Shepard v. Ocwen Federal Bank, Fsb

• Decision Date: 16 August 2005
• Docket Number: No. COA04-1634.,COA04-1634.
• Citation: 617 S.E.2d 61
• Parties: Wayne SHEPARD and Rosemary Sanders Shepard, Plaintiffs, v. OCWEN FEDERAL BANK, FSB and Wells Fargo Bank Minnesota, and Donald T. Ritter, in his capacity as Trustee, Defendants.
• Court: North Carolina Supreme Court

617 S.E.2d 61

Wayne SHEPARD and Rosemary Sanders Shepard, Plaintiffs, v. OCWEN FEDERAL BANK, FSB and Wells Fargo Bank Minnesota, and Donald T. Ritter, in his capacity as Trustee, Defendants.

No. COA04-1634.

Court of Appeals of North Carolina.

August 16, 2005.

Appeal by plaintiffs from order entered 8 July 2004 by Judge Charles H. Henry in New Hanover County Superior Court. Heard in the Court of Appeals 15 June 2005.

Financial Protection Law Center, by Mallam J. Maynard, Maria D. McIntyre, and Chandra T. Taylor, Wilmington, for plaintiffs-appellants.

Kellam & Pettit, P.A., by William Walt Pettit, Charlotte, for defendants-appellees.

Hartzell & Whiteman, LLP, by J. Jerome Hartzell, Raleigh, for Amicus Curiae The North Carolina Academy of Trial Lawyers.

Seth P. Rosebrock, Durham, for Amicus Curiae Center for Responsible Lending.

Carlene McNulty, Raleigh, for Amicus Curiae North Carolina Justice Center.

Hazel Mack-Hilliard, Winston-Salem, for Amicus Curiae Legal Aid of North Carolina, Inc.

Andrea Young Bebber, Charlotte, for Amicus Curiae Legal Services of Southern Piedmont, Inc.

William J. Whallen, Asheville, for Amicus Curiae Pisgah Legal Services.

TYSON, Judge.

Wayne Shepard and wife, Rosemary Sanders Shepard ("plaintiffs") appeal from the trial court's grant of Rule 12(b)(6) motions to dismiss filed by Wells Fargo Bank Minnesota, N.A. ("Wells Fargo") and Ocwen Federal Bank, FSB ("Ocwen") (collectively, "defendants"). We affirm.

I. Background

Plaintiffs obtained a second mortgage loan secured by their residential real property from Chase Mortgage Brokers, Inc. ("Chase"). The closing date for the loan was 25 July 1997. Plaintiffs were charged a loan origination fee by Chase. This fee was deducted from the loan proceeds and "wrapped" into the loan to be repaid over the course of several months. The loan was first assigned to Ocwen and later to Wells Fargo.

Plaintiffs filed this action against defendants on 3 May 2002 alleging the loan origination fee was usurious and illegal. The complaint asserted violations of N.C. Gen. Stat. § 24-1 et seq., N.C. Gen.Stat. § 75-1.1, sought reformation of the loan itself, treble damages, and attorneys' fees. Defendant Donald T. Ritter was the trustee of the original deed of trust and was joined as a party in the action for the reformation claim.

On 9 January 2004, Wells Fargo moved to dismiss plaintiffs' complaint under Rule 12(b)(6) of the North Carolina Rules of Civil Procedure. Wells Fargo affirmatively asserted and argued plaintiffs' claims were precluded by expiration of the applicable statute of limitations. The trial court heard Wells Fargo's motion and a similar motion to dismiss filed by Ocwen during its 3 May 2004 civil session. The trial court granted defendants' motions to dismiss on 8 July 2004 based on plaintiffs' failure to file within the expiration of the applicable statute of limitations. Plaintiffs appeal.

II. Issue

The sole issue before this Court is whether the trial court properly determined the statute of limitations for plaintiffs' claims had expired and dismissed plaintiffs' complaint.

III. Usury Law

Plaintiffs argue the trial court erred by dismissing their claims under N.C. Gen.Stat. § 24-1 et seq. for expiration of the applicable statute of limitations. We disagree.

A. Standard of Review

In reviewing the trial court's grant of a Rule 12(b)(6) motion to dismiss, we must determine whether "as a matter of law, the allegations of the complaint, treated as true, are sufficient to state a claim upon which relief can be granted under some legal theory." Considine v. Compass Grp. USA, Inc., 145 N.C.App. 314, 316-17, 551 S.E.2d 179, 181 (citing Lynn v. Overlook Development, 328 N.C. 689, 692, 403 S.E.2d 469, 471 (1991)), aff'd, 354 N.C. 568, 557 S.E.2d 528 (2001); see also N.C. Gen.Stat. § 1A-1, Rule 12(b)(6) (2003). The trial court's dismissal is affirmed only if "`it appears beyond doubt that the plaintiff could prove no set of facts in support of his claim which would entitle him to relief.'" Meyer v. Walls, 347 N.C. 97, 111-12, 489 S.E.2d 880, 888 (1997) (quoting Dixon v. Stuart, 85 N.C.App. 338, 340, 354 S.E.2d 757, 758 (1987)).

Dismissal of a complaint under Rule 12(b)(6) is proper when one of the following three conditions is satisfied: (1) when the complaint on its face reveals that no law supports plaintiff's claim; (2) when the complaint on its face reveals the absence of fact sufficient to make a good claim; (3) when some fact disclosed in the complaint necessarily defeats plaintiff's claim.

Jackson v. Bumgardner, 318 N.C. 172, 175, 347 S.E.2d 743, 745 (1986) (citing Oates v. JAG, Inc., 314 N.C. 276, 278, 333 S.E.2d 222, 224 (1985)).

B. Statute of Limitations

The trial court dismissed plaintiffs' complaint under Rule 12(b)(6) on the ground it disclosed a defect to defeat plaintiffs' claims. "A statute of limitations defense may properly be asserted in a Rule 12(b)(6) motion to dismiss if it appears on the face of the complaint that such a statute bars the claim." Horton v. Carolina Medicorp, Inc., 344 N.C. 133, 136, 472 S.E.2d 778, 780 (1996). "Once a defendant raises a statute of limitations defense, the burden of showing that the action was instituted within the prescribed period is on the plaintiff. A plaintiff sustains this burden by showing that the relevant statute of limitations has not expired." Id. (citations omitted).

Here, defendants asserted the affirmative defense of expiration of the applicable statute of limitations to plaintiffs' claims. The statute of limitations for a claim under the usury statutes of N.C. Gen.Stat. § 24-1 et seq. is two years. N.C. Gen.Stat. § 1-53(2)-(3) (2003). The issue before us is the date the two year period accrues. "Ordinarily, the period of the statute of limitations begins to run when the plaintiff's right to maintain an action for the wrong alleged accrues. The cause of action accrues when the wrong is complete, even though the injured party did not then know the wrong had been committed." Davis v. Wrenn, 121 N.C.App. 156, 158-59, 464 S.E.2d 708, 710 (1995) (quotation omitted), cert. denied, 343 N.C. 305, 471 S.E.2d 69 (1996).

Generally, the question of when a cause of action accrues is a factual determination. Spears v. Moore, 145 N.C.App. 706, 708, 551 S.E.2d 483, 485 (2001). However, "where the evidence is clear and shows without conflict that the claimant had both the capacity and opportunity to discover" the underlying issue but failed to do so, "the absence of reasonable diligence is established as a matter of law." Grubb Properties, Inc. v. Simms Investment Co., 101 N.C.App. 498, 501, 400 S.E.2d 85, 88 (citing Moore v. Fidelity & Casualty Co. of New York, 207 N.C. 433, 177 S.E. 406 (1934)), aff'd, 328 N.C. 267, 400 S.E.2d 36 (1991). We review de novo questions of law. In re Appeal of the Greens of Pine Glen Ltd. Part., 356 N.C. 642, 647, 576 S.E.2d 316, 319 (2003). "Under a de novo review, the court considers the matter anew and freely substitutes its own judgment for that of the [trial court]." Id. (citing Mann Media, Inc. v. Randolph Cty. Planning Bd., 356 N.C. 1, 13, 565 S.E.2d 9, 17 (2002)).

The United States District Court for the Middle District of North Carolina addressed this issue in Faircloth v. Nat'l Home Loan Corp., 313 F.Supp.2d 544 (M.D.N.C. 2003), aff'd, 87 Fed.Appx. 314 (4th Cir.2004) (unpublished). There, the class action plaintiffs asserted the identical causes of action for violations of North Carolina's Usury Statutes and Unfair and Deceptive Trade Practices Act as plaintiffs do here. Id. at 548. The defendants in Faircloth asserted the plaintiffs' causes of action accrued on the closing date and the plaintiffs' complaint was filed after expiration of the applicable statutes of limitation. Id. at 552. The court agreed. "[T]he wrong that continues over time, however, is different from a wrong which comes into existence or becomes known only after a passage of time.... [T]he alleged statutory violation, though continuing, is solitary and that a solitary action is distinguishable from wrongs that are perpetrated seriatim." Id. at 552-53 (citing and quoting Miller v. Pac. Shore Funding, 224 F.Supp.2d 977 (D.Md.2002), aff'd, 92 Fed. Appx. 93 (2004)). The Miller court concluded:

More than three years before filing his suit, at the closing of the loan, [the plaintiff] had sufficient knowledge of circumstances indicating he might have been harmed. The allegedly illegal fees were itemized on the face of the loan documents he signed on that date. The continued charging, collecting, and receiving of those fees by the lender or its assignees do not continuously renew the accrual of his cause of action.

224 F.Supp.2d at 990, n. 6.

Citing Miller, the Faircloth court determined, "the running of the statute of limitations for the plaintiff's cause of action began at the loan closing because the alleged wrong was not of a type that could become known only after a passage of time and because the alleged wrong, though continuing, arose from one unitary action." 313 F.Supp.2d at 553. The court held the statutes of limitation for both causes of action accrued on the closing date and expired prior to the plaintiffs filing their complaint. Id. at 554.

Although we are not bound by federal case law, we may find their analysis and holdings persuasive. Soderlund v. Kuch, 143 N.C.App. 361, 370, 546 S.E.2d 632, 638 ("With the exception of the United States Supreme Court, federal appellate decisions are not binding upon either the appellate or trial courts of this State."), disc. rev. denied, 353 N.C. 729, 551 S.E.2d 438 (2001); Huggard v. Wake County Hospital System, 102 N.C.App. 772, 775, 403 S.E.2d 568, 570 (1991) ("As an interpretation of state law by a federal court, this holding is not binding on us; however, we find its analysis persuasive."), aff'd, 330 N.C. 610, 411 S.E.2d 610 (1992); House v. Hillhaven, Inc., 105 N.C.App. 191, 195, 412 S.E.2d 893, 896 (Federal c...