              IN THE COURT OF APPEALS OF NORTH CAROLINA

                                  No. COA16-655

                               Filed: 7 February 2017

Macon County, No. 13 SP 130

IN THE MATTER OF THE FORECLOSURE OF REAL PROPERTY UNDER A
DEED OF TRUST EXECUTED BY ROBERT C. COLLINS AND RHONDA B.
COLLINS DATED JUNE 20, 2006 AND RECORDED ON JUNE 23, 2006 IN BOOK
K-30 AT PAGE 975 IN THE MACON COUNTY PUBLIC REGISTRY, NORTH
CAROLINA.

        Appeal by respondents from order entered 20 January 2016 by Judge Marvin

Pope in Macon County Superior Court. Heard in the Court of Appeals 29 November

2016.


        Katten Munchin Rosenman LLP, by Rebecca K. Lindahl and Daniel S.
        Trimmer, for petitioner-appellee.

        Jones, Key, Melvin & Patton, P.A., by Fred H. Jones, for respondents-
        appellants.


        ZACHARY, Judge.


        Respondents appeal from an order authorizing Beneficial Financial I Inc.,

through substitute trustee Trustee Services of Carolina, LLC (Trustee Services), to

proceed with foreclosure in accordance with the terms of the Deed of Trust secured

by real property located at 212 Cedar Ridge Road, Franklin, North Carolina (the

property). For the reasons that follow, we affirm.
                          IN RE FORECLOSURE OF COLLINS

                                  Opinion of the Court



                                  I. Background

       On 20 June 2006, Respondents borrowed $102,726.34 by executing a loan

agreement (the Note) in favor of Beneficial Mortgage Company of North Carolina

(BMCNC). The Note was secured by a Deed of Trust that encumbered the property.

In 2009, BMCNC merged with Beneficial Mortgage Company of Virginia (BMCV),

which then merged with Beneficial Financial I Inc. (Beneficial).

      Respondents later defaulted under the terms of the Note.          As a result,

Beneficial, through Trustee Services, initiated foreclosure proceedings pursuant to

the power-of-sale provision contained in the Deed of Trust. The Notice of Hearing,

dated 10 June 2013, indicated that “the current holder of the above-described Deed

of Trust and the indebtedness secured thereby is: Beneficial I Inc Successor by

Merger to Beneficial Mortgage Co of North Carolina.”

      On 17 October 2013, the Clerk of Superior Court of Macon County conducted a

hearing on the matter pursuant to N.C. Gen. Stat. § 45-21.16 and found, inter alia,

that notice was given to the record owners of the property, that Beneficial was the

holder of the Note, that the Note was in default, and that Beneficial had the right to

foreclose under the power-of-sale provision in the Deed of Trust. That same day, the

clerk entered an order allowing Trustee Services to proceed with the foreclosure sale.

Respondents appealed the clerk’s order to Macon County Superior Court for de novo

review.



                                         -2-
                           IN RE FORECLOSURE OF COLLINS

                                  Opinion of the Court



      On 19 January 2016, Judge Marvin Pope conducted the de novo hearing in the

power-of-sale foreclosure proceeding.    At the hearing, Beneficial introduced into

evidence an Affidavit of Default that had been executed by Beneficial’s Assistant

Secretary of Administrative Services, Cherron Martin.        In Paragraph 3 of the

affidavit, Martin averred that, based on her own personal knowledge of the business

and loan records at issue, “BENEFICIAL is in possession of the original promissory

note and/or loan agreement (“Note”) for this Loan. . . .” A number of exhibits were

attached to Martin’s affidavit, including photocopies of the Note, the Deed of Trust,

and merger documents pertaining to both BMCNC’s merger with BMCV and BMCV’s

merger with Beneficial.

      Respondents objected to the admission of Martin’s affidavit on three grounds:

(1) the affidavit was signed in July 2013 and there was no indication as to whether

the Note had been negotiated since then; (2) none of the averments established that

Martin had personal knowledge of Beneficial’s possession of the Note; and (3) the

affidavit was not accompanied by the original Note. After noting that Paragraph 3 of

the affidavit says “Beneficial is in possession of the original promissory note and/or

loan agreement for this loan[,]” Judge Pope overruled respondents’ objection.

      Respondents also moved for a directed verdict “on the basis that [Beneficial]

has failed to prove they’re the holder of the note and can’t proceed.” Judge Pope




                                         -3-
                           IN RE FORECLOSURE OF COLLINS

                                  Opinion of the Court



denied the motion.    As a result, Martin’s affidavit was admitted into evidence,

together with the accompanying exhibits.

      On 20 January 2016, Judge Pope entered an order that authorized Trustee

Services to proceed with the foreclosure on the property in accordance with the terms

of the Deed of Trust. Respondents appeal.

                II. Standard of Review and General Principles

      “The applicable standard of review on appeal where, as here, the trial court

sits without a jury, is whether competent evidence exists to support the trial court’s

findings of fact and whether the conclusions reached were proper in light of the

findings.” In re Foreclosure of Adams, 204 N.C. App. 318, 320, 693 S.E.2d 705, 708

(2010) (citation and quotation marks omitted). “Competent evidence is evidence that

a reasonable mind might accept as adequate to support the finding.” Id. at 321, 693

S.E.2d at 708 (citations and quotations marks omitted). “[T]he [trial] court’s findings

of fact are conclusive if supported by competent evidence, even though other evidence

might sustain contrary findings.” Stephens v. Dortch, 148 N.C. App. 509, 515, 558

S.E.2d 889, 892 (2002) (citations omitted). The trial court’s conclusions of law are

subject to de novo review. In re Foreclosure of Bass, 366 N.C. 464, 467, 738 S.E.2d

173, 175 (2013).

      Foreclosure by power-of-sale proceedings conducted pursuant to N.C. Gen.

Stat. § 45-21.16 are limited in scope. A power-of-sale provision contained in a deed



                                         -4-
                            IN RE FORECLOSURE OF COLLINS

                                    Opinion of the Court



of trust vests the trustee with the “ power to sell the real property mortgaged without

any order of court in the event of a default.” In re Foreclosure of Michael Weinman

Assocs. Gen. P’ship, 333 N.C. 221, 227, 424 S.E.2d 385, 388 (1993) (citation and

internal quotation marks omitted). After the trustee files a notice of hearing with the

clerk of superior court and serves that notice on the necessary parties, the clerk must

conduct a hearing on the matter. N.C. Gen. Stat. § 45-21.16(a), (d) (2015). At the

hearing, the petitioner must present evidence that establishes the following six

criteria before the clerk of court may authorize the trustee to proceed with the

foreclosure under a power-of-sale provision:

             (i) [a] valid debt of which the party seeking to foreclose is
             the holder, (ii) default, (iii) [a] right to foreclose under the
             instrument, (iv) notice to those entitled to such under
             subsection (b), (v) that the underlying mortgage debt is not
             a home loan as defined in G.S. 45-101(1b) . . . and (vi) that
             the sale is not barred by G.S. 45-21.12A[.]

Id. § 45-21.6(d). At a section 45-21.16 foreclosure hearing, “the clerk . . . is limited to

making the six findings of fact specified under subsection (d)[.]” In re Foreclosure of

Young, 227 N.C. App. 502, 505, 744 S.E.2d 476, 479 (2013). Although the clerk’s

decision may be appealed to superior court for a hearing de novo, N.C. Gen. Stat. §

45-21.16(d1), the superior court is similarly limited to determining whether the

petitioner has satisfied the six criteria contained in subsection 45-21.16(d). In re

Foreclosure of Carter, 219 N.C. App. 370, 373, 725 S.E.2d 22, 24 (2012). However,

upon de novo review, the superior court may consider evidence of legal defenses that


                                           -5-
                           IN RE FORECLOSURE OF COLLINS

                                   Opinion of the Court



would negate the findings required under subsection 45-21.16(d). In re Foreclosure

of Goforth Properties, Inc., 334 N.C. 369, 375, 432 S.E.2d 855, 859 (1993).

      Moreover, in a power-of-sale foreclosure hearing, “the clerk shall consider the

evidence of the parties and may consider . . . affidavits and certified copies of

documents.” N.C. Gen. Stat. § 45-21.16(d). Affidavits may also be used as competent

evidence to establish the required statutory elements in de novo foreclosure hearings.

In re Foreclosure of Brown, 156 N.C. App. 477, 486-87, 577 S.E.2d 398, 404-05 (2003).

                                     III. Analysis

      On appeal, Respondents make a series of separate but related arguments that

no competent evidence demonstrated that Beneficial was the holder of the Note at

the time of the de novo hearing. We disagree.

      Determination that a party is the holder of a valid debt requires competent

evidence (1) of a valid debt and (2) that the party seeking to foreclose is the holder of

the promissory note that secures the debt. In re Foreclosure of Adams, 204 N.C. App.

at 321-22, 693 S.E.2d at 709.       “[T]he definition of ‘holder’ under the Uniform

Commercial Code (“UCC”), as adopted by North Carolina, controls the meaning of the

term as it is used in section 45-21.16 of our General Statutes[.]” In re Foreclosure by

David A. Simpson, P.C., 211 N.C. App. 483, 490, 711 S.E.2d 165, 171 (2011).         The

UCC’s definition of a “holder” includes “[t]he person in possession of a negotiable

instrument that is payable either to bearer or to an identified person that is the



                                          -6-
                           IN RE FORECLOSURE OF COLLINS

                                   Opinion of the Court



person in possession[.]” N.C. Gen. Stat. § 25-1-201(b)(21)(a) (2015). In determining

whether a person is the holder of an instrument, “[i]t is the fact of possession which

is significant . . . , and the absence of possession defeats that status.” Connolly v.

Potts, 63 N.C. App. 547, 550, 306 S.E.2d 123, 125 (1983). Yet so long as “there is no

evidence that photocopies of a note or deed of trust are not exact reproductions of the

original instruments, a party need not present the original note or deed of trust and

may establish that it is the holder of the instruments by presenting photocopies of

the note or deed of trust.” Dobson v. Substitute Tr. Servs., Inc., 212 N.C. App. 45, 48,

711 S.E.2d 728, 730 (2011).

      Respondents first argue that because over two and half years passed between

the execution of Martin’s affidavit (July 2013) and the de novo hearing in superior

court (January 2016), “the possibility exists that the Note had been negotiated at

some point” during that period of time.

      Other than engaging in speculation, Respondents neither offer a colorable

reason nor cite any pertinent case law as to why their contention should prevail.

Nothing in the record suggests that Beneficial negotiated or transferred the Note to

another party before the de novo hearing was held. As a result, we conclude that this

argument is without merit.

      Respondents next argue that the terminology used in Martin’s affidavit

“provides no basis to conclude that she has personal knowledge of the alleged fact



                                          -7-
                           IN RE FORECLOSURE OF COLLINS

                                   Opinion of the Court



that Beneficial was ‘in possession’ of the original note[.]” The affidavit states, in

pertinent part, that “[i]n the regular performance of my job functions, I have access

to and am familiar with business records maintained by BENEFICIAL for the

purpose of servicing mortgage loans.”       According to Respondents, this language

established that Martin’s area of responsibility concerns only “servicing” loans, and

there is no “indication that Ms. Martin’s responsibilities extend to knowledge of the

lender’s inventory of negotiable instruments, or the status of its corporate existence—

including merger or succession.” Thus, Respondents insist that the affidavit is not

competent evidence of Beneficial’s physical possession of the Note or the merger.

      Generally, a “witness may not testify to a matter unless evidence is introduced

sufficient to support a finding that he has personal knowledge of the matter.

Evidence to prove personal knowledge may, but need not, consist of the testimony of

the witness himself.” N.C. Gen. Stat. § 8C-1, Rule 602 (2015).

      Rule 56(e) of the North Carolina Rules of Civil Procedure provides that

“[s]upporting and opposing affidavits shall be made on personal knowledge, shall set

forth such facts as would be admissible in evidence, and shall show affirmatively that

the affiant is competent to testify to the matters stated therein.” Civil Procedure Rule

43(e) provides, in relevant part, that “[w]hen a motion is based on facts not appearing

of record the court may hear the matter on affidavits presented by the respective

parties. . . .” While Rule 56(e) specifically applies to summary judgment motions,



                                          -8-
                           IN RE FORECLOSURE OF COLLINS

                                  Opinion of the Court



“this Court has held the N.C. R. Civ. Pro. 56(e) requirement that affidavits must be

based upon personal knowledge applies to Rule 43(e).” Lemon v. Combs, 164 N.C.

App. 615, 621, 596 S.E.2d 344, 348 (2004). As noted by the Lemon Court, “ ‘[a]lthough

an affidavit must be verified by a person with personal knowledge of the facts, the

court may rely on reasonable inferences drawn from the facts stated.’ ” Id. at 622,

596 S.E.2d at 348 (citation omitted).

      Here, there was an ample basis upon which to infer that Martin had personal

knowledge of the Note’s existence and status. Martin’s affidavit established that she

was an executive in Beneficial’s Administrative Services Division, that she had

“personal knowledge of the manner in which [Beneficial’s loan documents were]

created,” and that she had “reviewed and relied on those business records concerning

the loan which [was] the subject of [the foreclosure] proceeding.” The affidavit also

correctly identified the amount of the loan evidenced by the Note and the Deed of

Trust that secured the Note.     Accordingly, Martin’s affidavit was based on her

personal knowledge and respondent’s argument is overruled.

      Moreover, based on the facts stated in the affidavit, we conclude that Martin

had personal knowledge of Beneficial’s corporate status. Even so, it is irrelevant

whether Martin had any knowledge of the mergers that resulted in the formation of

Beneficial—in addition to Martin’s affidavit, several other documents establish that

Beneficial is the successor by merger to BMCNC. Beneficial’s Exhibit 3 contains



                                         -9-
                              IN RE FORECLOSURE OF COLLINS

                                    Opinion of the Court



official documents from the Secretaries of State of North Carolina, Delaware, and

California showing that BMCNC merged with BMCV, and that BMCV merged with

Beneficial.   Exhibit 4, an Appointment of Substitute Trustee form in which the

original trustee is replaced by Trustee Services, specifically states that “Beneficial

Financial I Inc. Successor by Merger to Beneficial Mortgage Co. of North Carolina

(“Holder”) is the holder of the Note.” As Respondents make no challenge to the

content of these exhibits, we conclude that the trial court had competent evidence of

the merger and transfer of rights before it. In sum, our review of the record reveals

that the trial court did not abuse its discretion in admitting Martin’s affidavit into

evidence.     See In re Simpson, 211 N.C. App. at 488, 711 S.E.2d at 170 (“The

admissibility of evidence in the trial court is based upon that court’s sound discretion

and may be disturbed on appeal only upon a finding that the decision was based on

an abuse of discretion.”) .

      Respondents’ final argument is that the trial court erred by concluding that

Beneficial was the holder of the Note without making a specific finding that Beneficial

was in physical possession of the Note.

      This Court has previously held that when a trial court’s findings of fact do not

address the actual physical possession of a promissory note, the court’s findings will

not support a conclusion that the petitioner in a foreclosure proceeding is the holder

of the note at issue. Id. at 492, 711 S.E.2d at 172; Connolly, 63 N.C. App. at 551, 306



                                           - 10 -
                           IN RE FORECLOSURE OF COLLINS

                                  Opinion of the Court



S.E.2d at 125.   However, “ ‘when a court fails to make appropriate findings or

conclusions, this Court is not required to remand the matter if the facts are not in

dispute and only one inference can be drawn from them.’ ” In re Foreclosure of Yopp,

217 N.C. App. 488, 499, 720 S.E.2d 769, 775 (2011) (brackets omitted) (quoting Green

Tree Financial Servicing Corp. v. Young, 133 N.C. App. 339, 341, 515 S.E.2d 223, 224

(1999)).

      Here, Beneficial produced a copy of the original Note at the de novo hearing.

While Respondents opposed the admission of the Note and Deed of Trust into

evidence based on alleged deficiencies in Martin’s affidavit, they did not dispute

Beneficial’s assertion that the photocopy of the Note was a true copy of the original

instrument. There being no requirement that the original Note be produced, the

photocopy was competent evidence that Beneficial was the holder of Respondent’s

Note. See Dobson, 212 N.C. App. at 48, 711 S.E.2d at 730 (noting that unless evidence

demonstrates that photocopies of a note or deed of trust “are not exact reproductions

of the original instruments, “a party . . . may establish that it is the holder of the

instruments by presenting photocopies of the note or deed of trust”).

      Furthermore, Martin’s affidavit, which we have held was properly admitted,

contained additional evidence indicating that Beneficial was in physical possession

of Respondent’s Note.      Martin specifically averred that “BENEFICIAL is in




                                         - 11 -
                           IN RE FORECLOSURE OF COLLINS

                                  Opinion of the Court



possession of the original promissory note and/or loan agreement (“Note”) for this

Loan. . . .”

       Finally, the record contains sufficient evidence of the merger and transfer of

rights from BMCNC to Beneficial to support the trial court’s conclusion that

Beneficial is the holder of the Note. See Econo-Travel Motor Hotel Corp. v. Taylor,

301 N.C. 200, 204, 271 S.E.2d 54, 58 (1980) (noting that “if the alleged merger had

occurred, then plaintiff, as the surviving corporation, would have succeeded by

operation of law to Econo-Travel Corporation’s status as owner and holder of the

promissory note, and would have had standing to enforce the note in its own name”);

In re Foreclosure of Carver Pond I, L.P., 217 N.C. App. 352, 356, 719 S.E.2d 207, 210-

11 (2011) (holding that evidence of a merger between former assignee of a promissory

note and the petitioner in an action to foreclose pursuant to the terms of the deed of

trust that secured that note was competent evidence that the petitioner was the

holder of the note). The inferences that Beneficial merged with BMCNC, thereby

succeeding by operation of law to BMCNC’s status as holder of the Note, and that

Beneficial was in physical possession of the Note at the time of the de novo hearing,

are easily drawn from the evidence cited above. Accordingly, the trial court properly

concluded that Beneficial was the holder of the note.




                                         - 12 -
                           IN RE FORECLOSURE OF COLLINS

                                  Opinion of the Court



                                  IV. Conclusion

      For the reasons stated above, Martin’s affidavit was properly admitted into

evidence and the trial court did not err in concluding that Beneficial was the holder

of the Note. Consequently, we affirm the trial court’s order authorizing Trustee

Services to proceed with the foreclosure sale.

      AFFIRMED.

      Judges CALABRIA and INMAN concur.




                                         - 13 -
