Cail v. Cerwin, COA06-304.

• Decision Date: 07 August 2007
• Docket Number: No. COA06-304.,COA06-304.
• Parties: Brian W. CAIL and wife, Dana S. Cail; and Jerry M. Deal, Plaintiffs, v. Dr. Robert A. CERWIN; Christina Cerwin; John M. Dunlow, Substitute Trustee; Canusa Mortgage Corporation; and D.B. Lancaster, Defendants.
• Court: North Carolina Court of Appeals

648 S.E.2d 510

Brian W. CAIL and wife, Dana S. Cail; and Jerry M. Deal, Plaintiffs, v. Dr. Robert A. CERWIN; Christina Cerwin; John M. Dunlow, Substitute Trustee; Canusa Mortgage Corporation; and D.B. Lancaster, Defendants.

No. COA06-304.

Court of Appeals of North Carolina.

August 7, 2007.

Appeal by defendants Cerwin from order entered 27 February 2004 by Judge Ken Titus and orders entered 3 March 2005 and 1 July 2005 by Judge Narley L. Cashwell in Granville County Superior Court. Heard in the Court of Appeals 6 February 2007.

Boxley, Bolton, Garber & Haywood, L.L.P., by Ronald H. Garber, Raleigh, for plaintiff-appellees.

J. Michael Weeks, P.A., by J. Michael Weeks, Zebulon, for Robert A. Cerwin, M.D. and Christina Cerwin, defendant-appellants.

JACKSON, Judge.

On 6 June 1995, Robert A. Cerwin ("defendant Robert Cerwin") entered into an agreement with Canusa Mortgage Corporation ("Canusa") for the purpose of investing in residential mortgage loans. D.B. Lancaster ("Lancaster") was the president of Canusa, a licensed broker engaged in originating long-term mortgage loans.

Defendant Robert Cerwin also brought his daughter, Christina Cerwin ("defendant Christina Cerwin") (collectively, "defendants"), into the business dealings with Canusa. She had no direct contact with Canusa and relied upon her father to make arrangements with Canusa for the investment of her money and collection of payments due to her. Defendant Christina Cerwin ultimately invested approximately $357,646.00 with Canusa, and as of 15 May 2002, defendant Robert Cerwin had made loans in the amount of $993,543.50 through Canusa.

On 20 June 1997, Jerry M. Deal ("Deal") obtained from Canusa a construction loan in the amount of $45,000.00 ("the Deal loan"). From applying for the loan to making payments, Deal worked solely with Canusa and its employees. Deal signed a promissory note ("the Deal Note") and a deed of trust ("the Deal Deed"), naming Canusa as the beneficiary and granting Canusa a lien on two lots owned by Deal. On 27 June 1997, defendant Robert Cerwin delivered $45,000.00 of defendant Christina Cerwin's money to Canusa for the initial funding of the Deal loan. That same day, Canusa assigned the Deal Note and Deal Deed to defendant Christina Cerwin, and the assignment was recorded.

Following the initial loan of $45,000.00, defendant Christina Cerwin made additional advances on the Deal Note in July, October, and November 1997. The funds for these loans were delivered to Canusa by defendant Robert Cerwin and disbursed by Canusa to Deal. Lancaster delivered to defendant Robert Cerwin a monthly check drawn on Canusa's bank account payable to defendant Christina Cerwin for payments on the Deal Note.

In May 2000, Deal refinanced his mortgage and hired Kathryn S. Drake ("Drake") to represent him. Drake requested a payoff figure from Canusa to satisfy Deal's mortgage. Canusa sent Drake a letter quoting the payoff figure as $64,291.00 to be mailed to the Canusa office. After Deal produced a series of cancelled checks reflecting certain payments that had not been credited by Canusa, Canusa sent a letter with a revised payoff amount of $59,162.50. On 19 May 2000, the refinance loan closed, and Drake mailed a check in the amount of $59,162.50 to Canusa at the Canusa office, requesting that the Deal Note and Deal Deed be forwarded to her and marked "Paid in Full." In 2001, Deal sold his house to Brian and Dana Cail ("the Cails").

Amanda S. Stadler ("Stadler"), the Canusa employee responsible for calculating the payoff figure, received Deal's payoff check for the Deal loan and, after Lancaster approved it, marked the account "Paid in Full" as of 25 May 2000. However, Canusa did not: (1) pay the funds received to defendant Christina Cerwin; (2) notify defendant Christina Cerwin that the Deal Note had been paid in full; or (3) request that defendant Christina Cerwin cancel the Deal Note. Rather, Lancaster continued to make payments on the Deal loan to the Cerwins as if the loan had not been paid off.

Around 1 March 2002, the Cerwins calculated the remaining balance on the Deal Note as approximately $43,500.00. In May 2002, after a check from Canusa was returned for insufficient funds, the Cerwins investigated Lancaster and Canusa. Lancaster ultimately was indicted for obtaining property by false pretenses and was sentenced to prison.

On 23 September 2002, Canusa was placed in receivership by court order, and on 2 October 2002, defendant Christina Cerwin instituted a foreclosure action to sell the property in the Deal Note. On 8 January 2003, the Cails and Deal (collectively, "plaintiffs") filed a complaint against defendants, Lancaster, Canusa, and Canusa's substitute trustee, seeking: (1) a declaratory judgment determining the status of the Deal Note and Deal Deed; (2) an injunction staying the foreclosure; (3) a civil penalty and attorneys' fees for failure to cancel the Deal Note and Deal Deed pursuant to North Carolina General Statutes, section 45-36.3; (4) damages and attorney's fees for false representation of the alleged debt in violation of Title 15, section 1692(e) of the United States Code; and (5) damages and attorneys' fees for unfair and deceptive trade practices.

On 12 February 2003, the trial court entered a preliminary injunction staying the foreclosure. On 6 March 2003, plaintiffs amended their complaint to demand recovery of a civil penalty of up to $1,000.00 for defendants' failure to cancel the Deal Deed. Defendant Christina Cerwin filed a counterclaim against plaintiffs, seeking: (1) a declaratory judgment determining the balance due on the Deal Note; (2) judgment for the counterclaim; (3) dissolution of the preliminary injunction staying the foreclosure; and (4) the costs of the action.

On 4 December 2003, defendant Christina Cerwin filed a motion for summary judgment, asking the court to: (1) dismiss all claims alleged in plaintiffs' amended complaint; and (2) grant the relief demanded in her counterclaim. Plaintiffs filed a response to the motion, and on 15 December 2003, Superior Court Judge Ken Titus ("Judge Titus") heard defendants' motion for summary judgment. By order entered 19 February 2004, Judge Titus denied the motion, except as to plaintiffs' claim for unfair and deceptive trade practices, for which the court neither granted nor denied summary judgment.

On 21 January 2005, plaintiffs filed a motion for summary judgment, and on 28 January 2005, defendants filed a response to the motion. On 31 January 2005, Superior Court Judge Narley Cashwell ("Judge Cashwell") heard the motion, and on 3 March 2005, Judge Cashwell entered an order: (1) granting judgment for plaintiffs with respect to their request for a declaratory judgment determining the status of the Deal Note and Deal Deed; (2) granting judgment for plaintiffs with respect to their request for a temporary restraining order, preliminary injunction, and permanent injunction staying the foreclosure of the Deal Deed; (3) granting judgment against plaintiffs with respect to their claim that defendants falsely represented the debt; (4) granting judgment against plaintiffs with respect to their claim for unfair and deceptive trade practices; (5) reserving judgment on plaintiffs' demand for a civil penalty and attorneys' fees for defendants' failure to cancel the Deal Note and Deal Deed; (6) reserving judgment on plaintiffs' demand for a civil penalty against defendants for their failure to cancel the Deal Note and Deal Deed; and (7) granting judgment against defendant Christina Cerwin on her counterclaim.

On 21 April 2005, plaintiffs filed a motion to tax costs to the Cerwins, and by order entered 1 July 2005, Judge Cashwell ordered that: (1) plaintiffs recover from defendant Christina Cerwin $6,684.90 for the expenses incurred in defending the foreclosure proceedings;¹ (2) plaintiffs recover from defendant Christina Cerwin $25,200.00 for refusing to cancel the Deal Deed, or, in the alternative, as sanctions for failure to admit pursuant to Rule 37(c) of the Rules of Civil Procedure; and (3) both the Cails and Deal recover from defendant Christina Cerwin a civil penalty of $500.00 pursuant to North Carolina General Statutes, section 45-36.3. Thereafter, defendants filed notice of appeal from Judge Titus' order denying their motion for summary judgment, Judge Cashwell's order granting summary judgment in part to plaintiffs, and Judge Cashwell's order taxing costs to defendant Christina Cerwin.

On appeal, defendants contend that the trial court erred by: (1) denying defendant Christina Cerwin's motion for summary judgment; (2) ordering defendant Christina Cerwin to pay attorneys' fees and expenses pursuant to Rule 37(c) of the North Carolina Rules of Civil Procedure; (3) assessing defendant Christina Cerwin with costs that are not listed in North Carolina General Statutes, section 7A-305; and (4) assessing defendant Christina Cerwin with attorneys' fees, costs, and civil penalties pursuant to North Carolina General Statutes, section 45-36.3.

Preliminarily, we must address the relationship between Judge Titus' order on defendant Christina Cerwin's motion for summary judgment and Judge Cashwell's subsequent order on plaintiffs' motion for summary judgment. Although not raised by the parties, the issue relates to jurisdiction, and jurisdictional issues "`can be raised at any time, even for the first time on appeal and even by a court sua sponte.'" Brown v. Brown, 171 N.C.App. 358, 362, 615 S.E.2d 39, 41 (2005) (quoting Hedgepeth v. N.C. Div. of Servs. for the Blind, 142 N.C.App. 338, 341, 543 S.E.2d 169, 171 (2001)).

It is well-established "that no appeal lies from one Superior Court judge to another; that one Superior Court judge may not correct another's errors of law; and that ordinarily one judge may not modify, overrule, or change the judgment of another Superior Court judge previously made in the same action." Calloway v. Ford Motor Co., 281 N.C....