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

Filing 70

ORDER granting 37 Motion to Dismiss; finding as moot 54 Motion for Summary Judgment and granting in part and denying in part 56 Motion for Summary Judgment. The court orders a court-hosted settlement conference with US Magistrate Judge Robe rt B. Jones, Jr. as settlement master. The conference will be conducted at a time and place selected by Magistrate Judge Jones. This matter remains on the calendar for the court's December 16, 2013 term. Signed by Senior Judge Malcolm J. Howard on 9/17/2013. (Lee, L.)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
NO. 5:12-CV-67-H

WELLS
FARGO,
N.A.,
as
successor
by
merger
to
Wachovia
Bank,
National
Association,
Plaintiff, 

v. 

LAWSON S. TRIPLETT, JR. as
Executor of the Estate of
Peggy Ann Triplett, RELIANCE
TRUST COMPANY, as Trustee of
the
PEGGY
ANN
TRIPLETT
REVOCABLE TRUST, and WILLIAM
A. VESTAL and MICHAEL C.
SMITH, as Trustees of the
Peggy
Ann
Triplett
Foundation,
Defendants
and
WILLIAM A. VESTAL and MICHAEL
C. SMITH, as Trustees of the
Peggy
Ann
Triplett
Foundation,
Third-Party Plaintiff,
v.
LAWSON S. TRIPLETT, JR.
Third-Party Defendant.

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ORDER 

This matter is before the court on
(1)

the motion to dismiss or for judgment on the pleadings of
defendants Lawson S. Triplett, Jr. as Executor of the
Estate of Peggy Ann Triplett (“Defendant Executor”) and
Defendant Reliance Trust Company, as Trustee of the Peggy
Ann Triplett Revocable Trust (“Trustee”) as to the
crossclaim against them;

(2)

Motion for Summary Judgment as to the same crossclaims;

(3)

Motion for Summary Judgment by William A. Vestal and
Michael C. Smith, as Trustees of the Peggy Ann Triplett
Foundation (“Foundation Trustees”) on the affirmative
defense of illegality.

Appropriate responses and replies have been filed, and these
matters are ripe for ruling.
BACKGROUND
Plaintiff Wells Fargo, N.A. (“Wells Fargo” or “Plaintiff”)
asserts claims for fraudulent transfer pursuant to N.C. General
Statute § 39-23.1, et seq., unjust enrichment or equitable lien
and

breach

of

contract

by

the

estate

and

the

trust.

Specifically, plaintiff has alleged that a transfer of eight
million dollars by Peggy A. Triplett (“Mrs. Triplett”) prior to
her death was fraudulent.
Mrs. Triplett died in June 2008.

Prior to her death, on

March 5, 2008, she made an eight million dollar contribution
(“the

transfer”)

foundation”)

to

through

the
the

Peggy

Ann

Peggy
2

Triplett

Ann

Foundation

Revocable

Trust

(“the
(“the

trust”).
and

Prior to the transfer on May 3, 2007, Mrs. Triplett

her

husband,

Lawson

S.

Triplett,

Jr.

(“Mr.

Triplett”)

signed a promissory note in an amount of two million dollars in
favor

of

Wachovia

predecessor.

This

Bank,

N.A.,

obligation

has

(“Wachovia”)
been

plaintiff’s

modified

on

several

occasions and an additional two million dollars was loaned by
plaintiff.
executed

In August 2009, The Estate, The Trust and others

an

Amended

Note

for

the

outstanding

balanced

owed

Wachovia of $2,987,585.90.
Motion to Dismiss the Crossclaims
I.

Standard of Review
A

federal

district

court

confronted

with

a

motion

to

dismiss for failure to state a claim should view the allegations
of

the

complaint

(here,

the

favorable to the plaintiff.

crossclaim)

See

F.3d 472, 474 (4th Cir. 1997).

in

the

light

most

Ibarra v. United States, 120
The intent of Rule 12(b)(6) is

to test the sufficiency of a complaint.

Edwards v. City of

Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999).

A

Rule 12(b)(6)

motion “‘does not resolve contests surrounding the facts, the
merits of a claim, or the applicability of defenses.’”

Id.

(quoting Republican Party v. Martin, 980 F.2d 943, 952 (4th Cir.
1992)).
supported

“[O]nce a claim has been stated adequately, it may be
by

showing

any

set

of
3

facts

consistent

with

the

allegations in the complaint.”
127

Bell Atlantic Corp. v. Twombly,

S. Ct. 1955, 1969 (2007).
“[A] complaint need not >make a case= against a defendant or

‘forecast
claim.”

evidence

sufficient

to

prove

an

element’

of

the

Chao v. Rivendell Woods, Inc., 415 F.3d 342, 349 (4th

Cir. 2005) (quoting Iodice v. United States, 289 F.3d 270, 281
(4th

Cir.

2002)).

Rule

8

of

the

Federal

Rules

of

Civil

Procedure provides “for simplicity in pleading that intends to
give little more than notice to the defendant of the plaintiff=s
claims and that defers until after discovery any challenge to
those

claims

insofar

as

they

rely

on

facts.”

Teachers=

Retirement Sys. of LA v. Hunter, 477 F.3d 162, 170 (4th Cir.
2007).

A complaint is generally sufficient if its “‘allegations

are detailed and informative enough to enable the defendant to
respond.’”

Id.

(quoting

5

Charles

Alan

Wright

&

Arthur

R.

Miller, Federal Practice and Procedure, ' 1215 at 193 (3d ed.
2004)). Thus, a complaint satisfies the Rules if it gives “fair
notice” of the claim and “the grounds upon which it rests.”
Twombly, 127 S. Ct. at 1964.
II.

Analysis
The Defendant Executor and the Trustee request this court

dismiss the crossclaim of the Foundation Trustees pursuant to
Rule 12(b)(6) of the Federal Rules of Civil Procedure or in the

4

alternative enter judgment on the pleadings pursuant to Rule
12(c) of the Federal Rules of Civil Procedure.
The crossclaim alleges the following:
Pursuant to Rule 13 of Federal Rules of Civil
Procedure, for a Crossclaim against [the Estate] and
[the Trust], the Foundation allege[s] and say[s] as
follows:
1. That in the event that the [Foundation is] liable
to Plaintiff on Plaintiff's First or Second Claims for
Relief, which is expressly denied, the [Foundation is]
entitled to indemnity from [the Estate] and [the
Trust] for any and all damages recovered by Plaintiff
from [the Foundation].
2. Alternatively, any damages for which the
[Foundation] might be liable to Plaintiff, which are
expressly denied, are the direct result of the actions
of [Defendant Executor] and [the Trustee] and any
assets still in the possession of [the Estate] and
[the Trust] should first be applied and credited
against any judgment obtained by Plaintiff.

(Answer at 18 [DE #17].)
The court finds that the Foundation Trustee’s crossclaim
fails as a matter of law for several reasons.
Carolina
claims,

Fraudulent
but

rather

Transfer

Act

does

specifically

transferee of a fraudulent transfer.
23.8.

not

details

First, the North
provide

the

for

rights

such
of

a

See N.C. Gen. Stat. § 39-

The Act does not provide for an indemnity or contribution

claim by the transferee.

Furthermore, the foundation received a

gift. The court finds that the indemnity and contribution claims
are not applicable to the mere receipt of a gift as there is no

5

contract, either express or implied involved and the parties are
not joint tortfeasors.

See Kaleel Builders, Inc. v. Ashby, 587

S.E.2d 470 (N.C. Ct. App. 2003).
that

it

has

alleged

a

claim

The Foundation also argues
of

paragraph two of its crossclaim.

equitable

subrogation

in

However, the court does not

read the crossclaim to so allege, and finds, amendment would be
futile because equitable subrogation does not apply in this case
as equitable subrogation applies when one party pays the debt of
another.

Here, the foundation may be required to return the

gift it received, but not to pay the obligation of another.

See

N.C. Ins. Guar. Ass’n v. Century Indem. Co., 444 S.E. 2d 464,
472 (N.C. Ct. App. 1994).
The court, therefore, grants the motion and dismisses the
foundation’s crossclaims.

However, the court notes it does not

foreclose

N.C.

application

of

Gen.

Stat.

39-23.7(a)(1)

which

allows for, “Avoidance of the transfer or obligation to the
extent necessary to satisfy the creditor’s claims.”
been

no

briefing

by

the

parties

on

whether,

There has
under

this

provision, the assets of the estate and/or the trust, if there
are any, must first be applied to the alleged debt and the
transfer avoided only as to the remaining balance.
the

court,

of

course,

still

retains

equity.

6

its

Furthermore,

general

powers

of

In light of the dismissal of the crossclaims, the motion
for summary judgment on the crossclaims is deemed MOOT.
Motion for Summary Judgment on Illegality
Also before the court is the foundation trustee’s motion
for summary judgment.
been filed.

Appropriate response and replies have

Additionally, the foundation trustees also filed a

notice of subsequently decided authority.
I.

Standard of Review

Summary judgment is appropriate pursuant to Rule 56 of the
Federal

Rules

material

of

fact

Civil

exists

Procedure

and

the

judgment as a matter of law.
477 U.S. 242, 247 (1986).
bears

the

initial

burden

when

moving

no

genuine

party

is

issue

of

entitled

to

Anderson v. Liberty Lobby, Inc.,
The party seeking summary judgment

of

demonstrating

genuine issue of material fact.

the

absence

of

a

Celotex Corp. v. Catrett, 477

U.S. 317, 325 (1986).
Once the moving party has met its burden, the non-moving
party

may

not

rest

on

the

allegations

or

denials

in

its

pleading, Anderson, 477 U.S. at 248, but "must come forward with
'specific

facts

showing

that

there

is

a

genuine

issue

for

trial.'"

Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio

Corp., 475 U.S. 574, 587 (1986) (quoting Fed. R. Civ. P. 56(e)).
7

Summary

judgment

is

not

a

disputed factual issues.
Supp.

123,

125

vehicle

for

the

court

to

resolve

Faircloth v. United States, 837 F.

(E.D.N.C.

1993).

Instead,

a

trial

court

reviewing a claim at the summary judgment stage should determine
whether a genuine issue exists for trial.

Anderson, 477 U.S. at

249.
In

making

this

determination,

the

court

must

view

the

inferences drawn from the underlying facts in the light most
favorable to the non-moving party.

United States v. Diebold,

Inc., 369 U.S. 654, 655 (1962) (per curiam).

Only disputes

between the parties over facts that might affect the outcome of
the

case

properly

preclude

the

Anderson, 477 U.S. at 247-48.

entry

of

summary

judgment.

The evidence must also be such

that a reasonable jury could return a verdict for the non-moving
party. Id. at 248.

Accordingly, the court must examine "both

the materiality and the genuineness of the alleged fact issues"
in ruling on this motion.
II.

Faircloth, 837 F. Supp. at 125.

Analysis
The Foundation Trustees contend that the plaintiff violated

the Equal Credit Opportunity Act (“ECOA”) and Regulation B by
requiring Mrs. Triplett to sign documents evidencing the May
2007 Loan, July 2007 Loan, and Consolidated Loan.

They argue

that these violations void Mrs. Triplett’s liability under all
8

three loans, based on a state law defense of illegality.

The

Act, codified at 15 U.S.C. § 1691 et seq. provides in pertinent
part:
(a)

It shall be unlawful for any creditor to discriminate
against any applicant, with respect to any aspect of a
credit transaction –(1) on the basis of race, color,
religion, national origin, sex or marital status. . .

15 U.S.C. § 1691(a)(1).
In its motion for summary judgment, the foundation trustees
argue the ECOA and its implementing regulations (“Regulation B”)
limit the ability of a lending bank to require the signature of
a spouse on loan documents.

Under Regulation B, a bank cannot

require the signature of a non-applicant spouse if the spouse
applying for the loan is qualified for the loan under the bank’s
standards

of

creditworthiness.

The

Foundation

Trustees

argue

that Mrs. Triplett was not a joint applicant on the loan and
that because Mr. Triplett was individually “creditworthy,” the
bank violated ECOA by requiring Mrs. Triplett’s signature.

They

therefore argue the contract is void under the state law defense
of illegality.
The plaintiff responds, arguing that the ECOA may not be
raised as an affirmative defense to avoid a debt.

Plaintiff

notes there is no express language in the ECOA providing for an
affirmative defense or stating that a violation of ECOA renders

9

an instrument void.

Citing several cases, plaintiff also argues

that the majority of courts that have considered the language of
ECOA and Regulation B have refused to recognize the validity of
an ECOA violation asserted as an affirmative defense to the
underlying debt and have declined to allow defendants to avoid
their obligations.

While the Fourth Circuit Court of Appeals

has not ruled directly on this issue, the Foundation Trustees
cite to a recently decided opinion by the North Carolina Court
of Appeals which reaches the issue.

RL REGI North Carolina, LLC

v. Lighthouse Cove, LLC, _____ S.E.2d ____, No. 12-1279, 2013 WL
4441665 (N.C. Ct. App. Aug. 20, 2013).

The North Carolina Court

of Appeals notes that “the question of whether procurement of a
spousal guaranty in violation of the ECOA as an affirmative
defense in a suit to enforce the provisions of a guaranty is a
question of first impression.”

Id., slip op. at 13.

After

detailing the three ways other state and federal courts have
addressed the issue, the Court of Appeals

ultimately holds that

a spouse may “assert an ECOA violation as an affirmative defense
in an action brought by a lender” under the state law defense of
illegality.

Id.,

slip

op.

at

13-14.

Following

a

thorough

discussion of the state law of illegality and its intersection
with the ECOA the court stated:
We believe that, in enacting the ECOA,
Congress did
not intend for the sole remedy available against a
10

creditor for an ECOA violation to be actual and
punitive damages under 12 C.F.R. § 202.16(b). Rather,
Congress expressly provided in the ECOA that, in
addition
to
actual
and
punitive
damages,
“the
appropriate United States district court or any other
court of competent jurisdiction may grant such
equitable and declaratory relief as is necessary to
enforce the requirements imposed under this title [.]
. . .”
Id., slip op. at 18 (quoting 15 U.S.C. § 1691(c)) (emphasis in
original).

This court will follow the ruling of the North

Carolina Court of Appeals and finds that a violation of the
ECOA

may

However,

support
whether

an
Mrs.

affirmative
Triplett

defense

was

a

joint

of

illegality.

applicant

and

whether Mr. Triplett was individually creditworthy at the time
the loan was made are genuine issues of material fact which
preclude summary judgment on the defense of illegality.
Plaintiff also argues that Mrs. Triplett waived any ECOA
defense based on language in the loan documents. This argument
is also without merit.

Under North Carolina law, “a defense

which allows a party to avoid the obligations of a contract
because it was entered into in violation of law cannot be
waived by stipulation.

Id., slip op. at 19 (citing Martin v.

Underhill, 144 S.E. 2d 872, 875 (1965).
Finally, the Foundation Trustees move for dismissal of
plaintiff’s claim for unjust enrichment based on the statute
of limitations.

Because the unjust enrichment claim is an

11

action based on an implied contract, it is subject to a three
year

statute

of

limitations

under

N.C.

Gen.

Stat.

§ 1-52.

Dean v. Mattox, 108 S.E.2d 541, 546 (1959); see also Joyce v.
Joyce, 605 S.E. 2d 267 (N.C. Ct. App. 2004).

The burden is on

plaintiff to show either that N.C. Gen. Stat. § 1-52 does not
apply or that there is some material issue of fact concerning
the

application

of

the

three

year

statute

Plaintiff has failed to meet this burden.

of

limitations.

Plaintiff has not

shown that N.C. Gen. Stat. § 1-52 does not apply or that the
statute of limitations began to run on a day different than
that argued by the Foundation Trustees.

Therefore, to the

extent plaintiff’s second claim is one for unjust enrichment
based on the alleged fraudulent conveyance and/or breach of
contract claims, it is dismissed.

However, the court, of

course, retains its powers in equity to form and fashion an
appropriate remedy in this case.
CONCLUSION
For

the

Foundation’s

foregoing

reasons,

crossclaims

is

the

motion

granted,

and

to

dismiss

the

the

motion

for

summary judgment as to the crossclaims is deemed moot.

The

Foundation Trustee’s motion for summary judgment is GRANTED in
part and DENIED in part.

12

Furthermore, pursuant to Local Civil Rule 101.2, EDNC, and
Rules 16 and 53 of the Federal Rules of Civil Procedure, the
court ORDERS a court-hosted settlement conference.
United

States

Magistrate

Judge

Robert

hereby appointed as settlement master.

B.

Jones,

Jr.

is

Magistrate Judge Jones

is directed to meet with the parties and supervise negotiations,
with

an

aim

issues.

toward

Magistrate

reaching
Judge

an

Jones

amicable

resolution

is

full

given

of

authority

the
to

establish such rules as he may desire, which shall be binding
upon the parties and their counsel during the course of the
conference.

The conference will be conducted at a time and

place selected by Magistrate Judge Jones upon notice to the
parties.
This

matter

remains

on

the

calendar

for

this

court’s

December 16, 2013 term.
This 17th day of September 2013.
____

__________________________________
Malcolm J. Howard
Senior United States District Judge
At Greenville, NC
#26

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