N.C. Ct. of App.: Iris Enterprises v. Five Wins- Foreclosure Trustee Bound by Judicial Determination of Claim Balance

Summary: Following failed Chapter 11 bankruptcy, Five Wins obtained a declaratory judgment against Iris finding that Iris owed $894,711.24 to redeem real property from foreclosure. After Five Wins bid $875,000.00 for the properties, WA Ventures made a successful upset bid at the subsequent foreclosure in the amount of $918,750.00 and then assigned the bid to Five Wins. (It would be guessed that Five Wins bought the assignment of he bid rather than making another higher bid for the property at foreclosure.) The Trustee disbursed $856,286.33 to Five Wins for the remaining redemption amount and the remainder to Five Wins as part of the “secured obligation.” The trial court, on rehearing of the original declaratory judgment, awarded the remaining funds to Iris and Five Wins appealed. The Court of Appeals held that the “redemption amount is the amount of the indebtedness.” And while the disbursements from a foreclosure “are within the sole province of the trustee[,]” In re Foreclosure of Deed of Trust Executed by Ferrell Bros. Farm, Inc., 118 N.C. App. 458, 461, 455 S.E.2d 676, 678 (1995), “the trustee of a property in foreclosure lacks authority to overrule a superior court judge.” Commentary: While the treatment of claims in a Chapter 13 bankruptcy is contingent upon the Debtor receiving a discharge, it is not necessarily true that the determination of the amount of a claim, including the disallowance of portions of a claim, i.e. pursuant to N.C.G.S. § 45-91, are contingent on a discharge. This case would support the contention that such determinations are binding. For a copy of the opinion, please see: Iris Enterprises v. Five Wins- Foreclosure Trustee Bound by Judicial Determination of Claim Balance