PennyMac Loan Servs. v. Johnson
| Decision Date | 18 April 2023 |
| Docket Number | COA22-629 |
| Parties | PENNYMAC LOAN SERVICES, LLC, Plaintiff/Counterclaim Defendant, v. BRAD JOHNSON and ELCI WIJAYANINGSIH, Defendants/Counterclaim Plaintiffs and Third-Party Plaintiffs, v. STANDARD GUARANTY INSURANCE COMPANY, ERIKA L. SANCHEZ, EFREN SALDIVAR, and ASSURANT, INC., Third-Party Defendants. |
| Court | North Carolina Court of Appeals |
Heard in the Court of Appeals 22 March 2023.
Appeal by defendant-counterclaim plaintiff and third-party plaintiff from order entered 27 May 2021 by Judge David L. Hall in Forsyth County Superior Court. No. 20-CVS-436
Brad R. Johnson, pro se defendant-appellant.
Womble Bond Dickinson (US) LLP, by B. Chad Ewing, for plaintiff-appellee.
Robinson, Bradshaw & Hinson, P.A., by Mark W. Merritt and Drinker Biddle & Reath, LLP, by W. Glenn Merten, for third-party defendants-appellees.
Brad R Johnson ("Johnson") appeals from the 27 May 2021 Order dismissing his counterclaim.[1] On appeal, Johnson argues the trial court: (1) erred in concluding Johnson's Verified First Amended Counterclaim contained the operative counterclaim in this case; (2) erred in dismissing Johnson's breach of contract claim by concluding PennyMac Loan Services, LLC ("PennyMac") was allowed to assess Johnson a fee related to force-placed insurance;[2] and (3) abused its discretion in denying Johnson's Motion for Leave to Amend his counterclaim. After careful review, we discern no error or abuse of discretion by the trial court.
On 7 November 2008, Johnson purchased two developed lots ("Lots 16 and 18") in Oak Island, North Carolina. Johnson subsequently obtained home and flood insurance to protect the home situated on Lots 16 and 18. On 25 August 2012, Johnson purchased three undeveloped lots ("Lots 13, 15, and 17") adjacent to Lots 16 and 18. To avoid paying the required sewer fees on the undeveloped lots, Johnson combined all five lots into a single developed parcel of land (the "Property").
On 9 June 2013, Johnson submitted a Uniform Residential Loan Application (the "Mortgage Loan") to Weststar Mortgage, Inc. ("Weststar") for the purpose of refinancing the Property. In addition to the Mortgage Loan, Johnson continued purchasing home and flood insurance for the Property and instructed Weststar to establish an escrow account so Johnson could pay the insurance and property taxes on a monthly basis. After the Mortgage Loan was submitted, Weststar ordered an appraisal of the Property. The appraisal invoice sent to Johnson specifically noted the appraisal was of "Lots 13, 15, 16, 17, and 18." Following the appraisal, Johnson's Mortgage Loan was approved, and Johnson was sent a Deed of Trust (the "Deed"). The Deed described the Property as "all of Lots 13, 15, and 17 . . ."; notably, it omitted Lots 16 and 18.
On 6 August 2013, PennyMac purchased the Mortgage Loan from Weststar. PennyMac maintained the escrow account established by Weststar and used it to pay the insurance coverage for the house. On 20 September 2017, Johnson requested PennyMac stop paying for home and flood insurance, claiming PennyMac had a lien on the vacant Lots 13, 15, and 17, not Lots 16 and 18, and therefore did not have an insurable interest in Lots 16 and 18. PennyMac approved Johnson's request to close the escrow account but explained the terms of the Mortgage Loan required Johnson to pay home and flood insurance for the Property. The relevant portion of the loan states:
Property Insurance. Borrower shall keep the improvements now existing or hereby erected on the Property insured against loss by fire, hazards included within the term "extended coverage," and any other hazards including, but not limited to earthquakes and floods, for which Lender requires insurance.
In September 2018, a representative for PennyMac allegedly told Johnson via telephone he would not be required to pay home insurance if he separated the Property back into the original parcels. On 22 March 2019, Johnson recorded an Instrument of Separation separating Lots 13, 15, and 17 from Lots 16 and 18.
On 10 May 2019, PennyMac sent Johnson a notice that his home insurance expired. PennyMac reminded Johnson that home insurance was required on the Property and requested Johnson provide proof of insurance. PennyMac further explained if Johnson did not provide proof of insurance, PennyMac would purchase insurance for the Property and charge Johnson. On 14 June 2019, PennyMac sent Johnson a second reminder to purchase home insurance. Once again, PennyMac explained to Johnson that failure to insure the Property would result in PennyMac purchasing force-placed insurance for the Property, which could be more expensive than an insurance policy Johnson purchased himself. Johnson refused to purchase insurance.
On 16 June 2019, PennyMac sent Johnson a certificate of coverage placement detailing the force-placed insurance coverage PennyMac purchased for the Property. The insurance was purchased through Standard Guaranty Insurance Company ("Standard Guaranty").
On 20 August 2019, Johnson filed an insurance complaint with the North Carolina Commissioner of Banks (the "Commissioner of Banks") and the North Carolina Department of Insurance alleging PennyMac's force-placed insurance was improper because PennyMac did not have an insurable interest in Lots 16 and 18. In response to this complaint, PennyMac sent a letter to the Commissioner of Banks explaining that, even though the Deed described only Lots 13, 15, and 17, the Mortgage Loan application submitted by Johnson indicated that the purpose of the Mortgage Loan was to refinance the then-existing loan encumbering the house on Lots 16 and 18.[3] PennyMac further noted it made a title insurance claim to resolve the alleged drafting error in the Deed. PennyMac represented to the Commissioner of Banks that the force-placed insurance would remain in effect, but PennyMac would not seek insurance premium payments from Johnson until the issue was resolved. PennyMac continued insuring the Property at its own expense.
On 23 January 2020, PennyMac filed a Complaint against Johnson in Forsyth County District Court to reform the Deed to include all property and improvements described in the appraisal report.[4] PennyMac alleged the Deed's omittance of Lots 16 and 18 was a "mutual mistake, inadvertence[,] or mistake of the draftsman."
On 21 February 2020, Johnson filed a pro se answer with counterclaim[5]against PennyMac for common law breach of contract alleging PennyMac breached the Mortgage Loan by force-placing home insurance on Lots 13, 15, and 17. Johnson filed claims against PennyMac and Standard Guaranty for violations of the Racketeering Influence and Corruption Organization Act ("RICO") under 18 U.S.C. §§ 1961-68. Johnson filed additional claims against PennyMac for violations of the Fair Debt Collection Practices Act ("FDCPA") under 15 U.S.C. § 1692, and breach of contract accompanied by fraudulent acts.
Also on 21 February 2020, Johnson filed a Notice of Removal to the United States District Court for the Middle District of North Carolina based on federal question and diversity jurisdiction. On 6 April 2020, Johnson filed a Verified First Amended Counterclaim ("FAC") in the middle district.
On 21 September 2020, Johnson filed for Leave to File a Verified Second Amended Counterclaim. On 3 March 2021, Judge Osteen remanded the case to the Forsyth County District Court for lack of subject matter jurisdiction. Judge Osteen further denied all other outstanding motions, including the motion to amend, as moot.
On 2 April 2021, Standard Guaranty filed a Motion to Dismiss Johnson's counterclaim in Forsyth County District Court. On 5 April 2021, PennyMac likewise filed a Motion to Dismiss Johnson's counterclaim. In response to the motions to dismiss, Johnson filed a Motion for Leave to Amend his original counterclaim. A hearing was held on the matter on 26 April 2021. On 27 May 2021, Judge Hall entered the Order on the Motions to Dismiss and the Motion to Amend, granting the motions to dismiss and denying Johnson's Motion to Amend based on futility.
On 10 March 2022, PennyMac voluntarily dismissed its Complaint to reform the deed. On 5 April 2022, Johnson filed timely notice of appeal to this Court.
This Court has jurisdiction to hear this appeal as a final order from a superior court pursuant to N.C. Gen. Stat. § 7A-27(b) (2021).
First, Johnson challenges Conclusion of Law 1, which states the FAC contains the operative counterclaim in this case. Specifically, Johnson argues the FAC is "void and a legal nullity" because he failed to meet the requirements for amended and supplemental pleadings set forth in Rule 15 of the Federal Rules of Civil Procedure. We disagree.
This Court reviews a trial court's conclusions of law de novo. Sykes v. Health Network Sols., Inc., 372 N.C. 326, 332, 828 S.E.2d 467, 471 (2019). "[W]e do not defer to the conclusions of ourt but conduct our own independent inquiry ...." Id. at 332, 828 S.E.2d at 471.
The Federal Rules of Civil Procedure allow a party to amend its pleading "once as a matter of course within 21 days after serving it, or . . . [i]n all other cases, a party may amend its pleading only with the opposing party's written consent or the court's leave." Fed.R.Civ.P. 15. "[U]ntimely amended pleading[s] served without judicial permission may be considered as properly introduced when leave to amend would have been granted had it been sought and when it does not appear that any of the parties [would have been] prejudiced by allowing the change." Straub v. Desa Indus., Inc., 88 F.R.D. 6, 8 (M.D. Pa. 1980); see also Madison...
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