Banks & Banking – Foreclosure Sale – Power of Sale

The foreclosure of the subject Property is proper.

The Guilford Clerk’s Order denying foreclosure is reversed, and the Substitute Trustee is authorized to sell the Property in accordance with the provisions of Article 2A of Chapter 45.

This matter was before the Court upon the appeal of JDPW Trust, by and through its Receiver Gerald A. Jeutter, Jr., from the Order of the Guilford County Clerk of Superior Court denying JDPW Trust’s request to allow a foreclosure sale under the power of sale.

HCM asserted two defenses to foreclosure: (a) payment, and (b) the statute of limitations found at N.C.G.S. § 45-21.12. 51. HCM failed to establish that the CM Note was paid. The CM Defendants relied on the Bank’s application in its internal records of part of the $2.1 million wired to the Bank by the Nivison Parties on behalf of JDPW in September 2012 as a payment for the benefit of the obligors on the CM Note. This reliance is misplaced. That wire transfer was the payment of the Purchase Price for JDPW to buy the Notes with a warranted outstanding balance. The Bank’s internal accounting does not establish otherwise. Therefore, the Court concluded that the internal accounting records are neither determinative nor instructive as to the legal effect of the Bank’s application of its receipt of the $2.1 million from the Nivison Parties on behalf of JDPW.

Similarly, the Court found Doug Harris’s and McDaniel’s newfound contention that JDPW paid off the CM Note and thus received from the Bank a “zeroed out mortgage” lacking in credibility based on the documentary evidence of record, which does not lend any support to this contention. Indeed, other than to rely on the Bank’s post-receipt, internal accounting decisions, which do not control what the parties agreed to in the Purchase Agreement, McDaniel and Harris failed to point to any credible documentary evidence that verifies their assertion that JDPW purchased the CM Note with a zero balance. None of the transaction documents support that testimony in any respect. Moreover, once the Bank executed the Allonge and Assignment of Notes on 21 September 2012, the Bank ceased to be a holder of the CM Note. Since the Bank was no longer a holder of the CM Note as of September 21, 2012, the Bank had no authority or power to accept payments on the CM Note after that date. As a result, the receipt of $2.1 million by the Bank on September 24, 2012 was not payment on the CM Note. To the contrary, the evidence establishes that the Nivison Parties’ $2.1 million payment on behalf of JDPW was made to effect JDPW’s purchase of the Notes and related Loan Documents, including the CM Deed of Trust, under the Purchase Agreement.

Much of the evidence proffered by the CM Defendants, McDaniel, and Doug Harris is appears intended to establish that (1) that the proceeds from the Nivison loan to facilitate the purchase of these Notes were to be used to pay off the CM Note and cause the release of the Castle McCulloch Property as security for all Epes-related loans, (2) that JDPW was simply a pass-through entity Doug Harris used to facilitate the Bank’s request that, to comply with banking regulations, a neutral third-party needed to receive the CM Note and CM Deed of Trust, (3) McDaniel negotiated for Dr. Epes and his companies a 39.5% reduction in the approximately $3.4 million then owed to the Bank on the Notes, and (4) that the CM Note and CM Deed of Trust were to have been paid off and have no value when they were transferred to JDPW. The CM Defendants, McDaniel, and Doug Harris ignored, however, the structure of the transaction as set forth in the transaction documents and that Doug Harris had a fiduciary duty as trustee of JDPW to act in furtherance of JDPW’s interests. Rather than support the Guilford Clerk’s Order, the evidence advanced and relied upon by the parties opposing foreclosure only affirms the Court’s previous conclusion in these actions that, by incurring the $2.1 million debt to the Nivison Parties on behalf of JDPW to purchase the CM Note, CM Deed of Trust, and related Loan Documents and thereafter cancelling the CM Note and releasing the CM Deed of Trust on the Castle McCulloch Property, Doug Harris breached his fiduciary duty as JDPW’s trustee.

Reversed.

In re Southeastern Eye Center (Lawyers’ Weekly No. 020-086-24, 30 pp.) (Louis A. Bledsoe III, J.) 2024 NCBC 86. Smith Debnam Narron Drake Saintsing & Myers, LLP, by Byron L. Saintsing, for Plaintiff Nivison Family Investments, LLC, Plaintiff Old Battleground Properties, Inc., and Arthur Nivison; Oak City Law LLP, by Robert E. Fields III and Samuel Pinero II, for Gerald A. Jeutter, Jr., as Receiver for JDPW Trust U/T/A Dated June 8, 2007; City of Oaks Law, by Michael J. Geiseman, for Jonathan W. Anderson, as Substitute Trustee on a Deed of Trust Executed by Historic Castle McCulloch, LLC Dated September 30, 2004 and Recorded in Book 6182, Page 2233 in the Guilford County Public Registry, North Carolina; Pinto Coates Kyre & Bowers, PLLC, by Richard L. Pinto and Kenneth Kyre, Jr., for Defendants Richard Harris, Historic Castle McCulloch, LLC, and Castle McCulloch, Inc. Douglas S. Harris, Pro Se. North Carolina Business Court