Matter of Ruepp

321 S.E.2d 517 (1984)

In the Matter of the Foreclosure of the Deed of Trust of Ferdinand RUEPP and Billie Lee Ruepp, Grantors, TO Larry W. Byrd, Trustee, As recorded in Book 4230 at Page 48 of the Mecklenburg Public Registry. See Appointment of Substitute Trustee as recorded in Book 4663 at Page 895 of the Mecklenburg Public Registry.

No. 8326SC1187.

Court of Appeals of North Carolina.

November 6, 1984.

*518 Manning, Fulton & Skinner by Charles L. Fulton, Raleigh, and E. Fred McPhail, Charlotte, for Columbus Mut. Life Ins. Co., petitioner-appellant.

Kenneth W. Parsons, Charlotte, for Gary H. Watts Realty Co., respondent-appellee.

*519 EAGLES, Judge.

This appeal raises an issue of first impression: Whether the foreclosure of a subordinate deed of trust activates the due on sale clause of the standard FNMA/FHLMC Uniform Instrument. We hold that it does not.

Petitioner first assigns as error the trial court's conclusion of law that petitioner elected to use the FNMA/FHLMC standard instrument as the original deed of trust and that petitioner thereby impliedly waived the acceleration provisions of paragraph 17. We find no error.

Petitioner argues that there was no evidence before the trial court upon which it could conclude that petitioner elected to use the FNMA/FHLMC standard instrument as the original deed of trust. The only evidence presented at the trial de novo was contained in the stipulations which make no reference to the manner in which the language of the original deed of trust was agreed upon, nor to the manner in which the printed form used was selected. We note, however, that the trial court is always permitted to incorporate matters of such common knowledge that they are subject to "judicial notice." See, generally, 1 Stansbury, North Carolina Evidence, Section 11 (Brandis Ed.1982). It is common knowledge that institutional lenders customarily dictate the form and language of the loan documentation to be used. Further, even if the conclusion was error, the error was harmless and petitioner has shown no prejudice.

Petitioner next assigns as error the trial court's refusal to conclude that an event of default existed under the original deed of trust, and that petitioner was entitled to accelerate the payment due. We find no error.

We agree that this assignment of error appears to present an issue of first impression in North Carolina: Whether the foreclosure of a subordinate deed of trust and the resulting conveyance to a party other than the original borrower amounts to a sale of "all or any part of the property or an interest therein ... by Borrower without Lender's prior written Consent" so as to constitute default under the senior deed of trust containing the FNMA/FHLMC due on sale clause. We hold that such a foreclosure is not a default under the FNMA/FHLMC due on sale cause.

Our appellate courts have upheld due on sale clauses containing acceleration provisions. Crockett v. Savings & Loan Assoc., 289 N.C. 620, 224 S.E.2d 580 (1976); In Re Foreclosure of Bonder, 306 N.C. 451, 293 S.E.2d 798 (1982); and In Re Foreclosure of Taylor, 60 N.C.App. 134, 298 S.E.2d 163 (1982). None of these cases address the narrow issue now before us.

An examination of the due on sale clause in question shows on its face that the type of subordinate lien foreclosed on in the instant case is expressly permitted. We think that where a subordinate lien is expressly permitted, the lender should reasonably anticipate that the borrower could default and the second lien could be foreclosed upon. Where a subordinate lien is expressly allowed, the trial court was correct in concluding as a matter of law that the lender impliedly waived the acceleration provisions of paragraph 17 upon the later exercise of the power of sale contained in the subordinate, second deed of trust. Petitioner, as assignee of the lender, is bound by the express terms of the instruments.

We note that the sale was not by the borrower. The sale and conveyance was ordered by the Assistant Clerk of Superior Court, Mecklenburg County and carried out by the substitute trustee.

We hold that the conveyance of the real property in question pursuant to the power of sale in the second deed of trust does not constitute an event of default under the terms of the FNMA/FHLMC due on sale clause contained in the original deed of trust sought to be foreclosed herein and does not entitle the petitioner to *520 accelerate payment of the outstanding balance. The order of the Superior Court is affirmed. Petitioner's other assignments of error are without merit.

Affirmed.

ARNOLD and WHICHARD, JJ., concur.