Hacker v. Wells Fargo Bank, N.A. et al

Filing 48

ORDER granting in part and denying in part 25 Motion to Dismiss; granting in part and denying in part 27 Motion to Dismiss for Failure to State a Claim; granting in part and denying in part 33 Motion to Dismiss. Signed by Senior Judge W. Earl Britt on 9/30/2016. (Marsh, K)

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NORTH CAROLINA
EASTERN DIVISION
NO. 4:15-CV-163-BR
VICKI WOOLARD HACKER,
Plaintiff,
v.
WELLS FARGO BANK, N.A.,
et al.,

ORDER

Defendants.

This matter is before the court on the motions to dismiss of defendants CitiFinancial, Inc.
f/k/a CitiFinancial Services, Inc. (“CitiFinancial”), CitiFinancial Servicing, LLC (“CitiFinancial
Servicing”), J.P. Morgan Mortgage Acquisition Corporation (“J.P. Morgan Mortgage”),
Carrington Mortgage Services, LLC (“Carrington”), and Residential Credit Solutions, Inc.
(“RCS”). The motions have been fully briefed and are ripe for disposition.
I.

BACKGROUND

On 26 January 2006, plaintiff and her then-spouse Lash Hacker (“Hacker”), acquired real
property located in New Bern, North Carolina (the “Property”) secured by a Deed of Trust
executed by plaintiff and Hacker in favor of CitiFinancial (the “2006 Loan”). (Compl., DE # 11, ¶¶ 24, 29.) On 14 January 2008, plaintiff and Hacker executed a second agreement secured by
a Deed of Trust executed by plaintiff and Hacker in favor of CitiFinancial (the “2008 Loan”).
(Id. ¶¶ 30-32.)

The Property was awarded to plaintiff as part of her divorce from Hacker, which became
final in September 2012. (Id. ¶ 38.) During the divorce proceedings, plaintiff was terminated
from her employment and starting in June of 2012 became unable to make the monthly payments
owed on the 2006 Loan. (Id. ¶ 40.) In July 2012, plaintiff contacted CitiFinancial and applied
for the Home Affordable Modification Program (“HAMP”) that was established to provide
homeowners, in financial need, the opportunity to lower their monthly mortgage payments. (Id.
¶¶ 34-35, 41-42.)
On 16 July 2012, plaintiff received correspondence from CitiFinancial, relating to her
application for HAMP modification of the 2006 Loan, informing plaintiff that Troy D. Vaughan
(“Vaughan”), an employee of CitiFinancial, was assigned as her Homeowner Support Specialist.
(Id. ¶¶ 43-44.) In response to the July 2012 letter from CitiFinancial, and at the request of
Vaughan and other representatives of CitiFinancial, plaintiff provided documentation to
CitiFinancial in support of her HAMP application. (Id. ¶¶ 45-46.)
On 30 November 2012, plaintiff, in telephone conversations with Vaughan and other
representatives of CitiFinancial, was told that “if she immediately made two (2) of the revised
monthly payments” under the terms of a proposed modification agreement, “approximately
$725.36, the 2006 Loan would be modified.” (Id. ¶¶ 51-52.) Plaintiff then verbally authorized
CitiFinancial to debit from her bank account the sum of $726.00. (Id. ¶ 53.)
On 1 December 2012, plaintiff and Hacker, whose name was not removed from either of
the loans nor the deed to the Property, signed the proposed modification agreement, entitled
“Adjustment of Terms Agreement,” in favor of CitiFinancial for the 2006 Loan, which was dated
30 November 2012. (Id. ¶ 48.) Plaintiff then transmitted the Adjustment of Terms Agreement to
CitiFinancial. (Id. ¶ 50.)

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Sometime in late December 2012, plaintiff received a letter from Carrington, entitled
“NOTICE OF SALE OF OWNERSHIP OF MORTGAGE LOAN,” informing plaintiff that on
20 December 2012, CitiFinancial sold ownership in the 2006 Loan to Wells Fargo Bank, N.A.
(“Wells Fargo”) and J.P. Morgan Mortgage. (Id. ¶¶ 56-58.) The letter incorrectly lists the
original amount of the 2006 Loan. (Id. ¶ 59.) In response to that letter, plaintiff contacted
Carrington to make payments on the 2006 Loan, as purportedly modified by the Adjustment of
Terms Agreement, but Carrington’s representatives refused to recognize that the loan had been
modified. (Id. ¶¶ 65-66.) In a letter dated 28 December 2012, CitiFinancial informed plaintiff
that her request for modification of the 2006 Loan was not approved because she did not provide
CitiFinancial with the documents it requested. (Id. ¶ 62.)
On 8 January 2013, a foreclosure proceeding was commenced before the Clerk of
Superior Court for Pamlico County, North Carolina, for the default by plaintiff on the 2006
Loan. (Id. ¶ 74.)
In June 2014, plaintiff received a letter informing her that on 29 May 2014, the 2006
Loan was sold to J.P. Morgan Mortgage and RCS was the agent authorized to act on behalf of
J.P. Morgan Mortgage. (Id. ¶¶ 77-78.) RCS assigned Randy Horton (“Horton”), an employee of
RCS, as plaintiff’s single point of contact regarding the 2006 Loan. (Id. ¶ 83.) RCS
representatives informed plaintiff that partial payments for the 2006 Loan would not be accepted.
(Id. ¶ 82.)
“On numerous occasions” plaintiff had telephone conversations with Horton and other
employees of RCS in which she was “belittled, harassed, and mocked due to her failure to make
the required payments on the 2006 Loan.” (Id. ¶¶ 84-85.) Plaintiff characterizes the statements
by Horton and other employees of RCS as “quite disparaging, foul, and offensive and could be

3

construed as personal attacks at the character and morality of Plaintiff.” (Id. ¶ 86.)
Representatives of RCS “repeatedly characterized statements made by Plaintiff regarding her
dire financial position and circumstances as irrelevant and untruthful.” (Id. ¶ 87.) They
informed plaintiff that the foreclosure proceeding could be postponed or prolonged, provided she
agree to make large payments on the 2006 Loan. (Id. ¶ 88.) Communications with Horton and
other representatives of RCS “often left Plaintiff visibly and emotionally upset, causing her
severe emotional distress relating to the Property and her financial position.” (Id. ¶ 89.)
On 12 November 2014, the Clerk of Court entered an Order Permitting Foreclosure. (Id.
¶ 91.) The Clerk of Court relied upon an Affidavit of Default that was executed by Therese
Pfullmann, an Assistant Vice President of RCS, which, according to plaintiff, “contained a
multitude of false, misleading and incorrect statements.” (Id. ¶ 92.) On 11 February 2015, the
Property was sold at a foreclosure sale where J.P. Morgan Mortgage purchased the Property. (Id.
¶ 96.)
Following the foreclosure sale, CitiFinancial and CitiFinancial Servicing informed
plaintiff that the 2008 Loan was forgiven. (Id. ¶ 102.) However, on 30 March 2015, plaintiff
received a mortgage loan statement issued by CitiFinancial and/or CitiFinancial Servicing,
informing her that “the 2008 Loan had been accelerated and was immediately due.” (Id. ¶ 103.)
In April 2015, after plaintiff’s counsel requested a complete accounting of the 2006 Loan,
plaintiff’s counsel received a letter from RCS which “identified (i) itself as the current servicer
for the 2006 Loan, (ii) [] J.P. Morgan Mortgage as the investor for the 2006 Loan, and (iii) []
Wells Fargo as the owner and the holder of the 2006 Loan.” (Id. ¶¶ 104, 108.)
On 2 September 2015, plaintiff filed this action asserting the following claims: (i)
violations of the North Carolina Debt Collection Act (“DCA”) and North Carolina Unfair and

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Deceptive Trade Practices Act (“UDTPA”) against all defendants; (ii) fraud against
CitiFinancial; (iii) violations of the North Carolina Collection Agency Act (“CAA”) against
CitiFinancial Servicing, Carrington, and RCS; (iv) breach of contract against CitiFinancial,
Wells Fargo, J.P. Morgan Mortgage, Carrington, and RCS; (v) intentional infliction of emotional
distress against all defendants; (vi) negligence against all defendants; (vii) negligent infliction of
emotional distress against all defendants; (viii) negligent misrepresentation against CitiFinancial,
CitiFinancial Servicing and RCS; and (ix) declaratory judgment against all defendants. Wells
Fargo, with consent of the other defendants, removed the action to this court.1 Defendants
subsequently responded to the complaint by filing the instant motions to dismiss pursuant to
Federal Rule of Civil Procedure 12(b)(6).
II.

DISCUSSION

Rule 12(b)(6) permits a court to dismiss an action for “failure to state a claim upon which
relief can be granted.” Fed. R. Civ. P. 12(b)(6). To state a claim, a complaint need only contain
“a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R.
Civ. P. 8(a)(2). A 12(b)(6) motion should only be granted if “it appears certain that the plaintiff
cannot prove any set of facts in support of his claim entitling him to relief.” Edwards v. City of
Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999). However, a complaint that proffers only “a
formulaic recitation of the elements of a cause of action” with no “further factual enhancement”
is insufficient. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 557 (2007). To survive
dismissal, a party must come forward with “enough facts to state a claim to relief that is plausible
on its face.” Id. at 548. The plausibility standard is met “when the pleaded factual content
allows the court to draw the reasonable inference that the defendant is liable for the misconduct

1

Plaintiff has since voluntarily dismissed Wells Fargo as a defendant.

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alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). The court must accept as true all wellpleaded allegations and must draw all reasonable factual inferences in favor of the plaintiff. See
Venkatraman v. REI Sys., Inc., 417 F.3d 418, 420 (4th Cir. 2005); Mylan Labs., Inc. v. Matkari,
7 F.3d 1130, 1134 (4th Cir. 1993). Additionally, the court may consider exhibits that plaintiff
attached to, and incorporated by reference in, his complaint. See Matrix Capital Mgmt. Fund, LP
v. BearingPoint, Inc., 576 F.3d 172, 197 (4th Cir. 2009).
A. The Effect of the Foreclosure Proceeding
Defendants initially contend that plaintiff’s failure to appeal the clerk’s Order of
Foreclosure pursuant to N.C. Gen. Stat. § 45-21.16(d) bars all of her claims based on the
doctrines of collateral estoppel and/or res judicata. Before considering the applicability of those
doctrines, it is important to understand the nature of a proceeding under § 45-21.16.
In North Carolina, the Clerk of Superior Court presides over power of sale foreclosure
actions under § 45-21.16. See N.C. Gen. Stat. § 45-21.16(d). The clerk “shall authorize” a
trustee to proceed with foreclosure if the clerk finds the existence of:
(i) a valid debt of which the party seeking to foreclose is the holder, (ii) default,
(iii) right to foreclose under the instrument, (iv) notice to those entitled to such . .
., (v) . . . if the loan is a home loan . . . that. . . pre-foreclosure notice. . . was
provided in all material respects, and that the periods of time established by
Article 11 of this Chapter have elapsed, and (vi) that the sale is not barred by [the
mortgagor’s military service pursuant to] G.S. 45-21.12A.
Id. Although the borrower cannot raise any equitable defenses to foreclosure in a § 45-21.16
proceeding, she may raise “evidence of legal defenses tending to negate any of the [] findings
required.” In re Foreclosure of Deed of Trust by Goforth Props., Inc., 432 S.E.2d 855, 859 (N.C.
1993) (citation omitted). A clerk’s judgment “will stand as a judgment of the court.” In re
Atkinson-Clark Canal Co., 67 S.E.2d 276, 278 (N.C. 1951). “Any issue that the clerk decides in
a foreclosure proceeding pursuant to N.C. Gen. Stat. § 45-21.16(d) is conclusive unless appealed
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and reversed and cannot be relitigated in a subsequent lawsuit.” Newton v. Nationstar Mortg.
LLC, No. 7:15-CV-16-D, 2015 WL 3413256, at *2 (E.D.N.C. May 26, 2015) (citations omitted).
The clerk’s findings (or failure to make any finding) may be appealed within 10 days. N.C. Gen.
Stat. § 45-21.16(d1).
North Carolina courts routinely recognize the applicability of the doctrine of collateral
estoppel to bar relitigation of issues determined in prior foreclosure proceedings. See
Funderburk v. J.P. Morgan Chase Bank, N.A., 775 S.E.2d 1, 5-6 (N.C. Ct. App. 2015)
(collecting cases). Although some cases refer to the companion doctrine of res judicata as the
operative bar, see, e.g., Mixon v.Wells Fargo Home Mortg., No. 3:12-CV-77-RJC-DLH, 2012
WL 1247202, at *3 (Apr. 13, 2012), the court concludes that collateral estoppel is more
appropriately considered applicable, if at all, under the circumstances here, see Petri v. Bank of
Am., N.A., No. COA13-907, 2014 WL 458095, at *2-3 (N.C. Ct. App. Feb. 4, 2014) (table)
(rejecting application of res judicata because no identity of causes of actions between the
plaintiff’s appeal from clerk’s order of foreclosure based on the defendant’s failure to satisfy the
elements of § 45-21.16(d) and complaint asserting causes of action for injunction to preclude
foreclosure, “agency and negligent non[-]disclosure,” and violations of UDTPA). Therefore, the
court confines its analysis to whether collateral estoppel applies.
This doctrine
bars the relitigation of specific issues that were actually determined in a prior
action. In order to assert collateral estoppel under North Carolina law, a party
must show that the issue in question was identical to an issue actually litigated
and necessary to the judgment, that the prior action resulted in a final judgment on
the merits, and that the present parties are the same as, or in privity with, the
parties to the earlier action.
Sartin v. Macik, 535 F.3d 284, 287-88 (4th Cir. 2008) (citations omitted).

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The court examines whether any of the issues the clerk previously determined (i.e.,
validity of debt, default, trustee’s right to foreclose, proper notice was provided, and military
service does not bar the sale) are determinative of (and thus fatal to) any of plaintiff’s claims.
This in turn necessitates an examination of the allegations forming the basis for each claim.
Plaintiff first claims that defendants’ conduct violated the DCA (and hence the UDTPA)
in multiple respects. To the extent she alleges that CitiFinancial’s and CitiFinancial Servicing’s
acts in regard to the 2008 Loan are the basis for her DCA/UDTPA claim, (see Compl., DE # 1-1,
¶¶ 124, 125, 129), these defendants acknowledge that no issues pertaining to the 2008 Loan were
determined in the foreclosure proceeding, (see Mem., DE # 28, at 11 n.3; Reply, DE # 42, at 3),
and therefore, plaintiff is not estopped from bringing her claim on that basis.
Additionally, plaintiff alleges that defendants violated the DCA/UDTPA in the course of
their collection efforts on the 2006 Loan. For example, she claims that defendants falsely
accused her, or threatened to accuse her, of conduct tending to cause disgrace, contempt, or
ridicule in attempting to collect the 2006 Loan and threatened to take actions against her which
were not permitted by law in the event of nonpayment of the 2006 Loan. (Compl., DE # 1-1, ¶
125(A), (C).) Issues concerning such alleged collection measures were not litigated (nor could
they have been) in the foreclosure proceeding. Therefore, to the extent plaintiff’s DCA/UDTPA
claim is based on defendants’ conduct in attempting to collect on the 2006 Loan, collateral
estoppel is not applicable.
However, plaintiff’s DCA/UDTPA claim is also premised, in part, on defendants’
conduct in the course of the foreclosure proceeding, namely the “[i]nitiation, continuation and
completing the Foreclosure Proceeding with the knowledge that the 2006 Loan had been
modified.” (Compl., DE # 1-1, ¶ 125(D); see also id. ¶ 132.) These allegations implicate

8

plaintiff’s default and/or validity of the debt—issues which the clerk determined, and thus, they
cannot be relitigated now. The court will allow defendants’ motion to dismiss plaintiff’s
DCA/UDTPA claim to the extent it is based on defendants’ conduct in the course of the
foreclosure proceeding.
Plaintiff’s fraud claim, which is only against CitiFinancial, rises and falls on her
contention that CitiFinancial misrepresented the fact that the 2006 Loan would be modified by
her execution of the Adjustment of Terms Agreement and her November 2012 payments.
Resolution of that claim necessarily depends on the validity of the debt. Again, the clerk decided
that issue, and plaintiff is estopped from relitigating it now. Plaintiff’s claims for breach of
contract and negligent misrepresentation, which are also based on the contention the 2006 Loan
was modified and/or its terms misrepresented, fail for the same reason.
Plaintiff’s claims for intentional and negligent infliction of emotional distress and
negligence, like her DCA/UDTPA claim, are based on allegations concerning defendants’
conduct in relation to the 2006 Loan and 2008 Loan. To the extent plaintiff’s claims are based
on the 2008 Loan, they are not barred by collateral estoppel because, as noted previously, issues
pertaining to the 2008 Loan were not litigated in the foreclosure proceeding. Similarly, issues
pertaining to the servicing of the 2006 Loan, such as defendants’ failure to timely reconcile the
loan after transfer of servicing rights from Carrington to RCS and their failure to provide
plaintiff with accurate monthly account statements for the loan, (Compl., DE # 1-1, ¶ 204(B),
(D)), do not pertain to any of the issues the clerk decided in the foreclosure proceeding.
However, plaintiff’s claims are based, at least in part, on defendants’ alleged failure to recognize
the 2006 Loan had been modified by the Adjustment of Terms Agreement; defendants’ allegedly
wrongful refusal to accept payments thereunder; and defendants’ failure to restore the 2006 Loan

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to non-delinquent status. (Id. ¶ 205(C), (E), (F), (H), (J).) The clerk’s finding of default and
validity of debt bar claims based on these allegations. In short, collateral estoppel does not bar
these claims in their entirety. Rather, they are only barred to the extent these claims rest on the
allegation that the 2006 Loan was modified and defendants’ refusal to accept payments
authorized by the Adjustment of Terms Agreement.
In summary, collateral estoppel bars the following claims: DCA/UDTPA to the extent
based on defendants’ conduct in the course of the foreclosure proceeding; fraud; breach of
contract; negligent misrepresentation; and intentional and negligent infliction of emotional
distress and negligence to the extent based on the allegation that the 2006 Loan was modified
and defendants’ refusal to accept payments authorized by the Adjustment of Terms Agreement.2
B. Plaintiff’s Remaining Claims
1. DCA/UDTPA
To state a claim under the DCA, the plaintiff must allege three “threshold” elements:
“[f]irst, the obligation owed must be a ‘debt’; second, the one owing the obligation must be a
‘consumer’; and third, the one trying to collect the obligation must be a ‘debt collector.’” Reid v.
Ayers, 531 S.E.2d 231, 233 (N.C. Ct. App. 2000) (citing N.C. Gen. Stat. § 75-50(1)-(3)). The
plaintiff must also allege the “requirements found in [the UDTPA]: (1) an unfair act (2) in or
affecting commerce (3) proximately causing injury.” Id. at 235 (citation omitted). Considering
plaintiff’s verified factual allegations along with the documents attached to the Complaint, the
court finds that plaintiff has adequately stated a claim for violation of DCA/UDTPA to the extent
the claim is based on defendants’ conduct in attempting to collect on the 2006 and 2008 Loans.

2

The court has not considered the applicability of collateral estoppel to plaintiff’s claims for violations of the CAA
and for declaratory judgment. Those claims are discussed infra.

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2. CAA
Plaintiff claims that CitiFinancial Servicing, Carrington, and RCS violated the CAA.
These defendants contend they are not a “collection agency” as defined by the CAA.
“Collection agency” means a person directly or indirectly engaged in soliciting,
from more than one person delinquent claims of any kind owed or due or asserted
to be owed or due the solicited person and all persons directly or indirectly
engaged in the asserting, enforcing or prosecuting of those claims.
N.C. Gen. Stat. § 58-70-15(a). However, the statute exempts a number of parties from that
definition, including:
[] Banks, trust companies, or bank-owned, controlled or related firms,
corporations or associations engaged in accounting, bookkeeping or data
processing services where a primary component of such services is the rendering
of statements of accounts and bookkeeping services for creditors[.]
Id. § 58-70-15(c)(2). According to CitiFinancial Servicing, Carrington, and RCS, they each fall
within this exemption as loan servicing companies. Plaintiff does not argue otherwise.
Accordingly, this claim will be dismissed.
3. Intentional and Negligent Infliction of Emotional Distress
Defendants argue that plaintiff has failed to state a claim for either intentional or
negligent infliction of emotional distress because she has failed to allege facts supporting the
severe emotional distress element required of both claims. Concerning the emotional distress she
allegedly suffered, plaintiff claims that her communications with representatives of RCS “often
left her visibility [sic] and emotionally upset, causing her severe emotional distress relating to the
Property and her financial position.” (Compl., DE # 101, ¶ 89.) She further alleges as a result
“particularly” of CitiFinancial’s and RCS’s conduct, she suffered “mental anguish, which
manifested itself physically through sleep loss, headaches, and other physical symptoms.” (Id. ¶

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117.) Further, she contends that she “has incurred severe and grievous mental and emotional
suffering, anguish, shock, nervousness, and anxiety.” (Id. ¶ 195.)
To state a valid intentional or negligent infliction of emotional distress claim to survive a
12(b)(6) motion, “a plaintiff must allege severe emotional distress, which has been defined as
‘any emotional or mental disorder, such as, for example, neurosis, psychosis, chronic depression,
phobia, or any other type of severe and disabling emotional or mental condition which may be
generally recognized and diagnosed by professionals trained to do so.’” Horne v. Cumberland
Cty. Hosp. Sys., Inc., 746 S.E.2d 13, 19-20 (N.C. Ct. App. 2013) (citation omitted). Plaintiff’s
conclusory allegations do not meet this standard, and her emotional distress claims will be
dismissed.
4. Negligence
Plaintiff claims all defendants were negligent in a number of respects in the servicing and
collection of both the 2006 and 2008 Loans. (See Compl., DE # 1-1, ¶ 204.) The primary issue
as to this claim is whether defendants owed plaintiff any duty of care, which is of course required
to state a claim for negligence. See Fussell v. N.C. Farm Bureau Mut. Ins. Co., 695 S.E.2d 437,
440 (N.C. 2010) (recognizing that to state a claim for negligence, a plaintiff must allege a legal
duty, among other things). Plaintiff acknowledges that the relationship between a borrower and
a lender is generally governed by the terms of their agreement. (See Resp., DE # 39, at 26.) See
also Synovus Bank v. Coleman, 887 F. Supp. 2d 659, 673 (W.D.N.C. 2012) (dismissing
borrower’s claims for negligence and gross negligence against lender pursuant to Rule 12(b)(6)
because borrower “offered no legal or factual basis on which the Court could impose any duty on
the Bank beyond those duties expressly provided for in the parties’ loan agreement”); Arnesen v.
Rivers Edge Golf Club & Plantation, Inc., 781 S.E.2d 1, 8 (N.C. 2015) (“In an ordinary debtor-

12

creditor transaction, the lender's duties are defined by the loan agreement and do not extend
beyond its terms.” (citation omitted)).
Plaintiff contends that defendants owed her a duty of care based on “the terms of their
agreements, the exercise of ordinary care required by the Uniform Commercial Code (“UCC”),
and the general duty of care to act as a reasonably prudent lender.” (Resp., DE # 39, at 26-27.)
Plaintiff does not point to what terms of the operative agreements created a duty on the part of
any defendant, and without some specific reference, the court will not read one into the parties’
agreements or assume a duty existed.
As far as the UCC, plaintiff cites to N.C. Gen. Stat. § 25-4-103(a) as an example showing
that the UCC “plainly contemplates the exercise of ordinary care by lenders.” (Id. at 26 & n.6.)
The provision to which plaintiff cites prohibits a bank and its customer from disclaiming by
agreement the bank’s responsibility for its failure to exercise ordinary care. See N.C. Gen. Stat.
§ 25-4-101 cmt. 3 (“Article 4 defines rights between parties with respect to bank deposits and
collections.”), -103(a) (“The effect of the provisions of this Article may be varied by agreement,
but the parties to the agreement cannot disclaim a bank's responsibility for its . . . failure to
exercise ordinary care . . . .”). Just because a bank might owe its customer a duty to exercise
ordinary care does not mean the bank owes that same duty to a person to whom it lends money.
With regard to a general duty of care required of a lender, plaintiff appears to rely
exclusively on the case of Hetzel v. JPMorgan Chase Bank, N.A., No. 4:13-CV-236-BO, 2014
WL 7336863 (E.D.N.C. Dec. 22, 2014). In Hetzel, the defendant-bank argued that the plaintiffborrower’s negligence claim based on the misapplication of loan payoff proceeds should be
dismissed on the ground of the economic loss doctrine. 2014 WL 7336863, at *7. In rejecting
the defendant’s argument, the court stated “the Court finds that Chase owed a general duty of

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due care in its relationship with [the plaintiff]. The wrong that occurred . . . is much less a breach
of contract than it is a simple negligence claim.” Id. The court declines to read as much into this
opinion as plaintiff would have it and will not find a lender owes a borrower a general duty of
care.
Finally, plaintiff suggests that the North Carolina Secure and Fair Enforcement Mortgage
Licensing (“S.A.F.E.”) Act creates a duty of care. (Resp., DE # 39, at 27-28.) The court is
hesitant to dismiss plaintiff’s negligence claim based on a duty arising under the S.A.F.E. Act
without further briefing. In Guyton v. FM Lending Services, Inc., 681 S.E.2d 465, 478 (N.C. Ct.
App. 2009), the North Carolina Court of Appeals held that certain provisions of the Mortgage
Lending Act (“MLA”), the predecessor to the S.A.F.E. Act, created a duty of care sufficient to
support the plaintiffs’ claim for negligent misrepresentation. No party discusses Guyton in this
regard. The court will deny defendants’ motions to dismiss the negligence claim without
prejudice to the extent the claim is based on a duty (duties) under the S.A.F.E. Act. Otherwise,
the court will dismiss the negligence claim.
5. Declaratory Judgment
Plaintiffs seeks declaratory relief under North Carolina’s Declaratory Judgment Act, N.C.
Gen. Stat. § 1-253, et seq., regarding:
a. The amount owed under the 2006 Loan, if any;
b. The amount owed under the 2008 Loan, if any.
c. The holder of the 2006 Loan; [and]
d. Whether any of the fees/charges that were assessed or charged by Defendants,
against either the 2006 Loan or the 2008 Loan, were waived pursuant to the North
Carolina Mortgage Debt Collection and Servicing Act.
(Compl., DE # 1-1, ¶ 222.)
The North Carolina Uniform Declaratory Judgment Act (the “Act”) grants courts
the power to declare the “rights, status, and other legal relations” of parties arising
under a contract, including questions regarding its construction or validity. N.C.
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Gen. Stat. §§ 1–253 and 1–254. “A declaratory judgment should issue (1) when it
will serve a useful purpose in clarifying and settling the legal relations at issue,
and (2) when it will terminate and afford relief from the uncertainty, insecurity
and controversy giving rise to the proceeding.” Conner v. N.C. Council of State,
365 N.C. 242, 258, 716 S.E.2d 836, 846, reh'g denied, 719 S.E.2d 40 (N.C. 2011)
(citation omitted). In order for the Court to have jurisdiction over a claim for
declaratory judgment, the complaint must demonstrate “the existence of an actual
controversy.” State ex rel. Utilities Comm'n v. Carolina Water Serv., Inc. of N.C.,
149 N .C. App. 656, 658, 562 S.E.2d 60, 62 (2002) (citations omitted). An
“actual controversy” is a “‘jurisdictional prerequisite” to proceeding under the
Act. Gaston Bd. of Realtors, Inc. v. Harrison, 311 N.C. 230, 234, 316 S.E.2d 59,
61 (1984) (citation omitted). “It is not necessary for one party to have an actual
right of action against another for an actual controversy to exist which would
support declaratory relief. The Court, however, must “be convinced that the
litigation appears to be unavoidable.” North Carolina Consumers Power, Inc. v.
Duke Power Co., 285 N.C. 434, 450, 206 S.E.2d, 178, 189 (1974).
S. Concrete Prod., Inc. v. ARCO Design/Build, Inc., No. 1:11CV194, 2012 WL 1067906, at *4
(W.D.N.C. Mar. 29, 2012).
As J.P. Morgan Mortgage and RCS point out here,3 the alleged wrongs for which plaintiff
seeks declaratory judgment have already occurred. The foreclosure on, and the sale of, the
Property has occurred. The other acts of which plaintiff complains have taken place, and there is
no threatened future action. On her surviving claims, plaintiff can be awarded damages. Under
these circumstances the court finds that declaratory judgment is not appropriate, see Tapia v.
U.S. Bank, N.A., 718 F. Supp. 2d 689, 695-96 (E.D. Va. 2010) (dismissing the plaintiffs’ claim
for declaratory relief under the Declaratory Judgment Act where the foreclosure had already
occurred and recognizing that “declaratory judgments are designed to declare rights so that
parties can conform their conduct to avoid future litigation, and are untimely if the questionable
conduct has already occurred or damages have already accrued” (citation and quotation marks
omitted), aff’d, 441 F. App’x 166 (4th Cir. 2011) (per curiam), and the court in its discretion
declines to render that relief, see Augar v. Augar, 573 S.E.2d 125, 130 (N.C. 2002) (recognizing

3

Plaintiff has not responded to any defendant’s argument regarding dismissal of her declaratory judgment claim.

15

the trial court has discretion “to decline a request for declaratory relief when (1) the requested
declaration will serve no useful purpose in clarifying or settling the legal relations at issue; or (2)
the requested declaration will not terminate or afford relief from the uncertainty, insecurity, or
controversy giving rise to the proceeding”).
III.

CONCLUSION

For the foregoing reasons, defendants’ motions to dismiss are GRANTED IN PART and
DENIED PART. Plaintiff’s claims for violations of the DCA/UDTPA to the extent based on
defendants’ conduct in the course of the foreclosure proceeding; fraud; breach of contract;
negligent misrepresentation; CAA; intentional infliction of emotional distress; negligent
infliction of emotional distress; negligence based on anything other than a duty under the
S.A.F.E. Act; and declaratory judgment are DISMISSED. Plaintiff’s claims for violations of the
DCA/UDTPA to the extent the claim is based is based on defendants’ conduct in attempting to
collect on the 2006 and 2008 Loans and negligence to the extent the claim is based on a duty
(duties) arising under the S.A.F.E. Act remain.
This 30 September 2016.

__________________________________
W. Earl Britt
Senior U.S. District Judge

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