N.C. Court of Appeals- Bryant v. Nationstar Mortgage, L.L.C.: Mortgage Lender Has No Duty to Disclose Secret Settlement with Insurance Carrier

By Ed Boltz, 13 February, 2019

Summary:

Mr. Bryan refinanced his home in 2007, with two mortgages, ultimately held by Nationstar, originally totaling $657,000. In August 2009, Mr. Bryant’s home was destroyed by fire, but was fortunately insured for up to $649,000. By May of 2013, when the home had still apparently not been rebuilt and the insurance proceeds not disposed of, Nationstar brought a “secret lawsuit” against the insurance carrier and settled that suit for $445,000. Nationstar then commenced foreclosure against Mr. Bryant, asserting that he owed $764,037.96 and was in default, without application of the $445,000 received from the insurance carrier. Mr. Bryant brought suit for a litany of claims in response.

The Court of Appeals, affirming the dismissal by the trial court, held that Mr. Bryan did not adequately allege actual fraud nor had he established that Nationstar had an affirmative duty to disclose the lawsuit against the insurance carrier. Similarly, “ordinary borrower-lender transactions … are consider arm’s length and do not typically give rise to fiduciary duties”, see Dallaire v. Bank of Am., 367 N.C. 363, such that Nationstar had acted with constructive fraud.

Mr. Bryant, in failing to raise and appeal issues of breach of contract and unjust enrichment during the foreclosure proceedings was collaterally estopped from litigating them later.

The allegations of unfair and deceptive trade practices did not include sufficient facts to support that any such actions were more than a breach of contract.

Commentary:

There would seem to be substantial details missing in this decision between the August 2009 fire and the May 2013 “secret lawsuit” and settlement between Nationstar and the insurance carrier. That said, however, this lack of transparency both by Nationstar and the insurance carrier should give everyone pause. Had Mr. Bryant run off with $445,000 in insurance proceeds, it seems unlikely that Nationstar would have similarly been deprived of recourse.

Perhaps this is something the North Carolina legislature and Commissioner of Insurance should investigate and consider establishing explicit duties on all parties.