EASTERN SAVINGS BANK, FSB v. DUGGER et al
Filing
31
MEMORANDUM OPINION AND ORDER signed by Chief Judge William L. Osteen, Jr., on 08/14/2015. IT IS ORDERED that ESB's Motion to Dismiss Counterclaims 19 is GRANTED and that the counterclaimants Rachel Dugger and Robert A. Dugger, Sr., are DISMISSED WITHOUT PREJUDICE. (Coyne, Michelle)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
EASTERN SAVINGS BANK, FSB,
Plaintiff,
v.
RACHEL DUGGER, ROBERT A.
DUGGER, SR., POORE SUBSTITUTE
TRUSTEE, LTD, in its capacity
as substitute trustee, ANDREW
TOBIAS, JANE KERESTES,
MARTHA RAISS, and MESSER
CAPARELLO, P.A., f/k/a MESSER
CAPARELLO & SELF, P.A.,1
Defendants.
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1:14CV849
MEMORANDUM OPINION AND ORDER
OSTEEN, JR., District Judge
Eastern Savings Bank, FSB (“ESB”) initiated this action
seeking to foreclose a deed of trust granted by Rachel Dugger
and Robert A. Dugger, Sr. (collectively, “Counterclaimants”),
which encumbers certain real property at 10837 N.C. Hwy 62 N.,
Milton, North Carolina.
ESB also seeks to collect the amount
due under the note that the deed of trust secures.
1
(Doc. 11.)
The parties submitted a Consent Motion to Substitute Poore
Substitute Trustee, LTD as a Defendant in this matter for John
M. Thomas, the original trustee on the Deed of Trust, pursuant
to Fed. R. Civ. P. 25(c). (Doc. 28.) This motion was granted
by the court on August, 12, 2015. (See Doc. 29.)
Counterclaimants subsequently filed counterclaims against ESB
under North Carolina law, including allegations of conversion,
unjust enrichment, and unfair and deceptive acts or practices in
or affecting commerce.
(Doc. 13.)
Presently before this court is ESB’s Motion to Dismiss
these Counterclaims.
(Doc. 19.)
Counterclaimants have
responded (Doc. 21), and ESB has filed a reply.
(Doc. 22.)
A
hearing was held on the motion on June 25, 2015, and this matter
is now ripe for adjudication.
For the reasons that follow, this
court will grant ESB’s motion and dismiss these counterclaims
without prejudice.
I.
BACKGROUND
On March 22, 2007, ESB recorded a deed of trust with the
Register of Deeds for Caswell County, North Carolina in Book 512
at Page 633 (“Deed of Trust”).
The Deed of Trust encumbers
certain real property in Caswell County, North Carolina,
commonly known as “Longwood,” which is more particularly
described in ESB’s Deed of Trust.
(See Amended Complaint (“Am.
Compl.”), Ex. B, Deed of Trust (Doc. 11-2).)
The Deed of Trust,
signed by both Counterclaimants, secures a Note in the amount of
$362,500.00.
(See Am. Compl., Ex. A, Note (Doc. 11-1).)
ESB alleges that Counterclaimants have failed to pay
amounts that have come due under the terms of the Note since
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January 1, 2014, and ESB has elected to accelerate the full
unpaid balance due under the Note and Deed of Trust and other
agreements between the parties, amounting to a total
indebtedness of $405,471.98.
29.)
(See Am. Compl. (Doc. 11) ¶¶ 26-
ESB seeks foreclosure of Longwood to satisfy this
indebtedness.
(See id. ¶ 31.)2
In their Answer to ESB’s Amended Complaint,
Counterclaimants deny several key allegations made by ESB and
assert a number of defenses challenging the foreclosure.
(See
Ans. to Pl.’s First Am. Compl. & Counterclaims of Defs. Rachel
Dugger and Robert A. Dugger, Sr. (“Counterclaims”) (Doc. 13) at
6-8.)3
However, in addition to these defenses to the foreclosure
action, Counterclaimants set out three counterclaims against
ESB, alleging conversion, unjust enrichment, and unfair and
deceptive acts or practices.
(See id. at 8-11.)
2
The other Defendants in this matter are not relevant for
the purposes of this motion. Defendant Poore Substitute Trustee
is a party due to its role as substitute trustee on the Deed of
Trust. (Docs. 10, 11, 28, 29.) Defendant Messer Caparello,
P.A. is a junior lienholder, has consented to an order
extinguishing its judgment lien, and has requested any surplus
funds from the foreclosure. (Doc. 7, 23.) The Clerk for the
Middle District of North Carolina has issued an Entry of Default
against all other Defendants, who are also junior lienholders.
(Doc. 18.)
3
All citations refer to the page number in the bottom
right-hand corner stamped during the electronic filing process
and as indicated on CM/ECF.
- 3 -
The events that led to the underlying dispute began on
December 26, 2013, when the house on the subject property,
Longwood, caught fire and was completely destroyed.
(Id. at 9.)
Counterclaimants indicate that they had purchased a homeowners
insurance policy from Carolina Farmers Mutual Insurance Company
(“Carolina Farmers Mutual”), Number NCFO 2K90045 (the “Policy”),
to cover Counterclaimants against such loss.
was named as the Mortgagee on the Policy.
(Id. at 8.)
ESB
(Id. at 9.)
However, despite the damage to the property,
Counterclaimants did not receive payment from Carolina Farmers
Mutual.
(Id.)
Instead, the proceeds of the Policy,
$336,536.00, were paid to ESB as the Mortgagee on the Policy.
(Id.)
Counterclaimants assert that ESB is now liable based on
its continued efforts to foreclose Longwood despite ESB’s
acceptance of payment from Carolina Farmers Mutual.
Counterclaimants allege that “rather than crediting [the
insurance proceeds] to the Note, toward payments on the Note, or
turning that amount over to these Defendants,” ESB has
improperly retained the insurance proceeds.
(Counterclaims
(Doc. 13) at 9-10; see also id., Ex. B, May 5, 2014 Letter from
ESB to Counterclaimants (Doc. 13-2).)
Counterclaimants contend
that these actions, and the subsequent finding of default and
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initiation of foreclosure proceedings, are tortious.
ESB has
now moved to dismiss these counterclaims.
Before considering the merits of these counterclaims, this
court notes there are several peculiar aspects of
Counterclaimants’ pleading.
First, Counterclaimants’ pleading
does not specify why Carolina Farmers Mutual paid the amount to
ESB and not to Counterclaimants.
Yet, the documents
incorporated by reference into Counterclaimants’ pleading
indicate that Carolina Farmers Mutual “voided [the] policy as to
Robert and Rachel Dugger for material misrepresentations made in
the application process.”
(Counterclaims, Ex. A, May 2, 2014
Letter from Carolina Farmers Mutual to ESB (Doc. 13-1).)
Carolina Farmers Mutual is not joined as a party to this suit,
and this court is not asked to determine the validity of
Carolina Farmers Mutual’s decision to void the Policy.
Instead,
Counterclaimants have informed this court that they have
initiated state court proceedings challenging this determination
made by Carolina Farmers Mutual.
Second, it is not clear whether Counterclaimants admit or
deny that they have failed to pay as scheduled on the Note and
related agreements.
Counterclaimants instead provide a
qualified response to ESB’s allegation that Counterclaimants
have not made payments on the Note as they have come due,
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drawing this court’s attention to the insurance payment rather
than responding directly to the allegation of non-payment.
(See
Am. Compl. (Doc. 11) ¶ 26; Counterclaims (Doc. 13) at 6, ¶ 26.)
In another area of their pleading, Counterclaimants fully deny
the allegation that “Defendant Rachel Dugger has materially
breached the terms of the Mortgage Loan by failing to pay all
amounts that are due under the terms of the Mortgage Loan.”
(See Am. Compl. (Doc. 11) ¶ 40; Counterclaims (Doc. 13) at 9,
¶ 40.)
Yet, nowhere in their pleading do Counterclaimants
assert that they have continually made payments on the Note or
satisfied in full the debt due under the Note and Deed of Trust.
(See Am. Compl. (Doc. 11) ¶ 29 (indicating that the total amount
due under the Note is $405,471.98); Counterclaims (Doc. 13) at
6, ¶ 29 (denying all parts of the allegation of the amount due
under the Note).)
The ambiguities created by these various
representations, while they are manifested in Counterclaimants’
responses to ESB’s allegations, have an impact on whether
Counterclaimants have stated a plausible claim for relief on
their counterclaims and will be considered below.
II.
LEGAL STANDARD
Rule 12(b)(6) of the Federal Rules of Civil Procedure
allows a party to make a motion to dismiss due to the opposing
party’s failure to state a claim upon which relief can be
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granted.
Fed. R. Civ. P. 12(b)(6).
“When there are well-
pleaded factual allegations, a court should assume their
veracity and then determine whether they plausibly give rise to
an entitlement to relief.”
(2009).
Ashcroft v. Iqbal, 556 U.S. 662, 679
The burden remains on the party making the claim “to
allege facts sufficient to state all the elements of
[Plaintiff’s] claim,” Bass v. E.I. DuPont de Nemours & Co., 324
F.3d 761, 765 (4th Cir. 2003), and “to raise a reasonable
expectation that discovery will reveal evidence” of the
misconduct alleged, see Bell Atl. Corp. v. Twombly, 550 U.S.
544, 556 (2007).
Granting a motion under Rule 12(b)(6) is proper when the
complaint’s factual allegations, read as true, fail as a matter
of law to state a plausible claim for relief.
678.
Iqbal, 556 U.S at
In determining if a claim has “facial plausibility,” a
court is not required to accept “[t]hreadbare recitals of the
elements of a cause of action supported by mere conclusory
statements,” id., unsupported legal allegations, Revene v.
Charles County Comm’rs, 882 F.2d 870, 873 (4th Cir. 1989), legal
conclusions couched as factual allegations, Papasan v. Allain,
478 U.S. 265, 286 (1986), or conclusory factual allegations
devoid of any reference to actual events, United Black
Firefighters v. Hirst, 604 F.2d 844, 847 (4th Cir. 1979).
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III. ANALYSIS
Counterclaimants assert three bases for their counterclaims
against ESB: (1) conversion; (2) unjust enrichment, and
(3) unfair and deceptive acts or practices in violation of
section 75-1.1 of the North Carolina General Statutes.
All
three causes of action are based on ESB’s decision not to credit
Counterclaimants for the Policy proceeds ESB received from
Carolina Farmers Mutual.
For the following reasons, this court
finds that all three causes of action fail to state a claim.
A.
Conversion
Counterclaimants allege that, by failing to credit the
Policy proceeds toward the debt owed under the Note or turn the
Policy proceeds over to Counterclaimants, ESB has unlawfully
converted and retained their property, namely the $336,536.00
that Counterclaimants assert is due to them.
(Doc. 13) at 10, ¶ 10.)
(Counterclaims
This court finds that Counterclaimants
have not stated a claim based on these allegations.
“Conversion is defined as ‘an unauthorized assumption and
exercise of the right of ownership over goods or personal
chattels belonging to another, to the alteration of their
condition or the exclusion of an owner's rights.’”
Gallimore v.
Sink, 27 N.C. App. 65, 67, 218 S.E.2d 181, 183 (1975) (quoting
Wall v. Colvard, Inc., 268 N.C. 43, 149 S.E.2d 559 (1966)).
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To state a claim for conversion, a party must show “(1) the
unauthorized assumption and exercise of the right of ownership;
(2) over the goods or personal property; (3) of another; and
(4) to the exclusion of the rights of the true owner.”
B.E.E.
Int'l, Ltd. v. Hawes, 381 F. Supp. 2d 488, 493 (M.D.N.C. 2005)
(citing Peed v. Burleson's, Inc., 244 N.C. 437, 439, 94 S.E.2d
351, 353 (1956)).
As to the ownership of the Policy proceeds, this court
finds that Counterclaimants have not plausibly alleged that they
are the “true owners” of the payments made by Carolina Farmers
Mutual because Counterclaimants have offered no facts to support
this conclusion.
Whether an individual is due money under an
insurance policy is a mixed question of law and fact.
In their
pleading, Counterclaimants merely state the legal conclusion
that they are entitled to the money paid by Carolina Farmers
Mutual to ESB.
(See Counterclaims (Doc. 13) at 10, ¶ 10 (“[ESB]
has unlawfully converted and retained $336,536.00 which is due
to these [Counterclaimants].”).)
This court is not required to
accept this unsupported legal conclusion as true and
Counterclaimants have offered no indication that it is true or
provided any facts that would allow this court to resolve this
question.
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Moreover, this court finds that the facts Counterclaimants
have asserted are inconsistent with a finding that they are the
“true owners” of the insurance payments.
Counterclaimants do
not challenge the validity of any of the agreements entered into
by the parties to this suit, including the Note, the Deed of
Trust, and the forbearance agreement between ESB and
Counterclaimants, along with the Policy issued by Carolina
Farmers Mutual.
(See Counterclaims (Doc. 13) at ¶¶ 19-22, 25,
27, 39 (responding that the documents referenced in ESB’s
Amended Complaint are the best evidence of their own content).)
Counterclaimants do not allege that Carolina Farmers Mutual has
approved their claim, or that Carolina Farmers Mutual has now
paid the entire amount owed ESB such that ESB can no longer
foreclose, or that Carolina Farmers Mutual intended for the
Policy proceeds to be used to rebuild or to be applied to the
mortgage.
Rather, Counterclaimants recognize that Carolina Farmers
Mutual made the decision to void the Policy held by
Counterclaimants and to pay ESB instead. (See Counterclaims
(Doc. 13) at 9, ¶ 6; id., Ex. A, May 2, 2014 Letter from
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Carolina Farmers Mutual to ESB (Doc. 13-1)),4 and the Policy,
which Counterclaimants reference in their pleading, specifically
provides that Carolina Farmers Mutual has the power to void the
Policy under certain circumstances, (see ESB’s Mem. in Supp. of
Mot. to Dismiss Counterclaims, Ex. 1, Policy (Doc. 20-1) at 24,
§ 2.)5
Counterclaimants may be challenging this determination in
state court, but at this point, Counterclaimants have not put
forward any facts indicating that the determination made by
Carolina Farmers Mutual is invalid or that Counterclaimants are
the “true owners” of the insurance payments.
Therefore, without
any basis to find that Counterclaimants are the true owners of
the insurance payments made by Carolina Farmers Mutual, this
4
The exhibits attached to Counterclaimants’ pleading are
part of the pleading pursuant to Rule 10(c) of the Federal Rules
of Civil Procedure, and this court can consider these documents
for purposes of deciding this motion.
5
This court can consider the Note, Deed of Trust, Policy,
and all other agreements entered into by Counterclaimants, even
though these documents were attached to ESB’s Amended Complaint
and ESB’s Memorandum in Support of its Motion to Dismiss and are
thus outside of Counterclaimants’ pleading, because (1) the
contractual relationship and the debt between the parties that
these documents represent, along with the insurance policy, are
integral to the counterclaims, and (2) Counterclaimants do not
doubt their authenticity. See Phillips v. LCI Int'l, Inc., 190
F.3d 609, 618 (4th Cir. 1999); CACI Int'l v. St. Paul Fire &
Marine Ins. Co., 567 F. Supp. 2d 824, 831 (E.D. Va. 2008).
Moreover, this court is able to examine the terms of the Policy
because the terms of all fire insurance policies are governed
and provided by statute. See N.C. Gen. Stat. § 58-44-16.
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court must find that Counterclaimants have not stated a
plausible claim for conversion against ESB.
In the alternative, this court finds that Counterclaimants
have not plausibly alleged that ESB has committed an
“unauthorized assumption” of the right of ownership over the
Policy proceeds to the exclusion of Counterclaimants’ rights,
even if this court accepts that Counterclaimants are the “true
owners” of the Policy proceeds.
At this point, ESB has only
(1) accepted the funds sent by Carolina Farmers Mutual; (2)
chosen not to forgive Counterclaimants’ entire indebtedness
based on the payment of those Policy proceeds; and (3) refused
to credit Counterclaimants’ pending payments with the Policy
proceeds.
(See Counterclaims (Doc. 13) at 9-10, ¶¶ 8-9.)
However, none of these actions support a conversion counterclaim
because all were proper, authorized actions for ESB to take.
First, Counterclaimants have not shown that it was improper
for ESB to receive the payments from Carolina Farmers Mutual.
Counterclaimants have recognized that ESB was listed as
Mortgagee on the Policy.
(See Counterclaims (Doc. 13) at 9,
¶ 3; see also Policy (Doc. 20-1) at 3.)
North Carolina courts
have recognized that a “standard mortgage clause” in a policy
for fire insurance, like the one at issue here, “is considered a
distinct and independent contract between the insurance company
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and mortgagee.”
See Tech Land Dev., Inc. v. S. Carolina Ins.
Co., 57 N.C. App. 566, 568, 291 S.E.2d 821, 823 (1982).
The
Policy provides that ESB, as mortgagee, was to receive payment
if Carolina Farmers Mutual decided not to pay Counterclaimants.
(See Policy (Doc. 20-1) at 26, § 14; see also Deed of Trust
(Doc. 11-2) at 6, § 5 (requiring all insurance policies issued
to Counterclaimants on the property to have a “standard mortgage
clause” naming ESB as mortgagee).)
This scenario complies with
the relevant North Carolina statute.
44-16(f)(11).
See N.C. Gen. Stat. § 58-
Despite these provisions to the contrary,
Counterclaimants’ pleading does not attempt to explain why it
was improper for ESB to retain the money paid pursuant to this
“distinct and independent contract.”
As a result, this court
finds that Counterclaimants have not plausibly alleged that ESB
improperly took control of the Policy proceeds by merely
retaining the funds.
Second, Counterclaimants do not plausibly assert that it
was improper for ESB to initiate foreclosure proceedings even
after receiving the Policy proceeds.
dispute that they are in default.
Counterclaimants do not
(See Counterclaims (Doc. 13)
at 6, ¶¶ 26-28 (asserting a qualified denial of the allegation
that Counterclaimants have not paid amounts that have come due
under the loan).)
At the time ESB received the $336,536.00
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payment from Carolina Farmers Mutual, Counterclaimants owed ESB
$350,565.14 in unpaid principal and $24,862.05 in unpaid
interest on the Note.
(See Am. Compl. (Doc. 11) ¶ 29.)
However, it is clear from the pleading that, even if the Policy
proceeds were used to offset part of the debt, the Policy
proceeds would not fully satisfy the principal balance, not to
mention the other costs owed to ESB.
Additionally, the statute
governing fire insurance policies specifically provides that any
payment by an insurance company and any subrogation that occurs
will not “impair[] the mortgagee’s right to sue.”
Stat. § 58-44-16(f)(11).
N.C. Gen.
Thus, the facts underlying the
counterclaims show that ESB has not converted Counterclaimants’
property by receiving the funds but then initiating foreclosure
proceedings.
Third, Counterclaimants have not plausibly shown that it
was improper for ESB to retain the Policy proceeds without
crediting that amount to Counterclaimants outstanding payments.
The explicit terms of the Note between ESB and Counterclaimants
state that ESB was not required to excuse Counterclaimants’
monthly payments based on any insurance proceeds ESB received.
(See Am. Compl., Ex. B, Deed of Trust (Doc. 11-2) at 4, ¶ 2
(“Any application of payments, insurance proceeds, or
Miscellaneous Proceeds to principal due under the Note shall not
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extend or postpone the due date, or change the amount, of
Periodic Payments.”).)
Counterclaimants have admitted to the
continued validity of the Deed of Trust, (see Counterclaims
(Doc. 13) at 5, ¶ 21), and based on these provisions of the Deed
of Trust, it was proper for ESB to continue to demand monthly
payments from Counterclaimants without crediting
Counterclaimants for the Policy proceeds, even if
Counterclaimants were the “true owner” of those proceeds.
As
referenced above, Counterclaimants do not assert that they have
continued to make monthly payments.
(See Am. Compl. (Doc. 11)
¶ 26; Counterclaims (Doc. 13) at 6, ¶ 26.)
Therefore, at this
point, Counterclaimants have not plausibly alleged that ESB has
converted any of Counterclaimants’ property by continuing to
require monthly payments and initiating foreclosure proceedings
based on Counterclaimant’s failure to make those monthly
payments.
Ultimately, principles of subrogation support the
conclusion that ESB has not improperly converted
Counterclaimants’ property.
Rather than treating the Policy
proceeds as their own property, ESB is now only holding the
Policy proceeds in trust for itself and Carolina Farmers Mutual,
pending the outcome of this suit and other relevant litigation.
The Supreme Court of North Carolina has explained:
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When the insurance company has paid only part of the
loss resulting from defendant's tort, the insurer is
subrogated only to the extent of the payment. The
injured party has the right to maintain an action for
all the damage resulting from the tortious act of
defendant. He holds the recovery in trust for himself
and the insurance company in accordance with their
respective rights.
Smith v. Pate, 246 N.C. 63, 68, 97 S.E.2d 457, 460 (1957)
(citations omitted).
Here, Carolina Farmers Mutual is partially
subrogated based on its payment of the Policy proceeds to ESB at
less than the full value of Counterclaimants’ indebtedness.
See
N.C. Gen. Stat. § 58-44-16; (see also Counterclaims, Ex. A, May
2, 2014 Letter from Carolina Farmers Mutual to ESB (Doc. 13-1)
(acknowledging that Carolina Farmers Mutual was now subrogated
to ESB based on its partial payment).)
ESB, as the “injured party[,] has a right to maintain an
action for all the damage resulting from” Counterclaimants’
failure to make their monthly payments as they came due.
See
Pate, 246 N.C. at 68, 97 S.E.2d at 460 (emphasis added).
Therefore, in addition for it being proper for ESB to initiate
foreclosure actions against Counterclaimants, it was also proper
for ESB not to credit the Policy proceeds against the total
amount due by Counterclaimants, and to seek a foreclosure remedy
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for the entire indebtedness.6
In doing so, ESB has not
improperly converted Counterclaimants’ property but is merely
holding part of the eventual recovery in trust for itself and
Carolina Farmers Mutual until all legal matters are resolved.
With these principles of subrogation underlying the
counterclaims, the allegation that ESB has converted
Counterclaimants’ property is thus implausible.
Therefore, for all of these reasons, this court will
dismiss the conversion counterclaim.
However, because there is
the possibility, albeit remote, that ESB could, because of the
procedural posture of the two civil actions and a duty to
provide credits in this action, convert Counterclaimants’
property within the course of these proceedings, this court will
dismiss this and each of the other counterclaims without
prejudice.
B.
Unjust Enrichment
Alongside its allegations of conversion, Counterclaimants
allege that ESB has been unjustly enriched by the $336,536.00
that it has received from ESB and that it has been able to use
for its own benefit.
(Counterclaims (Doc. 13) at 10, ¶¶ 11-12.)
6
The amount due on the Note and Deed of Trust is the full
value of the indebtedness based on the operation of the
acceleration clause. (Deed of Trust (Doc. 11-2) at 13, § 22.)
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In order to establish a claim for unjust enrichment, the
Counterclaimants must show that they “conferred a benefit on the
other party.
The benefit must not have been conferred
officiously . . . .
The benefit must not be gratuitous and it
must be measurable. . . . [T]he defendant must have consciously
accepted the benefit.”
Booe v. Shadrick, 322 N.C. 567, 570, 369
S.E.2d 554, 556 (1988).
Similar to the conversion counterclaim, this court finds
that Counterclaimants have failed to state a claim for unjust
enrichment.
Here, Counterclaimants have not conferred a benefit
on ESB that led to ESB receiving $336,536.00; Counterclaimants’
pleading indicates that Carolina Farmers Mutual made the
determination to pay ESB.
6.)
(See Counterclaims (Doc. 13) at 9, ¶
Carolina Farmers Mutual’s decision, as a third party, to
pay ESB cannot serve as the basis for an unjust enrichment claim
by Counterclaimants against ESB, even if ESB benefited from that
decision and Counterclaimants were injured by it.
See Sellers
v. Morton, 191 N.C. App. 75, 84, 661 S.E.2d 915, 923 (2008).
Therefore, for this reason as well as the reasons stated as to
the conversion counterclaim, the facts Counterclaimants have
presented do not plausibly show that ESB has accepted a benefit
from Counterclaimants by retaining the Policy proceeds from
Carolina Farmers Mutual and then initiating foreclosure
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proceedings.
Therefore, Counterclaimants have not stated a
plausible claim for unjust enrichment.
Counterclaimants’ argument in their briefing indicates that
they find ESB’s actions to constitute unjust enrichment because
it will allow for “double recovery” if ESB keeps all of the
Policy proceeds, forecloses Counterclaimants’ property, and
keeps all proceeds from the foreclosure sale.
Counterclaimants’ Resp. (Doc. 21) at 10.)
(See
Counterclaimants are
correct that courts, including another court in this district,
have recognized that “allow[ing] recovery of insurance proceeds
by the mortgagee after full satisfaction of the debt would
amount to the mortgagee's unjust enrichment.”
See United States
v. Lititz Mut. Ins. Co., 694 F. Supp. 159, 161 (M.D.N.C. 1988);
Tech Land Dev., 57 N.C. App. at 569, 291 S.E.2d at 823.
However, such a claim is not ripe because these actions have not
happened yet.
At this point, ESB has not foreclosed on
Counterclaimants’ property, and Counterclaimants’ debt has not
been satisfied.
Therefore, Counterclaimants have not suffered
an actual injury at this point and seek redress for contingent
future events that may not occur at all - something this court
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cannot provide.7
(1998).
See Texas v. United States, 523 U.S. 296, 300
Additionally, based on the principles of subrogation
and the subrogation provisions in the Policy, (see Policy (Doc.
20-1) at 26, § 14(c)(1)), Carolina Farmers Mutual will be able
to recover from ESB up to the amount that Carolina Farmers
Mutual has paid even if ESB is somehow overcompensated by the
payment of the insurance proceeds and any foreclosure.
Gen. Stat. § 58-44-16(f)(11).
See N.C.
This court agrees it would be
inappropriate for ESB to receive a double recovery as a result
of any foreclosure proceeding supervised by this court.
To
ensure this does not happen, this court will require an
accounting at the end of any foreclosure proceeding so that this
court may review who receives the proceeds from any foreclosure
sale along with the Policy proceeds and may ensure that ESB
receives only what it is owed.
Accordingly, there is currently no basis for an unjust
enrichment claim, and in fact, this issue may never arise.
In
the event the issue does arise, this court will take up the
7
Counterclaimants also claim that their debt to ESB confers
a benefit on ESB that could be used to state a claim for unjust
enrichment. However, because there is a contract between the
parties concerning that debt, that contract governs the claim,
and this court will not find unjust enrichment in ESB enforcing
that contract. See Booe, 322 N.C. at 570, 369 S.E.2d at 556.
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issue at that time.
As a result, this court must dismiss this
counterclaim without prejudice.8
C.
Unfair and Deceptive Acts of Practices
Based on the same conduct outlined above, Counterclaimants
argue that ESB has committed an unfair and deceptive act or
practice in violation of Section 75-1.1 of the North Carolina
General Statutes.
Section 75-1.1 of the North Carolina General Statutes
declares as “unlawful” all “[u]nfair methods of competition in
or affecting commerce” or “unfair or deceptive acts or practices
in or affecting commerce.”
N.C. Gen. Stat. § 75-1.1(a).
To
show that an act or practice violates Section 75-1.1, a
plaintiff must demonstrate (1) an unfair or deceptive act or
practice - meaning that it “offends established public policy;”
is “immoral, unethical, oppressive, unscrupulous, or
substantially injurious to consumers;” or has a tendency to
deceive, see Walker v. Fleetwood Homes of N.C., Inc., 362 N.C.
63, 72, 653 S.E.2d 393, 399 (2007); (2) the act or practice was
in or affecting commerce; and (3) the act or practice
8
This court notes that, even though it is dismissing these
counterclaims, Counterclaimants have asserted several defenses
relating to ESB’s acceptance of the Policy proceeds. (See
Counterclaims (Doc. 13) at 7-8.) These defenses will allow
Counterclaimants to raise these issues again at the appropriate
time to prevent a “double recovery.”
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proximately caused the injury to the plaintiff.
See Boyce &
Isley, PLLC v. Cooper, 153 N.C. App. 25, 35, 568 S.E.2d 893, 901
(2002).
For the reasons explained in this court’s discussion of the
conversion and unjust enrichment counterclaims, this court finds
that Counterclaimants have not sufficiently pled that they were
owed the Policy proceeds paid by Carolina Farmers Mutual to ESB
or that ESB wrongly retained those proceeds.
As a result,
Counterclaimants have not pled an injury that was proximately
caused by ESB’s actions and, thus, have not stated a plausible
cause of action under Section 75-1.1.
See Bob Timberlake
Collection, Inc. v. Edwards, 176 N.C. App. 33, 42, 626 S.E.2d
315, 323 (2006); Se. Shelter Corp. v. BTU, Inc., 154 N.C. App.
321, 330, 572 S.E.2d 200, 206 (2002).
IV.
CONCLUSION
IT IS THEREFORE ORDERED that ESB’s Motion to Dismiss
Counterclaims (Doc. 19) is GRANTED and that the counterclaims
filed by Counterclaimants Rachel Dugger and Robert A. Dugger,
Sr., are DISMISSED WITHOUT PREJUDICE.
This the 14th day of August, 2015.
______________________________________
United States District Judge
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