Real Property – Mortgages – Judicial Foreclosure – Civil Practice – Notice Pleading

U.S. Bank N.A. v. Pinkney (Lawyers Weekly No. 010-051-17, 11 pp.) (Paul Newby, J.) Appealed from Forsyth County Superior Court (Patrice Hinnant, J.) On discretionary review from the Court of Appeals. N.C. S. Ct.

Holding: Since the plaintiff-bank seeks judicial foreclosure rather than foreclosure by power of sale, the bank was not required to comply with the pleading requirements of a power-of-sale foreclosure. A missing indorsement at the initial pleading stage does not preclude the bank from proceeding with its civil action.

We reverse the Court of Appeals’ decision to uphold the trial court’s dismissal order. We remand for consideration of the remaining issues on appeal.

Judicial foreclosure is an ordinary civil action. To state a claim for judicial foreclosure, a complaint must allege a debt, default on the debt, a deed of trust securing the debt, and the plaintiff’s right to enforce the deed of trust. As with any other civil action, a creditor seeking judicial foreclosure is not required to prove its entire case at the initial pleading stage.

The bank alleged that the defendant-borrowers “executed a Note in the principal amount of $257,256.89,” which “evidences a valid debt owned [sic] by [the borrowers] to [the bank],” “secured by a Deed of Trust” on the underlying real property. The bank further alleged that it “is the holder of the Note” and listed a series of note transfers that ultimately ended with the bank. The bank expressly asked “to foreclose its lien by way of judicial foreclosure pursuant to the Subject Deed of Trust … as provided by N.C.G.S. § 1-339 et seq.,” and prayed “that the Subject Property be sold under and [through] judicial process.” These allegations are plainly sufficient to satisfy the substantive elements for a judicial foreclosure claim.

The Court of Appeals erred by applying the requirements of G.S. § 45-21.16(d), applicable to non-judicial foreclosure by power of sale, to the bank’s judicial foreclosure action.

Reversed and remanded.