Dobson v. Substitute Trustee Services, Inc.

STEPHENS, Judge.

Factual and Procedural Background

On 31 July 1996, Plaintiff Linda G. Dobson (“Dobson”) and her husband borrowed, at a yearly rate of 12.41% interest, $50,400.00 from Equivantage, Inc. (“Equivantage”). Dobson executed a promissory note in favor of Equivantage in that same amount, the terms of which (1) required Dobson to make monthly payments of interest and principal amounting to $534.38, not including escrow; (2) charged a fee to Dobson for any late payments in the amount of “4.000% of [the] overdue payment of principal and interest;” and (3) stated that Dobson would be in default under the note if she did not pay the full amount of each monthly payment on its due date. Along with the note, Dobson executed a deed of trust securing Dobson’s promise to pay with property located in Magnolia, North Carolina, and owned by Dobson and her husband.

In September 2001, Equivantage assigned the note and deed of trust to Defendant Wells Fargo Bank Minnesota, N.A.¹ (“Wells Fargo”). In October 2001, “Dobson became delinquent under the repayment terms.” At that time, the unpaid principal balance on the note was $49,288.96. To cure Dobson’s delinquency under the note, the parties agreed to the following modifications of the note: (1) $3,987.30 was capitalized as principal, resulting in an unpaid principal balance of $53,276.26; (2) Dobson was required to make monthly payments of interest and principal in the amount of $578.19 and escrow payments estimated at $62.51; and (3) the new maturity date was to be 1 November 2026. The loan modification agreement was signed by Dobson in February 2002.

Dobson made regular payments under the note between March 2002 and November 2003. However, Dobson stopped making payments after November 2003, and in March 2004, Wells Fargo “caused to be filed a foreclosure action assigned special proceeding number 04 SP 94.” On 2 April 2004, following commencement of foreclosure proceedings, Dobson filed a bankruptcy petition in the Eastern District of North Carolina to stay the foreclosure. The bankruptcy court created a bankruptcy plan and stayed foreclosure for several years until, on 18 July 2007, the bankruptcy court dismissed Dobson’s case for failure to comply with the provisions of the bankruptcy plan.

In September 2007, Defendant Substitute Trustee Services, Inc. (“STS”), as substitute trustee for Wells Fargo, filed a foreclosure action with the Duplin County Clerk of Superior Court. In an order filed 25 October 2007, the Duplin County Clerk of Superior Court found that (1) Wells Fargo is the holder of the note; (2) “[t]he total due under the note and [d]eed of [t]rust was undetermined;” and (3) “[t]here was insufficient evidence that [Dobson] was in default under the terms of the [d]eed of [t]rust.” The Clerk of Superior Court then ordered that “the foreclosure of the deed of trust... is dismissed with prejudice.”

On 29 October 2007, Wells Fargo gave notice of appeal of the dismissal to the Duplin County Superior Court. On 1 November 2007, Dobson filed a complaint against Wells Fargo, STS, Equivantage, and Defendant America’s Servicing Company (“ASC”) (collectively, “Defendants”) seeking (1) both a preliminary and permanent injunction against the foreclosure proceedings; (2) an equitable accounting and appointment of a referee; and (3) appointment of a mediator. On 13 November 2007, the trial court granted Dobson’s request for a preliminary injunction.

Defendants answered Dobson’s complaint on 14 January 2008, and on 10 September 2009, following a lengthy period of discovery, Dobson filed a motion for partial summary judgment. In an order entered 6 October 2009, Superior Court Judge Russell J. Lanier, Jr., denied Dobson’s motion for partial summary judgment on the permanent injunction claim, but held open Dobson’s motion on the requests for appointment of a referee and for an equitable accounting. On 30 November 2009, Defendants filed their own motion for summary judgment, requesting that Dobson’s action be dismissed. At the 7 December 2009 hearing on Defendants’ motion, Dobson “renewed and reopened” her previous summary judgment motion, which action was allowed by the trial court. On 28 December 2009, following the hearing on the motions for summary judgment, the trial court denied Defendants’ motion and partially granted Dobson’s motion for summary judgment by “permanently enjoin[ing] [Defendants] from foreclosing upon, or taking any steps of any nature to cause the foreclosure of the [d]eed of [t]rust. . . until such a time as Defendants can establish that they are the owner and holder of the [n]ote[] and the amount owed by [Dobson].” Wells Fargo and ASC gave notice of appeal of Judge Lanier’s order on 27 January 2010.

Discussion

Summary judgment is proper when, viewed in the light most favorable to the nonmovant, “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 and that any party is entitled to a judgment as a matter of law.” See S.B. Simmons Landscaping & Excavating, Inc. v. Boggs, 192 N.C. App. 155, 163-64, 665 S.E.2d 147, 152 (2008).

On appeal, Defendants argue that the trial court erred by granting partial summary judgment for Dobson because, based on the evidence before the court, Dobson was not entitled to judgment as a matter of law. For the following reasons, we agree.

“A party moving for summary judgment may prevail if it meets the burden ... of showing through discovery that the opposing party cannot produce evidence to support an essential element of his or her claim.” Bone Int’l, Inc. v. Brooks, 304 N.C. 371, 375, 283 S.E.2d 518, 520 (1981). In this case, the trial court concluded that Defendants should be enjoined from pursuing foreclosure because, as a matter of law, the evidence presented by Defendants was insufficient “to prove the existence of the facts necessary to allow a foreclosure.” Specifically, the court concluded that Defendants failed to present legally sufficient evidence to establish (1) that Wells Fargo is the holder of the note and (2) the amount owed by Dobson on the note. Both of these conclusions are erroneous.

On the issue of Wells Fargo’s status as holder of the note, Defendants presented the following evidence to establish that Wells Fargo is the holder of the note: (1) an affidavit by the vice president of loan documentation of Wells Fargo, which states that “[t]he owner and holder of the [n]ote and indebtedness is[] Wells Fargo;” (2) an affidavit by a default litigation specialist with Wells Fargo, which states that “Wells Fargo is the present and current holder of the [n]ote;” (3) a photocopy of the original note; and (4) a photocopy of the document assigning the note to “Norwest Bank Minnesota,” which is “now known as Wells Fargo.”

Despite this evidence establishing Wells Fargo as the holder of the note, Dobson argues on appeal — and successfully argued before the trial court — that Wells Fargo has not proven that it is the holder of the note because it failed to produce the original note. This argument is unavailing.

Under similar circumstances, this Court has held that where there is no evidence that photocopies of a note or deed of trust are not exact reproductions of the original instruments, a party need not present the original note or deed of trust and may establish that it is the holder of the instruments by presenting photocopies of the note or deed of trust. In In re Adams, — N.C. App. —, 693 S.E.2d 705 (2010), respondents argued that a foreclosing party “did not present competent evidence that it had possession of the Note and Deed of Trust because it offered only photocopies of the Note and Deed of Trust, rather than the original instruments.” Id. at —, 693 S.E.2d at 709. Based on a previous decision in In re Helms, 55 N.C. App. 68, 284 S.E.2d 553 (1981), disc. review denied, 305 N.C. 300, 291 S.E.2d 149 (1982)—in which this Court “determined that the photocopies of the promissory note and deed of trust were sufficient competent evidence to establish the required elements under [the foreclosure statute,]” id. at —, 693 S.E.2d at 709 (citing Helms, 55 N.C. App. at 70-71, 284 S.E.2d at 555) — the Court in Adams held that “[b]ecause respondents do not dispute that the photocopies are ‘correct copies’ of the original instruments, we conclude that [a foreclosing party] was not required to present the original Note and Deed of Trust at the foreclosure hearing to establish that it was in possession of these instruments.” Id. at —, 693 S.E.2d at 709-10.

In this case, although Dobson does not admit that the photocopy of the note is a correct copy, Dobson has presented no evidence to dispute the fact that Wells Fargo is the holder of the note. Dobson contends in her brief that she “specifically disputes that the photocopy of the [n]ote is a true and correct copy of the original.” However, Dobson’s only “dispute” of the authenticity of the note comes from her 7 December 2009 affidavit, in which she states that “I cannot confirm the authenticity of the copy of the [n]ote produced by the Defendants.” This bare statement by Dobson is insufficient to cast doubt on Defendants’ evidence that Wells Fargo is the holder of the note and does not serve as evidence that the copies are not exact reproductions.

Dobson further contends that in its “response to [Dobson’s] first request for admission,” Wells Fargo itself denied possession of the original note and, therefore, Defendants are required to establish that Wells Fargo is the holder of the note by presentation of the original note. Again, we are unpersuaded by Dobson’s argument. The response by Wells Fargo that Dobson characterizes as Defendants’ denial of possession of the original note reads as follows:

Wells Fargo did not prepare the loan origination documents, and is unsure as to whether the documents attached to [Dobson’s] first request for admission constitute the complete set of loan origination documents used by Equivantage in the formation of [Dobson’s] home loan. Because Wells Fargo did not originate this account, Wells Fargo denies that the documents attached to [Dobson’s] first request for admission are true and correct copies of the loan origination documents signed by [Dobson] and used by Equivantage in the formation of [Dobson’s] home loan.

However, Wells Fargo admits that the documents attached to [Dobson’s] first request for admissions are true and correct copies of all loan origination documents currently in the possession of Wells Fargo that were acquired when Wells Fargo was assigned the payment rights to [Dobson’s] account.

In our view, this statement by Wells Fargo clearly is not a denial of possession of the original note. The statement, read in its entirety, appears to (1) deny that the “attached documents” constitute all of the loan origination documents used by Equivantage in the formation of Dobson’s home loan, and (2) admit that the “attached documents” are “true and correct copies” of all loan origination documents currently in possession of Wells Fargo and provided by Equivantage. Accordingly, rather than the above-quoted statement serving to deny Wells Fargo’s possession of the original note, the statement admits that the photocopies of the original documents offered by Defendants are correct copies of the documents in Wells Fargo’s possession, which include the original note. Because Defendants presented sufficient evidence to show that Wells Fargo is the holder of the note, we hold that the trial court erred by concluding that the evidence, taken in the light most favorable to Defendants, was insufficient to establish that Wells Fargo is the holder of the note.

As for whether Defendants presented sufficient evidence to establish the amount owed by Dobson on the note, the record contains evidence of the note itself, a 2002 modification of the note, the' deed of trust, records of Dobson’s payments and modifications of Dobson’s payment schedule from bankruptcy proceedings, and computer printouts of Defendants’ records of Dobson’s payments and charges from January 2000 to February 2009. This evidence, taken in the light most favorable to Defendants, is sufficient to establish the amount owed by Dobson under the note.

The deed of trust and the note, both the original and as modified, set out the following information constituting the entirety of Dobson’s obligations to Defendants: (1) the total amounts of principal owed and interest charged; (2) the amount of Dobson’s initial monthly payment; (3) the due date of the monthly payments and the date on which payments are considered late; (4) the calculation and application of late charges; and (5) the types of expenses for which Dobson is responsible with respect to the property. This listing of Dobson’s obligations, combined with the data from Defendants’ records of Dobson’s payments and charges, provide all of the information necessary to determine what amount is owed by Dobson. Although arriving at that determination may take some time and effort, and perhaps a calculator, the evidence contained in the record in this case is not insufficient, as a matter of law, to allow the trial court to make that determination.

Accordingly, we hold that the trial court erred by granting summary judgment for Dobson based on the court’s erroneous conclusions that, as a matter of law, Defendants failed to present sufficient evidence to show the amount owed by Dobson under the note and to show that Wells Fargo is the holder of the note. We note that this holding should be viewed in the context of summary judgment, and should not be interpreted as finding Defendants’ evidence sufficient to warrant final judgment in Defendants’ favor. Obviously, if the trial court, in a later proceeding beyond the summary judgment stage, finds Defendants’ evidence incomplete, unreliable, or unconvincing, the court could ultimately conclude that Defendants failed to present sufficient evidence such that a permanent injunction is appropriate. However, based on the evidence presented in the case thus far, such a conclusion should not be made summarily by the court, but instead should be made only after meaningful consideration of the evidence, which apparently the trial court was loath to provide.³

Based on the foregoing, we remand “to let” the trial court “worry with it.”

REVERSED AND REMANDED.

Judge STEELMAN concurs. Judge HUNTER, ROBERT N., JR., dissents with a separate opinion.

1 . The note and deed of trust were assigned to “Norwest Bank Minnesota, National Association, as trustee of Equivantage Home Equity Loan Trust 1996-4 under the pooling and servicing agreement dated as of November 1,1996.” According to affidavits, Norwest Bank Minnesota is “now known as Wells Fargo.”

3 . From the transcript of the summary judgment hearing:

THE COURT: I just don’t like this mess. It’s confusing. It’s imprecise. I think probably the best thing to do is to let the Court of Appeals worry with it.

THE COURT: Prepare an order and hopefully the folks up at Raleigh will be a lot smarter than I am and can figure this thing out. I am just not comfortable with the facts at all.