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Gray v. Federal National Mortgage Association

Court of Appeals of North Carolina

March 26, 2019

JACQUELINE L. GRAY and MARY STEWART GRAY, Plaintiffs,
v.
FEDERAL NATIONAL MORTGAGE ASSOCIATION a/k/a FANNIE MAE, and TRUSTEE SERVICES OF CAROLINA, LLC, SUBSTITUTE TRUSTEE, Defendants.

          Heard in the Court of Appeals 29 January 2019.

          Appeal by defendants from order entered 13 March 2018 by Judge Wayland J. Sermons, Jr. in Dare County Superior Court No. 16 CVS 489.

          Nexsen Pruet PLLC, by Norman W. Shearin and George T. Smith III, for plaintiffs-appellees.

          Brock & Scott, PLLC, by Alan M. Presel, for defendant-appellant Trustee Services of Carolina, LLC.

          DAVIS, JUDGE.

         In this appeal, we consider the applicability of the doctrine of collateral estoppel to an order by a clerk of court authorizing a trustee to conduct a sale in a non-judicial foreclosure proceeding pursuant to a deed of trust. Trustee Services of Carolina, LLC ("TSC") appeals from an order denying its motion for summary judgment as to claims by the debtors for monetary damages stemming from the foreclosure. Because we conclude the debtors' claims are, in fact, barred by collateral estoppel, we reverse the trial court's order and remand for further proceedings.

         Factual and Procedural Background

         On 24 March 2006, Mary B. Gray and her husband, Jack S. Gray, executed and delivered a promissory note to Wells Fargo Bank in the amount of $300, 240 as part of a reverse mortgage loan transaction. As security for the promissory note, the Grays executed a deed of trust (the "Deed of Trust") on property that they owned in Dare County, North Carolina.

         The description of the collateral contained in the Deed of Trust described a tract of land that encompassed both the Grays' primary residence as well as the home of Grace Balance Peele, one of their relatives. Following the recordation of the Deed of Trust, the Grays subsequently subdivided the parcel of land containing their primary residence from the parcel containing Peele's home.

         Mary Gray and Jack Gray died on 21 March 2012 and 10 December 2013, respectively. Jacqueline L. Gray and Mary Stewart Gray (collectively "Plaintiffs") are the only devisees of Mary and Jack Gray. Peele's residence was devised to Jacqueline Gray pursuant to the terms of Jack Gray's will.

         Following Jack Gray's death, Wells Fargo proceeded to accelerate the outstanding balance of the reverse mortgage loan. After providing notice of default on the loan to the Grays' estates, Wells Fargo instructed TSC to initiate non-judicial foreclosure proceedings pursuant to the Deed of Trust.

         On 27 March 2015, Plaintiffs were provided with notice of a hearing in connection with the planned foreclosure proceeding. The hearing took place on 16 July 2015. Following the hearing, the Dare County assistant clerk of court entered an order that same day authorizing TSC to proceed with foreclosure. Pursuant to the order, TSC provided notice to Plaintiffs of the upcoming foreclosure sale, which included a legal description of the property listed in the Deed of Trust.

         At the foreclosure sale, Wells Fargo submitted the highest bid and purchased the property for $187, 500. Wells Fargo's bid was assigned to Federal National Mortgage Association ("Fannie Mae"), and on 29 September 2015 TSC executed and delivered a deed to Fannie Mae that included the same description of the collateral contained in the Deed of Trust.

         On 9 September 2016, Plaintiffs filed a complaint against TSC and Fannie Mae in Dare County Superior Court. In their complaint, they alleged that the description of the property contained in the Deed of Trust erroneously included the land on which Peele's residence was situated. They further contended that they had received no notice of the inclusion of the land containing Peele's home in the description of the property specified in the notice of foreclosure and that these mistakes "render[ed] [the foreclosure sale] a nullity." Plaintiffs' complaint asserted six claims for relief, including (1) a declaration that the foreclosure sale was a nullity; (2) mutual mistake; (3) unjust enrichment; (4) a violation of the North Carolina Reverse Mortgage Act; (5) breach of fiduciary duty; and (6) unfair and deceptive trade practices.

         On 31 July 2017, TSC filed a motion for summary judgment pursuant to Rule 56 of the North Carolina Rules of Civil Procedure on the ground that the order entered by the assistant clerk of court authorizing the foreclosure had constituted a final judgment and that Plaintiffs' claims were therefore barred pursuant to the doctrine of collateral estoppel. TSC's motion was heard on 5 March 2018 before the Honorable Wayland J. Sermons, ...


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