NO. COA13-464
NORTH CAROLINA COURT OF APPEALS
Filed: 7 October 2014
HRISTOS BASMAS and MARIA BASMAS,
Plaintiffs,
v. Iredell County
No. 12 CVS 1684
WELLS FARGO BANK NATIONAL
ASSOCIATION, CARRINGTON MORTGAGE
SERVICES, LLC AND NATIONWIDE
TRUSTEE SERVICES, INC., as
Substitute Trustee,
Defendants.
Appeal by plaintiffs from order entered 5 December 2012 by
Judge Hugh B. Lewis in Iredell County Superior Court. Heard in
the Court of Appeals 11 August 2014.
Elliott Law Firm, PC, by Michael K. Elliott for plaintiff-
appellants.
RCO Legal, P.S., by Susan B. Shaw, for defendant-appellee.
STEELMAN, Judge.
The effect of plaintiffs’ discharge in bankruptcy on
foreclosure proceedings was not preserved for appellate review.
The trial court’s order allowing foreclosure is affirmed.
I. Factual and Procedural Background
On 29 September 2006 Hristos and Maria Basmas (plaintiffs)
borrowed $304,056.00 from New Century Mortgage Corporation for
-2-
the purpose of purchasing residential property located in
Iredell County, North Carolina. The loan was secured by a deed
of trust on plaintiffs’ property, which was recorded in the
Iredell County Registry of Deeds. On 19 December 2006, the loan
was sold to Wells Fargo (defendant). In conjunction with the
sale of the loan, the original Note was “indorsed in blank by
New Century” and transferred to Wells Fargo, with Deutsche Bank
being the custodian of the original Note for Wells Fargo.
In 2009 plaintiffs became delinquent in their mortgage
payments; they failed to make the payment due on 1 March 2009,
and have made no payments towards their debt since that time. On
9 September 2010 the substitute trustee filed a petition in
Iredell County case No. 10 SP 1503, seeking to foreclose on the
note and deed of trust. On 6 September 2011 the Iredell County
Clerk of Court entered an order allowing defendant to proceed
with foreclosure. Plaintiffs appealed to the Superior Court of
Iredell County, and on 2 November 2011 Judge Theodore S.
Royster, Jr., entered an order stating in relevant part that:
1. On or about September 29, 2006, a
Promissory Note (‘the Note’) was executed in
favor of New Century Mortgage Corporation in
the principal sum of $304,056 which Note was
secured by a Deed of Trust on real estate
located in Iredell County, North Carolina,
and recorded in . . . the Iredell County
Registry.
-3-
2. The Respondents did not produce an
original Indorsement of the Note, nor a copy
of the Indorsed Note.
3. The Respondent claims to be the holder of
the Note.
4. Since the Respondent failed to produce
sufficient competent evidence of Indorsement
of the Note, . . . at the time of this
hearing the Respondent does not qualify as
the ‘holder’ under the North Carolina
Uniform Commercial Code, and is thus not the
‘holder’ of the Promissory Note as the term
is used in N.C.G.S. § 45-21-16 for
foreclosures under power of sale.
Judge Royster concluded that “[t]he Respondent has failed
to prove that it is the owner and holder of a valid indebtedness
of [plaintiffs] as required pursuant to N.C.G.S. 45-21.16(d) and
therefore cannot foreclose on the subject property under the
current case (10-SP-1503).” The court ordered that the “Order of
Sale entered by the Iredell Clerk of Court on September 6, 2011
is hereby vacated” and that the substitute trustee “shall not
proceed under the current case (10-SP-1503) with any foreclosure
of the real estate described in that certain Deed of Trust
recorded in Book 1789, Page 2079 in the Iredell County Public
Registry.”
On 14 March 2012 defendant filed a new petition, in Iredell
County case No. 12 SP 292, seeking to foreclose on the note and
deed of trust. On 10 July 2012 plaintiffs filed a complaint in
the instant case, seeking a permanent injunction barring
-4-
foreclosure, a declaratory judgment that foreclosure was barred
by the doctrine of res judicata on the basis of Judge Royster’s
order, and alleging claims for abuse of process, unfair and
deceptive trade practices, and misrepresentation. A hearing was
conducted on 5 November 2012 before the trial court and on 5
December 2012 the court denied plaintiffs’ claim for declaratory
judgment in an order that stated in relevant part:
[This matter] came on for hearing . . . on
Plaintiffs’ motion for declaratory judgment
that the doctrine of res judicata bars the
Defendants from pursuing foreclosure in . .
. Iredell County, N.C., 12-SP-0292 . . . or
any other subsequent foreclosure proceeding.
Having considered the briefs, supporting
affidavits, and case law submitted by the
parties . . . the Court hereby finds and
concludes as follows:
1. Since November 2011, no payment has been
made by the Plaintiffs under that certain
adjustable rate promissory note . . .
secured by the deed of trust . . . that is
the subject of the current foreclosure
[proceeding] and the loan . . . is,
accordingly, in default at this time;
2. Subsequent to the entry by Judge Theodore
S. Royster, Jr. on November 2, 2011 of the
order vacating the . . . order of
foreclosure entered by the Iredell County
Clerk of Court in [10-SP-1503] . . .
Defendant Wells Fargo obtained physical
possession of the original Note (with an
original blank indorsement by New Century
Mortgage Corporation, the original Lender,
affixed thereon), which Note was presented
to the Court at the November 5th hearing;
. . .
-5-
4. New facts have occurred since Judge
Royster’s November 2, 2011 order in the
initial foreclosure [proceeding], by way of
subsequent default and Defendants’
presentation of the original Note (with an
original blank indorsement by New Century
Mortgage Corporation, the original Lender,
affixed thereon), creating a change in
circumstances that would preclude any res
judicata effect of said order upon the
current foreclosure [proceeding] and/or any
other subsequent foreclosure proceeding;
5. Issues as to the res judicata effect, if
any, upon past due moneys owed by the
Plaintiffs upon the Note shall remain
pending as the Court, by the entry of this
Order, is not determining such issues at
this point in time and such issues are
hereby reserved for a later date, if so
necessary.
The order denied plaintiffs’ claim for declaratory judgment
and ruled that plaintiffs’ “other prayers for relief are hereby
deemed to be moot[.]”
Plaintiffs appeal.
II. Standard of Review
“Our standard of review of a declaratory judgment is the
same as in other cases. N.C. Gen. Stat. § 1-258[.]” Calhoun v.
WHA Med. Clinic, PLLC, 178 N.C. App. 585, 596, 632 S.E.2d 563,
571 (2006). “‘The standard of review in declaratory judgment
actions where the trial court decides questions of fact is
whether the trial court’s findings are supported by any
competent evidence. Where the findings are supported by
-6-
competent evidence, the trial court’s findings of fact are
conclusive on appeal.’” Cross v. Capital Transaction Grp., Inc.,
191 N.C. App. 115, 117, 661 S.E.2d 778, 780 (2008) (quoting
Lineberger v. N.C. Dep’t of Corr., 189 N.C. App. 1, 7, 657
S.E.2d 673, 678, affirmed in part, review improvidently granted
in part on other grounds, 362 N.C. 675, 669 S.E.2d 320 (2008)).
Findings of fact not challenged on appeal are binding on this
Court. Johnson v. Herbie’s Place, 157 N.C. App. 168, 180, 579
S.E.2d 110, 118 (2003). “‘However, the trial court’s conclusions
of law are reviewable de novo.’” Cross, 191 N.C. App. at 117,
661 S.E.2d at 780 (quoting Browning v. Helff, 136 N.C. App. 420,
423, 524 S.E.2d 95, 98 (2000)).
III. Doctrine of Res Judicata
Plaintiffs’ primary argument is that Judge Royster’s entry
of an order vacating defendant’s first foreclosure action barred
the subsequent foreclosure action under the doctrine of res
judicata. “‘Under the doctrine of res judicata, a final judgment
on the merits in a prior action in a court of competent
jurisdiction precludes a second suit involving the same claim
between the same parties or those in privity with them.’ The
essential elements of res judicata are: (1) a final judgment on
the merits in an earlier lawsuit; (2) an identity of the cause
of action in the prior suit and the later suit; and (3) an
-7-
identity of parties or their privies in both suits. ‘When a
court of competent jurisdiction has reached a decision on facts
in issue, neither of the parties are allowed to call that
decision into question and have it tried again.’” Nicholson v.
Jackson Cty. School Bd., 170 N.C. App. 650, 654-55, 614 S.E.2d
319, 322 (2005) (quoting Bockweg v. Anderson, 333 N.C. 486, 491,
428 S.E.2d 157, 161 (1993), and Green v. Dixon, 137 N.C. App.
305, 308, 528 S.E.2d 51, 53 (2000) (other citations omitted).
However, “[i]t is well settled that the estoppel of a
judgment extends only to the facts in issue as they existed at
the time the judgment was rendered, and does not prevent a re-
examination of the same questions between the same parties when
in the interval the facts have changed or new facts have
occurred which may alter the legal rights or relations of the
litigants.” Flynt v. Flynt, 237 N.C. 754, 757, 75 S.E.2d 901,
903 (1953) (citation omitted). In this case, the trial court
found two separate instances of new or changed circumstances:
plaintiffs’ default on their loan after entry of Judge Royster’s
order, and defendant’s production of documentation of its status
as holder of the note.
IV. Effect of Discharge in Bankruptcy
Plaintiffs argue that the trial court erred by finding that
their default on the loan after entry of Judge Royster’s order
-8-
constituted new facts or circumstances that rendered the
doctrine of res judicata inapplicable. Plaintiffs assert that
their mortgage debt was discharged in bankruptcy, eliminating
the possibility of any further default. We do not reach the
merits of this issue, because plaintiffs failed to preserve for
appellate review the effect of a discharge in bankruptcy on the
foreclosure action.
Rule 10(a)(1) of the North Carolina Rules of Appellate
Procedure states that “to preserve an issue for appellate
review, a party must have presented to the trial court a timely
request, objection, or motion, stating the specific grounds for
the ruling the party desired the court to make” and must “obtain
a ruling upon the party’s request, objection, or motion.” The
effect of the bankruptcy proceeding in which plaintiffs were
involved was not raised in plaintiffs’ complaint, their
memorandum of law, or at the hearing before the trial court.
Moreover, plaintiffs’ argument is premised in part on their
assertion that there was “no reaffirmation agreement entered”
during the bankruptcy case. Plaintiffs fail to support this
contention by citation to sworn testimony, affidavit,
documentary evidence, or any other record evidence. It “‘is
axiomatic that the arguments of counsel are not evidence.’”
State v. Roache, 358 N.C. 243, 289, 595 S.E.2d 381, 411 (2004)
-9-
(quoting State v. Collins, 345 N.C. 170, 173, 478 S.E.2d 191,
193 (1996)).
Plaintiffs failed to preserve for appellate review any
issues pertaining to the effect of their bankruptcy proceeding
on the foreclosure action, and have not supported their argument
with citation to record evidence. Accordingly, we do not reach
the merits of this argument.
As discussed above, the trial court found and concluded in
relevant part that:
New facts have occurred since Judge
Royster’s November 2, 2011 order in the
initial foreclosure [special proceeding], by
way of subsequent default and Defendants’
presentation of the original Note (with an
original blank indorsement by New Century
Mortgage Corporation, the original Lender,
affixed thereon), creating a change in
circumstances that would preclude any res
judicata effect of said order upon the
current foreclosure [special proceeding]
and/or any other subsequent foreclosure
proceeding.
Plaintiffs’ appellate challenge is restricted to the trial
court’s finding that their continued default subsequent to entry
of Judge Royster’s order constituted new facts. Plaintiffs do
not challenge the trial court’s finding that defendant’s
production of proper documentation of its status as holder of
the note separately established that “[n]ew facts have occurred
. . . creating a change in circumstances” that precluded
-10-
application of res judicata to defendant’s second foreclosure
proceeding. “It is not the role of the appellate courts . . . to
create an appeal for an appellant.” Viar v. N.C. Dep’t of
Transp., 359 N.C. 400, 402, 610 S.E.2d 360, 361 (2005) (per
curiam). Given that plaintiffs failed to preserve this challenge
to the trial court’s order, the order must be affirmed.
V. Public Policy Considerations
Plaintiffs also argue that we should reverse the trial
court’s order based upon various public policy concerns.
“Weighing . . . public policy considerations is the province of
our General Assembly, not this Court.” Shaw v. U.S. Airways,
Inc., 362 N.C. 457, 463, 665 S.E.2d 449, 453 (2008). This
argument lacks merit.
For the reasons discussed above, we conclude that the trial
court did not err and that its order should be
AFFIRMED.
Judges ERVIN and McCULLOUGH concur.