             IN THE SUPREME COURT OF NORTH CAROLINA

                                 No. 427PA13

                           FILED 20 AUGUST 2014

RL REGI NORTH CAROLINA, LLC

            v.
LIGHTHOUSE COVE, LLC; LIGHTHOUSE COVE DEVELOPMENT CORP.,
INC.; GLEN C. STYGAR; JOHN R. LANCASTER; LETICIA S. LANCASTER;
LIONEL L. YOW; and CONNIE S. YOW



      On discretionary review pursuant to N.C.G.S. § 7A-31 and on writ of

certiorari pursuant to N.C.G.S. § 7A-32(b) of a unanimous decision of the Court of

Appeals, ___ N.C. App. ___, 748 S.E.2d 723 (2013), affirming a judgment entered on

1 June 2012 by Judge Jay D. Hockenbury in Superior Court, New Hanover County.

Heard in the Supreme Court on 5 May 2014.


      Nelson Mullins Riley & Scarborough, LLP, by Christopher J. Blake and
      Joseph S. Dowdy, for plaintiff-appellant.

      Stubbs & Perdue, P.A., by Matthew W. Buckmiller, for defendant-appellee
      Connie S. Yow.

      Ward and Smith, P.A., by Jason T. Strickland and Matthew A. Cordell, for
      North Carolina Bankers Association, Inc., amicus curiae.


      NEWBY, Justice.

      In this case we consider the effect of a waiver on claims arising from a

guarantor-lender relationship, including claims under the federal Equal Credit

Opportunity Act (“ECOA”). In exchange for a lender’s willingness to restructure

loans after default, a guarantor may waive prospective claims against the lender.
                   RL REGI N.C., LLC V. LIGHTHOUSE COVE, LLC

                                 Opinion of the Court



Because we hold that defendant waived any potential claims, including those under

the ECOA, we reverse the decision of the Court of Appeals.

      In 2006 Regions Bank provided $4,208,000 in financing for the acquisition

and partial development of approximately fifty-seven acres of land in Brunswick

County to Lighthouse Cove, LLC and Lighthouse Cove Development Corp., Inc.

(“the LC Entities”). The loan was secured by the real estate and guaranteed by the

individual business partners and their spouses, including Lionel L. Yow and his

wife, defendant Connie S. Yow. By 2009 the LC Entities had defaulted on the

obligations. As part of a restructuring agreement, on 7 December 2009, defendant

executed a forbearance agreement that:

             recognize[d] and agree[d] that each Borrower [wa]s in
             default of its obligations under its respective Loan
             Documents as a result of the Payment Defaults and that
             the Lender has the present and immediate right to
             payment in full of all of the Obligations and the right to
             exercise any or all of its respective remedies contained in
             the Loan Documents.

According to the parties’ arrangement, Regions Bank “agree[d] to not exercise any of

the Collection Remedies under the Loan Documents” and to forego payments on the

principal debt during the agreed upon forbearance period. In exchange, defendant

waived “any and all claims, defenses and causes of action.”

             Waiver of Claims. Each Obligor acknowledges that the
             Lender has acted in good faith and has conducted itself in
             a commercially reasonable manner in its relationships
             with each of the Obligors in connection with this
             Agreement and in connection with the Obligations, the


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                                  Opinion of the Court



             [Letter of Credit] Obligations and the Loan Documents,
             each of the Obligors hereby waiving and releasing any
             claims to the contrary. Each Obligor . . . releases and
             discharges the Lender . . . from any and all claims,
             defenses and causes of action, whether known or
             unknown and whether now existing or hereafter arising,
             including without limitation, any usury claims, that have
             at any time been owned, or that are hereafter owned, in
             tort or in contract by any Obligor or any affiliate of an
             Obligor and that arise out of any one or more
             circumstances or events that occurred prior to the date of
             this Agreement.

Defendant further acknowledged that she freely and voluntarily entered into the

agreement “after an adequate opportunity and sufficient period of time to review,

analyze, and discuss . . . all terms and conditions of this Agreement.” Eventually,

the LC Entities defaulted on their obligations under the forbearance agreement.

      In September 2010, plaintiff RL REGI North Carolina, LLC purchased

Regions Bank’s interest in the LC Entities’ loans. Three months later, plaintiff filed

an action seeking recovery of the indebtedness from the business partners and their

spouses. Defendant asserted as an affirmative defense that plaintiff’s predecessor

in interest obtained her guaranty of the loans in violation of the ECOA, which, inter

alia, prohibits discrimination in credit transactions based on marital status. On 22

March 2012, the trial court entered an order granting summary judgment in favor

of plaintiff on all claims, counterclaims, and affirmative defenses, except those with

regard to defendant. The trial court concluded that a genuine issue of material fact




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                                 Opinion of the Court



existed as to whether plaintiff’s predecessor in interest violated the ECOA in

obtaining her guaranty.

      Following a jury trial, the trial court entered judgment for defendant,

concluding that Regions Bank had procured her guaranty in violation of the ECOA

and that this violation constituted an affirmative defense. Plaintiff appealed from

both the denial of its motion for summary judgment and the post-trial judgment

that concluded plaintiff violated the ECOA which voided the guaranty agreement

signed by defendant.

      On appeal the Court of Appeals unanimously affirmed the trial court. RL

REGI N.C., LLC v. Lighthouse Cove, LLC, ___ N.C. App. ___, 748 S.E.2d 723

(2013). The Court of Appeals held, inter alia, that defendant’s execution of the

forbearance agreement “waiv[ing] all defenses” could not waive the defense that the

guaranty was acquired in violation of the ECOA. Id. at ___, 748 S.E.2d at 730.

Plaintiff sought discretionary review in this Court, which we allowed, inter alia, to

decide whether defendant retained any claims under the ECOA when she executed

a forbearance agreement that broadly waived potential defenses. RL REGI N.C.,

LLC v. Lighthouse Cove, LLC, ___ N.C. ___, 753 S.E.2d 667 (2014).

      The ECOA prohibits lending institutions from discriminating against

applicants in credit transactions “on the basis of race, color, religion, national

origin, sex or marital status, or age.” 15 U.S.C. § 1691(a)(1) (2012). To enforce the

prohibition against discrimination based on marital status, federal law authorizes


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                                   Opinion of the Court



the Board of Governors of the Federal Reserve system to prescribe rules lending

institutions must follow in procuring spousal guarantees.        Id. § 1691b(a)(1); see

Equal Credit Opportunity Act (Regulation B), 12 C.F.R. Pt. 202 (2014), Supp. I to

Pt. 202—Official Staff Interpretations, para. 7(d)(6), cmt. 2; FDIC, Financial

Institution Letter NO. FIL- 6-04, Guidance on Regulation B Spousal Signature

Requirements, 2004 WL 61154, at *5 (Jan. 13, 2004). While a creditor may not

automatically require that a spouse be a party to a loan, it can do so if it first finds

the applicant is not independently creditworthy. FDIC, Financial Institution Letter

NO. FIL- 6-04, 2004 WL 61154, at *5.

         Some courts have held that, when a lender circumvents the ECOA

requirements, a guarantor may assert the lender’s violation as an affirmative

defense and avoid the contract. Bank of the West v. Kline, 782 N.W.2d 453, 461

(Iowa 2010); see also Integra Bank/Pittsburgh v. Freeman, 839 F. Supp. 326, 329

(E.D. Pa. 1993); Still v. Cunningham, 94 P.3d 1104, 1114 (Alaska 2004); Eure v.

Jefferson Nat’l Bank, 248 Va. 245, 252, 448 S.E.2d 417, 421 (1994). Other courts

have held a violation is not a defense to collection of the debt. See FDIC v. 32

Edwardsville, Inc., 873 F. Supp. 1474, 1480 (D. Kan. 1995); Riggs Nat’l Bank of

Washington, D.C. v. Linch, 829 F. Supp. 163, 169 (E.D. Va. 1993), aff’d, 36 F.3d 370

(4th Cir. 1994); CMF Va. Land, L.P. v. Brinson, 806 F. Supp. 90, 95 (E.D. Va. 1992);

Diamond v. Union Bank & Trust of Bartlesville, 776 F. Supp. 542, 544 (N.D. Okla.

1991).


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                   RL REGI N.C., LLC V. LIGHTHOUSE COVE, LLC

                                  Opinion of the Court



      It is unnecessary, however, for us to determine in this case whether a

violation of the ECOA occurred and, if so, whether such a violation creates an

affirmative defense to the recovery of the indebtedness.     Regardless of whether

plaintiff violated the ECOA, defendant waived any possible claims under that

statute.

      The waiver here is part of the contractual forbearance agreement. Applying

contract principles, we determine the intent of the parties by the plain meaning of

the written terms. E.g., Powers v. Travelers Ins. Co., 186 N.C. 336, 338, 119 S.E.

481, 482 (1923). “We must decide the case, therefore, . . . by what is written in the

contract actually made by them.”       Id. (citation and quotation marks omitted).

Parties are free to waive various rights, including those arising under statutes. See

Clement v. Clement, 230 N.C. 636, 640, 55 S.E.2d 459, 461 (1949); Cameron v.

McDonald, 216 N.C. 712, 715, 6 S.E.2d 497, 499 (1940); In re West, 212 N.C. 189,

192, 193 S.E. 134, 136 (1937); see also Ballard v. Bank of Am., 734 F.3d 308, 313

(4th Cir. 2013). In contracts parties understand that “liability to the burden is a

necessary incident to the right to the benefit.” Norfleet v. Cromwell, 70 N.C. 510,

516, 70 N.C. 633, 641 (1874) (citations omitted).

      In executing the forbearance agreement, defendant acknowledged the

enforceability of her guaranty and waived a wide array of potential claims. The

agreement expressly releases the lender from “any and all claims, defenses and

causes of action.” The comprehensive language contained in the agreement, inter


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                                  Opinion of the Court



alia, “waive[s] and release[s] any claims” that may challenge the lender’s “good

faith” or “commercially reasonable” conduct. Defendant argues that the waiver’s

phrase “in tort or in contract” limits the otherwise broad language in the agreement

from covering statutory claims.    This argument overlooks the preceding phrase

“including without limitation” and the overall expansive language of the waiver.

Given the wide-ranging nature of the statement “waiving and releasing any claims,”

we do not agree that the release should be interpreted to exclude statutory claims.

      Defendant argued, and the Court of Appeals agreed, that the waiver was

unenforceable because the original loan relationship violated public policy. The

cases cited for this view, however, hold that a contract which on its face involves

illegal conduct will not be enforced. See Cansler v. Penland, 125 N.C. 408, 409, 125

N.C. 578, 579, 34 S.E. 683, 684 (1899) (holding a contract in which a sheriff

authorized another to exercise certain duties of the sheriff was inherently illegal

and unenforceable); cf. Martin v. Underhill, 265 N.C. 669, 673-74, 144 S.E.2d 872,

875-76 (1965) (finding a contract to bid on property for another at a public auction

was not illegal in its essence and was thus enforceable). There is nothing facially

illegal about this loan relationship in which a lender provided a loan upon certain

conditions; moreover, parties routinely forego claims in settlement agreements.

Here a waiver of potential defenses to the guaranty, including a potential defense

for a violation of the ECOA, was a part of defendant’s decision to accept the benefits

of the forbearance agreement.


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                   RL REGI N.C., LLC V. LIGHTHOUSE COVE, LLC

                                 Opinion of the Court



      In a recent decision on similar facts, the United States Court of Appeals for

the Fourth Circuit enforced a waiver of potential claims under the ECOA. Ballard,

734 F.3d at 314. That court analogized a settlement of claims under the ECOA to

one under the Equal Employment Opportunity Act.          Id.; see, e.g., Alexander v.

Gardner–Denver Co., 415 U.S. 36, 52, 94 S. Ct. 1011, 1021, 39 L. Ed. 2d 147, 160

(1974) (“[P]resumably an employee may waive his cause of action under [the Equal

Employment Opportunity Act] as part of a voluntary settlement.”).          In either

scenario, a waiver does not operate as a precondition to the original contract for

credit or employment; instead, it acts as a “negotiated benefit” or compromise of the

original contract terms. Ballard, 734 F.3d at 314. Defendant’s waiver here was not

a precondition for the LC Entities to receive the original loan, but rather it was a

negotiated settlement.

      In executing the forbearance agreement, defendant acknowledged the

enforceability of her guaranty and waived her potential claims, including those

under the ECOA, in exchange for leniency in repaying the debt. The trial court

improperly allowed defendant to assert a claim she waived, thus depriving plaintiff

of its rights under the forbearance agreement. The Court of Appeals erroneously

affirmed the trial court’s judgment. Accordingly, we reverse the decision of the

Court of Appeals and remand this case to that court for consideration of defendant’s

remaining issues on appeal.

      REVERSED AND REMANDED.


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