Opinion
COA23-183
11-07-2023
IN RE FORECLOSURE OF ROGER LYNN SORRELL
LOGS Legal Group, LLP, by Jason K. Purser, for Petitioner-Appellee Grady I. Ingle, Substitute Trustee. McGuireWoods, LLP, by Abigail A. Golden, and Perkins Coie, LLP, by Aaron R. Goldstein, admitted pro hac vice, for Appellee U.S. Bank Trust. Adams & Reese LLP, by Lyndey R. Z. Bryant, for Appellee CitiMortgage, Inc. Coats & Bennett, PLLC, by David E. Bennett and Gavin B. Parsons, for Respondent-Appellant.
An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority. Citation is disfavored but may be permitted in accordance with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure.
Heard in the Court of Appeals 23 August 2023.
Appeal by Respondent-Appellant from Order entered 22 November 2022 by Judge Mark A. Sternlicht in Wake County No. 14 SP 3203 Superior Court.
LOGS Legal Group, LLP, by Jason K. Purser, for Petitioner-Appellee Grady I. Ingle, Substitute Trustee.
McGuireWoods, LLP, by Abigail A. Golden, and Perkins Coie, LLP, by Aaron R. Goldstein, admitted pro hac vice, for Appellee U.S. Bank Trust.
Adams & Reese LLP, by Lyndey R. Z. Bryant, for Appellee CitiMortgage, Inc.
Coats & Bennett, PLLC, by David E. Bennett and Gavin B. Parsons, for Respondent-Appellant.
HAMPSON, Judge.
Factual and Procedural Background
Roger Sorrell (Appellant) appeals from an Order entered 22 November 2022 denying Appellant's Motion to Vacate Judgment. The Record before us tends to reflect the following:
Appellant and Pamela Ray Young (Young) acquired record title to 9804 Southview Court, Raleigh, North Carolina 27603 (the Property) on 29 January 2002. On 1 March 2002, Appellant and Young obtained a loan of $68,000 secured by a deed of trust against the Property (2002 Loan). The deed of trust was properly recorded as of 6 March 2002. In 2005, Appellant and Young obtained a refinance loan from CitiMortgage secured by another deed of trust against the Property (2005 Loan). The 2005 Loan was used to repay the 2002 Loan. With repayment, the deed of trust for the 2002 Loan was extinguished as a lien from the title by a certificate of satisfaction.
On 31 March 2010, Grady I. Ingle (Substitute Trustee) initiated foreclosure proceedings on the 2005 Loan for nonpayment since 1 August 2009. On 22 June 2010, this initial foreclosure proceeding was dismissed. Appellant received a quitclaim deed to the Property from Young, as well as title subject to all recorded liens, including the 2005 deed of trust.
A quitclaim deed is used to convey all of the grantor's right, title, or interest in a property to the grantee. Hayes v. Ricard, 245 N.C. 687, 691, 97 S.E.2d 105, 108 (1957) ("[S]uch a [quitclaim] deed will convey whatever title or interest the grantor may have at the time it is given."). "[I]f there is a mortgage on land and the mortgagor grants the land without noting the existence of the mortgage and no reference is made to it, the purchaser takes 'subject to' the mortgage in the absence of any agreement to that effect." 2 Webster's Real Est. L. in N. Carolina § 13.18. When a transferee takes property subject to a mortgage, "the land remains subject to the mortgage and may be reached by the mortgagee in foreclosure to satisfy the mortgage debt." Id.
On 24 October 2014, Substitute Trustee filed a Notice of Hearing to initiate this proceeding to foreclose on the deed of trust securing the 2005 Loan. The Notice of Hearing included a hearing date of 5 December 2014. Substitute Trustee attempted to serve Appellant by certified mail, but the Notice was returned marked "not deliverable as addressed" by the Post Office despite being correctly addressed. Substitute Trustee also attempted personal service on the Appellant by Sheriff, as prescribed by N.C. Gen. Stat. § 1A-1, Rule 4(a). However, on 7 November 2014-after the Sheriff's Office certified that they were unable to serve Appellant after "due and diligent effort"-Notice was posted in a conspicuous location on the Property. Appellant appeared at the 5 December 2014 hearing and, based on claims unrelated to this case, obtained several continuances that led to the hearing being rescheduled for 25 September 2015.
Notice of the September 2015 hearing date was filed on 13 August 2015. Substitute Trustee again attempted to serve Appellant with Notice by certified mail, and again the Post Office returned the Notice as undeliverable. Substitute Trustee again attempted personal service on Appellant by Sheriff, but the Sheriff's Office was again unable to locate Appellant after "due and diligent effort," and posted Notice on the Property on 19 August 2015. Substitute Trustee was, however, able to serve Appellant's attorney, Heyward G. Wall (Wall), via certified mail on 17 August 2015.
The September 2015 hearing, which Wall attended on Appellant's behalf, resulted in further continuances that delayed the case until 30 November 2015. On 29 September 2015, a Notice of Continuance was mailed via first-class mail to both Appellant and Wall. At the November hearing, Wall obtained another continuance, and the case was ultimately postponed until 24 October 2016. Substitute Trustee filed a Notice of Hearing on 12 September 2016 and sent Notice via certified mail to Appellant and Wall. Wall was served on 15 September 2016, but the Notice to Appellant was again returned by the Post Office, which stated that there was no mail receptacle on the Property. Counsel for Substitute Trustee attested to this effort to serve Appellant in an affidavit (First Affidavit). On 14 September 2016, Substitute Trustee again attempted to serve Appellant by Sheriff; however, the Sheriff's Office was again unable to locate Appellant after "due and diligent effort," and posted Notice on the Property. Counsel for Substitute Trustee attested to this effort to serve Appellant in another affidavit (Second Affidavit).
A hearing on the Foreclosure Petition proceeded on 24 October 2016. The Clerk entered an Order allowing foreclosure (Foreclosure Order) and no appeal was filed within the statutory ten-day period. Pursuant to the Foreclosure Order, Substitute Trustee held a sale of the Property on 14 November 2016. Notice of the sale was mailed to Appellant and Wall on 25 October 2016. Prior to completion of the sale, Appellant filed a Bankruptcy Petition in the United States Bankruptcy Court for the Eastern District of North Carolina (Bankruptcy Court) on 28 November 2016. Consequently, Substitute Trustee moved to set aside the sale and to deactivate, but not dismiss, the foreclosure proceeding.
After the Bankruptcy Court dismissed Appellant's suit, the Clerk granted Substitute Trustee's motion to reopen the foreclosure proceeding on 31 January 2019. Pursuant to the Foreclosure Order, Substitute Trustee scheduled and held a sale of the Property on 1 March 2019. Substitute Trustee mailed Notice of the sale to Appellant and Wall on 29 January 2019. On 21 March 2019, Substitute Trustee recorded a trustee's deed conveying the Property to U.S. Bank Trust (U.S. Bank). The trial court entered an Order denying Appellant's request for a stay on 23 April 2019.
On 22 July 2022, after a lawsuit against various parties, including Substitute Trustee's law firm, the Superior Court judge, Fannie Mae, and U.S. Bank, brought by Appellant was dismissed with prejudice, Appellant filed a Motion to Vacate Judgment. The Motion sought to vacate the Foreclosure Order that permitted foreclosure and sale of the Property under N.C. Gen. Stat. § 1A-1, Rule 60(b)(1). On 26 July 2022, Appellant filed an Amended Motion to Vacate Judgment.
On 22 November 2022, the trial court entered an Order denying the Motion in part by declining to set aside the Foreclosure Order and sale, but it left open the ownership of the manufactured home on the Property. Appellant timely filed written Notice of Appeal on 28 October 2022 and filed Supplemental Notice of Appeal on 16 December 2022.
Appellate Jurisdiction
Appellees contend the trial court's Order is a non-appealable interlocutory order because it left ownership of the mobile home on the Property to be determined. However, the Order authorizing foreclosure in this case was final, and the denial of the Motion to Vacate leaves in place that final Foreclosure Order and sale of the Property. The trial court simply indicated it was not making a ruling on the ownership of any personal property remaining on the Property. Thus, for purposes of this appeal, the Order Denying Appellant's Motion to Vacate Judgment is final and appealable. See N.C. Gen. Stat. § 7A-27(b)(1) (2021).
Issue
The dispositive issue on appeal is whether the trial court abused its discretion in denying Appellant's Motion to Vacate the 24 October 2016 Foreclosure Order authorizing sale of the Property.
Analysis
Appellant contends that the trial court erroneously denied his Motion to Vacate Judgment because it failed to recognize that service of process was insufficient to meet the statutory requirements under N.C. Gen. Stat. § 45-21.16. "Appellate review of an order denying relief under North Carolina Rule of Civil Procedure 60(b) is limited to determining whether the court abused its discretion," In re Powell, 237 N.C.App. 441, 443, 768 S.E.2d 133, 134-35 (2014) (citation and quotation marks omitted); see also Sink v. Easter, 288 N.C. 183, 198, 217 S.E.2d 532, 541 (1975). Further, "[a]buse of discretion is shown only when the challenged actions are manifestly unsupported by reason." Powell, 237 N.C.App. at 443, 768 S.E.2d at 135 (citation and quotation marks omitted).
The trial court found that service of process by posting was proper and effective upon Appellant. In its Findings of Fact, the trial court found that Substitute Trustee had attempted to serve Appellant by certified mail, but the mail was returned undelivered. Additionally, it found that a Wake County Deputy visited the Property on 14 September 2016 and was unable to locate Appellant after "due and diligent effort" and posted notice "in a conspicuous place" on the Property. The trial court also noted that Appellant's attorney, Wall, was served with Notice. Lastly, the trial court found that Substitute Trustee initiated sale of the Property "[a]fter proper notice, posting, and publishing[.]" Based on these Findings, the trial court concluded: "Service of the petition to foreclose [the Property] . . . and of the notice of the October 24, 2016 hearing by posting was proper and effective upon [Appellant]."
Service of process by posting in foreclosure hearings requires (1) "reasonable and diligent effort" to serve notice by registered or certified mail; (2) an affidavit filed with the Clerk of Court "showing the circumstances warranting the use of service by posting;" and (3) proof of service "made in any manner provided by the Rules of Civil Procedure for service of summons[.]" N.C. Gen. Stat. § 45-21.16(a) (2021). Based on the Record before us, there is evidence to support the trial court's Findings of Fact and Conclusion that service of process and Notice to Appellant was sufficient.
First, there is evidence to support that Substitute Trustee used reasonable and diligent effort to serve Notice by certified mail. "[T]here is no restrictive mandatory checklist for what constitutes due diligence for purposes of service of process by publication; [r]ather, a case by case analysis is more appropriate." Jones v. Wallis, 211 N.C.App. 353, 358, 712 S.E.2d 180, 184 (2011) (citation and quotation marks omitted). "Further, a plaintiff is not required to jump through every hoop later suggested by a defendant in order to meet the requirement of 'due diligence.' This is particularly true when there is no indication in the record that any of the steps suggested by a defendant would have been fruitful." Id. at 359, 712 S.E.2d at 185. This Court has held that an attempt to serve a party by certified mail alone is sufficient due diligence to post notice. See Barnes v. Wells, 165 N.C.App. 575, 582, 599 S.E.2d 585, 590 (2004); see also Powell, 237 N.C.App. at 445-46, 768 S.E.2d at 136 (citing Barnes and holding that an attempt to serve notice of a foreclosure proceeding by certified mail and attempting personal service by a deputy was sufficient diligence to warrant service by posting). As in Powell, Substitute Trustee attempted to serve Appellant both via certified mail and by Sheriff.
Substitute Trustee attested that the envelopes were correctly addressed when he mailed Notice to Appellant. Substitute Trustee sent Notice via certified mail on multiple occasions, consistent with the statute. N.C. Gen. Stat. § 45-21.16(a) (2021). Although the Notice letters were returned each time, there was no indication that Substitute Trustee used the wrong address. Moreover, one such Notice was returned with a note indicating that it was undeliverable because there was no mail receptacle on the Property. These efforts are sufficient to support the trial court's finding of reasonable and diligent efforts. See Powell, 237 N.C.App. at 445-46, 768 S.E.2d at 136; see also Barnes, 165 N.C.App. at 582, 599 S.E.2d at 590. Further, Appellant has offered no alternative method or suggested with specificity what he believes would have constituted diligent efforts. Although Appellant argues that Substitute Trustee should have done more to serve him, each time Substitute Trustee mailed Notice to Appellant with the correct address, it was returned as undeliverable, and, in fact, the Record indicates that Appellant had no mail receptacle on the Property. These issues underscore the need for case-by-case fact-finding of reasonable and diligent efforts best entrusted to the trial court.
Second, Substitute Trustee filed two Affidavits with the Clerk of Court sufficient to satisfy the requirement to show the circumstances warranting service by posting under N.C. Gen. Stat. § 1A-1, Rule 4(j1) ("Upon completion of such service [by publication] there shall be filed with the court an affidavit showing the publication and mailing in accordance with the requirements of G.S. 1-75.10(a)(2)[.]"). The First Affidavit showed that the certified mail sent to Appellant was correctly addressed by Substitute Trustee, timely sent via certified mail, and returned undelivered. The Second Affidavit showed that the Sheriff's Office was unable to serve Appellant but posted Notice conspicuously on the Property. Appellant argues that these Affidavits were insufficient because they do not lay out precisely who mailed Notice to Appellant or what day Notice was sent. However, the Affidavits do contain the essential information for service by posting: that Notice was attempted by certified mail and by personal service by Sheriff, each was undertaken prior to the statutory deadline, and neither method was successful. Cf. In re A.J.C., 259 N.C.App. 804, 808, 817 S.E.2d 475, 479 (2018) (finding an affidavit insufficient where it contained no statement of facts regarding attempts to locate a party); Sink v. Easter, 284 N.C. 555, 559-60, 202 S.E.2d 138, 142 (1974) (finding an affidavit insufficient where it did not show the mailing of notice to defendant's address when the address was known). Based on this evidence, the trial court did not abuse its discretion by finding that Substitute Trustee had satisfied the affidavit requirement.
Finally, the trial court did not abuse its discretion in finding that Substitute Trustee had presented adequate proof of service under the statute. Appellant incorrectly argues that the proof of service required here falls under N.C. Gen. Stat. § 1-75.10(a)(1)(a), which articulates requirements for certificates filed when service is accomplished by sheriff. However, here, the Sheriff's Office was unable to locate and serve Appellant. As a result, Substitute Trustee had to utilize service by posting. Because Substitute Trustee relied on service by posting, the applicable statutory provision is N.C. Gen. Stat. § 45-21.16(a), which states: "In the event that the service is obtained by posting, an affidavit shall be filed with the clerk of court[.]" N.C. Gen. Stat. § 45-21.16(a) (2021). Substitute Trustee presented the First Affidavit as well as receipts from the Post Office demonstrating multiple attempts to serve Appellant via certified mail. Substitute Trustee also averred in the Second Affidavit and presented Return of Service documents showing that the Sheriff's Office had attempted to serve Appellant and, being unable to do so after due and diligent effort, posted Notice conspicuously on the Property. With this evidence in support of its Conclusion, the trial court was well within its discretion to conclude that Substitute Trustee's proof of service was sufficient. Cf. In re Foreclosure of Brown, 156 N.C.App. 477, 488-89, 577 S.E.2d 398, 405-06 (2003) (relying on a substitute trustee's affidavit to conclude that service of process was sufficient).
Thus, there was evidence to support the trial court's Findings that: (1) Substitute Trustee used reasonable and diligent effort to serve Appellant; (2) Substitute Trustee's Affidavits satisfied the requirements to show the circumstances warranting service by posting; and (3) Substitute Trustee presented adequate proof of service. Therefore, the trial court's Findings support its Conclusion that service on Appellant was proper and effective. Consequently, the trial court did not abuse its discretion by denying Appellant's Motion to Vacate.
Conclusion
Accordingly, for the foregoing reasons, we affirm the trial court's Order Denying Appellant's Motion to Vacate Judgment.
AFFIRMED.
Judges MURPHY and GRIFFIN concur.
Report per Rule 30(e).