JACQUELINE L. GRAY and MARY STEWART GRAY, Plaintiffs,
FEDERAL NATIONAL MORTGAGE ASSOCIATION a/k/a FANNIE MAE, and TRUSTEE SERVICES OF CAROLINA, LLC, SUBSTITUTE TRUSTEE, Defendants.
in the Court of Appeals 29 January 2019.
by defendants from order entered 13 March 2018 by Judge
Wayland J. Sermons, Jr. in Dare County Superior Court No. 16
Pruet PLLC, by Norman W. Shearin and George T. Smith III, for
& Scott, PLLC, by Alan M. Presel, for defendant-appellant
Trustee Services of Carolina, LLC.
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.
and Procedural Background
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.
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.
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
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.
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.
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
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.
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, ...