IN RE DISPUTE OVER THE SUM OF $375,757.47, CONSTITUTING THE SURPLUS CLOSING PROCEEDS FROM THE SALE OF THAT CERTAIN REAL PROPERTY AS DESCRIBED IN A DEED RECORDED IN DEED BOOK 712, AT PAGE 570, RUTHERFORD COUNTY, NORTH CAROLINA, PUBLIC REGISTRY
Heard in the Court of Appeals March 18, 2015
Buncombe County, No. 13 CVS 588.
Hutchens Law Firm, by J. Scott Flowers and Natasha M. Barone, for respondent-third party plaintiff, HSBC Bank, U.S.A, N.A.
Brooks, Pierce, McLendon, Humphrey & Leonard, LLP, by Joseph A. Ponzi, for third party defendant, Mountain 1st Bank & Trust Company.
Ferikes & Bleynat, PLLC, by H. Gregory Johnson, for respondent-third party defendants Raymond and Judy Chapman.
Judges STEPHENS and
HUNTER, JR. concur.
Appeal by respondent-third party defendants, from order entered 14 April 2014 by Judge Gary M. Gavenus
in Buncombe County Superior Court.
Raymond and Judy Chapman (" the Chapmans" ) appeal from the trial court's order granting summary judgment in favor of HSBC Bank USA, N.A. (" HSBC" ), and awarding attorneys' fees in favor of HSBC. We affirm the trial court's order.
In 1998, the Chapmans purchased property located at 304 Seton Road in Lake Lure. They obtained title by general warranty deed recorded in the Rutherford County Registry. On or about 7 April 2006, the Chapmans refinanced their mortgage loan. They obtained a loan and executed a promissory note in the amount of $600,000.00 from Mountain 1st Bank (" Mountain 1st). The note was secured by a deed of trust recorded in the Rutherford County Registry, which pledged the subject property and any proceeds from the sale of the property as collateral for the note.
In the deed of trust, Mountain 1st named Mortgage Electronic Registration Systems, Inc. (" MERS" ) as its nominee. MERS maintained an electronic registration system, by which it tracked any assignment of the promissory note and deed of trust.
Mountain 1st assigned the promissory note and deed of trust to Resource Mortgage Solutions, a division of Netbank, on or before 20 April 2006. On 30 June 2006, Netbank assigned the promissory note and deed of trust to Wells Fargo Bank, N.A. (" Wells Fargo" ). On 4 June 2010, while Wells Fargo was the holder of the promissory note and deed of trust, Mountain 1st recorded a Certificate of Satisfaction in the Rutherford County Registry, purporting to satisfy and cancel the Chapmans' obligation under the note.
Mountain 1st had assigned and relinquished being the holder of the promissory note and beneficiary of the deed of trust nearly four years before the Certificate of Satisfaction was recorded. Mountain 1st acknowledges it was without authority to execute and record the erroneous Certificate of Satisfaction. Wells Fargo assigned the
promissory note and deed of trust to HSBC on 30 October 2012.
The Chapmans continued to make payments on the note for more than two years after Mountain 1st's purported Certificate of Satisfaction was recorded. In August 2012, the Chapmans entered into an offer to purchase and contract to sell the property to Sylvia Pflum. Ms. Pflum's attorney performed a title search in preparation for the closing and discovered the Mountain 1st Certificate of Satisfaction. The Chapmans were previously unaware of the Certificate of Satisfaction. Wells Fargo claimed to be the holder of the Chapmans' note and deed of trust, and demanded payment of the sale proceeds.
At the closing of the sale, the Chapmans and the closing attorney deposited $375,757.47, the balance owed on the note, with an escrow agent pursuant to an Escrow Agreement executed by the Chapmans on 4 September 2012. Pursuant to the Escrow Agreement, the funds are to be held in escrow until either an agreement between the Chapmans and Wells Fargo is reached, or a court order directing the disbursement of funds is issued. The Escrow Agreement states that Wells Fargo asserts the Chapmans owe Wells Fargo $363,936.00 in unpaid principal, interest and other fees and charges in connection with the mortgage. It further states that a payoff of the purported debt after 27 August 2012 " may include other fees and charges, including late fees and/or interest." After Wells Fargo assigned the note to HSBC, it recanted its claim to the funds.
On 15 October 2012, after the property was sold and titled to Pflum, MERS executed and recorded a Document of Rescission, which purported to rescind the Certificate of Satisfaction and reinstate the deed of trust. MERS executed and recorded a Corporate Assignment of Deed of Trust on 30 October 2012, which also assigned Mountain 1st's beneficial interest under the deed of trust to HSBC. On 3 March 2014, HSBC executed and recorded another Document of Rescission, purporting to rescind the Certificate of Satisfaction and reinstate the deed of trust. HSBC is in possession of the Chapmans' original note.
The promissory note and deed of trust specifically allow for the lender to collect all expenses, including reasonable attorneys' fees, from the Chapmans in the event the Chapmans breach their obligations under the promissory note.
After request, the Chapmans refused to release the escrowed funds to HSBC. On 6 February 2013, Daniel L. Strobel, the escrow agent, filed a complaint in Buncombe County Superior Court seeking a court order declaring the rights and interests of the parties to the escrowed funds. HSBC filed a motion to dismiss the complaint, answer, counterclaim against Strobel, cross-claim against the Chapmans, and third party complaint against Pflum and Mountain 1st.
HSBC filed a motion for summary judgment on 17 March 2014. The matter came before the trial court on 14 April 2014. The court granted summary judgment in favor of HSBC. The court entered judgment against the Chapmans in the amount of $403,902.18, with interest accruing after judgment at the legal rate. The escrow agent was ordered to deliver the escrowed funds to HSBC to be applied toward satisfaction of the judgment. The court awarded attorneys' fees to HSBC in the amount of $57,162.76, representing fifteen percent of the amount due as provided in the promissory note. The Chapmans appealed.
The Chapmans argue the trial court erred in: (1) granting summary judgment in favor of HSBC; and, (2) ordering them to pay HSBC's attorneys' fees.
III. Summary Judgment
The Chapmans argue the trial court erred in granting summary judgment in favor of HSBC. They assert the escrowed funds belong to them as a result of Mountain 1st's cancellation of the deed of trust, and are not required to ...