PennyMac Loan Servs. ( 2023 )

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA22-629
Filed 18 April 2023
Forsyth County, No. 20-CVS-436
PENNYMAC LOAN SERVICES, LLC, Plaintiff/Counterclaim Defendant,
v.
BRAD JOHNSON and ELCI WIJAYANINGSIH, Defendants/Counterclaim Plaintiffs
and Third-Party Plaintiffs,
v.
STANDARD GUARANTY INSURANCE COMPANY, ERIKA L. SANCHEZ, EFREN
SALDIVAR, and ASSURANT, INC., Third-Party Defendants.
Appeal by defendant-counterclaim plaintiff and third-party plaintiff from
order entered 27 May 2021 by Judge David L. Hall in Forsyth County Superior Court.
Heard in the Court of Appeals 22 March 2023.
Brad R. Johnson, pro se defendant-appellant.
Womble Bond Dickinson (US) LLP, by B. Chad Ewing, for plaintiff-appellee.
Robinson, Bradshaw & Hinson, P.A., by Mark W. Merritt, and Drinker Biddle
& Reath, LLP, by W. Glenn Merten, for third-party defendants-appellees.
FLOOD, Judge.
PENNYMAC LOAN SERVS., LLC V. JOHNSON
Opinion of the Court
Brad R. Johnson (“Johnson”) appeals from the 27 May 2021 Order dismissing
his counterclaim.1 On appeal, Johnson argues the trial court: (1) erred in concluding
Johnson’s Verified First Amended Counterclaim contained the operative
counterclaim in this case; (2) erred in dismissing Johnson’s breach of contract claim
by concluding PennyMac Loan Services, LLC (“PennyMac”) was allowed to assess
Johnson a fee related to force-placed insurance;2 and (3) abused its discretion in
denying Johnson’s Motion for Leave to Amend his counterclaim. After careful review,
we discern no error or abuse of discretion by the trial court.
I. Factual and Procedural Background
On 7 November 2008, Johnson purchased two developed lots (“Lots 16 and 18”)
in Oak Island, North Carolina. Johnson subsequently obtained home and flood
insurance to protect the home situated on Lots 16 and 18. On 25 August 2012,
Johnson purchased three undeveloped lots (“Lots 13, 15, and 17”) adjacent to Lots 16
and 18. To avoid paying the required sewer fees on the undeveloped lots, Johnson
combined all five lots into a single developed parcel of land (the “Property”).
On 9 June 2013, Johnson submitted a Uniform Residential Loan Application
(the “Mortgage Loan”) to Weststar Mortgage, Inc. (“Weststar”) for the purpose of
1 Elci Wijayaningsih, Johnson’s wife, was a named defendant in the original suit filed by
PennyMac. Johnson filed this appeal seemingly on behalf of solely himself. Johnson refers only to
himself throughout his brief, and PennyMac and Standard Guaranty likewise refer to Johnson as a
singular person. This opinion will treat Johnson as the sole appellant.
2 “Force-Placed insurance” is “hazard insurance obtained by a servicer on behalf of the owner
or assignee of a mortgage loan that insures the property securing such loan.” 12 C.F.R. § 1-24.37(a)(1).
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Opinion of the Court
refinancing the Property. In addition to the Mortgage Loan, Johnson continued
purchasing home and flood insurance for the Property and instructed Weststar to
establish an escrow account so Johnson could pay the insurance and property taxes
on a monthly basis. After the Mortgage Loan was submitted, Weststar ordered an
appraisal of the Property. The appraisal invoice sent to Johnson specifically noted
the appraisal was of “Lots 13, 15, 16, 17, and 18.” Following the appraisal, Johnson’s
Mortgage Loan was approved, and Johnson was sent a Deed of Trust (the “Deed”).
The Deed described the Property as “all of Lots 13, 15, and 17 . . .”; notably, it omitted
Lots 16 and 18.
On 6 August 2013, PennyMac purchased the Mortgage Loan from Weststar.
PennyMac maintained the escrow account established by Weststar and used it to pay
the insurance coverage for the house. On 20 September 2017, Johnson requested
PennyMac stop paying for home and flood insurance, claiming PennyMac had a lien
on the vacant Lots 13, 15, and 17, not Lots 16 and 18, and therefore did not have an
insurable interest in Lots 16 and 18. PennyMac approved Johnson’s request to close
the escrow account but explained the terms of the Mortgage Loan required Johnson
to pay home and flood insurance for the Property. The relevant portion of the loan
states:
Property Insurance. Borrower shall keep the
improvements now existing or hereby erected on the
Property insured against loss by fire, hazards included
within the term “extended coverage,” and any other
hazards including, but not limited to earthquakes and
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Opinion of the Court
floods, for which Lender requires insurance.
In September 2018, a representative for PennyMac allegedly told Johnson via
telephone he would not be required to pay home insurance if he separated the
Property back into the original parcels. On 22 March 2019, Johnson recorded an
Instrument of Separation separating Lots 13, 15, and 17 from Lots 16 and 18.
On 10 May 2019, PennyMac sent Johnson a notice that his home insurance
expired. PennyMac reminded Johnson that home insurance was required on the
Property and requested Johnson provide proof of insurance. PennyMac further
explained if Johnson did not provide proof of insurance, PennyMac would purchase
insurance for the Property and charge Johnson. On 14 June 2019, PennyMac sent
Johnson a second reminder to purchase home insurance. Once again, PennyMac
explained to Johnson that failure to insure the Property would result in PennyMac
purchasing force-placed insurance for the Property, which could be more expensive
than an insurance policy Johnson purchased himself. Johnson refused to purchase
insurance.
On 16 June 2019, PennyMac sent Johnson a certificate of coverage placement
detailing the force-placed insurance coverage PennyMac purchased for the Property.
The insurance was purchased through Standard Guaranty Insurance Company
(“Standard Guaranty”).
On 20 August 2019, Johnson filed an insurance complaint with the North
Carolina Commissioner of Banks (the “Commissioner of Banks”) and the North
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Opinion of the Court
Carolina Department of Insurance alleging PennyMac’s force-placed insurance was
improper because PennyMac did not have an insurable interest in Lots 16 and 18. In
response to this complaint, PennyMac sent a letter to the Commissioner of Banks
explaining that, even though the Deed described only Lots 13, 15, and 17, the
Mortgage Loan application submitted by Johnson indicated that the purpose of the
Mortgage Loan was to refinance the then-existing loan encumbering the house on
Lots 16 and 18.3 PennyMac further noted it made a title insurance claim to resolve
the alleged drafting error in the Deed. PennyMac represented to the Commissioner
of Banks that the force-placed insurance would remain in effect, but PennyMac would
not seek insurance premium payments from Johnson until the issue was resolved.
PennyMac continued insuring the Property at its own expense.
On 23 January 2020, PennyMac filed a Complaint against Johnson in Forsyth
County District Court to reform the Deed to include all property and improvements
described in the appraisal report.4 PennyMac alleged the Deed’s omittance of Lots
16 and 18 was a “mutual mistake, inadvertence[,] or mistake of the draftsman.”
3 The Record did not include Johnson’s Mortgage Loan application. The letter PennyMac sent
Johnson on 19 September 2019 is the best evidence we have of the contents of the Mortgage Loan
application. According to PennyMac, a copy of the Mortgage Loan application was included with the
letter PennyMac sent the Commissioner of Banks.
4 We note for clarity purposes, PennyMac’s Complaint, Johnson’s second Motion to Amend,
and Standard Guaranty’s Motion to Dismiss were filed in Forsyth County District Court whereas
Standard Guaranty’s Opposition to Motion for Leave to Amend, PennyMac’s Motion to Dismiss, and
the Order were filed in Forsyth County Superior Court.
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PENNYMAC LOAN SERVS., LLC V. JOHNSON
Opinion of the Court
On 21 February 2020, Johnson filed a pro se answer with counterclaim5
against PennyMac for common law breach of contract alleging PennyMac breached
the Mortgage Loan by force-placing home insurance on Lots 13, 15, and 17. Johnson
filed claims against PennyMac and Standard Guaranty for violations of the
Racketeering Influence and Corruption Organization Act (“RICO”) under 18 U.S.C.
§§ 1961–68. Johnson filed additional claims against PennyMac for violations of the
Fair Debt Collection Practices Act (“FDCPA”) under 15 U.S.C. § 1692, and breach of
contract accompanied by fraudulent acts.
Also on 21 February 2020, Johnson filed a Notice of Removal to the United
States District Court for the Middle District of North Carolina based on federal
question and diversity jurisdiction. On 6 April 2020, Johnson filed a Verified First
Amended Counterclaim (“FAC”) in the middle district.
On 21 September 2020, Johnson filed for Leave to File a Verified Second
Amended Counterclaim. On 3 March 2021, Judge Osteen remanded the case to the
Forsyth County District Court for lack of subject matter jurisdiction. Judge Osteen
further denied all other outstanding motions, including the motion to amend, as moot.
On 2 April 2021, Standard Guaranty filed a Motion to Dismiss Johnson’s
counterclaim in Forsyth County District Court. On 5 April 2021, PennyMac likewise
5The original answer with counterclaim filed by Johnson was omitted from the Record.
Because we do not have any evidence to the contrary, we assume the claims asserted in the First
Amended Counterclaim were the same claims asserted in the original answer with counterclaim.
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PENNYMAC LOAN SERVS., LLC V. JOHNSON
Opinion of the Court
filed a Motion to Dismiss Johnson’s counterclaim. In response to the motions to
dismiss, Johnson filed a Motion for Leave to Amend his original counterclaim. A
hearing was held on the matter on 26 April 2021. On 27 May 2021, Judge Hall
entered the Order on the Motions to Dismiss and the Motion to Amend, granting the
motions to dismiss and denying Johnson’s Motion to Amend based on futility.
On 10 March 2022, PennyMac voluntarily dismissed its Complaint to reform
the deed. On 5 April 2022, Johnson filed timely notice of appeal to this Court.
II. Jurisdiction
This Court has jurisdiction to hear this appeal as a final order from a superior
court pursuant to N.C. Gen. Stat. § 7A-27(b) (2021).
III. Analysis
A. Amended Pleading Pursuant to Fed. R. Civ. P. 15
First, Johnson challenges Conclusion of Law 1, which states the FAC contains
the operative counterclaim in this case. Specifically, Johnson argues the FAC is “void
and a legal nullity” because he failed to meet the requirements for amended and
supplemental pleadings set forth in Rule 15 of the Federal Rules of Civil Procedure.
We disagree.
This Court reviews a trial court’s conclusions of law de novo. Sykes v. Health
Network Sols., Inc., 372 N.C. 326, 332, 828 S.E.2d 467, 471 (2019). “[W]e do not defer
to the conclusions of [the trial c]ourt but conduct our own independent inquiry . . . .”
Id. at 332, 828 S.E.2d at 471.
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Opinion of the Court
The Federal Rules of Civil Procedure allow a party to amend its pleading “once
as a matter of course within 21 days after serving it, or . . . [i]n all other cases, a party
may amend its pleading only with the opposing party’s written consent or the court’s
leave.” Fed. R. Civ. P. 15. “[U]ntimely amended pleading[s] served without judicial
permission may be considered as properly introduced when leave to amend would
have been granted had it been sought, and when it does not appear that any of the
parties [would have been] prejudiced by allowing the change.” Straub v. Desa Indus.,
Inc., 88 F.R.D. 6, 8 (M.D. Pa. 1980); see also Madison River Mgmt. Co. v. Bus. Mgmt.
Software Corp., 351 F. Supp. 2d 436, 448 (M.D.N.C. 2005) (allowing the defendant to
amend its complaint where the court would have granted leave to amend the
counterclaim and the plaintiff was not prejudiced).
Here, Johnson did not file the FAC within twenty-one days of the filing of the
original complaint, nor did he obtain leave from the court or written consent from the
parties prior to filing. See Fed. R. Civ. P. 15(a). Based on the liberalness with which
this rule is generally applied and the reliance on the FAC in the order remanding the
case, however, there is no reason for us to presume the middle district would have
denied a motion to amend had it been properly filed. See SGK Props., L.L.C. v. U.S.
Bank Nat’l Assoc., 881 F.3d 933, 944 (5th Cir. 2018) (“[T]he language of this rule
evinces a bias in favor of granting leave to amend[.]” (citation and internal quotation
marks omitted)); see also Fed. R. Civ. P. 15(a)(2) (“The court should freely give leave
when justice so requires.”). Further, there is no indication PennyMac or Standard
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PENNYMAC LOAN SERVS., LLC V. JOHNSON
Opinion of the Court
Guaranty would have been prejudiced because both filed individual motions for
extension of time to file answers to the amended counterclaim, neither party objected
to the FAC, and both have treated the FAC as the operative pleading throughout the
life of this case.
Moreover, Johnson is judicially estopped from asserting a legal position
inconsistent with one taken previously in the litigation. The doctrine of judicial
estoppel prevents a litigant from “intentional self-contradiction . . . as a means of
obtaining unfair advantage in a forum provided for suitors seeking justice.” Price v.
Price, 169 N.C. App. 187, 191, 609 S.E.2d 450, 452 (2005) (citation and internal
quotation marks omitted). Johnson cannot rely on the FAC while litigating in federal
court and then claim the FAC is “void and a legal nullity” when it becomes more
convenient while litigating in the state court. See id. at 191, 609 S.E.2d at 452.
We therefore find the FAC was properly introduced and contains the operative
counterclaim because leave to amend would have likely been granted by the middle
district, it did not cause prejudice to PennyMac or Standard Guaranty, and the
doctrine of judicial estoppel prevents Johnson’s argument. See Straub, 88 F.R.D. at
8; see also Price, 169 N.C. App. at 191, 609 S.E.2d at 452.
B. Breach of Contract
Next, Johnson argues the trial court erred in Conclusion of Law 12 by
dismissing his breach of contract claim. Specifically, Johnson argues the force-placed
hazard insurance was not reasonable, and therefore breached the property insurance
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Opinion of the Court
term set forth in the Mortgage Loan. We disagree.
“This Court must conduct a de novo review of the pleadings to determine their
legal sufficiency and to determine whether the trial court’s ruling on the motion to
dismiss was correct.” Leary v. N.C. Forest Prods., Inc., 157 N.C. App. 396, 400, 580
S.E.2d 1, 4 (2003).
For a prima facie breach of contract claim, a party must show: “(1) existence of
a valid contract and (2) a breach of the terms of [the] contract.” Wells Fargo Ins.
Servs. USA, Inc v. Link, 372 N.C. 260, 276, 827 S.E.2d 458, 472 (citation omitted)
(alteration in original).
Here, it is undisputed the Mortgage Loan is a valid contract between Johnson
and PennyMac. Instead, Johnson seemingly argues Penny Mac breached the
Mortgage Loan contract by imposing charges related to force-placed insurance when
the terms of the Mortgage Loan required insurance only on improvements on the
Property, of which there are none on Lots 13, 15, and 17. PennyMac argued, and the
trial court agreed, that the force-placed insurance was reasonable under C.F.R. §
1024.37(b) because PennyMac had a reasonable basis for believing insurance was
required under the terms of the Mortgage Loan. Initially, we note Johnson
confusingly argues the regulation was misapplied by the trial court, but then
subsequently argues the regulation is not applicable to this case because PennyMac
did not have an insurable interest in Lots 13, 15 and 17.
Under federal regulations, “[a] servicer may not assess on a borrower a
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Opinion of the Court
premium charge or fee related to force-placed insurance unless the servicer has a
reasonable basis to believe that the borrower has failed to comply with the mortgage
loan contract’s requirement to maintain hazard insurance.” 12 C.F.R. § 1024.37(b)
(2021) (emphasis added). The regulation specifies when a servicer may assess force-
placed insurance. Contrary to Johnson’s argument, it is not a question of whether
PennyMac had an insurable interest; rather, it is a question of whether it had a
reasonable basis to believe Johnson was not complying with the terms of the
Mortgage Loan contract. See id.Conclusion of Law 12 states:
To the extent that they are characterized as a breach of
contract claim, Johnson’s allegations still fail to state a
claim. Pursuant to 12 C.F.R. [§] 1024.37(b), PennyMac
was allowed to assess Johnson a fee related to force-placed
insurance because it had a reasonable basis to believe that
Johnson failed to comply with his mortgage loan contract’s
requirement to maintain hazard insurance. In making
this ruling, this [c]ourt does not prejudge the outcome of
the underlying deed reformation action.
PennyMac had a reasonable basis to believe home insurance was required for the
Property because: (1) Johnson applied for a residential loan through Weststar; (2)
Weststar conducted an appraisal of “Lots 13, 15, 16, 17, and 18”; (3) Johnson
instructed Weststar to create an escrow account to pay taxes and home insurance on
the Property; (4) the terms of the Mortgage Loan required insurance on the Property;
and (5) Johnson paid home and flood insurance on the Property until 2017. Based on
these facts, it is reasonable that PennyMac believed the Mortgage Loan required
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Opinion of the Court
home insurance on the Property and that Johnson was not in compliance with this
requirement. See C.F.R. § 1024.37(b).
Moreover, after Johnson filed his insurance complaint with the Commissioner
of Banks, PennyMac refunded Johnson the money it had charged him for the force-
placed insurance. As of the date of the hearing, PennyMac continued to pay for
insurance on the Property at its own expense. It is unlikely PennyMac would
continue to purchase home insurance for Johnson at its own expense if it did not
reasonably believe the Property required insurance.
Thus, we find PennyMac had a reasonable basis to believe the terms of the
Mortgage Loan contract required home insurance on the Property, and the trial
court’s dismissal of the breach of contract claim was, therefore, correct. See C.F.R. §
1024.37(b); see also Leary, 157 N.C. App. at 400, 580 S.E.2d at 4.
C. Denial of Johnson’s Motion to Amend the Counterclaim
Finally, Johnson argues the trial court abused its discretion by denying his
Motion for Leave to Amend the counterclaim. Johnson attempts to style this Motion
as his first amended counterclaim even though he had already filed the original FAC
in the middle district. Having previously concluded the FAC is the operative
counterclaim in this case, Johnson’s Motion to Amend filed in Forsyth County
Superior Court was Johnson’s second, not first, Motion to Amend.
1. Amendment by Right
First, Johnson argues the trial court abused its discretion in denying his second
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Opinion of the Court
Motion to Amend because the North Carolina removal statute allowed him to file a
first amended counterclaim by right. As previously discussed, Johnson was
permitted to file the FAC in the middle district as he would have been permitted to
do in the state court had the case not been removed to the middle district, and this
argument is, therefore, without merit. See N.C. R. Civ. P. 12(a)(2) (on remand from
a federal court a party may amend a pleading in the state court if they “would have
been permitted . . . to file” such pleadings had the case not been removed).
2. Futility of Amendment
Next, Johnson argues the trial court abused its discretion in Conclusion of Law
13 by concluding Johnson’s second Motion for Leave to Amend the counterclaim was
futile. Additionally, Johnson argues the trial court abused its discretion in
conclusions of law 2, 10, 11, and 12 which concluded Johnson’s RICO, FDCPA, breach
of contract with fraudulent act, and breach of contract claims were futile. We find no
abuse of discretion.
Where a party has already amended their pleading once as a matter of course,
as Johnson did here, the North Carolina Rules of Civil Procedure allow a party to
amend their pleading “only by leave of court or by written consent of the adverse
part[ies]; and leave shall be freely granted when justice so requires.” N.C. R. Civ. P.
15(a).
Here, PennyMac and Standard Guaranty did not consent to the second
amended counterclaim; thus, Johnson could file the second amended counterclaim
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Opinion of the Court
only by leave of the court.
[O]ur standard of review for motions to amend pleadings
requires a showing that the trial court abused its
discretion. Denying a motion to amend without any
justifying reason appearing for the denial is an abuse of
discretion. However, proper reasons for denying a motion
to amend include undue delay by the moving party and
unfair prejudice to the nonmoving party. Other reasons
that would justify a denial are bad faith, futility of
amendment, and repeated failure to cure defects by
previous amendments.
Williams v. Owens, 211 N.C. App. 393, 394, 712 S.E.2d 359, 360 (2011) (citation
omitted). “The trial court’s ruling is to be accorded great deference and will be upset
only upon a showing that it was so arbitrary that it could not have been the result of
a reasoned decision.” Brown v. N.C. Div. of Motor Vehicles, 155 N.C. App. 436, 438–
39, 573 S.E.2d 246, 248 (2002) (citation and internal quotation marks omitted); see
also Greenshields, Inc. v. Travelers Prop. Cas. Co. of Am., 245 N.C. App. 25, 31, 781
S.E.2d 840, 844 (2016) (“A judge is subject to reversal for abuse of discretion only
upon a showing by a litigant that the challenged actions are manifestly unsupported
by reason.”) (citation omitted); Bailey v. Handee Hugo’s, Inc., 173 N.C. App. 723, 727,
620 S.E.2d 312, 315 (2005) (holding a trial court’s denial of a motion to amend was
not an abuse of discretion where it stated proper reasons for denying the motion).
a. RICO Claim
Here, the trial court denied Johnson’s Motion to Amend his RICO claim based
on the futility of the amendment. Conclusion of Law 2 provides:
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Opinion of the Court
[Johnson’s] RICO claim fails to state a claim upon which
relief can be granted pursuant to N.C. R. Civ. P. 12(b)(6)
and is not pled with the particularity required by N.C. R.
Civ. P. 9(b). To state a claim for a violation of RICO, 18 §
1962(c), [Johnson] must allege “(1) conduct (2) of an
enterprise (3) through a pattern (4) of racketeering
activity.” Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496
(1985). As outlined below, the FAC as well as the proposed
amended counterclaims and third party claims fail to state
essential elements of a RICO claim, and in fact contain
allegations that affirmatively show that the required
elements of a RICO claim are not present in this case and
cannot be alleged.
The trial court, in conclusions of law 3–9, meticulously explained why each element
of Johnson’s RICO claim fails, and why those failings could not be cured by an
amended pleading. Therefore, it cannot be said, and Johnson does not adequately
argue, the trial court’s decision was not reasoned or was an abuse of discretion;
accordingly, our review of Johnson’s RICO claim ends. See Brown, 155 N.C. App. at
438–39, 573 S.E.2d at 248.
b. FDCPA
Johnson also challenges Conclusion of Law 10, which dismissed his FDCPA
claim against PennyMac.
The purpose of the FDCPA is “to eliminate abusive debt collection practices by
debt collectors[.]” 15 U.S.C. § 1692(e) (2021). A “debt collector” is any person who
regularly collects or attempts to collect debts owed another. See 15 U.S.C. § 1692a(6)
(2021). The United States Supreme Court held a debt purchaser “may indeed collect
debts for its own account without triggering the statutory definition” set forth in 15
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Opinion of the Court
U.S.C. § 1962a(6). Henson v. Santander Cons. USA Inc., 582 U.S. 79, 83, 137 S. Ct.
1718, 1721–22, 198 L. Ed. 2d 177, 181 (2017).
Conclusion of Law 10 states:
To plead a FDCPA claim against PennyMac, Johnson
“must allege facts sufficient to show that PennyMac is a
debt collector.” The FDCPA claim fails because Johnson
has pled facts sufficient to show that PennyMac is not a
debt collector. Johnson has specifically alleged that
PennyMac is the holder of the debt that he alleges it is
attempting to collect, and, therefore, it cannot be a debt
collector. Henson v. Santander Consumer USA Inc., 137 S.
Ct. 1718, 1721–22 (2017), quoting 15 U.S.C. 1692a(6).
Here, PennyMac is considered a debt purchaser because they purchased Johnson’s
Mortgage Loan from Weststar. Accordingly, PennyMac collected on a debt Johnson
owed it for the cost of the force-placed insurance. PennyMac did not collect a debt
owed to another, and is not, therefore, a debt collector as defined by the FDCPA. See
id. at 83, 137 S. Ct. at 1721–22, 198 L. Ed. 2d at 181.
Thus, we conclude the trial court did not abuse its discretion by concluding
Johnson’s claim for FDCPA was futile. See Brown, 155 N.C. App. at 438–39, 573
S.E.2d at 248.
c. Breach of Contract with Fraudulent Act
Next, Johnson argues the trial court abused its discretion when it concluded
he failed to plead breach of contract with fraudulent act. Johnson argues he
adequately plead the elements of a unilateral contract and breach of said unilateral
contract with a fraudulent act. We disagree.
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Opinion of the Court
Conclusion of Law 11 states:
The breach of contact with fraudulent act claim fails
because North Carolina law governs Johnson’s claim and
does not recognize a claim for breach of contract with
fraudulent act. Curtis v. Cafe Enterprises, Inc., 2016 WL
6916786 *10 (W.D.N.C. Nov. 11, 2016). To the extent that
South Carolina law governed Johnson’s breach of contract
with fraudulent act claim, that claim would still fail
because the FAC fails to plead a fraudulent act.
As the trial court points out, breach of contract accompanied by fraudulent acts arises
under South Carolina law and is not recognized by North Carolina law. See Curtis v.
Café Enterprises, Inc., 2016 WL 6916786 *10 (W.D.N.C. Nov. 11, 2016). Even if we
were to recognize this claim, it still fails because Johnson did not adequately plead a
fraudulent act. It is unclear from Johnson’s FAC or his brief what fraudulent act he
alleges PennyMac committed. Assuming, arguendo, that the fraudulent act was the
force-placed insurance, we have already concluded PennyMac had a reasonable basis
for instituting the force-placed insurance; therefore, it was not fraudulent. See C.F.R.
§ 1024.37(b).
Thus, we conclude the trial court did not abuse its discretion by concluding
Johnson’s claim for breach of contract with fraudulent act was futile. See Brown, 155
N.C. App. at 438–39, 573 S.E.2d at 248.
d. Breach of Contract
Finally, Johnson argues the trial court abused its discretion in dismissing the
breach of contract claim as futile. For the reasons explained above, PennyMac had a
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Opinion of the Court
reasonable basis to believe home insurance was required under the terms of the
Mortgage Loan. See C.F.R. § 1024.37(b).
Therefore, the trial court did not abuse its discretion by concluding Johnson’s
claim for breach of contract was futile. See Brown, 155 N.C. App. at 438–39, 573
S.E.2d at 248.
IV. Conclusion
We hold the trial court did not err in granting PennyMac and Standard
Guaranty’s Motion to Dismiss or abuse its discretion in denying Johnson’s Motion to
Amend.
AFFIRMED.
Judges TYSON and GRIFFIN concur.
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