{
  "id": 12425199,
  "name": "U.S. BANK NATIONAL ASSOCIATION, as Trustee for the C-BASS MORTGAGE LOAN ASSET-BACKED CERTIFICATES, SERIES 2006-RP2 v. WILLIE LEE PINKNEY, CLARA PINKNEY, SIDDCO, INC., and POORE SUBSTITUTE TRUSTEE, LTD",
  "name_abbreviation": "U.S. Bank National Ass'n v. Pinkney",
  "decision_date": "2017-06-09",
  "docket_number": "No. 229PA16",
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      "U.S. BANK NATIONAL ASSOCIATION, as Trustee for the C-BASS MORTGAGE LOAN ASSET-BACKED CERTIFICATES, SERIES 2006-RP2 v. WILLIE LEE PINKNEY, CLARA PINKNEY, SIDDCO, INC., and POORE SUBSTITUTE TRUSTEE, LTD"
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    "opinions": [
      {
        "text": "NEWBY, Justice.\nForeclosure by action or \u201cjudicial foreclosure,\u201d unlike non-judicial foreclosure by power of sale, is an ordinary civil action governed by the liberal standard of notice pleading. As such, a complaint is sufficient if it alleges a debt secured by a deed of trust, a default, and the plaintiff\u2019s right to enforce the deed of trust. Here plaintiff\u2019s complaint adequately states a cause of action for judicial foreclosure. The Court of Appeals erred by applying the requirements applicable in non-judicial foreclosure by power of sale to the plaintiff\u2019s judicial foreclosure action and, accordingly, we reverse the decision of that court.\nIn December 1997, defendants Willie Lee Pinkney and Clara Pinkney (collectively borrower) executed a promissory note with Ford Consumer Finance Company, Inc. (the Note) in the principal amount of $257,256.89 to purchase real property situated in Forsyth County. The debt is repayable through monthly installments due on the' seventeenth of the month and matures on 17 December 2027. The Note includes default and acceleration provisions. The debt is secured by a deed of trust on the underlying real property, identified \u201cas Lot No. 2,.. . SHERWOOD FOREST,... recorded in Plat Book 29, Page 22, in the Office of the Register of Deeds of Forsyth County.\u201d U.S. Bank National Association (the Bank) alleges that it \u201cis the present holder of the Note and Subject Deed of Trust and is the party entitled to enforce the same.\u201d\nIn September 2014, the Bank filed its complaint against borrower and the substitute trustee under the deed of trust in Superior Court, Forsyth County, seeking judicial foreclosure and judgment on the Note. The Bank alleges, inter alia, that \u201cthe Note evidences a valid debt owned [sic] by [borrower] to [the Bank],\u201d that borrower \u201cdefaulted under the terms of the Note for failure to make payments,\u201d and that the Bank \u201chas given [borrower] written notice of default,\u201d but that borrower has \u201crefused ... to make the payments required.\u201d The Bank claims that the outstanding balance on the Note is $268,171.13 plus \u201cpast due interest\u201d of $118,055.05.\nIn regard to the Bank\u2019s authority to enforce the terms of the deed of trust, the complaint states that the Note was \u201ctransferred\u201d several times, ultimately to the Bank. Ford Consumer Finance \u201cendorsed\u201d the Note to Credit Based Asset Servicing and Securitization, LLC (Credit Asset), which \u201cassigned\u201d the Note to the \u201cSalomon Mortgage Loan Trust\u201d Indenture, which \u201cspecifically endorsed\u201d the Note to the Bank.\nThe Bank also attached exhibits to its complaint, including Exhibit E (the Note), which includes allonges evidencing the two endorsements, and Exhibit G (\u201cAssignment of Mortgage/Deed of Trust\u201d) evidencing the assignment, which states that Credit Asset \u201cfor value received, does by these presents grant, bargain, sell, assign, transfer and set over unto: [the Salomon Mortgage Loan Trust Indenture] ... all of [its] right, title and beneficial interest in and to that certain Deed of Trust.\u201d\nBorrower moved to dismiss for failure to state a claim upon which refief can be granted under Rule 12(b)(6) of the North Carolina Rules of Civil Procedure. Because the Bank \u201cis not the original payee\u201d under the Note, borrower argued that the Exhibits reveal a \u201clack of indorsement from the predecessor in the chain of title [, which] is fatal to the Plaintiff\u2019s claim of being holder entitled to enforce the instrument.\u201d The trial court dismissed the action with prejudice, and the Bank appealed.\nThe Court of Appeals affirmed the trial court\u2019s dismissal order. U.S. Bank v. Pinkney, _ N.C. App. _, 787 S.E.2d 464, 2016 WL 2647709 (2016) (unpublished). Applying the requirements of N.C.G.S. \u00a7 45-21.16(d) applicable to non-judicial foreclosures by power of sale, the Court of Appeals found that the Bank failed to establish its status as a holder of the Note and therefore did not have the right to foreclose. Pinkney, 2016 WL 2647709, at *3-5 (citing and quoting In re Foreclosure of Gilbert, 211 N.C. App. 483, 490, 711 S.E.2d 165, 170 (2011) (requiring holdership status to foreclose under subsection 45-21.16(d))). Because the Bank \u201cwas not the original holder of the Note,\u201d id. at *4, the court reasoned that \u201ceach transfer required indorsement of the Note from one holder to the next,\u201d id. (quoting In re Foreclosure of Bass, 366 N.C. 464, 469, 738 S.E.2d 173, 176 (2013)). Though \u201cplaintiff alleged... that it was the present holder of the Note and Subject Deed of Trust,\u201d id. at *6, the court nonetheless concluded that the Exhibits lacked an essential \u201cindorsement from Credit Asset\u201d\u2014in other words, that the assignment was an inadequate indorsement, id. at *5. Therefore, the court found that \u201cplaintiff cannot establish that it is the holder of the Note.\u201d Id. We allowed the Bank\u2019s petition for discretionary review.\nWe review dismissals under Rule 12(b)(6) de novo, Bridges v. Parrish, 366 N.C. 539, 541, 742 S.E.2d 794, 796 (2013), \u201cview[ing] the allegations as true and... in the light most favorable to the non-moving party,\u201d Kirby v. NCDOT, 368 N.C. 847, 852, 786 S.E.2d 919, 923 (2016) (citing Mangum v. Raleigh Bd. of Adjust., 362 N.C. 640, 644, 669 S.E.2d 279, 283 (2008)). The complaint is construed liberally, and dismissal is appropriate \u201cif it appears certain that plaintiffs could prove no set of facts which would entitle them to relief under some legal theory,\u201d Fussell v. N.C. Farm Bureau Mut. Ins. Co., 364 N.C. 222, 225, 695 S.E.2d 437, 440 (2010) (citations omitted), or \u201cno law exists to support the claim made,\u201d id. at 225, 695 S.E.2d at 440 (quoting Burgess v. Your House of Raleigh, Inc., 326 N.C. 205, 209, 388 S.E.2d 134, 136 (1990)).\nThe precise question presented is whether the complaint reveals sufficient allegations to survive borrower\u2019s motion to dismiss the Bank\u2019s judicial foreclosure claim. Here the complaint provides adequate notice of the claim. Because the Court of Appeals applied the requirements applicable to non-judicial foreclosure by power of sale, not judicial foreclosure, we conclude that the court erred and that dismissal on that basis was improper.\nNorth Carolina law has long recognized a creditor\u2019s right to proceed with non-judicial foreclosure by power of sale or foreclosure by action (judicial foreclosure). In re Foreclosure of Lucks, _ N.C. _, _, 794 S.E.2d 501, 504-05 (2016); e.g., Blackledge v. Nelson, 16 N.C. (1 Dev. Eq.) 418, 419 (1830). \u201cNon-judicial foreclosure by power of sale arises under contract and is not a judicial proceeding.\u201d In re Lucks, _ N.C. at _, 794 S.E.2d at 504 (citation omitted). Judicial foreclosure, on the other hand, is an ordinary civil action. See Shaw v. Wolf, 23 N.C. App. 73, 76, 208 S.E.2d 214, 216 (1974) (\u201cA proceeding to foreclose a mortgage under an order of court is a civil action.\u201d (quoting 1 Thomas Johnston Wilson, II & Jane Myers Wilson, McIntosh North Carolina Practice and Procedure \u00a7 239(4), at 151 (2d ed. 1956))); see also N.C.G.S. \u00a7 1-339.1(a)(1) (2015) (\u201cA judicial sale ... is not... [a] sale made pursuant to a power of sale . . . [contained in a mortgage, deed of trust. . . .\u201d). As such, the Rules of Civil Procedure apply, and the parties are entitled to all the benefits and procedures available in a civil action, including the opportunity for discovery, to present and defend evidence, and to make legal arguments. See In re Lucks, _ N.C. at _, 794 S.E.2d at 503 (The Rules are \u201capplicable to formal judicial actions [for foreclosure].\u201d); see also N.C.G.S. \u00a7 1A-1, Rule 1 (2015) (\u201cThese rules shall govern ... all actions and proceedings of a civil nature ....\u201d).\nProcedurally, to pursue a claim for judicial foreclosure, the creditor files a complaint \u201cin the county in which the subject [property] of the action, or some part thereof, is situated,\u201d N.C.G.S. \u00a7 1-76 (2015), \u201cpraying that the real property be sold under judicial process and that the proceeds be applied to the mortgage debt,\u201d James A. Webster, Jr., Webster\u2019s Real Estate Law in North Carolina \u00a7 13.30[1], at 13-56.4 (Patrick K. Hetrick & James B. McLaughlin, Jr. eds., 6th ed. 2016) [hereinafter Webster\u2019s]; see In re Lucks, _ N.C. at _, 794 S.E.2d at 505 (Unlike judicial foreclosure, \u201cnon-judicial foreclosure does not require the filing of an action.\u201d); see also N.C.G.S. \u00a7 1A-1, Rule 3(a) (2015) (\u201cCommencement of action.\u201d). The complaint must allege, at minimum, a debt, default on the debt, a deed of trust securing the debt, and the plaintiff\u2019s right to enforce the deed of trust. See Webster\u2019s \u00a7 13.30 [4], at 13-57 (\u201cThe complaint... must set forth the mortgage contract, alleging facts entitling the plaintiff to a money judgment by reason of a breach or default, identifying the mortgaged property, and asking for a foreclosure of the mortgage security.\u201d).\nIf successful, the creditor obtains a judgment on the debt and a foreclosure decree, culminating in judicial sale of the mortgaged property. See N.C.G.S. \u00a7 1-243 (2015) (\u201cThe Supreme and other courts [may] order[ ] a judicial sale . . . .\u201d); id. \u00a7 1-339.3A (2015) (allowing the court to order public or private sale); id. \u00a7 1-339.4 (2015) (allowing the court to appoint various persons, including the trustee under the deed of trust, to hold the sale); see also Webster\u2019s \u00a7 13.30[4], at 13-57 (\u201cThe decree contains not only an order for a sale of real property to satisfy the debt, but. . . the court\u2019s directions for conduct of the sale.\u201d). Article 29A of Chapter 1 of our General Statutes governs judicial sale and foreclosure of the mortgaged property. See N.C.G.S. \u00a7 l-339.1(a) (\u201cA judicial sale is a sale of property made pursuant to an order of [the court]..., including a sale pursuant to an order made in an action in court to foreclose a mortgage or deed of trust-\u201d); see also A Survey of Statutory Changes in North Carolina in 1949, 27 N.C. L. Rev. 405, 479-81 (1949) (discussing the purpose of Article 29A, judicial sales, and sales under a power of sale).\nAs with any other civil action, a creditor seeking judicial foreclosure is not required to prove its entire case at the initial pleading stage. See In re Lucks, _ N.C. at _, 794 S.E.2d at 505 (Non-judicial foreclosure by power of sale, on the other hand, requires that the \u201ccreditor must show the existence of\u2019 all the subsection 45-21.16(d) elements to proceed.). The complaint need only contain \u201c[a] short and plain statement of the claim sufficiently particular to give the court and the parties notice of the transactions, occurrences, or series [thereof], intended to be proved showing that the [creditor] is entitled to relief.\u201d N.C.G.S. \u00a7 1A-1, Rule 8(a) (2015). Thus, the complaint \u201cis adequate if it gives sufficient notice of the claim asserted \u2018to enable the [borrower] to answer and prepare for trial... and to show the type of case brought.\u2019 \u201d Sutton v. Duke, 277 N.C. 94, 102, 176 S.E.2d 161, 165 (1970) (quoting 2A James Wm. Moore et al., Moore\u2019s Federal Practice \u00a7 8.13 (2d ed. 1968)). \u201cSuch simplified notice pleading is made possible by the liberal opportunity for discovery and the other pretrial procedures established by the Rules . . . .\u201d Pyco Supply Co. v. Am. Centennial Ins. Co., 321 N.C. 435, 442-43, 364 S.E.2d 380, 384 (1988) (citing Sutton, 277 N.C. at 102, 176 S.E.2d at 165).\nHere the Bank pled the facts and circumstances necessary to give borrower adequate notice of the judicial foreclosure claim. The complaint states that borrower \u201cexecuted a Note in the principal amount of $257,256.89,\u201d which \u201cevidences a valid debt owned [sic] by [borrower] to [the Bank],\u201d \u201csecured by a Deed of Trust\u201d on the underlying real property. The Bank further alleged that it \u201cis the holder of the Note\u201d and listed a series of Note transfers that ultimately ended with the Bank. The Bank expressly requested \u201cto foreclose its hen by way of judicial foreclosure pursuant to the Subject Deed of Trust ... as provided by N.C.G.S. \u00a7 1-339 et seq.,\u201d and prayed \u201cthat the Subject Property be sold under and [through] judicial process.\u201d These allegations are plainly sufficient to satisfy the substantive elements for a judicial foreclosure claim. Cf. Embree Constr. Grp. v. Rafcor, Inc., 330 N.C. 487, 501, 411 S.E.2d 916, 926 (1992) (finding \u201cunder the liberal concept of notice pleading\u201d that the allegations gave \u201csufficient notice of the events\u201d and substantive elements of the plaintiffs tort claim).\nThough the Bank elected to attach additional Exhibits in support of its claim, the Exhibits do not deprive borrower of adequate notice of foreclosure by judicial action. See Stanback v. Stanback, 297 N.C. 181, 202, 254 S.E.2d 611, 625 (1979) (\u201c[W]hen the allegations in the complaint give sufficient notice of the wrong complained of an incorrect choice of legal theory should not result in dismissal.\u201d). The Bank is entitled to submit and prove by evidence at trial its right to foreclose in a number of ways. Borrower is free to defend the action, such as by raising evidentiary objections and testing the legal sufficiency of the Bank\u2019s case. See Thompson v. Osborne, 152 N.C. 408, 410, 67 S.E. 1029, 1029 (1910) (noting that the defendant was entitled to assert legal and equitable defenses in response to an action on the note at trial). A missing indorsement at this initial notice-pleading stage does not preclude the Bank from proceeding with its civil action. See In re Lucks, _ N.C. at _, 794 S.E.2d at 506. The Court of Appeals therefore erred by applying the statutory requirements of N.C.G.S. \u00a7 45-21.16(d) applicable to nonjudicial foreclosure by power of sale to the Bank\u2019s judicial foreclosure action sub judice.\nIn sum, the Bank adequately pled its claim for judicial foreclosure. Because the Court of Appeals failed to analyze the complaint under the notice-pleading standard applicable to judicial foreclosures, we reverse the decision of that court and remand this case to the Court of Appeals for consideration of borrower\u2019s remaining issue on appeal.\nREVERSED AND REMANDED.\n. U.S. Bank National Association acts as Trustee for the C-BASS Mortgage Loan Asset-Backed Certificates, Series 2006-RP2.\n. The Bank alleges that defendant Poore Substitute Trustee, LTD is substitute trustee under the deed of trust and \u201cis named in this action solely for notice purposes.\u201d The Bank successfully moved for default judgment against defendant Siddco, Inc. regarding its priority of interest claim on a previously recorded deed of trust, which is not a subject of this appeal.\n. Ford Consumer Finance Company, Inc. merged into Associates Home Equity1 Services, Inc., which executed the endorsement. Credit Asset assigned the Note to U.S. Bank \u201cas Indenture Trustee under the Indenture, dated as December 14, 2001, Between Salomon Mortgage Loan Trust 2001-CB4, and U.S. Bank National Association, C-Bass Mortgage Loan Asset-Backed Notes,\u201d herein referred to as the \u201cSalomon Mortgage Loan Trust Indenture.\u201d\n. Borrower also argued that Exhibit E (the Note) failed to establish a negotiable instrument or an instrument under seal, and that the statute of limitations therefore barred \u201cany cause of action against the Defendants on the Note.\u201d\n. Having so held, the Court of Appeals did not reach borrower\u2019s statute-of-limitations argument. Pinkney, 2016 WL 2647709, at *6.\n. Generally, judicial foreclosure is favored when non-judicial foreclosure by power of sale is impracticable, for example \u201cwhere a poorly drafted mortgage or deed of trust omits the granting of an express power of sale to the [creditor],\u201d James A. Webster, Jr., Webster\u2019s Real Estate Law in North Carolina \u00a7 13.30[1], at 13-56.4 n.213 (Patrick K. Hetrick & James B. McLaughlin, Jr. eds., 6th ed. 2016), or \u201cwhen a lien priority is disputed,\u201d 1 Grant S. Nelson et al., Real Estate Finance Law \u00a7 7:12, at 904 (6th ed. 2014), which may obviate \u201ctitle problems for the sale purchaser,\u201d id.\n. See, e.g., N.C.G.S. \u00a7 25-3-301 (2015) (\u201c \u2018Person entitled to enforce\u2019 an instrument\u201d includes holder and nonholder in possession); id. \u00a7 25-3-309 (2015) (allowing \u201c[a] person not in possession\u201d to enforce an instrument when it is lost, destroyed, or stolen); see also, e.g., 25-3-203(b) (2015) (vesting transferee with transferor\u2019s rights to enforce the instrument); id. \u00a7 25-3-203(c) (2015) (providing transferee for value the \u201cenforceable right to the unqualified indorsement of the transferor\u201d); see also Norfolk Shipbuilding & Drydock Corp. v. Carlyle, 242 B.R. 881, 887 (Bankr. E.D. Va. 1999) (\u201c[T]he absence of an endorsement does not. . . deprive a transferee of the right to enforce the instrument.\u201d); Pierce v. DeZeeuw, 824 P.2d 97, 100 (Colo. App. 1991) (applying the indorsement exception under the predecessor of U.C.C. \u00a7 3-203(c) to an assignment), cert. denied, Colo. Sup. Ct., (Feb. 18, 1992) (unpublished); Fleming v. Caras, 170 Ga. App. 579, 580, 317 S.E.2d 600, 602 (1984) (reversing dismissal because the plaintiff was \u201centitled to an indorsement\u201d under the predecessor of U.C.C. \u00a7 3-203(c)).",
        "type": "majority",
        "author": "NEWBY, Justice."
      }
    ],
    "attorneys": [
      "Bradley Arant Boult Cummings LLP, by Brian M. Rowlson, for plaintiff-appellant.",
      "Law Office of Benjamin D. Busch, PLLC, by Benjamin D. Busch, for defendant-appellees Willie Lee Pinkney and Clara Pinkney."
    ],
    "corrections": "",
    "head_matter": "U.S. BANK NATIONAL ASSOCIATION, as Trustee for the C-BASS MORTGAGE LOAN ASSET-BACKED CERTIFICATES, SERIES 2006-RP2 v. WILLIE LEE PINKNEY, CLARA PINKNEY, SIDDCO, INC., and POORE SUBSTITUTE TRUSTEE, LTD\nNo. 229PA16\nFiled 9 June 2017\nMortgages and Deeds of Trust\u2014foreclosure\u2014pleadings\nThe trial court erred by dismissing plaintiffs foreclosure claim under N.C.G.S. \u00a7 1A-1, Rule 12(b)(6) where it applied requirements applicable to non-judicial foreclosures by power of sale to a judicial foreclosure. Foreclosure by action or \u201cjudicial foreclosure,\u201d unlike non-judicial foreclosure by power of sale, is an ordinary civil action governed by the liberal standard of notice pleading. A missing indorsement at the initial notice-pleading stage did not preclude the bank from proceeding with its civil action.\nOn discretionary review pursuant to N.C.G.S. \u00a7 7A-31 of a unanimous, unpublished decision of the Court of Appeals,_N.C. App._, 787 S.E.2d 464 (2016), affirming an order entered on 5 March 2015 by Judge Patrice A. Hinnant in Superior Court, Forsyth County. Heard in the Supreme Court on 11 April 2017.\nBradley Arant Boult Cummings LLP, by Brian M. Rowlson, for plaintiff-appellant.\nLaw Office of Benjamin D. Busch, PLLC, by Benjamin D. Busch, for defendant-appellees Willie Lee Pinkney and Clara Pinkney."
  },
  "file_name": "0723-01",
  "first_page_order": 799,
  "last_page_order": 805
}