An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority. Citation is disfavored, but may be permitted in accordance with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Proced ure.

NO. COA04-879


Filed: 7 June 2005


v .                         Bertie County
                            No. 03 CVS 114

    Appeal by plaintiff from judgment entered 19 April 2004 by Judge Milton F. Fitch, Jr. in Bertie County Superior Court. Heard in the Court of Appeals 3 March 2005.

    KELLAM & PETTIT, P.A., by William Walt Pettit, for the plaintiff.

    RUFFIN LAW FIRM, by Teresa L. Smallwood, for the defendant.


    Citifinancial Mortgage Company (“plaintiff”) appeals a trial court order dismissing plaintiff's complaint pursuant to Civil Procedure Rule 12(b)(6). For the reasons stated herein, we affirm the trial court's order.
    Plaintiff filed this action for declaratory judgment seeking a declaration of its rights under a mortgage agreement with Tonza Ruffin (“defendant”). The facts of this case as alleged in plaintiff's complaint are as follows: On or about 22 June 2000, defendant executed a note in the amount of $121,500 and a deed of trust for property located at 505 Confederate Lane in Windsor,North Carolina, to Associates Home Equity Services, Inc. (“Equity Services”). Equity Services subsequently transferred its rights, title and interest in the note and deed of trust to plaintiff.
    After plaintiff purchased the mortgage, defendant defaulted on the loan. Plaintiff declared the outstanding balance due and payable, and demanded that defendant pay $122,241.25 to satisfy the loan. Defendant's attorney, Teresa Smallwood (“Attorney Smallwood”) sent plaintiff a check for the agreed upon amount. The check was drawn on Attorney Smallwood's trust account at Southern Bank.
    After receiving the check, plaintiff verified with Southern Bank that Attorney Smallwood's trust account contained sufficient funds to honor the check, but did not negotiate the check at that time. Several months later, plaintiff negotiated the check, marked the deed of trust “paid and cancelled,” and presented the cancelled deed of trust to the Bertie County Register of Deeds. Southern Bank subsequently notified plaintiff that Attorney Smallwood had placed a stop payment order on the check, and that the check would not be honored.
    Plaintiff filed a complaint on 1 April 2003 seeking (1) a declaratory judgment that plaintiff has a valid and enforceable lien on the Confederate Lane property, and that plaintiff is entitled to foreclose on the lien; (2) a judicial sale of the property; and (3) an award of $125,584.86 plus interest. Defendant filed a motion to dismiss the complaint pursuant to Civil Procedure Rule 12(b)(6) for failure to state a claim upon which relief can begranted. The matter was heard before the trial court on 26 January 2004. At the conclusion of oral arguments, the trial court made the following statement to plaintiff:
        COURT:        I don't like the way you're doing business . . . . You had the money. The lady, according to the allegations, was attempting to pay you off. You kept the check, you kept the check, you kept the check, then you finally decided to negotiate the check. Her counsel decided that it's been long enough, put a stop payment on the thing, and in the meantime, you cancelled [the deed of trust]. It's not like an insurance company, it's about like the bar tells you, don't do anything until the check clears. Now you're in a situation where you're attempting to back up and go through a foreclosure proceeding and I agree with Ms. Smallwood. I'm not sure that foreclosure is your remedy. Now what else is in this lawsuit other than foreclosure?

        PLAINTIFF:    Your Honor, it's just the Declaratory Judgment, Judicial Sale and Monetary Judgment, and the amount of it.

        COURT:        Alright, step aside.


        COURT:        If you want this matter to go over it will have to be April. It will be in August otherwise. I'll dismiss the foreclosure and you all can do the best you can on whatever else is left.
Thus, the trial court granted defendant's motion to dismiss as it pertained to the foreclosure issue. The trial court reserved judgment on the remaining issues pending additional oral arguments at the continued hearing.
    The trial court reconvened for oral arguments on 19 April 2004. Following is the dialogue between the trial court and defense counsel at the continued hearing in its entirety:
        COURT:        Is this the matter that we heard in Hertford?

        DEFENDANT:    No, sir. This is the matter we heard here in Bertie County, January 26, where both attorneys argued to you and you basically asked if there was any ability for us to come together. I said certainly I was certainly willing to do so.

                    During this period of time they have basically snubbed us. We wanted to follow through for a deposition to be set up three different dates. Each -- well, two of the dates they cancel[l]ed. They've just made absolutely no effort whatsoever to come together as parties and see if there was a way that we could resolve this matter.

                    In anticipation that -_ you know, when the Court made its ruling as related to the motion to dismiss, it was my indication at that time that the young lawyer who was here felt like that would be the best approach with this. At some point in time they're either going to refile or they're going to take their losses.
        COURT:        Did Citifinancial have notice to be here today?

        DEFENDANT:    Yes, sir. I mean, we were both notified.

        COURT:        The file indicates that this matter was continued to 4/19 by Judge Fitch on 1/28/04. Today is the fourth month, the nineteenth day, so all parties knew to be in front of me today.

        DEFENDANT:    Yes, sir.

        COURT:        And this is the matter of Citifinancial Mortgage versus, so they are the plaintiff. The matter was on on January 28 on -_ let me see what matter. What was the issue at that time?

        DEFENDANT:    It was a motion to dismiss filed by the defendant for failure to state a claim upon which relief could be granted.

        COURT:        Well, the Court then is of the opinion, based on notice to appear today to defend against a motion to dismiss filed on behalf of the defendant, the Court at the call of the matter in 03-CVS-[]114, nobody answering on behalf of the plaintiff, defendant renews the motion to dismiss, that motion is granted.

        DEFENDANT:    May I approach?

        COURT:        And I'll sign such an order.

The trial court entered an order granting defendant's motion to dismiss with prejudice. It is from this order that plaintiff appeals.

    The sole issue raised on appeal is whether the trial court properly granted defendant's motion to dismiss. For the following reasons, we affirm the trial court's ruling.
    For a motion to dismiss under Rule 12(b)(6), the standard of review is “'whether, as a matter of law, the allegations of the complaint, treated as true, are sufficient to state a claim upon which relief may be granted under some legal theory.'” Block v. County of Person, 141 N.C. App. 273, 277, 540 S.E.2d 415, 419 (2000) (quoting Harris v. NCNB, 85 N.C. App. 669, 670, 355 S.E.2d 838, 840 (1987)). Dismissal of a declaratory judgment action can be allowed under Rule 12(b)(6) where “'there is no basis for declaratory relief, as when the complaint does not allege an actual, genuine existing controversy.'” Morris v. Plyler Paper Stock Co., 89 N.C. App. 555, 557, 366 S.E.2d 556, 558 (1988) (quoting Consumers Power v. Power Co., 285 N.C. 434, 439, 206 S.E.2d 178, 182 (1974)). See also Phillips v. Ledford, 162 N.C. App. 150, 590 S.E.2d 280, disc. review denied, 358 N.C. 377, 597 S.E.2d 133 (2004).
    Our General Statutes provide that a deed of trust is discharged and released where the deed of trust is presented to the register of deeds with an “endorsement of payment and satisfaction thereon.” N.C. Gen. Stat. § 45-37(a)(2003). “It shall be conclusively presumed that the conditions of any deed of trust . . . have been complied with or the debts secured thereby paid or obligations performed.” N.C. Gen. Stat. § 45-37(b). This presumption can be rebutted where the “holder of the indebtedness”files an affidavit with the register of deeds stating (1) the amount of debt unpaid, or (2) any other condition of the debt left unfulfilled. Id.
    In the present case, the trial court indicated at the close of the January hearing that it was not persuaded by plaintiff's argument against the motion to dismiss. The transcript indicates that the trial court dismissed the foreclosure claim and permitted the parties to present oral arguments on the remaining issues at a later date. When plaintiff did not appear at the continued hearing for further arguments, the trial court, still unpersuaded by plaintiff's position on the matter, granted the motion to dismiss. The trial court's ruling is supported by the facts alleged in plaintiff's complaint, to wit:
        After verifying that there were sufficient funds in the trust account of Teresa Smallwood to cover the amount of the item, Plaintiff proceeded to forward the check through the banking process and marked the Deed of Trust “paid and cancelled.” Furthermore, Plaintiff forwarded the Deed of Trust to the Register of Deeds of Bertie County, North Carolina with said notation.

Plaintiff marked the deed of trust “paid and cancelled” after inquiring about the availability of funds in Attorney Smallwood's trust account, but without having received an actual payment. By presenting the “paid and cancelled” deed of trust to the register of deeds prior to receiving payment from Attorney Smallwood's trust account, plaintiff failed to comply with N.C. Gen. Stat. § 45-36.3 (2003) which instructs the “holder of the evidence of indebtedness” to cancel the deed of trust after the mortgagor's obligation hasbeen satisfied. For plaintiff to reinstate its lien on the property and claim a right to foreclosure, plaintiff must provide the register of deeds with an affidavit stating the amount of debt unpaid and secured by the mortgage in accordance with N.C. Gen. Stat. § 45-37(b). The complaint does not allege that plaintiff has taken the necessary steps to rebut this presumption. Thus, we affirm the order of the trial court granting defendant's motion to dismiss.
    Judges BRYANT and LEVINSON concur.
    Report per Rule 30(e).

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