481 B.R. 364
Bankr. E.D.N.C.2012Background
- Plaintiffs filed a chapter 13 and an adversary proceeding against Countrywide, BAC, BANA, the Shoaf Law Firm, Fannie Mae, Substitute Trustee, and Salyer on Sept. 13, 2010 and Feb. 21, 2012 hearing occurred.
- Countrywide originated a loan in 2007 secured by a 2-acre tract; deed of trust described 7.12-acre parcel, no property description attached at signing.
- Foreclosure proceedings were initiated in 2010; the Clerk’s order stated BAC was the note holder and the deed covered the 7.12-acre tract, and the property was sold Sept. 2, 2010.
- Bank participated in HAMP discussions; plaintiffs allege repeated miscommunications, false assurances, and mismanagement of the modification process.
- Bankruptcy filing occurred within the NC upset bid window, raising issues about the scope of relief the Clerk’s foreclosure determines and whether reformation is appropriate.
- Plaintiffs asserted six counts in the complaint, including objections to BAC’s proof of claim, deed validity/reformation, UDTPA, good-faith/fair-dealing obligations, negligent closing by Shoaf, and a statute-of-limitations defense.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Counts I and II are barred by Rooker-Feldman or collateral estoppel | Clerk's state-court rulings do not bind this court; rights to title/claims not previously adjudicated. | Rooker-Feldman bars re-litigation of state foreclosure issues; collateral estoppel applies to preclude. | Counts I and the portion of Count II are barred; reformation of the deed (mutual mistake) in Count II survives. |
| Whether Count II reformation claim for mutual mistake is viable | Clerk lacked authority to adjudicate collateral description; deed should reflect 2-acre intent. | Clerk already determined validity of the deed; reformation not contemplated by clerk. | Reformation for mutual mistake survives; equitable relief permissible under NC law. |
| Whether Count III UDTPA claim survives given HAMP context | HAMP violations and misrepresentations can support UDTPA even without private HAMP remedy. | HAMP does not create a private right of action and UDTPA relies on other bases. | UDTPA claim survives; plaintiffs alleged acts in commerce causing injury, proximately linked to foreclosure. |
| Whether Count IV good faith/fair dealing claims survive | Implied duty in contract and SPA/S.A.F.E. Act implications support breach and HAMP-related misfeasance. | No implied duty in negotiation phase; SAFÉ Act does not guarantee private action; limits apply. | Implied duty to act in good faith and fair dealing exists within the existing contract; SPA evidence supports withstand of dismissal. |
Key Cases Cited
- In re Watts, 38 N.C. App. 90 (N.C. Ct. App. 1978) (clerks’ inquiry limited to four foreclosure issues)
- Metro. Property & Casualty Ins. Co. v. Dillard, 126 N.C. App. 795, 487 S.E.2d 157 (N.C. Ct. App. 1997) (reformation and mutual mistake framework)
- Sunset Beach Development, LLC v. AMEC, Inc., 196 N.C. App. 202, 675 S.E.2d 46 (N.C. Ct. App. 2009) (public policy and implied duties considerations)
- Stanley v. Moore, 339 N.C. 717, 454 S.E.2d 225 (N.C. 1995) (public policy and UDTPA context)
- Gray v. North Carolina Ins. Underwriting Ass’n, 352 N.C. 61, 529 S.E.2d 676 (N.C. 2000) (public policy and UDTPA scope)