In Re Goddard & Peterson, PLLC
In Re Goddard & Peterson, PLLC
Opinion
*191 Lillian Cain ("respondent") appeals from an order authorizing the Substitute Trustee, *838 Goddard & Peterson, PLLC ("G & P"), to proceed with the foreclosure of the Deed of Trust for 1478 Thelbert Drive in Fayetteville, North Carolina ("the property"). We affirm.
I. Background
On 19 October 1999, respondent borrowed $74,500 by executing a promissory note ("the Note"). To secure the loan evidenced by the Note, respondent executed a Deed of Trust on the property. Initially, the Note was specially endorsed to Household Realty Corporation ("HRC") by Household Bank, FSB; HRC later specially endorsed the Note to Beal Bank, S.S.B. ("petitioner"). Subsequently, respondent defaulted on the deed of trust.
In April 2012, petitioner executed a Substitution of Trustee of the Deed of Trust substituting Rogers Townsend & Thomas ("RTT") for the original trustee, Andre F. Barrett. Roughly a month later, RTT sent respondent a pre-foreclosure notice for the property that included the date of her last scheduled payment, which was made on 1 December 2011. In June 2012, RTT sent respondent a letter informing her, inter alia, that it had been retained to initiate foreclosure proceedings for the property, and that she could pay the amount of the debt ($68,559.51), dispute the debt, or dispute that petitioner was the creditor. On 17 September 2012, RTT executed an affidavit certifying that a Notice of Hearing and a Notice of Substitute Trustee's Foreclosure Sale of the property were mailed to respondent.
On 24 September 2012, the Clerk of Superior Court of Cumberland County heard evidence and found, inter alia, that notice was given to the record owner of the property, that petitioner was the holder of the Note and Deed of Trust, that the Note was in default, and that the Deed of Trust gave petitioner the right to foreclose under a power of sale. Consequently, the clerk entered an order allowing RTT to proceed with the foreclosure sale. Respondent noted an appeal to Cumberland County Superior Court from the clerk's order.
On 23 September 2013, respondent served RTT with a Request for Admissions, which asked petitioner to admit it was not the holder of the Note and the Deed of Trust. Respondent also filed a Certificate of Service specifying that copies of the Request had been served on all parties and were properly addressed to the attorney or attorneys for all parties. The only names listed on the Certificate of Service, however, *192 were attorneys David W. Neill and Michael Morris from RTT, which was acting as Substitute Trustee at the time. It appears that petitioner never responded to the Request for Admissions.
On 13 October 2013, petitioner executed another Substitution of Trustee, substituting G & P for RTT. After being relieved from its duties as Substitute Trustee, RTT began representing petitioner in the foreclosure proceedings. In April 2014, G & P filed a Notice of Appeal Hearing and certified that respondent and her attorney were served.
On 16 February 2015, the Honorable Ebern T. Watson, III presided at the hearing on respondent's appeal from the clerk's Order. Before any evidence was presented, respondent served petitioner with a motion to dismiss the foreclosure proceedings and presented the unfiled motion to Judge Watson. The motion was based entirely upon petitioner's purported failure to answer respondent's Request for Admissions. Because the motion had not been scheduled to be heard separately or at the de novo hearing, neither petitioner nor G & P had notice that respondent planned to move the superior court to dismiss the proceeding. Judge Watson orally denied respondent's motion.
During the hearing, petitioner introduced an Affidavit of Indebtedness which was executed by Tracy Duck ("Duck"), an "authorized signer" for petitioner. A number of exhibits were attached to Duck's affidavit, including photocopies of the Note, the Deed of Trust, and accounting records pertaining to respondent's loan from petitioner. Duck's affidavit was admitted into evidence over respondent's objection, as were the exhibits. Respondent also objected to the appearance of RTT as petitioner's counsel, but Judge Watson overruled the objection and proceeded with the hearing.
After hearing all the evidence, the superior court entered an order on 16 February 2015 *839 that authorized G & P to proceed with the foreclosure sale. Respondent appeals.
II. Standard of Review and Generally Applicable Law
" 'The applicable standard of review on appeal where, as here, the trial court sits without a jury, is whether competent evidence exists to support the trial court's findings of fact and whether the conclusions reached were proper in light of the findings.' "
In re Foreclosure of Adams,
*193
" 'A power of sale is a contractual arrangement [which may be contained] in a mortgage or a deed of trust [.]' "
(i) [a] valid debt of which the party seeking to foreclose is the holder, (ii) default, (iii) [a] right to foreclose under the instrument, (iv) notice to those entitled to such under subsection (b), (v) that the underlying mortgage debt is not a home loan as defined in G.S. 45-101(1b) ... and (vi) that the sale is not barred by G.S. 45-21.12A [.]
In the context of a section 45-21.16 foreclosure proceeding, "the clerk ... is limited to making the six findings of fact specified under subsection (d)...."
In re Foreclosure of Young,
*194 III. Motion to Dismiss
Respondent first argues that the trial court erred by denying her motion to dismiss the foreclosure proceeding. According to respondent, since petitioner did not respond to her formal Request for Admissions, it was conclusively established that petitioner was not the holder of the Note or the Deed of Trust. Respondent asserts that by ignoring these judicial admissions, the superior court erroneously found that petitioner was "the holder of the Note and Deed of Trust sought to be foreclosed." We disagree.
Rule 36(a) of the North Carolina Rules of Civil Procedure provides, in pertinent part, that when a written request for admissions is properly served upon a party to a lawsuit,
[t]he matter is admitted unless, within 30 days after service of the request, or within such shorter or longer time as the court may allow, the party to whom the request *840 is directed serves upon the party requesting the admission a written answer or objection addressed to the matter, signed by the party or by his attorney[.]
N.C. Gen.Stat. § 1A-1, Rule 36(a) (2014). Rule 36(b), which governs the effect of admissions, provides that "[a]ny matter admitted under this rule is conclusively established unless the court on motion permits withdrawal or amendment of the admission."
"A judicial admission is a formal concession which is made by a party in the course of litigation for the purpose of withdrawing a particular fact from the realm of dispute. Such an admission is not evidence, but it, instead, serves to remove the admitted fact from the trial by formally conceding its existence."
Eury v. N.C. Emp't Sec. Comm'n,
In the instant case, respondent's motion to dismiss was based entirely upon petitioner's purported judicial admissions. Unfortunately
*195
for respondent, she failed to obtain a written ruling on her motion. Although the superior court announced its decision to deny respondent's motion at the
de novo
hearing, "an order rendered in open court is not enforceable until it is 'entered,' i.e., until it is reduced to writing, signed by the judge, and filed with the clerk of court."
West v. Marko,
IV. Appearance of Counsel
Respondent next argues that the court erred in allowing RTT, the former Substitute Trustee, to appear as counsel for petitioner and advocate against respondent in the de novo foreclosure hearing. Respondent's argument, as we understand it, is that (1) RTT owed a fiduciary duty to her when this matter went before the superior court, and that (2) RTT's representation of petitioner constituted a breach of that duty. We disagree.
Although fiduciary relationships often escape precise definition, they generally arise when "there has been a special confidence reposed
*196
in one who in equity and good
*841
conscience is bound to act in good faith and with due regard to the interests of the one reposing confidence."
Green v. Freeman,
"In deed of trust relationships, the trustee is a disinterested third party acting as the agent of both [parties]."
In re Proposed Foreclosure of McDuffie,
Here, since RTT was removed as Substitute Trustee on 13 October 2013, its formal fiduciary duties to respondent ended well before the 2 February 2015 de novo hearing in superior court. Apart from citing the general fiduciary duties of an acting trustee, respondent fails to explain how RTT's representation of petitioner at the de novo hearing either violated a specific principle of law or was undertaken in bad faith. Also absent from respondent's brief is an argument that she sustained some specific injury that was proximately caused by RTT's conduct. We suspect this argument has not been made because it does not exist. At the time of the hearing, G & P, the acting Substitute Trustee, was charged *197 with acting in the best interests of both petitioner and respondent. When the parties appeared before the superior court, RTT had no obligation to act as a disinterested party. Consequently, we discern no prejudice to respondent's rights or interests as a result of RTT's representation of petitioner.
Furthermore, looking beyond the substantive law, we cannot see how RTT's representation of petitioner allowed petitioner to procure an unfair advantage in the foreclosure proceeding. While not precedential authority for this Court, North Carolina State Bar Ethics Opinions ("RPCs" and "CPRs") "provide ethical guidance for attorneys and ... establish ... principle[s] of ethical conduct." 27 N.C. Admin. Code 1D.0101(j) (2015). Our State Bar has addressed the specific issue that respondent has raised. N.C. CPR 220 (1979) provides that if a lawyer who is acting as a trustee for a deed of trust resigns his position as trustee, the lawyer may represent the petitioner bringing the foreclosure claim "as long as no prior conflict of interest existed because of some prior obligation to the opposing party." N.C. RPC 82 (1990) states that "former service as a trustee does not disqualify a lawyer from assuming a partisan role in regard to foreclosure under a deed of trust." N.C. RPC 90 (1990) ties it all together, and provides that
[i]t has long been recognized that former service as a trustee does not disqualify a lawyer from assuming a partisan role in regard to foreclosure under a deed of *842 trust. CPR 220, RPC 82. This is true whether the attorney resigns as trustee prior to the initiation of foreclosure proceedings or after the initiation of such proceedings when it becomes apparent that the foreclosure will be contested.
Furthermore, in 2013, the State Bar adopted Formal Opinion 5, which more specifically defined RPC 90, by stating:
[A] lawyer/trustee must explain his role in a foreclosure proceeding to any unrepresented party that is an unsophisticated consumer of legal services; if he fails to do so and that party discloses material confidential information, the lawyer may not represent the other party in a subsequent, related adversarial proceeding unless there is informed consent.
N.C. Formal Opinion 5 (2013).
In the instant case, respondent does not argue that she was an unrepresented, unsophisticated consumer of legal services or that she *198 disclosed material confidential information to RTT when it was acting as Substitute Trustee. Instead, the record suggests that respondent was represented by counsel throughout the contested foreclosure proceedings held before the clerk and the superior court, which spanned more than three years. Further, respondent has not demonstrated that RTT failed to notify her of its intent to represent petitioner in the foreclosure proceedings. Because the record is replete with correspondence from RTT notifying respondent of and updating her on the de novo hearing in superior court, she has failed to demonstrate any legal or ethical violation in connection with RTT's representation of petitioner at that proceeding. Accordingly, the superior court did not err in overruling respondent's objection to such representation.
V. Duck's Affidavit of Indebtedness
Respondent's final argument is that the trial court erred in admitting Duck's affidavit and its attachments into evidence. Specifically, respondent contends that (1) Duck was not a qualified witness as required under Rule 803(6) of the North Carolina Rules of Evidence ("the business records exception" to the hearsay rule), (2) the Note and Deed of Trust were not business records and were not properly authenticated, and (3) certain statements contained in Duck's affidavit were inadmissible hearsay. We disagree.
"The admissibility of evidence in the trial court is based upon that court's sound discretion and may be disturbed on appeal only upon a finding that the decision was based on an abuse of discretion."
In re Foreclosure by David A. Simpson, P.C.,
" 'Hearsay' is a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted." N.C. Gen.Stat. § 8C-1, Rule 801(c) (2015). Unless allowed by statute or the North Carolina Rules of Evidence, hearsay evidence is not admissible in court. N.C. Gen.Stat. § 8C-1, Rule 802 (2015).
Pursuant to the business records exception, the following items of evidence are not excluded by the hearsay rule, even though the declarant is unavailable as a witness:
A memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinions, or *199 diagnoses, made at or near the time by, or from information transmitted by, a person with knowledge, if kept in the course of a regularly conducted business activity, and if it was the regular practice of that business activity to make the memorandum, report, record, or data compilation, all as shown by the testimony of the custodian or other qualified witness, unless the source of information or the method or circumstances of preparation indicate lack of trustworthiness.
N.C. Gen.Stat. § 8C-1, Rule 803(6) (2015). Qualifying business records are admissible under Rule 803(6) "when a proper foundation ... is laid by testimony of a witness who is familiar with the ... records and the methods under which they were made so as to satisfy the court that the methods, the
*843
sources of information, and the time of preparation render such evidence trustworthy."
In re S.D.J.,
Generally, a "witness may not testify to a matter unless evidence is introduced sufficient to support a finding that he has personal knowledge of the matter." N.C. Gen.Stat. § 8C-1, Rule 602 (2015) ;
see also
Gilreath v. N.C. Dep't of Health and Human Servs.,
In the instant case, while the Note and Deed of Trust were identified as attachments, the only specific "business records" that petitioner sought to introduce through Duck's affidavit were documents related to respondent's loan account. Our review of the record reveals that the foundational requirements of Rule 803(6) were satisfied through the submission of Duck's affidavit, which provided that petitioner's financial records were made and kept in the regular course of business by persons having knowledge of the information set forth at or near the time of the acts, events, or conditions recorded. Furthermore, Duck-an "authorized signor" for petitioner who was permitted "to make the representations contained" in the affidavit-specifically stated that her averments were "based upon [her] review of [petitioner's] records relating to [respondent's] loan and from [her] own personal knowledge of how they are kept and maintained." As a result, Duck was a qualified witness under Rule 803(6) and petitioner's records regarding respondent's default on her loan account were properly introduced through Duck's affidavit.
Respondent also briefly argues that the Note and Deed of Trust are not "business records" and were not properly authenticated by Duck's affidavit. Even assuming respondent raised this objection below-
see
Weil v. Herring,
Finally, respondent argues that certain statements contained in Duck's affidavit constituted inadmissible hearsay. For example, respondent takes issue with Duck's statement that petitioner "is the holder of
*844
the loan." We reject respondent's argument for two reasons.
*201
We first note that in a foreclosure hearing before the clerk of court, "the clerk shall consider the evidence of the parties and may consider ... affidavits and certified copies of documents." N.C. Gen.Stat. § 45-21.16(d). In addition, this Court has held that affidavits may be used as competent evidence to establish the required statutory elements in
de novo
foreclosure hearings.
In re Foreclosure of Brown,
The record in the instant case reveals that Duck (and presumably petitioner) is based in Illinois, and respondent cites no authority that would support requiring out-of-state lenders seeking to foreclose under a power of sale to present live witness testimony in North Carolina. We conclude, as the Brown Court did, that Duck's Affidavit of Indebtedness was the most certain and expeditious way to prove and establish certain criteria required by subsection 45-21.16(d).
Moreover, this Court has previously held that whether an entity is a "holder" is "a legal conclusion ... to be determined by a court of law on the basis of factual allegations."
In re Simpson,
*202 VI. Conclusion
Since an order was never entered on respondent's motion to dismiss, she cannot appeal from the superior court's denial of that motion. Furthermore, the superior court did not err in allowing RTT to represent petitioner because the firm had no specific fiduciary duty to respondent when the de novo foreclosure hearing was conducted, and there is no evidence that the representation was injurious to respondent or was undertaken in bad faith. Finally, the superior court did not err in allowing Duck's affidavit and its attachments to be admitted into evidence. For these reasons, the superior court properly authorized G & P to proceed with the foreclosure sale. We therefore affirm the superior court's order.
AFFIRMED.
Judges BRYANT and ZACHARY concur.
We further note that respondent's Request for Admissions was served one year after entry of the clerk's order authorizing the foreclosure sale and approximately a year and a half before the de novo hearing in the superior court. Thus, petitioner's purported failure to respond to the Request was old news when the de novo hearing was held. Although we impute no bad faith to respondent, the basis of her motion-judicial admissions under Rule 36(b) -and the manner in which it was presented to the superior court-with no prior notice to the court or respondent-suggest nothing more than an attempt to introduce confusion into the de novo hearing and perhaps complete a "Hail Mary" before the foreclosure clock ran out.
Reference
- Full Case Name
- In the Matter of the Foreclosure by GODDARD & PETERSON, PLLC, Substitute Trustee, of a Deed of Trust Executed by Lillian A. Cain Dated October 19, 1999 and Recorded on October 27, 1999 in Book No. 5183 at Page 131 of the Cumberland County Public Registry.
- Cited By
- 15 cases
- Status
- Published