In re Rogers Townsend & Thomas, PC

• Decision Date: 02 June 2015
• Docket Number: No. COA14–387.,COA14–387.
• Citation: 241 N.C.App. 247,773 S.E.2d 101
• Court: North Carolina Court of Appeals
• Parties: In the Matter of the Foreclosure by ROGERS TOWNSEND & THOMAS, PC, Substitute Trustee, of a Deed of Trust Executed by Julia Weskett Beasley, dated February 12, 2007 and recorded on February 16, 2007 in Book No. 1211 at Page 169 of the Carteret County Registry, North Carolina Substitute Trustees Rogers Townsend & Thomas, PC.

241 N.C.App. 247

773 S.E.2d 101

In the Matter of the Foreclosure by ROGERS TOWNSEND & THOMAS, PC, Substitute Trustee, of a Deed of Trust Executed by Julia Weskett Beasley, dated February 12, 2007 and recorded on February 16, 2007 in Book No. 1211 at Page 169 of the Carteret County Registry, North Carolina Substitute Trustees Rogers Townsend & Thomas, PC.

No. COA14–387.

Court of Appeals of North Carolina.

June 2, 2015.

Nelson Mullins Riley & Scarborough, LLP, by Joseph S. Dowdy, Donald R. Pocock, Winston–Salem, and D. Martin Warf ; Raleigh, and Rogers Townsend & Thomas, PC, Charlotte, by Renner Jo St. John, for petitioner-appellants.

Shipman & Wright, LLP, by Gregory M. Katzman, for respondent-appellee.

CALABRIA, Judge.

FV–I, Inc. ("FV–I"), in trust for Morgan Stanley Mortgage Capital Holdings, LLC ("Morgan Stanley"), and substitute trustee Rogers Townsend & Thomas, PC ("RTT") (collectively with Morgan Stanley and FV–I, "petitioners"), appeal from an order granting Julia Weskett Beasley's ("Mrs. Beasley") motion to dismiss, with prejudice, FV–I's foreclosure proceeding against her. We reverse.

On 12 February 2007, Mrs. Beasley executed a promissory note ("the note") in favor of Equity Services, Inc. in the original principal amount of one million dollars ($1,000,000). The purpose of the note was to finance the purchase of 109 Knollwood Drive located in the Pine Knoll Shores subdivision of Atlantic Beach, North Carolina ("the property"). The note was secured by a Deed of Trust recorded on 16 February 2007 in Book 1211 at Page 169 in the Carteret County Public Registry ("the deed of trust").

On 15 June 2011, Philip A. Glass ("Mr. Glass"), acting as substitute trustee for FV–I, the holder of the note, filed a Notice of Foreclosure Hearing ("first notice") alleging that Mrs. Beasley had defaulted for failing to make timely payments on the note. According to the first notice, FV–I intended to accelerate payment of the entire amount due on the note and deed of trust; however, Mrs. Beasley could cure the default and prevent the foreclosure by paying the past due indebtedness plus attorneys' fees and actual costs incurred if FV–I agreed to let her do so. On 17 January 2012, Mr. Glass filed a notice of voluntary dismissal in the foreclosure proceedings.

On 4 April 2013, RTT, a new substitute trustee, filed a second Notice of Foreclosure Hearing ("second notice") alleging that Mrs. Beasley was still in default on the note and stating that FV–I had accelerated the maturity of the debt. The second notice also stated Mrs. Beasley could cure her default and reinstate the loan obligation if the deed of trust provided her such a right. Mrs. Beasley's total debt of $1,208,025.18 included the amount of principal and interest $1,151,427.01 plus the amount of other fees, expenses, or disbursements. On 26 April 2013, Mrs. Beasley filed a motion to dismiss, alleging, inter alia, that RTT failed to refile the action within one year in accordance with Rule 41(a) of the North Carolina Rules of Civil Procedure (" Rule 41").

On 10 July 2013, the day before the scheduled foreclosure hearing, RTT filed a second voluntary dismissal without prejudice. On 11 July 2013, the matter was heard before the Carteret County Clerk of Court ("the Clerk of Court"). The Clerk of Court subsequently entered a 16 July 2013 order which found, inter alia, that the second voluntary dismissal operated as an adjudication on the merits of the case pursuant to Rule 41(a). As a result, the Clerk granted Mrs. Beasley's motion to dismiss with prejudice.

Petitioners appealed to Superior Court. After conducting a hearing de novo, the Superior Court found that, because the new foreclosure by power of sale action was filed more than one year after the first voluntary dismissal, Rule 41(a) barred the claim. The Superior Court also concluded that the second voluntary dismissal operated as an adjudication on the merits pursuant to Rule 41(a). The court then struck the notice of voluntary dismissal and granted Mrs. Beasley's motion to dismiss the action with prejudice. Petitioners appeal.

On appeal, petitioners argue (1) that the Superior Court erred because it lacked jurisdiction to dismiss the matter, and (2) that the Superior Court's order was erroneous to the extent that it precluded further appropriate foreclosure proceedings.

As an initial matter, we address petitioners' contention that non-judicial foreclosures are not subject to Rule 41. This Court has previously held that "[a] foreclosure under power of sale is a type of special proceeding, to which our Rules of Civil Procedure apply." Lifestore Bank v. Mingo Tribal Pres. Trust, ––– N.C.App. ––––, ––––, 763 S.E.2d 6, 9 (2014), disc. review denied, – –– N.C. ––––, 771 S.E.2d 306 (2015). Therefore, Rule 41 applies in the instant case.

Petitioners next argue that the Superior Court erred because it lacked jurisdiction and misapplied the law. Specifically, petitioners contend that because they filed a notice of dismissal on 10 July 2013, both the Clerk of Court and the Superior Court lacked jurisdiction to grant Mrs. Beasley's motion to dismiss. Petitioners also argue that even if the Superior Court had jurisdiction to enter the dismissal order, the court's conclusion that petitioners' second voluntary dismissal operated as an adjudication on the merits was erroneous to the extent that it prevents them from bringing a third foreclosure action. We agree.

Our standard of review regarding whether the Superior Court had subject matter jurisdiction to decide the matter is de novo. In re Foreclosure of Young, ––– N.C.App. ––––, ––––, 744 S.E.2d 476, 479 (2013).

In this instance, a proper examination of both Rule 41(a) and the relevant Statute of Limitations is necessary to determine whether petitioners were required to file their second foreclosure by power of sale action within one year after dismissing the first action.

Rule 41(a) "permits a plaintiff to dismiss, without prejudice, any claim without an order of the court by filing a notice of dismissal at any time before resting his case, and to file a new action based upon the same claim within one year after the dismissal." Richardson v. McCracken Enters., 126 N.C.App. 506, 508, 485 S.E.2d 844, 845 (1997). With respect to Rule 41(a), the additional year to refile is often known as the "savings provision." The extra time granted

is an extension of time beyond the general statute of limitation rather than a restriction upon the general statute of limitation. In other words, a party always has the time limit prescribed by the general statute of limitation and in addition thereto they get the one year provided in Rule 41(a)(1). But Rule 41(a)(1) shall not be used to limit the time to one year if the general statute of limitation has not expired.

Whitehurst v. Virginia Dare Transp. Co., 19 N.C.App. 352, 356, 198 S.E.2d 741, 743 (1973) (emphasis added). Accordingly, petitioners could refile their action at any time until the expiration of the applicable statute of limitations. N.C. Gen.Stat. § 1–47 (2013) sets a ten-year statute of limitations during which time a foreclosure action may be commenced. Since the note and deed of trust at issue came into existence in 2007, petitioners' actions were timely filed, and the effect of the second voluntary dismissal was such that any subsequent orders entered by the Clerk or by the Superior Court were without legal effect. See Carter v. Clowers, 102 N.C.App. 247, 252, 401 S.E.2d 662, 664 (1991) ("After the dismissal, there is no longer a pending action, and therefore no further proceedings are proper.") (citations omitted); Hopkins v. Hopkins, 8 N.C.App. 162, 169, 174 S.E.2d 103, 108 (1970) ("When a court decides a matter without the court's having jurisdiction, then the whole proceeding is null and void, [i].e., as if it had never happened.") (citations omitted).

Even though the orders entered after petitioners' second voluntary dismissal were void, we still must determine the effect of that dismissal. Rule 41(a) provides that "a notice of dismissal operates as an adjudication upon the merits when filed by a plaintiff who has once dismissed ... an action based on or including the same claim." N.C. Gen.Stat. § 1A–1, Rule 41(a)(1). This provision is commonly referred to as the "two dismissal" rule¹ . According to Rule 41(a)'s two dismissal rule, "a second dismissal of an action asserting claims based upon the same transaction or occurrence as a previously dismissed action ... operate[s] as an adjudication on the merits and bar[s] a third action based upon the same set of facts." Richardson, 126 N.C.App. at 509, 485 S.E.2d at 846. In order to determine whether a second action was based upon the same transaction or occurrence as a first action, we examine whether the claims in both actions were "based upon the same core of operative facts" and whether "all of the claims could have been asserted in the same cause of action." Id. at 509, 485 S.E.2d at 846–47.

Here, petitioners twice voluntarily dismissed foreclosure by power of sale actions against Mrs. Beasley and they filed both notices of dismissal prior to resting their case. In addition, FV–I sought to accelerate Mrs. Beasley's debt in both actions. Therefore, we must decide whether FV–I's decision to accelerate the debt placed the entire balance of the note at issue and eliminated any factual distinctions between the two actions. If it did, the second action was based upon the same transaction or occurrence as the first one, and Rule 41 as well as the principles of res judicata will bar petitioners from bringing a third foreclosure by power of sale action on the same note. The dispositive issue, as we see it, is whether or not each failure to make a payment by a borrower under the terms of a promissory note and deed of trust constitutes a separate default, or separate period of default, such that any successive acceleration and foreclosure actions on the same note and deed of trust involve...