N.C. Court of Appeals: In re Clouse- Requirement for De Novo Foreclosure Hearing


On October 21, 1998, the Clouses granted a Deed of Trust against their home originally to Homecomings Financial, later assigned to Deutsche Bank and serviced by GMAC. On June 22, 2012, Turnip Investments, following its suit against the Clouses, purchased the property at a judgment execution sale for $1,000. Subsequently, Deutsche Bank commenced foreclosure against the property and Turnip Investments appealed the foreclosure authorization by the Clerk first to the Superior Court, where Turnip Investments raised no objections to any evidence, and then a further appeal to the Court of Appeals.

There Turnip Investment argued that the Superior Court failed to conduct a proper de novo hearing and had insufficient evidence to show that Deutsche Bank was the holder of the Note. The Court of Appeals rejected the assertion that the hearing by Superior Court was merely a “review”, it had reviewed the full file, accepted new evidence (including a blue-ink original allonge) and heard arguments from both sides. Regarding whether Deutsche Bank was the holder of the note, the Court of Appeals held that “[b]earing in mind the strong presumption in favor of the legitimacy of indorsements” and with a complete chain of indorsements, found that evidence clearly supported that conclusion.


Turnip Investments (which has to have been named because “You can’t get blood from a Turnip”) appears to be owned by Ralph Clontz, a prominent North Carolina Debt Collection Attorney, which is a somewhat surprising source for an argument questioning the legitimacy of Deutsche Bank as the holder of the note.

Hopefully, however, this case was not a false flag designed to let a bank knock down a weak objections to holder of notes in order to establish case law against such defenses. This would be particularly concerning as this defense is not unrelated to the objection that debt buyers, such as Turnip Investments, are unable to document their ownership of claims upon which suit are brought.

At the very least, this case could be used to discredit any assertion made by Turnip Investment or similar debt buyers that the production of a full chain of documents attesting to the ownership of a debt is unduly burdensome.

For a copy of the opinion, please see:

Clouse- Requirement for De Novo Foreclosure Hearing


1. Bachelor of Arts degree in English Literature from Washington University, 1993. 2. Juris Doctor degree from George Washington University, 1996. Admissions to Practice of Law: North Carolina Bar, 1996. Federal District Courts for the Eastern and Middle Districts of North Carolina. Specialty Certification: North Carolina State Bar: Certified as a Specialist in Consumer Bankruptcy. Areas of Practice: Practice limited to consumer and business debtor bankruptcy law, 1998 to present. Memberships: National Association of Consumer Bankruptcy Attorneys (NACBA). North Carolina Academy of Trial Lawyers (NCATL). North Carolina Bar Association, Bankruptcy Section. Lectures prepared and presented: North Carolina Academy of Trial Lawyers seminar on bankruptcy; Topic: Counseling the Consumer Debtor Prior to Court - C.Y.A. Forms to Help 'Gird They Loins'; 2001. Middle District Bankruptcy Seminar; Topic: Preparing Chapter 13 Plans; 2002. NACBA National Convention; Topic: Efficient Office Practices; 2003. NACBA National Convention; Topic: Chapter 7 vs. Chapter 13 Debates; 2004. Middle District Bankruptcy Seminar; Topic: Chapter 7 & 13 Hot Issues; 2004. Positions held: NACBA National Convention; Convention Chair; 2008. NACBA National Convention; Panel Moderator: Topic: Basic Bankruptcy Issues; 2008. NACBA National Convention; Panel Moderator; Topic: Chapter 13-Disposable Income and Other Issues; 2007. NACBA National Convention; Panel Moderator; Topic: Representing Members of the Military and Their Families; 2007. NACBA, Member of National Board of Directors, 2006 to present. NCATL, Chair of the Bankruptcy Section, 2003 to 2007. NACBA, Chair of the North Carolina Section, 2003 to 2007. NC Bar Association, Bankruptcy Section, Bankruptcy Council Member, 2004 to present.

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