Gilbert v. Residential Funding LLC

PUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

REX T. GILBERT, JR.; DANIELA L. 
GILBERT,
Plaintiffs-Appellants,
v.
RESIDENTIAL FUNDING LLC; GMAC
MORTGAGE LLC; DEUTSCHE BANK

TRUST COMPANY AMERICAS, as
Trustee for Residential Accredit No. 10-2295
Loans, Incorporated,
Defendants-Appellees,
and
DAVID A. SIMPSON, Substitute
Trustee,
Trustee.

Appeal from the United States District Court
for the Eastern District of North Carolina, at Raleigh.
James C. Dever III, District Judge.
(4:09-cv-00181-D)

Argued: January 24, 2012

Decided: May 3, 2012

Before TRAXLER, Chief Judge, FLOYD, Circuit Judge,
and J. Michelle CHILDS, United States District Judge for
the District of South Carolina, sitting by designation.
2 GILBERT v. RESIDENTIAL FUNDING LLC
Affirmed in part, reversed in part, and remanded by published
opinion. Judge Floyd wrote the opinion, in which Chief Judge
Traxler and Judge Childs joined.

COUNSEL

ARGUED: Katherine Suzanne Parker-Lowe, Ocracoke,
North Carolina, for Appellants. Marc James Ayers, BRAD-
LEY ARANT BOULT CUMMINGS, LLP, Birmingham,
Alabama, for Appellees. ON BRIEF: Nicholas J. Voelker,
BRADLEY ARANT BOULT CUMMINGS, LLP, Charlotte,
North Carolina, Jonathan M. Hooks, BRADLEY ARANT
BOULT CUMMINGS, LLP, Birmingham, Alabama, for
Appellees.

OPINION

FLOYD, Circuit Judge:

Rex and Daniela Gilbert appeal the district court’s dis-
missal of their claim that Deutsche Bank Trust Company
Americas (Deutsche), as trustee for Residential Accredit
Loans, Inc. (RAL); David A. Simpson (Simpson), substitute
trustee; Residential Funding LLC (RFL); and GMAC Mort-
gage LLC (GMAC) violated various consumer protection
laws in connection with a mortgage the Gilberts secured on
their home, located at 134 West End Road, Ocracoke, North
Carolina (the subject property). Specifically, the Gilberts
allege that they are entitled to relief on account of violations
of the Truth in Lending Act (TILA), 15 U.S.C. §§ 1601-
1667(f), and its implementing regulation, Regulation Z, 12
C.F.R. § 1026 (previously codified at 12 C.F.R. § 226); North
Carolina usury law, N.C. Gen. Stat. § 24; the North Carolina
Unfair and Deceptive Trade Practices Act (NCUDTPA), id.
§ 75-1.1; and North Carolina’s Prohibited Acts by Debt Col-
 GILBERT v. RESIDENTIAL FUNDING LLC 3
lectors statute, id. § 75-50. The Gilberts also claim a breach
of contract and that Deutsche lacks the authority to enforce
the loan.

Appellees filed a motion to dismiss, which the district court
granted. The Gilberts timely appealed. For the reasons that
follow, we affirm in part, reverse in part and remand for fur-
ther proceedings.

I.

We review the district court’s decision granting a motion to
dismiss de novo, and we view the facts in the light most
favorable to the non-prevailing party. See Chaudhry v. Mobil
Oil Corp., 186 F.3d 502, 504 (4th Cir. 1999).

On May 5, 2006, Rex Gilbert executed an adjustable rate
note with First National Arizona to refinance the existing lien
on the subject property. Pursuant to the terms of the note, Mr.
Gilbert agreed to pay a principal amount of $525,000, plus
interest to the bank. The Gilberts executed a deed of trust on
the subject property to secure the note. As a part of the trans-
action, First National Arizona provided several disclosures,
including a "Truth in Lending Disclosure Statement," a "No-
tice of Right to Cancel," a "Variable Rate Mortgage Program
Disclosure," a "HUD-1 Settlement Statement," and a "First
Payment Letter."

Thereafter, according to the district court, First National
Arizona transferred its interest in the Gilberts’ mortgage to
First National Bank of Nevada, First National Bank of
Nevada transferred its interest in the mortgage to RFL, and
RFL sold its interest to Deutsche, as the trustee for RAL. Gil-
bert v. Deutsche Bank Trust Co. Ams., No. 09-CV-181-D,
2010 WL 2696763, at *1 (E.D.N.C. July 7, 2010). Thus, the
district court stated, Deutsche, as the trustee for RAL, cur-
rently owns and holds the note and deed of trust on the subject
4 GILBERT v. RESIDENTIAL FUNDING LLC
property. Id. RFC is the master servicer and GMAC is the
subservicer. Id. at *2.

The Gilberts defaulted on the loan in 2008. Subsequently,
Deutsche chose Simpson as the substitute trustee of the deed
of trust. Id. On March 12, 2009, Simpson filed a foreclosure
action against the Gilberts in the Hyde County Superior
Court.

The Gilberts’ counsel wrote a letter to GMAC dated April
5, 2009, in which she alleged several violations of TILA, pro-
vided notice that the Gilberts were rescinding their mortgage
transaction, and requested that GMAC cancel its security
interest in the subject property and return all consideration
paid by the Gilberts. In a letter dated April 14, 2009, counsel
for GMAC responded that GMAC had reviewed the Gilberts’
file and found "no basis to conclude that there were any mate-
rial disclosure errors that would give rise to an extended right
of rescission." As such, counsel for GMAC stated that they
would not rescind the transaction.

On June 2, 2009, the Clerk of the Hyde County Superior
Court conducted a foreclosure hearing, after which she
entered a June 17, 2009, order allowing Simpson to proceed
with the foreclosure. According to the order, the Clerk found
that Deutsche was the holder of the subject note and deed of
trust and that the note evidenced a valid debt. The Gilberts
appealed to the Hyde County Superior Court.

Following a de novo hearing on the matter on August 18,
2009, the superior court allowed the foreclosure proceeding to
go forward. In doing so, the court relied in part on an affidavit
signed by Jeffrey Stephan, a signing officer for GMAC, certi-
fying the validity of the indebtedness pursuant to the note as
well as Deutsche’s status as the current owner and holder of
the note. The Gilberts appealed that decision to the North Car-
olina Court of Appeals.
 GILBERT v. RESIDENTIAL FUNDING LLC 5
On September 14, 2009, while their appeal was pending,
the Gilberts filed suit in the Hyde County Superior Court
against Appellees seeking, among other things, to enjoin the
mortgage foreclosure sale and to rescind their May 5, 2006,
loan. They alleged violations of TILA by Appellees. The Gil-
berts also claimed that Appellees violated North Carolina
usury law, engaged in unfair and deceptive trade practices,
engaged in prohibited debt collection acts, and breached the
mortgage contract. The Gilberts further maintained that Deut-
sche was without authority to enforce the note because of a
defect in the allonge, which granted Deutsche an interest in
the note.

Appellees removed the Gilberts’ suit to the district court
and subsequently filed a motion to dismiss the complaint,
which the district court granted. This appeal, in which the Gil-
berts contest the district court’s dismissal of their TILA,
usury, and NCUDTPA claims, followed. They also assign
error to the district court’s determination that res judicata
barred them from raising claims related to the endorsement on
the allonge to the note, as well as the district court’s denial of
their motion to alter or amend the judgment pursuant to Rule
59(e) of the Federal Rules of Civil Procedure.

After becoming aware that Stephan had engaged in
improper affidavit practices in unrelated cases, the Gilberts
filed with the district court a motion for relief pursuant to
Rule 60(b) of the Federal Rules of Civil Procedure and Rule
12.1 of the Federal Rules of Appellate Procedure. In light of
this new evidence, they requested that the district court file an
order indicating whether it would be inclined to relieve them
of its prior order dismissing their claims and its denial of their
Rule 59(e) motion.

On May 3, 2011, the North Carolina Court of Appeals
reversed the superior court’s decision to allow Simpson to
proceed with a foreclosure sale, finding that "the record is
lacking of competent evidence sufficient to support that
6 GILBERT v. RESIDENTIAL FUNDING LLC
[Deutsche] is the owner and holder of Mr. Gilbert’s note and
deed of trust." In re Simpson, 711 S.E.2d 165, 175 (N.C. Ct.
App. 2011). The court was also troubled by the fact "that
[GMAC] was recently found to have submitted a false affida-
vit by Signing Officer Jeffrey Stephan in a motion for sum-
mary judgment against a mortgagor in the United States
District Court of Maine." Id. at 173 n.2. The Gilberts subse-
quently supplemented their Rule 60(b) motion with a copy of
the Simpson opinion.

On June 15, 2011, the district court filed an order stating
that "should the Fourth Circuit return jurisdiction to this court,
the court would grant the [Rule 60(b)] motion, dismiss the
federal claims for the reasons stated in the July 7, 2010[,]
order [dismissing all of the Gilberts’ claims], and remand all
state-law claims to Hyde County Superior Court." Gilbert v.
Deutsche Bank Trust Co. Ams., No. 4:09-CV-181-D
(E.D.N.C. June 15, 2011). In light of this order, the Gilberts
filed a motion with us to reverse and remand the case to the
district court. We denied the motion. Accordingly, we now
undertake a de novo review of each of the Gilberts’ assign-
ments of error. See Chaudhry, 186 F.3d at 504.

II.

A.

The Gilberts first argue that the district court erred in dis-
missing their TILA claim on the basis that they had failed to
exercise their extended right to rescind in a timely manner.

In adopting TILA, Congress declared that "[i]t is the pur-
pose of this subchapter to assure a meaningful disclosure of
credit terms so that the consumer will be able to compare
more readily the various credit terms available to him and
avoid the uninformed use of credit." 15 U.S.C. § 1601(a). As
such, TILA requires that a creditor make certain material dis-
closures at the time the loan is made. Id. § 1638(a). If the
 GILBERT v. RESIDENTIAL FUNDING LLC 7
creditor fails to comply with this mandate, the borrower has
the right to rescind up to three years after the transaction. Id.
§ 1635(f).

The Gilberts closed the loan with First National Arizona on
May 5, 2006, but they did not file the instant lawsuit until
September 14, 2009. They notified GMAC by letter, however,
that they were exercising their right to rescind in April 2009.
So, although the Gilberts did not file this lawsuit within three
years of closing the loan, they did notify GMAC that they
were exercising their right to rescind during that three-year
time period.

There is a split of authority as to whether the borrower
must file a lawsuit within three years after the consummation
of a loan transaction to exercise her right to rescind, or
whether the borrower need only assert the right to rescind
through a written notice within the three-year period. For
example, in McOmie-Gray v. Bank of America Home Loans,
667 F.3d 1325 (9th Cir. 2012), the Ninth Circuit held that "re-
scission suits must be brought within three years from the
consummation of the loan, regardless [of] whether notice of
rescission is delivered within that three-year period." Id. at
1328. But, in In re Hunter, 400 B.R. 651 (Bankr. N.D. Ill.
2009), the bankruptcy court held that "TILA gives a consumer
the right to rescind a credit transaction simply by notifying the
creditor, within a specific period of time, that she intends to
do so." Id. at 659.

The district court cited American Mortgage Network, Inc.
v. Shelton, 486 F.3d 815 (4th Cir. 2007), for the proposition
that the Gilberts were required to file suit to exercise their
right of rescission. Thus, in that the Gilberts failed to file suit
until after the three years passed, the district court dismissed
their rescission claim. As explained below, however, we are
convinced that the Gilberts exercised their right to rescind
when they sent their April 5, 2009, letter to GMAC, alleging
several violations of TILA and Regulation Z, and providing
8 GILBERT v. RESIDENTIAL FUNDING LLC
notice of their rescission of the mortgage transaction. More-
over, we do not think that our prior decision in Shelton com-
pels a contrary conclusion. Further, we disagree with the
Ninth Circuit that a borrower must file a lawsuit within the
three-year time period to exercise her right to rescind, as
opposed simply to notifying the creditor.

We begin, as we must, with the plain meaning of the stat-
ute. "The starting point for any issue of statutory interpreta-
tion . . . is the language of the statute itself." United States v.
Bly, 510 F.3d 453, 460 (4th Cir. 2007). "We have stated time
and again that courts must presume that a legislature says in
a statute what it means and means in a statute what it says
there. When the words of a statute are unambiguous, then, this
first canon is also the last: ‘judicial inquiry is complete.’"
Conn. Nat’l Bank v. Germain, 503 U.S. 249, 253–54 (1992)
(citations omitted) (quoting Rubin v. United States, 449 U.S.
424, 430 (1981)).

In the same way, our interpretation of regulations begins
with their text. Textron, Inc. v. Comm’r, 336 F.3d 26, 31 (1st
Cir. 2003). "The Supreme Court has repeatedly emphasized
the importance of the plain meaning rule, stating that if the
language of a statute or regulation has a plain and ordinary
meaning, courts need look no further and should apply the
regulation as it is written." Id. In most cases, a textual reading
will be dispositive. United States v. Ron Pair Enters., Inc.,
489 U.S. 235, 242 (1989). Furthermore, "absent some obvious
repugnance to the statute, the . . . regulation implementing
[TILA] should be accepted by the courts." Anderson Bros.
Ford v. Valencia, 452 U.S. 205, 219 (1981).

Here, we are primarily concerned with just one statute and
one regulation. Section 1635(f) provides, in relevant part, the
following:

An obligor’s right of rescission shall expire three
years after the date of consummation of the transac-
 GILBERT v. RESIDENTIAL FUNDING LLC 9
tion or upon the sale of the property, whichever
occurs first, notwithstanding the fact that the infor-
mation and forms required under this section or any
other disclosures required under this part have not
been delivered to the obligor . . . .

15 U.S.C. § 1635(f). Its implementing regulation, Regulation
Z, states as follows:

To exercise the right to rescind, the consumer shall
notify the creditor of the rescission by mail, telegram
or other means of written communication. Notice is
considered given when mailed, when filed for tele-
graphic transmission or, if sent by other means,
when delivered to the creditor’s designated place of
business.

12 C.F.R. § 1026.23(a)(2). Taking the plain meaning of these
texts, and assuming that the words say what they mean and
mean what they say, we come to the conclusion that the Gil-
berts exercised their right to rescind with the April 5, 2009,
letter. Simply stated, neither 15 U.S.C. § 1635(f) nor Regula-
tion Z says anything about the filing of a lawsuit, and we
refuse to graft such a requirement upon them.

But what about the Shelton case that the district court relied
upon in reaching a different conclusion? There, the creditor
filed an action seeking a declaratory judgment that the pro-
cessing of the borrowers’ home refinancing loan complied
with TILA. 486 F.3d at 817. The borrowers counterclaimed,
requesting damages for violations of TILA. Id. They also
sought rescission and a declaration by the district court that
the defendant had forfeited the loan principal pursuant to
TILA. Id.

We stated that the "unilateral notification of cancellation
does not automatically void the loan contract." Id. at 821.
"[O]therwise, a borrower could get out from under a secured
10 GILBERT v. RESIDENTIAL FUNDING LLC
loan simply by claiming TILA violations, whether or not the
lender had actually committed any." Id. (quoting Yamamoto
v. Bank of N.Y., 329 F.3d 1167, 1172 (9th Cir. 2003)) (internal
quotation marks omitted).

We must not conflate the issue of whether a borrower has
exercised her right to rescind with the issue of whether the
rescission has, in fact, been completed and the contract
voided. The former is the concern of § 1635(f) and Regulation
Z, and a borrower exercises her right of rescission by merely
communicating in writing to her creditor her intention to
rescind. To complete the rescission and void the contract,
however, more is required. Either the creditor must "acknowl-
edge[ ] that the right of rescission is available" and the parties
must unwind the transaction amongst themselves, or the bor-
rower must file a lawsuit so that the court may enforce the
right to rescind. Shelton, 486 F.3d at 821 (quoting Large v.
Conseco Fin. Servicing Corp., 292 F.3d 49, 54-55 (1st Cir.
2002)) (internal quotation marks omitted).

At this stage of the litigation, we are not concerned with
whether the contract has been effectively voided. A court
must make a determination on the merits as to whether that
should occur. Instead, the question presented here is whether
the Gilberts exercised their right to rescind with the April 5,
2009, letter. Based on the plain meaning of the applicable
statute and regulation, we answer that question in the affirma-
tive.

Appellees’ reliance on Beach v. Ocwen Federal Bank, 523
U.S. 410 (1998), is misplaced. The Beach Court did not
address the proper method of exercising a right to rescind or
the timely exercise of that right. Instead, in Beach, the Court
looked at "whether § 1635(f) is a statute of limitation, that is,
‘whether [it] operates, with the lapse of time, to extinguish the
right which is the foundation for the claim’ or ‘merely to bar
the remedy for its enforcement.’" Id. at 416 (alteration in orig-
 GILBERT v. RESIDENTIAL FUNDING LLC 11
inal) (quoting Midstate Horticultural Co. v. Pa. R.R. Co., 320
U.S. 356, 358-59 (1943)). The Court stated the following:

Section 1635(f), however, takes us beyond any ques-
tion whether it limits more than the time for bringing
a suit, by governing the life of the underlying right
as well. . . . It talks not of a suit’s commencement
but of a right’s duration, which it addresses in terms
so straightforward as to render any limitation on the
time for seeking a remedy superfluous.

Id. at 417. In other words, the three-year limitation in 15
U.S.C. § 1635 concerns the extinguishment of the right of
rescission and does not require borrowers to file a claim for
the invocation of that right. Thus, that the Gilberts failed to
seek enforcement of their right to rescind within the three
years does nothing to take away from the fact that they exer-
cised their right of rescission within that time period.

B.

Next, the Gilberts argue that the district court’s decision to
dismiss their claim for rescission on the basis that Appellees
are assignees and not creditors was improper. Appellees do
not appear to disagree.

Section 1641(c) states, "Any consumer who has the right to
rescind a transaction under section 1635 of this title may
rescind the transaction as against any assignee of the obliga-
tion." 15 U.S.C. § 1641(c). The district court’s holding to the
contrary is reversible error.

C.

According to the Gilberts, the district court also erred in
deciding that all of their money damages under TILA are
barred by the one-year statute of limitations. We agree.
12 GILBERT v. RESIDENTIAL FUNDING LLC
Section 1640(e) provides a one-year statute of limitations
for the filing of a suit once a violation of TILA has occurred.
Id. ("Any action under this section may be brought in any
United States district court, or in any other court of competent
jurisdiction, within one year from the date of the occurrence
of the violation."). The alleged TILA disclosure violations
occurred on May 5, 2006, but the Gilberts did not file suit
until September 14, 2009. Thus, the statute of limitations for
those violations has long past and the district court was cor-
rect in dismissing those claims.

But, it appears that the Gilberts’ TILA claim regarding
Appellees’ refusal to honor their right to rescind was timely
filed. The Gilberts sent a letter to GMAC pursuant to 15
U.S.C. § 1635(f) and Regulation Z on April 5, 2009, indicat-
ing that they were exercising their right to rescind the mort-
gage loan. The creditor then had twenty days to respond. Id.
§ 1635(b). The alleged violation of TILA occurred when
GMAC sent the April 14, 2009, letter indicating that it would
not rescind the loan transaction. To maintain an action for
damages pursuant to TILA, the action had to be filed "within
one year from the date of the occurrence of the violation." Id.
§ 1640(e). Inasmuch as the Gilberts filed this lawsuit on Sep-
tember 14, 2009, their TILA claim for damages for GMAC’s
refusal to honor their right to rescind is not time barred.

III.

Next, the Gilberts challenge the district court’s dismissal of
their usury claim. Appellees make two arguments as to why
the district court did not err. We are convinced by neither.

First, Appellees urge that the Gilberts’ usury claim is not
ripe for adjudication. According to Appellees, to the extent
that the Gilberts might be subject to pay usurious interest,
given the manner in which the payment schedule is config-
ured, they have not yet been required to pay the alleged usuri-
ous interest rate. The Gilberts counter that because the
 GILBERT v. RESIDENTIAL FUNDING LLC 13
payments that they made were interest only, they were paying
usurious interest with each payment. As such, according to
the Gilberts, their claim is ripe. Construing the Gilberts’ alle-
gations as true, as we must at this stage, we accept that this
claim is ripe for adjudication.

Second, Appellees maintain that the Gilberts failed to plead
a usury claim. According to Appellees, parties have the right
to pay any interest rate to which they agree. Therefore, claim
Appellees, "to survive a motion to dismiss, the Gilberts would
have to allege that they never agreed to the interest rates
imposed by the loan documents. On this they are silent." We
disagree.

In their complaint, the Gilberts allege that Appellees
"charged and collected interest in excess of the agreed rate or
limits set forth in Chapter 24 of the North Carolina General
Statutes, including without limitation, the charge, collection
and imposition of hidden finance charges contained in the
erroneous payment schedule set forth in the Truth in
[L]ending disclosure statement."

The elements of a usury claim are as follows:

a loan or forbearance of the collection of money,
an understanding that the money owed will be paid,
payment or an agreement to pay interest at a rate
greater than allowed by law, and the lender’s corrupt
intent to receive more in interest than the legal rate
permits for use of the money loaned.

Swindell v. Fed. Nat’l Mortg. Ass’n, 409 S.E.2d 892, 895
(N.C. 1991). "Where the lender intentionally charges the bor-
rower a greater rate of interest than the law allows and his
purpose is clearly revealed on the face of the instrument, a
corrupt intent to violate the usury law on the part of the lender
is shown." Id. at 895–96 (quoting Kessing v. Nat’l Mortg.
14 GILBERT v. RESIDENTIAL FUNDING LLC
Corp., 180 S.E.2d 823, 827 (1971)) (internal quotation marks
omitted).

No one disputes that the Gilberts have established the first
two elements. We hold that the Gilberts have adequately pled
elements three and four as well. Specifically, the Gilberts con-
tend that there was a loan that was to be repaid; pursuant to
the terms of the loan, they were charged an agreed upon or
stated interest rate; under the repayment schedule for the loan,
they were charged a higher interest rate than agreed upon or
allowed by Chapter 24 of the North Carolina General Stat-
utes; when they paid a higher interest rate, Appellees col-
lected more than the agreed upon or allowed interest rate; and
Appellees charged the higher rate with a corrupt intent. Con-
sequently, they have properly pled a usury claim pursuant to
Swindell.

Although not argued by the parties or referenced below, on
remand, the district court should consider whether North Car-
olina General Statute Section 24-1.1A(a)(1) ("Where the prin-
cipal amount is ten thousand dollars ($10,000) or more the
parties may contract for the payment of interest as agreed
upon by the parties . . . ."), Section 24-9(a)(3) ("‘Exempt loan’
means a loan in which . . . [t]he loan amount is three hundred
thousand ($300,000) or more . . . ."), and Section 24-9(b) ("A
claim or defense of usury is prohibited in an exempt loan
transaction.") are applicable.

IV.

The Gilberts also urge that the district court erred in grant-
ing Appellees’ Rule 12(b)(6) motion as to their NCUDTPA
cause of action. To establish a prima facie case of unfair and
deceptive trade practices, a plaintiff must demonstrate the fol-
lowing: (1) the defendant committed an unfair or deceptive
trade practice; (2) the action in question was in or affecting
commerce; and (3) the act proximately caused injury to the
plaintiff. Spartan Leasing v. Pollard, 400 S.E.2d 476, 482
 GILBERT v. RESIDENTIAL FUNDING LLC 15
(N.C. Ct. App. 1991). An act is unfair when it is unethical or
unscrupulous, and it is deceptive if it tends to deceive. Mar-
shall v. Miller, 276 S.E.2d 397, 403 (N.C. 1981).

In their allegations concerning their NCUDTPA claims, the
Gilberts make the following complaints: usury law violations,
TILA violations, and "falsely representing to be the owner
and holder of [the Gilberts’] note and deed of trust." Thus,
they argue the following:

These acts and omissions proximately damaged
plaintiffs, are in and affecting commerce, violate
public policy, have the capacity to deceive an ordi-
nary consumer, are unscrupulous, immoral, and
oppressive, and constitute unfair and/or deceptive
trade practices under [North Carolina General Stat-
ute] § 75-1.1, thereby entitling plaintiffs to three
times their actual damages plus a reasonable attor-
ney’s fee pursuant to [North Carolina General Stat-
ute] §§ 75-16 and 75-16.1.

Some of the Gilberts’ allegations concern the actions of the
Appellees, and some concern the actions of the original credi-
tor, who is not party to this lawsuit. And, although some
claims in this lawsuit can be assigned, "unfair practice claims
pursuant to . . . § 75-1.1 cannot be assigned," Investors Title
Ins. Co. v. Herzig, 413 S.E.2d 268, 271 (N.C. 1992). Thus, the
district court properly dismissed those portions of the claims.
"[A] violation of a consumer protection statute may, in some
instances, constitute a per se violation of the UDTPA[,]" how-
ever. In re Fifth Third Bank, Nat’l Ass’n-Vill. of Penland
Litig., 719 S.E.2d 171, 176 (N.C. Ct. App. 2011). Inasmuch
as we have held that certain of the Gilberts’ TILA and usury
claims should go forward, and because we are of the opinion
that the Gilberts have set forth a sufficient factual basis for
these claims, we hold that their unassigned NCUDTPA claims
should be allowed to proceed as well.
16 GILBERT v. RESIDENTIAL FUNDING LLC
V.

The Gilberts also contest the district court’s determination
that res judicata barred them from raising issues related to the
endorsements on the allonge to the note.

As the district court recognized, "[i]ssues that ‘the clerk of
court decides at a foreclosure hearing as to the validity of the
debt and the trustee’s right to foreclose are subject to res judi-
cata and cannot be relitigated.’" Gilbert, 2010 WL 2696763,
at *4 (quoting Merrill Lynch Bus. Fin. Servs. Inc. v. Cobb,
No. 5:07-CV-129-D, 2008 WL 6155804, at *3 (E.D.N.C.
Mar. 18, 2008)). Because the superior court affirmed the
Clerk’s decision that Deutsche could enforce the note, the dis-
trict court concluded that res judicata barred the Gilberts from
relitigating Deutsche’s enforcement authority. Id.

But, as noted above, on May 3, 2011, the North Carolina
Court of Appeals reversed the state trial court’s decision that
allowed Simpson to proceed with a foreclosure sale, finding
that "the record is lacking of competent evidence sufficient to
support that [Deutsche] is the owner and holder of Mr. Gil-
bert’s note and deed of trust." In re Simpson, 711 S.E.2d at
175. As such, res judicata no longer bars the Gilberts from lit-
igating whether Deutsche has authority to enforce the note.

VI.

Finally, the Gilberts complain that the district court erred
in denying their motion to alter or amend pursuant to Rule
59(e). Because we are reversing and remanding this case to
the district court, the argument is moot.

VII.

In light of the foregoing, we affirm in part, reverse in part
and remand for further proceedings.
GILBERT v. RESIDENTIAL FUNDING LLC 17
AFFIRMED IN PART,
REVERSED IN PART,
AND REMANDED