Borrower's Failure to Properly Challenge Foreclosure

Borrower Must Follow Procedural Requirements to Maintain Foreclosure Challenge

A recent unpublished opinion issued by the North Carolina Court of Appeals confirms that a borrower who seeks to successfully challenge the clerk’s order authorizing foreclosure sale must comply with the procedural hurdles set out in the foreclosure statute.  The Court in In re Reeb, COA 15-927 (N.C.App.  May 17, 2016), held that by failing to post a bond when she appealed the clerk’s order or to file a separate action to seek injunctive relief to stop the sale, the borrower’s challenge to the sale was rendered moot.

In this case the clerk of superior court entered an order authorizing the foreclosure sale, which requires the clerk to make several findings, one of which is that the party seeking foreclosure is entitled to the relief it seeks.  N.C.G.S. § 45-21.16(d).  Reeb timely appealed to superior court pursuant to § 45-21.16(d1), which triggers a de novo review by the court, meaning the court has to consider afresh whether the party seeking to foreclose the subject property is entitled to do so pursuant to the requirements set forth in § 45-21.16(d).  However, upon taking an appeal the appellant “shall post a bond with sufficient surety as the clerk deems adequate to protect the opposing party from any probable loss by reason of appeal.”  That, Reeb failed to do.

Alternatively, after the sale but before “the rights of the parties to the sale or resale becoming fixed pursuant to G.S. 45-21.29A”, § 45-21.34, (i.e., before the post-sale upset period expired), Reeb could have sought an injunction by filing an action in superior court pursuant to § 45-21.34.  She did not do so.

The sale went ahead and the trustee’s deed was recorded, concluding the foreclosure.  Thereafter, the superior court dismissed the appeal as moot, meaning that when the case has already been resolved the court lacks jurisdiction to consider further argument on the merits of the case.  Reeb appealed to the Court of Appeals.   

The Court of Appeals affirmed the order relying on well-established precedent:  “[W]hen the trustee’s deed has been recorded after a foreclosure sale, and the sale was not stayed, the parties’ rights to the real property become fixed, and any attempt to disturb the foreclosure sale is moot.” In re Cornblum, 220 N.C. App. 100, 106, 727 S.E.2d 338, 342.”  Reeb, at 3.  Noting that mootness applies to the same extent in the appellate courts as it does in the trial courts, the Court found that it therefore lacked jurisdiction to review Reeb’s arguments.  Reeb, at 4, citing Simeon v. Hardin, 339 N.C. 358, 370, 451 S.E.2d 858, 866 (1994).

North Carolina is quite generous in providing the borrower or property owner with opportunities to challenge a foreclosure sale.  The clerk’s order may be appealed to superior court, then to the appellate courts.  Additionally, “[a]ny owner of real estate, or other person, firm or corporation having a legal or equitable interest therein” may apply to enjoin the sale based upon any legal or equitable grounds, including that the bid price is inadequate and inequitable and will result in irreparable damage.  However, as the Court makes clear in Reeb, failure to employ the proper procedures to invoke these opportunities will doom the challenge to failure.

Published by Hutchens Law Firm on June 15, 2016