TD Bank, N.A. v. Williams , 247 N.C. App. 864 ( 2016 )

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA 15-598
Filed: 7 June 2016
McDowell County, No. 13 CVS 56
TD BANK, N.A., Plaintiff,
v.
RICKY NEAL WILLIAMS, Defendant.
Appeal by Defendant from an order entered 8 December 2014 by Judge J.
Thomas Davis in McDowell County Superior Court. Heard in the Court of Appeals
18 November 2015.
Ward and Smith, P.A., by Lance P. Martin and Norman J. Leonard, for
Plaintiff-Appellee.
David R. Payne, P.A., by David R. Payne, for Defendant-Appellant.
HUNTER, JR., Robert N., Judge.
Ricky Williams (“Williams”) appeals from the trial court’s grant of summary
judgment in favor of TD Bank. Williams argues genuine issues of material fact
existed relating to the proceeds from a foreclosure sale. He also contends the trial
court erred by dismissing three counterclaims. We affirm in part and dismiss in part.
I. Factual and Procedural History
TD BANK V. WILLIAMS
Opinion of the Court
Williams, individually or as a Trustee, Steak House Inc., and Shuttle Services
Inc. (business entities controlled by Williams), borrowed money from the Bank,
guaranteed loans and secured the loans to the Bank in the following manner:
1. Williams Note:
On or about 5 March 2004, Williams signed an installment promissory note in
the principal amount of $160,000 bearing interest at the rate of five percent (5%) to
Carolina First Bank (“the Williams Note”). Repayment was to be made in 60
installments of $1,271.46, with a final payment of the remaining unpaid balance due
5 March 2009. The note reflects this loan was secured by an assignment of leases
and rents, an assignment of investment property, and a deed of trust on property at
Circle Street. The Assignment of Investment Property assigns Carolina First Bank
a securities account held by UVEST Financial Services in the name of Williams to
secure the Williams Note. The record does not contain a copy of the assignment of
leases and rents or the deed of trust. The loan file for the Williams Note contained a
Securities Entitlement Control Agreement dated 8 March 2004 naming Carolina
First Bank as the secured party, Williams as the debtor, and UVEST as the securities
intermediary. The property subject to the securities agreement included a securities
account held by UVEST Financial Services in the name of Williams. Williams claims
the Securities Entitlement Control Agreement is a product of forgery.
2. Steak House Note:
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TD BANK V. WILLIAMS
Opinion of the Court
On or about 27 March 2007, The Steak House, Inc., a North Carolina
corporation, signed an installment promissory note in the principal amount of
$850,000 bearing interest at the rate of seven and three-quarters percent (7¾%) to
Carolina First Bank (“the Steak House Note”). The note was to be paid back in
monthly installments of $7,039.39 with a balloon payment of the remaining balance
at the end of five years on 27 March 2012. Simultaneously, Williams executed a
guaranty, promising to pay the Steak House Note in the event that Steak House, Inc.
failed to pay the note. In addition, Williams, as Trustee of the Ricky Williams
Revocable Trust, signed a deed of trust dated 27 March 2007 conveying property at
Sterling Street in Morganton to MTNBK, Ltd. in trust for the benefit of Carolina First
Bank to be sold to pay the Steak House Note upon default.
3. Shuttle Truck Note:
On or about 25 June 2007, Shuttle Truck Service, Inc., a North Carolina
corporation, signed an installment promissory note in the principal amount of
$700,000 bearing interest at seven and three-quarters percent (7¾%) per annum (“the
Shuttle Truck Note”). The note was to be repaid in 60 installments of $5,805.54 with
a balloon payment on 2 July 2012 of the remaining balance. According to the loan
agreement, this loan is secured by the following property: an assignment of leases
and rents and a deed of trust on property at US 221 North. The record does not
contain a copy of these documents. Additionally, the loan was cross-collateralized
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TD BANK V. WILLIAMS
Opinion of the Court
with the Steak House Note. The Shuttle Truck Note was personally guaranteed by
Williams on the date it was signed.
When the Williams Note matured on 5 March 2009, Williams was unable to
pay the balance on the note, and he requested that the bank extend the maturity
date. On 5 March 2009, Williams and Carolina First Bank agreed to extend the
maturity date of the Williams note for 60 days. On 20 May 2009, the parties again
extended the maturity date for an additional 60 days.
When the Williams Note matured again, Williams and Carolina First Bank
agreed to enter into a new loan. At the request of Carolina First Bank, UVEST
liquidated $10,000 from Williams’s brokerage account on 21 August 2009 to pay
delinquent property taxes. On 27 August 2009, Carolina First Bank closed on the
loan renewal. The Williams Note was refinanced by a new loan evidenced by a new
promissory note signed by Williams payable to Carolina First Bank in the principal
amount of $148,000 at an interest rate of seven and three-quarters percent (7¾%) per
annum. The new loan paid off the 5 March 2004 loan, which had a remaining balance
of $137,387.42. In the second Williams Note, there are three recitals as follows:
9. LOAN PURPOSE. The purpose of this Loan is RENEW
AND ADD ADDITIONAL COLLATERAL TO MATURED
LOAN $10M NEW MONEY TO COVER APPRAISAL
COST ON THREE COMMERCIAL PROPERTIES.
10. ADDITIONAL TERMS. THIS LOAN IS CROSS
COLLATERALIZED WITH LOAN ----1911 IN THE NAME
OF THE STEAK HOUSE, INC IN THE AMOUNT OF
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TD BANK V. WILLIAMS
Opinion of the Court
$850,000.00, DATED MARCH 27, 2007 SECURED BY
REAL ESTATE AND EQUIPMENT.
11. SECURITY. The Loan is secured by separate security
instruments prepared together with this Note as follows:
Document Name; Parties to Document
Leases And Rents Assignment – 1610 MAIN STREET; J &
R’S FOOD, INC.
Leases And Rents Assignment – 2115 S. STERLING
STREET; THE RICKY N. WILLIAMS REVOCABLE
TRUST
Assignment of Investment Property/Securities – Account
Number ----7087; RICKY N. WILLIAMS
Deed of Trust – 2115 S. STERLING STREET; THE RICKY
N. WILLIAMS REVOCABLE TRUST
Deed of Trust – 1610 MAIN STREET; J & R’S FOOD, INC.
and by the following, previously executed, security
instruments or agreements: ASSIGNMENT OF
INVESTMENT PROPERTIES/SECURITIES HELD IN
THE NAME OF RICKY N. WILLIAMS ISSUED MARCH
5, 2004 SECURED BY UVEST FINANCIAL SERVICES
ACCOUNT # ----7087
On 17 November 2009, Shuttle Truck Service, Inc. and Carolina First Bank
entered into an agreement modifying the Shuttle Truck Note. According to the bank,
the modification agreement included an agreement that Williams would liquidate the
balance of his UVEST brokerage account and apply the remaining balance to the
Williams Note. However, the modification contract does not reflect that
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TD BANK V. WILLIAMS
Opinion of the Court
understanding. UVEST liquidated the remaining balance, $94,058.76 from the
account on 30 November 2009.
On 30 September 2010, Carolina First Bank merged into TD Bank, N.A.. The
assets including the loans and the secured properties underlying these three notes
were transferred to TD Bank as Carolina First Bank’s successor in interest.
According to the complaint, The Steak House, Inc. defaulted on its loan. The
record does not contain a payment history on the Steak House note, a date of default,
or a demand letter requesting payment in full. On 12 October 2010, Williams failed
to make a payment on the Williams Note, and was assessed a late fee of $56.10.
Williams was assessed four additional late fees and made no additional payments on
his personal loan. The record does not contain a demand letter requesting payment
in full of the Williams Note. According to the final report of sale, the Trustee
foreclosed on the Williams Revocable Trust property by bidding in the amount of
$595,000. The final report states that of this sum $591,850.40 went to pay the
obligations owed on the Williams Note and the Steak House Note. TD Bank was the
successful bidder at the sale of the property.
On 22 January 2013, TD Bank filed a verified complaint seeking monetary
damages from Williams on the basis of his breach of guaranty of the Steak House
Note and for his failure to pay the Williams Note. In addition to monetary damages,
TD Bank sought attorneys fees of 15% of the amount of the outstanding indebtedness
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TD BANK V. WILLIAMS
Opinion of the Court
on the basis of N.C. Gen. Stat. § 6-21.2. The record contains no summons so we are
unable to discern when service was returned.
On 13 May 2013, Williams responded to the complaint by filing a Rule 12(b)(6)
motion to dismiss, an unverified answer containing general denials to some of the
allegations in the complaint and defenses to liability under the Deficiency Judgment
Act. Subsequently, Williams sought to amend his answer by filing a “Proposed
Amended Answer” to add additional defenses and include a counterclaim for
negligence, negligent entrustment, and a Chapter 75 violation for unfair and
deceptive trade practices. However, there is no order allowing the proposed
amendment to the complaint in our record.
On 30 October 2014, TD Bank filed an “amended” motion for summary
judgment. With its motion, TD Bank filed four affidavits and the transcript from
Williams’s deposition together with supporting documents. The affidavits and
deposition are described below.
The affidavit of Elizabeth Walker, previously the Vice President and City
Executive for TD Bank in Marion, North Carolina, establishes Walker was involved
in Carolina First Bank’s relationship with Williams and his corporations. Walker
stated that she “had many conversations with Williams and his accountant, Frank
Biddix, concerning the loans because they were often past due or because the bank
often received only partial payments on some of the loans.” She described all of the
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TD BANK V. WILLIAMS
Opinion of the Court
loans as “seriously delinquent.” Additionally, the closing on the renewal of the
Williams Note was delayed when Carolina First Bank discovered Williams owed
delinquent real property taxes. Walker sent UVEST a letter authorizing them to
liquidate $10,000 for the purpose of paying Williams’s delinquent taxes. Shuttle
Truck defaulted on its note in 2009. On 17 November 2009, Williams requested the
bank modify the Shuttle Truck Note rather than exercise the Bank’s rights of default
under that note. Carolina First Bank agreed, allowing Shuttle Truck, Inc. to make
interest-only payments for six months in return for Williams agreeing to liquidate
the remaining balance of his brokerage account to reduce the amount owed on the
Williams Note. Walker contacted UVEST on 24 November 2009, authorizing them
to liquidate the remaining balance of the brokerage account. Until 11 July 2011,
Williams continued to make monthly payments on the Williams Note. However, the
attached payment history does not contain any records from 10 November 2010
through 8 November 2013.
The second affidavit, the affidavit of Shelley McTaggart, the Vice President of
TD Bank, contained the following in support of the bank’s motion for summary
judgment. After default on the Steak House Note, TD Bank commenced foreclosure
proceedings in Burke County. The bank’s bid of $595,000 was the only bid for the
property. After applying the proceeds of the sale to expenses of the foreclosure
proceeding and the Steak House Note, a balance of $238,940.71 remained on the
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TD BANK V. WILLIAMS
Opinion of the Court
Steak House Note. She also explained the UVEST account securing the Williams
Note was maintained by UVEST Financial Services, not Carolina First Bank. She
admits a clerical error in some documents in the loan file which list Carolina First
Bank as the holder of the account. UVEST has never been a subsidiary or affiliate of
Carolina First Bank or TD Bank.
Terri Payne, the Vice President of Client Support Services of LPL Financial
(“LPL”), a custodian of records for UVEST Financial Services, executed an affidavit
for LPL. LPL is an affiliate of UVEST. In 2004, Williams registered an individual
brokerage account with UVEST. The account was opened under the name Carolina
First Collateral Account for Benefit of Ricky N. Williams. UVEST held the account
as collateral for a loan with Carolina First Bank. The account was opened with the
instruction that “it is acceptable to distribute cash and future dividends off this
account to the customer. Trading, however, should be limited as to not drop below
the value of the account at the time the loan was closed.” In January 2006, Williams
bought shares in Enterra Energy. Williams initiated the purchase. In January 2007,
Williams sold his shares in Enterra as well as shares in Ford Motor Company. The
trade confirmation represents the sale was solicited by a UVEST representative. The
same month, Williams bought mutual funds in the amount of $130,000. On 21
August 2009, UVEST liquidated securities in the account in the amount of $10,000
and tendered a check in that amount to Carolina First Bank. At the request of
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TD BANK V. WILLIAMS
Opinion of the Court
Carolina First Bank, UVEST liquidated the remainder of the account on or about 30
November 2009, tendering a check to Carolina First Bank in the amount of
$94,058.76. She also noted the value of the brokerage account declined over time
between 2004 and 2009 due to the stock market decline.
Finally, TD Bank filed an affidavit of David Wooten, a former Market
Executive for the Marion office of Carolina First Bank, in support of its motion for
summary judgment. Wooten was involved in the bank’s loan to Williams in his
individual capacity. Wooten did not forge Williams’s name on the loan documents,
including the Assignment of Investment Properties, nor does he have reason to
believe any other person at Carolina First Bank forged Williams’s signature.
TD Bank also filed a deposition of Williams with its motion for summary
judgment. In his deposition, Williams explained he was the president and sole
shareholder of The Steak House, Inc. He bought a Western Sizzlin’ and converted it
into The Steak House. Since 2008, the restaurant has generated no revenue and has
no employees. Williams is also the president of Shuttle Truck Service, Inc. Shuttle
Truck Service is a truck stop that washes trailers and has a snack area. He bought
the company from its previous owner.
In his deposition, Williams described his meeting at Carolina First Bank when
he executed the Williams Note. He explained he discussed having an investment
account as collateral for the loan with a man at the bank. Because of that
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TD BANK V. WILLIAMS
Opinion of the Court
conversation, he thought UVEST and Carolina First Bank were part of the same
company. He did not, however, recognize the Securities Control Agreement dated 5
March 2004. The Agreement, which was part of the Williams Note file, was executed
when Williams lived in Michigan. As a result, Williams contends the Agreement was
forged, because he did not live at the address listed on the Agreement at that time.
He also said “this definitely is not my signature.”
In response to TD Bank’s motion for summary judgment, Williams filed a
verified response and a cross motion for partial summary judgment related to the
deficiency claim on 2 November 2015. The response contained the following factual
allegations:
14. In 2009 as a result of the banking crisis across America
the Defendant struggled to make payments to Carolina
First Bank but was assured by Beth Walker of Carolina
First Bank that the bank would work with him related to
his loans. The real estate which secured the Morganton
Steak House was valuable and he felt as if in the event of
a potential foreclosure that the property would more than
cover the value of the loan. The value of the property
located at 2115 South [Sterling] Street in June of 2009 was
$1,060,000.00.
15. The Defendant listed the property for $1,700,000.00 in
2009 and in August of 2011 he entered into a lease/option
agreement with respect to the subject property in the
amount of $1,500,000.00.
Attached to the response, Williams provided an appraisal of the property for
$1,060,000 dated 16 June 2009, a listing agreement with a real estate agent listing
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TD BANK V. WILLIAMS
Opinion of the Court
the sale price at $1,700,000 dated 16 March 2009, and a lease with purchase option
in the amount of $1,500,000 dated 20 June 2011.
On 8 December 2014, the trial court entered an order granting summary
judgment in favor of TD Bank. The order decreed TD Bank recover $296,402.27 in
relief under the Steak House Note plus interest and reasonable attorneys fees as well
as $46,744.80 on the Williams Note plus interest and reasonable attorneys fees. The
trial court also dismissed Williams’s counterclaims. Williams timely entered a Notice
of Appeal.
II. Jurisdiction
As an appeal from a final judgment of a superior court, jurisdiction lies in this
Court pursuant to N.C. Gen. Stat. § 7A-27(b).
III. Standard of Review
On appeal, an order granting summary judgment is reviewed de novo.
Howerton v. Arai Helmet, Ltd., 358 N.C. 440, 470, 597 S.E.2d 674, 693 (2004).
Summary judgment is appropriate only when there is no genuine issue of material
fact and any party is entitled to judgment as a matter of law. In re Will of Jones, 362
N.C. 569, 573, 669 S.E.2d 572, 576 (2008).
When reviewing the evidence on a motion for summary judgment, we review
evidence presented in the light most favorable to the non-moving party. Summey v.
Barker, 357 N.C. 492, 496, 586 S.E.2d 247, 249 (2003). Moreover, “if the granting of
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TD BANK V. WILLIAMS
Opinion of the Court
summary judgment can be sustained on any grounds, it should be affirmed on
appeal.” Wells Fargo Bank, N.A. v. Arlington Hills of Mint Hill, LLC, 226 N.C. App.
174, 176, 742 S.E.2d 201, 203 (2013) (quoting Shore v. Brown, 324 N.C. 427, 428, 378
S.E.2d 778, 779 (1989)).
IV. Analysis
A. Summary Judgment
N.C. Gen. Stat. § 45-21.36 makes a statutory defense available to loan obligors
in actions brought by a lender to recover the deficiency following a foreclosure sale of
the collateral. Branch Banking and Trust Co. v. Smith, __ N.C. App. __, __, 769
S.E.2d 638, 641–642 (2015). A deficiency judgment is an imposition of personal
liability on a mortgagor for the unpaid balance of the mortgage debt after proceeds
from a foreclosure sale have been applied to the debt, and failed to satisfy the total
debt due. Hyde v. Taylor, 70 N.C. App. 523, 526, 320 S.E.2d 904, 906 (1984). The
statute reads:
When any sale of real estate has been made by a
mortgagee, trustee, or other person authorized to make the
same, at which the mortgagee, payee or other holder of the
obligation thereby secured becomes the purchaser and
takes title either directly or indirectly, and thereafter such
mortgagee, payee or other holder of the secured obligation,
as aforesaid, shall sue for and undertake to recover a
deficiency judgment against the mortgagor, trustor or
other maker of any such obligation whose property has
been so purchased, it shall be competent and lawful for the
defendant against whom such deficiency judgment is
sought to allege and show as matter of defense and offset,
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TD BANK V. WILLIAMS
Opinion of the Court
but not by way of counterclaim, that the property sold was
fairly worth the amount of the debt secured by it at the
time and place of sale or that the amount bid was
substantially less than its true value, and, upon such
showing, to defeat or offset any deficiency judgment
against him, either in whole or in part[.]
N.C. Gen. Stat. § 45-21.36 (2015).
A guarantor is entitled to the statutory defense as well, even if the borrower
has been dismissed from the action. Branch Banking and Trust, __ N.C. App. at __,
769 S.E.2d at 642 (citing Virginia Trust Co. v. Dunlop, 214 N.C. 196, 198 S.E. 645(1938)). By allowing guarantors to exert a defense under the statute in addition to
the mortgagor, the statute “establishes an equitable method of calculating the
indebtedness.” High Point Bank and Trust Co. v. Highmark Properties, LLC, 368
N.C. 301, 305, 776 S.E.2d 838, 841 (2015).
In order to calculate the indebtedness, the statute requires the holder of the
obligation to show “that the property sold was fairly worth the amount of the debt
secured by at the time and place of sale or that the amount bid was substantially less
than its true value.” N.C. Gen. Stat. § 45-21.36 (2015). The burden of proof lies with
the mortgagor or guarantor to provide evidence that at the time of sale either the
property was worth more than the debt or that the mortgagee’s bid was substantially
less than its true value. Branch Banking and Trust, __ N.C. App. at __, 769 S.E.2d
at 641. Under N.C. Gen. Stat. § 45-21.36, Williams is entitled to benefit from the
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Opinion of the Court
statutory defense because he is the mortgagor of the Williams Note and a guarantor
of the Steak House Note.
Pursuant to Rule 56 of the North Carolina Rules of Civil Procedure, summary
judgment shall be rendered “if the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact . . . .” N.C. Gen. Stat. § 1A-1, Rule 56 (2015). A
verified complaint or motion may be treated as an affidavit if it meets the above
criteria. See Wein II, LLC v. Porter, 198 N.C. App. 472, 477, 683 S.E.2d 707, 711
(2009). At summary judgment, the non-moving party must set forth specific facts by
affidavits, depositions, answers to interrogatories, and other means provided by Rule
56 to show a genuine issue of material fact exists. Any affidavit submitted at
summary judgment must “be made on personal knowledge, shall set forth such facts
as would be admissible in evidence, and shall show affirmatively that the affiant is
competent to testify to the matters stated therein.” N.C. Gen. Stat. § 1A-1, Rule 56
(2015). Unsworn letters and correspondence are not the type of evidence considered
by the court at summary judgment, and should not be considered. Duke Energy
Carolinas, LLC v. Bruton Cable Serv., Inc., 233 N.C. App. 468, 473, 756 S.E.2d 863,
866 (2014).
The central issue of this appeal is whether Williams has presented a forecast
of evidence sufficient to raise a question of material fact. Under the issue to be
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Opinion of the Court
decided by the court, a property owner may testify to the value of his or her property.
“Unless it affirmatively appears that the owner does not know the market value of
his property, it is generally held that he is competent to testify as to its value.”
Goodson v. Goodson, 145 N.C. App. 356, 361, 551 S.E.2d 200, 204 (2001) (quoting N.C.
Highway Comm. v. Helderman, 285 N.C. 645, 652, 207 S.E.2d 720, 725 (1974)). This
stems from the rule that lay persons may testify as to the value of real property “if
the witness can show he has knowledge of the property and some basis for his
opinion.” See Finney v. Finney, 225 N.C. App. 13, 16, 736 S.E.2d 639, 642 (2013)
(quoting Whitman v. Forbes, 55 N.C. App. 706, 711, 286 S.E.2d 889, 892 (1982)).
Here, Williams alleged TD Bank did not extract the full value of the property
as a defense in his unverified answer filed 13 May 2013. He contends the value of the
property was sufficient to pay the mortgage in full. Because the answer is unverified,
it does not support a holding that Williams has forecast evidence that a genuine
issue of material fact of value exists.
However Williams’s motion for partial summary judgment was verified and
contends that the Sterling Street property was fairly worth the amount of debt
secured by it at the time and place of sale. At the time of the foreclosure sale,
Williams owed $830,800.11 on the Steak House Note and $41,836.50 on the Williams
Note, for a total of $872,636.61. The evidence presented by Williams that the
property was worth more than the indebtedness is contained within Williams’s
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Opinion of the Court
verified response to the motion for summary judgment. There he alleges the following
facts:
14. In 2009 as a result of the banking crisis across America
the Defendant struggled to make payments to Carolina
First Bank but was assured by Beth Walker of Carolina
First Bank that the bank would work with him related to
his loans. The real estate which secured the Morganton
Steak House was valuable and he felt as if in the event of
a potential foreclosure that the property would more than
cover the value of the loan. The value of the property
located at 2115 South [Sterling] Street in June of 2009 was
$1,060,000.00.
15. The Defendant listed the property for $1,700,000.00 in
2009 and in August of 2011 he entered into a lease/option
agreement with respect to the subject property in the
amount of $1,500,000.00.
Attached to Fact 14, Williams provided one page of an appraisal by a
commercial appraising company, Miller & Associates, stating that on 10 June 2009
the Sterling Street Property was worth $1,060,000.00. With Fact 15, Williams
provided a listing agreement, listing the sale price of the property at $1,700,000.00
dated 16 March 2009 and a lease with purchase option in the amount of $1,500,000.00
dated 29 June 2011. The attachments were not accompanied by supporting data or
affidavits from the appraiser or the real estate professionals stating that on the date
of the foreclosure the property was valued at these amounts. Furthermore, Williams
himself does not aver that he has an opinion of the value of the property at the time
of the foreclosure or that he relied on these documents in reaching this conclusion.
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Opinion of the Court
Finding no other verified evidence in the record supporting Williams’s property value
claim, we hold Williams fails to forecast evidence sufficient to create a question of
material fact. Because Williams did not base the value of the property on his personal
knowledge and because we have no alleged value from Williams at the time of sale,
there is a lack of evidence to support Williams’s claims that the property was worth
more than the value obtained at the foreclosure sale. We therefore affirm the trial
court’s grant of summary judgment.
B. Dismissed Claims
Williams filed a Proposed Amended Answer alleging negligence, negligent
entrustment, and a Chapter 75 violation. Williams argues the trial court erred by
dismissing these three claims. Because we find no order in the record showing the
trial court allowed Williams to amend his answer, we cannot consider a “proposed”
amended answer. If a necessary pleading is not contained in the record on appeal,
the proper remedy is to dismiss the appeal. Washington County v. Norfolk Southern
Land Co., 222 N.C. 637, 638, 24 S.E.2d 338, 339–340 (1943).
V. Conclusion
For the foregoing reasons, we affirm in part and dismiss in part.
AFFIRMED IN PART AND DISMISSED IN PART.
Judges STEPHENS and INMAN concur.
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