Carver Pond executed a promissory note and Deed of Trust secured by an apartment complex to Red Capital Commercial Funding. This note was subsequently assigned to Nomura Credit & Capital and then LaSalle Bank. In 2008, LaSalle merged with Bank of America. In 2010, after defaulting on the note, Bank of America had a receiver appointed to operate the apartment complex. The receiver made no payments in the April or May of 2010, but did send sufficient funds in July for the missed payments. That notwithstanding, Bank of America accelerated the note and commenced foreclosure.
Carver Pond first asserted that Bank of America had failed to show the note was transferred from LaSalle with the merger. Following Econo-Travel Motor Hotel Corp. V. Taylor, 301 N.C. 200 (1980), the Court of Appeals held that since the merger was not disputed, separate evidence of a transfer was unnecessary as Bank of America succeeded as a matter of law to LaSalle’s status as holder of the note.
Carver Pond also objected to a finding that it was in default under the note, since the receiver had made sufficient payment in July and had been in control of the funds. The Court of Appeals rejected this since the receiver was acting as an officer of the court, not an agent of Bank of America, and its errors were not attributable to Bank of America.
This weakness in the receivership statute, viz. that Bank of America controlled the appointment of the receiver but was not liable for its errors, shows that Carver Pond would, all other things aside, have been better in Chapter 11, which it controlled.
This case also shows that the issues concerning valid indorsements of notes is spilling outside of the consumer realm and being raised in commercial transactions also.