Court Opinion

ID: 9387499
Source: CourtListenerOpinion
Date Created: 2023-04-18 12:04:15.267096+00
Date Added: 2024-06-11T17:18:13.825740
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                 No. COA22-629

                               Filed 18 April 2023

Forsyth County, No. 20-CVS-436

PENNYMAC LOAN SERVICES, LLC, Plaintiff/Counterclaim Defendant,

            v.

BRAD JOHNSON and ELCI WIJAYANINGSIH, Defendants/Counterclaim Plaintiffs
and Third-Party Plaintiffs,

            v.

STANDARD GUARANTY INSURANCE COMPANY, ERIKA L. SANCHEZ, EFREN
SALDIVAR, and ASSURANT, INC., Third-Party Defendants.

      Appeal by defendant-counterclaim plaintiff and third-party plaintiff from

order entered 27 May 2021 by Judge David L. Hall in Forsyth County Superior Court.

Heard in the Court of Appeals 22 March 2023.

      Brad R. Johnson, pro se defendant-appellant.

      Womble Bond Dickinson (US) LLP, by B. Chad Ewing, for plaintiff-appellee.

      Robinson, Bradshaw & Hinson, P.A., by Mark W. Merritt, and Drinker Biddle
      & Reath, LLP, by W. Glenn Merten, for third-party defendants-appellees.

      FLOOD, Judge.
                          PENNYMAC LOAN SERVS., LLC V. JOHNSON

                                         Opinion of the Court

       Brad R. Johnson (“Johnson”) appeals from the 27 May 2021 Order dismissing

his counterclaim.1 On appeal, Johnson argues the trial court: (1) erred in concluding

Johnson’s     Verified     First    Amended        Counterclaim       contained      the    operative

counterclaim in this case; (2) erred in dismissing Johnson’s breach of contract claim

by concluding PennyMac Loan Services, LLC (“PennyMac”) was allowed to assess

Johnson a fee related to force-placed insurance;2 and (3) abused its discretion in

denying Johnson’s Motion for Leave to Amend his counterclaim. After careful review,

we discern no error or abuse of discretion by the trial court.

                         I. Factual and Procedural Background

       On 7 November 2008, Johnson purchased two developed lots (“Lots 16 and 18”)

in Oak Island, North Carolina.            Johnson subsequently obtained home and flood

insurance to protect the home situated on Lots 16 and 18. On 25 August 2012,

Johnson purchased three undeveloped lots (“Lots 13, 15, and 17”) adjacent to Lots 16

and 18. To avoid paying the required sewer fees on the undeveloped lots, Johnson

combined all five lots into a single developed parcel of land (the “Property”).

       On 9 June 2013, Johnson submitted a Uniform Residential Loan Application

(the “Mortgage Loan”) to Weststar Mortgage, Inc. (“Weststar”) for the purpose of

       1  Elci Wijayaningsih, Johnson’s wife, was a named defendant in the original suit filed by
PennyMac. Johnson filed this appeal seemingly on behalf of solely himself. Johnson refers only to
himself throughout his brief, and PennyMac and Standard Guaranty likewise refer to Johnson as a
singular person. This opinion will treat Johnson as the sole appellant.
        2 “Force-Placed insurance” is “hazard insurance obtained by a servicer on behalf of the owner

or assignee of a mortgage loan that insures the property securing such loan.” 12 C.F.R. § 1-24.37(a)(1).

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                      PENNYMAC LOAN SERVS., LLC V. JOHNSON

                                   Opinion of the Court

refinancing the Property. In addition to the Mortgage Loan, Johnson continued

purchasing home and flood insurance for the Property and instructed Weststar to

establish an escrow account so Johnson could pay the insurance and property taxes

on a monthly basis. After the Mortgage Loan was submitted, Weststar ordered an

appraisal of the Property. The appraisal invoice sent to Johnson specifically noted

the appraisal was of “Lots 13, 15, 16, 17, and 18.” Following the appraisal, Johnson’s

Mortgage Loan was approved, and Johnson was sent a Deed of Trust (the “Deed”).

The Deed described the Property as “all of Lots 13, 15, and 17 . . .”; notably, it omitted

Lots 16 and 18.

      On 6 August 2013, PennyMac purchased the Mortgage Loan from Weststar.

PennyMac maintained the escrow account established by Weststar and used it to pay

the insurance coverage for the house. On 20 September 2017, Johnson requested

PennyMac stop paying for home and flood insurance, claiming PennyMac had a lien

on the vacant Lots 13, 15, and 17, not Lots 16 and 18, and therefore did not have an

insurable interest in Lots 16 and 18. PennyMac approved Johnson’s request to close

the escrow account but explained the terms of the Mortgage Loan required Johnson

to pay home and flood insurance for the Property. The relevant portion of the loan

states:

             Property Insurance. Borrower shall keep the
             improvements now existing or hereby erected on the
             Property insured against loss by fire, hazards included
             within the term “extended coverage,” and any other
             hazards including, but not limited to earthquakes and

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                     PENNYMAC LOAN SERVS., LLC V. JOHNSON

                                 Opinion of the Court

             floods, for which Lender requires insurance.

      In September 2018, a representative for PennyMac allegedly told Johnson via

telephone he would not be required to pay home insurance if he separated the

Property back into the original parcels. On 22 March 2019, Johnson recorded an

Instrument of Separation separating Lots 13, 15, and 17 from Lots 16 and 18.

      On 10 May 2019, PennyMac sent Johnson a notice that his home insurance

expired. PennyMac reminded Johnson that home insurance was required on the

Property and requested Johnson provide proof of insurance.      PennyMac further

explained if Johnson did not provide proof of insurance, PennyMac would purchase

insurance for the Property and charge Johnson. On 14 June 2019, PennyMac sent

Johnson a second reminder to purchase home insurance. Once again, PennyMac

explained to Johnson that failure to insure the Property would result in PennyMac

purchasing force-placed insurance for the Property, which could be more expensive

than an insurance policy Johnson purchased himself. Johnson refused to purchase

insurance.

      On 16 June 2019, PennyMac sent Johnson a certificate of coverage placement

detailing the force-placed insurance coverage PennyMac purchased for the Property.

The insurance was purchased through Standard Guaranty Insurance Company

(“Standard Guaranty”).

      On 20 August 2019, Johnson filed an insurance complaint with the North

Carolina Commissioner of Banks (the “Commissioner of Banks”) and the North

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                        PENNYMAC LOAN SERVS., LLC V. JOHNSON

                                      Opinion of the Court

Carolina Department of Insurance alleging PennyMac’s force-placed insurance was

improper because PennyMac did not have an insurable interest in Lots 16 and 18. In

response to this complaint, PennyMac sent a letter to the Commissioner of Banks

explaining that, even though the Deed described only Lots 13, 15, and 17, the

Mortgage Loan application submitted by Johnson indicated that the purpose of the

Mortgage Loan was to refinance the then-existing loan encumbering the house on

Lots 16 and 18.3 PennyMac further noted it made a title insurance claim to resolve

the alleged drafting error in the Deed. PennyMac represented to the Commissioner

of Banks that the force-placed insurance would remain in effect, but PennyMac would

not seek insurance premium payments from Johnson until the issue was resolved.

PennyMac continued insuring the Property at its own expense.

       On 23 January 2020, PennyMac filed a Complaint against Johnson in Forsyth

County District Court to reform the Deed to include all property and improvements

described in the appraisal report.4 PennyMac alleged the Deed’s omittance of Lots

16 and 18 was a “mutual mistake, inadvertence[,] or mistake of the draftsman.”

       3 The Record did not include Johnson’s Mortgage Loan application. The letter PennyMac sent
Johnson on 19 September 2019 is the best evidence we have of the contents of the Mortgage Loan
application. According to PennyMac, a copy of the Mortgage Loan application was included with the
letter PennyMac sent the Commissioner of Banks.
        4 We note for clarity purposes, PennyMac’s Complaint, Johnson’s second Motion to Amend,

and Standard Guaranty’s Motion to Dismiss were filed in Forsyth County District Court whereas
Standard Guaranty’s Opposition to Motion for Leave to Amend, PennyMac’s Motion to Dismiss, and
the Order were filed in Forsyth County Superior Court.

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                       PENNYMAC LOAN SERVS., LLC V. JOHNSON

                                     Opinion of the Court

       On 21 February 2020, Johnson filed a pro se answer with counterclaim5

against PennyMac for common law breach of contract alleging PennyMac breached

the Mortgage Loan by force-placing home insurance on Lots 13, 15, and 17. Johnson

filed claims against PennyMac and Standard Guaranty for violations of the

Racketeering Influence and Corruption Organization Act (“RICO”) under 18 U.S.C.

§§ 1961–68. Johnson filed additional claims against PennyMac for violations of the

Fair Debt Collection Practices Act (“FDCPA”) under 15 U.S.C. § 1692, and breach of

contract accompanied by fraudulent acts.

       Also on 21 February 2020, Johnson filed a Notice of Removal to the United

States District Court for the Middle District of North Carolina based on federal

question and diversity jurisdiction. On 6 April 2020, Johnson filed a Verified First

Amended Counterclaim (“FAC”) in the middle district.

       On 21 September 2020, Johnson filed for Leave to File a Verified Second

Amended Counterclaim. On 3 March 2021, Judge Osteen remanded the case to the

Forsyth County District Court for lack of subject matter jurisdiction. Judge Osteen

further denied all other outstanding motions, including the motion to amend, as moot.

       On 2 April 2021, Standard Guaranty filed a Motion to Dismiss Johnson’s

counterclaim in Forsyth County District Court. On 5 April 2021, PennyMac likewise

       5The original answer with counterclaim filed by Johnson was omitted from the Record.
Because we do not have any evidence to the contrary, we assume the claims asserted in the First
Amended Counterclaim were the same claims asserted in the original answer with counterclaim.

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                      PENNYMAC LOAN SERVS., LLC V. JOHNSON

                                   Opinion of the Court

filed a Motion to Dismiss Johnson’s counterclaim. In response to the motions to

dismiss, Johnson filed a Motion for Leave to Amend his original counterclaim. A

hearing was held on the matter on 26 April 2021. On 27 May 2021, Judge Hall

entered the Order on the Motions to Dismiss and the Motion to Amend, granting the

motions to dismiss and denying Johnson’s Motion to Amend based on futility.

      On 10 March 2022, PennyMac voluntarily dismissed its Complaint to reform

the deed. On 5 April 2022, Johnson filed timely notice of appeal to this Court.

                                   II. Jurisdiction

      This Court has jurisdiction to hear this appeal as a final order from a superior

court pursuant to N.C. Gen. Stat. § 7A-27(b) (2021).

                                     III. Analysis

               A. Amended Pleading Pursuant to Fed. R. Civ. P. 15

      First, Johnson challenges Conclusion of Law 1, which states the FAC contains

the operative counterclaim in this case. Specifically, Johnson argues the FAC is “void

and a legal nullity” because he failed to meet the requirements for amended and

supplemental pleadings set forth in Rule 15 of the Federal Rules of Civil Procedure.

We disagree.

      This Court reviews a trial court’s conclusions of law de novo. Sykes v. Health

Network Sols., Inc., 372 N.C. 326, 332, 828 S.E.2d 467, 471 (2019). “[W]e do not defer

to the conclusions of [the trial c]ourt but conduct our own independent inquiry . . . .”

Id. at 332, 828 S.E.2d at 471.

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                       PENNYMAC LOAN SERVS., LLC V. JOHNSON

                                     Opinion of the Court

       The Federal Rules of Civil Procedure allow a party to amend its pleading “once

as a matter of course within 21 days after serving it, or . . . [i]n all other cases, a party

may amend its pleading only with the opposing party’s written consent or the court’s

leave.” Fed. R. Civ. P. 15. “[U]ntimely amended pleading[s] served without judicial

permission may be considered as properly introduced when leave to amend would

have been granted had it been sought, and when it does not appear that any of the

parties [would have been] prejudiced by allowing the change.” Straub v. Desa Indus.,

Inc., 88 F.R.D. 6, 8 (M.D. Pa. 1980); see also Madison River Mgmt. Co. v. Bus. Mgmt.

Software Corp., 351 F. Supp. 2d 436, 448 (M.D.N.C. 2005) (allowing the defendant to

amend its complaint where the court would have granted leave to amend the

counterclaim and the plaintiff was not prejudiced).

       Here, Johnson did not file the FAC within twenty-one days of the filing of the

original complaint, nor did he obtain leave from the court or written consent from the

parties prior to filing. See Fed. R. Civ. P. 15(a). Based on the liberalness with which

this rule is generally applied and the reliance on the FAC in the order remanding the

case, however, there is no reason for us to presume the middle district would have

denied a motion to amend had it been properly filed. See SGK Props., L.L.C. v. U.S.

Bank Nat’l Assoc., 881 F.3d 933, 944 (5th Cir. 2018) (“[T]he language of this rule

evinces a bias in favor of granting leave to amend[.]” (citation and internal quotation

marks omitted)); see also Fed. R. Civ. P. 15(a)(2) (“The court should freely give leave

when justice so requires.”). Further, there is no indication PennyMac or Standard

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                      PENNYMAC LOAN SERVS., LLC V. JOHNSON

                                  Opinion of the Court

Guaranty would have been prejudiced because both filed individual motions for

extension of time to file answers to the amended counterclaim, neither party objected

to the FAC, and both have treated the FAC as the operative pleading throughout the

life of this case.

       Moreover, Johnson is judicially estopped from asserting a legal position

inconsistent with one taken previously in the litigation. The doctrine of judicial

estoppel prevents a litigant from “intentional self-contradiction . . . as a means of

obtaining unfair advantage in a forum provided for suitors seeking justice.” Price v.

Price, 169 N.C. App. 187, 191, 609 S.E.2d 450, 452 (2005) (citation and internal

quotation marks omitted). Johnson cannot rely on the FAC while litigating in federal

court and then claim the FAC is “void and a legal nullity” when it becomes more

convenient while litigating in the state court. See id. at 191, 609 S.E.2d at 452.

       We therefore find the FAC was properly introduced and contains the operative

counterclaim because leave to amend would have likely been granted by the middle

district, it did not cause prejudice to PennyMac or Standard Guaranty, and the

doctrine of judicial estoppel prevents Johnson’s argument. See Straub, 88 F.R.D. at

8; see also Price, 169 N.C. App. at 191, 609 S.E.2d at 452.

                               B. Breach of Contract

       Next, Johnson argues the trial court erred in Conclusion of Law 12 by

dismissing his breach of contract claim. Specifically, Johnson argues the force-placed

hazard insurance was not reasonable, and therefore breached the property insurance

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                        PENNYMAC LOAN SERVS., LLC V. JOHNSON

                                  Opinion of the Court

term set forth in the Mortgage Loan. We disagree.

       “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 (2003).

       For a prima facie breach of contract claim, a party must show: “(1) existence of

a valid contract and (2) a breach of the terms of [the] contract.” Wells Fargo Ins.

Servs. USA, Inc v. Link, 372 N.C. 260, 276, 827 S.E.2d 458, 472 (citation omitted)

(alteration in original).

       Here, it is undisputed the Mortgage Loan is a valid contract between Johnson

and PennyMac.         Instead, Johnson seemingly argues Penny Mac breached the

Mortgage Loan contract by imposing charges related to force-placed insurance when

the terms of the Mortgage Loan required insurance only on improvements on the

Property, of which there are none on Lots 13, 15, and 17. PennyMac argued, and the

trial court agreed, that the force-placed insurance was reasonable under C.F.R. §

1024.37(b) because PennyMac had a reasonable basis for believing insurance was

required under the terms of the Mortgage Loan.           Initially, we note Johnson

confusingly argues the regulation was misapplied by the trial court, but then

subsequently argues the regulation is not applicable to this case because PennyMac

did not have an insurable interest in Lots 13, 15 and 17.

       Under federal regulations, “[a] servicer may not assess on a borrower a

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                     PENNYMAC LOAN SERVS., LLC V. JOHNSON

                                  Opinion of the Court

premium charge or fee related to force-placed insurance unless the servicer has a

reasonable basis to believe that the borrower has failed to comply with the mortgage

loan contract’s requirement to maintain hazard insurance.” 12 C.F.R. § 1024.37(b)

(2021) (emphasis added). The regulation specifies when a servicer may assess force-

placed insurance. Contrary to Johnson’s argument, it is not a question of whether

PennyMac had an insurable interest; rather, it is a question of whether it had a

reasonable basis to believe Johnson was not complying with the terms of the

Mortgage Loan contract. See id.

      Conclusion of Law 12 states:

            To the extent that they are characterized as a breach of
            contract claim, Johnson’s allegations still fail to state a
            claim. Pursuant to 12 C.F.R. [§] 1024.37(b), PennyMac
            was allowed to assess Johnson a fee related to force-placed
            insurance because it had a reasonable basis to believe that
            Johnson failed to comply with his mortgage loan contract’s
            requirement to maintain hazard insurance. In making
            this ruling, this [c]ourt does not prejudge the outcome of
            the underlying deed reformation action.

PennyMac had a reasonable basis to believe home insurance was required for the

Property because: (1) Johnson applied for a residential loan through Weststar; (2)

Weststar conducted an appraisal of “Lots 13, 15, 16, 17, and 18”; (3) Johnson

instructed Weststar to create an escrow account to pay taxes and home insurance on

the Property; (4) the terms of the Mortgage Loan required insurance on the Property;

and (5) Johnson paid home and flood insurance on the Property until 2017. Based on

these facts, it is reasonable that PennyMac believed the Mortgage Loan required

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                     PENNYMAC LOAN SERVS., LLC V. JOHNSON

                                  Opinion of the Court

home insurance on the Property and that Johnson was not in compliance with this

requirement. See C.F.R. § 1024.37(b).

      Moreover, after Johnson filed his insurance complaint with the Commissioner

of Banks, PennyMac refunded Johnson the money it had charged him for the force-

placed insurance. As of the date of the hearing, PennyMac continued to pay for

insurance on the Property at its own expense.            It is unlikely PennyMac would

continue to purchase home insurance for Johnson at its own expense if it did not

reasonably believe the Property required insurance.

      Thus, we find PennyMac had a reasonable basis to believe the terms of the

Mortgage Loan contract required home insurance on the Property, and the trial

court’s dismissal of the breach of contract claim was, therefore, correct. See C.F.R. §

1024.37(b); see also Leary, 157 N.C. App. at 400, 580 S.E.2d at 4.

         C. Denial of Johnson’s Motion to Amend the Counterclaim

      Finally, Johnson argues the trial court abused its discretion by denying his

Motion for Leave to Amend the counterclaim. Johnson attempts to style this Motion

as his first amended counterclaim even though he had already filed the original FAC

in the middle district.   Having previously concluded the FAC is the operative

counterclaim in this case, Johnson’s Motion to Amend filed in Forsyth County

Superior Court was Johnson’s second, not first, Motion to Amend.

                              1. Amendment by Right

      First, Johnson argues the trial court abused its discretion in denying his second

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                         PENNYMAC LOAN SERVS., LLC V. JOHNSON

                                     Opinion of the Court

Motion to Amend because the North Carolina removal statute allowed him to file a

first amended counterclaim by right.            As previously discussed, Johnson was

permitted to file the FAC in the middle district as he would have been permitted to

do in the state court had the case not been removed to the middle district, and this

argument is, therefore, without merit. See N.C. R. Civ. P. 12(a)(2) (on remand from

a federal court a party may amend a pleading in the state court if they “would have

been permitted . . . to file” such pleadings had the case not been removed).

                                 2. Futility of Amendment

          Next, Johnson argues the trial court abused its discretion in Conclusion of Law

13 by concluding Johnson’s second Motion for Leave to Amend the counterclaim was

futile.     Additionally, Johnson argues the trial court abused its discretion in

conclusions of law 2, 10, 11, and 12 which concluded Johnson’s RICO, FDCPA, breach

of contract with fraudulent act, and breach of contract claims were futile. We find no

abuse of discretion.

          Where a party has already amended their pleading once as a matter of course,

as Johnson did here, the North Carolina Rules of Civil Procedure allow a party to

amend their pleading “only by leave of court or by written consent of the adverse

part[ies]; and leave shall be freely granted when justice so requires.” N.C. R. Civ. P.

15(a).

          Here, PennyMac and Standard Guaranty did not consent to the second

amended counterclaim; thus, Johnson could file the second amended counterclaim

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                      PENNYMAC LOAN SERVS., LLC V. JOHNSON

                                  Opinion of the Court

only by leave of the court.

             [O]ur standard of review for motions to amend pleadings
             requires a showing that the trial court abused its
             discretion. Denying a motion to amend without any
             justifying reason appearing for the denial is an abuse of
             discretion. However, proper reasons for denying a motion
             to amend include undue delay by the moving party and
             unfair prejudice to the nonmoving party. Other reasons
             that would justify a denial are bad faith, futility of
             amendment, and repeated failure to cure defects by
             previous amendments.

Williams v. Owens, 211 N.C. App. 393, 394, 712 S.E.2d 359, 360 (2011) (citation

omitted). “The trial court’s ruling is to be accorded great deference and will be upset

only upon a showing that it was so arbitrary that it could not have been the result of

a reasoned decision.” Brown v. N.C. Div. of Motor Vehicles, 155 N.C. App. 436, 438–

39, 573 S.E.2d 246, 248 (2002) (citation and internal quotation marks omitted); see

also Greenshields, Inc. v. Travelers Prop. Cas. Co. of Am., 245 N.C. App. 25, 31, 781

S.E.2d 840, 844 (2016) (“A judge is subject to reversal for abuse of discretion only

upon a showing by a litigant that the challenged actions are manifestly unsupported

by reason.”) (citation omitted); Bailey v. Handee Hugo’s, Inc., 173 N.C. App. 723, 727,

620 S.E.2d 312, 315 (2005) (holding a trial court’s denial of a motion to amend was

not an abuse of discretion where it stated proper reasons for denying the motion).

a. RICO Claim

      Here, the trial court denied Johnson’s Motion to Amend his RICO claim based

on the futility of the amendment. Conclusion of Law 2 provides:

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                     PENNYMAC LOAN SERVS., LLC V. JOHNSON

                                  Opinion of the Court

             [Johnson’s] RICO claim fails to state a claim upon which
             relief can be granted pursuant to N.C. R. Civ. P. 12(b)(6)
             and is not pled with the particularity required by N.C. R.
             Civ. P. 9(b). To state a claim for a violation of RICO, 18 §
             1962(c), [Johnson] must allege “(1) conduct (2) of an
             enterprise (3) through a pattern (4) of racketeering
             activity.” Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496
             (1985). As outlined below, the FAC as well as the proposed
             amended counterclaims and third party claims fail to state
             essential elements of a RICO claim, and in fact contain
             allegations that affirmatively show that the required
             elements of a RICO claim are not present in this case and
             cannot be alleged.

The trial court, in conclusions of law 3–9, meticulously explained why each element

of Johnson’s RICO claim fails, and why those failings could not be cured by an

amended pleading. Therefore, it cannot be said, and Johnson does not adequately

argue, the trial court’s decision was not reasoned or was an abuse of discretion;

accordingly, our review of Johnson’s RICO claim ends. See Brown, 155 N.C. App. at

438–39, 573 S.E.2d at 248.

b. FDCPA

      Johnson also challenges Conclusion of Law 10, which dismissed his FDCPA

claim against PennyMac.

      The purpose of the FDCPA is “to eliminate abusive debt collection practices by

debt collectors[.]” 15 U.S.C. § 1692(e) (2021). A “debt collector” is any person who

regularly collects or attempts to collect debts owed another. See 15 U.S.C. § 1692a(6)

(2021). The United States Supreme Court held a debt purchaser “may indeed collect

debts for its own account without triggering the statutory definition” set forth in 15

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                      PENNYMAC LOAN SERVS., LLC V. JOHNSON

                                  Opinion of the Court

U.S.C. § 1962a(6). Henson v. Santander Cons. USA Inc., 582 U.S. 79, 83, 137 S. Ct.

1718, 1721–22, 198 L. Ed. 2d 177, 181 (2017).

      Conclusion of Law 10 states:

             To plead a FDCPA claim against PennyMac, Johnson
             “must allege facts sufficient to show that PennyMac is a
             debt collector.” The FDCPA claim fails because Johnson
             has pled facts sufficient to show that PennyMac is not a
             debt collector. Johnson has specifically alleged that
             PennyMac is the holder of the debt that he alleges it is
             attempting to collect, and, therefore, it cannot be a debt
             collector. Henson v. Santander Consumer USA Inc., 137 S.
             Ct. 1718, 1721–22 (2017), quoting 15 U.S.C. 1692a(6).

Here, PennyMac is considered a debt purchaser because they purchased Johnson’s

Mortgage Loan from Weststar. Accordingly, PennyMac collected on a debt Johnson

owed it for the cost of the force-placed insurance. PennyMac did not collect a debt

owed to another, and is not, therefore, a debt collector as defined by the FDCPA. See

id. at 83, 137 S. Ct. at 1721–22, 198 L. Ed. 2d at 181.

      Thus, we conclude the trial court did not abuse its discretion by concluding

Johnson’s claim for FDCPA was futile. See Brown, 155 N.C. App. at 438–39, 573

S.E.2d at 248.

c. Breach of Contract with Fraudulent Act

      Next, Johnson argues the trial court abused its discretion when it concluded

he failed to plead breach of contract with fraudulent act.      Johnson argues he

adequately plead the elements of a unilateral contract and breach of said unilateral

contract with a fraudulent act. We disagree.

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                        PENNYMAC LOAN SERVS., LLC V. JOHNSON

                                    Opinion of the Court

      Conclusion of Law 11 states:

                The breach of contact with fraudulent act claim fails
                because North Carolina law governs Johnson’s claim and
                does not recognize a claim for breach of contract with
                fraudulent act. Curtis v. Cafe Enterprises, Inc., 2016 WL
                6916786 *10 (W.D.N.C. Nov. 11, 2016). To the extent that
                South Carolina law governed Johnson’s breach of contract
                with fraudulent act claim, that claim would still fail
                because the FAC fails to plead a fraudulent act.

As the trial court points out, breach of contract accompanied by fraudulent acts arises

under South Carolina law and is not recognized by North Carolina law. See Curtis v.

Café Enterprises, Inc., 2016 WL 6916786 *10 (W.D.N.C. Nov. 11, 2016). Even if we

were to recognize this claim, it still fails because Johnson did not adequately plead a

fraudulent act. It is unclear from Johnson’s FAC or his brief what fraudulent act he

alleges PennyMac committed. Assuming, arguendo, that the fraudulent act was the

force-placed insurance, we have already concluded PennyMac had a reasonable basis

for instituting the force-placed insurance; therefore, it was not fraudulent. See C.F.R.

§ 1024.37(b).

      Thus, we conclude the trial court did not abuse its discretion by concluding

Johnson’s claim for breach of contract with fraudulent act was futile. See Brown, 155

N.C. App. at 438–39, 573 S.E.2d at 248.

d. Breach of Contract

      Finally, Johnson argues the trial court abused its discretion in dismissing the

breach of contract claim as futile. For the reasons explained above, PennyMac had a

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                     PENNYMAC LOAN SERVS., LLC V. JOHNSON

                                 Opinion of the Court

reasonable basis to believe home insurance was required under the terms of the

Mortgage Loan. See C.F.R. § 1024.37(b).

      Therefore, the trial court did not abuse its discretion by concluding Johnson’s

claim for breach of contract was futile. See Brown, 155 N.C. App. at 438–39, 573

S.E.2d at 248.

                                 IV. Conclusion

      We hold the trial court did not err in granting PennyMac and Standard

Guaranty’s Motion to Dismiss or abuse its discretion in denying Johnson’s Motion to

Amend.

      AFFIRMED.

      Judges TYSON and GRIFFIN concur.

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