Brock & Scott COVID-19 Alert - Procedural Impacts on the North Carolina Foreclosure Process

• By: ALFN
• On: 04/16/2020 18:04:59
• In: COVID-19

In response to the COVID-19 pandemic sweeping through America and the rest of the world, the State of North Carolina has undertaken a multitude of rolling, continually evolving initiatives at the state and local level to ensure the safety and welfare of its citizens are protected to the greatest extent possible.  Specifically, and most recently with respect to the North Carolina Judicial Branch, Chief Justice of the Supreme Court of North Carolina Cheri Beasley issued a series of Orders which extended filing deadlines, which otherwise would have expired on or after March 16, 2020, until June 1, 2020 and required the scheduling/rescheduling of Court proceedings – unless they are for the purpose of emergency relief, necessary to preserve due process or can be conducted remotely – until at least June 1, 2020, in conjunction with North Carolina Governor Roy Cooper's Executive Orders 117 and 121 prohibiting “Mass Gatherings” and issuing a “Stay and Home” Directive to North Carolinians.[1]
 
Purposefully, Chief Justice Beasley's Orders align with the State's goals to combat the COVID-19 pandemic as it poses a health and safety risk to all 100 counties in North Carolina.  The Orders, citing authority under NCGS §7A-39(b)(1)-(2), issue Emergency Directives aimed at stopping the spread of COVID-19 while maintaining the sanctity of the day-to-day judicial functions of the North Carolina Court System.  Chief Justice Beasley's Emergency Directives adopt a pragmatic approach to balance continuity of the court system while aiming to reduce risks inherent to the COVID-19 pandemic by striving to restrict gatherings of ten (10) or more people in one setting at courthouses and prohibiting individuals with a recent history of foreign travel, who have been exposed to or diagnosed with COVID-19 and/or who have exhibited specific symptoms tied to the COVID-19 virus from entering courthouses.  Procedurally, Chief Justice Beasley's Orders encourage remote hearings where feasible and further extend the filing deadlines for all Court proceedings. from the previous extension of April 17, 2020, to June 1, 2020. 

In North Carolina, most foreclosure proceedings are conducted under Chapter 45 of the North Carolina General Statutes through a quasi-judicial power of sale process with a default hearing before the Clerk of Superior Court in the specific county with a public sale at the prescribed courthouse location.  Consequently, the power of sale foreclosure proceeding has statutorily defined deadlines throughout the statutory process. 
 
Chief Justice Beasley's Orders do not prohibit new filings of foreclosure proceedings, also known as “First Legal,” as courthouses do remain open, in varying capacities, to accepting new filings.[2]  That said, it should be noted that any new filings should be viewed under the spectrum of the Federal Coronavirus Aid, Relief, and Economic Security (CARES) Act to determine applicability for filing First Legal.[3]  For foreclosure matters that have achieved First Legal, but no Clerk hearing had taken place, Chief Justice Beasley's Orders effectively ensured all hearings under N.C.G.S. § 45-21.16 were continued until at least June 1, 2020.[4]  In North Carolina, the hearings under N.C.G.S. § 45-21.16 cannot feasibly be conducted on a remote basis because the administrability for obtaining all parties' consent would create an undue burden on the Court and its day-to-day operations under Chief Justice Beasley's Orders.  Therefore, continuing the hearings until after May 31, 2020, in compliance with all statutory notice provisions under N.C.G.S. § 45-21.16, is the appropriate course of action and will prevent against potential unnecessary collateral litigation.  
 
With respect to foreclosure sales under Chapter 45 of the North Carolina General Statutes, we believe those should fall into Court proceedings as set forth under Chief Justice Beasley's Orders.  A foreclosure sale is a process specifically ordered by the Clerk of Superior Court at the hearing under N.C.G.S. § 45-21.16.  A foreclosure sale is open to the general public and in practicality can create situations at the courthouse whereby there is a gathering of ten (10) or more people.  Therefore, pursuant to the spirit if not also the letter of Chief Justice Beasley's Orders, we believe a postponement of any foreclosure sale scheduled prior to June 1, 2020 is the appropriate measure under N.C.G.S. § 45-21.21.  Under N.C.G.S. § 45-21.21, a foreclosure sale can be postponed for up to ninety (90) days before a new or amended Notice of Sale is required, which among other things would incur additional publication costs.  It is important to maintain awareness of the statutory 90-day timeframe under N.C.G.S. § 45-21.21 as it is juxtaposed to the initial sale date and adherence to Chief Justice Beasley's Orders in order to potentially mitigate additional publication costs caused by an amended Notice of Sale. 
 
Perspective and Proactivity.
Ultimately, reliance upon local counsel in North Carolina is paramount.  Continual proactive communication with local counsel will bolster successful compliance of statutory directives and the Chief Justice's Emergency Directives embodied in her COVID-19 related Orders.  As mentioned earlier, the COVID-19 pandemic has created a need for ever evolving adaptability and accepting that change is very likely and almost inevitable.  Therefore, understanding the intent of Chief Justice Beasley's Orders and being prepared for any action in furtherance of those goals will help you effectively navigate through these uncertain times.  Please reach out to Jeremy Wilkins and Alan Presel, who are both copied here, or myself for any questions or related requests.
  
[1] See Order of the North Carolina Supreme Court Chief Justice Cheri Beasley March 13, 2020.  https://www.nccourts.gov/assets/news-uploads/COVID-19-13-March-2020-7A-39%28b%29%282%29-Order_0.pdf?sCe0Me_YaLJBPjYl4doVvi4r_4Sm1Zbn=
 
See Order of the North Carolina Supreme Court Chief Justice Cheri Beasley March 19, 2020.  https://www.nccourts.gov/assets/news-uploads/COVID-19%20-%2019%20March%202020%20-%207A-39%28b%29%281%29%20Order%20%28FINAL%29.pdf?bba2.JnZLu2WZ0VL0ekFushCeYUdih3X
 
See Order of the North Carolina Supreme Court Chief Justice Cheri Beasley April 2, 2020.  https://www.nccourts.gov/assets/news-uploads/2%20April%202020%20-%207A-39%28b%29%282%29%20Order%20%28Final%29.pdf?UqRJH9wO2z3oEU4GW3Eg9rxRuFvTlixn
 
See Order of the North Carolina Supreme Court Chief Justice Cheri Beasley April 13, 2020.  https://www.nccourts.gov/assets/news-uploads/COVID-19%20-%2013%20April%202020%20-%207A-39%28b%29%281%29%20Order%20%28FINAL%29.pdf?.u_u1lNIMPsEI6sKza5B6f7ZiZRcBH.D
 
2 All 100 Clerks of Superior Court have authority to create local rules within their county which include governing the times courthouses remain open for hours of operation throughout the course of the day.  Therefore, a case by case approach is best advised here by local counsel. 
 
3 CARES Act §4022-§4024  – Foreclosure and Eviction Moratorium and Forbearance for “Federally Backed mortgage loans.”  Each investor and servicer should work together with local counsel to ensure compliance to these provisions of the CARES Act.
 
4 Local counsel should take necessary measures to continue all matters by filing the appropriate documentation with the Clerk of Court and providing notice to all statutory mandated parties.