Lifestore Bank v. Mingo Tribal Pres. Trust

• Decision Date: 19 August 2014
• Docket Number: No. COA14–46.,COA14–46.
• Citation: 763 S.E.2d 6
• Court: North Carolina Court of Appeals
• Parties: LIFESTORE BANK, f/k/a AF Bank, Plaintiff, v. MINGO TRIBAL PRESERVATION TRUST Dated January 4, 1993; Pitchfork Basin, LLC, f/k/a EAC Rev No.6, LLC; Tuscarora Ranch, LLC and Allen C. Moseley, Substitute Trustee, Defendants.

763 S.E.2d 6

LIFESTORE BANK, f/k/a AF Bank, Plaintiff

v.MINGO TRIBAL PRESERVATION TRUST Dated January 4, 1993; Pitchfork Basin, LLC, f/k/a EAC Rev No.6, LLC; Tuscarora Ranch, LLC and Allen C. Moseley, Substitute Trustee, Defendants.

No. COA14–46.

Court of Appeals of North Carolina.

Aug. 19, 2014.

Di Santi Watson Capua Wilson & Garrett, Boone, by Chelsea Bell Garrett, for plaintiff-appellant.

Hamilton Stephens Steele & Martin, PLLC, Charlotte, by Keith J. Merritt, for defendant-appellants.

Opinion

BRYANT, Judge.

A creditor can seek to enforce payment of a promissory note by pursuing foreclosure by power of sale, judicial foreclosure, or by filing for a money judgment, or all three options, until the debt has been satisfied. The “ two dismissal rule” of Rule 41 does not bar a creditor from bringing an action for judicial foreclosure or for money judgment where the creditor has filed and then taken voluntary dismissals from two prior actions for foreclosure by power of sale. Collateral estoppel is not applicable where a final judgment in an action has not been reached. Where there exists genuine issues of material fact as to whether a creditor is the holder of an enforceable instrument, summary judgment is not appropriate.

A. The Tuscarora Note

On 12 February 2007, defendant Mingo Tribal Preservation Trust (“Mingo”) entered into a promissory note with plaintiff Lifestore Bank (“Lifestore”) for $2,450,000.00 (the “Tuscarora Note”). The Tuscarora Note was secured by a deed of trust on property in Wilkes County owned by defendant Tuscarora Ranch, LLC (“Tuscarora”).

On 1 December 2010, Lifestore initiated a foreclosure by power of sale proceeding against Mingo and Tuscarora, alleging that Mingo was in default on the Tuscarora Note. The Wilkes County Clerk of Court entered an order finding that Mingo was in default and Lifestore could conduct a foreclosure by power of sale of the Tuscarora property. Mingo appealed to the Superior Court, and on 8 March 2011, the Wilkes County Superior Court affirmed the Clerk's order allowing Lifestore to foreclose on the Tuscarora property. On 6 April 2011, Mingo appealed the Superior Court's order to this Court and filed a motion to stay enforcement of the Superior Court's order. Mingo's motion to stay was granted on 15 April. After filing its appeal with this Court on 26 August, Mingo and Lifestore agreed to file a joint motion to dismiss the appeal which was granted by

this Court. On 10 October 2011, Lifestore entered a voluntary dismissal without prejudice as to the foreclosure by power of sale action.

On 7 December 2011, Lifestore filed a second foreclosure by power of sale action against Mingo and Tuscarora alleging that Mingo had defaulted on the Tuscarora Note. On 8 March 2012, the Clerk of Court entered an order allowing the foreclosure. Mingo appealed the order to the Wilkes County Superior Court. Lifestore entered a voluntary dismissal as to the foreclosure by power of sale on 13 July 2012.

B. The EAC Note

On 8 February 2008, Mingo entered into a new promissory note for $1,800,000.00 with Lifestore. To secure this loan, Lifestore took a security interest in a promissory note held between Mingo and Pitchfork Basin, f/k/a EAC (“EAC”). The promissory note between Mingo and EAC (the “EAC Note”) was entered into on 21 November 2006 and was secured by a deed of trust between EAC and Mingo.

On 1 December 2010, Lifestore filed a foreclosure by power of sale action against Mingo and EAC alleging that Mingo had defaulted on the EAC Note and Lifestore could, therefore, foreclose on the EAC deed of trust. The Wilkes County Clerk of Court entered an order that same day finding that Lifestore could foreclose; this order was appealed to the Wilkes County Superior Court. On 8 March 2011, the Superior Court affirmed the Clerk of Court's order allowing the foreclosure. Mingo and EAC appealed to this Court on 6 April 2011; on 7 October 2011, Lifestore took a voluntary dismissal without prejudice.

On 7 December 2011, Lifestore filed a second foreclosure by power of sale action against Mingo and EAC alleging that Mingo had defaulted on the EAC Note. The Clerk of Wilkes County Superior Court entered an order on 8 March 2012 allowing the foreclosure; Mingo and EAC appealed this order to the Superior Court. Lifestore entered an oral notice of voluntary dismissal as to the foreclosure by power of sale on 7 May during the foreclosure hearing; a written notice of voluntary dismissal was entered 13 July 2012.

C. The Current Complaint

On 6 June 2012, Lifestore filed a complaint against Mingo, Tuscarora, and EAC which asserted three claims for: judgment against Mingo and EAC as to the EAC Note; judgment against Mingo as to the Tuscarora Note; and judicial foreclosure of the Tuscarora and EAC deeds of trust. Mingo, Tuscarora, and EAC (“defendants”) filed a motion to dismiss Lifestore's complaint pursuant to Rule 41 of the Rules of Civil Procedure

on 17 August 2012. On 28 September 2012, the trial court entered an order denying defendants' motion to dismiss Lifestore's first and second claims for relief, and granting defendants' motion to dismiss as to Lifestore's third claim for judicial foreclosure.

On 8 April 2013, Lifestore filed a motion for judgment on the pleadings pursuant to Rule 12(c) or, in the alternative, for summary judgment pursuant to Rule 56 as to its first and second claims for relief in its complaint. Defendants filed a motion for summary judgment on 23 April. On 29 August 2013, the trial court entered an order allowing Lifestore's motion for summary judgment and denying defendants' motion for summary judgment. Both Lifestore and defendants appeal.

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Defendants raise two issues as to whether the trial court erred in (I) denying defendants' motion to dismiss and for summary judgment and (II) in granting judgment in favor of Lifestore on the EAC Note. Plaintiff Lifestore raises the sole issue of whether the trial court erred in (III) dismissing Lifestore's claim for judicial foreclosure.

I. & III.

As defendants' first issue on appeal concerns the same matter as that of Lifestore's sole issue on appeal, i.e., whether the trial court erred in its application of the “two dismissal rule” of Rule 41, we address both issues together.

Defendants first argue that the trial court erred in denying their motion to dismiss and for summary judgment. In contrast, Lifestore contends the trial court erred in dismissing its claim for judicial foreclosure. We disagree as to defendants, and agree as to Lifestore.

“This Court must conduct a de novo review of the pleadings to determine their legal sufficiency and to determine whether the trial court's ruling on the motion to dismiss was correct.” Leary v. N.C. Forest Prods., Inc., 157 N.C.App. 396, 400, 580 S.E.2d 1, 4 (2003). When a motion for summary judgment is brought, the trial court must determine whether “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law.” N.C. Gen.Stat. § 1A–1, Rule 56(c) (2013). The movant “has the burden of establishing the lack of any triable issue of fact.” Pembee Mfg. Corp. v. Cape Fear Constr. Co., 313 N.C. 488, 491, 329 S.E.2d 350, 353 (1985) (citation omitted).

When considering a motion for summary judgment, the trial judge must view the presented evidence in a light most favorable to the nonmoving party. In addition, [i]f the granting of summary judgment can be sustained on any grounds, it should be affirmed on appeal. If the correct result has been reached, the judgment will not be disturbed even though the trial court may not have assigned the correct reason for the judgment entered.

Rankin v. Food Lion, 210 N.C.App. 213, 215, 706 S.E.2d 310, 312–13 (2011) (citations and quotations omitted).

Defendants contend the trial court erred in denying their motion to dismiss and for summary judgment as to Lifestore's first and second claims for relief. Specifically, defendants argue that pursuant to the “two dismissal rule” of Rule 41, Lifestore's claims for judgment on the Tuscarora and EAC promissory notes were barred. Lifestore, in contrast, argues that its claim for judicial foreclosure is not barred pursuant to the “two dismissal rule” of Rule 41.

Foreclosure and Rule 41

A foreclosure under power of sale is a type of special proceeding, to which our Rules of Civil Procedure apply. See Phil Mech. Constr. Co. v. Haywood, 72 N.C.App. 318, 320–21, 325 S.E.2d 1, 2–3 (1985). North Carolina Rules of Civil Procedure, Rule 41, states that:

an action or any claim therein may be dismissed by the plaintiff without order of court (i) by filing a notice of dismissal at any time before the plaintiff rests his case, or; (ii) by filing a stipulation of dismissal signed by all parties who have appeared in the action. Unless otherwise stated in the notice of dismissal or stipulation, the dismissal is without prejudice, except that a notice of dismissal operates as an adjudication upon the merits when filed by a plaintiff who has once dismissed in any court of this or any other state or of the United States, an action based on or including the same claim.

N.C. Gen.Stat. § 1A–1, Rule 41(a)(1) (2013) (emphasis added).

[I]n enacting the two dismissal provision of Rule 41(a)(1), the legislature intended that a second dismissal of an action asserting claims based upon the same transaction or occurrence as a previously dismissed action would operate as an adjudication on the merits and bar a third action based upon the same set of facts.

Richardson v. McCracken Enters., 126 N.C.App. 506, 509, 485 S.E.2d 844, 846 (1997). “The ‘two dismissal’ rule has two elements: (1) the plaintiff must have filed two notices to dismiss under Rule 41(a)(1) and (2) the second action must have been based on or included the same claim as the first action.” Dunton v. Ayscue, 203 N.C.App....