Midfirst Bank v. Brown

2022-NCCOA-788

MIDFIRST BANK, Plaintiff, v. BETTY J. BROWN and MICHELLE ANDERSON, Defendants

No. COA22-283

Court of Appeals of North Carolina

December 6, 2022

Heard in the Court of Appeals 18 October 2022.

Appeal by Defendants from order entered 19 July 2021 by Judge Karen EadyWilliams in Mecklenburg County No. 20 CVS 6129 Superior Court.

The Green Firm, PLLC, by Bonnie Keith Green, and The Deaton Law Firm, PLLC, by Wesley L. Deaton, for Defendants-Appellants.

Alexander Ricks PLLC, by Benjamin F. Leighton, Roy H Michaux, Jr., Ryan P. Hoffman, and David Q. McAdams, for Plaintiff-Appellee.

JACKSON, JUDGE

¶ 1 Betty J. Brown and Michelle Anderson (collectively "Defendants") appeal from the trial court's order denying summary judgment for Defendants and granting summary judgment in favor of Midfirst Bank ("Plaintiff"). For the reasons detailed below, we reverse the order of the trial court and remand for entry of summary judgment in Defendants' favor.

I. Background

¶ 2 In 2000, Ms. Brown purchased her home, the property that is the subject of the litigation in this matter, in Charlotte, North Carolina. Ms. Brown obtained a loan from First Horizon Home Loan Corporation for the property on 26 March 2004. The deed of trust for this loan was recorded in the Mecklenburg County Register of Deeds.

¶ 3 On 21 January 2010, judgment was entered against Ms. Brown in Charleston County, South Carolina, in a matter unrelated to the case before us. This judgment, in the amount of $114,812.35 including post-judgment interest, was domesticated by United General Title Insurance Company in North Carolina pursuant to N.C. Gen. Stat. § 1C-1703 and filed in the Office of the Clerk of Mecklenburg County Superior Court on 15 July 2014.

¶ 4 In August of 2016, Ms. Brown refinanced her First Horizon loan. Nationstar Mortgage LLC made a loan to Ms. Brown, paying off the First Horizon loan. Nationstar recorded the deed of trust for this loan with the Mecklenburg County Register of Deeds. Nationstar recorded satisfaction of the First Horizon loan on 12 September 2016. Plaintiff is Nationstar's successor in interest for the August 2016 loan made to Ms. Brown.

¶ 5 In 2019, United General began enforcement proceedings in North Carolina for the 2010 judgment against Ms. Brown. On 19 July 2019, the Mecklenburg County Sheriff's Office levied the judgment against Ms. Brown's property. An initial foreclosure sale was held on 12 August 2019. The sale was postponed for one week because there were no bids. A second sale was held on 19 August 2019, where First American Title Insurance Company placed a high bid of $98,000.00. On 22 August 2019, after pooling together funds provided by relatives and withdrawn from her and her husband's retirement and savings accounts, Ms. Brown's daughter, Ms. Anderson, placed an upset bid of $102,900.00, with the intention of having Ms. Brown remain living at the property if the bid was successful. No subsequent bids were placed to upset Ms. Anderson's bid, and the Clerk of Mecklenburg County Superior Court filed a confirmation of sale on 4 September 2019.

¶ 6 On 22 April 2020, Plaintiff filed its complaint seeking to quiet title by way of a declaratory judgment asking the court to rule that the Nationstar deed of trust still encumbers the property that Ms. Anderson took title to through her upset bid. In the alternate, Plaintiff asserted that upon paying off the First Horizon Loan, Nationstar and its successors in interest were equitably subrogated to the rights and priorities of the First Horizon deed of trust.

¶ 7 On 29 April 2021, Defendants jointly moved for summary judgment. On 3 May 2021, Plaintiff moved for summary judgment. A hearing on the competing motions was held on 26 May 2021 before the Honorable Karen Eady-Williams. On 19 July 2021, the trial court granted Plaintiff's motion for summary judgment and denied Defendants' motion for summary judgment.

¶ 8 Defendants filed timely notice of appeal of both the grant of Plaintiff's motion and the denial of their own summary judgment motion on 13 August 2021.

II. Analysis

¶ 9 Defendants make three arguments on appeal: (1) the trial court erred in granting summary judgment to Plaintiff because the property was no longer subject to Plaintiff's lien after the execution sale; (2) the Sheriff's deed cannot dictate whether liens remain on real property; and (3) Plaintiff cannot rely on the doctrine of equitable subrogation for survival of its lien because it cannot claim that it was excusably ignorant of the publicly recorded judgment against the property.

A. Standard of Review

¶ 10 Summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to judgment as a matter of law." N.C. Gen. Stat. § 1A-1, Rule 56(c) (2021). "The burden is on the moving party to show that there is no triable issue of fact and that he is entitled to judgment as a matter of law. In deciding the motion, all inferences of fact . . . must be drawn against the movant and in favor of the party opposing the motion." Fin. Servs. of Raleigh, Inc. v. Barefoot, 163 N.C.App. 387, 391, 594 S.E.2d 37, 40 (2004) (internal marks and citations omitted). We review a grant of summary judgment de novo. Forbis v. Neal, 361 N.C. 519, 524, 649 S.E.2d 382, 385 (2007).

B. Status of the Nationstar Deed of Trust After the Execution Sale

¶ 11 Defendants first argue that following the execution sale, the subject property no longer secured the Nationstar deed of trust. We agree.

¶ 12 North Carolina General Statute § 1-339.68(b) provides that "[a]ny real property sold under execution remains subject to all liens which became effective prior to the lien of judgment pursuant to which the sale is held, in the same manner and to the same extent as if no such sale had been held." N.C. Gen. Stat. § 1-339.68(b) (2021) (emphasis added).

¶ 13 While this statutory provision does not specifically address the status of liens that become effective after the lien of judgment upon which a prior lienholder executes to force a judicial sale, we construe the language of this provision to mean that liens recorded after a prior lien holder has executed and forced a sale are extinguished by the sale.

¶ 14 It is a basic tenet of statutory construction that the intent of the legislature controls. Campbell v. Church, 298 N.C. 476, 484, 259 S.E.2d 558, 564 (1978). "The intent of the legislature may be ascertained from the phraseology of the statute as well as the nature and purpose of the act and the consequences which would follow from a construction one way or another." Id.

¶ 15 A longstanding canon of statutory construction is that of expressio unius est exclusio alterius, which means "the expression of one thing is the exclusion of the other." See Morrison v. Sears, Roebuck &Co., 319 N.C. 298, 303, 354 S.E.2d 495, 498 (1987). This doctrine provides that where the legislature has specifically mentioned exceptions in a statute there is an implied exclusion of other exceptions on which the statute is silent. See., e.g., id. (holding that where a statute explicitly excepted actions for breach of express warranties from available defenses but was silent on actions for breach of implied warranties, those defenses were available in breach of implied warranty actions).

¶ 16 While N.C. Gen. Stat. § 1-339.68(b) expressly provides that liens which exist prior to a lien of judgment under which an execution sale is held survive that sale and remain an encumbrance on the real property, the statute is silent on the status of liens that become effective after the lien of judgment under which an execution sale is held. Applying the expressio unius canon, however, we can conclude that this implied exclusion was intentional on the part of our Legislature. Therefore, liens that come to encumber a property after the lien of judgment under which an execution sale is held do not survive the sale and are extinguished.

¶ 17 Here, judgment was entered against Ms. Brown in South Carolina on 21 January 2010. This judgment was domesticated in North Carolina and filed with the Office of the Clerk of Mecklenburg County on 15 July 2014. Nationstar's deed of trust was filed in the Mecklenburg Register of Deeds on 16 August 2016, more than six years after the judgment against Ms. Brown was initially entered and more than two years after it was domesticated and filed in Mecklenburg County. The subject property was sold via execution sale pursuant to the 2010 judgment. Because the Nationstar deed of trust became effective as a lien on the property after the judgment under which the execution sale took place, it was extinguished by the sale.

C. Sheriff's Deed

¶ 18 Defendants next argue that the Sheriff has no authority to subordinate one lien to another when conducting an execution sale, and that N.C. Gen. Stat. § 1-339.68(b), not the Sheriff's deed, controls with respect to what encumbrances remain on the property. Plaintiff argues, on the other hand, that the Sheriff's deed for the execution sale dictates the terms of the conveyance and controls what liens or other encumbrances remain attached to a property after the property is sold. We agree with Defendants.

¶ 19 The relevant portion of the Sheriff's deed here states:

NO TITLE OPINION RENDERED. Deed remains subject to all liens and any encumbrances of any kind or nature (recorded or unrecorded) against the subject property, including without limitations a certain Deed of Trust recorded in the Mecklenburg County Register of Deeds on or about April 17, 2000, Book 11222 Page 893-911; a Deed of Trust filed on

...