Opinion
No. COA15-1236
07-19-2016
JOHN T. TURCHIN and SUSAN TURCHIN, Plaintiffs, v. ENBE, INC., Defendant.
Moffatt & Moffatt, PLLC, by Tyler R. Moffatt, for plaintiffs-appellants. Horack Talley Pharr & Lowndes, P.A., by Christopher T. Hood and Phillip E. Lewis, for defendant-appellee.
An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority.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. Avery County, No. 14 CVS 213 Appeal by plaintiffs from order entered 25 June 2015 by Judge Anderson D. Cromer in Avery County Superior Court. Heard in the Court of Appeals 9 March 2016. Moffatt & Moffatt, PLLC, by Tyler R. Moffatt, for plaintiffs-appellants. Horack Talley Pharr & Lowndes, P.A., by Christopher T. Hood and Phillip E. Lewis, for defendant-appellee. DAVIS, Judge.
John T. Turchin ("John") and Susan Turchin ("Susan") (collectively "Plaintiffs") appeal from the trial court's order denying their motion for summary judgment and granting the motion of ENBE, LLC. ("Defendant") for summary judgment. After careful review, we affirm.
Factual Background
On 30 January 2008, John, the manager of Eagles Nest, a John Turchin Company, LLC ("Eagles Nest") executed a promissory note ("the Note") on behalf of Eagles Nest in favor of CommunityOne Bank, N.A. ("CommunityOne") for a loan in the amount of $23,000,000.00. The Note was guaranteed by a deed of trust securing the loan with several parcels of real property located in Avery County, North Carolina, one of which was a .418-acre parcel ("the Property") which is the subject of the present litigation.
On 22 October 2008, Eagles Nest conveyed several portions of the encumbered property to John and Susan — subject to CommunityOne's deed of trust — by special warranty deed. Eagles Nest subsequently defaulted on the Note, and on 20 April 2011, CommunityOne initiated foreclosure proceedings.
On 30 June 2011, a hearing was held before the Avery County Clerk of Court. At the conclusion of the hearing, the clerk entered an order authorizing CommunityOne's sale of the Property, and a foreclosure sale was scheduled for 2 August 2011.
Eagles Nest filed an action in Avery County Superior Court to dismiss or abate the foreclosure. On 1 August 2011 — a day before the scheduled foreclosure sale — a hearing was held before the Honorable C. Philip Ginn in Avery County Superior Court. Eagles Nest requested a continuance, which Judge Ginn granted. Judge Ginn further ordered that the foreclosure sale would be stayed upon the posting by Eagles Nest of a bond in the amount of $50,000.00.
Instead of posting the foreclosure bond, however, the following day, Eagles Nest filed for bankruptcy, thereby preventing the foreclosure sale from taking place. On 2 September 2011, CommunityOne filed a motion to dismiss Eagles Nest's bankruptcy petition with the Bankruptcy Court for the Western District of North Carolina.
On 29 September 2011, the Bankruptcy Court entered orders dismissing Eagles Nest's bankruptcy petition on the ground that it was futile and had been filed in bad faith. As a result, the automatic stay afforded by virtue of Eagles Nest's bankruptcy filing was dissolved. On October 26, a second amended notice of foreclosure sale of the Property was posted by CommunityOne's substitute trustee setting a new foreclosure sale date of 21 November 2011.
On 1 November 2011, Judge Ginn issued an order ("Judge Ginn's Order") denying Eagles Nest's original motion to dismiss the foreclosure sale and setting the bond to stay the foreclosure sale pending appeal at $250,000.00. Judge Ginn also ordered Eagles Nest to pay the outstanding ad valorem taxes on the real property. Eagles Nest filed a notice of appeal of Judge Ginn's Order to this Court on 7 November 2011 but failed to post the bond or pay any of the accumulated ad valorem taxes.
On 16 November 2011, Eagles Nest filed a motion challenging the sufficiency of the notice of sale, which alleged — for the first time — that Susan had never received notice of the foreclosure sale. In response, CommunityOne released certain real property from its deed of trust and proceeded with the foreclosure sale on 21 November 2011.
At the foreclosure sale, CommunityOne purchased the parcels encumbered by the Note, including the Property, for $15,085,000.00. On 1 December 2011, the upset bid period for the foreclosure sale expired, thereby affixing the rights of the parties pursuant to N.C. Gen. Stat. § 45-21.27(a).
On 23 November 2011, Plaintiffs filed a motion to set aside the foreclosure sale and a motion challenging the sufficiency of the notice of sale based on their assertion that "Susan Turchin was not noticed of the foreclosure sale in this proceeding." On 5 December 2011, Plaintiffs' motions were heard before the Honorable Mark E. Powell in Avery County Superior Court. In a written order filed that same day, Judge Powell entered an order ("Judge Powell's Order") denying Plaintiffs' motion. The order specifically stated, in pertinent part, that "[t]hese Motions challenge the Second Amended Notice of Sale in this foreclosure action on two grounds: . . . (2) Susan Turchin, an owner of a portion of the real property being foreclosed, Lot L-5, Lodges at Eagles Nest . . . was not given notice of the foreclosure sale." The order then stated that:
1. There were no irregularities in the Second Amended Notice of Sale.
2. There was nothing material or prejudicial to Movants regarding the alleged irregularities in the Second Amended Notice of Sale and equity does not favor setting aside the sale.
3. The Motions are denied. The request to set aside the foreclosure sale is also denied.
On 8 December 2011, Judge Powell issued an order clarifying several aspects of his 5 December 2011 order that do not affect the issues raised in the present appeal.
On 6 January 2012, Eagles Nest filed a notice of appeal of Judge Powell's Order to this Court. CommunityOne filed a motion to dismiss the appeal on the ground that the foreclosure sale had occurred following Eagles Nest's failure to post the requisite bond pending appeal. On 15 March 2012, this Court entered an order dismissing Eagles Nest's appeal. Eagles Nest then filed a petition for writ of certiorari with our Supreme Court. However, on 9 October 2012, the parties reached a "confidential settlement agreement" pursuant to which they filed a joint motion to dismiss the appeal. The Supreme Court granted the motion and dismissed Eagles Nest's appeal on 31 October 2012.
On 5 December 2011, CommunityOne conveyed title of the Property to ENBE Holding Company, LLC. On 1 March 2013, ENBE Holding Company, LLC conveyed the Property to Defendant by special warranty deed.
On 25 August 2014, Plaintiffs filed a verified complaint in Avery County Superior Court against Defendant, which is the subject of the present appeal. In their verified complaint, Plaintiffs alleged causes of action (1) to quiet title; (2) seeking a declaratory judgment; and (3) for trespass to real property. Plaintiffs' causes of action were premised upon their contention that because Susan was not given any notice of the original foreclosure proceedings, the 21 November 2011 foreclosure sale was invalid and title to the Property remains with Plaintiffs.
On 6 November 2014, Defendant filed a motion to dismiss Plaintiffs' complaint. In part, Defendant's motion asserted that Plaintiffs' claims were barred by the doctrine of collateral estoppel as well as the fact that Defendant was a bona fide purchaser of the Property for value.
On 5 May 2015, Plaintiffs filed a motion for summary judgment, and on 4 June 2015, Defendant filed a cross-motion. On 18 June 2015, a hearing on these motions was held before the Honorable Anderson D. Cromer in Avery County Superior Court. On 25 June 2015, the trial court entered an order ("Judge Cromer's Order") denying Plaintiffs' motion for summary judgment and granting Defendant's motion. Plaintiffs filed a notice of appeal of Judge Cromer's Order on 20 July 2015. On 15 January 2016, Defendant filed a motion to dismiss Plaintiffs' appeal.
Analysis
Defendant asserts that Plaintiffs' appeal is barred by the doctrine of collateral estoppel and, alternatively, is rendered moot on the ground that Defendant is a bona fide purchaser of the Property for value. We agree.
The elements of collateral estoppel, as stated by our Supreme Court, are as follows: (1) a prior suit resulting in a final judgment on the merits; (2) identical issues involved; (3) the issue was actually litigated in the prior suit and necessary to the judgment; and (4) the issue was actually determined.Bluebird Corp. v. Aubin, 188 N.C. App. 671, 678, 657 S.E.2d 55, 61 (citation omitted), disc. review denied, 362 N.C. 679, 669 S.E.2d 741 (2008).
Collateral estoppel only applies to "matters in issue or points controverted, upon the determination of which the finding or verdict was rendered." City of Asheville v. State, 192 N.C. App. 1, 17, 665 S.E.2d 103, 117 (2008) (citation, quotation marks, and emphasis omitted), appeal dismissed and disc. review denied, 363 N.C. 123, 672 S.E.2d 685 (2009). "Whether the doctrine of collateral estoppel is applicable and bars a specific claim or issue is a question of law subject to de novo review." Powers v. Tatum, 196 N.C. App. 639, 642, 676 S.E.2d 89, 92, disc. review denied, 363 N.C. 583, 681 S.E.2d 784 (2009).
Plaintiffs' 23 November 2011 motion challenging the sufficiency of the notice of sale was predicated on their argument that Susan had never received proper notice of the foreclosure sale of the Property. Judge Powell's Order denying Plaintiffs' motion specifically determined that "[t]hese Motions challenge the Second Amended Notice of Sale in this foreclosure action on two grounds: . . . (2) Susan Turchin, an owner of a portion of the real property being foreclosed, Lot L-5, Lodges at Eagles Nest . . . was not given notice of the foreclosure sale." Therefore, the issue of whether proper notice of the foreclosure sale was provided to Susan was squarely before the trial court, was fully resolved against Plaintiffs, and was necessary to Judge Powell's ruling. Furthermore, Defendant is in privity with CommunityOne as it is CommunityOne's successor in interest.
As a result, Plaintiffs are barred from now litigating an identical claim that the foreclosure sale was void as a result of improper notice being provided to Susan. Because we hold that Plaintiffs' current complaint is merely an attempt to do just that, we affirm Judge Cromer's Order.
In addition, Defendant was a bona fide purchaser for value of the Property that acquired title roughly three-and-a-half years after the foreclosure sale became final at the conclusion of the statutorily mandated 10-day upset bid period. As a result, Defendant's title cannot be disturbed regardless of whether CommunityOne procedurally erred in failing to provide Susan with adequate notice of the foreclosure sale. See Swindell v. Overton, 310 N.C. 707, 714, 314 S.E.2d 512, 517 (1984) ("It is true that where the defect in a foreclosure sale renders the sale voidable, as in the case at bar, the mortgagor's right of redemption can be cut off if the land is bought by a bona fide purchaser for value without notice. In such instances, a plaintiff is left with an action for damages against the trustee as his only remedy."); see also Oakwood Acceptance Corp. v. Massengill, 162 N.C. App. 199, 206, 590 S.E.2d 412, 419 (2004). Consequently, summary judgment in favor of Defendant was properly granted by the trial court on this ground as well.
Based on our holding, we deny Defendant's motion to dismiss Plaintiffs' appeal as moot.
Conclusion
For the reasons stated above, we affirm Judge Cromer's 25 June 2015 order.
AFFIRMED.
Judges ELMORE and HUNTER, JR. concur.
Report per Rule 30(e).