (3)” in the second sentence.

Session Laws 2011-312, s. 18, effective October 1, 2011, rewrote the section, adding subsection (a1).

Legal Periodicals.

For article, “Future Advances Lending in North Carolina,” see 13 Wake Forest L. Rev. 297 (1977).

For article, “Future Advances and Title Insurance Coverage,” see 15 Wake Forest L. Rev. 329 (1979).

CASE NOTES

Future Advance Not Prioritized. —

Because plaintiff corporate lender to farm partnership gave actual notice to additional lender that it had perfected a lien on farm property, the future advances made by additional lender to farm subsequent to the receipt of the notice and in excess of the cumulative amount initially stated in commitment letter was not obligatory and did “not take priority over” the plaintiff’s loan. Richardson Corp. v. Barclays Am./Mtg. Corp., 111 N.C. App. 432, 432 S.E.2d 409, 1993 N.C. App. LEXIS 787 (1993).

Advance Retaining Priority of Security Instrument. —

Under this section, all advances made under a future advances deed of trust meeting the conditions provided in G.S. 45-68 retain the priority of the original security instrument from the recording date thereof, and subsequent liens, even though recorded or filed prior to certain advances, are junior to all advances under the future advances deed of trust. Perry v. Carolina Bldrs. Corp., 128 N.C. App. 143, 493 S.E.2d 814, 1997 N.C. App. LEXIS 1281 (1997).

§ 45-71. Satisfaction of the security instrument.

Upon payment of all the obligations secured by a security instrument which conforms to the requirements of this Article and upon termination of all obligation to make advances, and upon written demand made by the maker of the security instrument, his successor in interest, or anyone claiming under him, the holder of the security instrument is hereby authorized to and shall make a written entry upon the security instrument showing payment and satisfaction of the instrument, which entry he shall date and sign. When the security instrument secures notes, bonds, or other undertakings for the payment of money which have not already been entered on the security instrument as paid, the holder of the security instrument, unless payment was made to him, may require the exhibition of all such evidences of indebtedness secured by the instrument marked paid before making his entry showing payment and satisfaction.

History. 1969, c. 736, s. 1.

Legal Periodicals.

For article, “Future Advances Lending in North Carolina,” see 13 Wake Forest L. Rev. 297 (1977).

§ 45-72. Termination of future optional advances.

  1. The holder of a security instrument conforming to the provisions of this Article shall, at the request of the maker of the security instrument or his successor in title promptly furnish to him a statement duly executed and acknowledged in such form as to meet the requirements for the execution and acknowledgment of deeds, setting forth in substance the following:
  2. Such statement, when duly executed and acknowledged, shall be entitled to probate and registration, and upon filing for registration shall be effective from the date of the statement. It shall have the effect of limiting the lien or encumbrance of the holder of the security instrument to the amount therein stated, plus any necessary advances made to preserve the security, and interest on the unpaid principal. It shall bar any further advances under the security instrument therein referred to except such as may be necessary to preserve the security then held as provided in G.S. 45-70(c).

“This is to certify that the total outstanding balance of all obligations, the payment of which is secured by that certain instrument executed by , dated , recorded in book at page in the office of the Register of Deeds of County, North Carolina, is $ , of which amount $ represents principal. “No future advances will be made under the aforesaid instrument, except such expense as it may become necessary to advance to preserve the security now held This day of , . (Signature and Acknowledgment)’’

Click to view

History. 1969, c. 736, s. 1; 1989, c. 496, s. 4; 1999 c. 456, s. 59; 1999-456, s. 59.

Legal Periodicals.

For article, “Future Advances Lending in North Carolina,” see 13 Wake Forest L. Rev. 297 (1977).

§ 45-73. Cancellation of record; presentation of notes described in security instrument sufficient.

The provisions of G.S. 45-37 apply to discharge of record of instruments executed under this Article.

History. 1969, c. 736, s. 1; 2011-246, s. 6.

Effect of Amendments.

Session Laws 2011-246, s. 6, effective October 1, 2011, deleted “except that in cases of cancellation by exhibition or presentation under G.S. 45-37(a)(2) or 45-37(a)(3), only notes or bonds described in the body of the instrument or noted in writing thereon as provided in G.S. 45-68(3) need to be exhibited or presented” from the end.

Legal Periodicals.

For article, “Future Advances Lending in North Carolina,” see 13 Wake Forest L. Rev. 297 (1977).

§ 45-74. Article not exclusive.

The provisions of this Article shall not be deemed exclusive. Nothing in this Article shall invalidate or overrule any rule of validity or priority applicable to any security instrument failing to comply with the provisions of this Article.

History. 1969, c. 736, s. 1; 2011-312, s. 19.

Effect of Amendments.

Session Laws 2011-312, s. 19, effective October 1, 2011, deleted “and no security instrument securing future advances or future obligations which is otherwise valid shall be invalidated by failure to comply with the provisions of this Article” from the end of the first sentence, and added the last sentence.

Legal Periodicals.

For article, “Future Advances Lending in North Carolina,” see 13 Wake Forest L. Rev. 297 (1977).

§§ 45-75 through 45-79.

Reserved for future codification purposes.

Article 8. Instruments to Secure Certain Home Loans.

§ 45-80. Priority of security instruments securing certain home loans.

  1. Notwithstanding any other provision of law, a deed of trust or mortgage which secures a loan that complies with subsection (b) below shall have priority and continue to have priority from the time and date of registration thereof to the extent of all principal and interest secured by said deed of trust or mortgage notwithstanding that the loan may be renewed or extended one or more times and notwithstanding that the interest rate may be increased or decreased from time to time. Interest which accrues pursuant to changes in the interest rate made pursuant to a method agreed to as provided in subsection (b) below (whenever such changes are made) shall be secured and have priority from the registration of the deed of trust or mortgage and not from the time changes are made.
  2. With respect to a loan referred to in subsection (a) above:
    1. The parties must provide in a written instrument agreed to by the borrower at or before registration of the deed of trust or mortgage that the loan may be renewed or extended in accordance with stated terms and that the interest rate may be increased or decreased according to a stated method; and
    2. The loan must be a loan described in G.S. 24-1.1A(a)(1) or (2).
  3. The provisions of this section shall not be deemed exclusive and no deed of trust or mortgage or other security instrument which is otherwise valid shall be invalidated by failure to comply with the provisions of this section.

History. 1979, 2nd Sess., c. 1182.

Article 9. Instruments to Secure Equity Lines of Credit.

§ 45-81. Definitions.

The following definitions apply in this Article:

  1. Authorized person. — A ny borrower; the legal representative of any borrower; the attorney for any borrower; a title insurance company authorized pursuant to Article 26 of Chapter 58 of the General Statutes to issue title insurance policies in the State of North Carolina, but only when the company is acting in connection with a title insurance policy issued or to be issued with respect to property then encumbered by an existing equity line security instrument; or an attorney licensed to practice law in the State of North Carolina or a bank, savings and loan association, savings bank, or credit union, but only when (i) the attorney, bank, savings and loan association, savings bank, or credit union is or was responsible for the disbursement of funds in connection with the sale of, or a new loan secured by, property then encumbered by an existing equity line security instrument and (ii) a requirement of the sale or new loan transaction is or was that the property be conveyed or encumbered free and clear of the lien of the existing equity line security instrument.
  2. Borrower. — A person primarily liable for payment or performance of an equity line of credit.
  3. Equity line of credit. — An agreement in writing between a lender and a borrower for an extension of credit pursuant to which (i) at any time within a specified period not to exceed 30 years the borrower may request and the lender is obligated to provide advances up to an agreed aggregate limit; (ii) any repayments of principal by the borrower within the specified period will reduce the amount of advances counted against the aggregate limit; and (iii) the borrower’s obligation to the lender is secured by an equity line security instrument.
  4. Equity line security instrument. — An agreement, however denominated, that (i) creates or provides for an interest in real property to secure payment or performance of an equity line of credit, whether or not it also creates or provides for a lien on personal property; (ii) shows on its face the maximum principal amount which may be secured at any one time; and (iii) shows on its face that it secures an equity line of credit governed by the provisions of this Article. The term “equity line security instrument” includes a deed of trust and a mortgage.
  5. Lender is obligated.  —   The lender is contractually bound to provide advances. The contract must set forth any events of default by the borrower, or other events not within the lender’s control, which may relieve the lender from his obligation, and must state whether or not the lender has reserved the right to cancel or terminate the obligation.
  6. Notice regarding future advances.  —   A written notice submitted under G.S. 45-82.3 to a lender that prevents certain advances made pursuant to an equity line of credit from being secured by the related equity line security instrument.
  7. Owner.  —   Any person owning a present or future interest in the real property encumbered by an equity line security instrument, but does not mean the trustee in a deed of trust or the owner or holder of a mortgage, deed of trust, mechanic’s or materialman’s lien, judgment lien, or any other lien on, or security interest in, the real property.
  8. Person.   —  An individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, public corporation, government, or governmental subdivision, agency, or instrumentality, or any other legal or commercial entity.
  9. Qualified lien holder.   —  A person who has a mortgage or deed of trust on property already encumbered by an existing equity line security instrument, where that person’s mortgage or deed of trust was recorded after the existing equity line security instrument and it appears from warranties or otherwise that the person’s mortgage or deed of trust was not intended to be subordinate to the existing equity line security instrument. The term does not include a trustee under a deed of trust.
  10. Request to terminate an equity line of credit; and termination request.  —   A written request submitted under G.S. 45-82.2 to a lender to terminate an equity line of credit. Each of the following shall be deemed a termination request: (i) a notification given pursuant to G.S. 45-36.9(a) requesting the lender to terminate the equity line of credit, (ii) a notification given pursuant to G.S. 45-36.9(a) containing a statement sufficient to terminate the effectiveness of the provision for future advances in the equity line security instrument, and (iii) a written request made by or on behalf of a borrower to a lender pursuant to G.S. 45-37 to satisfy a related equity line security instrument as a matter of public record.

History. 1985, c. 207, s. 2; 1995, c. 237, s. 1; 2011-312, s. 20.

Effect of Amendments.

Session Laws 2011-312, s. 20, effective October 1, 2011, rewrote the section.

CASE NOTES

Subsequent Advancements Secured by Deed of Trust. —

Subsequent advancements, made pursuant to an original agreement establishing a line of credit, must be treated as if made and identified on the date of execution of that original agreement, and until such time as the original security agreement is cancelled, later loans are also secured by the deed of trust even if all previous debts or obligations have been paid in full. Raintree Realty & Constr., Inc. v. Kasey, 116 N.C. App. 340, 447 S.E.2d 823, 1994 N.C. App. LEXIS 911 (1994), aff'd, 341 N.C. 195, 459 S.E.2d 273, 1995 N.C. LEXIS 376 (1995).

Equity Line of Credit. —

As a matter of law, G.S. 45-81 through G.S. 45-83, by their terms, require the subject deed of trust to specifically identify the document as an equity line of credit. No such specific language appeared in the deed of trust; therefore, it was not an equity line of credit automatically entitled to priority as of the date of execution. Den-Mark Constr., Inc. v. Wachovia Bank N.A., 398 B.R. 842, 2008 Bankr. LEXIS 3742 (Bankr. E.D.N.C. 2008).

§ 45-82. Priority of equity line security instrument.

An equity line security instrument shall, from the time and date of its registration, have the same priority to the extent of all advances secured by it as if the advances had been made at the time of the registration of the equity line security instrument, notwithstanding the fact that from time to time during the term of the equity line of credit no balance is outstanding. Interest that accrues on the equity line of credit and all payments made, sums advanced, and expenses incurred by the lender (i) for insurance, taxes, and assessments, (ii) to protect the lender’s interest under the equity line security instrument, or (iii) to preserve and protect the value or condition of the property encumbered by the equity line security instrument shall be secured by the equity line security instrument and shall have the same priority as if they had been accrued, paid, advanced, and incurred at the time the equity line security instrument was registered. The accrued interest, payments, advances, and expenses shall not be considered in computing the principal amount that is secured by the equity line security instrument at any one time.

History. 1985, c. 207, s. 2; 2011-312, s. 21.

Effect of Amendments.

Session Laws 2011-312, s. 21, effective October 1, 2011, in the section catchline, inserted “equity line”; in the first sentence, substituted “An equity line security instrument” for “A mortgage or deed of trust which shows on its face that it secures an equity line of credit governed by the provisions of this Article,” inserted “and date,” and substituted “registration of the equity line security instrument” for “execution of the mortgage or deed of trust” and “term of the equity line of credit” for “term of the loan,” deleted the former second sentence, which read: “Payments made by the lender for insurance, taxes, and assessments and other payments made by the lender pursuant to the deed of trust shall have the same priority as if made at the time of the execution of the mortgage or deed of trust, notwithstanding the maximum principal amount set forth in the mortgage or deed of trust,” and added the last two sentences.

CASE NOTES

Subsequent Advancements Treated as If Made on Date of Original Agreement. —

Subsequent advancements, made pursuant to an original agreement establishing a line of credit, must be treated as if made and identified on the date of execution of that original agreement, and until such time as the original security agreement is cancelled pursuant to G.S. 45-81(c), later loans are also secured by the deed of trust even if all previous debts or obligations have been paid in full. Raintree Realty & Constr., Inc. v. Kasey, 116 N.C. App. 340, 447 S.E.2d 823, 1994 N.C. App. LEXIS 911 (1994), aff'd, 341 N.C. 195, 459 S.E.2d 273, 1995 N.C. LEXIS 376 (1995).

§ 45-82.1. Extension of period for advances.

  1. The period for advances agreed to pursuant to G.S. 45-81(3) may be extended by written agreement of the lender and borrower executed and registered prior to expiration or termination of the equity line of credit or the borrower’s obligation to repay any outstanding indebtedness. Any extended period shall not exceed 30 years from the end of the preceding period for advances.
  2. If a lender and borrower extend the period for advances by registering a certificate as described in subsection (c) of this section, advances that are made after the period for advances provided in the original recorded equity line security instrument or any previously recorded extension shall have priority from a date not later than the date of registration of the certificate described in subsection (c) of this section.
  3. The priority provided in subsection (b) of this section shall be accorded only if the lender, the borrower, and, if different than the borrower, the then owners of the real property encumbered by the equity line security instrument execute a certificate evidencing the extension and register the certificate in the office of the register of deeds where the equity line security instrument is registered. The failure of any owner to execute the certificate shall affect only that owner’s interest in the property, and executions by other owners shall have full effect to the extent of their interests in the property.
  4. No particular phrasing is required for a certificate of extension under this section. The following form, when properly completed, is sufficient to satisfy the requirements of subsection (c) of this section:

“Certificate of Extension of Period for Advances Under Equity Line of Credit () G.S. 45-82.1 is now the lender and secured creditor in the security instrument identified as follows: Type of Security Instrument: (identify type of security instrument, such as deed of trust or mortgage) Original Grantor(s): (identify original grantor(s), trustor(s), or mortgagor(s)) Original Secured Party(ies): (identify the original beneficiary(ies), mortgagee(s), or secured party(ies) in the security instrument) Recording Data: The security instrument is recorded in Book at Page or as document number in the office of the Register of Deeds for County, North Carolina. The borrower(s) is/are the following: . The current owner(s) of the property described in the security instrument is/are: . The parties have agreed to extend to (insert date) the period within which the borrower may request advances as set forth in .. G.S. 45-82.1 Date: Signature of secured creditor Signature of borrower(s) Signature of property owner(s)(if different) [Acknowledgment before officer authorized to take acknowledgments]”.

Click to view

History. 1995, c. 237, s. 2; 2011-312, s. 22.

Effect of Amendments.

Session Laws 2011-312, s. 22, effective October 1, 2011, rewrote the section.

§ 45-82.2. Request to terminate an equity line of credit.

  1. Upon receipt of a request from an authorized person to terminate an equity line of credit, the lender shall (i) terminate the borrower’s right to obtain advances under the borrower’s equity line of credit; (ii) apply all sums subsequently paid by or on behalf of the borrower in connection with the equity line of credit to the satisfaction of the equity line of credit and other sums secured by the related equity line security instrument; and (iii) when the balance of all outstanding sums secured by the related equity line security instrument becomes zero, satisfy the related equity line security instrument as a matter of public record pursuant to G.S. 45-37. A request to terminate an equity line of credit shall be conclusively deemed to have been submitted by or on behalf of a borrower if it is submitted by an authorized person.
  2. No particular phrasing is required for a request to terminate an equity line of credit. The following form, when properly completed, is sufficient to serve as a request to terminate an equity line of credit:
  3. If the person who gives a lender a request to terminate an equity line of credit is an attorney, bank, savings and loan association, savings bank, or credit union described in G.S. 45-81(1), that person shall give a copy of the request to the borrower accompanied by a notice that provides substantially as follows:

“REQUEST TO TERMINATE AN EQUITY LINE OF CREDIT () G.S. 45-82.2 To: (name of lender) This is a request to terminate an equity line of credit submitted pursuant to G.S. 45-82.2.. For purposes of this request: 1. The borrower(s) is/are: (identify one or more of the borrowers) 2. The account number of the equity line of credit is: (specify the account number of the equity line of credit, if known by the person submitting the request) 3. The street address of the property is: (provide the street address of the property encumbered by the security instrument identified in 4.) 4. The equity line of credit is secured by the security instrument identified as follows: Type of Security Instrument: (identify type of security instrument, such as deed of trust or mortgage) Original Grantor(s): (identify original grantor(s), trustor(s), or mortgagor(s)) Original Secured Party(ies): (identify the original beneficiary(ies), mortgagee(s), or secured party(ies) in the security instrument) Recording Data: The security instrument is recorded in Book at Page or as document number in the office of the Register of Deeds for County, North Carolina. I request and direct that you (i) terminate the borrower’s right to obtain advances under the borrower’s equity line of credit; (ii) apply all sums subsequently paid by or on behalf of the borrower in connection with the equity line of credit to the satisfaction of the equity line of credit and other sums secured by the related security instrument; and (iii) when the balance of all outstanding sums secured by the related security instrument becomes zero, satisfy the security instrument identified above as a matter of public record pursuant to . G.S. 45-37 I certify that I am: [ ] The borrower (or one of the borrowers, if there is more than one). [ ] The legal representative of a borrower. [ ] The attorney for a borrower. [ ] A title insurance company that satisfies the requirements of G.S. 45-81(1). [ ] An attorney licensed to practice law in the State of North Carolina that satisfies the requirements of G.S. 45-81(1).. [ ] A bank, savings and loan association, savings bank, or credit union that satisfies the requirements of G.S. 45-81(1).. Date: Signature of person submitting the request’’ (c) If the person who gives a lender a request to terminate an equity line of credit is a title insurance company described in , that person shall give a copy of the request to the borrower accompanied by a notice that provides substantially as follows: G.S. 45-81(1) “NOTICE TO BORROWER

Click to view

You have an equity line of credit with (name of lender) secured by a mortgage or deed of trust on real property located at (address of property).

We are a title insurance company that has issued or has agreed to issue a title insurance policy on that property. As permitted by North Carolina law, we are sending the (enclosed / attached / following / foregoing) request to your lender asking that your equity line of credit be terminated. Our reason for making this request is:

(specify reason it is appropriate for the title insurance company to request the termination of the borrower’s equity line of credit)

When your lender receives our request, your lender will terminate and close your equity line of credit, and you will no longer be able to obtain credit advances. However, termination of your equity line of credit will not release you from liability for the account. All sums your lender subsequently receives in connection with your equity line of credit (including any sums we may send to your lender) will be applied by your lender to the satisfaction of your account. When the balance of your account becomes zero, your lender will be required to cancel the mortgage or deed of trust as a matter of public record.

If you have questions about this notice or our action, please contact (name of contact person or department) by calling us at (phone number) or writing to us at (mailing address).

(Name of title insurance company)”

“NOTICE TO BORROWER You have an equity line of credit with (name of lender) secured by a mortgage or deed of trust on real property located at (address of property).We were responsible for disbursing funds in connection with the sale of the property or a new loan secured by the property. A requirement of the sale or new loan transaction was that the property be conveyed or encumbered free and clear of the existing mortgage or deed of trust that secures your equity line of credit.As permitted by North Carolina law, we are sending the (enclosed / attached / following / foregoing) request to your lender asking that your equity line of credit be terminated. Our reason for making this request is to ensure that the mortgage or deed of trust on the property will be cancelled once your equity line of credit is paid in full.When your lender receives our request, your lender will terminate and close your equity line of credit, and you will no longer be able to obtain credit advances. However, termination of your equity line of credit will not release you from liability for the account. All sums your lender subsequently receives in connection with your equity line of credit (including any sums we send to your lender in connection with the closing of the sale of the property or the new loan) will be applied by your lender to the satisfaction of your account. When the balance of your account becomes zero, your lender will be required to cancel the mortgage or deed of trust as a matter of public record.If you have questions about this notice or our action, please contact (name of contact person or department) by calling us at (phone number) or writing to us at (mailing address).(Name of attorney, bank, savings and loan association, savings bank, or credit union)”

History. 2011-312, s. 23.

CASE NOTES

Remedies. —

Bank could not obtain cancellation or subordination of an equity line of credit deed of trust due to the equity line of credit lender’s failure to cancel the deed of trust after the bank transmitted a portion of its loan funds to the lender to pay the balance of the line of credit because G.S. 45-82.2 did not provide for such a remedy for failure to cancel a deed of trust. Cooper v. First Bank, 2013 Bankr. LEXIS 2985 (Bankr. E.D.N.C. July 25, 2013), aff'd, 2014 U.S. Dist. LEXIS 60107 (E.D.N.C. Apr. 3, 2014).

§ 45-82.3. Notice regarding future advances.

  1. A notice regarding future advances may be submitted to a lender by an authorized person, an owner of the property, or a qualified lien holder.
  2. Except as provided in subsection (c) of this section, an advance made by a lender to a borrower pursuant to an equity line of credit will not be secured by the related equity line security instrument if the advance occurs after the lender receives and has had not less than one complete business day to act on a notice regarding future advances.
  3. Notwithstanding a lender’s receipt of a notice regarding future advances, the following shall be secured by the equity line security instrument and shall have the same priority as if they had been owing, accrued, paid, advanced, or incurred at the time the equity line security instrument was registered:
    1. Sums owing to the lender under the equity line of credit at the time the lender receives the notice regarding future advances (including accrued interest), all interest that thereafter accrues on the equity line of credit, and all payments made, sums advanced, and expenses incurred by the lender before or after the lender receives the notice regarding future advances (i) for insurance, taxes, and assessments, (ii) to protect the lender’s interest under the equity line security instrument, or (iii) to preserve and protect the value or condition of the real property encumbered by the equity line security instrument.
    2. Any advance made by the lender to a borrower pursuant to an equity line of credit that occurs within one complete business day after the lender receives the notice regarding future advances.
    3. Any advance made by the lender to a borrower pursuant to an equity line of credit that occurs more than one complete business day after the lender receives the notice regarding future advances, but only if the advance was initiated or approved before the lender received the notice regarding future advances.
  4. Receipt by a lender of a notice regarding future advances shall be conclusively deemed to be an action by the borrower adversely affecting the lender’s security for the equity line of credit. Upon receipt of a notice regarding future advances, the lender may terminate the borrower’s right and ability to obtain additional advances under the equity line of credit.
  5. No particular phrasing is required for a notice regarding future advances. The following form, when properly completed, is sufficient to serve as a notice regarding future advances:
  6. If the person who gives a lender a notice regarding future advances is (i) a title insurance company described in G.S. 45-81(1); (ii) an attorney, bank, savings and loan association, savings bank, or credit union described in G.S. 45-81(1), (iii) an owner as defined in G.S. 45-81(7), other than an owner who is also a borrower, or (iv) a qualified lien holder described in G.S. 45-81(9), then that person shall give a copy of the notice regarding future advances to the borrower accompanied by a notice that provides substantially as follows:

“NOTICE REGARDING FUTURE ADVANCES () G.S. 45-82.3 To: (name of lender) This is a notice regarding future advances submitted pursuant to G.S. 45-82.3. For purposes of this notice: 1. The borrower(s) is/are: (identify borrower(s)) 2. The account number of the equity line of credit is: (specify the account number of the equity line of credit, if known by the person submitting the notice) 3. The street address of the property is: (provide the street address of the property encumbered by the security instrument identified in 4.) 4. The equity line of credit is secured by the security instrument identified as follows: Type of Security Instrument: (identify type of security instrument, such as deed of trust or mortgage) Original Grantor(s): (identify original grantor(s), trustor(s), or mortgagor(s)) Original Secured Party(ies): (identify the original beneficiary(ies), mortgagee(s), or secured party(ies) in the security instrument) Recording Data: The security instrument is recorded in Book at Page or as document number in the office of the Register of Deeds for County, North Carolina. Except as provided in ,, subsequent advances made by you under the equity line of credit will not be secured by the security instrument identified above. G.S. 45-82.3(c) I certify that I am: [ ] The borrower (or one of the borrowers, if there is more than one). [ ] The legal representative of a borrower. [ ] The attorney for a borrower. [ ] An owner of the property encumbered by the security instrument identified above. [ ] A title insurance company that satisfies the requirements of G.S. 45-81(1).. [ ] An attorney licensed to practice law in the State of North Carolina that satisfies the requirements of G.S. 45-81(1). [ ] A bank, savings and loan association, savings bank, or credit union that satisfies the requirements of G.S. 45-81(1). [ ] A qualified lien holder as defined in G.S. 45-81(9). Date: Signature of person submitting the request’’

Click to view

“NOTICE TO BORROWER You have an equity line of credit with (name of lender) secured by a mortgage or deed of trust on real property located at (address of property).As permitted by North Carolina law, we are sending the (enclosed / attached / following / foregoing) Notice Regarding Future Advances to your lender. Subject to certain exceptions, the notice prevents any new credit advances you obtain under your equity line of credit from being secured by the mortgage or deed of trust that currently secures its repayment. Our reason for giving your lender the notice is to limit the amount secured by the mortgage or deed of trust that secures your equity line of credit and to prevent that amount from increasing.When your lender receives our notice, your lender may elect to terminate your right and ability to obtain additional advances under your equity line of credit. However, termination of your right and ability to obtain additional advances will not release you from liability for the account. You should contact your lender to determine whether you will be able to obtain additional credit advances from your lender.If you have questions about this notice or our action, please contact (name of contact person or department) by calling us at (phone number) or writing to us at (mailing address).(Name of insurance company, attorney, bank, savings and loan association, savings bank, credit union, owner, or qualified lien holder)”.

History. 2011-312, s. 24.

§ 45-82.4. Prepayment penalty.

Except as provided in G.S. 24-9(c), no prepayment penalty may be charged with respect to an equity line of credit.

History. 2011-312, s. 25.

§ 45-83. Future advances statute shall not apply.

The provisions of Article 7 of this Chapter shall not apply to an equity line of credit or the equity line security instrument securing it, if the equity line security instrument shows on its face that it secures an equity line of credit governed by the provisions of this Article.

History. 1985, c. 207, s. 2; 2011-312, s. 26.

Effect of Amendments.

Session Laws 2011-312, s. 26, effective October 1, 2011, twice inserted “equity line security.”

§ 45-84. Article not exclusive.

Except as otherwise provided in G.S. 45-83, the provisions of this Article are not exclusive. Nothing in this Article shall invalidate or overrule any rule of validity or priority applicable to any mortgage, deed of trust, or other security instrument failing to comply with the provisions of this Article.

History. 1985, c. 207, s. 2; 2011-312, s. 27.

Effect of Amendments.

Session Laws 2011-312, s. 27, effective October 1, 2011, in the first sentence, deleted “and no mortgage or deed of trust which secures a line of credit or other obligation shall be invalidated by failure to comply with the provisions of this Article” from the end, and added the last sentence.

§§ 45-85 through 45-89.

Reserved for future codification purposes.

Article 10. Mortgage Debt Collection and Servicing.

§ 45-90. Definitions.

As used in this Article, the following definitions apply:

  1. Home loan. — A loan secured by real property located in this State used, or intended to be used, by an individual borrower or individual borrowers in this State as a dwelling, regardless of whether the loan is used to purchase the property or refinance the prior purchase of the property or whether the proceeds of the loan are used for personal, family, or business purposes.
  2. Servicer. — A “servicer” as defined in the Real Estate Settlement Procedures Act, 12 U.S.C. § 2605(i). A licensed attorney, who in the practice of law or performing as a trustee, accepts payments related to a loan closing, default, foreclosure, or settlement of a dispute or legal claim related to a loan, shall not be considered a servicer for the purposes of this Article.

History. 2007-351, s. 5.

Editor’s Note.

The sections in Article 10 have been renumbered at the direction of the Revisor of Statutes, the section numbers in Session Laws 2007-351, s. 5, having been G.S. 45-85 to 45-90.

CASE NOTES

Section Not Applicable to Lawyers and Law Firms. —

In a suit brought by mortgagors against various defendants alleging various federal and North Carolina state law claims related to a mortgage on their home, a magistrate judge recommended granting the motion to dismiss for failure to state a claim filed by a law firm as to the mortgagors’ claims against it under G.S. 45-90, because professional services, including claims against law firms and lawyers, are excluded under the statute. Bryant v. Wells Fargo Bank, N.A., 861 F. Supp. 2d 646, 2012 U.S. Dist. LEXIS 38102 (E.D.N.C.), dismissed, 861 F. Supp. 2d 646, 2012 U.S. Dist. LEXIS 36686 (E.D.N.C. 2012).

Waiver of Fees. —

Debtor’s objection to that portion of a creditor’s proof of claim that was for attorneys’ fees was sustained because the creditor was a servicer of a home loan for purposes of G.S. 45-91, and creditor failed to mail a statement to the debtor’s last known address that clearly and conspicuously explained the attorneys’ fees it sought in its claim as required by G.S. 45-91(1). This failure constituted a waiver of such fees under G.S. 45-91(3). In re Saeed, 2010 Bankr. LEXIS 3267 (Bankr. M.D.N.C. Sept. 17, 2010).

§ 45-91. Assessment of fees; processing of payments; publication of statements.

A servicer must comply as to every home loan, regardless of whether the loan is considered in default or the borrower is in bankruptcy or the borrower has been in bankruptcy, with the following requirements:

  1. Any fee that is incurred by a servicer shall be both:
    1. Assessed within 45 days of the date on which the fee was incurred. Provided, however, that attorney or trustee fees and costs incurred as a result of a foreclosure action shall be assessed within 45 days of the date they are charged by either the attorney or trustee to the servicer.
    2. Explained clearly and conspicuously in a statement mailed to the borrower at the borrower’s last known address within 30 days after assessing the fee, provided the servicer shall not be required to take any action in violation of the provisions of the federal bankruptcy code. The servicer shall not be required to send such a statement for a fee that either:
      1. Is otherwise included in a periodic statement sent to the borrower that meets the requirements of paragraphs (b), (c), and (d) of 12 C.F.R. § 1026.41.
      2. Results from a service that is affirmatively requested by the borrower, is paid for by the borrower at the time the service is provided, and is not charged to the borrower’s loan account.
  2. All amounts received by a servicer on a home loan at the address where the borrower has been instructed to make payments shall be accepted and credited, or treated as credited, within one business day of the date received, provided that the borrower has made the full contractual payment and has provided sufficient information to credit the account. If a servicer uses the scheduled method of accounting, any regularly scheduled payment made prior to the scheduled due date shall be credited no later than the due date. Provided, however, that if any payment is received and not credited, or treated as credited, the borrower shall be notified within 10 business days by mail at the borrower’s last known address of the disposition of the payment, the reason the payment was not credited, or treated as credited to the account, and any actions necessary by the borrower to make the loan current.
  3. The notification required by subdivision (2) of this section is not necessary if (i) the servicer complies with the terms of any agreement or plan made with the borrower and has applied and credited payments received in the manner required, and (ii) the servicer is applying and crediting payments to the borrower’s account in compliance with all applicable State and federal laws, including bankruptcy laws, and if at least one of the following occurs:
    1. The borrower has entered into a written loss mitigation, loan modification, or forebearance agreement with the servicer that itemizes all amounts due and specifies how payments will be applied and credited;
    2. The borrower has elected to participate in an alternative payment plan, such as a biweekly payment plan, that specifies as part of a written agreement how payments will be applied and credited; or
    3. The borrower is making payments pursuant to a bankruptcy plan.
  4. Failure to charge the fee or provide the information within the allowable time and in the manner required under subdivision (1) of subsection (a) of this section constitutes a waiver of such fee.
  5. All fees charged by a servicer must be otherwise permitted under applicable law and the contracts between the parties. Nothing herein is intended to permit the application of payments or method of charging interest which is less protective of the borrower than the contracts between the parties and other applicable law.
  6. The obligations of mortgage servicers set forth in G.S. 53-244.110.

History. 2007-351, s. 5; 2008-227, s. 1; 2008-228, s. 19; 2015-264, s. 43; 2017-10, s. 1.2.

Editor’s Note.

The section as enacted by Session Laws 2007-351, s. 5, contained a subsection (a), but no subsection (b). The subsection (a) designation was deleted at the direction of the Revisor of Statutes.

Session Laws 2008-228, s. 19, which added subdivision (5), was effective January 1, 2009, and applicable to anyone engaged in the business of mortgage servicing on or after that date.

Session Laws 2017-10, s. 5.1 , is a severability clause.

Effect of Amendments.

Session Laws 2008-227, s. 1, effective October 1, 2008, in subdivision (1)b, substituted “within 30 days” for “at least 30 days,” and added the last sentence; and added subdivision (2a).

Session Laws 2008-228, s. 19, effective January 1, 2009, and applicable to anyone engaged in the business of mortgage servicing on or after that date, added subdivision (5).

Session Laws 2015-264, s. 43, effective October 1, 2015, substituted “G.S. 53-244.110” for “G.S. 53-243.11” in subdivision (5).

Session Laws 2017-10, s. 1.2, effective May 4, 2017, substituted “for a fee that either:” for “for a fee that: (i) results” in the last sentence of subdivision (1)b.; added subdivision (1)b.1. and the (1)b.2. designation; and in subdivision (1)b.2., deleted the (ii) and (iii) designations and, added “Results” to the beginning of the sentence.

CASE NOTES

Waiver of Fees. —

Debtor’s objection to that portion of a creditor’s proof of claim that was for attorneys’ fees was sustained because the creditor was a servicer of a home loan for purposes of G.S. 45-91, and creditor failed to mail a statement to the debtor’s last known address that clearly and conspicuously explained the attorneys’ fees it sought in its claim as required by G.S. 45-91(1). This failure constituted a waiver of such fees under G.S. 45-91(3). In re Saeed, 2010 Bankr. LEXIS 3267 (Bankr. M.D.N.C. Sept. 17, 2010).

§ 45-92. Obligation of servicer to handle escrow funds.

Any servicer that exercises the authority to collect escrow amounts on a home loan held or to be held for the borrower for insurance, taxes, and other charges with respect to the property shall collect and make all payments from the escrow account, so as to ensure that no late penalties are assessed or other negative consequences result. The provisions of this section shall apply regardless of whether the loan is delinquent or in default unless the servicer has a reasonable basis to believe that recovery of these funds will not be possible or the loan is more than 90 days in default.

History. 2007-351, s. 5.

§ 45-93. Borrower requests for information.

The servicer shall make reasonable attempts to comply with a borrower’s request for information about the home loan account and to respond to any dispute initiated by the borrower about the loan account, as provided in this section. The servicer shall maintain, until the home loan is paid in full, otherwise satisfied, or sold, written or electronic records of each written request for information regarding a dispute or error involving the borrower’s account. Specifically, the servicer is required to do all of the following:

  1. Provide a written statement to the borrower within 10 business days of receipt of a written request from the borrower that includes or otherwise enables the servicer to identify the name and account of the borrower and includes a statement that the account is or may be in error or otherwise provides sufficient detail to the servicer regarding information sought by the borrower. The borrower is entitled to one such statement in any six-month period free of charge, and additional statements shall be provided if the borrower pays the servicer a reasonable charge for preparing and furnishing the statement not to exceed twenty-five dollars ($25.00). The statement shall include the following information if requested:
    1. Whether the account is current or, if the account is not current, an explanation of the default and the date the account went into default.
    2. The current balance due on the loan, including the principal due, the amount of funds (if any) held in a suspense account, the amount of the escrow balance (if any) known to the servicer, and whether there are any escrow deficiencies or shortages known to the servicer.
    3. The identity, address, and other relevant information about the current holder, owner, or assignee of the loan.
    4. The telephone number and mailing address of a servicer representative with the information and authority to answer questions and resolve disputes.
  2. Provide the following information and/or documents within 25 business days of receipt of a written request from the borrower that includes or otherwise enables the servicer to identify the name and account of the borrower and includes a statement that the account is or may be in error or otherwise provides sufficient detail to the servicer regarding information sought by the borrower:
    1. A copy of the original note, or if unavailable, an affidavit of lost note.
    2. A statement that identifies and itemizes all fees and charges assessed under the loan transaction and provides a full payment history identifying in a clear and conspicuous manner all of the debits, credits, application of and disbursement of all payments received from or for the benefit of the borrower, and other activity on the home loan including escrow account activity and suspense account activity, if any. The period of the account history shall cover at a minimum the two-year period prior to the date of the receipt of the request for information. If the servicer has not serviced the home loan for the entire two-year time period the servicer shall provide the information going back to the date on which the servicer began servicing the home loan. For purposes of this subsection, the date of the request for the information shall be presumed to be no later than 30 days from the date of the receipt of the request. If the servicer claims that any delinquent or outstanding sums are owed on the home loan prior to the two-year period or the period during which the servicer has serviced the loan, the servicer shall provide an account history beginning with the month that the servicer claims any outstanding sums are owed on the loan up to the date of the request for the information. The borrower is entitled to one such statement in any six-month period free of charge. Additional statements shall be provided if the borrower pays the servicer a reasonable charge for preparing and furnishing the statement not to exceed fifty dollars ($50.00).
  3. Promptly correct errors relating to the allocation of payments, the statement of account, or the payoff balance identified in any notice from the borrower provided in accordance with subdivision (2) of this section, or discovered through the due diligence of the servicer or other means.

History. 2007-351, s. 5.

§ 45-94. Remedies.

In addition to any equitable remedies and any other remedies at law, any borrower injured by any violation of this Article may bring an action for recovery of actual damages, including reasonable attorneys’ fees. The Commissioner of Banks, the Attorney General, or any party to a home loan may enforce the provisions of this section. With the exception of an action by the Commissioner of Banks or the Attorney General, at least 30 days before a borrower or a borrower’s representative institutes a civil action for damages against a servicer for a violation of this Article, the borrower or a borrower’s representative shall notify the servicer in writing of any claimed errors or disputes regarding the borrower’s home loan that forms the basis of the civil action. The notice must be sent to the address as designated on any of the servicer’s bills, statements, invoices, or other written communication, and must enable the servicer to identify the name and loan account of the borrower. For purposes of this section, notice shall not include a complaint or summons. Nothing in this section shall limit the rights of a borrower to enjoin a civil action, or make a counterclaim, cross-claim, or plead a defense in a civil action. A servicer will not be in violation of this Article if the servicer shows by a preponderance of evidence that:

  1. The violation was not intentional or the result of bad faith; and
  2. Within 30 days after discovering or being notified of an error, and prior to the institution of any legal action by the borrower against the servicer under this section, the servicer corrected the error and compensated the borrower for any fees or charges incurred by the borrower as a result of the violation.

History. 2007-351, s. 5; 2008-228, s. 20; 2013-412, s. 8.

Effect of Amendments.

Session Laws 2008-228, s. 20, effective January 1, 2009, and applicable to foreclosure proceedings filed on or after that date, added the third sentence in the introductory paragraph.

Session Laws 2013-412, s. 8, effective August 23, 2013, deleted the former third sentence, which read “The Clerk of Superior Court shall also suspend foreclosure proceedings for 60 days if notified by the Commissioner of Banks as provided in G.S. 53-243.12(n).”

§ 45-95. Severability.

The provisions of this Article shall be severable, and if any phrase, clause, sentence, or provision is declared to be invalid or is preempted by federal law or regulation, the validity of the remainder of this section shall not be affected thereby. If any provision of this Article is declared to be inapplicable to any specific category, type, or kind of points and fees, the provisions of this Article shall nonetheless continue to apply with respect to all other points and fees.

History. 2007-351, s. 5.

§§ 45-96 through 45-99.

Reserved for future codification purposes.

Article 11. Emergency Program to Reduce Home Foreclosures.

§ 45-100. Title.

This Article shall be known as the Emergency Program to Reduce Home Foreclosures Act.

History. 2008-226, s. 1; 2010-168, s. 9; 2012-79, s. 2.17(g).

Editor’s Note.

Session Laws 2008-226, s. 6, as amended by Session Laws 2010-168, s. 9, and Session Laws 2012-79, s. 2.17(g), made this section effective November 1, 2008. Session Laws 2012-79, s. 2.17(g), deleted the sunset provision and thus this Article will not expire May 31, 2013.

§ 45-101. Definitions.

The following definitions apply throughout this Article:

  1. Act as a mortgage servicer. — To engage, whether for compensation or gain from another or on its own behalf, in the business of receiving any scheduled periodic payments from a borrower pursuant to the terms of any mortgage loan, including amounts for escrow accounts, and making the payments of principal and interest and such other payments with respect to the amounts received from the borrower as may be required pursuant to the mortgage loan, the mortgage servicing loan documents, or servicing contract.
  2. Repealed by Session Laws 2010-168, s. 1, effective November 1, 2010.
  3. Home loan. — A loan that has all of the following characteristics:
    1. The loan is not (i) an equity line of credit as defined in G.S. 24-9, (ii) a construction loan as defined in G.S. 24-10, (iii) a reverse mortgage transaction, or (iv) a bridge loan with a term of 12 months or less, such as a loan to purchase a new dwelling where the borrower plans to sell a current dwelling within 12 months.
    2. The borrower is a natural person.
    3. The debt is incurred by the borrower primarily for personal, family, or household purposes.
    4. The principal amount of the loan does not exceed the conforming loan size limit for a single-family dwelling as established from time to time by Fannie Mae.
    5. The loan is secured by (i) a security interest in a manufactured home, as defined in G.S. 143-145, in the State which is or will be occupied by the borrower as the borrower’s principal dwelling, (ii) a mortgage or deed of trust on real property in the State upon which there is located an existing structure designed principally for occupancy of from one to four families that is or will be occupied by the borrower as the borrower’s principal dwelling, or (iii) a mortgage or deed of trust on real property in the State upon which there is to be constructed using the loan proceeds a structure or structures designed principally for occupancy of from one to four families which, when completed, will be occupied by the borrower as the borrower’s principal dwelling.
    6. A purpose of the loan is to (i) purchase the dwelling, (ii) construct, repair, rehabilitate, remodel, or improve the dwelling or the real property on which it is located, (iii) satisfy and replace an existing obligation secured by the same real property, or (iv) consolidate existing consumer debts into a new home loan.
  4. Housing Finance Agency. — The North Carolina Housing Finance Agency.
  5. Mortgage lender. — A person engaged in the business of making mortgage loans for compensation or gain.
  6. Mortgage servicer. — A person who directly or indirectly acts as a mortgage servicer as that term is defined in subdivision (1) of this section or who otherwise meets the definition of the term “servicer” in the Real Estate Settlement Procedures Act, 12 U.S.C. § 2605(i), with respect to mortgage loans.
  7. Repealed by Session Laws 2010-168, s. 1, effective November 1, 2010.
  8. Repealed by Session Laws 2010-168, s. 1, effective November 1, 2010.

History. 2008-226, s. 1; 2009-457, s. 3; 2010-168, ss. 1, 9; 2011-288, s. 1; 2012-79, s. 2.17(g).

Editor’s Note.

Subdivision (1c) was originally enacted as subdivision (3b) by Session Laws 2011-288, s. 1. It has been renumbered as subdivision (1c) at the direction of the Revisor of Statutes in order to maintain alphabetical order.

Session Laws 2008-226, s. 6, as amended by Session Laws 2010-168, s. 9, and Session Laws 2012-79, s. 2.17(g), made this section effective November 1, 2008. Session Laws 2012-79, s. 2.17(g), deleted the sunset provision and thus this Article will not expire May 31, 2013.

Effect of Amendments.

Session Laws 2009-457, s. 3, effective October 1, 2009, added subdivisions (1a), (1b), and (3a); and in subdivision (4), substituted “meets” for “would meet” and “this Article” for “G.S. 24-1.1F(a)(7), if that section had been in effect when the loan was originated.”

Session Laws 2010-168, s. 1, effective November 1, 2010, deleted subdivisions (1a), (3a), and (4), which were the definitions for “annual percentage rate,” “rate spread home loan,” and “subprime loan,” respectively.

Session Laws 2011-288, s. 1, effective July 1, 2011, added subdivision (1c).

§ 45-102. Pre-foreclosure notice for home loans.

At least 45 days prior to the filing of a notice of hearing in a foreclosure proceeding on a primary residence, mortgage servicers of home loans shall send written notice by mail to the last known address of the borrower to inform the borrower of the availability of resources to avoid foreclosure, including:

  1. An itemization of all past due amounts causing the loan to be in default.
  2. An itemization of any other charges that must be paid in order to bring the loan current.
  3. A statement that the borrower may have options available other than foreclosure and that the borrower may discuss available options with the mortgage lender, the mortgage servicer, or a counselor approved by the U.S. Department of Housing and Urban Development.
  4. The address, telephone number, and other contact information for the mortgage lender, the mortgage servicer, or the agent for either of them who is authorized to attempt to work with the borrower to avoid foreclosure.
  5. The name, address, telephone number, and other contact information for one or more HUD-approved counseling agencies operating to assist borrowers in North Carolina to avoid foreclosure.
  6. The address, telephone number, and other contact information for the State Home Foreclosure Prevention Project of the Housing Finance Agency.

History. 2008-226, s. 1; 2010-168, ss. 1, 9; 2012-79, s. 2.17(a), (g).

Editor’s Note.

Session Laws 2008-226, s. 6, as amended by Session Laws 2010-168, s. 9, and Session Laws 2012-79, s. 2.17(g), made this section effective November 1, 2008. Session Laws 2012-79, s. 2.17(g), deleted the sunset provision and thus this Article will not expire May 31, 2013.

Session Laws 2012-79, s. 2.17(h) provides: “This section becomes effective December 1, 2012. The North Carolina Housing Finance Agency shall assume the responsibilities designated in this section for operation of the State Home Foreclosure Prevention Project no later than December 31, 2012.”

Effect of Amendments.

Session Laws 2010-168, s. 1, effective November 1, 2010, in the section catchline and in the introductory paragraph, substituted “home loans” for “subprime loans”; and in subdivision (6), added “or, alternatively, if the loan is served by a credit union, the address, telephone number, and other contact information for the consumer complaint section of the Credit Union Division.”

Session Laws 2012-79, s. 2.17(a), effective December 1, 2012, rewrote subdivision (6), which formerly read: “The address, telephone number, and other contact information for the consumer complaint section of the Office of Commissioner of Banks, or, alternatively, if the loan is serviced by a credit union, the address, telephone number, and other contact information for the consumer complaint section of the Credit Union Division.”

§ 45-103. Pre-foreclosure information to be filed with the Administrative Office of the Courts for home loans.

  1. Within three business days of mailing the notice required by G.S. 45-102, the mortgage servicer shall file certain information with the Administrative Office of the Courts. The filing shall be in an electronic format, as designated by the Administrative Office of the Courts, and shall contain the name and address of the borrower, the due date of the last scheduled payment made by the borrower, and the date the notice was mailed to the borrower. The Administrative Office of the Courts shall establish an internal database to track information required by this section. The Housing Finance Agency shall design and develop the State Home Foreclosure Prevention Project database, in consultation with the Administrative Office of the Courts. Only the Administrative Office of the Courts, the Housing Finance Agency, and the clerk of court as provided by G.S. 45-107 shall have access to the database.
  2. As permitted by applicable State and federal law, optional information may be requested from the mortgage servicer to facilitate further review by the State Home Foreclosure Prevention Project described in G.S. 45-104. This optional information shall be used by the State Home Foreclosure Prevention Project to prioritize efforts to reach borrowers most likely to avoid foreclosure and to prevent delay for defaults where foreclosure is unavoidable.
  3. Repealed by Session Laws 2010-168, s. 1, effective November 1, 2010.

History. 2008-226, s. 1; 2010-168, ss. 1, 9; 2011-288, s. 2; 2012-79, s. 2.17(b), (g).

Editor’s Note.

Session Laws 2008-226, s. 6, as amended by Session Laws 2010-168, s. 9, and Session Laws 2012-79, s. 2.17(g), made this section effective November 1, 2008. Session Laws 2012-79, s. 2.17(g), deleted the sunset provision and thus this Article will not expire May 31, 2013.

Session Laws 2012-79, s. 2.17(h) provides: “This section becomes effective December 1, 2012. The North Carolina Housing Finance Agency shall assume the responsibilities designated in this section for operation of the State Home Foreclosure Prevention Project no later than December 31, 2012.”

Effect of Amendments.

Session Laws 2010-168, s. 1, effective November 1, 2010, in the section catchline, substituted “home loans” for “certain subprime loans”; in subsection (a), in the second sentence, inserted “the due date of the last scheduled payment made by the borrower” and added the last three sentences; in subsection (b), deleted the former second sentence, which read: “The nature of the optional information requested shall be determined in connection with the design of the database established by subsection (c) of this section”; and deleted former subsection (c), which contained the same material as the three sentences added to subsection (a).

Session Laws 2011-288, s. 2, effective July 1, 2011, inserted “the Housing Finance Agency” in the last sentence of subsection (a).

Session Laws 2012-79, s. 2.17(b), effective December 1, 2012, in subsection (a), substituted “Housing Finance Agency” for “Commissioner of Banks”, and added “State Home Foreclosure Prevention Project” in the fourth sentence, and deleted “the Office of Commissioner of Banks,” preceding “the Housing Finance Agency” in the fifth sentence.

§ 45-104. State Home Foreclosure Prevention Project and Fund.

  1. The purpose of the State Home Foreclosure Prevention Project is to seek solutions to avoid foreclosures for home loans. The Project may include input from HUD-approved housing counselors, community organizations, the Credit Union Division and other State agencies, mortgage lenders, mortgage servicers, and other partners. The Housing Finance Agency shall administer the Project.
  2. There is established a State Home Foreclosure Prevention Trust Fund to be managed and maintained by the Housing Finance Agency. The funds shall be held separate from any other funds received by the Housing Finance Agency in trust for the operation of the State Home Foreclosure Prevention Project.
  3. Upon the filing of the information required under G.S. 45-103, the mortgage servicer shall pay a fee of seventy-five dollars ($75.00) to the State Home Foreclosure Prevention Trust Fund. The fee shall not be charged more than once for a home loan covered by this act. The Housing Finance Agency shall collect the fee. Upon receipt of the fee the Housing Finance Agency shall deposit the funds into the State Home Foreclosure Prevention Trust Fund. The Housing Finance Agency shall manage the State Home Foreclosure Prevention Trust Fund.
  4. The Housing Finance Agency shall use funds from the State Home Foreclosure Prevention Trust Fund to compensate performance-based service contracts or other contracts and grants necessary to implement the purposes of this act in the following manner:
    1. An amount, not to exceed the greater of two million two hundred thousand dollars ($2,200,000) or thirty percent (30%) of the funds per year, to cover the administrative costs of the operation of the program by the Housing Finance Agency, including managing on behalf of the Administrative Office of the Courts the database identified in G.S. 45-103, expenses associated with informing homeowners of State resources available for foreclosure prevention, expenses associated with connecting homeowners to available resources, and assistance to homeowners and counselors in communicating with mortgage servicers.
    2. An amount, not to exceed the greater of three million four hundred thousand dollars ($3,400,000) or forty percent (40%) per year, to make grants to or reimburse nonprofit housing counseling agencies for providing foreclosure prevention counseling services to homeowners involved in the State Home Foreclosure Prevention Project.
    3. An amount, not to exceed thirty percent (30%) of the total funds collected per year, to make grants to or reimburse nonprofit legal service providers for services rendered on behalf of homeowners in danger of defaulting on a home loan to avoid foreclosure, limited to legal representation such as negotiation of loan modifications or other loan work-out solutions, defending homeowners in foreclosure or representing homeowners in bankruptcy proceedings, and research and counsel to homeowners regarding the status of their home loans.
    4. Any funds remaining in the State Home Foreclosure Prevention Trust Fund as of June 30, 2011, and any funds remaining in the State Home Foreclosure Prevention Trust Fund upon the expiration of each subsequent fiscal year shall be directed to the North Carolina Housing Trust Fund.
  5. The Housing Finance Agency shall have the discretion to enter into an agreement to administer funds under subdivisions (2) and (3) of subsection (d) of this section in a manner that complements or supplements other State and federal programs directed to prevent foreclosures for homeowners participating in the State Home Foreclosure Prevention Project.
  6. The Housing Finance Agency shall report to the General Assembly describing the operation of the program established by this act not later than May 1 of each year until the funds are completely disbursed from the State Home Foreclosure Prevention Trust Fund. Information in the report shall be presented in aggregate form and may include the number of clients helped, the effectiveness of the funds in preventing home foreclosure, recommendations for further efforts needed to reduce foreclosures, and provide any other aggregated information the Housing Finance Agency determines is pertinent or that the General Assembly requests.

History. 2008-226, ss. 1, 5; 2010-168, ss. 1, 9; 2011-288, s. 3; 2012-79, s. 2.17(c), (f), (g).

Editor’s Note.

Session Laws 2008-226, s. 5, as amended by Session Laws 2012-79, s. 2.17(f), effective December 1, 2012, was codified as subsection (f) at the direction of the Revisor of Statutes.

Session Laws 2008-226, s. 6, as amended by Session Laws 2010-168, s. 9, and Session Laws 2012-79, s. 2.17(g), made this section effective November 1, 2008. Session Laws 2012-79, s. 2.17(g), deleted the sunset provision and thus this Article will not expire May 31, 2013.

Session Laws 2012-79, s. 2.17(h) provides: “This section becomes effective December 1, 2012. The North Carolina Housing Finance Agency shall assume the responsibilities designated in this section for operation of the State Home Foreclosure Prevention Project no later than December 31, 2012.”

Effect of Amendments.

Session Laws 2010-168, s. 1, effective November 1, 2010, in the section catchline, added “and Fund”; added the subsection (a) designation, and, in subsection (a), substituted “home loans” for “certain subprime loans” and “the Credit Union Division and other State agencies” for “state agencies”; and added subsections (b) through (e).

Session Laws 2011-288, s. 3, effective July 1, 2011, in subsection (a), added the last sentence; in subsection (b), in the first sentence, substituted “Housing Finance Agency” for “Office of the Commissioner of Banks,” and in the last sentence, inserted “either” and “or the Housing Finance Agency”; in subsection (c), rewrote the third sentence, which formerly read: “The collection of this fee shall be managed by the Office of the Commissioner of Banks in a manner so as to minimize burdens on mortgage servicers in complying with the requirements of this section,” and added the last three sentences; in the introductory paragraph of subsection (d) and in subsection (e), substituted “Housing Finance Agency” for “Commissioner of Banks”; in the introductory paragraph of subsection (d), substituted “shall use funds” for “shall allocate funds” and inserted “compensate performance-based service contracts or other contracts and grants necessary to”; in subdivision (d)(1), inserted “and the Housing Finance Agency” near the middle; and rewrote subdivision (d)(4), which formerly read: “Any funds remaining upon the expiration of the State Home Foreclosure Prevention Project shall be directed to the North Carolina Housing Trust Fund.”

Session Laws 2012-79, s. 2.17(c), effective December 1, 2012, in subsection (a), deleted the former first sentence, which read: “The Commissioner of Banks is authorized to establish the State Home Foreclosure Prevention Project,” added “State Home Foreclosure Prevention” in the second sentence, and substituted “The Project” for “In developing the Project, the Commissioner” in the third sentence; in subsection (b), deleted “either the Office of the Commissioner of Banks or” preceding “the Housing Finance Agency”; in subsection (c), substituted “Housing Finance Agency shall collect” for “Office of the Commissioner of Banks shall collect” and “Housing Finance Agency shall deposit” for “Commissioner shall deposit,” and deleted “into a separate account. The funds shall be transferred no less than monthly” following “deposit the funds”; and in subdivision (d)(1), deleted “the Office of the Commissioner of Banks and” preceding “the Housing Finance Agency.”

§ 45-105. Extension of foreclosure process.

The Housing Finance Agency shall review information provided in the database created by G.S. 45-103 to determine which home loans are appropriate for efforts to avoid foreclosure. If the Housing Finance Agency reasonably believes, based on a full review of the loan information, the mortgage servicer’s loss mitigation efforts, the borrower’s capacity and interest in staying in the home, and other appropriate factors, that further efforts by the State Home Foreclosure Prevention Project offer a reasonable prospect to avoid foreclosure on primary residences, the Executive Director of the Housing Finance Agency shall have the authority to extend one time under this Article the allowable filing date for any foreclosure proceeding on a primary residence by up to 30 days beyond the earliest filing date established by the pre-foreclosure notice. If the Executive Director of the Housing Finance Agency makes the determination that a loan is subject to this section, the Housing Finance Agency shall notify the borrower, mortgage servicer, and the Administrative Office of the Courts.

History. 2008-226, s. 1; 2010-168, ss. 1, 9; 2011-288, s. 4; 2012-79, s. 2.17(d), (g).

Editor’s Note.

Session Laws 2008-226, s. 6, as amended by Session Laws 2010-168, s. 9, and Session Laws 2012-79, s. 2.17(g), made this section effective November 1, 2008. Session Laws 2012-79, s. 2.17(g), deleted the sunset provision and thus this Article will not expire May 31, 2013.

Session Laws 2012-79, s. 2.17(h) provides: “This section becomes effective December 1, 2012. The North Carolina Housing Finance Agency shall assume the responsibilities designated in this section for operation of the State Home Foreclosure Prevention Project no later than December 31, 2012.”

Effect of Amendments.

Session Laws 2010-168, s. 1, effective November 1, 2010, in the first sentence, substituted “home loans” for “subprime loans,” and added the last sentence.

Session Laws 2011-288, s. 4, effective July 1, 2011, inserted “upon referral from the Housing Finance Agency” in the first sentence.

Session Laws 2012-79, s. 2.17(d), effective December 1, 2012, deleted “Commissioner of Banks upon referral from the” preceding “Housing Finance Agency” in the first sentence, substituted “Housing Finance Agency” for “Commissioner” and “Executive Director of the Housing Finance Agency” for “Commissioner” in the second and third sentences, and deleted the former fourth sentence, which read: “If the mortgage servicer is a state or federally chartered credit union, the Commissioner shall also notify the Administrator of the Credit Union Division of the determination.”

§ 45-106. Use and privacy of records.

The data provided to the Administrative Office of the Courts pursuant to G.S. 45-103 shall be exclusively for the use and purposes of the State Home Foreclosure Prevention Project developed by the Commissioner of Banks and administered by the Housing Finance Agency in accordance with G.S. 45-104. The information provided to the database is not a public record, except that a mortgage lender and a mortgage servicer shall have access to the information submitted only with regard to its own loans. Provision of information to the Administrative Office of the Courts for use by the State Home Foreclosure Prevention Project shall not be considered a violation of G.S. 53B-8. A mortgage servicer shall be held harmless for any alleged breach of privacy rights of the borrower with respect to the information the mortgage servicer provides in accordance with this Article.

History. 2008-226, s. 1; 2010-168, ss. 1, 9; 2011-288, s. 5; 2012-79, s. 2.17(e), (g).

Editor’s Note.

Session Laws 2008-226, s. 6, as amended by Session Laws 2010-168, s. 9, and Session Laws 2012-79, s. 2.17(g), made this section effective November 1, 2008. Session Laws 2012-79, s. 2.17(g), deleted the sunset provision and thus this Article will not expire May 31, 2013.

Session Laws 2012-79, s. 2.17(h) provides: “This section becomes effective December 1, 2012. The North Carolina Housing Finance Agency shall assume the responsibilities designated in this section for operation of the State Home Foreclosure Prevention Project no later than December 31, 2012.”

Effect of Amendments.

Session Laws 2010-168, s. 1, effective November 1, 2010, added the third sentence.

Session Laws 2011-288, s. 5, effective July 1, 2011, inserted “and administered by the Housing Finance Agency” in the first sentence.

Session Laws 2012-79, s. 2.17(e), effective December 1, 2012, deleted the former third sentence, which read: “Any notice provided by the Commissioner to the Administrator of the Credit Union Division under G.S. 45-105 is not a public record.”

§ 45-107. Foreclosure filing.

  1. For the duration of the program authorized by this Article, foreclosure notices filed on home loans on or after November 1, 2010, shall contain a certification by the filing party that the pre-foreclosure notice required by G.S. 45-102 and the pre-foreclosure information required by G.S. 45-103 were provided in accordance with this Article and that the periods of time established by the Article have elapsed.
  2. The clerk of superior court or other judicial officer may have access to the pre-foreclosure database to confirm information provided in subsection (a) of this section. A materially inaccurate statement in the certification shall be cause for dismissal without prejudice of any foreclosure proceeding on a primary residence initiated by the mortgage servicer and for payment by the filing party of costs incurred by the borrower in defending the foreclosure proceeding.

History. 2008-226, s. 1; 2010-168, ss. 1, 9; 2012-79, s. 2.17(g).

Editor’s Note.

Session Laws 2008-226, s. 6, as amended by Session Laws 2010-168, s. 9, and Session Laws 2012-79, s. 2.17(g), made this section effective November 1, 2008. Session Laws 2012-79, s. 2.17(g), deleted the sunset provision and thus this Article will not expire May 31, 2013.

Effect of Amendments.

Session Laws 2010-168, s. 1, effective November 1, 2010, substituted “notices filed on home loans on or after November 1, 2010” for “notices filed on subprime loans on or after November 15, 2008” in subsection (a).