Foreclosure Notice in North Carolina

Creditor serving foreclosure notice in North Carolina

In Re: Foreclosure of Real Property Under Deed of Trust from Eli Brown and Velvet Brown, in the original amount of $ 143,600 .00, dated October 18, 1999 , and recorded in Book 2724, Page 568, Durham County Registry Current Owner(s): Eli Brown and Velvet Brown Lawrence S. Maitin, Substitute Trustee

NO. COA01-838
COURT OF APPEALS OF NORTH CAROLINA
156 N.C. App. 477; 577 S.E.2d 398; 2003 N.C. App. LEXIS 179
March 18, 2003, Filed

Facts: Debtor A defaulted in the payment of his obligation prompting mortgagee to commence foreclosure suit. A’s sole defense to the foreclosure action was that service of the notice of hearing was inadequate. Debtor argues that because he rented out the subject property and did not reside therein, efforts to serve the notice of hearing by certified mailings to the subject property address, and ultimately by posting the subject property, were insufficient. The appellate court held that the trial court properly allowed the loan servicer to rebut this claim by calling the trustee as a 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 his status as a "disinterested third party" in the deed of trust relationship was not adversely affected. Unserved affidavits, identical to earlier affidavits admitted at an earlier hearing, and which contained no new assertions, were properly admitted in evidence.

Issue: Whether there was sufficient notice given to debtor of the foreclosure sale?

Ruling: Yes. 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 . . . 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 hearing. In this case the efforts to serve debtors prior to posting the property were "reasonable and diligent" within the meaning of N.C. Gen. Stat. § 45-21.16(a). The server had no way of knowing whether the names on the tax records, one of which was a corporation, represented the same individuals who signed the deed of trust. The court found it significant that debtors clearly had actual notice of both hearings, since they were either present or represented by counsel at each. Where respondents "received no notice of the hearing, but the record shows that [they were] present at the hearing and participated in it," we have held that debtors cannot complain of lack of notice, as they are unable to show any prejudice to their rights by it.

Lesson Learned: In a foreclosure proceeding, the lender bears the burden of proving that there was a valid debt, default, right to foreclose under power of sale, and notice. The debtor must be given notice of his right to appear at the foreclosure hearing and show cause as to why the foreclosure should not be allowed to be held. However, if creditor exerted due diligence in complying with the sending of the notice, the court shall declare that as substantial compliance.

Written by Kevin Levonas and Giselle G.