Court Opinion

ID: 2728807
Source: CourtListenerOpinion
Date Created: 2014-09-08 21:36:28.579166+00
Date Added: 2024-06-11T13:26:15.669292
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An unpublished opinion of the North Carolina Court of Appeals does not constitute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
A   p   p    e   l   l   a    t   e       P   r    o   c   e   d   u    r   e   .

                             NO. COA13-1038
                     NORTH CAROLINA COURT OF APPEALS

                            Filed: 1 April 2014

WELLS FARGO BANK, N.A.,
     Plaintiff,

      v.                                    Rockingham County
                                            No. 12 CVS 1522
BAMBI T. HUNDLEY, WILLIAM C.
HUNDLEY, DAVID M. TOLBERT, and
VICKI M. TOLBERT,
     Defendants.

      Appeal by Plaintiff from order entered 14 May 2013 by Judge

Edwin   G.   Wilson,    Jr.,   in   Rockingham     County      Superior   Court.

Heard in the Court of Appeals 5 February 2014.

      The Law Office of John T. Benjamin, Jr., P.A., by John T.
      Benjamin, Jr., and James R. White, for Plaintiff.

      Ivey, McClellan, Gatton &            Talcott,     LLP,    by   Darren   A.
      McDonough, for Defendants.

      STEPHENS, Judge.

              Procedural History and Factual Background

      On 28 August 2012, Plaintiff Wells Fargo Bank, N.A., filed

a complaint seeking a declaratory judgment, to quiet title, and
                                        -2-
reformation1 of a deed of trust               along with a notice of                lis

pendens,    concerning     a    piece   of    real   property       in   Rockingham

County.     Defendants Bambi T. Hundley, William C. Hundley, David

M. Tolbert, and Vicki M. Tolbert moved to dismiss Plaintiff’s

complaint     pursuant     to    Rule    of    Civil       Procedure        12(b)(6).

Following a hearing on that motion on 25 March 2013, the trial

court entered an order on 14 May 2013 dismissing Plaintiff’s

complaint for failure to state a claim upon which relief could

be granted.      Plaintiff filed a written notice of appeal on 13

May 2013, prior to entry of the court’s order, and filed a

second written notice of appeal on 20 May 2013.

    On      18   July    2007,     Bambi      Hundley       and    David      Tolbert

(collectively, “the borrowers”)2 obtained a loan in the amount of

$193,662    from    Plaintiff     to    finance      the    construction       of     a

1
  Although the complaint does not specifically label any claim as
reformation, “when the allegations in the complaint give
sufficient notice of the wrong complained of an incorrect choice
of legal theory should not result in dismissal of the claim if
the allegations are sufficient to state a claim under some legal
theory. . . .”     Haynie v. Cobb, 207 N.C. App. 143, 149, 698
S.E.2d 194, 198 (2010) (citation, internal quotation marks, and
bracket omitted).     Plaintiff’s complaint provides sufficient
notice to Defendants of a claim for reformation. Defendants did
not contend otherwise in the trial court, and specifically
address the reformation claim in their brief to this Court.
2
   The other       two   named    defendants      are      the    spouses    of     the
borrowers.
                                        -3-
manufactured home on a piece of real property in Reidsville.                    An

appraisal conducted as part of the loan process fixed the value

of the land alone at $15,000 and the combined value of the land

and planned home at approximately $215,000.

    Upon closing the loan, the borrowers executed a note in the

amount of $193,662 payable to Plaintiff.              The note was secured

by a deed of trust, executed by Defendants, on real property and

including   any    later-existing        improvements       having    a    street

address of 2141 Grooms Road, Reidsville, North Carolina 27320.

Exhibit A attached to the deed of trust described the property

as “[l]ying and being in Williamsburg Township on the North Side

of Grooms Road, S.R. #2571” and further delineated by a metes

and bounds description.

    The     borrowers     subsequently         defaulted     on      the   loan.

Plaintiff sought an order from the court allowing a foreclosure

sale of the property.         The clerk of superior court in Rockingham

County entered an order to allow the foreclosure sale on 27

August   2010,    and   the    foreclosure     sale   was    finalized     on   3

December 2010, conveying the property back to Plaintiff as the

last and highest bidder.

    A    survey   obtained      after    the   foreclosure     was    concluded

revealed that the home financed by the loan, although having a
                                             -4-
street      address    of    2141     Grooms      Road    in   Reidsville,     had    been

constructed         just    north    of     the    approximately         one-acre    tract

described in the metes and bounds description in Exhibit A to

the deed.3     Realizing that the portion of the property covered by

the metes and bounds description did not include the home and

was thus worth only a small fraction of the $193,662 promissory

note, Plaintiff instituted this action.

       In     their        answer,     Defendants          alleged       the   following

affirmative defenses:              (1) Plaintiff’s lack of standing to bring

the action; (2) the three-year statute of limitations contained

in section 1-52(9); (3) waiver, estoppel, and unclean hands; and

(4) payment and release.              In their motion to dismiss pursuant to

Rule   12(b)(6)       and     at     the    hearing       before   the     trial    court,

Defendants alleged only that, because the foreclosure sale had

been completed, Plaintiff was no longer a lender, but rather was

now merely a purchaser.               Accordingly, Defendants contended that

no causes of action would permit Plaintiff to obtain the relief

sought, to wit, reformation of the property description attached

to   the     deed    of     trust.         The    trial    court   dismissed        all   of

Plaintiff’s claims, and this appeal ensued.

3
  Nothing in the record suggests that the parties intended that
the deed of trust cover anything other than the one-acre tract
described in Exhibit A and the house to be built thereupon.
                               -5-
                       Standard of Review

         The standard of review of an order granting
         a 12(b)(6) motion is whether the complaint
         states a claim for which relief can be
         granted under some legal theory when the
         complaint is liberally construed and all the
         allegations included therein are taken as
         true.      On   a  motion   to  dismiss,  the
         complaint’s material factual allegations are
         taken as true. Dismissal is proper when one
         of   the   following    three  conditions  is
         satisfied:    (1) the complaint on its face
         reveals that no law supports the plaintiff’s
         claim; (2) the complaint on its face reveals
         the absence of facts sufficient to make a
         good claim; or (3) the complaint discloses
         some fact that necessarily defeats the
         plaintiff’s claim.    On appeal of a 12(b)(6)
         motion to dismiss, this Court conducts a de
         novo review of the pleadings to determine
         their legal sufficiency and to determine
         whether the trial court's ruling on the
         motion to dismiss was correct.

Burgin v. Owen, 181 N.C. App. 511, 512, 640 S.E.2d 427, 428-29

(citations and internal quotation marks omitted), disc. review

denied and appeal dismissed, 361 N.C. 425, 647 S.E.2d 98, cert.

denied, 361 N.C. 690, 652 S.E.2d 257 (2007).

                           Discussion

    On appeal, Plaintiff argues that the trial court erred in

dismissing its claims for (1) reformation of the deed of trust,

(2) a declaratory judgment, and (3) to quiet title.   We agree.

I. Reformation of the Deed of Trust
                                       -6-
           Reformation is a well-established equitable
           remedy used to reframe written instruments
           where,   through    mutual    mistake    or   the
           unilateral mistake of one party induced by
           the   fraud   of   the   other,    the    written
           instrument fails to embody the parties’
           actual,   original    agreement.       A   mutual
           mistake is one common to both parties to a
           contract . . . wherein each labors under the
           same misconception respecting a material
           fact, the terms of the agreement, or the
           provisions    of    the    written    instrument
           designed    to    embody     such     agreement.
           Reformation is proper to give effect to the
           terms of the contract the parties originally
           agreed upon provided there is clear, cogent
           and convincing evidence of the parties’
           intentions to contract upon these terms.

Metropolitan Prop. & Cas. Ins. Co. v. Dillard, 126 N.C. App.

795, 798, 487 S.E.2d 157, 159 (1997) (citations and internal

quotation marks omitted; alteration in original).               The purchaser

of real property at a foreclosure sale may bring an action for

declaratory judgment and to reform alleged errors in deeds or

other documents executed during transactions affecting the real

property   even    if   those    transactions     predated    the   foreclosure

sale.   See Citifinancial Mortg. Co. v. Gray, 187 N.C. App. 82,

85, 652 S.E.2d 321, 322 (2007)               (upholding the trial court’s

judgment   where    a   lender    who,   like   Plaintiff     here,   was    also

eventually   the    purchaser     of   property    at   a   foreclosure     sale,

obtained reformation of deeds, foreclosure judgments, and other
                                          -7-
transaction documents affecting the real property purchased at

the foreclosure sale).

       Here, Plaintiff’s complaint sufficiently stated a claim for

reformation      based     upon        mutual       mistake.          The     complaint

specifically     alleges    that       (1)    the    parties    all    intended      that

Plaintiff’s loan to the borrowers be secured by a deed of trust

which would include the property on which the home would be

constructed, (2) due to a mutual mistake of the parties, the

deed of trust inaccurately described the property to exclude the

portion on which the home was constructed, and (3) Plaintiff has

no adequate remedy at law.               Further, like the lender/purchaser

in    Citifinancial     Mortg.    Co.,        Plaintiff,   as    purchaser      of    the

property at a foreclosure sale, has standing to bring a claim

for      reformation.             Accordingly,          Plaintiff’s           complaint

sufficiently     stated    a     claim    for    reformation      of    the    deed    of

trust.

       On   appeal,    Defendants        do    not    contend    that       Plaintiff’s

complaint failed to include the allegations required to state a

claim    for   reformation.        Instead,         Defendants    argue      their    own

allegations regarding weaknesses in the merits of Plaintiff’s

claim    and   its    forecast    of     evidence.       These    matters      are    not

relevant to the question of whether Plaintiff’s complaint is
                                     -8-
sufficient to survive dismissal on a Rule 12(b)(6) motion, and

thus we do not consider them.

II. Declaratory Judgment

            A motion to dismiss for failure to state a
            claim is seldom appropriate in actions for
            declaratory judgments, and will not be
            allowed simply because the plaintiff may not
            be able to prevail.    The motion is allowed
            only when there is no basis for declaratory
            relief, as when the complaint does not
            allege    an   actual,    genuine   existing
            controversy. A claim for declaratory relief
            is sufficient if the complaint alleges the
            existence of a real controversy arising out
            of the parties’ opposing contentions and
            respective legal rights under a deed, will
            or contract in writing.

Morris v. Plyler Paper Stock Co., 89 N.C. App. 555, 557, 366

S.E.2d 556, 558 (1988) (citation and internal quotation marks

omitted).

    Here, the complaint alleges that Plaintiff owns the real

property located at 2141 Grooms Road in Reidsville and that the

property includes the home constructed thereon.              The complaint

alleges that Defendants assert that Plaintiff does not own the

portion     of   the   property    including   the   home.     Thus,   “the

complaint alleges the existence of a real controversy arising

out of the parties’ opposing contentions and respective legal

rights under a deed[.]”           See id.   Thus, Plaintiff’s complaint

sufficiently stated a claim for a declaratory judgment.
                                        -9-
III. Quiet Title

      “The statutory action to quiet title to realty consists of

two essential elements.           The first is that the plaintiff must

own the land in controversy, or have some estate or interest in

it; and the second is that the defendant must assert some claim

to   such    land    adverse     to   the    plaintiff’s        title,   estate   or

interest.”     Wells v. Clayton, 236 N.C. 102, 107, 72 S.E.2d 16,

20 (1952) (citations omitted).              Here, the complaint alleges that

Plaintiff owns the real property in controversy and that it held

a deed of trust secured by the property.                    The complaint also

alleges     that    Defendants    claim     an   interest   in     the   same   real

property     adverse      to     Plaintiff’s      interest.          Accordingly,

Plaintiff’s        complaint   sufficiently       stated    a    claim    to    quiet

title.

      While we express no opinion as to the merits of Plaintiff’s

claims, we conclude that the trial court erred in dismissing the

complaint pursuant to Rule 12(b)(6).              Accordingly, the order is

      REVERSED.

      Judges BRYANT and DILLON concur.

      Report per Rule 30(e).