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In re North Carolina (Future Advance) Deed of Trust

Court of Appeals of North Carolina

August 6, 2019

IN THE MATTER OF NORTH CAROLINA (FUTURE ADVANCE) DEED OF TRUST BY NICOR, LLC TO JERONE C. HERRING AND SUBSEQUENTLY D. TALMADGE SCARBOROUGH III, SUBSTITUTE TRUSTEE RECORDED AT BOOK 1770, PAGE 152 OF THE MOORE COUNTY REGISTRY SUBSTITUTION OF TRUSTEE RECORDED AT BOOK 4862, PAGE 263, IN THE MOORE COUNTY REGISTRY IN THE MATTER OF NORTH CAROLINA DEED OF TRUST AND SECURITY AGREEMENT BY NICOR, LLC TO BB&T COLLATERAL SERVICECORPORATION AND SUBSEQUENTLY D. TALMADGE SCARBOROUGH III, SUBSTITUTE TRUSTEE RECORDED AT BOOK 2988, PAGE 461 OF THE MOORE COUNTY REGISTRY SUBSTITUTION OF TRUSTEE RECORDED AT BOOK 4862, PAGE 265, IN THE MOORE COUNTY REGISTRY IN THE MATTER OF NORTH CAROLINA DEED OF TRUST AND SECURITY AGREEMENT BY FOREST HAVEN, LLC TO BB&T COLLATERAL SERVICE CORPORATION AND SUBSEQUENTLY D. TALMADGE SCARBOROUGH III, SUBSTITUTE TRUSTEE RECORDED AT BOOK 2793, PAGE 393 OF THE MOORE COUNTY REGISTRY SUBSTITUTION OF TRUSTEE RECORDED AT BOOK 4862, PAGE 269, IN THE MOORE COUNTY REGISTRY IN THE MATTER OF NORTH CAROLINA DEED OF TRUST AND SECURITY AGREEMENT BY NICOR, LLC TO BB&T COLLATERAL SERVICECORPORATION AND SUBSEQUENTLY D. TALMADGE SCARBOROUGH III, SUBSTITUTE TRUSTEE RECORDED AT BOOK 3216, PAGE 62 OF THE MOORE COUNTY REGISTRY SUBSTITUTION OF TRUSTEE RECORDED AT BOOK 4862, PAGE 267, IN THE MOORE COUNTY REGISTRY

          Heard in the Court of Appeals 27 March 2019.

          Appeal by respondents from orders entered 26 April 2018 by Judge Tanya T. Wallace in Moore County Superior Court Nos. 17 SP 224-26.

          Nelson Mullins Riley & Scarborough LLP, by Leslie Lane Mize and D. Martin Warf, for petitioner-appellee.

          Clayton Myrick McClanahan & Coulter, by Noel B. McDevitt, Jr., and West & Smith, LLP, by Stanley W. West, for respondents-appellants.

          ZACHARY, JUDGE.

         Respondents-Appellants Nicor, LLC and Forest Haven, LLC (hereinafter "Nicor," "Forest Haven," and collectively "Obligors") appeal from orders of sale in three proceedings permitting foreclosure of certain real property "described in the [d]eeds of [t]rust in accordance with the terms and provisions of the power of sale contained therein." Prior to commencing foreclosure proceedings, RREF II WBC Acquisitions, LLC ("RREF"), then the holder of the notes, filed Obligors' confession of judgment entitling RREF to judgment for the entire outstanding amount owed on the promissory notes securing the deeds of trust. The trial court entered judgment in RREF's favor and stayed the foreclosure proceedings. Obligors argued before the trial court, and now argue before this Court, that the entry of judgment in RREF's favor for the aggregate debt secured by the deeds of trust on the property precluded the holder of the notes from subsequently foreclosing on the properties. Due to the limited scope of power-of-sale foreclosure proceedings, we conclude that this argument was not properly before the trial court. Accordingly, we affirm the trial court's orders of sale permitting foreclosure.

         I. Background

         Over a period of nearly twelve years, Nicor executed five promissory notes with principal amounts totaling $1, 351, 200.00 and secured repayment by executing three deeds of trust, originally for the benefit of BB&T Collateral Service Corporation ("BB&T"). Thereafter, BB&T assigned the Nicor promissory notes and deeds of trust to RREF.

         On 4 May 2015, Forest Haven executed a promissory note in the original principal amount of $933, 500.00, and secured repayment of the note by executing a deed of trust in favor of BB&T. BB&T assigned the Forest Haven promissory note and deed of trust to RREF.

         Obligors defaulted; however, in October 2015, Obligors and RREF entered into a forbearance agreement, which provided Obligors additional time to satisfy their debts. The agreement acknowledged the current amount of the debt owed and the existence of defaults under the promissory notes. RREF agreed not to exercise its rights under the loan documents until the earlier of 31 August 2016, or Obligors' failure to comply with the terms of the forbearance agreement (including any event of default). In addition, Obligors agreed to entry of judgment in RREF's favor if Obligors failed to satisfy the terms of the forbearance agreement, and they accordingly executed a confession of judgment. Obligors further permitted RREF, "[u]pon termination of the Forbearance Period," to initiate foreclosure proceedings upon the Nicor and Forest Haven deeds of trust that "have not [been] paid off under the terms of this Agreement."

         One year later, in October 2016, the parties executed a "Modification of Forbearance Agreement" extending the forbearance period to 31 August 2017. The second forbearance agreement included confession of judgment and foreclosure provisions that were identical to those contained in the first forbearance agreement.

         Obligors subsequently failed to comply with the terms of the modified forbearance agreement, and RREF filed the confession of judgment on 8 August 2017 in Moore County Superior Court. That day, the clerk of court entered judgment against Obligors in the amount of $1, 834, 071.42, plus interest at the annual rate of 12% to be calculated from the filing of the confession of judgment.

         On 12 October 2017, RREF initiated three power-of-sale foreclosure proceedings before the Moore County Clerk of Superior Court. After initiating the foreclosure proceedings, RREF assigned the Nicor and Forest Haven promissory notes and deeds of trust to CL45 MW Loan 1, LLC ("CL45"), the current holder of the notes. The assistant clerk of superior court consolidated the matters for hearing, and concluded that the requirements of N.C. Gen. Stat. § 45-21.16 were satisfied. On 1 February 2018, the assistant clerk of court entered an order of sale in each proceeding allowing CL45 to proceed with the power-of-sale foreclosures on the real estate described in the deeds of trust.

         Obligors appealed, and the matters were consolidated for a de novo hearing in Moore County Superior Court on 12 March 2018, the Honorable Tanya T. Wallace presiding. On 26 April 2018, Judge Wallace concluded that the requirements of N.C. Gen. Stat. § 45-21.16 were satisfied and entered orders of sale permitting foreclosure. Obligors timely filed notices of appeal.

         II. Discussion

         Obligors argue on appeal that the trial court erred in permitting the foreclosures to proceed after the holder of the notes had already obtained a judgment against Obligors for the entire amount of the debt secured by the deeds of trust. For the reasons explained ...


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