IN THE MATTER OF PROPOSED FORECLOSURE OF CLAIM OF LIEN FILED ON CALMORE GEORGE AND HYGIENA JENNIFER GEORGE BY THE CROSSINGS COMMUNITY ASSOCIATION, INC. DATED AUGUST 22, 2016, RECORDED IN DOCKET NO. 16-M-6465 IN THE OFFICE OF THE CLERK OF COURT OF SUPERIOR COURT FOR MECKLENBURG COUNTY REGISTRY BY SELLERS, AYRES, DORTCH & LYONS, P.A.
in the Court of Appeals 27 November 2018.
by respondents from orders entered 17 July 2017, 9 August
2017, and 15 March 2018 by Judge Nathaniel J. Poovey in
Mecklenburg County No. 16-SP-3875 Superior Court.
McElroy & Diehl, P.A., by Preston O. Odom, III, and
DeVore Acton & Stafford, PA, by Derek P. Adler, for
Thurman, Wilson, Boutwell & Galvin, P.A., by James P.
Galvin, for petitioners-appellees.
Holdings and National Indemnity Group ("National
Indemnity" and collectively "Respondents")
appeal orders adding them as parties to this action, setting
aside an order for foreclosure, canceling a deed, and denying
an indicative joint motion for relief under Rule 60(b)(6).
After careful review, we conclude that the trial court
correctly determined that the foreclosure sale in this case
was invalid due to lack of proper service of the notice of
foreclosure, and that the trustee on a deed of trust other
than that on which foreclosure was instituted was not a
necessary party to the proceedings; however, KPC Holdings was
a good faith purchaser for value. Therefore, the trial court
should not have voided the deed conveying the property to KPC
Holdings or the subsequent deed to National Indemnity.
George and his wife, Hygiena Jennifer George, owned a home in
Mecklenburg County, North Carolina. On 22 August 2016, The
Crossings Community Association, Inc., the Georges'
homeowners' association, filed a planned community claim
of lien against the Georges' property for unpaid
association fees totaling $204.75. The homeowners'
association appointed a trustee to represent the association
on its claim of lien, and the trustee commenced a
non-judicial foreclosure proceeding on the property. Included
in the documents filed in the foreclosure proceeding were two
sheriff's returns of service indicating personal service
of the notice of foreclosure upon Hygiena Jennifer George and
substitute service upon Calmore George by leaving the notice
with his wife at their residence. The foreclosure trustee
also filed an affidavit of attempted service of process by
certified mail, return receipt requested, and by first class
mail sent to both the Mecklenburg County property and to the
Georges' other known address in the Virgin Islands.
December 2016, an Assistant Clerk of Mecklenburg County
Superior Court filed an order permitting foreclosure with a
notice of sale indicating that the property would be sold at
auction on 12 January 2017. KPC Holdings purchased the
property on 12 January 2017 for $2, 650.22. No party filed an
upset bid by the deadline and on 3 February 2017, the
foreclosure trustee deeded the land to KPC Holdings. On 21
March 2017, KPC Holdings conveyed the property to National
Indemnity in consideration for National Indemnity's
promise to pay KPC Holdings $150, 000.00, evidenced by a
promissory note and deed of trust naming Jonathan Hankin as
April 2017, the Georges filed a motion to set aside the
foreclosure sale under Rule 60(c) of the North Carolina Rules
of Civil Procedure alleging that "[n]o type of personal
service was effectuated [upon] the Georges." National
Indemnity moved to intervene on 10 May 2017. On 17 July 2017,
the Honorable Nathaniel J. Poovey heard the Rule 60 motion
and subsequently entered an order joining National Indemnity
and KPC Holdings as necessary parties to the proceeding.
After a hearing, on 9 August 2017, Judge Poovey entered an
order setting aside the order for foreclosure, canceling the
trustee's foreclosure deed to KPC Holdings, and canceling
KPC Holdings' deed to National Indemnity.
Indemnity appealed the 9 August 2017 order setting aside the
foreclosure on 1 September 2017. That same day, KPC Holdings
appealed both the 17 July 2017 order joining KPC Holdings as
a necessary party and the 9 August 2017 order setting aside
the foreclosure and canceling the deeds.
Respondents filed a Joint Motion for Relief under Rule
60(b)(6) with the trial court, and requested that this Court
temporarily remand the case for the trial court to hear the
motion and enter an indicative ruling. This Court granted
Respondent's Motion to Remand. On 15 March 2018, the trial
court entered an Indicative Denial of Joint Motion for Relief
under Rule 60(b)(6). Respondents timely filed notices of
appeal from the Indicative Denial.
argue on appeal that the trial court erred in: (1) failing to
join the trustee on the deed of trust between KPC Holdings
and National Indemnity as a necessary party to the Rule 60
proceeding; (2) ruling that the foreclosure trustee failed to
give sufficient notice of the non-judicial foreclosure
proceeding to Calmore George; and (3) determining that
Respondents were not good faith purchasers for
value. We address each argument in turn.
of the North Carolina Rules of Civil Procedure allows the
trial court to relieve a party from a final judgment or order
for several reasons, including that "[t]he judgment is
void" and "[a]ny other reason justifying relief
from the operation of the judgment." N.C. Gen. Stat.
§ 1A-1, Rule 60(b)(4), (6) (2017). "A judgment will
not be deemed void merely for an error in law, fact, or
procedure. A judgment is void only when the issuing court has
no jurisdiction over the parties or subject matter in
question or has no authority to render the judgment
entered." Burton v. Blanton, 107 N.C.App. 615,
616, 421 S.E.2d 381, 382 (1992). A trial court cannot set
aside a judgment or order pursuant to Rule 60(b)(6) without
showing that: (1) extraordinary circumstances exist, and (2)
justice demands relief. Howell v. Howell, 321 N.C.
87, 91, 361 S.E.2d 585, 588 (1987). Additionally, to obtain
relief under Rule 60(b)(6), the moving party must show that
it has a meritorious defense. In re Oxford Plastics v.
Goodson, 74 N.C.App. 256, 258, 328 S.E.2d 7, 9 (1985).
determination of whether to grant relief under Rule 60(b)(6)
is equitable in nature and within the trial court's
discretion. Kennedy v. Starr, 62 N.C.App. 182, 186,
302 S.E.2d 497, 499-500, disc. review denied, 309
N.C. 321, 307 S.E.2d 164 (1983). As such, this Court reviews
Rule 60(b) motions for an abuse of discretion. Davis v.
Davis, 360 N.C. 518, 523, 631 S.E.2d 114, 118 (2006).
"A trial court abuses its discretion when its decision
is manifestly unsupported by reason or so arbitrary that it
could not have been the result of a reasoned decision."
Ehrenhaus v. Baker, 216 N.C.App. 59, 71, 717 S.E.2d
9, 18 (2011) (quotation marks omitted), appeal dismissed
and disc. review denied, 366 N.C. 420, 735 S.E.2d 332
Carolina Planned Community Act
General Assembly enacted the North Carolina Planned Community
Act to regulate "the creation, alteration, termination,
and management of planned subdivision communities."
Wise v. Harrington Grove Cmty. Ass'n, 357 N.C.
396, 399, 584 S.E.2d 731, 734, reh'g denied, 357
N.C. 582, 588 S.E.2d 891 (2003); see also generally
"An Act to Establish the North Carolina Planned
Community Act," 1998 N.C. Sess. Laws 674, ch. 199
(codified as amended at N.C. Gen. Stat. §§
47F-1-101 to -3-122). A "planned community" is
"real estate with respect to which any person, by virtue
of that person's ownership of a lot, is expressly
obligated by a declaration to pay real property taxes,
insurance premiums, or other expenses to maintain, improve,
or benefit other lots or other real estate described in the
declaration." N.C. Gen. Stat. § 47F-1-103(23)
(2017). A planned community's owners' association is
empowered to, among other things, "[i]mpose and receive
any payments, fees, or charges for the use, rental, or
operation of the common elements . . . and for services
provided to lot owners." Id. §
47F-3-102(10). Any assessment levied upon a lot owner that is
unpaid for thirty days or more constitutes a lien on the
property when a claim of lien is filed with the clerk of
superior court in the county in which the land is situated.
Id. § 47F-3-116(a). The owners' association
"may foreclose a claim of lien in like manner as a
mortgage or deed of trust on real estate under power of sale,
as provided in Article 2A of Chapter 45 of the General
Statutes, if the assessment remains unpaid for 90 days or
more." Id. § 47F-3-116(f). Thus, a
foreclosure of an owners' association claim of lien
proceeds as a power of sale foreclosure.
Failure to Join a Necessary Party
argue that the trial court erred by failing to join Jonathan
Hankin, the trustee named on the deed of trust between KPC
Holdings and National Indemnity, as a necessary party to the
Rule 60(b) proceedings. We disagree.
"who are united in interest must be joined as plaintiffs
or defendants." Id. § 1A-1, Rule 19(a).
"A person is 'united in interest' with another
party when that person's presence is necessary in order
for the court to determine the claim before it without
prejudicing the rights of a party before it or the rights of
others not before the court." Ludwig v. Hart,
40 N.C.App. 188, 190, 252 S.E.2d 270, 272, disc. review
denied, 297 N.C. 454, 256 S.E.2d 807 (1979). "A
'necessary' party is one whose presence is required
for a complete determination of the claim, and is one whose
interest is such that no decree can be rendered without
affecting the party." In re Foreclosure of
Barbot, 200 N.C.App. 316, 319, 683 S.E.2d 450, 453
(2009). "A judgment which is determinative of a claim
arising in an action to which one who is 'united in
interest' with one of the parties has not been joined is
void." Ludwig, 40 N.C.App. at 190, 252 S.E.2d
at 272. When the absence of a necessary party is brought to
the attention of the trial court, it should not address the
merits of the case until the necessary party is joined to the
action, and the trial court should bring in the necessary
party ex mero motu if no other party moves to do so.
Booker v. Everhart, 294 N.C. 146, 158, 240 S.E.2d
360, 367 (1978).
when a party seeks "to have [a] deed declared null and
void[, ] . . . . the court would have to have jurisdiction
over the parties necessary to convey good title."
Brown v. Miller, 63 N.C.App. 694, 699, 306 S.E.2d
502, 505 (1983), appeal dismissed and disc. review
denied, 310 N.C. 476, 312 S.E.2d 882 (1984). A trustee
is one of three parties involved in a deed of trust,
[wherein] the borrower conveys legal title to real property
to a third party trustee to hold for the benefit of the
lender until repayment of the loan . . . . When the loan is
repaid, the trustee cancels the deed of trust, restoring
legal title to the borrower, who at all times retains
equitable title in the property.
Skinner v. Preferred Credit, 361 N.C. 114, 120-21,
638 S.E.2d 203, 209 (2006) (citations omitted), reh'g
denied, 361 N.C. 371, 643 S.E.2d 519 (2007).
Accordingly, in foreclosure proceedings, "[t]rustees are
necessary parties . . . because the trustee is the party
tasked with facilitating the [foreclosure] process."
Greene v. Tr. Servs. of Carolina, LLC, 244
N.C.App. 583, 596, 781 S.E.2d 664, 673, disc. review
denied, 368 N.C. 911, 786 S.E.2d 268 (2016).
trustee on a deed of trust is not, however, inevitably a
necessary party to all litigation involving property for
which the trustee holds the deed of trust. In 2011, the
General Assembly enacted a statute titled, "An Act to
Modernize and Enact Certain Provisions Regarding Deeds of
Trust . . . Eliminating Trustee of Deed of Trust as Necessary
Party for Certain Transactions and Litigation . . . ."
2011 N.C. Sess. Laws 1212, 1231-32, ch. 312, § 15
(codified as amended at N.C. Gen. Stat. § 45-45.3). This
Act provides that
[e]xcept 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.
N.C. Gen. Stat. § 45-45.3(c) (2017) (emphasis added).
Proceedings in which the trustee on the deed of trust is not
a necessary party include "[t]he foreclosure of a
lienother 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 ...