NC Appeals Court: Foreclosed Property Owner's Affidavit Expressing Subjective Belief Of Collateral Value May Be Enough To Stiff-Arm Bankster Seeking To Score Deficiency Judgment
- It shouldn’t be that hard to get a deficiency judgment in North Carolina. To start with, unlike some other states, North Carolina does not have a “one-action” rule and allows lenders to recover deficiencies on almost all commercial and residential loans. And the facts are typically straightforward for suit– the lender acquired the property at a public foreclosure sale and now the borrower owes the remaining balance of the debt. It should be simple to get a judgment, right?
Not so fast, says the North Carolina Court of Appeals. In a decision issued on July 7, 2015 (United Community Bank v. Wolfe), the Court handed borrowers with North Carolina loans a powerful tool to ensure that, absent advance planning, lenders will almost always have to go through a full jury trial in order to obtain a deficiency judgment. And that thought can be a mighty strong deterrent for a lender pursuing an otherwise collectible deficiency.
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What’s unique about the UCB decision is that it allows borrowers to avoid the lender’s summary judgment motion based on nothing more than a borrower’s subjective belief about the value of the property.
The UCB court analyzed a long line of North Carolina decisions which held that an owner of real estate is presumed to be competent to give an opinion as to the value of the property. Those cases led the court to accept the borrower’s affidavit as sufficient to overcome summary judgment, even though the affidavit said nothing more than that borrower “believes the property was at the time of the foreclosure sale worth the amount of the debt it secured.” Period. End of story.
Providing that one sentence biased opinion (with no other evidence of value at all) is now sufficient for a borrower to avoid summary judgment and ensure a jury trial. Lenders better get used to reading that sentence because it’s about to become standard in every borrower affidavit contesting summary judgment in a deficiency action.
For the court ruling, see United Community Bank v. Wolfe, No. COA14-1309 (N.C. App. July 7, 2015).
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