Nationstar Mortg., LLC v. Dean

261 N.C.App. 375

820 S.E.2d 854

NATIONSTAR MORTGAGE, LLC, Plaintiff,

v.Clarence E. DEAN, Jr. and Kelly Ann Dean, and Wells Fargo Bank, N.A., Defendants.

No. COA18-132

Court of Appeals of North Carolina.

Filed: September 18, 2018

Burr & Forman, LLP, by William J. Long, Matthew W. Barnes, Raleigh and E. Travis Ramey, pro hac vice, for plaintiff-appellee.

Hornthal, Riley, Ellis & Maland, LLP, Elizabeth City, by M.H. Hood Ellis, for defendant-appellants.

TYSON, Judge.

Clarence E. Dean, Jr. and Kelly Ann Dean appeal from the trial court's order, which granted Nationstar Mortgage, LLC's ("Nationstar") motion for summary judgment on Nationstar's declaratory judgment claim, and alternatively granted Nationstar's claim to reform a deed of trust. We affirm.

I. Background

In 2003, Clarence E. Dean, Jr. and his brother-in-law, Jerry Shanahan, formed a limited partnership, 505 N Virginia Dare, L.P.

Mr. Dean and Mr. Shanahan purchased the Tanglewood Motel located at the address of 505 N. Virginia Dare Trail, Kill Devil Hills, N.C. and took title in the name of their limited partnership. After operating the Tanglewood Motel for a rental season, Mr. Dean and Mr. Shanahan demolished the motel and built two large beach cottages with financing acquired from First South Bank.

Approximately a year later, 505 N Virginia Dare, L.P. subdivided and conveyed one cottage and lot to Mr. Shanahan and the other cottage and lot to Mr. Dean ("the Property"). The subdivided property's previous address of 505 N. Virginia Dare Trail remained with the lot conveyed to Mr. Shanahan. The Property conveyed to Mr. Dean carried the street address of 507 N. Virginia Dare Trail, Kill Devil Hills, N.C. 27948-7828.

In June 2004, Mr. Dean and his wife, Kelly Ann Dean (collectively "the Deans"), pledged the Property as collateral to secure a $1,820,000 loan from First South Bank. The Deans retained an attorney, Charles D. Evans, to prepare a deed of trust and close the loan, and granted him a power of attorney to execute and record the loan documents on their behalf. The property description in the deed of trust stated "See Attached Exhibit A" and stated the property has the address of "507 N VIRGINIA DARE TRAIL , KILL DEVIL HILLS , North Carolina 27948-7828 ("Property Address")." (Emphasis original). Mr. Evans recorded the deed of trust ("First South Deed of Trust" or "Original Deed of Trust) on 1 June 2004 with the Dare County Register of Deeds, but failed to include "Exhibit A." Exhibit A contained the platted lot and block number of the Property. On 16 November 2004, First South Bank sent a letter to Mr. Evans advising him "The Deed of Trust was not recorded with the legal description. Please [add] the legal description and re-record the Deed of Trust."

Mr. Evans re-recorded the First South Deed of Trust on 24 November 2004 without the Deans’ knowledge and attached Exhibit A. Mr. Evans noted the following on the first page of the re-recorded First South Deed of Trust:

This deed of trust is being re-recorded to add the Exhibit "A" which was omitted

s/ Charles D. Evans

Charles D. Evans, Attorney

11/22/04

On 27 October 2004, the Deans granted a deed of trust ("Wachovia Deed of Trust") to Wachovia Bank, N.A. in the amount of $500,000, which was recorded with the Dare County Register of Deeds on 18 November 2004. The Deans allegedly granted Wachovia this deed of trust in exchange for a second-position lien on the Property. Wells Fargo Bank, N.A. ("Wells Fargo") later became the owner and holder of the Wachovia Deed of Trust.

In 2011, the Deans missed a payment on their loan with First South Bank. Aurora Bank FSB ("Aurora"), Nationstar's predecessor-in-interest, was servicing the Deans’ loan at the time. The Deans asserted an employee of Aurora contacted them and advised them to miss another payment, so that "Aurora could work with [the Deans] and make some accommodation[.]" The Deans intentionally missed another payment and Aurora purportedly orally agreed to enter into a forbearance agreement.

Aurora mailed the Deans a proposed "Special Forbearance Agreement" with an attached cover letter. The cover letter instructed the Deans to:

Please execute the attached Special Forbearance Agreement and return it along with .... your initial payment in the amount of $14240.24. This payment as well as the requested information must be received in our office on or before 11/15/2011 . (Emphasis supplied).

The proposed "Special Forbearance Agreement" states the Deans had accrued a total arrearage of $65,444.07 on their loan as of 7 November 2011. According to the Deans, they did not receive the proposed "Special Forbearance Agreement" and cover letter until after the 15 November 2011 deadline for returning the document had passed. On 28 November 2011, Aurora sent the Deans a letter informing them that their "request for a foreclosure alternative option is considered closed" because "[w]e did not receive one of the req[uired] payments under your forbearance agreement."

On 6 December 2011, the Deans received notice Aurora was initiating foreclosure proceedings. On 15 June 2012, Aurora sent a letter to the Deans informing them the servicing of the loan was being transferred to Nationstar. During this time, the hearings in the foreclosure proceeding were continued.

According to the Deans, on 17 August 2012, a Nationstar representative, allegedly named "Lisa," contacted Mr. Dean and they purportedly orally negotiated the terms of a restructured and modified loan to avoid foreclosure. When the Deans received the modification documents from Nationstar, the terms stated in the documents were different from the terms which had allegedly been negotiated over the telephone between Mr. Dean and "Lisa."

The Deans retained another attorney, Jane Dearwester, to communicate with Nationstar on their behalf. Ms. Dearwester sent a letter to Nationstar on 27 August 2012 and advised them that the terms contained in the modification documents were different than the orally negotiated terms. On 29 October 2012, Nationstar sent an additional set of modification documents to the Deans, but these documents were identical to the documents which were sent earlier in August 2012. Attorney Dearwester sent yet another letter to Nationstar expressing that the new set of modification documents was identical to the last set Nationstar had sent.

On 7 November 2012, an employee of Nationstar, Brittanee Clark, purportedly contacted the Deans to confirm that the terms set forth in the two previously sent sets of modification documents were not the same as to the terms Nationstar had allegedly agreed to over the phone on 17 August 2012. However, on 14 November 2012, Ms. Clark emailed the Deans to inform them Nationstar would not honor the terms discussed in the phone conversation between Mr. Dean and "Lisa."

On 1 July 2013, Nationstar filed a verified complaint against the Deans and Wells Fargo seeking: (1) a declaration that the First South Deed of Trust is a valid encumbrance on the Property; (2) in the alternative, judicial reformation of the First South Deed of Trust to include the legal description contained within Exhibit A and relating back to 1 June 2004; and, (3) in the alternative, an order quieting title; and, (4) a declaration that the First South Deed of Trust has priority over the Wachovia Deed of Trust. No further action was taken in the foreclosure proceedings against the Property once Nationstar's verified complaint was filed.

The Deans initially filed an answer, and later an amended answer on 13 June 2014. In their amended answer, the Deans asserted, in part, the doctrine of unclean hands and the statute of limitations against Nationstar's reformation claim.

On 29 September 2014, the trial court entered a consent order between Nationstar and Wells Fargo, which ordered:

1. That the First South Deed of Trust is a valid encumbrance on the Property having a priority date of June 1, 2004.

2. That the First South Deed of Trust has priority over the Wachovia Deed of Trust[.]

The consent order dismissed Nationstar's remaining claims against Wells Fargo.

Following discovery, Nationstar filed a motion for summary judgment on 21 March 2017. The Deans filed four affidavits in opposition to Nationstar's motion for summary judgment, including the affidavits of Mr. Dean; Jane Dearwester; Claire Ellington, an assistant to Jane Dearwester; and, Laura Elizabeth Ceva, an attorney who worked with Jane Dearwester.

Following a hearing on Nationstar's motion for summary judgment, the trial court entered an order granting summary judgment in Nationstar's favor. With respect to Nationstar's declaratory judgment claim, the trial court's order decreed that the street address for the Property listed in First South's Original Deed of Trust "is a legally sufficient description as of June 1, 2004 when said Deed of Trust was recorded." The trial court's order alternatively decreed that the First South Deed of Trust be "reformed as of June 1, 2004 to include ‘Exhibit A’ originally omitted, but subsequently included in the Deed of Trust as was re-recorded on November 24, [2004.]"

The Deans filed timely notice of appeal from the trial court's order granting Nationstar's motion for summary judgment.

II. Jurisdiction

Jurisdiction lies in this Court pursuant to N.C. Gen. Stat. § 7A-27(b)(1) (2017).

III. Standard of Review

Summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law." N.C. Gen. Stat. § 1A-1, Rule 56(c) (2017). The trial court must deny a summary judgment motion if any genuine issue of material fact exists. Forbis v. Neal , 361 N.C. 519, 524, 649 S.E.2d 382, 385 (2007). An issue of fact is genuine where supported by substantial evidence, and "is material if the facts alleged would constitute a legal defense, or would...