U.S. BANK NATIONAL ASSOCIATION, as Trustee for the C-BASS MORTGAGE LOAN ASSET-BACKED CERTIFICATES, SERIES 2006-RP2
WILLIE LEE PINKNEY, CLARA PINKNEY, SIDDCO, INC., and POORE SUBSTITUTE TRUSTEE, LTD
in the Supreme Court on 11 April 2017.
discretionary review pursuant to N.C. G.S. § 7A-31 of a
unanimous, unpublished decision of the Court of Appeals, __
N.C.App. __, 787 S.E.2d 464 (2016), affirming an order
entered on 5 March 2015 by Judge Patrice A. Hinnant in
Superior Court, Forsyth County.
Bradley Arant Boult Cummings LLP, by Brian M. Rowlson, for
Office of Benjamin D. Busch, PLLC, by Benjamin D. Busch, for
defendant-appellees Willie Lee Pinkney and Clara Pinkney.
by action or "judicial foreclosure, " unlike
non-judicial foreclosure by power of sale, is an ordinary
civil action governed by the liberal standard of notice
pleading. As such, a complaint is sufficient if it alleges a
debt secured by a deed of trust, a default, and the
plaintiff's right to enforce the deed of trust. Here
plaintiff's complaint adequately states a cause of action
for judicial foreclosure. The Court of Appeals erred by
applying the requirements applicable in non-judicial
foreclosure by power of sale to the plaintiff's judicial
foreclosure action and, accordingly, we reverse the decision
of that court.
December 1997, defendants Willie Lee Pinkney and Clara
Pinkney (collectively borrower) executed a promissory note
with Ford Consumer Finance Company, Inc. (the Note) in the
principal amount of $257, 256.89 to purchase real property
situated in Forsyth County. The debt is repayable through
monthly installments due on the seventeenth of the month and
matures on 17 December 2027. The Note includes default and
acceleration provisions. The debt is secured by a deed of
trust on the underlying real property, identified "as
Lot No. 2, . . . SHERWOOD FOREST, . . . recorded in Plat Book
29, Page 22, in the Office of the Register of Deeds of
Forsyth County." U.S. Bank National Association (the
Bank) alleges that it "is the present
holder of the Note and Subject Deed of Trust and is the party
entitled to enforce the same."
September 2014, the Bank filed its complaint against borrower
and the substitute trustee under the deed of trust in
Superior Court, Forsyth County, seeking judicial foreclosure
and judgment on the Note. The Bank alleges, inter alia,
that "the Note evidences a valid debt owned [sic] by
[borrower] to [the Bank], " that borrower
"defaulted under the terms of the Note for failure to
make payments, " and that the Bank "has given
[borrower] written notice of default, " but that
borrower has "refused . . . to make the payments
required." The Bank claims that the outstanding balance
on the Note is $268, 171.13 plus "past due
interest" of $118, 055.05.
regard to the Bank's authority to enforce the terms of
the deed of trust, the complaint states that the Note was
"transferred" several times, ultimately to the
Bank. Ford Consumer Finance "endorsed" the Note to
Credit Based Asset Servicing and Securitization, LLC (Credit
Asset), which "assigned" the Note to the
"Salomon Mortgage Loan Trust" Indenture, which
"specifically endorsed" the Note to the
Bank also attached exhibits to its complaint, including
Exhibit E (the Note), which includes allonges evidencing the
two endorsements, and Exhibit G ("Assignment of
Mortgage/Deed of Trust") evidencing the assignment,
which states that Credit Asset "for value received, does
by these presents grant, bargain, sell, assign, transfer and
set over unto: [the Salomon Mortgage Loan Trust Indenture] .
. . all of [its] right, title and beneficial interest in and
to that certain Deed of Trust."
moved to dismiss for failure to state a claim upon which
relief can be granted under Rule 12(b)(6) of the North
Carolina Rules of Civil Procedure. Because the Bank "is
not the original payee" under the Note, borrower argued
that the Exhibits reveal a "lack of indorsement from the
predecessor in the chain of title[, which] is fatal to the
Plaintiff's claim of being holder entitled to enforce the
instrument." The trial court dismissed the action with
prejudice, and the Bank appealed.
Court of Appeals affirmed the trial court's dismissal
order. U.S. Bank v. Pinkney, __ N.C.App. __, 787
S.E.2d 464, 2016 WL 2647709 (2016) (unpublished). Applying
the requirements of N.C. G.S. § 45-21.16(d) applicable
to non-judicial foreclosures by power of sale, the Court of
Appeals found that the Bank failed to establish its status as
a holder of the Note and therefore did not have the right to
foreclose. Pinkney, 2016 WL 2647709, at *3-5 (citing
and quoting In re Foreclosure of Gilbert, 211
N.C.App. 483, 490, 711 S.E.2d 165, 170 (2011) (requiring
holdership status to foreclose under subsection
45-21.16(d))). Because the Bank "was not the original
holder of the Note, " id. at *4, the court
reasoned that "each transfer required indorsement of the
Note from one holder to the next, " id.
(quoting In re Foreclosure of Bass, 366 N.C. 464,
469, 738 S.E.2d 173, 176 (2013)). Though "plaintiff
alleged . . . that it was the present holder of the Note and
Subject Deed of Trust, " id. at *6, the court
nonetheless concluded that the Exhibits lacked an essential
"indorsement from Credit Asset"-in other words,
that the assignment was an inadequate indorsement,
id. at *5. Therefore, the court found that
"plaintiff cannot establish that it is the holder of the
Note." Id. We allowed the Bank's petition for
review dismissals under Rule 12(b)(6) de novo, Bridges v.
Parrish, 366 N.C. 539, 541, 742 S.E.2d 794, 796 (2013),
"view[ing] the allegations as true and . . . in the
light most favorable to the non-moving party, "
Kirby v. NCDOT, 368 N.C. 847, 852, 786 S.E.2d 919,
923 (2016) (citing Mangum v. Raleigh Bd. of Adjust.,
362 N.C. 640, 644, 669 S.E.2d 279, 283 (2008)). The complaint
is construed liberally, and dismissal is appropriate "if
it appears certain that plaintiffs could prove no set of
facts which would entitle them to relief under some legal
theory, " Fussell v. N.C. Farm Bureau Mut. Ins.
Co., 364 N.C. 222, 225, 695 S.E.2d 437, 440 (2010)
(citations omitted), or "no law exists to support the
claim made, " id. at 225, 695 S.E.2d at 440
(quoting Burgess v. Your House of Raleigh, Inc., 326
N.C. 205, 209, 388 S.E.2d 134, 136 (1990)).
precise question presented is whether the complaint reveals
sufficient allegations to survive borrower's motion to
dismiss the Bank's judicial foreclosure claim. Here the
complaint provides adequate notice of the claim. Because the
Court of Appeals applied the requirements applicable to
non-judicial foreclosure by power of sale, not ...