Meehan v. Cable

• Decision Date: 02 September 1997
• Docket Number: No. COA96-1335,COA96-1335
• Citation: 489 S.E.2d 440,127 N.C.App. 336
• Court: North Carolina Court of Appeals
• Parties: John Thomas MEEHAN, Plaintiff, v. Dorothy Ann CABLE and K. Reid Berglund, Trustee, Defendants.

Page 440

489 S.E.2d 440

127 N.C.App. 336

John Thomas MEEHAN, Plaintiff, v. Dorothy Ann CABLE and K. Reid Berglund, Trustee, Defendants.

No. COA96-1335.

Court of Appeals of North Carolina.

Sept. 2, 1997.

Jones, Key, Melvin, & Patton, P.A. by Richard Melvin, Highlands, for plaintiff-appellant.

Creighton W. Sossomon, Highlands, for defendant-appellee.

TIMMONS-GOODSON, Judge.

On 27 August 1985, plaintiff John Thomas Meehan purchased a tract of land with a summer house in Highlands, North Carolina from defendant Dorothy Ann Cable. To secure the unpaid portion of the purchase price, plaintiff executed a purchase money note and deed of trust providing for annual payments to be applied first toward the interest and the remainder toward the principal. Plaintiff made inconsistent payments until 9 August 1993, at which point defendants filed a petition to foreclose and gave notice of a hearing pursuant to North Carolina General Statutes section 45-21.16. The petition was granted by the clerk of superior court, upheld by the superior court on appeal de novo, and again upheld on appeal to this Court. To prevent foreclosure, plaintiff was required to deposit with the clerk of superior court a sum representing the amount due under the note as alleged by defendants.

In a separate action pursuant to North Carolina General Statutes section 45-21.34, plaintiff filed a complaint in the Superior Court of Macon County alleging that defendants had demanded payment in excess of the amount owed, seeking to enjoin the foreclosure proceedings, and requesting a proper accounting. Plaintiff subsequently filed two amended complaints in which he claimed, in pertinent part, that he was not in default; that his account was entitled to certain credits; that defendants' actions were in violation of the federal "Fair Debt Collection Practices Act," 15 U.S.C.A. § 1692 (1982); that defendants were barred by principles of waiver and estoppel from either claiming default or accelerating payments; and that defendants had anticipatorily breached the terms of the note.

After hearing the arguments of both parties and examining the evidence, the trial court dismissed all of the claims alleged in the original complaint for lack of jurisdiction, stating that they were "properly before the Clerk of Superior Court as part of the foreclosure proceeding." In addition, the trial court dismissed plaintiff's claim under the federal "Fair Debt Collection Practices Act" for lack of jurisdiction. With regard to plaintiff's first amended complaint, the trial court dismissed the claims therein for lack of jurisdiction as well. Finally, the trial court dismissed all claims made in plaintiff's second amended complaint based on defendants' plea of res judicata and collateral estoppel. Plaintiff appeals.

Plaintiff's first assignment of error is that the trial court erred in dismissing his claims based on lack of jurisdiction. We agree and remand this action to the superior court.

North Carolina General Statutes section 45-21.34 provides that:

Any owner of real estate, or other person, firm or corporation having a legal or equitable interest therein, may apply to a judge of the superior court, prior to the time that the rights of the parties to the sale or resale becoming fixed pursuant to G.S. 45-21.29A to enjoin such sale, upon the ground that the amount bid or price offered therefor is inadequate and inequitable and will result in irreparable damage to the owner or other interested person, or upon any other legal or equitable ground which the court may deem sufficient . ...

N.C. Gen.Stat. § 45-21.34 (1996)(emphasis added). Moreover, the notice and hearing provided for under North Carolina General Statutes section 45-21.16

were designed to enable the mortgagor to utilize the injunctive relief already available in G.S. 45-21.34. The hearing was not intended to settle all matters in controversy between mortgagor and mortgagee, nor was it designed to provide a second procedure for invoking equitable relief.

In re Watts, 38 N.C.App. 90, 94, 247 S.E.2d 427, 429 (1978). "The proper method for invoking equitable jurisdiction to enjoin a foreclosure sale is by bringing an action in the Superior Court pursuant to G.S. 45-21.34." Id. (citations omitted); see also Golf Vistas v. Mortgage Investors, 39 N.C.App. 230, 249 S.E.2d 815 (1978). In Golf Vistas, a case similar to the present case, this Court held that, after a foreclosure proceeding had been initiated by special hearing under section 45-21.16, plaintiff was entitled to pursue claims that there was no default and that part of the property had been released from the deed of trust in a civil action to enjoin the foreclosure under section 45-21.34. 39 N.C.App. 230, 249 S.E.2d 815.

In the case sub judice, plaintiff argues in his original and first amended complaints that the foreclosure should be enjoined because he is not in default, and that allowing the foreclosure to proceed without an accurate accounting would force plaintiff to pay defendants more than they are due, in order to prevent a sale of the property. We find that these claims, if proven, might be a basis for an injunction against foreclosure and, as such, are within the jurisdiction of the superior court in an action pursuant to North Carolina General Statutes section 45-21.34. Accordingly, the trial court erred in concluding that it lacked jurisdiction to hear these claims and that they were properly addressed before the clerk of court in the foreclosure proceeding.

In his second assignment of error, plaintiff argues that the trial court erred in dismissing his claim under the federal "Fair Debt Collection Practices Act," 15 U.S.C.A. § 1692, for lack of jurisdiction. We disagree.

North Carolina General Statutes section 7A-243 provides that the superior court is the proper division for trial in a civil action where the amount in controversy exceeds $10,000. N.C. Gen.Stat. § 7A-243 (1995). However, under 15 U.S.C.A. § 1692, statutory damages are limited to $1,000 per proceeding. 15 U.S.C.A. § 1692k(a)(2)(A). Accordingly, as plaintiff's only other claims were for the equitable remedies of injunction and accounting, the trial court correctly determined that it was without jurisdiction to hear the claim.

In his final assignment of error, plaintiff argues that the trial court erred in dismissing his second amended complaint based on the doctrines of res judicata and collateral estoppel. We agree and hold that these issues should be remanded to the court below for consideration on the merits.

First, we note that the issue is properly one of collateral estoppel, not res judicata. Res judicata applies only when the present action involves the same parties and the same claims as the prior action; whereas, collateral estoppel may apply where the same parties appear with different claims. See Chrisalis Properties, Inc. v. Separate Quarters, Inc., 101 N.C.App. 81, 398 S.E.2d 628 (1990), disc. rev. denied, 328 N.C. 570, 403 S.E.2d 509 (1991). As we have already noted, plaintiff's claims for an injunction pursuant to section 45-21.34 of the General Statutes are not claims which could have been brought in the prior action under section 45-21.16 and, thus, are different claims for purposes of res judicata.

The elements of collateral estoppel, as stated by our Supreme Court, are as follows: (1) a prior suit resulting in a final judgment on the merits; (2) identical issues involved; (3) the issue was actually litigated in the prior suit and necessary to the judgment; and (4) the issue was actually determined. Thomas M. McInnis & Associates, Inc. v. Hall, 318 N.C. 421, 349 S.E.2d 552 (1986). Moreover, this Court has recently held that where the court adjudicating the prior proceeding lacked jurisdiction over an issue, the third element of collateral estoppel has not been met. Alt v. John Umstead Hospital, 125 N.C.App. 193, 479 S.E.2d 800, disc. rev. denied, 345 N.C. 639, 483 S.E.2d 702 (1997); see also In re Atkinson-Clark Canal Co., 234 N.C. 374, 377, 67 S.E.2d 276, 278 (1951)(noting that "[a] judgment entered by a clerk of the Superior Court in a special proceeding in which such clerk had jurisdiction, will stand as a judgment of the court ...." (emphasis added)).

It is well established that a clerk of court is without jurisdiction to consider equitable defenses in a foreclosure hearing pursuant to section 45-21.16 of the General Statutes.

According to G.S. 45-21.16, ... there are only four issues before the clerk at a foreclosure hearing: the existence of a valid debt of which the party...