*1 SHEPARD OCWEN FED. BANK (2006)] WAYNE SHEPARD and ROSEMARY SANDERS SHEPARD v. OCWEN FEDERAL BANK, and WELLS FARGO BANK FSB, DONALD T. in his MINNESOTA, RITTER, capacity as Trustee
No. 476A05 (Filed 20 December
Usury; mortgage Unfair Trade Practices— second —usurious origination expiration of statute of limitations fee — trial granting court did not err defendants’ motions to expiration
dismiss on applicable based statutes of limita- plaintiffs’ nearly years tions for causes of action closing five asserting usury on second law violations under Chapter 24 of the North Carolina General Statutes and unfair and deceptive practices trade 75-1.1, (1) under N.C.G.S. § because: began the statutes of limitations to run on these claims at the closing dispute paid; the loan when fee in (2) although plaintiffs pay a usurious per- fee in excess of two cent of the loan’s value in 24-14(f), violation of N.C.G.S. statute of limitations necessitated that file their claim years closing; (3) the fee at the manner in which the or paid closing could have been almost before filed their is irrеle- vant and cannot extension of on the statute of limitations fees; claims (4) entirety for usurious the origination piecemeal and not payments; (5) no usurious fees have since on thus, the statute of limita- nearly tions on expired claim three before May 2002; expira- was filed- four-year tion of the statute of limitations under deceptive N.C.G.S. 75-16.2 prac- bars unfair and trade tices claim when have conceded that deceptive practices trade claim is derived from their claim.
Justice dissenting. Timmons-Goodson joining dissenting Justices Martin and Edmunds opinion.
Appeal pursuant to 7A-30(2) from the decision of panel App. 475, divided of the Court of (2005), affirming granting an order defendants’ motions to dis- THE SUPREME COURT IN v. OCWEN FED. BANK
[361 Henry in Su- by Judge Charles H. miss entered on County. Heard in the Court perior New Hanover March 2006. Hartzell, plaintiff- Whiteman, LLP, by J. & Jerome
Hartzell for appellants. Kilpatrick Pettit, Pettit, P.A., by & William Walt Kellam Chames, defendant-appellees. LLP, by H. Stockton Adam for Center, McNulty, North by Carlene North Carolina Justice for Carolina, Inc., Center, Legal Aid North Justice Carolina of Inc., Pisgah Legal Piedmont, Legal Southern Services of Carolina, Services, Society North Legal Aid Northwest North of Academy Lawyers, Trial and Center Cаrolina Responsible Lending, curiae. amici BRADY,Justice. applicable of limita- presented whether the statutes issue (1) law violations asserting bar of action
tions causes Chapter 24 the North Carolina General Statutes under usury claims, practices, deceptive trade derived bеgan of limitations Wehold that the statutes under section 75-1.1. dispute when the fee in at the run on these claims plaintiff’s paid, and claims are barred. therefore PROCEDURAL BACKGROUND FACTUAL AND Rosemary Shepard Wayne Shepard and Sanders Plaintiffs July 1997, closing date of 25 with a obtained second Mortgage Brokers, (Chase) Inc. from Chase prop- real on their residential $16,500.00and executed deed of trust charged plaintiffs erty to the loan. Chase secure percent origina- This $1,485.00, to nine of the loan. which amounts ultimately disbursed to from the loan tion plaintiffs. deducted Federal loan to defendant Ocwen assigned Chase later Fargo Wells Bank, assigned then the loan to (Ocwen) FSB and Ocwen Minnesota, (Wells Fargo). N.A. Bank May 2002, nearly closing, plaintiffs initiated
On 3 orig- that the defendants, alleging in their against litigation Carolina law. Plaintiffs’ impermissible under North ination fee was Chapter 24 of the fee violated asserted that the 75-1.1, the loan and N.C.G.S. General Statutes North Carolina OCWEN FED. BANK reformed, requested should be damages treble and counsel fees. Ritter, Defendant T. Donald the trustee the original trust, deed of joined purposes of the reformation claim.1 Fargo Ocwen and Wells made motions to dismiss com- plaint claim, asserting for failure to state a time actions were barred On of limitations. 25 June 2004 the trial court both ap- motions to dismiss because “the plicable statute of limitation on expired both claims for relief had prior appealed institution of this action.” Plaintiffs the grant- ing of the motions to the Court which, in a divided opinion, affirmed the trial appealed court’s order. Plaintiffs as of *3 right to this Court.
ANALYSIS On a dismiss, review of motion to we determine whether, law, as matter of allegations complaint, true, treated upon as are sufficient to state a claim which relief theory. be under legal somе In ruling such a motion, complaint liberally is to construed, be and the trial court should not appears dismiss the it beyond unless plaintiff prove doubt that could set no of facts in of [the] his claim which would entitle him to relief.
Meyer Walls, 97, 111-12, 489 S.E.2d (1997) (brack (citations ets in original) quotation and internal omitted). marks “A statute may properly of limitations defense in a asserted 12(b)(6) appears Rule motion to dismiss if it of the face the com- plaint that such statute bars the claim.” Horton v. Carolina Medicorp, Inc., “Once a defendant defense, raises a statute of limitations of burden showing prescribed that action instituted within the period plaintiff. plaintiff A sustains this burden [rests] that showing expired.” the relevant statute of limitations has not Id. (citations omitted).
Chapter of governs lending the General Statutes transactions by setting charges. maximum rates for interest and other fees and Plaintiffs assert Chase fee violation secondary 24-14(f), § of N.C.G.S. which limits fees for certain real 1. T. Donald Ritter failed to answer and default September against him was entered on 9 2002. FED. BANIK
SHEPARD v. OCWEN percent of the loan amount. property to a maximum of two loans for a claim un- The statute of limitations 24-14(f) (2005). N.C.G.S. (2005). Thus, years. 1-53(2), (3) Id. is two der the years filing their required within two of plaintiffs to show that charged plaintiffs paid a usurious defendant so, limitations bars a result the statute of Plaintiffs cannot do and as plaintiffs’ claims. in excess pay a usurious appears
It However, the statute of limitations percent of loan’s value. of two paying plaintiffs file their claim necessitated that limitations, Attempting to circumvent the statute closing. the fee at closing out loan the fee argue paying that and are proceeds they essentially rolled the fee into the loan they payment. time make a the usurious fee each any partial they Therefore, plaintiffs are entitled recover assert they filing made within two of the usurious fee fee made complaint plus partial payments of the usurious all complaint. filing of since the fee was not argument sound. The
Plaintiffs’ not amount, but was deducted added to the loan ques- they All the fees in obtained their loan. received made, 24-14(f), “fully when the earned” tion were prerequisite received at charged, paid, *4 paid origina- the Although plaintiffs could have obtaining the loan. they card, opted to have the full by cash, check, or credit tion fee they received at of the fee subtracted amount or origination fee was Regardless manner in which the closing. monthly payments and are paid, plaintiffs’ could have $16,500.00 solely principal and interest on a based on the calculated year manner in which the term. The loan for fifteen before paid closing at almost or could have been fee was support exten- complaint is irrelevant and cannot plaintiffs filed their for usurious on claims of limitations sion of the statute origination fees. law inter- controlling upon this federal case
Although not conclusion. reaches the same preting North Carolina’s Supp. 544, Corp., F. 2d 553 Loan 313 v. Nat’l Home See Faircloth curiam, App’x (4th Cir. per 87 F. 314 (M.D.N.C.2003) (mem.), aff’d sub similar to the case In a case with facts 2004) (unpublished). of limitations held that the statute judice, the court in Faircloth 141 SHEPARD v. OCWEN FED. BANK began to run at the closing because “all ‘actions’ Plaintiff attri- butеs to are but one action which occurred at the [defendants] wrongs perpetrated Plaintiffs rather than a series continually.” Id. plaintiffs rely
The cases which do not overcome fatal flaw the argument. Security in their Mortgage The loans in Henderson & v. Building Finance Co. and Hollowell Southern & Loan Ass’n were subject statutory to rаtes, limitations on interest not fees. Henderson, 253, 263, 39, (1968);Hollowell, 273 N.C. 196, 197-98, 781, 120 N.C. In (1897). S.E. cases, these two statutory this Court made clear that lenders cannot subvert
limits on
requiring
interest
“dues” or
to
“commissions”
paid
part
as
payments. Henderson,
of the loan
263,
N.C. at
47;Hollowell,
S.E.2d
197,
287,
120N.C. at
120N.C. at
Swindell
Mortgage
equally
v. Federal
inapplic-
National
Ass’n is
able.
153,
Swindell,
In
this Court con-
payment
cluded that a usurious
charged
late
fee constituted interest
separate
on the
collecting pay-
transaction of forbearance in
ment
158,
due. Id. at
pay-
S.E.2d at 895. Because the usurious late
represented
ment
interest on a second
the lenders forfeited
payment
their right
fee,
to the late
right
but
not forfeit their
original
interest
loan. Id. at
Because no usurious fees have been since clos- ing on- 25 statute years limitations on expired nearly claim three before was filed May properly on 3 trial 2002. The court Ocwen’s and Wells Fargo’s motions to dismiss failure state claim which granted. relief could bе
Likewise, four-year expiration statute of lim- *5 plaintiffs’ deceptive practices itations bars trade claim. See (2005). § N.C.G.S. 75-16.2 Plaintiffs have conceded that their unfair deceptive usury practices trade claim is derived from their claim. Therefore, because we hold that this claim accrued at properly trial court dismissеd on this issue. COURT IN THE SUPREME FED. BANK OCWEN correctly granted conclude the trial court Accordingly, we Fargo’s motions dismiss because and Wells Ocwen’s We limitations. statutes of claims were barred Appeals. judgment of the Court of therefore affirm the AFFIRMED. dissenting.
Justice TIMMONS-GOODSON majority agrees, that the demonstrated, and the Plaintiffs have un- charged is usurious fee indeed loan $16,500, repaid loan was for North Carolina law. Plaintiffs’ der a loan fee months. Plaintiffs were over 180 $1485, This fee was percent to nine the loan. which amounts 24-14(f)provides, in loan. N.C.G.S. financed as pertinent part: dis- principal balance fees or include in the lender
[T]he counts not principal exceeding percent amount (2%) two any existing by that lender to be the loan less the refinanced, modified or extended. applies to loans which meet 24-14(f) This section (2005).
N.C.G.S. § following criteria: security part by in instrument on real whole or Secured security prop- instrument on real property, other than first erty; and twenty-five principal not exceed
(2) The amount the loan does ($25,000); thousand dollars [and] than 181 repayable is in no less than six nor more (3) The loan monthly payments, which shall be sub- successive stantially equal in amount. clearly requirements. mеets these Plaintiffs’ loan
§Id. conjunction plain- with Therefore, Moreover, for loans 24-14(f). under N.C.G.S. tiffs’ loan loan, any $300,000, fee or inter- including of less than by Chapter affirmatively permitted imposed by that is not est a lender prohibited Chapter Statutes is 53 of the General 24-8(a). claims of majority of limitations for that the statute holds instant case accrued under the facts violations *6 IN THE SUPREME COURT 143
SHEPARD v. OCWEN FED. BANK (2006)] N.C. 137
[361 reaching conclusion, majority date of the loan. In the that adopts Corp., reasoning in Faircloth v. National Home Loan 313 Supp. curiam, 2d (M.D.N.C.2003), aff'd per App’x E 87 Fed. 314 (unpublished), plaintiff Cir. (4th federal case which arguеd theory present the identical that the instant case. decisions, exception Federal Supreme with the of the United States upon McDowell, binding are not this Court. State v. See 74, 61, 301, N.C. 310 S.E.2d 310 (1984) (State courts should treat binding “decisions of United States Court as persuasiveness decisions lower courts federal such accord[] reasonably might command.”). these decisions disagree I with the Faircloth, rationale in majority, therefore with the for rea sons which follow. paramount public policy
“It protect is the of North Carolina to North Carolina through application resident borrоwers of North Carolina interest laws.” N.C.G.S. 24-2.1 “Our do not courts hesitate to look beneath alleged the forms the transactions to be order to determine whether or not such are transactions reality Kessing in truth and Mortgage Corp., usurious.” v. Nat’l 523, 531, 823, N.C. 180 S.E.2d 828 (1971) (citations omitted). As this Security Mortgage Court stated in Co., Henderson v. and Finance “ ‘A profit,’ greater interest; intentionally than the lawful rate exacted as a money, bonus for the loan of ... ais violation of the ” usury laws, it matters not what or disguise form it assume.’ 273 253, 263, 39, 46 N.C. 160S.E.2d (1968) (quoting English, Doster 325, 237, 754, N.C. 67 S.E. 755 (1910)).
I would hold that claim is not time-barred. Because usurious loan fee was financed and mortgage added to their have usurious interest monthly payment. with comports each This conclusion Security Co., with our view Mortgage in Henderson v. &Finance (1968), right which holds of action “[t]he penalty payment to recover the accrues each payment usurious interest when that is made.” Id. case, plaintiffs’ monthly payment $219.63.
at 47. In instant This payment percent origination amount includes the usurious nine If two had non-usurious monthly payment $203.86. percent, would have been every Accordingly, plaintiffs month. usurious interest Therefore, Henderson, plaintiffs’ following claim is not barred. COURT IN THE SUPREME
JONES v. CITY OF DURHAM my position in the Internal Further cаn be found As a of eco- of financed fees. matter Revenue Service’s treatment *7 recognizes that fees that reality, the Internal Revenue Service nomic closing. Specifically, United States are not at financed fees be deducted as Tax has determined that financed cannot Court year part a in the the loan is made. of the interest on home See, Comm’r, Instead, such e.g., 77 T.C. Schubel v. loan. Id. This treatment fees must be over the life of the deducted reality present plaintiffs’ situation. Plaintiffs have reflects the of the to that include interest for the made and сontinue make alleged usurious loan reasons, I foregoing would hold that claim for
For filing interest twice Accordingly, limitations. I complaint is not barred the statute of respectfully dissent. join dissenting opinion. in this
Justices MARTIN EDMUNDS CITY OF DURHAM and JOSEPH M. LINDA JONES THE KELLY, his in official City capacity police a Durham officer
No. 137A05 (Filed 20 Decеmber city gross negligence speeding on street— Police Officers— — genuine responding another officer’s issue of ma- to call— terial fact presented genuine issue of material fact
Plaintiff’s evidence operation in the police grossly negligent officer was as whether a pedestrian responding while of his when he struck vehicle speed city call on a street to another officer’s for assist- high rate of prior reported in N.C. decision this case ance. is withdrawn. S.E.2d 596
Appeal pursuant 7A-30(2) from the decision App. 433, panel Court of divided part affirming reversing an order (2005), Superior Stanback, A. Jr. January Judge Leon entered on 6 County. September Court Durham Heard