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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF TENNESSEE


AT KNOXVILLE

LNV CORPORATION, )
)
Plaintiff, )
)
v. ) No.: 3:12-CV-468-TAV-HBG
)
CATHERINE GEBHARDT )
)
Defendant. )

INTERVENERS MOTION FOR JUDICIAL NOTICE OF
INFORMATION AND CRIMINAL INDICTMENT AND PLEA
AGREEMENT OF LORRAINE BROWN

Comes Now the Interveners, representing themselves, pursuant to Rule 201 Judicial Notice of
Adjudicative Facts hereby requests this Court take Judicial Notice of the documents described
herein and in support states as follows:
1. THE INTERVENERS move this Court to take judicial notice of:
Opinion of J udge Robert N. Hunter, J r. in the Court of Appeals of North Carolina; No.
COA11-565, Bass v. U.S. Bank, Dec. 6 2011, affirming the trials courts ruling that U.S.
Bank was note the Note Holder and lacked standing to foreclose based on a Judy Faber
signature on an allonge to a Note transferring beneficial interest from Residential
Funding Corporation (attached hereto as Exhibit A.)
Opinion of J udge Robert N. Hunter, J r. in the Court of Appeals of North Carolina; NO
COA10-361, Gilbert v. Simpson, reversing the trail courts order to proceed with
foreclosure based on a Judy Faber signature on an allonge to a Note transferring
beneficial interest from Residential Funding Corporation (attached hereto as Exhibit B.)
Deposition Transcript of J udy Faber for U.S. Bank v. Robinson; State of I ndiana;
Marion County, Cause No.: 49D06-0703-MF-013045 consolidated with: 49D10-0609-
PL-40167 (attached hereto as Exhibit C.)
2. Under Federal Rule of Evidence 201 the court may judicially notice a fact that is not
subject to reasonable dispute because it: (1) is generally known within the trial courts
territorial jurisdiction; or (2) can be accurately and readily determined from sources
whose accuracy cannot reasonably be questioned. The Court may take judicial notice of
records of any court of record of the United States.
3. THE INTERVENERS move this Court to take Judicial Notice of the opinion of other
courts and the deposition transcript of Judy Faber because the documents show that
employees of Residential Funding Corporation signed thousands of mortgage
assignments and allonges, often signing the names of other persons on the Mortgage
Assignments that would then be witnessed and notarized. These employees often signed
as officers of banks and mortgage companies. The employees signed without reading the
documents or in any way ascertaining the truth of the matter presented therein, including
the grantor, grantee, and the date of the purported transfer.
4. Many of the documents, including mortgage assignments and lost note affidavits, were
later relied upon in court proceedings including foreclosure proceedings and federal
bankruptcy actions.
5. The documents attached hereto as Exhibits A and B may be accessed online from
PACER.
6. Timely written notice of this request is hereby given by email and postal mail service
upon Plaintiffs counsel as required by law.
WHEREFORE, pursuant to Federal Rule of Evidence 201 THE INTERVENERS move
this Court to take Judicial Notice of judicially determined facts pertaining to the signature
of Judy Faber and the authenticity of deed assignments and allonges bearing her signature
without hearing, and for such other and further relief as this Court deems just and proper
under the circumstances.

RESPECTFULLY SUBMITTED on this _____ day of May, 2014
_________________________________
DENISE SUBRAMANIAM as Representative for THE INTERVENERS


CERTIFICATE OF SERVICE
The undersigned hereby certifies that the copy of the foregoing motion of the Interveners
has been forwarded by regular U.S. Mail upon the following:
Ronald G. Steen Jr. and
Kevin P. Hartley
STITES & HARBISON, PLLC
Sun Trust Plaza
401 Commerce Street
Suite 800
Nashville, Tennessee, 37219

SUBMITTED on this _____ day of May, 2014
_________________________________
DENISE SUBRAMANIAM as Representative for the THE INTERVENERS


Exhibit A - Page 1 of 2



EXHIBIT A


SOURCE: http://dtc-systems.net/2011/12/bank-note-holder-north-carolina-bass-vs-bank/
US Bank is not the Note Holder North Carolina: Bass vs. US Bank
Posted on December 13, 2011 by Dan Edstrom
This case is listed here without comment. The issues of endorsements, allonges, burden of proof, etc. are raised
here and are very illuminating.
In the Matter of the foreclosure of a Deed of Trust executed by Tonya R. Bass in the original amount of
$139,988.00 dated October 12, 2005, recorded in Book 4982, Page 86, Durham County Registry,
Substitute Trustee Services, Inc., as Substitute Trustee,
No. COA11-565.
Court of Appeals of North Carolina.
Filed: December 6, 2011.
K&L Gates, LLP, by A. Lee Hogewood III, and Brian C. Fork for Petitioner-appellant.
Legal Aid of North Carolina, Inc., by E. Maccene Brown, Gregory E. Pawlowski, J ohn Christopher Lloyd, and
Andre C. Brown, for Respondent-appellee.
ROBERT N. HUNTER, J R., J udge.
U.S. Bank, National Association, as Trustee, c/o Wells Fargo Bank, N.A. (Petitioner) appeals the trial courts
order dismissing foreclosure proceedings against Respondent Tonya R. Bass. Petitioner assigns error to the trial
courts determination that Petitioner is not the legal holder of a promissory note executed by Respondent and
therefore lacks authorization to foreclose on Respondents property securing the note under a deed of trust.
After careful review, we affirm.
I. Factual & Procedural Background
On 12 October 2005, Respondent executed an adjustable rate promissory note (the Note) in favor of
Mortgage Lenders Network USA, Inc. (Mortgage Lenders). The Note evidences Respondents promise to pay
Mortgage Lenders the principal amount of $139,988.00 plus interest in monthly installments of $810.75
beginning December 2005. The terms of the Note state that Respondent will be in default if she fails to pay the
full amount of each monthly payment on the date it is due. Respondent secured the Note with a Deed of Trust
encumbering real property located at 4240 Amberstone Way in Durham. The Deed identifies Mortgage Lenders
as the lender and Mitchell L. Hefferman as trustee. The Deed of Trust also sets forth a power of sale clause
providing that Respondents default on her monthly payment obligations under the terms of the Note and failure
to cure such default could result in foreclosure of Respondents property as described in the Deed of Trust.
The record indicates Respondent fell behind on her monthly payments under the Note and, to date, is current on
payments only through J uly 2008. As discussed further infra, the Note was purportedly transferred several times
before coming into Petitioners possession. On or about 10 J anuary 2008, Petitioner, as holder of the Note
evidencing the entire indebtedness secured by the [] Deed of Trust, filed an Appointment of Substitute Trustee
with the Durham County Register of Deeds. The Appointment of Substitute Trustee purportedly removed Mr.
Hefferman as trustee under the Deed of Trust and replaced him with Substitute Trustee Services, Inc.
(Substitute Trustee). On 27 March 2009, Substitute Trustee commenced foreclosure proceedings against
Respondent by filing a Notice of Foreclosure Hearing in Durham County Superior Court in accordance with
North Carolina General Statutes 45-21.16. The Notice of Foreclosure Hearing stated Petitioners intent to
foreclose on the Note and Deed of Trust because of [Respondent's] failure to make timely payments on the
Note.
On 8 April 2010, a foreclosure hearing was held before the Clerk of Durham County Superior Court. Upon
consideration of the statutorily prescribed elements, see N.C. Gen. Stat. 45-21.16(d) and discussion infra, the
clerk of court entered an order permitting Substitute Trustee to proceed with foreclosure of Respondents
property. Respondent timely appealed the clerks order to the superior court, and foreclosure of Respondents
property was stayed pending outcome of the appeal. Respondents appeal to the superior court was continued
twice as she attempted, unsuccessfully, to negotiate a loan modification with Petitioner.
On 16 August 2010, this matter was heard before Superior Court J udge Abraham Penn J ones. Petitioner
introduced evidence establishing: Respondents default on her payment obligations under the Note, the Note
was secured by the Deed of Trust, the Deed of Trust set forth a power of sale clause, and Respondent was
properly served with notice of the foreclosure hearing. Petitioner also produced the original Note and Deed of
Trust through the testimony of Erin Hirzel-Roesch, a Wells Fargo litigation specialist, and introduced copies of
each document for examination by the court.
The Note as introduced before the trial court consists of five pages with a one-page ALLONGE TO NOTE
(the Allonge) attached as page six. The fifth page of the Note bears three stamps purportedly indorsing and
transferring the Note among prior holders and, ultimately, to Petitioner. The first stamp reads PAY TO THE
ORDER OF EMAX FINANCIAL GROUP, LLC WITHOUT RECOURSE By: MORTGAGE LENDERS
NETWORK USA, INC and bears no handwritten signature. The second stamp reads RESIDENTIAL
FUNDING CORPORATION CHAD J ONES VICE PRESIDENT and bears the apparent handwritten
signature of Chad J ones. The third stamp reads PAY TO THE ORDER OF U.S. Bank National Association as
Trustee WITHOUT RECOURSE Residential Funding Corporation by J udy Faber, Vice President and bears
the apparent handwritten signature of J udy Faber. The Allonge, dated 25 October 2005, states Pay to the order
of Without recourse: Residential Funding Corporation. The Allonge bears the apparent handwritten signature
of Michele Morales and identifies Ms. Morales as Manager of Sales and Acquisitions [at] Emax Financial
Group, LLC.
Respondent did not testify or present evidence at the foreclosure appeal hearing. Respondent contended only
that Petitioner is not entitled to foreclose because [Petitioner is] not the proper holder of [the Note].
Specifically, Respondent asserted that the indorsement from Mortgage Lenders to Emax Financial Group, LLC
(Emax) was not a proper indorsement because you have to have more than a stamp and We dont know
who had authority [at Mortgage Lenders] to authorize the sale of (unintelligible) to [Emax]. Respondent also
challenged the indorsement from Emax to Residential Fundings Corporation (Residential) because [t]here is
nothing on the last page of [the Note] to show how and where [Residential] got this commercial paper.
The trial court entered an order on 13 September 2010 dismissing Petitioners foreclosure proceedings against
Respondent. In its order, the trial court found as fact, inter alia, that the indorsement from Mortgage Lenders to
Emax was not signed, and the indorsement from Emax to Residential did not indicate the source of the transfer.
The trial court concluded as a matter of law that, in light of these ineffective indorsements, Petitioner was not
the legal holder of the Note and was not authorized to appoint a substitute trustee to institute foreclosure
proceedings against Respondent. Petitioner filed its Notice of Appeal with this Court on 3 November 2010.
II. Analysis
There are two methods of foreclosure possible in North Carolina: foreclosure by action and foreclosure by
power of sale. Phil Mech. Const. Co., Inc. v. Haywood, 72 N.C. App. 318, 321, 325 S.E.2d 1, 3 (1985). A
foreclosure by action consists of a formal judicial proceeding; a foreclosure by power of sale, in contrast, is a
special proceeding
[1]
whereby `[t]he parties have agreed to abandon the traditional foreclosure by judicial
action in favor of a private contractual remedy to foreclose. In re Adams, ___ N.C. App. ___, ___, 693 S.E.2d
705, 708 (2010) (citation omitted) (alteration in original); In re Goforth Properties, Inc., 334 N.C. 369, 374, 432
S.E.2d 855, 858 (1993) (`Historically, foreclosure pursuant to a power of sale in a deed of trust ha[s] been a
private contract remedy. (citations omitted)).
A mortgagee or trustee seeking to exercise a power of sale under a deed of trust must establish four elements
before the clerk of court in order to proceed with foreclosure: (1) a valid debt exists and the foreclosing party is
the holder of the debt; (2) the debtor has defaulted on the debt; (3) the instrument evidencing the debt permits
foreclosure; and (4) proper notice has been provided to all entitled parties.
[2]
See N.C. Gen. Stat. 45-21.16(d)
(2009); In re Adams, ___ N.C. App. at ___, 693 S.E.2d at 709. The scope of the foreclosure hearing before the
clerk of court is strictly limited to these four issues because foreclosure under a power of sale provision in a
deed of trust is intended to serve as a means of avoiding lengthy and costly foreclosures by action. In re
Watts, 38 N.C. App. 90, 94, 247 S.E.2d 427, 429 (1978). Our Courts have stressed, however, that while a
power of sale provision is meant to `function as a more expeditious and less expensive alternative to a
foreclosure by action, `foreclosure under a power of sale is not favored in the law, and its exercise will be
watched with jealousy. In re Adams, ___ N.C. App. at ___, 693 S.E.2d at 708 (citations omitted). The clerk of
courts order authorizing or dismissing foreclosure is appealable to the superior court. N.C. Gen. Stat. 45-
21.16(d)(1) (2009). On appeal, the superior court reviews de novo the same four issues described supra. See id.
The superior courts order dismissing foreclosure is a final judgment, and, therefore, this Court exercises
jurisdiction over Petitioners appeal pursuant to North Carolina General Statutes 7A-27(b) (2009). Our review
of the trial courts order dismissing foreclosure is limited to determining whether competent evidence exists to
support the trial courts findings of fact and whether the conclusions [of law] reached [by the trial court in its
order dismissing foreclosure] were proper in light of the findings [of fact]. In re Azalea Garden Bd. & Care,
Inc., 140 N.C. App. 45, 50, 535 S.E.2d 388, 392 (2000). Findings of fact by the trial court in a non-jury trial
have the force and effect of a jury verdict and are conclusive on appeal if there is evidence to support those
findings. A trial courts conclusions of law, however, are reviewable de novo. Holden v. John Alan Holden,
___ N.C. App. ___, ___, 715 S.E.2d 201, 209 (2011).
Before applying this standard in the instant case, we note the trial court incorrectly classified multiple legal
conclusions as findings of fact. This Court has recognized that [t]he classification of a determination as
either a finding of fact or a conclusion of law is admittedly difficult. In re Helms, 127 N.C. App. 505, 510, 491
S.E.2d 672, 675 (1997). Nonetheless, proper classification is critical because it shapes this Courts review of the
issues on appeal. Significant deference is afforded to the trial courts findings of fact under the competent
evidence standard. See State v. Hagin, ___, N.C. App. ___, ___, 691 S.E.2d 429, 431, review denied, ___ N.C.
___, 702 S.E.2d 500 (2010) (The trial courts findings are conclusive `if supported by any competent evidence
even if there is evidence to the contrary that would support different findings. (citation omitted)). In contrast,
we afford no deference to the trial courts conclusions of law. See Goldston v. State, 199 N.C. App. 618, 625,
683 S.E.2d 237, 242 (2009) (Because we review questions of law de novo, we give no deference to the trial
courts rulings.). Generally, any determination requiring the exercise of judgment or the application of
legal principles is more properly classified a conclusion of law. In re Helms, 127 N.C. App. at 510, 491 S.E.2d
at 675 (internal citations omitted). A determination reached through `logical reasoning from the evidentiary
facts is more properly classified a finding of fact. Id. (citation omitted).
Here, the trial court found as fact and concluded as a matter of law the following: (1) purported prior holders of
the Note, Mortgage Lenders and Emax, did not properly indorse and transfer the Note, (2) Petitioner is not the
legal holder of the Note, (3) Petitioner did not have authority to appoint a substitute trustee because it was not
the legal holder of the Note, and (4) Petitioner did not have authority to commence foreclosure proceedings
against Respondent. We conclude that these determinations each involve application of legal principles and are
more properly classified as conclusions of law. We reclassify these findings of fact as conclusions of law and
apply our standard of review accordingly. See N.C. State Bar v. Key, 189 N.C. App. 80, 88, 658 S.E.2d 493, 499
(2008) ([C]lassification of an item within the order is not determinative, and, when necessary, the appellate
court can reclassify an item before applying the appropriate standard of review.).
Of the issues considered by the clerk of court and subsequently reviewed de novo by the trial court, the sole
issue presented on appeal to this Court is whether Petitioner, as the party seeking foreclosure under a power of
sale, is the holder of a valid debt. See N.C. Gen. Stat. 45-21.16(d) (2009). Respondent is entitled to demand
strict proof of this element. Liles v. Myers, 38 N.C. App. 525, 528, 248 S.E.2d 385, 388 (1978).
This Court has described this inquiry as follows:
In order to find that there is sufficient evidence that the party seeking to foreclose is the holder of a valid debt in
accordance with N.C.G.S. 45-21.16(d), this Court has determined that the following two questions must be
answered in the affirmative: (1) `is there sufficient competent evidence of a valid debt?; and (2) `is there
sufficient competent evidence that [the party seeking to foreclose is] the holder of the notes [that evidence that
debt]?
In re Adams, ___ N.C. App. at ___, 693 S.E.2d at 709 (alterations in original) (citations omitted). We note that
the separation of this statutory requirement into two distinct inquiries is a simplification tool and does not alter
our standard of review. This Court constructed the sufficient competent evidence standard to serve as
guidance in the clerk of courts application of North Carolina General Statutes 45-21.16(d). See, e.g., In re
Burgess, 47 N.C. App. 599, 603, 267 S.E.2d 915, 918 (1980) ([W]e construe G.S. 45-21.16(d)(i) to permit the
clerk to find a `valid debt of which the party seeking to foreclose is the holder if there is competent evidence
that the party seeking to foreclose is the holder of some valid debt, irrespective of the exact amount owed.); In
re Simpson, ___ N.C. App. at ___, 711 S.E.2d at 171 ([I]n order for the foreclosure to proceed, the clerk of
court must find.. . the existence of a valid debt. (citing N.C. Gen. Stat. 45-21.16(d) (2009)) (emphasis
added) (internal quotation marks omitted)). Whether a party is the holder of a valid debt and whether a valid
debt exists are questions of law. See In re Helms, 127 N.C. App. at 510, 491 S.E.2d at 675 ([A]ny
determination requiring the exercise of judgment or the application of legal principles is more properly
classified a conclusion of law. (internal citations omitted)). As such, this Court must determine whether the
trial courts conclusions with respect to these questions are supported by its findings and, in turn, whether such
findings are supported by competent evidence. See supra.
In the case sub judice, the existence of a valid debt is not in disputeRespondent concedes she has defaulted
under the terms of the Note. The sole issue remaining is whether Petitioner is the legal holder of the Note
evidencing Respondents debt. This determination is critical because it protect[s] [Respondent] from the threat
of multiple judgments on the [Note]. In re Simpson, ___ N.C. App. at ___, 711 S.E.2d at 171. Absent this
requirement, the Note could be negotiated `to a third party who would become a holder in due course, bring a
suit upon the [Note] and obtain a judgment in her favor. Id. (quoting Liles, 38 N.C. App. at 527, 248 S.E.2d
at 387). Requiring the foreclosing party to introduce sufficient competent evidence that it `is the holder of
the note at the time of [the] suit reduces the possibility of such an inequitable occurrence. Id. (quoting Liles,
38 N.C. App. at 527, 248 S.E.2d at 387).
In determining whether the foreclosing party is the holder of a valid debt for purposes of North Carolina
General Statutes 45-21.16(d), this Court has applied the definition of holder as set forth in North Carolinas
adoption of the Uniform Commercial Code (UCC). See In re Connolly, 63 N.C. App. 547, 550, 306 S.E.2d
123, 125 (1983). North Carolina General Statutes 25-1-201 defines holder as [t]he person in possession of
a negotiable instrument that is payable either to bearer or to an identified person that is the person in
possession. N.C. Gen. Stat. 25-1-201(b)(21) (2009). This Court has also defined holder under former
North Carolina General Statutes 25-1-201(20) as `a person who is in possession of an instrument issued
or indorsed to him or to his order. In re Connolly, 63 N.C. App. at 550, 306 S.E.2d at 125 (citation omitted)
(alterations in original). Any `individual, corporation, business trust, estate, trust.. . or any other legal or
commercial entity can serve as the holder of a promissory note. In re Simpson, ___ N.C. App. at ___, 711
S.E.2d at 171 (quoting N.C. Gen. Stat. 25-1-201(b)(27) (2009)) (alteration in original).
A person may become the holder of an instrument: (1) through issuance of the instrument to that person or (2)
through negotiation of the instrument to that person. See N.C. Gen. Stat. 25-3-201(b) (2009); N.C. Gen. Stat.
25-3-201 cmt. 1 (2009). Issuance of an instrument occurs through first delivery of the instrument by the
maker of the instrument. N.C. Gen. Stat. 25-3-105(a) (2009). The record before this Court establishes that
Respondent issued the Note in favor of Mortgage Lenders. See N.C. Gen. Stat. 25-3-103(a)(5) (2009)
(defining maker as a person who signs a note as a person undertaking to pay); N.C. Gen. Stat. 25-1-
201(b)(15) (2009) (defining delivery of an instrument as a voluntary transfer of possession); N.C. Gen.
Stat. 25-3-110(a) (2009) (The person to whom an instrument is initially payable is determined by the intent
of the person signing as the issuer of the instrument.).
The second method through which a person becomes the holder of an instrument, negotiation, occurs when a
person other than the issuer transfers possession of the instrument to a person who becomes its holder. See N.C.
Gen. Stat. 25-3-201 (2009). Mortgage Lenders, as a party in possession of a promissory note made payable to
its order was the original holder of the Note. In order for Mortgage Lenders to negotiate the Note, thereby
conferring holder status upon a subsequent transferee, Mortgage Lenders was required to (1) indorse the Note
and (2) transfer possession of the Note to the intended transferee. N.C. Gen. Stat. 25-3-201(b) (2009) ([I]f an
instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and
its indorsement by the holder.).
Petitioner contends the stamps on the fifth page of the Note and the accompanying Allonge establish: (1)
Mortgage Lenders indorsed and negotiated the Note to Emax, (2) Emax indorsed and negotiated the Note to
Residential, and (3) Residential indorsed and negotiated the Note to Petitioner. Petitioner further contends that
because these stamps establish proper negotiation of the Note to Petitioner, and because Petitioner is currently
in possession of the Note, the trial court erred in concluding that Petitioner is not the holder of the Note.
Petitioner produced the original Note at the de novo foreclosure hearing through the testimony of Ms. Hirzel-
Roesch. However, [p]roduction of an original note at trial does not, in itself, establish that the note was
transferred to the party presenting the note with the purpose of giving that party the right to enforce the
instrument. In re Simpson, ___ N.C. App. at ___, 711 S.E.2d at 171. The critical question is whether the Note
was properly negotiated through the chain of purported holders such that Petitioner is the holder of the Note.
We begin by examining the first stamp on page five of the Note. The stamp reads:
PAY TO THE ORDER OF: EMAX FINANCIAL GROUP, LLC WITHOUT RECOURSE BY: MORTGAGE
LENDERS NETWORK USA, INC.
Petitioner contends this stamp represents Mortgage Lenders indorsement of the Note for purposes of
negotiating the Note to Emax. We cannot agree.
An indorsement is a signature, other than that of a signer or maker that alone or accompanied by other words
[may be] made on an instrument for the purpose of negotiating the instrument. N.C. Gen. Stat. 25-3-
204(a)(i) (2009). [R]egardless of the intent of the signer, a signature and its accompanying words is an
indorsement, unless the accompanying words, terms of the instrument, place of the signature, or other
circumstances unambiguously indicate that the signature was made for a purpose other than indorsement. N.C.
Gen. Stat. 25-3-204(a)(iii) (2009). North Carolina has adopted a broad definition of signature to include any
mark, symbol, or initials, which may be printed, stamped, or written. N.C. Gen. Stat. 25-1-201(b)(37) cmt.
37 (2009) (emphasis added) ([A] compete signature is not necessary. No catalog of possible situations can
be complete and the court must use common sense and commercial experience in passing upon these matters.).
Notwithstanding this broad definition, a symbol will constitute a signature only where the symbol was adopted
by the party with the present intent to authenticate the writing. Id. Moreover, an indorsment does not prove
itself, but must be established by proper testimony. Our Supreme Court has specifically held that a stamp
may constitute a valid indorsement, but only if the stamp is executed by a person having the intent and authority
to do so. Mayers v. McRimmon, 140 N.C. 640, 642, 53 S.E. 447, 448 (1906); Branch Banking & Trust Co. v.
Gill, 293 N.C. 164, 178, 237 S.E.2d 21, 29 (1977) (holding a stamp is sufficient to indorse a negotiable
instrument if done by a person authorized to indorse for the payee and with intent thereby to indorse).
At the foreclosure hearing, Petitioner did not introduce any evidence to establish that the stamp purportedly
indorsing and transferring the Note from Mortgage Lenders to Emax is an authorized signature. Petitioner
introduced only the Note itself, depicting, as the trial court found, a stamp on the Promissory Note stat[ing]
PAY TO THE ORDER OF: EMAX FINANCIAL GROUP, LLC, WITHOUT RECOURSE, BY: MORTGAGE
LENDERS NETWORK USA, INC. This stamp is unsigned. Petitioners sole witness, Ms. Hirzel-Roesch,
admitted she had no personal knowledge of the transfers made by the purported prior holders of the Note
beyond the information represented on the Note itself. Petitioner avers, however, that it was not required to
produce additional evidence to establish the stamps authenticity as an indorsement because a stamp falls within
the broad statutory definition of signature, and [t]he language and location of the indorsement clearly and
unambiguously show the stamp was made with the intention to transfer ownership of the note from Mortgage
Lenders [] to Emax.
While it is true that a stamp can serve as a valid indorsement, our Supreme Courts rulings in Mayers and
Branch Banking & Trust Co, see supra, clearly hold that the person placing the stamp must act with
authorization and with the intent to indorse the instrument. See supra. The stamp at issue reflects only the name
of an entity, Mortgage Lenders. Unlike the other stamps on the Note, no countersignature appears to indicate the
capacity in which the signor acted in executing the stamp on behalf of Mortgage Lenders. This is a troublesome
omission, as [a] corporation can only act through its agents, Anderson v. Am. Suburban Corp., 155 N.C. 131,
71 S.E. 221, 222 (1911). Mortgage Lenders liability on the Note turns on the authority (or lack thereof) of the
individual executing the stamp, a determination impossible for this Court to make based solely upon the face of
this stamp.
Petitioner contends that Respondent bears the burden of proving the stamp is an invalid signature. Petitioner
cites North Carolina General Statutes 25-3-308(a) as quoted in a recent decision of the United States
Bankruptcy Court for the Middle District of North Carolina. The Court, considering the question of what
evidence a subsequent holder of a promissory note must show to establish the authenticity of a prior
indorsement stated [i]f the validity of a signature is denied in the pleadings, the burden of establishing the
validity is on the person claiming validity, but the signature is presumed to be authentic. In re Vogler, 2009
WL 4113704 at 2 (Bankr. M.D.N.C. 2009) (citing N.C. Gen. Stat. 25-3-308(a)). Petitioner contends that in
light of the presumption set forth under North Carolina General Statutes 25-3-308(a), [t]he indorsement
stamp is presumed to be authentic, and that presumption cannot be overcome unless the Respondent presents
evidence to contest such authenticity.
We note initially that a decision of the Bankruptcy Court is not binding on this Court. However, Petitioners
contention raises an apparent conflict among our General Statutes. On one hand, North Carolina General
Statutes 45-21.16(d) clearly places the burden upon Petitioner to prove it is the holder of a valid debt; North
Carolina General Statutes 25-3-308(a), however, presumes authenticity of a signature, apparently placing the
burden upon Respondent to disprove the validity of an indorsement. We find Official Comment 1 under 25-3-
308 instructive. Official Comment 1 to North Carolina General Statutes 25-3-308 states [t]he question of the
burden of establishing the signature arises only when it has been put in issue by specific denial. N.C. Gen. Stat.
25-3-308(a) cmt. 1 (2009). Once put in issue, [t]he burden is on the party claiming under the signature to
prove that the signature is valid. Id.
Petitioner contends Respondent did not raise objection to the stamp at issue and therefore the burden remained
upon Respondent to introduce evidence invalidating the purported indorsement. Contrary to Petitioners
assertion, this Courts review of the transcript indicates that counsel for Respondent did in fact challenge the
stamps validity, stating: you have to have more than a stamp and we dont know who had authority [at
Mortgage Lenders] to authorize the sale of (unintelligible) to [Emax]. We conclude that this challenge by
Respondent before the trial court was a specific denial of the signatures authenticity, thereby placing the
burden upon Petitioner to put on evidence establishing authorization.
Furthermore, Comment 1 to North Carolina General Statutes 25-3-308 defines presumed to mean that until
some evidence is introduced which would support a finding that the signature is forged or unauthorized, the
plaintiff is not required to prove that it is valid. Id. In contrast to the stamp at issue, a handwritten signature
accompanies each of the other stamps on the Note introduced by Petitioner before the trial court. The stamp
purporting to transfer the Note from Residential to Petitioner, for example, bears the apparent handwritten
signature of J udy Faber, identified as Residentials vice president. This signature provides at least some
evidence that this stamp was executed with the requisite intent and authority. Whether a stamp bearing an
apparent handwritten signature is sufficient competent evidence of the purported indorsement, however, is not
before this Court as Respondent challenges the only stamp without a handwritten signature. The omission of a
handwritten signature with respect to the challenged stamp is competent evidence from which the trial court
could conclude that this particular stamp was not executed by an authorized individual and is therefore facially
invalid indorsement. Thus, even if Respondent had failed to object to the stamp, which it did not, the burden
properly remained upon Petitioner to prove its validity.
We further note it would be illogical to place this particular burden upon Respondent, as Petitioner is in
possession of the Note and is in the best position to prove or disprove the authenticity of the signatures included
thereon. See Bank of Statesville v. Blackwelder Furniture Co., 11 N.C. App. 530, 532, 181 S.E.2d 785, 786
(1971) (holding that the burden of establishing the authority behind an indorsement was properly placed on the
bank because as a purchaser of the instrument, [the bank] was in the best position to inform itself as to the
authority of the seller-indorser). Because we cannot presume the authenticity of this stamp as a signature, and
because Petitioner offered no evidence establishing its authenticity other than the Note itself, the stamp is a
valid signature only if it is self-authenticating. However, as our Supreme Court has explained:
It is well settled by the decisions of this Court, as well as of other courts, and by approved text-writers, that
words written on the back of a negotiable instrument, purporting to be an indorsement by which the instrument
was negotiated, do not prove themselves. The mere introduction of a note, payable to order, with words written
on the back thereof, purporting to be an indorsement by the payee, does not prove or tend to prove their
genuineness.
Whitman, Inc. v. York, 192 N.C. 87, 133 S.E. 427, 430 (1926) (citations omitted). In the case sub judice,
Petitioner has offered only a bare assertion that the challenged stamp is a facially valid indorsement. Absent an
allonge, testimony, or other evidence indicating that the stamp is an authorized signature, it would be imprudent
for this Court to accept Petitioners position. We hold that the facial invalidity of this stamp is competent
evidence from which the trial court could conclude the stamp is unsigned and fails to establish negotiation
from Mortgage Lenders to Emax. Consequently, Petitioner has failed to establish it is the holder of the Note,
and the trial court did not err in dismissing Petitioners summary foreclosure proceedings against Respondent.
For the foregoing reasons, the trial courts order is
Affirmed.
J udges THIGPEN and McCULLOUGH concur.
[1] Since rights sought to be enforced under [the provisions of the North Carolina General Statutes governing
foreclosure pursuant to a power of sale] are instituted by filing notice instead of a complaint and summons and
are prosecuted without regular pleadings, they are properly characterized as `special proceedings. Id. at 321,
325 S.E.2d at 2-3.
[2] The North Carolina Legislature added a fifth consideration, which expired 31 October 2010, requiring the
clerk to determine whether the underlying mortgage debt was a subprime home loan, and, if it was a subprime
loan, whether written notice of the foreclosure proceedings was provided at least 45 days prior to filing notice
of the foreclosure hearing with the superior court. See N.C. Gen. Stat. 45-102 (2009); In re Simpson, ___ N.C.
App. ___, ___, 711 S.E.2d 165, 169 (2011) (citing N.C. Gen. Stat. 45-21.16 (2009)).

Exhibit A - Page 1 of 2




EXHIBIT B



NO COA10-361
NORTH CAROLINA COURT OF APPEALS
Filed 3 May 2011
IM THE MATTER OF THE FORECLOSURE
BY'
DAVID A SIMPSON, P C
,
SUBSTITUTE
TRUSTEE, OF A DEED OF TRUST EXECUTED
BY REX T GILBERT, JR AMD DAMIELA L
GILBERT, HUSBAND AMD WIPE, DATED MAY
5, 2006 AMD RECORDED OM MAY 10, 2006,
IM BOOK 219 AT PAGE 53 OF THE HYDE
COUNTY PUBLIC REGISTRY
Hyde County
Mo 09 SP 09
Appeal by Respondents from order entered 18 August 2009
by Judge
Marvin K Blount, III zn Hyde County Superior Court Heard zn the
Court of Appeals 12 October 2010
Katherzne 8 Parker-Lowe, for respondent-appellants.
The Law Offzce of John 7 Bengamzn, Zr
,
P.A.
, by
John 7
Ben7amzn, Zr. and James 22. AThzte for petztzoner-appellee.
HUNTER, JR
,
Robert M
,
Judge
Respondents Rex T Gz. lbert, Jx and his wife Daniela L Gilbert,
appeal from the trial court's Order authorizing David A Szmpson,
P C
,
as Substitute Trustee, to proceed with foreclosure under a
power of sale in the Deed of Trust recorded zn Book 219 at Page 53
in the Hyde County Register of Deeds We reverse
I. Factual and Procedural History
On 5 Nay 2006, Respondent Rex T Gilbert, Zr executed an
adjustable rate note ("the Note"
) to refinance an existing mortgage
on his home According to the terms of the Mote, Nr Gilbert promi. sed
to
pay
a principal amount of $525, 000 00 plus interest to First
National Bank of Arizona The Mote was secured
by a Deed of Trust,
executed
by
Mr Gilbert and his wi. fe, Daniela L Gilbert, on real
property located at 134 Nest End Road, Ocracoke, North Carolina The
Deed of Trust identified First National Bank of Arizona as the lender
and Matthew J Ragaller of Casey, Grimsley & Ragaller, PLLC as the
trustee
The record reveals that, during 2008, Respondents ceased making
payments on the Note and made an unsuccessful attempt to negotiate
a modification of the loan On 9 March 2009, a Substitution of
Trustee was recorded in the Hyde County Regi. ster of Deeds, which
purports to remove Matthew Ragaller as the trustee of the Deed of
Trust and appoint his successor, David A Simpson, P C ("Substi. tute
Trustees) The Suhstrtutron of Trustee rdentrfred Deutsohe Bank
Trust Company Americas as Trustee for Residential Accredit Loans,
Inc Series 2006-QA6 ("Petiti. oner"
) as the holder of the Mote and
the lien created
by
the Deed of Trust
On 12 Narch 2009, the Substi. tute Trustee commenced this acti. on
by filing a Notice of Hearing on Foreclosure of Deed of Trust with
the Hyde County Clerk of Superior Court pursuant to secti. on 45-21 16
of our General Statutes M C Gen Stat 5
45-21 16 (2009) The
Mot, i.ce of Heax'ing stated, "the current holder of the foregoing Deed
of Trust, and of the debt secured. thereby, is Deutsche Bank Trust
Company Americas as Trustee for Residential Accredit Loans, Inc
Series 2006-QA6
In a letter dated 5 April 2009, Mr Gilbert purported to exercise
hi. s right to rescind the loan txansaction he entered into wi. th the
original lender, First National Bank of Axi. zona, pursuant to the
federal Truth in Lending Act, 15 U S C 5 1635 As justi. fi.cati. on
for his purported resci. ssion, Gi. lbert alleged that the Truth in
Lending Disclosure Statement provided by First National Bank of
Arizona failed to accurately pxovi. de all required materi. al
disclosures including, inter alia, the correct annual percentage
rate and payment schedule The Substitute Txustee responded with
a letter from GMAC ResCap, in which it denied any materi. al disclosure
errors were made and xefused to rescind the loan transaction
The foreclosure hearing was held on 2 June 2009 befoxe the Clerk
of Superior Court of Hyde County The Honorable Sharon G Sadler
entered an Order on 17 June 2009, pexmitting the Substi. tute Trustee
to proceed with the foreclosure In the Order, the Clerk
specifically found, inter a2. za, that Petitioner was the holdex of
the Mote and Deed of Trust that i.t sought to foreclose and the Note
eve. denced a valj d debt owed
by Mr Qj.lbert Respondents appealed
the Order to superj or court
The matter came on for a de novo hearjng on 18 August 2009 before
the Honorable Marvj. n K Blount, III, xn Hyde County Super j or Court
Durj. ng the hearj.
ng, the trj.al court admj. tted j.nto evj. dence a
certj. fxed
copy of the Mote and the Deed of Trust and two affxdavj. ts
attestjng to the valjdj.
ty
of Qj.lbert's indebtedness pursuant to the
Mote, and that Deutsche Bank Trust Company Amerjcas as Trustee for
Reszdentzal Accredit. t Loans, Inc Serj es 2006-QA6 j.s the current owner
and holder of the Note Addxtxonally, Petj. tj.oner introduced the
orj.gjnal Mote and Allonge for the trz. al court's j.nspectzon
Revj. ewzng the record before thxs Court, the Allonge contains
a serves of j.ndorsements eve. dencxng the alleged assignments of the
Mote, as follows
PAY TO THE ORDER OF
Fj.rst Nato. onal Bank of Nevada
WITHOUT RECOURSE BY
[Sj.gnature]
%MY HAWKIMS, ASSISTANT VICE PRESIDENT
FIRST NATIONAL BANK OF ARIZONA
Pay to the order of
RESIDENTIAL FUNDIMQ CORPORATION
Without Recourse
FIRST NATIONAL BANK OF NEVADA
By [Sjgnature]
Deutsche Bank Matj. onal Trust
Company, F/K/A Bankers Trust
Company of Californj. a, M A
as Custodj an as Attorney xn Fact
[Illegible Name and Titlel
PAY TO THE ORDER OF
Deutsche Bank Trust Company Americas as Trustee
WITHOUT RECOURSE
Residential Funding Corporation
BY [Signature]
Judy Faber, Vice President
Respondents made two arguments at the hearing Fi.rst,
Respondents argued that the debt evidenced
by the Mote no longer
existed, as Nr Gilbert had rescinded the transacti. on for the loan
with First National Bank of Arizona Petitioner objected to
Respondents' resci. ssion argument as being a defense in equity and,
as such, inadmi. ssible in a proceeding held pursuant to M C Gen Stat
5
45-21 16 The trial court agreed and refused to let Respondents'
expert witness testify as to alleged material errors in the Truth
in Lending Disclosure Statement, which Mr Gilbert alleged permitted
him the right to rescind the loan Second, Respondents argued. that
Peti. tioner had not produced suffici. ent evi. dence to establish that
Deutsche Bank Trust Company Americas as Trustee for Residenti. al
Accredi. t Loans, Inc Series 2006-QA6 was the holder of the Mote
Based on the preceding evidence, the trial court entered an
order on 18 August 2009 in which it found, izzt:er a2ia Mr Gilbert
executed the Mote and, with his wife, executed a Deed of Trust in
favor of Fi.rst National Bank of Arizona, secured by the real property
described in the Deed of Trust, a valid debt exists and is owed by
Gilbert't to Petitioner, Gilbert is in default under the Note and Deed
of Trust, proper notice of the foreclosure hearing was given to all
parties as required by
N C Gen Stat 5
45-21
16, Petitioner was
the current holder of the Note and the Deed of Trust The trial court
concluded as a matter of law that the requirements of N C Gen Stat
45-21 16 had been satisfied Based on these findings and
conclusion of law, the trial court authorized the Substitute Trustee
to proceed with the foreclosure Respondents timely entered notice
of appeal
II Analysis
A party seeking permission from the clerk of court to proceed
with a foreclosure pursuant to a power of sale contained in a deed
of trust must prove the following statutory req'uirements (1) the
party seeking foreclosure is the holder of a valid debt, (2) default
on the debt by the debtor, (3) the deed of trust provides the right
to foreclose, (4) proper notice was given to those parties entitled
to notice pursuant to section 45-21
16(b) N C Gen Stat
45-21 16 (d) (2009) The General Assembly added a fif th requirement,
which expired 31 October 2010 "that the underlying mortgage debt
is not a subprime loan,
"
or, if it is a subprime loan, "that the
pre-foreclosure notice under G S 45-102 was provided in all material
respects, and that the periods of time established by Article 11 of
this Chapter have elapsed[
]"
Id. The role of the clerk of court
z. s limited to making a determz. natz. on on the matters speci. fz.ed
by
section 45-21
16(d) See Nosier ex r'el. . Szmon v Druzd IIzlls Iazzd
Co
,
Inc.
,
199 M C
App 293, 295-96, 681 S E 2d 456, 458 (2009)
If the clerk's order is appealed to superior court, that court's de
zzovo bearzng is lzmz. ted to making a determznatzon. on the same z. ssues
as the clerk of court See zd.
The trial court's order authorizing the foreclosure to proceed
was a final judgment of the superior court, therefore, thz. s Court
bas jurisdz. ctz.on to hear tbe instant appeal M C Gen Stat
7A-27(b) (2009) Our standard of revz. ew for thz. s appeal, where tbe
trz. al court sat wz. thout a
jury,
z. s "'whether
competent evz. dence
exists to support the trial court's findings of fact and whether the
conclusions reached were proper in light of the fz.ndz. ngs
'"
In re
Adams, M C
App , ,
693 S E 2d 705, 708 (2010) (quoting In
re Foreclosure of Azalea Garden Bd. 6 Care, inc
,
140 M C
App 45,
50, 535 S E 2d 388, 392 (2000) )
We note the trial court classifz. ed multiple conclusions of law
as "fzndzngs of fact
"
We have previously recognized
"
tt] be
classi. fi.cation of a determination as either a findz.
ng
of fact or a
conclusion of law is admittedly di. ffz. cult
"
Zn xe IIelms, 127 M C
App 505, 510, 491 S E 2d 672, 675 (1997) Generally, "any
determinatz. on requiring the exercise of judgment or tbe applicatz. on
of legal prznciples i.s more properly classified a conclusion of law
"
Zd. (cztations omztted) Any determznatzon made by
"'logzcal
reasonzng from the evzdentzaxy facts,
'"
however,
"zs
more properly
classzfzed a fzndzng of fact
"
Zd. (quotzng guzck v. guzck, 305 M C
446, 452, 290 S E 2d 653, 657-58 (1982) )
When thzs Court, determines
that fzndzngs of fact and conclusxons of law have been mzslabeled
by the trzal couxt, we may reclasszfy them, whexe necessary, befoxe
applyzng our standard of revzew 1W. C. State Bar v. Key, 189 M C
App 80, 88, 658 S E 2d 493, 499 (2008) (cztzng
I'zz
re He2ms, 127 M C
App
at 510, 491 S E 2d at 675)
Lookzng to the txz. al court's Order, we conclude that the
followzng "fzndzngs of fact" are determinatzons that requzred the
applzcatzon of legal prznczples and are more approprzately
classzfzed as concluszons of law a valzd debt exzsts and zs owed
to Deutsche Bank Trust Company Amerzcas as Trustee for Reszdentzal
Accx'edzt Loans, Inc Serzes 2006-QA6, proper notxce was gzven to and
recezved
by all paxtz. es as requzred by
M C Gen Stat 5
45-21 16
and the Rules of Czvzl Procedure, Deutsche Bank Trust Company
Amexzcas as Trustee for Reszdentzal Accredz. t Loans, Inc Serzes
2006-QA6 zs the current owner and holder of the Mote and Deed of Trust
See Zn re Watts, 38 M C
App 90, 92, 247 S E 2d 427, 428 (1978)
(notzng upon the appeal of a M C Gen Stat 5
45-21 16 speczal
proceedzng the trzal court's conc2. uszons oS 2.aw zncluded the
exzstence of a valzd debt, the rzght to foreclose under the deed of
trust, and proper notice to the mortgagors), see a2so Conno22y v.
Potts, 63 M C
App
547, 549, 306 S E 2d 123, 124 (1983) (same) In
light of this reclassification of the trial court's findings of fact
and conclusions of law, we turn to the issues raised on appeal
1. Rescission of the Loan Transaction
Respondents raise several arguments alleging the trial court
erred
by refusing to consider their defense to the foreclosure
action, that the debt Peti. tioner sought to foreclose was not a valid
debt

a required element under the statute for foreclosure


by power
of sale See M C Qen Stat 5
45-21
16(d)(i) (requiring, inter
a2ia, that the clerk of court must determine that a valid debt
exists) Respondents contend the debt is not valid because Nr
Gilbert rescinded the transaction
by which he obtained the loan from
First Mational Bank of Arizona pursuant to the federal Truth in
Lending Act ("TILA"), 15 U S C gg 1601-1667f, and the Federal
Reserve Board's Regulation Z, 12 C F R 5 226
1-
58 We conclude
the trial court did not err
The admissibility of evidence in the tri. al 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
Sibyls v. Mayo, 162 M C
App 549, 561, 591 S H 2d 905, 913 (2004)
Here, we conclude the trial court properly refused to consider
Respondents' evidence of rescission Resci. ssion under the TILA is
an equitable remedy See Am. Nor tg. Network, Inc. v. Slzel ton, 486
F 3d 815, 819 (4th Cir 2007)
("'
[A] lthough the right to rescind
[under the TILA] i.s [statutory], it remains an. equz. table doctrine
subject to equz. table considerati. ons
'"
(quoting Brown v. Nat~l
Permanent Fed Sav. Z Ioan Ass'n, 683 P 2d 444, 447 (D C Cir 1982) )
Whi. le legal defenses to a foreclosure under a power of sale are
properly rai. sed in a hearing held pursuant to secti. on 45-21
16,
equz. table defenses are not Alatts, 38
H'
C
App
at 94, 247 S E 2d
at 429 As we have previously stated, a hearing under section
45-21 16 is "not intended to settle all matters in controversy
between mortgagor and mortgagee, nor was it designed to provide a
second procedure for invoking equz. table relief
"
Zd. A party
seeking to rai. se an equitable defense may do so in a separate civi. l
action brought in superior court under secti. on 45-21 34 Zd.
,
I C
Gen Stat 0
45-21 34 (2009) (stating that a party with a legal or
ec(uz. table interest in the subject property may apply
to a superior
court judge to enjoin a sale of the property upon legal or equitable
grounds) Accordingly, the trial court properly concluded
Respondents' argument that Mr Gilbert had rescinded the loan
transacti. on, invali. ding the debt Peti. tioner sought to foreclose, was
an equitable defense and not properly before the trial court
Respondents' argument i.s without merit
1 During the pendency of this action, the Gi. lberts filed a
2. Evidence that Petitioner was the Ownex and. Holdex
of Mr. Gilbert's Promissory Note
Respondents also argue the 'trial court erred in. ordering the
foreclosure to proceed, as Petitioner did not prove that it was the
holder of the Mote with the right to foreclose under the instrument
as requz. red
by
section. 45-21
16(d)(i) and (iii) We agree
A "foreclosure under a power of sale is not favored in the law
and its exercise will be watched with jealousy
"
In re Foreclosure
of Goforth Props.
i
Inc, 334 M C 369, 37S, 432 S E 2d 855, 859 (1993)
(citations and internal quotation marks omitted) That the party
seeking to foreclose on a promissory note is the holder of said note
is an. essential element of the action and the debtor is "entitled
to demand strict proof of this element
"
I&2.es v. Myers, 38 M C
App
525, 528, 248 S E 2d 385, 388 (1978)
For the trial court to find sufficient evidence that Petitioner
is the holder of a valid debt in accordance with section 45-21
16(d),
"this Court has determined that the following two questions must be
separate action against Deutsche Bank Trust Company Americas,
Residential Funding, LLC, GMAC Mortgage, LLC, and David A Simpson,
P C to litigate, inter alia, their TILA claim in Hyde County Superior
Court The defendants removed the action to federal court See
Gz, lbezt
v'
Deutsche Bank Trust Co. Americas, slip op
at 1,
4 09-CV-181-D, 2010 WL 2696763 (E D M C t'uly
7, 2010),
reconsideration denied, 2010 WL 4320460 (E D M C Oct 19, 2010)
Because the Gilberts' claim was filed more than three years after
the loan transaction was completed, the federal trial court dismissed
the action for failure to state a claim upon which relief could be
granted Id at
,
slip op at 5
answered in tbe affirmative (1)
'is
there suffici. ent competent
evidence of a valid debt~', and (2)
'is
there suffici. ent competent
evidence that [the party seeking to foreclose is] the holder[
]
of
tbe notes [that evidence that debt]
~'"
Adams, N C
App
at
693 S E 2d at 709 (quoting In re Cooke, 37 M C
App 575, 579, 246
S E 2d 801, 804-05
(1978)), see M C Gen Stat %
45-21
16(d) (2009)
(in order for the foreclosure to proceed, the clerk of court must
find.
,
znter a2. za, tbe existence of a "valid debt of which the party
seekzng to foreclose zs the holder,
"
and a "right to foreclose under
the instrument" securing the debt) (emphasis added)
Establishing that a party i.s tbe bolder of the note is essenti. al
to protect tbe debtor from the threat of multiple judgments on tbe
same note
If such proof were not required, the plaznti. ff
could negotiate tbe instrument to a third party
who would become a holder zn due course, bring
a suit upon the note in her own name and obtain
a judgment in ber favor Requiring proof
that tbe plaintiff is the bolder of tbe note at
tbe tzme of ber suit reduces tbe possibility of
such an inequitable occurrence
Izles, 38 M C
App
at 527, 248 S E 2d at 387
We have previously determined that the defini. tion of "holder"
under the Uni. form Commercial Code ("UCC"), as adopted by North
Carolina, controls the meaning of tbe term as it used zn secti. on
45-21 16 of our General Statutes for foreclosure acti. ons under a
power of sale See Connolly, 63 M C
App
at 550, 306 S H 2d at 125,
Adams, M C
App
at
,
693 S E 2d at 709 Oux Genexal Statutes
define the "holder" of an instxument as "[tjhe pexson in possession
of a. negoti. able instxument that i.s payable either to bearer or to
an identifi. ed person that is the person. in possession
"
N C Gen
Stat 5
25-1-201(b) (21) (2009), Econo-Travel Motor Hotel Corp.
v'
Taylor, 301 M C 200, 203, 271 S E 2d 54, 57 (1980) Furthermore,
a "'[p]erson.
'
means an indivi. dual, corporati. on, business trust,
estate, trust or any other legal or commercial entity
"
N C
Gen Stat h
25-1-201
(b) (27) (2009)
As addressed above, we conclude the trial court properly found
that a valid debt existed The remaining i.ssue before this Court
is whether there was competent evidence that Petiti. oner was the
holder of the Mote that evidences Nr Gi. lbert's debt
In suppoxt of its argument that it provided competent evi. dence
to support the txi.al court's findings, Petitioner fi.rst points to
its production of the original Mote wi. th the Allonge at the de novo
hearing, as well as its intxoduction into evi. dence true and accurate
copies of the Mote and Allonge Petitioner asserts this evidence
"plainly evidences the transfers" of the Note to Petitioner Ne
cannot agxee
Under the UCC, as adopted by
Moxth Carolina, "[ajn instrument
is txansfexred when it is delivered by a person other than its issuer
for the purpose of giving to the person receiving delivery the right
to enforce the instrument
"
M C Gen Stat 5
25-3-203(a) (2009)
Production of an original note at trial does not, in itself, establi. sh
that the note was transferred to the party presenting the note with
the purpose of giving that party the right to enforce the instrument,
as demonstrated zn ConnoZZy, 63 M C
App
at 551, 306 S E 2d at 125,
and Smathers v. Bmathers, 34 M C
App 724, 726, 239 S E 2d 637, 638
(1977) (holding that despite evidence of voluntary transfer of
promissory notes and the plaintiff's possession thereof, the
plaintiff was not the holder of the note under the UCC as the notes
were not drawn.
,
issued, or indorsed to her, to bearer, or in blank
"[T]he plaint'. ff testified to some of the circumstances under which
she obtained possession of the notes, but the trial court made no
findings of fact wi. th respect thereto
")
In CoxznoZZy, determining who had possession of the note became
the critical question for the foreclosure proceeding 63 M C
App
at 551, 306 S H 2d at 125 Several years prior to the foreclosure
proceedings at issue in CoznoZZy, the petitioners obtained a loan
from a bank and pledged as collateral a promissory note that was
payable to the petitioners
by assigning and delivering the note to
the bank Id at 549, 306 S H 2d at 124 After obtaining their
loan, the petitioners sought to foreclose on the promissory note and
deed of trust, which was in the bank's possession, but were denied
at the special proceeding before the clerk of court Xd at 548,
306 S E 2d at 124 Tbe petj tj.oners appealed the decxsxon to super&or
court Xd. Dura.
ng tbe de novo
bearding,
the petj. tj.oners testz. fj.ed
their loan to the bank bad been paj. d, but "they had left tbe
[]
note
at the bank, for securj.
ty purposes
"
Zd at 551, 306 S E 2d at 125
The petj. txoners, however, "introduced tbe orjgj.nals of tbe note and
deed. of trust" durj. ng the hearj.
ng 1d. Tbe trz. al court found the
bank was jn possessj. on of the note and concluded, as a matter of law,
tbe petxtj. oners were not tbe holders of the note at the j.nstxtutxon
of tbe foreclosure proceedings, the foreclosure was agar. n denj ed
Connolly, 63 M C
App
at 550, 306 S E 2d at 124-25 On appeal, tbj. s
Court concluded that despite the fact that the party seekj.
ng
foreclosure jntroduced tbe orjgj. nal note at the tjme of the de novo
hearjng, the trz. al court's fxndjngs of fact dz. d not address whether
the pets. tj.oners were xn possess'. on of the note at the time of the
trial, tbe trial court's
judgment was vacated and remanded Zd at
551, 306 S E 2d at 125-26
Sjmj. larly, bere, the trial court's fj.ndxngs of fact do not
address who bad possessjon of Mr Gj lbert's note at the tame of the
de novo
bearding
Wz. thout a determxnatj. on of wbo bas pbysj cal
possessj. on of the Mote, the trj.al court cannot determz. ne, under the
UCC, the entity that xs the holder of the Mote See M C Gen Stat
25-1-201(b)
(21) (defxnxng "bolder" as "the
person zn possession
of a negotiable instrument that is payable either to bearer or to
an identified person that is the person zn possession") (emphasis
added), Connolly, 63 N C
App
at 550, 306 S H 2d at 125
("
It is the
fact of possession which is significant in determining whether a
person is a holder, and the ahsence of possession defeats that
status
")
(emphasis added) Accordingly, the trial court's
findings of fact do not support the conclusion of law that Petitioner
is the holder of Nr Gilbert's note
Assuming arguendo that production of the Mote was evidence of
a transfer of the Note pursuant to the UCC and that Petitioner was
zn possession of the Mote, this is not sufficient evidence that
Petitioner is the "holder"
of the Mote As di. scussed zn detail
below, the Mote was not indorsed to Petitioner or to bearer, a
prerequisite to confer upon Petitioner the status of holder under
the UCC See M C Gen Stat 5 25-1-201(b)(21) (requiring that, to
be a holder, a person must be in possession of the note payable to
bearer or to the person in possession of the note)
"'
[Nj ere
possession' of a, note
by a party to whom the note has neither been
indorsed nor made payable
'does not suffice to prove ownership or
holder status
'"
Adams, M C
App
at
,
693 S E 2d at 710
(quoting Econo-Travel Motor Hotel Corp.
,
301 M C at 203, 271 S E 2d
at 57)
Petiti. oner acknowledges that following the signing of the Mote
by
Mr Gilbert, the Mote was sequentially assigned to several
entities, as indi. cated by the seri. es of indorsements on the Allonge,
reprinted above Respondents argue these indorsements present two
problems First, Respondents state that Petitioner did not provide
any evidence to establi. sh that Deutsche Bank Mati. onal Trust Company
had the authority, as the attorney-in-fact for Fi.rst Mati. onal Bank
of Nevada, to assign the Note to Resi. dential Funding Corporation in
the second assignment Respondents make no argument

and ci.te no
authority to establi. sh

that such evi. dence is needed Therefore,


we do not address the merits of thi s alleged error and deem it
abandoned See M C R
App
P 28 (6) (2011)
("
Issues not presented
in a party's bri. ef, or in support of whi. ch no reason or argument i.s
stated, wi. ll be taken as abandoned
")
Second, Respondents argue Petitioner has not offered suffi. cient
evidence that Deutsche Bank Trust Company Americas as Trustee for
Residential Accredit Loans, Inc Series 2006-QA6 was the holder of
the Mote and, thus, the party enti. tied to proceed with the foreclosure
actj.on Ne agree
Respondents note the third and final assignment on the Allonge
was made to "Deutsche Bank Trust Company Americas as Trustee,
"
whi. ch
is not the party asserting a security interest in Respondents'
property, thi. s action was brought by
Deutsche Bank Trust Company
Americas as Trustee for Residential Accredit Loans, Inc Seri.es
2006-QA6, tbe enti.
ty
the trial court found to be the owner and holder
of the Mote Section 3-110 of tbe UCC, as codified in our Genexal
Statutes, states in pertinent part
For the purpose of determining the holder of an
instxument, the following rules
apply
(2) If an instxument is payable to (i) a trust,
an estate, oz a person described as trustee or
representative of a txust or estate, the
instrument is payab2e to the trustee, tbe
representative, ox a successor of either,
whether or not tbe
beneficiary
ox estate is also
named
M C Gen Stat 5
25-3-110
(c) (2009) (emphasis added)
Additionally, the official comments to this section of the UCC state,
zn part,
"This provi. sion merely determines who can deal with an
instxument as a holdex It does not determine ownership of the
instrument or its proceeds
"
I'd
5
25-3-110, Official Comment. 3
In the present case, tbe Mote is clearly indoxsed "PAY
TO THE
ORDER OF Deutsche Bank Tx'ust
Company Americas as Trustee
"
Thus,
pursuant to section 25-3-110(c)
(2), the Note is payable to Deutsche
Bank Trust Company Americas as Trustee See Zd Because tbe
indorsement does not identi
fy Petitioner and zs not indorsed in blank
or to bearer, i.t cannot be competent evidence that Peti. tioner is the
holder of the Note See M C Gen Stat 5
25-1-201(b) (21) (defining
"holder" as "[t]he person in possession of a negotiable instrument
that is payable either to bearer or to an identified person that is
the person zn possession"), Econo-Travel Motor Hotel Corp.
,
301 M C
at 204, 271 S H 2d at 57 (concluding that where the defendants
produced a
copy
of the note indorsed to an entity other than the
plaintiff, the "defendants established that plaintiff was not the
owner or holder of the note")
In addition to the Mote and Allonge, Petitioner points to two
affidavits provided by
two GNAC Mortgage employees as further
evidence that the trial court's findings are based on suffi. cient
competent evi. dence Again, we disagree
The first affidavit is an Affidavit of Indebtedness
by Jeffrey
Stephan
("
Stephan"
)
'
In his affidavit, Stephan averred, inter
2 This Court finds troubling that GNAC Mortgage, LLC was
recently found to have submitted a false affidavit by Signing Officer
Jeffrey Stephan zn a motion for summary judgment against a mortgagor
in the United States District Court of Maine Judge John H Rich,
III concluded that GNAC Mortgage submitted Stephan' s false affidavit
in bad faith and levi. ed sanctions against GNAC Mortgage, stating
[T] he attestation to the Stephan affidavit was
not, in fact, true, that is, Stephan did not know
personally that all of the facts stated in the
affidavit were true GNAC [Nortgage] was
on notice that the conduct at issue here was
unacceptable to the courts, which rely on sworn
affidavits as admissible evidence in connection.
with motions for summary judgment In 2006, an
identical jurat signed under i.denti. cal
circumstances resulted in the imposition. of
sanctions against GNAC [Mortgage] in Florida
-20-
aZia, he was a limited signing officer for GMAC Mortgage, the
sub-servicer of Mr Gilbert's loan, and as such, was "familiar with
tbe books and records of [GNAC Mortgage1, specifically payments made
pursuant to the Mote and Deed of Trust
"
Accordingly, Stephan
testifi. ed as to the principal amount of Mr Gilbert's loan and to
his history of loan payments Stephan further testi. fied that after
the Mote and Deed of Trust were executed they were "delivered" to
the original lender, Pi.rst Mational Bank of Arizona, tbe original
lender then "assigned and transferred all of its right, title and
interest" to First National Bank of Nevada, which, in turn, assigned
all its rights, title, and interest in the instruments to Residential
Funding Corporation The final assignment to which Stephan averred
is an assignment and securitizati. on of the Mote and Deed of Trust
from Residential Funding Corporation to "Deutsche Bank Trust Company
Americas as Trustee
"
Stephan then makes the conclusory statement,
"Deutsche Bank Trust Company Americas as Trustee for Residential
Accredit Loans, Inc Series 2006-QA6 is the current owner and bolder
of the Mote and Deed of Trust described herein
Whether Deutsche Bank Trust Company Americas as Trustee for
Residential Accredit Loans, Inc Series 2006-QA6 is the owner and
holder of the Mote and Deed of Trust is a legal conclusion that is
Zames v. V S. Bank Mat. Ass~n, 272 P R D 47, 48 (D Me 2011)
to be detexmined by a court of law on the basis of factual allegations
As such, we disregard Stephan's conclusion as to the identity of the
"owner and holder" of the instruments See Lemon v Combs, 164 M C
App
615, 622, 596 S H 2d 344, 349 (2004) {"'Statements in affidavits
as to opinion, belief, or conclusions of law are of no effect
(cLuoting 3 Am Jur 2d, Affidavits 5 13 (2002))), see a2so Speedway
Motorsports Inter Ltd. v Bronwen Energy Trading, Ltd.
,
M C
App
n 2, S 8 2d
,
n 2, slip op at 12 n 2, Mo 09-1451
(Feb 15, 2011) {rejecting a party's contention that this Court must
accept as true all statements found xn the affidavits in the xecord,
stating,
"our standard of review does not req'uvre that we accept a
witness' chaxacterxzatxon of what 'the facts' mean") While Stephan
referred to a Pooling and Servicing Agxeement ("PSA") that allegedly
governs the secuxxtxzation of the Note to Deutsche Bank Trust Company
Americas as Trustee, the PSA was not included xn the recoxd and will
not be considered by this Court See M C R
App
P 9(a) (2011)
{"
In appeals
fx'om the trial division of the General Court of Justice,
review is solely upon the record on appeal, the verbatim transcript
of proceedings, xf one is designated, and any other items filed
pursuant to this Rule 9
")
The record, xs void of any evidence the
Mote was assigned and securitized to a trust
We also note that Stephan alleged no facts as to who possesses
Mr Gilbert's note, other than his averment that the Note was
"delivered" to the original lender, First National Bank of Arizona
Stephan referred to a statement made
by counsel for GNAC Mortgage
that the original Mote "would be brought to the foreclosure hearing,
"
but he did not provide any facts from which the trial court could
determine who has possession of the Mote As demonstrated
by
Conno22y, discussed above, production of a note at trial is not
conclusive evidence of possession 63 M C
App
at 551, 306 S E 2d
at 125 Thus, we conclude Stephan's affidavit is not competent
evidence to support the trial court's conclusion that Deutsche Bank
Trust Company Americas as Trustee fox Residential Accredit Loans,
Inc Series 2006-QA6 is the owner and holder of Nr Gilbert's note
Petitioner also provided the affidavit of Scott Zeitz
("Zeitz"), who alleged in his affidavit to be a litigation analyst
for GMAC Plortgage Zeitz's basis for his affidavit testimony is that
he works with "the documents that relate to account histories and
account balances of particular loans" and that he is familiar with
Mr Gilbert's account Accordingly, Zeitz testified to the details
of Mr Gilbert's loan and the terms of the Note Zeitz's affidavit,
substantially similar to the affidavit of Jeffrey Stephan, also
averred to the transfer of the Mote and Deed of Trust through the
series of entities indicated on the Allonge, stating in part
Residential Funding Corporation sold, assigned.
and transferred all of its right, title and
interest in and to the Mote and Deed. of Trust
-23-
to Deutsche Bank Trust Company Americas as
Trustee for Residential Accredzt Loans, Inc
Series 2006 QA6 Thzs zs ref1ected on the
Allonge to tlze Note, a true and accurate
copy
of wlzzclz zs attaclzed and incorporated hereto as
EXHIBIT 5 (Emphasis added
)
This statement is factually zncorrect, the Allonge in the record
contains no indorsement to Deutsche Bank Trust Company Americas as
Trustee for Residential Accredit Loans, Inc Ser zes 2006-QA6 Zeztz
further stated that "Deutsche Bank Trust Company Amerz. cas as Trustee
for Residential Accredit Loans, Inc Series 2006-QA6 is tbe current
owner and holder of the Note and Deed of Trust
"
This statement is
a legal conclusion postured as an allegation. of fact and as such will
not be considered
by
this Court See Lemon, 164 M C
App
at 622,
596 S E 2d at 349
Unlzke Jeffrey Stephan, Zeitz stated that Deutsche Bank Trust
Company Americas as Trustee for Resz. dential Accredit Loans, Inc
Series 2006-QA6 "has
possession. of the orzginal Mote and Deed. of
Trust
"
We note, however, that "[wl hen an affiant makes a conclusion
of fact, z t must appear that the af fiant had an opportunity to observe
and dzd observe matters about which he or she testifies
"
Lemon,
164 N C
App
at 622, 596 S E 2d at 348-49
(c(uoting 3 Am Jur 2d
Affzdav'zts
5 13) (znternal quotation marks omitted) Moreover,
[tj he personal knowledge of facts asserted. zn
an affidavit is not presumed from a mere
positive averment of facts but rather the court
should be shown how the affiant knew or could
have known. such facts and zf there zs no evz. dence
from which an znference of personal knowledge
can be drawn, then zt zs presumed that such does
not exzst
Xd. at 622-23, 596 S E 2d at 349 (quotzng 3 Am Jur 2d Affzdavzts
5 14, czted wztl2 approval. zn Currztuck Assoczates Reszdentzal 5''sizz@
v'
tIol2owell, 170 M C
App
399, 403-04, 612 S 8 2d 386, 389 (2005))
Thus, wbzle Zeztz concluded as fact that Deutsche Bank Trust Company
Amerz. cas as Trustee for Reszdentzal Accredzt Loans, Inc Serves
2006-QA6 bas possesszon of the Mote, hz. s affzdavzt provides no basz. s
upon which we can conclude he had personal knowledge of this alleged
fact Because of these defzczencz. es, we conclude that nez. ther the
affzdavzt of Jeffrey Stephan nor tbe affzdavzt of Scott Zeztz zs
competent evzdence to support tbe trzal court' s fzndzng that Deutsche
Bank Trust Company Amerzcas as Trustee for Reszdentzal Accredzt
Loans, Inc Serzes 2006-QA6 zs tbe owner and holder of Nr Gzlbert's
note
XIl. Conclusion
We conclude tbe record zs lackzng of competent evzdence
suffzczent to support that Petztzoner zs tbe owner and holder of Nr
Gzlbert's note and deed of trust The trz. al court, erred zn
permzttzng tbe Substztute Trustee to proceed wztb foreclosure
proceedzngs and zts order zs
-25-
Reversed
Judges MCGEE and BEASLEY concur
Exhibit A - Page 1 of 2



EXHIBIT C


Exhibit A - Page 2 of 2