# NationStar Mortg. LLC v. Curry

> Court of Appeals of North Carolina · November 6, 2018 · 262 N.C. App. 218

URL: https://www.frixlaw.com/law-library/cases/4328189

## Case

- **Full name:** NATIONSTAR MORTGAGE LLC, D/B/A Champion Mortgage Company, Plaintiff, v. Jerry CURRY and Pamela Curry; Melissa Carlton Holmes; Ray M. Warren, Jr.; J. Gregory Matthews, as Personal Representative of the Estate of Eulala Warren McNeil; Secretary of Housing & Urban Development; And Satterfield Legal, PLLC, as Trustee, Defendants.
- **Court:** Court of Appeals of North Carolina
- **Decided:** November 6, 2018
- **Citations:** 262 N.C. App. 218; 822 S.E.2d 122
- **Precedential status:** Published
- **Opinion:** Opinion by Tyson
- **Judges:** Tyson
- **Cited by:** 4 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/4328189

## Opinion text

IN THE COURT OF APPEALS OF NORTH CAROLINA

No. COA18-351

Filed: 6 November 2018

Wilkes County, No. 17 CVS 201

NATIONSTAR MORTGAGE LLC, d/b/a CHAMPION MORTGAGE COMPANY,
Plaintiff,

v.

JERRY CURRY and PAMELA CURRY; MELISSA CARLTON HOLMES; RAY M.
WARREN, JR.; J. GREGORY MATTHEWS, as Personal Representative of the Estate
of EULALA WARREN McNEIL; SECRETARY of HOUSING & URBAN
DEVELOPMENT; and SATTERFIELD LEGAL, PLLC, as Trustee, Defendants.

Appeal by plaintiff from order entered 27 September 2017 by Judge Susan E.

Bray in Wilkes County Superior Court. Heard in the Court of Appeals 3 October

2018.

McGuireWoods, LLP, by Christopher B. Karlsson, for plaintiff-appellant.

McElwee Firm, PLLC, by John M. Logsdon, for defendant-appellees Jerry
Curry and Pamela Curry.

TYSON, Judge.

Nationstar Mortgage, LLC, d/b/a Champion Mortgage Company (“Champion”),

appeals from the trial court’s order, which granted Jerry and Pamela Curry’s

(collectively “the Currys”) motion for judgment on the pleadings. We affirm.

I. Background
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Opinion of the Court

In 2011, Eulala W. McNeil, now deceased, owned two tracts of real property

located in Wilkes County (“the Property”). On 25 January 2011, McNeil obtained a

loan from and executed a promissory note payable to Sidus Financial, LLC (“Sidus”),

which was secured by a deed of trust on the Property in favor of Sidus (“the Deed of

Trust”). The Deed of Trust was recorded with the Wilkes County Register of Deeds

on 31 January 2011 and encumbered the Property.

That same day, Sidus transferred its rights in the Deed of Trust to Metlife

Home Loans, a division of Metlife Bank, N.A. (“Metlife”), through an assignment of

deed of trust that was also properly recorded. Subsequently, Metlife assigned the

Deed of Trust to Champion on 15 October 2012. Champion properly recorded this

assignment of deed of trust the same day.

McNeil died on 11 August 2012, and Melissa Carlton Holmes was subsequently

appointed as executrix of McNeil’s estate. On 13 December 2012, Holmes filed a

petition (‘the Petition”) in special proceeding 12 SP 368 (“the Special Proceeding”) to

seek a sale of the Property in order to repay the debts of the estate. The only

respondent party named in the Petition was Ray M. Warren, an heir of McNeil.

On 18 December 2012, Holmes filed an amended petition (“the Amended

Petition”), adding Metlife, Sidus, and “HUD” as additional respondent parties.

Neither petition named Champion in the caption of the case. However, both the

Petition and Amended Petition described Champion’s Deed of Trust on the Property

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as a debt of the estate. Specifically, the Petition stated one of the debts of the estate

was “[t]he previously stated reverse mortgage owed to Champion Lender in the

current amount of $66,988.86” and petitioner prayed for the court to “sell [the

Property] in order to create assets to pay the taxes and above referenced debts of the

Estate.”

On 26 March 2013, Robert G. Green, Jr., Esq., the attorney of record in the

Special Proceeding, filed an affidavit of service by certified mail (“the Affidavit of

Service”) stating he had served Champion “with a copy of the Petition, Amended

Petition, Notice of Hearing, and Special Proceedings Summons” by certified mail.

Green also attached a copy of the signed receipt, which showed Champion had

received these documents on 23 March 2013.

On 26 April 2013, the Wilkes County Clerk of Superior Court entered an order

(“the Order of Sale”) authorizing the sale of the Property. The Order of Sale listed

the “reverse mortgage owed to Champion” as one of the debts of the estate and

concluded as a matter of law that the Property should be sold to create assets to pay

“the above referenced debts of the Estate.” Pursuant to the Order of Sale, the

appointed commissioner posted a notice of sale (“the Notice of Sale”), which included

the following statements: “This sale is subject to ad valorem taxes and such other

liens as may appear of record[,]” and “[t]his sale is made subject to all prior liens and

encumbrances, and unpaid taxes and assessments.”

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The sale of the Property was conducted on 26 July 2013. After the sale

remained open for a period of time for upset bids to expire, the Currys became the

final bidder and purchased the Property for and paid $90,000. On 16 September 2013,

the commissioner deducted fees and expenses and disbursed $84,692.69 to the

executrix of the McNeil estate as proceeds from the sale of the Property. On 19

September 2013, the commissioner executed and delivered a deed for the Property to

the Currys. After receiving the net sale proceeds in her capacity as executrix of the

McNeil estate, Holmes embezzled the money and did not remit and pay the proceeds

from the sale to extinguish the outstanding balance of the Deed of Trust to Champion.

Champion commenced this action by filing a complaint on 21 February 2017 in

superior court to seek a declaration that Champion’s Deed of Trust is a first lien on

the Property and an order for judicial foreclosure of the Deed of Trust. In their

answer, the Currys alleged (1) an affirmative defense that, by operation of collateral

estoppel, the Special Proceeding Order of Sale barred Champion’s claims (“the Second

Affirmative Defense”), and (2) asserted a counterclaim for a declaration that

Champion’s lien was extinguished by the sale of the Property in the Special

Proceeding and their payment of the purchase price (“the First Counterclaim”).

The Currys subsequently filed a motion for judgment on the pleadings

asserting their First Counterclaim and Second Affirmative Defense. Following a

hearing on 18 September 2017, the trial court entered judgment on the pleadings in

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Opinion of the Court

favor of the Currys on both their First Counterclaim and Second Affirmative Defense.

The trial court’s order decreed that (1) “Champion Mortgage is collaterally estopped

from seeking a judicial sale of [the Property]” and (2) the “Curry[s] hold title to [the

Property] free and clear of the lien of [Champion’s] Deed of Trust.”

Champion filed timely notice of appeal from the trial court’s order granting the

Currys’ motion for judgment on the pleadings.

II. Jurisdiction

Jurisdiction lies in this Court pursuant to N.C. Gen. Stat. § 7A-27(b)(1) (2017).

III. Issues

Champion argues the trial court erred by concluding as a matter of law

Champion was a named party to and bound by the Special Proceeding. Champion

also argues the trial court erred by granting judgment on the Currys’ First

Counterclaim by decreeing the Special Proceeding extinguished Champion’s prior

recorded lien on the Property. Lastly, Champion argues the trial court erred in

applying the doctrine of collateral estoppel in granting judgment on the Currys’

Second Affirmative Defense.

We need not reach the issue of whether Champion was collaterally estopped

from seeking a judicial sale of the Property. Because Champion was on notice of and

was a party to the Special Proceeding, the Currys acquired the Property free and

clear of Champion’s Deed of Trust.

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Opinion of the Court

IV. Standard of Review

The trial court’s order granted the Currys’ motion for judgment on the

pleadings pursuant to North Carolina Rule of Civil Procedure 12(c). However, when

“matters outside the pleadings [have been] considered by the [trial] court in reaching

its decision on the judgment on the pleadings, the motion [is] treated as if it were a

motion for summary judgment” under Rule 56 on review by this Court. Helms v.

Holland, 124 N.C. App. 629, 633, 478 S.E.2d 513, 516 (1996) (citation omitted).

In making its decision on the Currys’ motion for judgment on the pleadings,

the trial court’s order stated the court had considered the pleadings and exhibits,

arguments of counsel at the hearing, and certain documents from the Special

Proceeding file submitted during the 18 September 2017 hearing. One of these

documents from the Special Proceeding file was the Affidavit of Service asserting

Champion was served “with a copy of the Petition, Amended Petition, Notice of

Hearing, and Special Proceedings Summons” by certified mail with return receipt.

With these documents outside the pleadings being considered, the 12(c) motion for

judgment on the pleadings will be treated for review as a motion for summary

judgment under Rule 56 on appeal. See Horne v. Town of Blowing Rock, 223 N.C.

App. 26, 30, 732 S.E.2d 614, 617 (2012) (“Our case law has consistently treated

submission of affidavits as a matter outside the pleadings.” (citation omitted)).

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Opinion of the Court

“Summary judgment is appropriate if 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 [a] party is entitled to

judgment as a matter of law.” Summey v. Barker, 357 N.C. 492, 496, 586 S.E.2d 247,

249 (2003) (citation and internal quotation marks omitted); see also N.C. Gen. Stat. §

1A-1, Rule 56(c) (2017).

A defendant may show entitlement to summary
judgment by (1) proving that an essential element of the
plaintiff’s case is non-existent, or (2) showing through
discovery that the plaintiff cannot produce evidence to
support an essential element of his or her claim, or (3)
showing that the plaintiff cannot surmount an affirmative
defense. Summary judgment is not appropriate where
matters of credibility and determining the weight of the
evidence exist.

Once the party seeking summary judgment makes
the required showing, the burden shifts to the nonmoving
party to produce a forecast of evidence demonstrating
specific facts, as opposed to allegations, showing that he
can at least establish a prima facie case at trial. To hold
otherwise . . . would be to allow plaintiffs to rest on their
pleadings, effectively neutralizing the useful and efficient
procedural tool of summary judgment.

Draughon v. Harnett Cty. Bd. of Educ., 158 N.C. App. 208, 212, 580 S.E.2d 732, 735

(2003) (citations and quotation marks omitted), aff’d per curiam, 358 N.C. 131, 591

S.E.2d 521 (2004).

“Our standard of review of an appeal from summary judgment is de novo[.]” In

re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572, 576 (2008) (citing Forbis v. Neal,

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361 N.C. 519, 523-24, 649 S.E.2d 382, 385 (2007)). “The evidence produced by the

parties is viewed in the light most favorable to the non-moving party.” Hardin v. KCS

Int’l, Inc., 199 N.C. App. 687, 695, 682 S.E.2d 726, 733 (2009) (citation omitted). “If

the evidentiary materials filed by the parties indicate that a genuine issue of material

fact does exist, the motion for summary judgment must be denied.” Vernon, Vernon,

Wooten, Brown & Andrews, P.A. v. Miller, 73 N.C. App. 295, 298, 326 S.E.2d 316, 319

(1985).

V. Party to the Special Proceeding

Champion argues the trial court erred by concluding as a matter of law

Champion was a party to and bound by the orders and judgment from the Special

Proceeding. Champion asserts “[i]n the absence of a summons and a petition naming,

and properly served on, Champion, it could not have been a party to the Special

Proceeding.” The Currys assert the Affidavit of Service from the Special Proceeding

complies with the requirements for proof of service and shows Champion was a party

to and bound by the Special Proceeding.

Rule 4(j)(1)(c) of our Rules of Civil Procedure permits service by certified mail

“[b]y mailing a copy of the summons and of the complaint, . . . return receipt

requested, addressed to the party to be served, and delivering to the addressee.” N.C.

Gen. Stat. § 1A-1, Rule 4(j)(1)(c) (2017). Once service by certified mail is complete,

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Opinion of the Court

the serving party may make proof of service by filing an affidavit in accordance with

N.C. Gen. Stat. § 1-75.10. N.C. Gen. Stat. § 1A-1, Rule 4(j2)(2) (2017).

Under N.C. Gen. Stat. § 1-75.10(a)(4) (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.

Such an affidavit, when filed along with a return receipt signed by the

individual who received the mail, “raises a presumption that the person who received

the mail or delivery and signed the receipt was an agent of the addressee authorized

by appointment or by law to be served or to accept service of process[.]” N.C. Gen.

Stat. § 1A-1, Rule 4(j2)(2); see also Granville Med. Ctr. v. Tipton, 160 N.C. App. 484,

490-91, 586 S.E.2d 791, 796 (2003).

Here, the Affidavit of Service comports with N.C. Gen. Stat. § 1-75.10. The

Affidavit of Service states the petitioner in the Special Proceeding attempted to serve

Champion “with a copy of the Petition, Amended Petition, Notice of Hearing, and

Special Proceedings Summons in the [Special Proceeding] by certified mail, return

receipt requested,” and that Champion had, in fact, received service of the documents.

Attached to the Affidavit of Service is the return receipt showing delivery to

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Opinion of the Court

Champion. Therefore, the Currys are entitled to a rebuttable presumption of valid

service. See Carpenter v. Agee, 171 N.C. App. 98, 100, 613 S.E.2d 735, 736 (2005) (“By

filing a copy of the signed return receipt, along with an affidavit that comports with

N.C. Gen. Stat. § 1-75.10, plaintiff is entitled to a rebuttable presumption of valid

service.”).

Champion has failed to rebut this presumption. At the 18 September 2017

hearing, Champion argued the person who had signed the receipt was not its

registered agent. However, to rebut the presumption of regular service, Champion

needed to “present evidence that service of process failed to accomplish its goal of

providing [it] with notice of the [Special Proceeding], rather than simply questioning

the identity, role, or authority of the person who signed for delivery of the summons.”

Granville, 160 N.C. App. at 493, 586 S.E.2d at 797.

Champion’s own admission shows that it had received prior notice of the

Special Proceeding. Paragraph 59 of the Currys’ First Counterclaim states:

“[Champion] was made party to the Special Proceeding and was served with

summons and a copy of the Petition.” In response, Champion stated the following:

“[Champion] admits that it was included as a party to be noticed in the Special

Proceedings action . . . .” (emphasis supplied). This statement shows the Affidavit of

Service “accomplish[ed] its goal of providing [Champion] with notice of the [Special

Proceeding.]” See id. Champion has failed to rebut the presumption of proper service.

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Champion further asserts that the trial court erred in concluding it was a party

to the Special Proceeding because Champion was never identified in the caption of

either the Petition or Amended Petition. Champion cites Lee v. County of

Cumberland in support of its contention. __ N.C. App. __, 809 S.E.2d 407, 2018 WL

710085 at *1 (2018) (unpublished). Lee is an unpublished opinion and, therefore,

lacks precedential value. N.C. R. App. P. 30(e)(3). Nonetheless, this Court finds it

instructive.

In Lee, the plaintiff sent the defendant, Keating, a copy of the amended

complaint by certified mail; however, the plaintiff failed to name Keating in the

caption of his complaint and never mentioned Keating in the body of the complaint.

Id. at *7. This Court held “[b]ecause Plaintiff failed to name Keating in the caption

of his complaint, and because Plaintiff failed to mention Keating in the body of the

complaint, we conclude the trial court properly granted the motion to dismiss as to

Keating.” Id.

In reaching this decision, the Court relied on Roberts v. Hill, stating:

In Roberts v. Hill, . . . the plaintiff named a
defendant in the complaint’s caption, but failed to make
any allegations against that defendant in the body of his
complaint. Our State Supreme Court directed the
defendant’s name be stricken from the complaint since
there were no allegations against that defendant. Here, as
in Roberts, Plaintiff fails to make any allegations against
Keating in the body of his complaint, in addition to failing
to name Keating in his complaint’s caption.

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Id. (emphasis supplied) (citation omitted) (quoting Roberts v. Hill, 240 N.C. 373, 377,

82 S.E.2d 373, 377 (1954)).

The facts here are readily distinguishable from both Lee and Roberts. Although

neither petition named Champion as such in the caption, the body of both the Petition

and Amended Petition described Champion’s Deed of Trust mortgage, listed the

amount owed to Champion on this mortgage, and stated the Property should be sold

to pay off Champion’s debt. Because the body of the Petition and Amended Petition

alerted Champion to the nature of the Special Proceeding and asserted allegations

specifically naming Champion, the mere failure to include Champion’s name in the

caption is not fatal. See Roberts, 240 N.C. at 377, 82 S.E.2d at 377.

The Affidavit of Service shows the sale to the Currys was entitled to a

rebuttable presumption of valid service of the “Petition, Amended Petition, Notice of

Hearing, and Special Proceedings Summons[,]” and Champion has failed to rebut this

presumption. Further, Champion’s own admission indicates that it had been served

and received prior notice of the Special Proceeding. Although the Petition and

Amended Petition failed to name Champion in the caption, the body of these

documents specifically named Champion’s mortgage and provided Champion with

notice of the Special Proceeding. For these reasons, Champion was a named party

within and bound by the Special Proceeding. This assignment of error is dismissed.

VI. Status of Champion’s Deed of Trust

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Champion argues the trial court erred by granting judgment on the Currys’

First Counterclaim by declaring the Special Proceeding had extinguished Champion’s

prior recorded lien on the Property. We disagree.

As an initial matter, Champion, in its complaint, requested the trial court to

declare that equitable title to the Property is vested in Champion and legal title is

vested in the trustee of the Deed of Trust. Under North Carolina law, “[a] mortgage

or deed of trust to secure a debt passes legal title to the mortgagee or trustee, as the

case may be, but the mortgagor or trustor is looked on as the equitable owner of the

land . . . .” Daniel Boone Complex, Inc. v. Furst, 43 N.C. App. 95, 101, 258 S.E.2d 379,

385 (1979). N.C. Gen. Stat. § 28A-15-2(b) (2017) states:

The title to real property of a decedent is vested in
the decedent’s heirs as of the time of the decedent’s death;
but the title to real property of a decedent devised under a
valid probated will becomes vested in the devisees and
shall relate back to the decedent’s death[.]

Here, at the time of the Special Proceeding, legal title to the Property was held

by the trustee of the Deed of Trust for the benefit of Champion, and Ray M. Warren,

Jr. and Melissa Carlton Holmes held equitable title to the Property, as devisees and

executrix under the will of Eulala W. McNeil. See id.; see also Complex Inc., 43 N.C.

App. at 101, 258 S.E.2d at 385.

Chapter 28A of the North Carolina General Statutes governs the

administration of a decedent’s estate. Section 28A-15-1(a) provides: “All of the real

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and personal property, both legal and equitable, of a decedent shall be assets

available for the discharge of debts and other claims against the decedent’s estate[.]”

N.C. Gen. Stat. § 28A-15-1(a) (2017) (emphasis supplied).

The executrix or personal representative of the estate may “apply to the clerk

of superior court of the county where the decedent’s real property . . . is situated, by

petition, to sell such real property for the payment of debts and other claims against

the decedent’s estate.” N.C. Gen. Stat. § 28A-17-1 (2017). “When real property sought

to be sold, or any interest therein, is claimed by another person, such claimant may

be made a party to the proceeding.” N.C. Gen. Stat. § 28A-17-6 (2017) (emphasis

supplied). In addition, the beneficiary of the deed of trust, not the trustee, is the

proper party to be joined in the proceeding to sell real estate of the decedent. See N.C.

Gen. Stat. § 45-45.3(c) (2017) (“[T]he 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[.]”).

Here, the Wilkes County Clerk of Superior Court had the authority to enter

the Order of Sale authorizing the sale of the Property. See N.C. Gen. Stat. §§ 28A-15-

1(a); 28A-17-1 (2017). Holmes, as executrix of McNeil’s estate, petitioned the clerk of

superior court for an order to sell the Property in order to create liquid assets to pay

the debts of the estate and the mortgage owed to Champion. As outlined above,

Champion was a party to, named in and bound by the Special Proceeding; therefore,

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the clerk of court had the authority to sell both legal and equitable title in the

Property. See id.; see also N.C. Gen. Stat. §§ 28A-17-6; 45-45.3(c) (2017).

Champion contends that its lien remained attached to the Property after the

Special Proceeding, regardless of whether it was a named party to the proceeding or

not. This contention is without merit for several reasons.

Although Chapter 28A does not expressly provide for a sale of real property

owned by an estate pursuant to the clerk’s order to be free and clear of liens, North

Carolina’s long standing decisional law supports the view that where the lienholder

is named as a party to the proceeding and the order authorizing the sale does not

specify that the sale is subject to the lien, the property is sold free and clear of the

lien to the purchaser. When the purchase price is paid by the purchaser, said lien is

transferred to the proceeds of the sale. See Jerkins v. Carter, 70 N.C. 500 (1874); see

also Town of Tarboro v. Pender, 153 N.C. 427, 69 S.E. 425 (1910); Moore v. Jones, 226

N.C. 149, 36 S.E.2d 920 (1946); Williams v. Johnson, 230 N.C. 338, 53 S.E.2d 277

(1949).

In Moore, the administrator of the estate petitioned the court to have real

property of the decedent sold to make liquid assets available to pay the following

debts of the estate: (1) costs of administration, (2) a judgment docketed against the

decedent, and (3) a deed of trust on real property. 226 N.C. at 150, 36 S.E.2d at 921.

The trial court ordered the costs of administration be paid first because N.C. Gen.

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Stat. § 28-105 (now N.C. Gen. Stat. § 28A-19-6) required personal property to be

distributed to the cost of administration before all other debts of the estate. Id. at

150-51, 36 S.E.2d at 921-22.

Our Supreme Court reversed the trial court and held that under section 28-

105, the statute dictating the order in which debts were to be paid, related exclusively

to the application of personal property, and not the realty. Id. at 151, 36 S.E.2d at

922. The Supreme Court went on to conclude “when the land is sold to make assets

the proceeds remain real estate until all liens are discharged and are to be applied to

the payment of such liens in the order of their priority.” Id.

Champion contends our Supreme Court in Moore “made [it] clear that a lien

on property sold to make assets remains after the sale.” However, Champion

misinterprets this decision. Our Supreme Court in Moore held that when real

property, which is burdened by a lien, is sold to make assets, the proceeds must first

be distributed to satisfy the lien, rather than being distributed in accordance with the

priority set by the statute governing the distribution of funds from personal property.

Id.; see also Pender, 153 N.C. at 430, 69 S.E.2d at 426 (holding when the court ordered

decedent’s real property to be sold, the proceeds must be applied according to the

priority of the liens); Williams, 230 N.C. at 345, 53 S.E.2d at 282 (holding when real

property is sold to make assets, “the proceeds of the sale retain the quality of real

property to the extent necessary to discharge all liens thereon”).

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Because the trial court had incorrectly applied the priority of payment of the

proceeds and was reversed, our Supreme Court in Moore did not address whether the

lien would remain on the real estate if the proceeds of the sale were insufficient to

pay off the debt. See Moore, 226 N.C. at 152, 36 S.E.2d at 922-23. Nevertheless, Moore

supports the position that the lien is transferred to the proceeds of the sale and when

payment is made the buyer takes the property free and clear when the lienholder is

made a party to the sale.

We find additional justification for this position from our Supreme Court in

Jerkins. See 70 N.C. at 501. In Jerkins, our Supreme Court stated the following:

The order of payment of the debts of the decedent is
regulated by [statute,] which declares that judgments
docketed are in force, have priority to the extent to which
they are a lien on the property of the deceased at his death.
The extent of the lien is the amount of the judgment, if the
land is of greater value, but if the real estate is of less
value, the extent of the lien is the value of the land only.
Thus, if the value of the real estate is only five hundred
dollars, and the personal assets fifteen hundred dollars,
and the judgment is for one thousand dollars, the plaintiff
would be entitled as a credit, upon his judgment, to five
hundred dollars out of the real assets, that is, the value of
the real estate, and for the residue of his judgment, he
would come in pro rata with other creditors, as to the
remaining personal assets.

Id. The precedents of Jerkins, Pender, Moore, and Williams, read and taken together,

support the proposition that when a lienholder is joined in a proceeding to sell land

to make liquid assets to satisfy debts for a decedent’s estate, the lienholder’s lien

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Opinion of the Court

follows the proceeds of the sale and the purchaser of the real estate who paid the

purchase price in excess of the lein, takes title free and clear of the lien.

Here, Chapter 28A sets out the procedures for the disposition of a decedent’s

property and Holmes, as the qualified executrix, followed these procedures. The

Order of Sale disposed of both the legal and equitable title to the property, which

included Champion’s deed of trust, and the Order of Sale specified the purpose of the

sale was to make liquid assets to pay the debts of the estate, including the Champion

Deed of Trust. See N.C. Gen. Stat. § 28A-15-1(a). Because Champion was a party to

the Special Proceeding, its lien followed the proceeds of the sale and the Currys took

title to the Property free and clear of Champion’s lien. See Jerkins, 70 N.C. at 501;

Pender, 153 N.C. at 430, 69 S.E. at 425; Moore, 226 N.C. at 151, 36 S.E.2d at 922;

Williams, 230 N.C. at 345, 53 S.E.2d at 282.

Champion also contends its lien remains upon the Property because the Order

of Sale did not explicitly state the sale was to be “free and clear” and the Notice of

Sale included the following language: “This sale is subject to ad valorem taxes and

such other liens as may appear of record[,]” and “[t]his sale is made subject to all prior

liens and encumbrances, and unpaid taxes and assessments.”

Even if the Order of Sale did not explicitly state the sale of the real property

was to be free and clear of Champion’s lien, it did specify that “it [was] in the best

interests of the Decedent’s Estate and for the necessity of paying the Decedent’s just

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debts” to sell the Property “to create assets with which to pay the taxes and the above

referenced debts of the Estate.” The Order of Sale listed one of these referenced debts

as the “mortgage owed to Champion Mortgage in the current amount of $66,988.86[.]”

The Property was sold pursuant to N.C. Gen. Stat. § 28A-17-1 et seq., which

allows the administrator to sell both the legal and equitable title and claims of all

parties to the proceeding. As concluded above, Champion was a named party to, was

served notice of, and bound by the Special Proceeding. The commissioner of the

Special Proceeding under the clerk’s order had the judicial authority to sell and

convey all interests in the Property. Although the Notice of Sale said the sale was

subject to prior liens, the substance of the Order of Sale made it clear the proceeds

generated from the sale were directed to pay off these liens and debts of the estate.

Although Champion never received the payoff, due to the executrix absconding

with the proceeds, this does not change the fact that the Currys, as last and highest

bidder at the sale, paid for the Property and took the Property free and clear of

Champion’s lien. See Cherry v. Woolard, 244 N.C. 603, 613, 94 S.E.2d 562, 568 (1956)

(“[I]t [is] not incumbent upon the purchaser at the judicial sale to see that the money

paid for the property was properly disbursed.” (citation omitted)). “When the

purchaser paid his bid into court, or to its officer duly authorized to receive it, he was

relieved of any further responsibility in connection with the interest then being sold.”

Id. at 613, 94 S.E.2d at 569 (citation and internal quotation marks omitted). Here,

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Opinion of the Court

the Currys paid the purchase price, which was well in excess of Champion’s lien, to

the commissioner under the clerk’s order, and had no further duty to ensure that the

commissioner or the executrix paid Champion. See id.

In North Carolina, an executrix is under a duty to ensure that creditors of the

estate are paid according to their class. See N.C. Gen. Stat. § 28A-19-13 (2017). If the

personal representative fails to pay out claims of the estate in accordance with their

class, the personal representative commits a devastavit. Id.; see also Coggins v.

Flythe, 113 N.C. 102, 113, 18 S.E. 96, 99 (1893) (“The general rule, both at law and in

equity, is that it would be a devastavit if an executor or administrator should give

preference to a debt of lower class over those duly presented of a higher dignity[.]”

(citation omitted)). However, in addressing the respective claims of Champion and

the Currys only, which is all that is before us in this case, it is unnecessary for us to

address any claims Champion may assert against the commissioner of the Special

Proceeding and Holmes as the executrix of McNeil’s estate.

Champion was made a party to and received notice of the Special Proceeding.

The procedure followed in the Special Proceeding allowed the commissioner to sell

the Property to the Currys, as the highest and last bidder at the sale, upon their

payment, free and clear of Champion’s lien. Although the Notice of Hearing

erroneously stated the sale was subject to all prior liens, Champion’s lien followed

the proceeds, and the substance of the Order of Sale showed the sale of the Property

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Opinion of the Court

was to be conveyed upon payment as free and clear of Champion’s lien. The trial

court properly granted judgment on the Currys’ First Counterclaim by declaring the

Special Proceeding extinguished Champion’s prior recorded lien on the Property.

VII. Conclusion

The Affidavit of Service created a rebuttable presumption of valid service of

the petition and summons and Champion failed to rebut this presumption. The trial

court did not err by concluding as a matter of law Champion was a named party to

and bound by the Special Proceeding. The trial court also did not err in concluding

as a matter of law the Special Proceeding extinguished Champion’s prior recorded

lien on the Property, which was converted into the paid proceeds of the sale.

The trial court also correctly ruled the Currys, upon payment of proceeds

exceeding the lien, took the Property free and clear of the lien. As a result, it is

unnecessary for this Court to address Champion’s remaining arguments concerning

the trial court’s application of the doctrine of collateral estoppel.

The order of the trial court granting judgment on the pleadings, as reviewed

on appeal for summary judgment under Rule 56, is affirmed. It is so ordered.

AFFIRMED.

Judges CALABRIA and ZACHARY concur.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/4328189. Public record. Not legal advice.