In Re Matter of on George
In Re Matter of on George
Opinion of the Court
*39KPC 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 *40voided the deed conveying the property to KPC Holdings or the subsequent deed to National Indemnity.
Background
Calmore 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.
On 9 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 landto *24KPC 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 trustee.
On 18 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.
National Indemnity appealed the 9 August 2017 order setting aside the foreclosure on 1 September 2017. That same day, KPC Holdings *41appealed 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.
Thereafter, 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.
Discussion
Respondents 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.
Rule 60(b) Motions
Rule 60 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 *42when 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 ,
The 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 ,
North Carolina Planned Community Act
The 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 ,
*43§ 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."
I. Failure to Join a Necessary Party
Respondents 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.
Parties "who are united in interest must be joined as plaintiffs or defendants."
*26Generally, 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 ,
[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 *44to the borrower, who at all times retains equitable title in the property.
Skinner v. Preferred Credit ,
The 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 ...."
[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.
Here, Jonathan Hankin is named as trustee on the deed of trust between KPC Holdings and National Indemnity. The proceedings in this case did not endeavor to foreclose upon the deed of trust for which Hankin is trustee, but rather concerned the foreclosure of the homeowners' association's claim of lien on the property-"a lien other than the lien of the deed of trust."
*45II. Notice of Foreclosure
Respondents next argue that the trial court erred by ruling that the foreclosure trustee failed to give proper notice of the non-judicial foreclosure proceeding to Calmore George. This argument lacks merit.
To foreclose upon a claim of lien, a homeowners' association must do so "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." N.C. Gen. Stat. § 47F-3-116(f) (2017). Chapter 45 of the General Statutes provides that
[a]fter the notice of hearing is filed, the notice of hearing shall be served upon each party entitled to notice under this section .... The 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.
Rule 4 of our Rules of Civil Procedure provides the acceptable methods of service of process required in order to properly exercise personal jurisdiction upon a natural person in this State. N.C. Gen. Stat. § 1A-1, Rule 4(j)(1) (2017). Relevant to this case, a party may accomplish service upon a natural person not under disability in one of the following ways:
a. By delivering a copy of the summons and of the complaint to the natural person or by leaving copies thereof at the defendant's dwelling house or usual place of abode *46with some person of suitable age and discretion then residing therein.
....
c. By mailing a copy of the summons and of the complaint, registered or certified mail, return receipt requested, addressed to the party to be served, and delivering to the addressee.
Service by personal delivery is accomplished by either: (1) delivering the complaint and summons to "the natural person" named therein, or (2) leaving a copy of those documents "at the defendant's dwelling house or usual place of abode" with someone "of suitable age and discretion" who resides at the residence.
When attempting to effectuate service by certified mail, return receipt requested, "the serving party shall file an affidavit with the court showing proof of such service in accordance with the requirements of G.S. 1-75.10(a)(4)." N.C. Gen. Stat. § 1A-1, Rule 4(j2)(2) (2017). The affidavit must aver:
a. That a copy of the summons and complaint was deposited in the post office for mailing by registered or certified mail, return receipt requested;
b. That it was in fact received as evidenced by the attached registry receipt or other evidence satisfactory to the court of delivery to the addressee; and
c. That the genuine receipt or other evidence of delivery is attached.
Here, while the Georges owned the Mecklenburg County property at issue, they did not reside there; they lived in the Virgin Islands. The Georges' three daughters lived at the Mecklenburg County residence in order to attend college. Hygiena Jennifer George testified that she visited the Mecklenburg County property when she was on vacation. Calmore George testified that he usually visited the Mecklenburg County property once per year around the Christmas holiday *28or once every few years if there was a significant maintenance issue that required his presence. Whenever the Georges did visit the Mecklenburg County property, they "stay[ed] in the study area with [an] inflatable bed."
Deputy Shakita Barnes of the Mecklenburg County Sheriff's Office attempted personal service of the notice of foreclosure upon the Georges. According to the Foreclosure Notice of Return, Deputy Barnes personally served Hygiena Jennifer George and served Calmore George by leaving copies of the notice with his wife Jennifer, "who is a person of suitable age and discretion and who resides in the respondent's dwelling house or usual place of abode." However, Deputy Barnes actually served one of the Georges' daughters, Janine, a younger female who "said that she was ... Ms. Jennifer George."
In voiding the foreclosure sale of the property, the trial court found that the property was "not the dwelling or usual place of abode for Calmore George" and that "proper service upon Calmore George did not occur and the court did not have personal jurisdiction to enter an order adverse to him." The trial court further determined "that no findings are necessary regarding the determination of whether [the Mecklenburg County property] is the dwelling or usual place of abode for [Hygiena] Jennifer George." As a result, the trial court set aside the foreclosure of the Georges' property, canceled the foreclosure deed to KPC Holdings, and canceled the subsequent conveyance of the property from KPC Holdings to National Indemnity.
The trial court correctly determined that the foreclosure trustee failed to serve all record owners of the property as required by
*48A place of residence to which the owners only return once or twice each year over the holidays or for maintenance issues does not qualify as a dwelling house or usual place of abode for purposes of Rule 4 service. In Van Buren , service was accomplished by delivering copies of the summons to the appellant's fifteen-year-old son.
By contrast, in this case, the Georges were present at the property far less than "twice during any 30-day period." Id. at 5,
III. Purchaser in Good Faith
Respondents next argue that the trial court erred in determining that neither KPC Holdings nor National Indemnity were good faith purchasers for value, and by thereafter voiding KPC Holdings' title to the property as well as its subsequent deed to National Indemnity. We agree.
Our General Statutes provide that title to property sold under a judgment to a good faith purchaser for value cannot be set aside:
If a judgment is set aside pursuant to Rule 60(b) or (c) of the Rules of Civil Procedure and the judgment or any part thereof has *29been collected or otherwise enforced, such restitution may be compelled as the court directs. Title to property sold under such judgment to a purchaser in good faith is not thereby affected.
*49
Absent actual notice of any defect, a purchaser may rely on the record's facial validity in determining that title to the land in question is devoid of defects. See Goodson v. Goodson ,
An individual purchases something when they acquire an "interest in real or personal property by sale, discount, negotiation, mortgage, pledge, lien, issue, reissue, gift, or any other voluntary transaction." Purchase , Black's Law Dictionary (10th ed. 2014). Consideration is "[s]omething such as an act, a forbearance, or a return promise bargained for and received by a promisor from a promisee." Consideration , Black's Law Dictionary (10th ed. 2014) (parentheses omitted). "What constitutes valuable consideration depends upon the context of a particular case." Estate of Graham v. Morrison ,
*50A bedrock principle of both our federal and state constitutions is that a person's property cannot be taken without due process of law. U.S. Const. amends. V, XIV ; N.C. Const. art. I, § 19. "The fundamental premise of procedural due process protection is notice and the opportunity to be heard." Peace v. Employment Sec. Comm'n ,
In the instant case, the trial court concluded in its Indicative Denial of Joint Motion for Relief Under Rule 60(b)(6) that "[n]either KPC Holdings nor National Indemnity Group qualifies under
Nonetheless, KPC Holdings was a good faith purchaser for value at the foreclosure sale. No record evidence exists that either KPC Holdings or National Indemnity had actual knowledge or constructive notice of the improper service of the foreclosure notice. No infirmities *51or irregularities existed in the foreclosure record that would reasonably put KPC Holdings or any other prospective purchaser on notice that service was improper. The sheriff's return of service indicated that personal service was made upon Hygiena Jennifer George and that substitute service was accomplished for Calmore George by leaving copies with Hygiena Jennifer George. KPC Holdings was entitled to rely upon that record in purchasing the property at the foreclosure sale. Further, as our Supreme Court has held, the low price of the foreclosure sale alone, absent actual or constructive notice of any infirmities, is not sufficient grounds to set aside a purchase by an otherwise good faith purchaser. Swindell , 310 N.C. at 713,
Our dissenting colleague on this issue contends that Respondents are not good faith purchasers within the meaning of
Foust stands for the proposition that it is the materiality of the irregularity in such a sale, not mere inadequacy of the purchase price, which is determinative of a decision in equity to set the sale aside. Where an irregularity is first alleged, gross inadequacy of purchase price may then be considered on the question of the materiality of the irregularity.
Swindell , 310 N.C. at 713,
*52While Calmore George did not receive proper Rule 4 notice of the foreclosure sale of the property, as explained above, the Georges did receive constitutionally sufficient notice. Thus, pursuant to
Here, the trustee for the homeowners' association attempted to inform the Georges of the foreclosure sale by: (1) attempted personal service on Hygiena Jennifer George; (2) attempted personal service on Calmore George; (3) attempted certified mail to the Georges at the Mecklenburg County property address; (4) attempted certified mail to the Georges at the Virgin Islands address; (5) regular mail to the Georges at the Mecklenburg County property address; (6) regular mail to the Georges at the Virgin Islands address; and (7) an email exchange between "Jennifer George" and the foreclosure trustee on 17 January 2017, before the upset-bid period expired, in which Jennifer George requested the reinstatement quote.
Accordingly, because KPC Holdings was a good faith purchaser for value and because the Georges received constitutionally sufficient notice of the foreclosure sale, the trial court abused its discretion in voiding the order of foreclosure and in canceling both the deed to KPC Holdings and its subsequent deed to National Indemnity. While a harsh result for the Georges, they are not without a remedy.
*53In any event, our General Assembly has made the policy decision to favor the good faith purchaser at a foreclosure over the debtor where there is a deficiency in the procedure. As this Court has explained,
it is our duty to follow the policy decision made by our General Assembly, as set forth inN.C. Gen. Stat. § 1-108 , which would favor the interests of [KPC Holdings], as a good faith purchaser at a judicial sale, ahead of the interests of [the Georges] in the Property. We note that the General Assembly's policy decision favoring [KPC Holdings] is rational because it encourages higher bids at judicial sales ....
In addition to encouraging higher bids at foreclosure sales, our Supreme Court has long recognized that this policy fosters reliance on the integrity of record title to property and judicial proceedings concerning property. See, e.g. , Sutton v. Schonwald ,
Conclusion
KPC Holdings abandoned its appeal of the 17 July 2017 order joining it as a necessary party; thus, that appeal is dismissed. Jonathan Hankin, trustee on the deed of trust between KPC Holdings and National Indemnity, was not a necessary party to either Rule 60 proceeding. The trial court correctly determined that Calmore George was not *32properly served with notice of the foreclosure sale and that the clerk of court therefore lacked personal jurisdiction to enter a foreclosure against him. However, KPC Holdings was a good faith purchaser for value, and the Georges received constitutionally sufficient notice of the foreclosure sale.
Accordingly, we affirm the portion of the 9 August 2017 order voiding the foreclosure. The portion of that order canceling and setting aside the trustee's foreclosure deed to KPC Holdings, canceling and setting aside the deed between KPC Holdings and National Indemnity, *54and canceling and voiding the deed of trust between KPC Holdings and National Indemnity is reversed and remanded. On remand, the trial court may enter an order not inconsistent with this opinion, which may include, for example, relief to the Georges in the form of restitution, as authorized by
DISMISSED IN PART; AFFIRMED IN PART; REVERSED IN PART AND REMANDED.
Judge DILLON concurs by separate opinion.
Judge BRYANT concurs in part and dissents in part by separate opinion.
Generally, the filing of an appeal divests the trial court's jurisdiction over a case; however, "[t]he trial court retains limited jurisdiction to indicate how it is inclined to rule on a Rule 60(b) motion." Hall v. Cohen ,
KPC Holdings noticed for appeal the 17 July 2017 order joining it as a necessary party; however, KPC Holdings presents no argument in its brief concerning this alleged error. Thus, this argument is abandoned and we will not review it. N.C.R. App. P. 28(a) ("Issues not presented and discussed in a party's brief are deemed abandoned.").
It is unclear whether this "Jennifer George" was Hygiena Jennifer George or one of the Georges' daughters.
Concurring Opinion
The facts of this case produce a harsh result. The Georges have lost much wealth due to the low purchase price paid at the foreclosure sale of their property. However, we are compelled to follow the law. And the law does not require that the party who purchased their property at the foreclosure sale to have paid a "valuable consideration," as that term is understood in cases cited by the dissent, to be entitled to protection.
Our General Assembly protects the title of anyone who purchases property at a judicial sale so long as the purchaser is "a purchaser in good faith[.]"
*55But Section 1-108 does not require that the purchaser at a judicial sale have paid "a valuable consideration" in order to be protected, so long as purchaser believed in good faith that the sale was properly conducted. Indeed, as long as the purchaser at a judicial sale believed in good faith that the sale was proper, the "inadequacy of the purchase price realized [from the sale] ... will not be sufficient to upset a sale." Swindell v. Overton ,
In the present case, KPC Holdings purchased the Georges' property at the foreclosure sale. Though the consideration it paid would probably not be adequate enough to qualify them for protection under the Connor Act against a prior, unrecorded conveyance, the amount it paid is not relevant to determine whether it is entitled to protection under Section 1-108. There is nothing in the record to indicate that KPC Holdings was not a purchaser in good faith. There is nothing in the record to indicate that the sale was not duly advertised, etc., or that KPC Holdings thwarted the ability of anyone else from bidding at the judicial sale. KPC Holdings was simply the high bidder. KPC Holdings then sold the property to the current owner, National Indemnity, who seeks protection *33based on its title from KPC Holdings. There is some allegation that KPC Holdings and National Indemnity may have been self-dealing. However, the nature of the relationship between KPC Holdings and National Indemnity or the consideration paid by National Indemnity to KPC Holdings is irrelevant in this case. The only relevant issue is whether KPC Holdings was a good faith purchaser and, therefore, possessed good title. If it was and it did, then the nature of KPC Holdings' relationship with National Indemnity is irrelevant.
This result is, indeed, a harsh one. "Be that as it may, we must remember that hard cases are the quicksands of the law and [we must] confine ourselves to our appointed task of declaring the legal rights of the parties." Fulghum v. Selma ,
BRYANT, Judge, concurring in part, dissenting in part.
While I agree with the majority's holding that the trustee with legal title was not a necessary party and the Georges were not properly served with notice of the foreclosure sale, I disagree with the majority's holding that Respondents KPC Holdings and National Indemnity qualify as purchasers in good faith within the meaning of
The uncontroverted evidence before the trial court reflected that, at the time of the foreclosure sale, KPC Holdings was made aware of the property value at approximately $150,000, no pending mortgage, and the outstanding debt of $204.75 in homeowners' dues. As the majority details, KPC Holdings purchased the property for $2,650.22, an amount that is grossly disproportionate to the value of the property. Such actions call into question "notice" and "acting in good faith" which are necessary to justify the applicability of a purchaser in good faith under N.C.G.S. § 1-108.
The protection accorded to a purchaser in good faith will not be given to a purchaser for a grossly inadequate consideration. He must have paid a fair consideration, though not necessarily the full value. See Worthy v. Caddell ,
KPC Holdings took the property with notice--actual and constructive--of the estimated value of the property and outstanding debt: both appeared on the face of the record. While KPC Holdings may not have possessed actual knowledge of the defective service to the Georges, there was a public record of the HOA's Claim of Lien and KPC Holdings was on reasonable notice that there were no other liens when it placed a bid of $2,650.22 notwithstanding the property value.
As I believe KPC Holdings is unable to establish good faith purchaser status, National Indemnity, as the subsequent purchaser, cannot attain such status from KPC Holdings: KPC Holdings cannot convey what it does not have.
Given the insufficiency of notice of the foreclosure sale combined with the gross inadequacy of the ultimate sales price, I would affirm the trial court's ruling that Respondents were not purchasers in good faith and thus it was proper to void the sale and cancel the deed.
The Georges owned the property free and clear of any mortgage or other liens.
Case-law data current through December 31, 2025. Source: CourtListener bulk data.