                             NO. COA13-464

                    NORTH CAROLINA COURT OF APPEALS

                         Filed: 7 October 2014


HRISTOS BASMAS and MARIA BASMAS,

    Plaintiffs,

    v.                                 Iredell County
                                       No. 12 CVS 1684
WELLS FARGO BANK NATIONAL
ASSOCIATION, CARRINGTON MORTGAGE
SERVICES, LLC AND NATIONWIDE
TRUSTEE SERVICES, INC., as
Substitute Trustee,

    Defendants.

    Appeal by plaintiffs from order entered 5 December 2012 by

Judge Hugh B. Lewis in Iredell County Superior Court. Heard in

the Court of Appeals 11 August 2014.


    Elliott Law Firm, PC, by Michael K. Elliott for plaintiff-
    appellants.

    RCO Legal, P.S., by Susan B. Shaw, for defendant-appellee.


    STEELMAN, Judge.

    The   effect    of   plaintiffs’   discharge   in    bankruptcy   on

foreclosure proceedings was not preserved for appellate review.

The trial court’s order allowing foreclosure is affirmed.

                   I. Factual and Procedural Background

    On 29 September 2006 Hristos and Maria Basmas (plaintiffs)

borrowed $304,056.00 from New Century Mortgage Corporation for
                                       -2-
the   purpose     of   purchasing     residential     property    located    in

Iredell County, North Carolina. The loan was secured by a deed

of trust on plaintiffs’ property, which was recorded in the

Iredell County Registry of Deeds. On 19 December 2006, the loan

was sold to Wells Fargo (defendant). In conjunction with the

sale of the loan, the original Note was “indorsed in blank by

New Century” and transferred to Wells Fargo, with Deutsche Bank

being the custodian of the original Note for Wells Fargo.

      In   2009   plaintiffs      became     delinquent   in   their   mortgage

payments; they failed to make the payment due on 1 March 2009,

and have made no payments towards their debt since that time. On

9 September 2010 the substitute trustee filed a petition                     in

Iredell County case No. 10 SP 1503, seeking to foreclose on the

note and deed of trust. On 6 September 2011 the Iredell County

Clerk of Court entered an order allowing defendant to proceed

with foreclosure. Plaintiffs appealed to the Superior Court of

Iredell    County,     and   on   2   November    2011    Judge   Theodore   S.

Royster, Jr., entered an order stating in relevant part that:

            1. On or about September 29, 2006, a
            Promissory Note (‘the Note’) was executed in
            favor of New Century Mortgage Corporation in
            the principal sum of $304,056 which Note was
            secured by a Deed of Trust on real estate
            located in Iredell County, North Carolina,
            and recorded in . . . the Iredell County
            Registry.
                                        -3-
             2. The Respondents did not produce an
             original Indorsement of the Note, nor a copy
             of the Indorsed Note.

             3. The Respondent claims to be the holder of
             the Note.

             4. Since the Respondent failed to produce
             sufficient competent evidence of Indorsement
             of the Note, . . . at the time of this
             hearing the Respondent does not qualify as
             the   ‘holder’  under   the   North   Carolina
             Uniform Commercial Code, and is thus not the
             ‘holder’ of the Promissory Note as the term
             is   used   in  N.C.G.S.    §   45-21-16   for
             foreclosures under power of sale.

       Judge Royster concluded that “[t]he Respondent has failed

to prove that it is the owner and holder of a valid indebtedness

of [plaintiffs] as required pursuant to N.C.G.S. 45-21.16(d) and

therefore cannot foreclose on the subject property under the

current case (10-SP-1503).” The court ordered that the “Order of

Sale entered by the Iredell Clerk of Court on September 6, 2011

is hereby vacated” and that the substitute trustee “shall not

proceed under the current case (10-SP-1503) with any foreclosure

of    the   real   estate   described       in   that   certain   Deed   of   Trust

recorded in Book 1789, Page 2079 in the Iredell County Public

Registry.”

       On 14 March 2012 defendant filed a new petition, in Iredell

County case No. 12 SP 292, seeking to foreclose on the note and

deed of trust. On 10 July 2012 plaintiffs filed a complaint in

the    instant     case,    seeking     a     permanent    injunction     barring
                                -4-
foreclosure, a declaratory judgment that foreclosure was barred

by the doctrine of res judicata on the basis of Judge Royster’s

order, and   alleging   claims for abuse of process, unfair and

deceptive trade practices, and misrepresentation. A hearing was

conducted on 5 November 2012 before the trial court and on 5

December 2012 the court denied plaintiffs’ claim for declaratory

judgment in an order that stated in relevant part:

         [This matter] came on for hearing . . . on
         Plaintiffs’ motion for declaratory judgment
         that the doctrine of res judicata bars the
         Defendants from pursuing foreclosure in . .
         . Iredell County, N.C., 12-SP-0292 . . . or
         any other subsequent foreclosure proceeding.
         Having considered the briefs, supporting
         affidavits, and case law submitted by the
         parties . . . the Court hereby finds and
         concludes as follows:

         1. Since November 2011, no payment has been
         made by the Plaintiffs under that certain
         adjustable rate promissory note . . .
         secured by the deed of trust . . . that is
         the subject of the current foreclosure
         [proceeding] and the loan . . . is,
         accordingly, in default at this time;

         2. Subsequent to the entry by Judge Theodore
         S. Royster, Jr. on November 2, 2011 of the
         order   vacating  the   .   .   .  order  of
         foreclosure entered by the Iredell County
         Clerk of Court in [10-SP-1503] . . .
         Defendant Wells Fargo      obtained physical
         possession of the original Note (with an
         original blank indorsement by New Century
         Mortgage Corporation, the original Lender,
         affixed thereon), which Note was presented
         to the Court at the November 5th hearing;

                               . . .
                                     -5-


            4. New facts have occurred since Judge
            Royster’s November 2, 2011 order in the
            initial foreclosure [proceeding], by way of
            subsequent     default    and     Defendants’
            presentation of the original Note (with an
            original blank indorsement by New Century
            Mortgage Corporation, the original Lender,
            affixed thereon), creating a change in
            circumstances that would preclude any res
            judicata effect of said order upon the
            current foreclosure [proceeding] and/or any
            other subsequent foreclosure proceeding;

            5. Issues as to the res judicata effect, if
            any, upon past due moneys owed by the
            Plaintiffs  upon  the  Note   shall  remain
            pending as the Court, by the entry of this
            Order, is not determining such issues at
            this point in time and such issues are
            hereby reserved for a later date, if so
            necessary.

    The order denied plaintiffs’ claim for declaratory judgment

and ruled that plaintiffs’ “other prayers for relief are hereby

deemed to be moot[.]”

    Plaintiffs appeal.

                             II. Standard of Review

    “Our standard of review of a declaratory judgment is the

same as in other cases. N.C. Gen. Stat. § 1-258[.]” Calhoun v.

WHA Med. Clinic, PLLC, 178 N.C. App. 585, 596, 632 S.E.2d 563,

571 (2006). “‘The standard of review in declaratory judgment

actions   where    the    trial   court    decides    questions   of   fact   is

whether     the   trial    court’s   findings        are   supported   by     any

competent     evidence.     Where    the    findings       are   supported    by
                                        -6-
competent     evidence,       the   trial   court’s      findings     of   fact    are

conclusive on appeal.’” Cross v. Capital Transaction Grp., Inc.,

191 N.C. App. 115, 117, 661 S.E.2d 778, 780 (2008) (quoting

Lineberger v. N.C. Dep’t of Corr., 189 N.C. App. 1, 7, 657

S.E.2d 673, 678, affirmed in part, review improvidently granted

in part on other grounds, 362 N.C. 675, 669 S.E.2d 320 (2008)).

Findings of fact not challenged on appeal are binding on this

Court. Johnson v. Herbie’s Place, 157 N.C. App. 168, 180, 579

S.E.2d 110, 118 (2003). “‘However, the trial court’s conclusions

of law are reviewable de novo.’” Cross, 191 N.C. App. at 117,

661 S.E.2d at 780 (quoting Browning v. Helff, 136 N.C. App. 420,

423, 524 S.E.2d 95, 98 (2000)).

                          III. Doctrine of Res Judicata

       Plaintiffs’ primary argument is that Judge Royster’s entry

of an order vacating defendant’s first foreclosure action barred

the   subsequent     foreclosure       action    under       the   doctrine   of   res

judicata. “‘Under the doctrine of res judicata, a final judgment

on    the   merits   in   a    prior    action    in     a    court   of   competent

jurisdiction precludes a second suit involving the same claim

between the same parties or those in privity with them.’ The

essential elements of res judicata are: (1) a final judgment on

the merits in an earlier lawsuit; (2) an identity of the cause

of action in the prior suit and the later suit; and (3) an
                                         -7-
identity of parties or their privies in both suits. ‘When a

court of competent jurisdiction has reached a decision on facts

in   issue,   neither    of    the     parties    are   allowed    to    call   that

decision into question and have it tried again.’” Nicholson v.

Jackson Cty. School Bd., 170 N.C. App. 650, 654-55, 614 S.E.2d

319, 322 (2005) (quoting Bockweg v. Anderson, 333 N.C. 486, 491,

428 S.E.2d 157, 161 (1993), and Green v. Dixon, 137 N.C. App.

305, 308, 528 S.E.2d 51, 53 (2000) (other citations omitted).

      However,   “[i]t    is    well     settled    that   the    estoppel      of   a

judgment extends only to the facts in issue as they existed at

the time the judgment was rendered, and does not prevent a re-

examination of the same questions between the same parties when

in   the   interval     the    facts    have     changed   or    new    facts   have

occurred which may alter the legal rights or relations of the

litigants.” Flynt v. Flynt, 237 N.C. 754, 757, 75 S.E.2d 901,

903 (1953) (citation omitted). In this case, the trial court

found two separate instances of new or changed circumstances:

plaintiffs’ default on their loan after entry of Judge Royster’s

order, and defendant’s production of documentation of its status

as holder of the note.

                  IV. Effect of Discharge in Bankruptcy

      Plaintiffs argue that the trial court erred by finding that

their default on the loan after entry of Judge Royster’s order
                                                  -8-
constituted      new     facts          or    circumstances             that      rendered        the

doctrine of res judicata inapplicable. Plaintiffs assert that

their mortgage debt was discharged in bankruptcy, eliminating

the possibility of any further default. We do not reach the

merits of this issue, because plaintiffs failed to preserve for

appellate review the effect of a discharge in bankruptcy on the

foreclosure action.

    Rule     10(a)(1)        of    the       North       Carolina       Rules      of    Appellate

Procedure      states       that    “to       preserve          an    issue       for    appellate

review, a party must have presented to the trial court a timely

request, objection, or motion, stating the specific grounds for

the ruling the party desired the court to make” and must “obtain

a ruling upon the party’s request, objection, or motion.” The

effect of the bankruptcy proceeding in which plaintiffs were

involved     was      not     raised         in         plaintiffs’          complaint,         their

memorandum of law, or at the hearing before the trial court.

    Moreover, plaintiffs’ argument is premised in part on their

assertion that there was “no reaffirmation agreement entered”

during   the    bankruptcy         case.          Plaintiffs         fail    to    support       this

contention       by     citation             to         sworn        testimony,         affidavit,

documentary      evidence,         or    any      other     record       evidence.         It    “‘is

axiomatic      that    the    arguments           of     counsel       are    not       evidence.’”

State v. Roache, 358 N.C. 243, 289, 595 S.E.2d 381, 411 (2004)
                                      -9-
(quoting State v. Collins, 345 N.C. 170, 173, 478 S.E.2d 191,

193 (1996)).

        Plaintiffs   failed   to    preserve     for   appellate     review   any

issues pertaining to the effect of their bankruptcy proceeding

on the foreclosure action, and have not supported their argument

with citation to record evidence. Accordingly, we do not reach

the merits of this argument.

        As discussed above, the trial court found and concluded in

relevant part that:

             New   facts   have    occurred   since   Judge
             Royster’s November 2, 2011 order in the
             initial foreclosure [special proceeding], by
             way of subsequent default and Defendants’
             presentation of the original Note (with an
             original blank indorsement by New Century
             Mortgage Corporation, the original Lender,
             affixed thereon), creating a change in
             circumstances that would preclude any res
             judicata effect of said order upon the
             current   foreclosure   [special   proceeding]
             and/or any other subsequent foreclosure
             proceeding.

Plaintiffs’     appellate     challenge     is   restricted    to    the   trial

court’s finding that their continued default subsequent to entry

of Judge Royster’s order constituted new facts. Plaintiffs do

not     challenge    the   trial    court’s      finding   that     defendant’s

production of proper documentation of its status as holder of

the note separately established that “[n]ew facts have occurred

.   .   .   creating   a   change    in   circumstances”      that    precluded
                                        -10-
application of res judicata to defendant’s second foreclosure

proceeding. “It is not the role of the appellate courts . . . to

create    an   appeal   for    an     appellant.”      Viar   v.    N.C.   Dep’t    of

Transp., 359 N.C. 400, 402, 610 S.E.2d 360, 361 (2005) (per

curiam). Given that plaintiffs failed to preserve this challenge

to the trial court’s order, the order must be affirmed.

                        V. Public Policy Considerations

    Plaintiffs        also    argue    that    we   should    reverse      the   trial

court’s    order      based    upon     various     public     policy      concerns.

“Weighing . . . public policy considerations is the province of

our General Assembly, not this Court.” Shaw v. U.S. Airways,

Inc.,    362   N.C.   457,    463,    665     S.E.2d   449,   453    (2008).      This

argument lacks merit.

    For the reasons discussed above, we conclude that the trial

court did not err and that its order should be

    AFFIRMED.

    Judges ERVIN and McCULLOUGH concur.
