Summary
holding that the assignee of mortgages and mortgage notes was not liable to the mortgagors for unfair or deceptive trade practices relating to allegedly excessive loan origination fees and interest rates, where the assignee had no connection to the execution of the notes
Summary of this case from Belanger v. Bac Home Loans Servicing, L.P.Opinion
No. COA04-1450.
Filed 16 August 2005.
1. Jurisdiction — long-arm — trust holding mortgage
Long-arm jurisdiction was not extended to defendant Trust 1997-1 in an action for usury and unfair trade practices in connection with a mortgage, and plaintiff's complaint was properly dismissed. Defendant, which was assigned the loan after the closing, is a New York common law trust which receives and distributes income from mortgages to its certificate holders. It has back offices in New York and California but no employees; and its mortgage notes are serviced by an independent contractor in California. It had no connection with the origination of this loan and did not directly collect or direct the collection of the payments. The only connection defendant has to North Carolina is that less than three percent of its mortgage notes are secured by North Carolina real property. N.C.G.S. §§ 1-75.4(1)(d), 1-75.4(5)(d), 1-75.4(6)(b).
2. Statutes of Limitation and Repose — usury and unfair trade practices — accrual at closing
In an action decided on other grounds, the trial court did not err by dismissing claims for usury and unfair trade practices arising from a mortgage for expiration of the statute of limitations. The statute of limitations for usury is two years and for unfair trade practices four years, with accrual on closing date. Plaintiffs' complaint was filed over four years from the closing date. N.C.G.S. § 1-52(2), (3), N.C.G.S. § 75-16.2.
3. Unfair Trade Practices — subsequent purchaser of mortgage note
It has been held that a subsequent purchaser of a mortgage note who did not participate in alleged improprieties during the execution of the mortgage is not liable under N.C.G.S. § 75-1.1.
Judge BRYANT dissenting.
Appeal by plaintiffs from order entered 9 June 2004 by Judge Henry W. Hight, Jr., in Durham County Superior Court. Heard in the Court of Appeals 15 June 2005.
Shipman Gore Mason Wright, LLP, by Gary K. Shipman and William G. Wright, for plaintiffs-appellants. Womble Carlyle Sandridge Rice, PLLC, by Hada V. Haulsee and Ronald R. Davis; Leslie A. Greathouse, Santa Ana, California, pro hac vice, for defendants-appellees Preferred Credit Trust 1997-1 and Bankers Trust Company.
Garry Lee Skinner and Judy Cooper Skinner ("Skinners"), as individuals and on behalf of all other individuals similarly situated (collectively, "plaintiffs"), appeal an order dismissing plaintiffs' complaint against Preferred Credit Trust 1997-1 ("Trust 1997-1") and Bankers Trust Company (collectively, "defendants") under Rule 12(b)(1), Rule (2), and Rule (6) of the North Carolina Rules of Civil Procedure. We affirm.
I. Background
The Skinners obtained a second mortgage loan from defendant Preferred Credit on 22 January 1997. The loan was secured by a lien on their residential real property. After the closing date, the loan was assigned to Trust 1997-1. Trust 1997-1 holds mortgage loans, receives income from the mortgage loans, and distributes that income to holders of its certificates.
The Skinners allege defendant Preferred Credit charged excessive loan origination fees and interest rates for the loan in violation of North Carolina's usury law. Plaintiffs filed a class action complaint on 3 December 2001 against multiple defendants asserting violations of North Carolina's Usury Statutes and Unfair and Deceptive Trade Practices Act.
On 12 May 2003, the Chief Justice of the North Carolina Supreme Court designated this case as "exceptional" and assigned Judge Hight to hold sessions. Defendants' motions to dismiss under Rule 12(b)(1), Rule (2), and Rule (6) were heard by Judge Hight. The trial court reviewed the pleadings, read briefs submitted by plaintiffs and defendants, and heard statements and arguments in open court by both plaintiffs and defendants.
On 9 June 2004, the trial court entered its order which determined: (1) plaintiffs voluntarily dismissed claims against defendants Credit Suisse First Boston Mortgage Securities Corporation, Imperial Credit Industries, Inc., Banc One Financial Services, Life Bank, Life Financial Home Loan Owner Trust 1997-3, Wilmington Trust Company, and GMAC-Residential Funding Corporation; (2) plaintiffs voluntarily dismissed all claims against defendant U.S. Bank, N.A., ND. with prejudice; (3) plaintiffs conceded lack of standing against defendants US Bank N.A., Empire Funding Home Loan Owner Trust 1998-1, ICIFC Secured Assets Corporation Mortgage Pass-Through Certificates, Series 1997-1, ICIFC Secured Assets Corporation Mortgage Pass-Through Certificates, Series 1997-2, ICIFC Secured Assets Corporation Mortgage Pass-Through Certificates, Series 1997-3, Preferred Mortgage Trust 1996-2, United Mortgage C.B., LLC, and IMH Assets Corp. Collateralized Asset-Backed Bonds Series 1999-1; (4) plaintiffs lack personal jurisdiction over IMPAC Mortgage Holdings, Inc., IMPAC Secured Assets Corporation, IMPAC Secured Assets CMN Trust Series 1998-1 Collateralized Asset-Backed Notes, Series 1998-1, and Trust 1997-1; (5) plaintiffs lack standing to assert claims against defendants IMPAC Funding Corporation, IMPAC Mortgage Holdings, Inc., IMPAC Secured Assets Corporation, Bankers Trust Company of California, NA, and Bankers Trust Company; and (6) plaintiffs' complaint fails to state any claim upon which relief may be granted against any of defendants. Plaintiffs appeal.
II. Issues
The issues on appeal are whether: (1) plaintiffs have personal jurisdiction over Trust 1997-1; and (2) the applicable statute of limitations periods have expired concerning plaintiffs' claims against defendants for violations of N.C. Gen. Stat. § 24-10 and N.C. Gen. Stat. § 75-1.1.
III. Parties Before the Court
After filing its notice of appeal, plaintiffs filed with this Court a motion to dismiss its appeal with respect to: (1) IMPAC Funding Corporation; (2) IMPAC Mortgage Holdings, Inc.; (3) IMPAC Secured Assets Corporation; (4) IMPAC Secured Assets CMN Trust Series 1998-1 Collateralized Asset-Backed Notes, Series 1998-1; and (5) Bankers Trust Company of California, N.A. We allowed this motion pursuant to Rule 37 of the North Carolina Rules of Appellate Procedure. N.C.R. App. P. 37 (2004). The sole remaining defendants are Trust 1997-1 and its trustee, Bankers Trust Company.
IV. Personal Jurisdiction
Plaintiffs assert the trial court erred in determining they lacked personal jurisdiction over Trust 1997-1. We disagree.
A. Standard of Review
"The standard of review of an order determining jurisdiction is whether the findings of fact by the trial court are supported by competent evidence in the record; if so, this Court must affirm the order of the trial court." Better Business Forms, Inc. v. Davis, 120 N.C. App. 498, 500, 462 S.E.2d 832, 833 (1995). "If presumed findings of fact are supported by competent evidence, they are conclusive on appeal despite evidence to the contrary." Cameron-Brown Co. v. Daves, 83 N.C. App. 281, 285, 350 S.E.2d 111, 114 (1986).
A court must engage in a two-part inquiry to determine whether personal jurisdiction over a non-resident defendant is properly asserted. Better Business Forms, Inc., 120 N.C. App. at 500, 462 S.E.2d at 833. First, the court must determine whether North Carolina's `long-arm' statute authorizes jurisdiction over the defendant. N.C. Gen. Stat. § 1-75.4 (2003). If so, the court must determine whether the court's exercise of jurisdiction over the defendant is consistent with due process. Better Business Forms, Inc., 120 N.C. App. at 500, 462 S.E.2d at 833.
Tejal Vyas, LLC v. Carriage Park, Ltd. P'ship, 166 N.C. App. 34, 37, 600 S.E.2d 881, 884-85 (2004), aff'd per curiam, 359 N.C. 315, 608 S.E.2d 751 (2005).
B. Long-Arm Statute
Plaintiffs assert three subsections of North Carolina's long-arm statutes provide them personal jurisdiction over Trust 1997-1: (1) N.C. Gen. Stat. § 1-75.4(1)(d); (2) N.C. Gen. Stat. § 1-75.4(5)(d); and (3) N.C. Gen. Stat. § 1-75.4(6)(b).
N.C. Gen. Stat. § 1-75.4(1)(d) (2003) provides that if the defendant is "engaged in substantial activity within this State, whether such activity is wholly interstate, intrastate, or otherwise[,]" personal jurisdiction exists. N.C. Gen. Stat. § 1-75.4(5)(d) (2003) states that if the plaintiff shipped "goods, documents of title, or other things of value from [North Carolina to the defendant on its] order or direction," personal jurisdiction exists. Under N.C. Gen. Stat. § 1-75.4(6)(b) (2003), personal jurisdiction exists
[i]n any action which arises out of: A claim to recover for any benefit derived by the defendant through the use, ownership, control or possession by the defendant of tangible property situated within this State either at the time of the first use, ownership, control or possession or at the time the action is commenced[.]
1. "Substantial Activity" and "Things of Value"
Trust 1997-1 correctly notes and our review of the record shows plaintiffs' claims against defendants arose out of allegedly "excessive and illegal origination fees" and "unfair and deceptive acts associated with the making and collection of the loans." Trust 1997-1 had no connection with the origination of the loans, payment of the origination fees, and does not directly collect or direct the collection of loan payments. Trust 1997-1 has no employees and merely holds payments for the benefit of its certificate holders after receipt from its servicer in California. Trust 1997-1 neither engages in "substantial activity within this State" to satisfy N.C. Gen. Stat. § 1-75.4(1)(d) nor receives "shipped goods, documents of title, or other things of value" from North Carolina under N.C. Gen. Stat. § 1-75.4(5)(d).
2. Tangible Property
This Court addressed the applicability of N.C. Gen. Stat. § 1-75.4(6)(b) to a nonresident defendant who only had an interest in a note secured by a deed of trust on real property in North Carolina in Whitener v. Whitener, 56 N.C. App. 599, 601, 289 S.E.2d 887, 889, disc. rev. denied, 306 N.C. 393, 294 S.E.2d 221 (1982). In Whitener, the plaintiff filed a complaint in North Carolina state court against his exwife, a Florida resident. Id. He sought an accounting of payments she received in Florida from a purchase money note related to a pre-divorce sale of North Carolina real property. Id. at 602, 289 S.E.2d at 889. The defendant challenged the existence of personal jurisdiction. Id. at 600, 289 S.E.2d at 888.
The defendant's only connection to North Carolina was receipt of payments based on her sale of real property in North Carolina and the note she received secured by the deed of trust. Id. at 601, 289 S.E.2d at 889. Recognizing the "serious constitutional problems that would arise were we to hold otherwise," this Court granted the defendant's motion to dismiss stating, "[w]e believe that if we read G.S. 1-75.4(6)(b) to give the North Carolina court jurisdiction for a suit against the defendant for an accounting of money she received on the note it would violate the rule of Shaffer." Id. at 602, 289 S.E.2d at 889-90 (following the minimum contacts analysis in Shaffer v. Heitner, 433 U.S. 186, 53 L. Ed. 2d 683 (1977)).
Here, the only connection Trust 1997-1 has to North Carolina is less than three-percent of the mortgage notes it holds are secured by North Carolina real property. Trust 1997-1 is a New York common law trust with back offices in New York and California. It has no employees. Its servicer of the mortgage notes is an independent contractor located in California. See Wyatt v. Walt Disney World, Co., 151 N.C. App. 158, 166, 565 S.E.2d 705, 710 (2002) (actions of an independent contractor alone are not enough to establish jurisdiction). Trust 1997-1 is an assignee holder of second mortgage notes. Trust 1997-1's connections to and contacts with North Carolina are even more tenuous than those asserted in Whitener. We hold these connections are not sufficient to satisfy North Carolina's long-arm statute.
Because this case presents an issue of first impression in our courts, we look to other jurisdictions to review persuasive authority that coincides with North Carolina's law. In Frazier v. Preferred Credit, the United States District Court for the Western District of Tennessee, held Trust 1997-1, the same nonresident assignee defendants as here, did not engage in sufficient contacts with the forum state to justify the exercise of personal jurisdiction, and dismissed the plaintiff's claims. No. 01-2714 GB, 2002 WL 31039856 at 6-7 (W.D. Tenn., 2002) (Unpublished). The court relied on the facts that: (1) the defendants had no employees or agents in the state; (2) the defendants had no representatives that traveled to the state; (3) the defendants had not entered into any contracts, including second mortgage loans, in the state; and (4) the loans the defendants held secured by property in the state did not exceed two percent of the total loans they held. Id.
Under very similar facts and law, the Tennessee Court of Appeals held personal jurisdiction could not be extended to the defendants and dismissed the plaintiffs' claims. See Hollingsworth, Inc. v. Johnson, 138 S.W.3d 863, 869 (Tenn.Ct.App., 2003) ("One of the general principles of the law of assignments is that the assignee steps into the shoes of the assignor with regard to the matters covered by the assignment.") (internal quotation omitted), appeal denied, 2004 Tenn. LEXIS 289 (Tenn. Mar. 22, 2004). Here, the dissenting opinion notes we focus on the Trust's quantity, rather than the quality, of defendants' contacts as the basis to establish jurisdiction. Plaintiffs failed to establish either.
In light of our discussion that the subsections of N.C. Gen. Stat. § 1-75.4, as argued by plaintiffs, do not extend the long-arm statute to Trust 1997-1, we need not address the due process considerations. See Tejal Vyas, LLC, 166 N.C. App. at 37, 600 S.E.2d at 884-85 ("A court must engage in a two-part inquiry to determine whether personal jurisdiction over a non-resident defendant is properly asserted."). We hold the trial court properly dismissed plaintiffs' complaint against Trust 1997-1 for lack of personal jurisdiction. This assignment of error is overruled.
V. Statute of Limitations
Although we hold plaintiffs did not have personal jurisdiction over Trust 1997-1, we also consider plaintiffs' assertion that the trial court erred in granting the Rule 12(b)(6) motion to dismiss due to expiration of the statute of limitations. We disagree.
Orally argued the same day and filed simultaneously with this opinion is Shepard v. Ocwen Federal Bank, FSB, et al., 172 N.C. App. 475, 617 S.E.2d 61 (2005). In Shepard, we addressed the issue of accrual of the statute of limitations for claims of usury violations and unfair and deceptive trade practices in the same factual scenario. Id. at 477, 617 S.E.2d at 63. Shepard holds the statute of limitations accrues on the date of closing. Our holding in Shepard provides an alternative basis to affirm the trial court's dismissal of plaintiffs' complaint.
The discussion in Shepard was limited to the usury claim due to the plaintiffs stipulating that their claim under N.C. Gen. Stat. § 75-1.1 was time-barred under the applicable statute of limitations. Id. at 482, 617 S.E.2d at 66. Plaintiffs do not so stipulate. Our analysis and discussion as applied to the usury statute of limitations in Shepard is equally applicable to plaintiffs' unfair and deceptive trade practices claim. Id.
The Skinners closed on their second mortgage on 22 January 1997. Their complaint was not filed until 3 December 2001, over four years after the closing date. The statute of limitations for both the usury and unfair and deceptive trade practices had expired. See N.C. Gen. Stat. § 1-52(2)-(3) (2003) (statute of limitations for usury claims is two years); see also N.C. Gen. Stat. § 75-16.2 (2003) (statute of limitations for unfair and deceptive trade practices claims is four years). As an alternative basis to affirm the trial court's order, the trial court properly granted defendants' Rule 12(b)(6) motion to dismiss on expiration of the statute of limitations on both claims.
We further recognize this Court has addressed the issue of mortgage holder/assignee's liability to borrowers for claims of unfair and deceptive trade practices based on execution of the original loan. In Melton v. Family First Mortgage Corp., the plaintiff filed a complaint against the original lender and subsequent assignees of the mortgage note for unfair and deceptive trade practices, fraud, and civil conspiracy. 156 N.C. App. 129, 132-34, 576 S.E.2d 365, 368-69, aff'd per curiam, 357 N.C. 573, 597 S.E.2d 672 (2003). The allegations arose from activities occurring prior to and on the date of closing. Id. at 131, 576 S.E.2d at 367-68. With regards to the bank that purchased the mortgage shortly after its execution, we noted the plaintiff did not meet with the defendant's representatives, did not correspond with the defendant, and had no relationship with the defendant until after the defendant bought the mortgage subsequent to the closing date. Id. at 133, 576 S.E.2d at 369. As here, "there is no evidence that [the defendant] committed improprieties with regard to the execution of the mortgage." Id. We held a subsequent purchaser of a mortgage note who did not participate in alleged improprieties during the execution of the mortgage is not liable under N.C. Gen. Stat. § 75-1.1. Id.
There are no allegations that Trust 1997-1, as a subsequent purchaser of a mortgage note, had any connection to the execution of the mortgage note. Under Melton, plaintiffs' claim of unfair and deceptive trade practices against Trust 1997-1 fails. In light of our holding, we decline to address plaintiffs' remaining assignments of error.
VI. Conclusion
The trial court properly dismissed plaintiffs' claims against defendants for lack of personal jurisdiction. As an alternative basis to affirm the trial court's order, the applicable statute of limitations governing both causes of action plaintiffs asserted accrued on the closing date and expired prior to plaintiffs filing this action. Trust 1997-1 is not liable under N.C. Gen. Stat. § 75-1.1 for allegations involving the execution of the mortgage. The trial court's order is affirmed.
Affirmed.
Judge McCULLOUGH concurs.
Judge BRYANT dissents.