Court Opinion

ID: 2744009
Source: CourtListenerOpinion
Date Created: 2014-10-21 12:04:48.837093+00
Date Added: 2024-06-11T09:53:38.977127
License: Public Domain

An unpublished opinion of the North Carolina Court of Appeals does not constitute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
                                                  -2-
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
                                           -3-
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
                                                -4-
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).
                                              -5-
    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
                                           -6-
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
                                          -7-
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.
                                             -8-

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
                                      -9-
“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.
                                       -10-
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
                                           -11-
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.
                                    -12-
    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
                                 -13-
          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
                                          -14-
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
                                     -15-
            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.
                                           -16-
        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
                                            -17-
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).