Wells Fargo Bank, N.A. v. Corneal
767 S.E.2d 374
N.C. Ct. App.2014Background
- In December 2008 John M. Corneal and Jorene S. Proper executed a note for $389,890 secured by a deed of trust; the note matured with a balloon payment due December 4, 2011.
- Defendants failed to make the maturity/balloon payment; plaintiff (Wells Fargo, successor to Wachovia) sent cure and foreclosure notices in early 2012.
- Wells Fargo sued on July 10, 2013 for breach of contract and judicial foreclosure.
- Defendants answered, raised affirmative defenses (including estoppel and unclean hands), and asserted counterclaims under the North Carolina Unfair and Deceptive Trade Practices Act (UDTPA) and the North Carolina Debt Collection Act (NCDCA), alleging among other things a promise to allow refinancing at maturity.
- Plaintiff moved to dismiss the counterclaims under Rule 12(b)(6); the trial court granted the motion on February 18, 2014.
- Defendants appealed; the Court of Appeals found the interlocutory dismissal affected a substantial right and exercised jurisdiction to review the dismissal on the merits.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the interlocutory dismissal of counterclaims is immediately appealable (substantial right) | The order dismissing counterclaims does not create a substantial right warranting immediate appeal | The counterclaims share common factual issues with plaintiff’s complaint (promise to refinance), so separate resolution risks inconsistent verdicts and affects a substantial right | Court: appealable — counterclaims and complaint share common factual issue (risk of inconsistent verdicts), so substantial right is affected |
| Whether defendants stated a UDTPA claim | The alleged broken promise to allow refinancing does not amount to an unfair or deceptive practice absent allegations of intent to deceive or other egregious conduct | The bank promised refinancing and broke that promise, which injured defendants and therefore supports a UDTPA claim | Court: Dismissed — mere breach of a promise to refinance, without allegations showing intent to deceive or aggravating circumstances, is insufficient for UDTPA relief |
| Whether defendants stated an NCDCA claim | The obligation is a consumer debt and Wells Fargo is a debt collector for NCDCA purposes | Defendants incurred a debt and sought protection under the NCDCA | Court: Dismissed — defendants failed to plead that the debt was for personal, family, household, or agricultural purposes (required to be a “consumer”) |
Key Cases Cited
- Hamilton v. Mortgage Information Services, 212 N.C. App. 73 (2011) (party asserting interlocutory appeal bears burden to show substantial right)
- Guyton v. FM Lending Services, Inc., 199 N.C. App. 30 (2009) (standard for Rule 12(b)(6) dismissal and that legal conclusions are not presumed true)
- Burgin v. Owen, 181 N.C. App. 511 (2007) (de novo review of pleadings on Rule 12(b)(6))
- Overstreet v. Brookland, Inc., 52 N.C. App. 444 (1981) (promise later broken does not alone constitute a UDTPA violation absent intent to deceive at time of promise)
- Opsahl v. Pinehurst, Inc., 81 N.C. App. 56 (1986) (failure to meet a projected completion date is insufficient for UDTPA liability)
- McKinnon v. CV Industries, Inc., 213 N.C. App. 328 (2011) (UDTPA requires egregious or aggravating circumstances beyond a breach of contract)