Branch Banking And Tr. v. Keesee

An unpublished opinion of the North Carolina Court of Appeals does not constitute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 Appellate Procedure.
NO. COA14-328
NORTH CAROLINA COURT OF APPEALS
Filed: 21 October 2014
BRANCH BANKING AND TRUST
COMPANY,
Plaintiff,
v. New Hanover County
No. 13 CVS 996
BRIAN KEITH KEESEE and BRIAN
KEITH KEESEE CONSTRUCTION,
INC.,
Defendants.
Appeal by defendants from order entered 10 October 2013 by
Judge W. Allen Cobb, Jr. in New Hanover County Superior Court.
Heard in the Court of Appeals 10 September 2014.
McGuire Woods LLP., by John H. Anderson, Jr. and Pamela J.
Butler, for plaintiff.
Shanklin & Nichols, LLP., by Kenneth A. Shanklin and
Matthew A. Nichols, for defendant.
ELMORE, Judge.
Brian Keith Keesee and Brian Keith Keesee Construction,
Inc. (collectively defendants), appeal from an order entered on
10 October 2013 granting Branch Banking and Trust Company’s
(plaintiff) motions to dismiss defendants’ counterclaims and
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strike certain affirmative defenses. After careful
consideration, we affirm.
I. Facts
In 2004, defendants obtained numerous commercial
construction loans with plaintiff totaling in excess of nine
million dollars through the execution of twenty commercial
promissory notes currently owned and held by plaintiff.
Defendants secured their obligation to repay the notes with one
deed of trust from defendant Brian Keesee and another from
defendant Keesee Construction, Inc. (collectively “deeds of
trust”). Both deeds of trust conveyed real property located in
Brunswick County to plaintiff. Defendants defaulted on certain
promissory notes (the notes) by failing to make required
payments of interest and principal when due. Plaintiff
thereafter filed special proceedings in Brunswick County seeking
orders to allow foreclosure of the collateral securing the
notes. In orders entered 17 May 2012, the Brunswick County
Assistant Clerk of Superior Court (the clerk) concluded that H.
Kenneth Stephens, II (the substitute trustee), was “authorized
to exercise the power of sale contained in the Deed of Trust
executed by Brian Keith Keesee Construction, Inc. [and Brian
Keith Keesee] . . . and to proceed with foreclosure[s] under the
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terms of such Deed[s] of Trust in accordance with the laws of
the State of North Carolina.” The foreclosure sales were
completed on 10 September 2012 and 10 October 2012, and the
clerk entered her final reports and accounts of the foreclosure
sales (final reports and accounts) on 21 September 2012 and 29
October 2012. At no point prior to the clerk’s entry of the
final reports and accounts did defendants object to the sale or
attempt to enjoin the foreclosures pursuant to N.C. Gen. Stat. §
45-21.34.
After the clerk approved the final reports and accounts,
plaintiff applied the proceeds of the foreclosure sales to the
outstanding balance on the notes. On 6 March 2013, plaintiff
filed a complaint to recover the remaining balance of
approximately $6,500,000 still due on the notes.
In response, defendants filed six counterclaims: 1.) A
declaratory judgment action pursuant to N.C. Gen. Stat. § 1-253
et seq., seeking “judicial determinations of its rights,
remedies and relief with respect to the purported [deeds of
trust]” because plaintiff and its substitute trustee handled
each foreclosure unlawfully; 2.) A request that the trial court
declare the foreclosures to be null and void; 3.) An allegation
of wrongful foreclosure because plaintiff, in the foreclosure
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proceedings, violated the terms of the deeds of trust, the
notes, and provisions of North Carolina law; 4.) An allegation
that plaintiff’s conduct during the foreclosure proceedings
clogged “the equity of redemption in each parcel of real estate”
and resulted in damages in excess of $10,000; 5.) An assertion
that defendants were entitled to a common law accounting from
plaintiff for all loan transactions between plaintiff and
defendants referenced in plaintiff’s complaint; 6.) An
allegation that pursuant to N.C. Gen. Stat. § 45-21.36,
plaintiff was obligated to account for the fair value of the
property at the time and place of the foreclosure sales, and
plaintiff’s failure to do so precluded any judgment against
defendants.
Defendants also asserted several affirmative defenses. In
their third affirmative defense, defendants stated that they
were not provided adequate notice of the foreclosure proceedings
as required by N.C. Gen. Stat. § 45-21.16. The fourth
affirmative defense alleged that notice of the foreclosure
hearings to the guarantors was insufficient. Finally, the
sixteenth defense stated that plaintiffs violated the statutory
requirements of the foreclosure statute (Chapter 45 of North
Carolina’s General Statutes).
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Plaintiff filed motions to dismiss all of defendants’
counterclaims and strike affirmative defenses #3, 4, and 16.
After a hearing on said motions, Judge W. Allen Cobb, Jr.
entered an order on 10 October 2013 granting plaintiff’s
motions. Defendants timely appeal.
II. Analysis
a.) Interlocutory Appeal
We first address whether we should dismiss defendant’s
appeal as interlocutory.
“Generally, there is no right of immediate appeal from
interlocutory orders and judgments.” Goldston v. Am. Motors
Corp., 326 N.C. 723, 725, 392 S.E.2d 735, 736 (1990). “An
interlocutory order is one made during the pendency of an
action, which does not dispose of the case, but leaves it for
further action by the trial court in order to settle and
determine the entire controversy.” Veazey v. City of Durham,
231 N.C. 357, 362, 57 S.E.2d 377, 381 (1950) (citation omitted).
An order that grants “a motion to dismiss certain claims in an
action, while leaving other claims in the action to go forward,
is plainly an interlocutory order.” Pratt v. Staton, 147 N.C.
App. 771, 773, 556 S.E.2d 621, 623 (2001). Similarly, our rules
ordinarily preclude “an appeal from an order striking or denying
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a motion to strike allegations contained in pleadings.”
Faulconer v. Wysong & Miles Co., 155 N.C. App. 598, 600, 574
S.E.2d 688, 690-91 (2002) (citation and internal quotation marks
omitted).
However, immediate appeal of an interlocutory order is
available when it “affects a substantial right[.]” Sharpe v.
Worland, 351 N.C. 159, 162, 522 S.E.2d 577, 579 (1999). Our
Supreme Court has noted that “the right to avoid the possibility
of two trials on the same issues can be such a substantial
right.” Bockweg v. Anderson, 333 N.C. 486, 490-91, 428 S.E.2d
157, 160 (1993) (citation and internal quotation marks omitted).
The possibility of a second trial “affects a substantial right
only when the same issues are present in both trials, creating
the possibility that a party will be prejudiced by different
juries in separate trials rendering inconsistent verdicts on the
same factual issue.” Green v. Duke Power Co., 305 N.C. 603,
608, 290 S.E.2d 593, 596 (1982).
This appeal is clearly interlocutory because the trial
court will be required to address plaintiff’s claims to resolve
the entire controversy notwithstanding the dismissal and
striking of defendants’ counterclaims and some of their
affirmative defenses. However, a substantial right is affected
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in this case because should we dismiss this appeal as
interlocutory, defendants would be required to proceed to trial
upon plaintiff’s claims seeking approximately $6,500,000. A
critical component of a judgment in this case is the valuations
of the numerous real properties foreclosed upon by plaintiff in
the foreclosure proceedings. If defendants later appeal the
trial court’s dismissal of their counterclaims and striking of
their affirmative defenses, and we rule that the trial court
erred, then a second trial on defendants’ counterclaims could
occur. These counterclaims, in part, require a factual
evaluation and determination by a jury of the values of the real
estate foreclosed upon. Thus, a second trial could result in an
inconsistent jury decision on overlapping issues. Accordingly,
we hold that the interlocutory appeal affects a substantial
right and address the merits of defendants’ arguments.
b.) Counterclaims #1-5
Defendants argue that the trial court erred in granting
plaintiff’s motion to dismiss their counterclaims. We disagree.
The motion to dismiss under N.C. R. Civ. P.
12(b)(6) tests the legal sufficiency of the
complaint. In ruling on the motion the
allegations of the complaint must be viewed
as admitted, and on that basis the court
must determine as a matter of law whether
the allegations state a claim for which
relief may be granted.
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Stanback v. Stanback, 297 N.C. 181, 185, 254 S.E.2d 611, 615
(1979) (citations omitted). “This Court must conduct 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.” Leary v. N.C. Forest Prods., Inc., 157
N.C. App. 396, 400, 580 S.E.2d 1, 4, aff’d per curiam, 357 N.C.
567, 597 S.E.2d 673 (2003). A dismissal pursuant to Rule
12(b)(6) is appropriate when “(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.” Wood v. Guilford
Cnty., 355 N.C. 161, 166, 558 S.E.2d 490, 494 (2002) (citation
omitted).
N.C. Gen. Stat. § 45-21.16(d) (2013) gives the clerk
judicial authority to authorize a foreclosure proceeding under a
power of sale. Any argument that the foreclosure proceeding was
unauthorized or conducted improperly is “incumbent on [the
party] to raise that issue in that proceeding either by
objection or motion in the cause.” Douglas v. Pennamco, Inc.,
75 N.C. App. 644, 646, 331 S.E.2d 298, 300 (1985). A party
seeking to appeal an order or judgment entered by the clerk
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“may, within 10 days of entry of the order or judgment, appeal
to the appropriate court for a trial or hearing de novo. The
order or judgment of the clerk remains in effect until it is
modified or replaced by an order or judgment of a judge.” N.C.
Gen. Stat. § 1-301.1 (2013). Moreover, “the clerk’s order is
binding and [a party] [is] estopped from arguing those same
issues” if no timely appeal from the clerk’s order occurred.
Phil Mech. Const. Co., Inc. v. Haywood, 72 N.C. App. 318, 322,
325 S.E.2d 1, 3 (1985).
On 17 May 2012 the clerk entered two orders concluding that
plaintiff was the owner and holder of the notes, the notes held
by plaintiff were valid debts, defendants defaulted on the notes
and deeds of trust, the substitute trustee had the right to
foreclose, and proper notice of the hearing was provided to all
required parties.
Defendant’s first four counterclaims (declaratory judgment,
voiding the foreclosures, wrongful foreclosures, and lender
liability), each seek relief based on impropriety of the
foreclosure proceedings. However, defendants did not argue
these issues during the foreclosure proceedings or timely appeal
the clerk’s order. Thus, defendants are precluded from now
challenging issues arising from the foreclosure proceedings.
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Accordingly, the trial court did not err by dismissing
defendants’ counterclaims.
Moreover, defendants’ first four counterclaims are barred
by res judicata because of an order entered 14 February 2013 by
Judge Reuben F. Young in Brunswick County Superior Court. Res
judicata, also known as claim preclusion, bars “the relitigation
of all matters . . . that were or should have been adjudicated
in the prior action.” Whitacre P’ship v. Biosignia, Inc., 358
N.C. 1, 15, 591 S.E.2d 870, 880 (2004) (citation and internal
quotation marks omitted). The party seeking to assert res
judicata has the burden of establishing its elements. Bluebird
Corp. v. Aubin, 188 N.C. App. 671, 679, 657 S.E.2d 55, 62
(2008). A party must show “(1) a final judgment on the merits
in an earlier suit, (2) an identity of the causes of action in
both the earlier and the later suit, and (3) an identity of the
parties or their privies in the two suits” in order to prevail
on a theory of res judicata. Herring v. Winston-Salem/Forsyth
Cnty. Bd. of Educ., 188 N.C. App. 441, 444, 656 S.E.2d 307, 310
(2008) (citation and quotation marks omitted).
Judge Young entered an order in response to plaintiff’s
Motion to Cancel Defendants’ Notice of Lis Pendens. The parties
in that action were plaintiff and defendants. Judge Young
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granted plaintiff’s motion, ruling, in part, that the Notice of
Lis Pendens was not authorized by law. He also ruled that
because defendants failed to appeal from the clerk’s order
granting power of sale and “further failed to bring an action to
enjoin the foreclosure sales under N.C. Gen. Stat. § 45-21.34
before the foreclosure sales were finalized,” the clerk’s orders
are “binding res judicata, and [defendants] are estopped in this
action from arguing any of the statutory considerations set
forth . . . and from challenging [plaintiff’s] right to obtain
title to the Collateral through the statutory foreclosure
process.” (emphasis added). Defendants never appealed Judge
Young’s order.
Thus, plaintiff’s Motion to Cancel Defendants’ Notice of
Lis Pendens resulted in a final order on the merits, the subject
matter in that motion and the complaint in the present case both
arise from defendants’ attempt to prevent plaintiff from
obtaining title to the collateral due to alleged improprieties
in the foreclosure proceedings, and both actions involve
identical parties. Thus, in addition to the clerk’s order,
Judge Young’s order also bars defendants from asserting their
first four counterclaims.
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We also note that defendants fail to articulate any
argument in their brief related to the trial court’s alleged
error in dismissing their fifth counterclaim. Thus, defendants
have abandoned appellate review of that issue pursuant to the
North Carolina Rules of Appellate Procedure. N.C.R. App. P.
28(a).
c.) Clogging the Equity of Redemption
Defendants also argue that the trial court erred in
dismissing the equitable portion of their fourth counterclaim.
We disagree.
An equitable claim contesting a foreclosure sale must “be
asserted in an action to enjoin the foreclosure sale under G.S.
45–21.34.” In re Foreclosure Under That Deed of Trust Executed
by Azalea Garden Bd. & Care, Inc., 140 N.C. App. 45, 57, 535
S.E.2d 388, 396 (2000) (citations and internal quotation marks
omitted). N.C. Gen. Stat. § 45-21.34 (2013) states:
Any owner of real estate, or other person,
firm or corporation having a legal or
equitable interest therein, may apply to a
judge of the superior court, prior to the
time that the rights of the parties to the
sale or resale becoming fixed pursuant to
G.S. 45-21.29A to enjoin such sale, upon the
ground that the amount bid or price offered
therefor [sic] is inadequate and inequitable
and will result in irreparable damage to the
owner or other interested person, or upon
any other legal or equitable ground which
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the court may deem sufficient[.]
(emphasis added). Generally, a party’s rights to a foreclosure
sale become fixed at the “expiration of the period for filing an
upset bid[.]” Goad v. Chase Home Fin., LLC, 208 N.C. App. 259,
263, 704 S.E.2d 1, 4 (2010). The time period for filing an
upset bid lapses if it “is not filed [within ten days] following
a sale, resale, or prior upset bid[.]” N.C. Gen. Stat. § 45-
21.29A (2013).
The fourth counterclaim, in part, alleges that the
plaintiff’s conduct during the foreclosure proceedings clogged
“the equity of redemption in each parcel of real estate[.]”
Defendants rely on Swindell v. Overton to support their
argument that N.C. Gen. Stat. § 45-21.34 does not bar their
equitable claims after the completion of a foreclosure sale.
310 N.C. 707, 712, 314 S.E.2d 512, 516 (1984).
In Swindell, our Supreme Court held that a party was “allowed to
challenge the clerk’s confirmation of a foreclosure sale by an
independent [equitable] action under circumstances hereinafter
set forth.” Id. Importantly, the circumstances in Swindell are
distinguishable from the case at bar because in Swindell, a
party objected to a foreclosure sale and sought to enjoin the
resale of foreclosed property by informing the clerk of its
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intent to file a restraining order before the clerk actually
entered her order confirming the foreclosure resale. Id. at
709, 314 S.E.2d at 514.
Defendants in the instant case, however, never objected to
the foreclosure sales before the clerk entered her order
confirming the foreclosure sales. Moreover, the record is
devoid of any evidence that defendants exercised their rights to
enjoin the foreclosures on equitable grounds within the
prescribed time period required by N.C. Gen. Stat. § 45-21.29A.
Accordingly, the equitable ground presented in defendants’
counterclaim fails.
e.) Counterclaim #6:
Defendants argue that the trial court erred in dismissing
their sixth counterclaim. This counterclaim alleges that
plaintiff failed to account for the fair value of the property
at the time of the foreclosure sales in violation of N.C. Gen.
Stat. § 45-21.36. We disagree.
N.C. Gen. Stat. § 45-21.36 (2013) states:
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
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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,
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[.]
(emphasis added). Here, plaintiff filed a deficiency action
against defendants to recover the remaining balance of
approximately $6,500,000 due on the notes after completion of
the foreclosure sales. Pursuant to the plain language of the
statute above, defendants were required to allege the accounting
issue as an affirmative defense. Instead, defendants asserted a
counterclaim alleging that the amounts bid for the properties at
the foreclosure sales were less than their fair value. Thus,
defendant’s counterclaim #6 is improper as a matter of law, and
the trial court properly dismissed this claim.
f.) Affirmative Defenses #3, 4, 16
Defendants also argue that the trial court erred in
striking their third, fourth, and sixteenth affirmative
defenses. We disagree.
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Pursuant to North Carolina Rule of Civil Procedure 12(f), a
trial court “may order stricken from any pleading any
insufficient defense or any redundant, irrelevant, immaterial,
impertinent, or scandalous matter.” N.C. R. Civ. P. § 1A-1,
Rule 12. An affirmative defense “should not be stricken unless
it has no possible bearing upon the litigation. If there is any
question as to whether an issue may arise, the motion to strike
should be denied.” Reese v. Charlotte-Mecklenburg Bd. of Educ.,
196 N.C. App. 539, 556, 676 S.E.2d 481, 492 (2009) (citations
and quotation marks omitted). A trial court’s ruling on a
motion to strike will not be disturbed on appeal “absent an
abuse of discretion.” Id.
Each of defendants’ affirmative defenses (inadequate notice
and violation of the North Carolina foreclosure statute) are
premised in the alleged irregularities of the foreclosure
proceedings. However, in her orders allowing the foreclosure
sales, the clerk concluded that “[p]roper notice of hearing was
given to all of those parties entitled to such notice under
North Carolina General Statute § 45-21.16.” She further
authorized the substitute trustee to “exercise the power of sale
. . . in accordance with the laws of the State of North
Carolina.” Thus, defendants’ affirmative defenses are
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immaterial according to Rule 12(f) because defendants neither
raised these issues at the foreclosure proceedings nor appealed
the clerk’s orders.
Their affirmative defenses are also barred by res judicata
in light of Judge Young’s order since plaintiff’s Motion to
Cancel Defendants’ Notice of Lis Pendens resulted in a final
order on the merits, the subject matter asserted in the
affirmative defenses and that motion arise from defendants’
attempt to attack the legality of the foreclosure proceedings,
and both actions involve identical parties. Accordingly, the
trial court did not err by dismissing defendants’ third, fourth,
and sixteenth affirmative defenses.
III. Conclusion
In sum, the trial court neither erred by granting
plaintiff’s motion to dismiss all of defendants’ counterclaims
nor by granting plaintiff’s motion to strike defendants’ third,
fourth, and sixteenth affirmative defenses. Accordingly, we
affirm the trial court’s order.
Affirmed.
Judges CALABRIA and STEPHENS concur.
Report per Rule 30(e).