Wells Fargo Bank, N.A. v. Hundley ( 2014 )

An unpublished opinion of the North Carolina Court of Appeals does not constitute
controlling legal authority. Citation is disfavored, but may be permitted in
accordance with the provisions of Rule 30(e)(3) of the North Carolina Rules of
A p p e l l a t e P r o c e d u r e .
NO. COA13-1038
NORTH CAROLINA COURT OF APPEALS
Filed: 1 April 2014
WELLS FARGO BANK, N.A.,
Plaintiff,
v. Rockingham County
No. 12 CVS 1522
BAMBI T. HUNDLEY, WILLIAM C.
HUNDLEY, DAVID M. TOLBERT, and
VICKI M. TOLBERT,
Defendants.
Appeal by Plaintiff from order entered 14 May 2013 by Judge
Edwin G. Wilson, Jr., in Rockingham County Superior Court.
Heard in the Court of Appeals 5 February 2014.
The Law Office of John T. Benjamin, Jr., P.A., by John T.
Benjamin, Jr., and James R. White, for Plaintiff.
Ivey, McClellan, Gatton & Talcott, LLP, by Darren A.
McDonough, for Defendants.
STEPHENS, Judge.
Procedural History and Factual Background
On 28 August 2012, Plaintiff Wells Fargo Bank, N.A., filed
a complaint seeking a declaratory judgment, to quiet title, and
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reformation1 of a deed of trust along with a notice of lis
pendens, concerning a piece of real property in Rockingham
County. Defendants Bambi T. Hundley, William C. Hundley, David
M. Tolbert, and Vicki M. Tolbert moved to dismiss Plaintiff’s
complaint pursuant to Rule of Civil Procedure 12(b)(6).
Following a hearing on that motion on 25 March 2013, the trial
court entered an order on 14 May 2013 dismissing Plaintiff’s
complaint for failure to state a claim upon which relief could
be granted. Plaintiff filed a written notice of appeal on 13
May 2013, prior to entry of the court’s order, and filed a
second written notice of appeal on 20 May 2013.
On 18 July 2007, Bambi Hundley and David Tolbert
(collectively, “the borrowers”)2 obtained a loan in the amount of
$193,662 from Plaintiff to finance the construction of a
1
Although the complaint does not specifically label any claim as
reformation, “when the allegations in the complaint give
sufficient notice of the wrong complained of an incorrect choice
of legal theory should not result in dismissal of the claim if
the allegations are sufficient to state a claim under some legal
theory. . . .” Haynie v. Cobb, 207 N.C. App. 143, 149, 698
S.E.2d 194, 198 (2010) (citation, internal quotation marks, and
bracket omitted). Plaintiff’s complaint provides sufficient
notice to Defendants of a claim for reformation. Defendants did
not contend otherwise in the trial court, and specifically
address the reformation claim in their brief to this Court.
2
The other two named defendants are the spouses of the
borrowers.
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manufactured home on a piece of real property in Reidsville. An
appraisal conducted as part of the loan process fixed the value
of the land alone at $15,000 and the combined value of the land
and planned home at approximately $215,000.
Upon closing the loan, the borrowers executed a note in the
amount of $193,662 payable to Plaintiff. The note was secured
by a deed of trust, executed by Defendants, on real property and
including any later-existing improvements having a street
address of 2141 Grooms Road, Reidsville, North Carolina 27320.
Exhibit A attached to the deed of trust described the property
as “[l]ying and being in Williamsburg Township on the North Side
of Grooms Road, S.R. #2571” and further delineated by a metes
and bounds description.
The borrowers subsequently defaulted on the loan.
Plaintiff sought an order from the court allowing a foreclosure
sale of the property. The clerk of superior court in Rockingham
County entered an order to allow the foreclosure sale on 27
August 2010, and the foreclosure sale was finalized on 3
December 2010, conveying the property back to Plaintiff as the
last and highest bidder.
A survey obtained after the foreclosure was concluded
revealed that the home financed by the loan, although having a
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street address of 2141 Grooms Road in Reidsville, had been
constructed just north of the approximately one-acre tract
described in the metes and bounds description in Exhibit A to
the deed.3 Realizing that the portion of the property covered by
the metes and bounds description did not include the home and
was thus worth only a small fraction of the $193,662 promissory
note, Plaintiff instituted this action.
In their answer, Defendants alleged the following
affirmative defenses: (1) Plaintiff’s lack of standing to bring
the action; (2) the three-year statute of limitations contained
in section 1-52(9); (3) waiver, estoppel, and unclean hands; and
(4) payment and release. In their motion to dismiss pursuant to
Rule 12(b)(6) and at the hearing before the trial court,
Defendants alleged only that, because the foreclosure sale had
been completed, Plaintiff was no longer a lender, but rather was
now merely a purchaser. Accordingly, Defendants contended that
no causes of action would permit Plaintiff to obtain the relief
sought, to wit, reformation of the property description attached
to the deed of trust. The trial court dismissed all of
Plaintiff’s claims, and this appeal ensued.
3
Nothing in the record suggests that the parties intended that
the deed of trust cover anything other than the one-acre tract
described in Exhibit A and the house to be built thereupon.
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Standard of Review
The standard of review of an order granting
a 12(b)(6) motion is whether the complaint
states a claim for which relief can be
granted under some legal theory when the
complaint is liberally construed and all the
allegations included therein are taken as
true. On a motion to dismiss, the
complaint’s material factual allegations are
taken as true. Dismissal is proper when one
of the following three conditions is
satisfied: (1) the complaint on its face
reveals that no law supports the plaintiff’s
claim; (2) the complaint on its face reveals
the absence of facts sufficient to make a
good claim; or (3) the complaint discloses
some fact that necessarily defeats the
plaintiff’s claim. On appeal of a 12(b)(6)
motion to dismiss, this Court conducts a de
novo review of the pleadings to determine
their legal sufficiency and to determine
whether the trial court's ruling on the
motion to dismiss was correct.
Burgin v. Owen, 181 N.C. App. 511, 512, 640 S.E.2d 427, 428-29
(citations and internal quotation marks omitted), disc. review
denied and appeal dismissed, 361 N.C. 425, 647 S.E.2d 98, cert.
denied, 361 N.C. 690, 652 S.E.2d 257 (2007).
Discussion
On appeal, Plaintiff argues that the trial court erred in
dismissing its claims for (1) reformation of the deed of trust,
(2) a declaratory judgment, and (3) to quiet title. We agree.
I. Reformation of the Deed of Trust
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Reformation is a well-established equitable
remedy used to reframe written instruments
where, through mutual mistake or the
unilateral mistake of one party induced by
the fraud of the other, the written
instrument fails to embody the parties’
actual, original agreement. A mutual
mistake is one common to both parties to a
contract . . . wherein each labors under the
same misconception respecting a material
fact, the terms of the agreement, or the
provisions of the written instrument
designed to embody such agreement.
Reformation is proper to give effect to the
terms of the contract the parties originally
agreed upon provided there is clear, cogent
and convincing evidence of the parties’
intentions to contract upon these terms.
Metropolitan Prop. & Cas. Ins. Co. v. Dillard, 126 N.C. App.
795, 798, 487 S.E.2d 157, 159 (1997) (citations and internal
quotation marks omitted; alteration in original). The purchaser
of real property at a foreclosure sale may bring an action for
declaratory judgment and to reform alleged errors in deeds or
other documents executed during transactions affecting the real
property even if those transactions predated the foreclosure
sale. See Citifinancial Mortg. Co. v. Gray, 187 N.C. App. 82,
85, 652 S.E.2d 321, 322 (2007) (upholding the trial court’s
judgment where a lender who, like Plaintiff here, was also
eventually the purchaser of property at a foreclosure sale,
obtained reformation of deeds, foreclosure judgments, and other
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transaction documents affecting the real property purchased at
the foreclosure sale).
Here, Plaintiff’s complaint sufficiently stated a claim for
reformation based upon mutual mistake. The complaint
specifically alleges that (1) the parties all intended that
Plaintiff’s loan to the borrowers be secured by a deed of trust
which would include the property on which the home would be
constructed, (2) due to a mutual mistake of the parties, the
deed of trust inaccurately described the property to exclude the
portion on which the home was constructed, and (3) Plaintiff has
no adequate remedy at law. Further, like the lender/purchaser
in Citifinancial Mortg. Co., Plaintiff, as purchaser of the
property at a foreclosure sale, has standing to bring a claim
for reformation. Accordingly, Plaintiff’s complaint
sufficiently stated a claim for reformation of the deed of
trust.
On appeal, Defendants do not contend that Plaintiff’s
complaint failed to include the allegations required to state a
claim for reformation. Instead, Defendants argue their own
allegations regarding weaknesses in the merits of Plaintiff’s
claim and its forecast of evidence. These matters are not
relevant to the question of whether Plaintiff’s complaint is
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sufficient to survive dismissal on a Rule 12(b)(6) motion, and
thus we do not consider them.
II. Declaratory Judgment
A motion to dismiss for failure to state a
claim is seldom appropriate in actions for
declaratory judgments, and will not be
allowed simply because the plaintiff may not
be able to prevail. The motion is allowed
only when there is no basis for declaratory
relief, as when the complaint does not
allege an actual, genuine existing
controversy. A claim for declaratory relief
is sufficient if the complaint alleges the
existence of a real controversy arising out
of the parties’ opposing contentions and
respective legal rights under a deed, will
or contract in writing.
Morris v. Plyler Paper Stock Co., 89 N.C. App. 555, 557, 366
S.E.2d 556, 558 (1988) (citation and internal quotation marks
omitted).
Here, the complaint alleges that Plaintiff owns the real
property located at 2141 Grooms Road in Reidsville and that the
property includes the home constructed thereon. The complaint
alleges that Defendants assert that Plaintiff does not own the
portion of the property including the home. Thus, “the
complaint alleges the existence of a real controversy arising
out of the parties’ opposing contentions and respective legal
rights under a deed[.]” See id. Thus, Plaintiff’s complaint
sufficiently stated a claim for a declaratory judgment.
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III. Quiet Title
“The statutory action to quiet title to realty consists of
two essential elements. The first is that the plaintiff must
own the land in controversy, or have some estate or interest in
it; and the second is that the defendant must assert some claim
to such land adverse to the plaintiff’s title, estate or
interest.” Wells v. Clayton, 236 N.C. 102, 107, 72 S.E.2d 16,
20 (1952) (citations omitted). Here, the complaint alleges that
Plaintiff owns the real property in controversy and that it held
a deed of trust secured by the property. The complaint also
alleges that Defendants claim an interest in the same real
property adverse to Plaintiff’s interest. Accordingly,
Plaintiff’s complaint sufficiently stated a claim to quiet
title.
While we express no opinion as to the merits of Plaintiff’s
claims, we conclude that the trial court erred in dismissing the
complaint pursuant to Rule 12(b)(6). Accordingly, the order is
REVERSED.
Judges BRYANT and DILLON concur.
Report per Rule 30(e).