First Fed. Bank v. Aldridge

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NO. COA13-450 NORTH CAROLINA COURT OF APPEALS Filed: 5 November 2013 FIRST FEDERAL BANK Plaintiff, v. Brunswick County No. 12 CVD 2009 SCOTT D. ALDRIDGE Defendant. Appeal by plaintiff from order entered 5 November 2012 by Judge Marion R. Warren in Brunswick County District Court. Heard in the Court of Appeals 26 September 2013. Smith Debnam Narron Drake Saintsing & Myers, LLP, by Connie Carrigan, and Clawson and Staubes, LLC, by J. Ronald Jones, Jr., for plaintiff-appellant. The Chandler Law Firm, P.A., by John Calvin Chandler, for defendant-appellee. HUNTER, JR., Robert N., Judge. First Federal dismissing 12(b)(6) its of the Bank ( Plaintiff ) complaint North appeals from an order to Rule with prejudice pursuant Carolina Rules Civil of Procedure. Plaintiff contends that its complaint, which seeks enforcement of two promissory identifying its notes, right to contains enforce the sufficient allegations instruments. In the alternative, Plaintiff contends that dismissal with prejudice -2was inequitable and requests a remand with opportunity to amend the complaint. We disagree and affirm the trial court s order. I. Factual & Procedural History Plaintiff filed a complaint in this action on 26 September 2012 seeking enforcement of two promissory notes executed by Scott D. Aldridge ( Defendant ). Both of these promissory notes, which are attached and incorporated into the complaint by reference, identify Defendant as the borrower and Cape Fear Bank as the lender. Plaintiff is not identified in either instrument. The first note, executed by Defendant on 13 February 2008, required Defendant to pay back a principal loan of $293,727.44 by 20 February 2009 at a five percent interest rate. note, executed by Defendant on 17 March 2009, The second modified the original agreement by extending the due date on the loan by thirteen months. Plaintiff alleges that Defendant is in default under the terms of the agreement, leaving an unpaid balance of $228,830.29, plus interest. Attached Michael S. to Plaintiff s Brinson ( Mr. Coordinator for Plaintiff. that he was familiar complaint Brinson ), was an the affidavit Asset of Recovery In the affidavit, Mr. Brinson stated with the books and records of the -3Plaintiff and familiar with the account of [Defendant], and that Defendant s account was $228,830.29, plus interest. in arrears for the amount of Neither the text of the complaint nor Mr. Brinson s affidavit indicate that Plaintiff Bank had acquired the debt from Cape Fear Bank or was otherwise entitled to it as a holder in due course. On 23 October simultaneously failure to pursuant moved state to Rule Following a complaint with 2012, Defendant dismiss claim a to upon 12(b)(6) hearing, the prejudice. of trial The an Plaintiff s which our filed relief Rules court record of answer and complaint for can Civil dismissed does be not granted Procedure. Plaintiff s contain any evidence that Plaintiff sought to amend the complaint during the hearing or afterward. II. Jurisdiction Plaintiff s appeal from the district court s final order granting Defendant s motion to dismiss lies of right to this Court pursuant to N.C. Gen. Stat. § 7A-27(c) (2011). III. Analysis Plaintiff s appeal presents two questions for our review. First, whether the trial court erred in granting Defendant s motion to dismiss. Second, if the dismissal was proper, whether -4the trial court erred by dismissing Plaintiff s complaint with prejudice. A. Defendant s 12(b)(6) Motion to Dismiss At issue with respect to Defendant s motion to dismiss is whether the Plaintiff s allegations right to of Plaintiff s enforce complaint promissory Defendant with a third party bank. notes demonstrate executed by Plaintiff contends that the allegations are sufficient under the notice pleading standard of N.C. R. Civ. P. 8 and that any ambiguity in the complaint should be resolved through discovery. 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, aff d per curiam, 357 N.C. 567, 597 S.E.2d 673 (2003). On a Rule 12(b)(6) motion to dismiss, the question is whether, as a matter of law, the allegations of the complaint, treated as true, granted. App. 280, state a claim upon which relief can be Allred v. Capital Area Soccer League, Inc., 194 N.C. 282, 669 S.E.2d 777, 778 (2008) (quoting Wood v. Guilford Cty., 355 N.C. 161, 166, 558 S.E.2d 490, 494 (2002)). Accordingly, we must consider Plaintiff s complaint to -5determine whether, when liberally construed, it states enough to give the substantive elements of a legally recognized claim. Governors Club, Inc. v. Governors Club Ltd. P Ship, 152 N.C. App. 240, 246, 567 S.E.2d 781, 786 (2002) (internal citations omitted), aff d per curiam, 357 N.C. 46, 577 S.E.2d 620 (2003). Evidence that a plaintiff is the holder of a promissory note, or has otherwise acquired the rights of the holder, is an essential element of a cause of action upon such note. Liles v. Myers, 38 N.C. App. 525, 528, 248 S.E.2d 385, 388 (1978); accord N.C. Gen. Stat. § 25-3-301 (2011). See also Kane Plaza Assocs. v. Chadwick, 126 N.C. App. 661, 664, 486 S.E.2d 465, 467 (1997) (stating that the party seeking enforcement of a promissory note must be a real party in interest, i.e., it must assert legal rights that will be determined by the litigation ). The holder of a negotiable instrument is defined as: a. The person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession; b. The person in possession of a negotiable tangible document of title if the goods are deliverable either to bearer or to the order of the person in possession; or c. The person in control of electronic document of title. N.C. Gen. Stat. § 25-1-201(21) (2011). a negotiable -6When the plaintiff is the payee of a promissory note that has been attached to the complaint, he is not required to allege in his complaint that he is the holder of the note because [t]he payee or endorsee of a note is the prima facie owner and holder. Deloatch v. Vinson, 108 N.C. 147, 148, 12 S.E. 895, 896 (1891).1 However, when the plaintiff is not the payee, he must aver the facts showing the execution of the note and the assignment or other transfer to himself. Id. at 150, 12 S.E. at 896. For example, in Kane Plaza, the trial court dismissed the plaintiff s complaint in an action to enforce a promissory note on the ground that the complaint failed plaintiff was the holder of the note. at 663, 486 S.E.2d at 466. to allege that the Kane Plaza, 126 N.C. App. On appeal, this Court reversed because, although the note did not indicate the plaintiff was the payee, an additional agreement indicating that the payee was a disclosed agent of the plaintiff with respect to the note was attached and incorporated into the complaint. Id. at 665-66, 486 S.E.2d at 467-68. Here, both promissory notes identify Cape Fear Bank as the payee, not Plaintiff. 1 The instruments are payable to the Although Deloatch was decided under the former code pleading standard, we find it instructive here. -7order of Cape Fear Bank, not to the bearer of the instrument. Moreover, Plaintiff did not allege in the body of its complaint that it was the payee on the notes or that it acquired the right to enforce the notes. While Mr. Brinson s affidavit indicates that Plaintiff was aware of the status of Defendant s account, it likewise failed to establish Plaintiff s standing to collect on the outstanding debt. Plaintiff points to the liberal nature of notice pleading and argues that [c]ommon knowledge exists that loans and extensions of credit are transferred between lenders utilizing various methods and that [a]ny ambiguity in the Complaint would have been readily explained in the discovery process. Even so, neither of these factors negate Plaintiff s obligation under N.C. R. Civ. P. 8 to draft a complaint that is sufficiently particular to show that Plaintiff is entitled to relief. See Sutton v. Duke, 277 N.C. 94, 105, 176 S.E.2d 161, 167 (1970) (stating that no amount of liberalization should seduce the pleader into failing to state enough to give the substantive elements of his claim (internal quotation marks and citation omitted)). must allege plaintiff s facts right To enforce a promissory note, a plaintiff sufficiently to enforce particular the to instrument. indicate the Accordingly, -8because Plaintiff s complaint is missing this essential element, we hold that dismissal pursuant to Rule 12(b)(6) was proper. B. Order of Dismissal with Prejudice without Leave to Amend Given our decision to affirm the trial court s dismissal of Plaintiff s complaint pursuant to Rule 12(b)(6), we now reach Plaintiff s second contention, namely, that the erred by dismissing the complaint with prejudice. trial court Specifically, Plaintiff argues that a dismissal with prejudice produces an extreme and inequitable result and that the trial court should have granted Plaintiff leave to amend its complaint. The decision to dismiss an action with or without prejudice is in the discretion of the trial court and will disturbed on appeal absent an abuse of discretion. not be Trent v. River Place, LLC, 179 N.C. App. 72, 77, 632 S.E.2d 529, 533 (2006). Abuse of discretion results where the court s ruling is manifestly unsupported by reason or is so arbitrary that it could not have been the result of a reasoned decision. State v. Hennis, 323 N.C. 279, 285, 372 S.E.2d 523, 527 (1988). With respect to the amendment of pleadings, the North Carolina Rules of Civil Procedure provide that [a] party may amend his pleading once as a matter of course at any time before a responsive pleading is served. . . . Otherwise a party may -9amend his pleading only by leave of court or by written consent of the adverse party; justice so requires. plaintiff completely and leave shall be freely N.C. R. Civ. P. 15(a). fails to make any given when However, when the effort to amend the pleading, take a voluntary dismissal, or move that the complaint be dismissed without prejudice, the trial court does not abuse its discretion in dismissing the complaint with prejudice. Johnson v. Bollinger, 86 N.C. App. 1, 9, 356 S.E.2d 378, 383 (1987). In Johnson, the seeking damages for distress. by the plaintiff filed intentional a infliction Id. at 2, 356 S.E.2d at 379-80. plaintiff to amend the defective of complaint emotional Without any attempt complaint, the trial dismissed the complaint with prejudice under Rule 12(b)(6). at 2, 356 S.E.2d at 380. court Id. On appeal, the plaintiff made a similar argument to the one at issue here to the effect that the trial court should have, sua sponte, given the plaintiff leave to amend the complaint. Id. at 7, 356 S.E.2d at 382. Addressing the trial court s failure to provide leave to amend, this Court said: As plaintiff failed to take any action to amend his complaint either before or after its dismissal, he cannot now complain he lacked adequate opportunity to amend his -10complaint. After dismissal of plaintiff s complaint under Rule 12(b)(6), the trial court was no longer empowered to grant plaintiff leave to amend under Rule 15(a): To hold otherwise would enable the liberal amendment policy of Rule 15(a) to be employed in a way that is contrary to the philosophy favoring finality of judgments and the expeditious termination of litigation. Id. at 7-8, 356 S.E.2d at 382 (quotation marks and citation omitted). Moreover, and with regard to the trial court s decision to dismiss the complaint with prejudice, this Court said: Since the dismissal order operates as an adjudication on the merits unless the order specifically states to the contrary, the party whose claim is being dismissed has the burden to convince the court that the party deserves a second chance; thus, the party should move the trial court that the dismissal be without prejudice. Id. at 9, 356 S.E.2d at 383. As the plaintiff in Johnson failed to make any such motion, this Court held that dismissing the complaint with prejudice was not an abuse of discretion. Id. Here, the record is devoid of any motion by Plaintiff to amend its complaint. Furthermore, there is nothing in the record indicating that Plaintiff moved that the dismissal be without prejudice. Plaintiff cannot now Consistent with our decision in Johnson, claim that the trial court abused its -11discretion by not offering Plaintiff, sua sponte, an opportunity to amend the complaint. Accordingly, we hold that the trial court did not abuse its discretion when it dismissed Plaintiff s complaint with prejudice. IV. Conclusion For the foregoing reasons, we affirm the order of the trial court in its entirety. Affirmed. Judges ERVIN and DAVIS concur.

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