Howse v. Bank of Am., N.A., 255 N.C. App. 22

Background

In July 2008 Plaintiffs Howse and Reed executed a $376,000 promissory note to Bank of America secured by a deed of trust on property in Catawba County; the deed permitted sale of the note without prior notice and required notice if loan servicer changed.
Bank of America sold the note to Fannie Mae on Aug. 1, 2008 but remained servicer; Plaintiffs defaulted Nov. 2009 and sought assistance/communicated with Bank of America in 2010–2013.
A clerk authorized foreclosure by power of sale in Nov. 2012; the superior court and this Court affirmed the clerk’s order in an earlier appeal (Foreclosure of Reed).
After the appellate affirmance, Plaintiffs filed a new suit (Mar. 2015) seeking declaratory and equitable relief, including challenging § 45-21.16(d) as applied, alleging negligent misrepresentation and breach of the covenant of good faith and fair dealing, and invoking N.C.G.S. § 45-21.34 to enjoin sale.
Defendants moved for summary judgment (Apr. 2016); the trial court granted it and denied Plaintiffs’ motion to compel discovery, reasoning the suit was an impermissible collateral attack. Plaintiffs appealed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the suit is an impermissible collateral attack on the prior foreclosure order	Reed/Howse: UDJA and equitable claims are not barred; they may raise equitable defenses under § 45-21.34	Bank of America/Fannie Mae: The UDJA claim attacks a valid judgment and is barred as a collateral attack	UDJA claims are an impermissible collateral attack and barred
Whether Plaintiffs may pursue equitable defenses under N.C.G.S. § 45-21.34 after the clerk and appellate rulings	Plaintiffs: § 45-21.34 is the proper vehicle to enjoin foreclosure and present equitable defenses because prior proceedings could not consider such defenses	Defendants: The prior proceedings resolved the dispute; Plaintiffs already had their remedies	Court: § 45-21.34 claims are proper (not a collateral attack); summary judgment as to those claims was erroneous and must be remanded
Whether summary judgment was proper while Plaintiffs’ motion to compel discovery was pending	Plaintiffs: Denial of discovery prejudiced their ability to forecast evidence opposing summary judgment	Defendants: Summary judgment may be proper despite pending discovery when no genuine issue exists	Court: Granting summary judgment and denying the motion to compel was an abuse of discretion as to § 45-21.34 claims; remand for discovery/decision on those claims
Whether equitable claims (negligent misrepresentation; breach of implied covenant) fail on the merits	Plaintiffs: Defendants concealed ownership/servicer facts and misled them, causing harm	Defendants: Deed authorized sale without notice; BOA remained servicer and could decide modification; no special fiduciary duty or detrimental reliance	Majority: Did not resolve merits; remanded for § 45-21.34 proceedings. Dissent would affirm on merits, holding Plaintiffs cannot show essential elements

Key Cases Cited

Foreclosure of Reed v. Bank of Am., 233 N.C. App. 598, 758 S.E.2d 902 (N.C. Ct. App. 2014) (prior appellate decision upholding clerk’s foreclosure order)
In re Young, 227 N.C. App. 502, 744 S.E.2d 476 (N.C. Ct. App. 2013) (scope of review on clerk’s foreclosure findings and prohibition on equitable defenses in § 45-21.16 proceedings)
In re Foreclosure of Goforth Props., Inc., 334 N.C. 369, 432 S.E.2d 855 (N.C. 1993) (equitable defenses not available in § 45-21.16 hearing)
Funderburk v. JPMorgan Chase Bank, N.A., 241 N.C. App. 415, 775 S.E.2d 1 (N.C. Ct. App. 2015) (equitable defenses may be raised in separate § 45-21.34 action to enjoin foreclosure)
Conover v. Newton, 297 N.C. 506, 256 S.E.2d 216 (N.C. 1979) (general rule against granting summary judgment while discovery is pending)
Templeton v. Town of Boone, 208 N.C. App. 50, 701 S.E.2d 709 (N.C. Ct. App. 2010) (a trial court’s ruling may be affirmed if correct on any legal theory)
Gaunt v. Pittaway, 138 N.C. App. 778, 534 S.E.2d 660 (N.C. Ct. App. 2000) (summary judgment burden-shifting and requirement for nonmoving party to forecast evidence)
Dallaire v. Bank of Am., N.A., 367 N.C. 363, 760 S.E.2d 263 (N.C. 2014) (lender’s duty of care in debtor-creditor relations is defined by contract)
Arnesen v. Rivers Edge Golf Club & Plantation, Inc., 368 N.C. 440, 781 S.E.2d 1 (N.C. 2015) (no special relationship in ordinary debtor-creditor dealings)
Raritan River Steel Co. v. Cherry, Bekaert & Holland, 322 N.C. 200, 367 S.E.2d 609 (N.C. 1988) (elements of negligent misrepresentation)