259 N.C. App. 582
N.C. Ct. App.2018Background
- Maggie B. McDonald obtained a 15-year mortgage in 2001 secured by a recorded deed of trust; loan later serviced by GMAC and then transferred to Specialized Loan Servicing (SLS) and Bank of New York Mellon.
- GMAC approved McDonald for a trial modification in June 2012 and offered a permanent loan modification signed by McDonald on September 26, 2012; the modification required the first modified payment on October 1, 2012 and stated "time is of the essence."
- McDonald’s transactional history shows the October 1, 2012 payment was made on October 15, 2012; subsequent payments in November and December 2012 allegedly were refused by SLS.
- Foreclosure was initiated; the Cumberland County clerk entered an order on May 23, 2016 finding the note in default; McDonald did not appeal the clerk’s order and later filed bankruptcy which was dismissed in May 2017.
- Foreclosure sale occurred July 17, 2017; McDonald filed a verified complaint and motion for injunction asserting breach of the permanent modification, specific performance, breach of covenant of good faith and fair dealing, and unfair/deceptive trade practices.
- Trial court granted defendants’ Rule 12(b)(6) motion and dismissed McDonald’s complaint with prejudice; McDonald appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether McDonald stated a breach of contract claim based on the permanent loan modification | McDonald says the modification was effective and defendants breached by refusing payments in Nov/Dec 2012 | Defendants say modification never took effect because McDonald failed to make the time‑sensitive Oct 1 payment | Held: Dismissed — modification never became effective because Oct 1 payment was late, so no breach can be shown |
| Whether McDonald stated a claim for specific performance of the modification | McDonald seeks an order enforcing the permanent modification | Defendants argue no enforceable contract existed due to failure of a time‑of‑the‑essence condition precedent | Held: Dismissed — specific performance unavailable because the modification never commenced |
| Whether McDonald stated a claim for breach of implied covenant of good faith and fair dealing | McDonald claims defendants’ refusal to accept payments deprived her of modification benefits | Defendants contend there was no underlying contract breach because modification was not in effect | Held: Dismissed — duty claim fails where the underlying contract was not in effect |
| Whether McDonald stated a claim under N.C. Gen. Stat. § 75-1.1 for unfair or deceptive trade practices | McDonald alleges defendants’ conduct in rejecting payments, foreclosing, and forcing bankruptcy was deceptive/unfair | Defendants argue the conduct related to a contract that never went into effect; mere breach cannot support a § 75-1.1 claim | Held: Dismissed — no UDTP claim because defendants had no obligation to accept payments under a non‑effective modification |
Key Cases Cited
- Bissette v. Harrod, 226 N.C. App. 1 (standard for Rule 12(b)(6) motion)
- Wood v. Guilford Cty., 355 N.C. 161 (grounds for dismissal under Rule 12(b)(6))
- Munchak Corp. v. Caldwell, 301 N.C. 689 (specific performance requires valid contract and performance or readiness to perform)
- In re Foreclosure of Goforth Properties, Inc., 334 N.C. 369 (equitable defenses to foreclosure must be asserted in an action to enjoin sale)
- Suntrust Bank v. Bryant/Sutphin Props., LLC, 222 N.C. App. 821 (mere breach of contract does not by itself support a § 75-1.1 claim)
- Eastway Wrecker Serv., Inc. v. City of Charlotte, 165 N.C. App. 639 (documents referenced in the complaint may be considered on a Rule 12(b)(6) motion)
- Schlieper v. Johnson, 195 N.C. App. 257 (court may reject allegations contradicted by attached documents)
- Bumpers v. Cmty. Bank of N. Va., 367 N.C. 81 (elements of a § 75-1.1 claim)