Despite similarities, no conflict on COA foreclosure rulings

The North Carolina Court of Appeals recently issued two rulings on cases involving foreclosure notice that, at first glance, might appear to conflict one another. But a closer look reveals that the cases highlight some finer points of foreclosure law.

In HomeTrust Bank v. Tsiros, the court interpreted North Carolina’s foreclosure statute and held that since the property owner had actual notice of the proceeding, proper service of process was not required.  In County of Jackson v. Moor, the court, following the Rules of Civil Procedure, held that although the property ownersknew about the foreclosure proceeding, they were not properly served with process so the default judgment against them was invalid.

According to Charlotte foreclosure attorney, Jason McGrath of McGrath and Spielberger, the cases are not directly in conflict because they represent two different types of foreclosures.

The type of foreclosure in the Tsiros case is a quasi-judicial foreclosure as opposed to a judicial foreclosure, the type of foreclosure in Moor.

“[H]aving handled both types of cases, I can confirm that the procedure and the approach is significantly different for judicial foreclosures versus quasi-judicial foreclosures . . . In reading these two decisions together, they further confirm North Carolina courts provide less protection to a person facing a quasi-judicial special proceedings foreclosure action when compared to a defendant in a judicial foreclosure,” McGrath said.

In Tsiros, HomeTrust Bank sued Mr. and Mrs. Tsiros to recover the deficiency after a foreclosure sale of their property. The trial court granted summary judgment in favor of both Mr. and Mrs. Tsiros, because neither was properly served with process. On appeal, HomeTrust argued the trial court erred in granting summary judgment in favor of Mr. Tsiros, because even though he never received proper service of process, Mr. Tsiros, by his own admission, knew about the hearing.

In Moor, Jackson County sued the Moors for delinquent taxes owed on a commercial property they owned. A default judgment was issued against the Moors and subsequently the property was sold at a foreclosure sale. The Moors sued arguing they were not served with process and therefore the judgment was void. The trial court ruled against them and held the default judgment valid. The Court of Appeals reversed the trial court holding that proper service of process is required under the Rules of Civil Procedure, which are controlling in this case.

With respect to Mrs. Tsiros, the court held there was no evidence that Mrs. Tsiros knew about the foreclosure proceeding so summary judgment in favor of Mrs. Tsiros was proper.

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