In an unpublished opinion, the North Carolina Court of Appeals affirmed the order of the Superior Court authorizing the foreclosure sale because the respondent (borrower) failed to raise arguments before the Superior Court that he sought to raise on appealIn Re Foreclosure of Herring, No. COA14-1159 (N.C. Ct. App., 1 September, 2015).

Respondent argued on appeal: (1) that the foreclosure proceeding was not brought by the actual trustee as the only real party in interest, as required by Rule 17 of the Rules of Civil Procedure; and, (2) that he received inadequate notice of the foreclosure hearing.  As is the usual practice, the creditor had substituted the original trustee, and it was the substitute trustees who had initiated the foreclosure proceedings.  The respondent had attended and participated in the foreclosure hearing before the Clerk.

In rejecting the first ground for appeal the Court noted “[a]lthough Rule 17 requires that an action be brought by the real party in interest, “the real party in interest provisions of Rule 17 are for the parties’ benefit and may be waived if no objection is raised[.]” J & B Slurry Seal Co. v. Mid-South Aviation, Inc., 88 N.C. App. 1, 16, 362 S.E.2d 812, 822 (1987).”  The Court observed that respondent failed to raise the issue before the Superior Court; however, the Court also noted that the substitute trustees had been properly substituted and were the ones who had brought the action.

In rejecting the second ground, the Court again observed that respondent failed to raise the issue  before the Superior Court and the Court would not consider the argument for the first time on appeal, citing Westminster Homes, Inc. v. Town of Cary Zoning Bd. of Adjustment, 354 N.C. 298, 309, 554 S.E.2d 634, 641 (2001). Moreover, the Court noted that even if the issue was properly raised “[i]t is well-settled that a party entitled to notice may waive notice . . . ,” by being “present at the hearing and participat[ing] in it.” In re Foreclosure of Norton, 41 N.C. App. 529, 531, 255 S.E.2d 287, 289 (1979).

While not breaking any new ground in the jurisprudence of foreclosure law, this opinion serves two valuable purposes.  Firstly, it affirms that foreclosure proceedings, even though not full-blown civil actions, are still accorded the same degree of solemnity as other actions and all applicable procedural rules will be applied with equal force.  Somewhat ironically, we have observed a trend in the Court of Appeals to insist on treating foreclosure special proceedings more like other civil actions, and apply the Rules of Civil Procedure to them.  In this instance, this reasoning favored the creditor, punishing the respondent borrower for his failure to follow the Rules.  We remain concerned, however, in the event the Court were to decide that all the Rules apply to a special proceeding foreclosure, because that would open the door to applying the discovery rules, the rules governing dismissal and summary judgment.  Secondly, it is a reminder to all litigants that they must raise all legitimate claims and defenses at the trial stage of legal proceedings; otherwise the Court of Appeals will not entertain the argument for the first time on appeal.