IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA23-1077
Filed 20 August 2025
Mecklenburg County, No. 18CVS006946-590
DEUTSCHE BANK NATIONAL TRUST COMPANY, as TRUSTEE for SOUNDVIEW HOME LOAN TRUST 2006-EQ1 ASSET-BACKED CERTIFICATES, SERIES 2006-EQ1; 2006 MASTER ASSET-BACKED SECURITIES TRUST 2006- HE5 MORTGAGE PASS THROUGH CERTIFICATES, SERIES HE5, by and through U.S. BANK, NATIONAL ASSOCIATION, in its capacity as TRUSTEE under POOLING and SERVICING AGREEMENT dated as of DECEMBER 1, 2006, Plaintiffs,
v.
CYRIL N. GAYDOS; KARINA C. GAYDOS; MEHA BHUPENDRA SHAH; FENIL HIREN KUMAR SHAH; GAYDOS & FAMILY 14716 VIA SORRENTO CONDOMINIUM, INC.; U.S. BANK, NATIONAL ASSOCIATION s/i/i PINNACLE BANK s/b/m BANK OF NORTH CAROLINA; PINNACLE BANK s/b/m BANK OF NORTH CAROLINA; MILTON XAVIER EARQUHART a/k/a MILTON XAVIER; JOHN DOES #1-10; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., solely as nominee for BANK OF NORTH CAROLINA and its successors and assigns, Defendants.
Appeal by defendants Meha Bhupendra Shah, Fenil Hiren Kumar Shah, and
U.S. Bank, National Association s/i/i Pinnacle Bank s/b/m Bank of North Carolina
from order entered 26 October 2021 by Judge Robert C. Ervin in Superior Court,
Mecklenburg County. Heard in the Court of Appeals 2 April 2024
Alexander Ricks PLLC, by Ryan P. Hoffman, Benjamin F. Leighton, and David Q. McAdams, for defendants-appellants Meha Bhupendra Shah, Fenil Hiren Kumar Shah, and U.S. Bank, National Association s/i/i Pinnacle Bank s/b/m Bank of North Carolina.
McGuireWoods LLP, by Scott I. Perle, Bradley R. Kutrow, and Dylan M. Bensinger, for plaintiff-appellee Deutsche Bank National Trust Company. DEUTSCHE BANK NAT’L TR. CO. V. GAYDOS
Opinion of the Court
No briefs filed by remaining parties.
STROUD, Judge.
Defendants, Meha Bhupendra and Fenil Hiren Kumar Shah, along with U.S.
Bank, National Association s/i/i Pinnacle Bank s/b/m Bank of North Carolina
(collectively the “Shah Defendants”), appeal from an order granting summary
judgment to Plaintiff Deutsche Bank National Trust Company (“Deutsche Bank”) on
its declaratory judgment claim to restore a fraudulently extinguished deed of trust
and giving Deutsche Bank priority to subsequent interests following the entry of final
judgment disposing of all remaining claims. On appeal, the Shah Defendants argue
the trial court erred in granting summary judgment because the deed of trust had a
fatal patent ambiguity and failed to encumber the property at issue. After careful
review, we affirm the trial court’s entry of summary judgment in favor of Deutsche
Bank.
I. Background
The subject property at issue is a condominium located at 14716 Via Sorrento
Drive in Charlotte, North Carolina, Tax Parcel ID: 223-545-47, known as Unit 7104
of Belle Vista Condominiums (hereafter the “subject property”).
-2- DEUTSCHE BANK NAT’L TR. CO. V. GAYDOS
On 5 April 2018, Deutsche Bank1 initiated this action by filing summonses and
a complaint alleging that Defendants, Cyril N. and Karina C. Gaydos, Gaydos &
Family 14716 Via Sorrento Condominium, Inc., Xavier Milton Earquhart a/k/a Milton
Xavier, and John Does #1-10 (collectively the “Gaydos/Earquhart Defendants”)
successfully conspired to file a fraudulent satisfaction of a deed of trust for the subject
property held by Deutsche Bank. Deutsche Bank sought monetary damages from the
Gaydos/Earquhart Defendants and a declaratory judgment against all named
defendants, including the Shahs, who were innocent subsequent purchasers for value
of the subject property. In the declaratory judgment claim, Deutsche Bank sought to
restore the fraudulently extinguished deed of trust and to have its interest named
superior to that held by the Shahs’ mortgagee. An amended complaint was filed on 4
May 2018, adding Defendant, Mortgage Electronic Registration Systems, Inc.
(“MERS”), as a party.
On 10 February 2020, the Shah Defendants filed their answer with a motion
to dismiss, and Deutsche Bank voluntarily dismissed its claims against the individual
Gaydos defendants (the “Gaydoses”), MERS, and John Does #1-10. The following day,
Deutsche Bank obtained an entry of default as to the remaining Gaydos/Earquhart
1 Deutsche Bank was joined by its co-plaintiff, 2006 Master Asset-Backed Securities Trust 2006-HE5
Mortgage Pass Through Certificates, Series HE5, by and through U.S. Bank National Association in its capacity as Trustee under Pooling and Servicing Agreement dated as of December 1, 2006. Deutsche Bank’s co-plaintiff ultimately dismissed its claims and is therefore omitted from discussion in this opinion.
-3- DEUTSCHE BANK NAT’L TR. CO. V. GAYDOS
Defendants based on their failure to plead or otherwise defend against the action.
The Shah Defendants then moved for summary judgment on 25 June 2020, and
Deutsche Bank did the same on 5 August 2020.
The trial court heard the parties’ pending dispositive motions on 19 July 2021
and entered an “Order on Motions to Dismiss and Motions for Summary Judgment”
on 26 October 2021, which denied the Shah Defendants’ motions to dismiss and
granted summary judgment in favor of Deutsche Bank on its claim for declaratory
relief against the Shah Defendants, ordering Deutsche Bank’s deed of trust is
superior in time and priority over the Shah Defendants’ interest in the subject
property and any subsequent liens or interests granted by the Shahs. Deutsche Bank
then moved for, and received, a “Final Default Judgment” against the defaulted
Gaydos/Earquhart Defendants on 5 April 2022.
The Shah Defendants appealed from the summary judgment order following
entry of the default judgment. By unpublished opinion filed on 21 March 2023, this
Court dismissed the Shah Defendants’ first appeal as interlocutory because the
purported final default judgment and the other orders contained in the record only
resolved Deutsche Bank’s claims for declaratory relief and did not resolve its claims
for monetary relief against the Gaydos/Earquhart Defendants. See Deutsche Bank
Nat’l Trust Co. v. Gaydos, 288 N.C. App. 191, 884 S.E.2d 78, 2023 WL 257731, *2
(2023) (unpublished).
Following the dismissal of the appeal, on 4 May 2023, Deutsche Bank and the
-4- DEUTSCHE BANK NAT’L TR. CO. V. GAYDOS
Shah Defendants filed a stipulation of voluntary dismissal under North Carolina
General Statute Section 1A-1, Rule 41(a)(1)(ii), thus dismissing Deutsche Bank’s
“claims for monetary relief against the remaining Gaydos/Earquhart Defendants and
any remaining claims other than those previously resolved in [Deutsche Bank’s] favor
by [the trial court’s summary judgment and default judgment o]rders dated 26
October 2021 and 5 April 2022.” (Emphasis in original.) On the same day, Deutsche
Bank and the Shah Defendants also filed a joint motion for entry of final judgment in
accordance with the declaratory relief granted in the summary judgment and default
judgment orders previously entered.
The trial court heard the parties’ motion for entry of final judgment on 17 July
2023 and granted the motion based on its determination that all claims had been
adjudicated between the 26 October 2021 summary judgment order, the 5 April 2022
default judgment order, and the 4 May 2023 stipulation of voluntary dismissal of all
remaining claims. On 6 September 2023, the trial court entered a “Final Judgment”
in accordance with the 26 October 2021 summary judgment order and the 5 April
2022 default judgment order and dismissed all remaining claims.
The Shah Defendants have now appealed, again, from the trial court’s 26
October 2021 summary judgment order, noting that final judgment was entered on 6
September 2023.
II. Standard of Review
“Our standard of review of an appeal from summary judgment is de novo; such
-5- DEUTSCHE BANK NAT’L TR. CO. V. GAYDOS
judgment is appropriate only when the record shows that there is no genuine issue
as to any material fact and that any party is entitled to a judgment as a matter of
law.” In re Will of Jones, 362 N.C. 569, 573, 669 S.E.2d 572, 576 (2008) (citations and
quotation marks omitted); see also N.C. Gen. Stat. § 1A-1, Rule 56(c) (2023) (providing
summary judgment is proper if “the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that any party is entitled to a
judgment as a matter of law”).
“Likewise, whether the language of a contract is ambiguous is a question of
law to be reviewed de novo.” Morrell v. Hardin Creek, Inc., 371 N.C. 672, 680, 821
S.E.2d 360, 366 (2018); see also Bank of America, N.A. v. Schmitt, 263 N.C. App. 19,
22, 823 S.E.2d 396, 398 (2018) (“The construction of the terms of a deed, including
the question of the property the deed is intended to cover, has historically been a
question of law for the court[.]”). “When reviewing a matter de novo, this Court
considers the matter anew and freely substitutes its own judgment for that of the
lower courts.” Upchurch v. Harp Builders, Inc., 385 N.C. 816, 818, 898 S.E.2d 713,
715 (2024) (citations and quotation marks omitted).
III. Analysis
On appeal, the Shah Defendants argue the trial court erred as a matter of law
in determining the Gaydos deed of trust held by Deutsche Bank was a valid and
enforceable lien and had priority over their interest in the subject property. The Shah
-6- DEUTSCHE BANK NAT’L TR. CO. V. GAYDOS
Defendants thus contend the trial court erred in entering summary judgment in favor
of Deutsche Bank on its claim for declaratory relief.
The material facts relevant for summary judgment are not in dispute. The
Gaydoses entered a contract with a condominium developer to buy the subject
property in March 2006. Documents executed in anticipation of the purchase—
including the purchase contract with addendums, an appraisal, a HUD Settlement
Statement, and an adjustable-rate note—make it clear the Gaydoses were purchasing
the subject property, Unit 7104. When the purchase closed on 16 June 2006, the
condominium developer executed a general warranty deed intending to convey the
subject property to the Gaydoses (the “initial Gaydos vesting deed”), and the
Gaydoses executed a note secured by a deed of trust in favor of its mortgagee,
Deutsche Bank’s predecessor-in-interest, EquiFirst Corporation (the “Gaydos deed of
trust”).2 The initial Gaydos vesting deed and the Gaydos deed of trust were recorded
in the Mecklenburg County Register of Deeds on 19 June 2006.
The initial Gaydos vesting deed and the Gaydos deed of trust, as recorded in
June 2006, correctly listed the address and the tax parcel number for the subject
property throughout the documents; and the initial Gaydos vesting deed included a
brief description at the top of the document identifying the subject property as “Unit
2 A second note and deed of trust were also executed by the Gaydoses to accomplish the condominium
purchase. The second deed of trust is not at issue because it was assigned to Deutsche Bank’s co- plaintiff, who dismissed its claims.
-7- DEUTSCHE BANK NAT’L TR. CO. V. GAYDOS
7104, Bldg 7 of Belle Vista Condominium, Phase V.” However, the legal description
of the subject property in the initial Gaydos vesting deed and attached to the Gaydos
deed of trust incorrectly listed “Unit No. 7301, Building 7 of Belle Vista
Condominium, Phase V” instead of identifying “Unit 7104.” Unit 7301 is a separate
property within the same condominium complex as the subject property but has a
different address and different tax parcel number from the subject property.
Public records show that within one year of the Gaydoses’ purchase of the
subject property, on 21 May 2007, a second general warranty deed (the “second
Gaydos vesting deed”) was recorded that correctly identified Unit 7104 in the legal
description and explained that “the purpose of this deed is to convey the correct
property.” Along with the recording of the second Gaydos vesting deed, the Gaydos
deed of trust was rerecorded on 21 May 2007 with a correction in the attached legal
description to identify Unit 7104. The Gaydos deed of trust was later assigned to
Deutsche Bank by an assignment executed on 18 July 2014 and recorded on 25
August 2014.
After the Gaydoses filed for bankruptcy in July 2013, in May 2014, the
condominium owners’ association obtained relief from the bankruptcy stay to
foreclose on the subject property due to unpaid assessments. The owners’ association
ultimately acquired title to the subject property by foreclosure deed executed and
recorded on 13 March 2015 and, within approximately two months, conveyed the
subject property to Gaydos & Family 14716 Via Sorrento Condominium, Inc. (“Gaydos
-8- DEUTSCHE BANK NAT’L TR. CO. V. GAYDOS
& Family”), a business entity associated with the Gaydoses, by non-warranty deeds
recorded in April and May 2015. In the same time frame as Gaydos & Family
acquired title to the subject property, fraudulent satisfactions of the Gaydos deed of
trust were recorded as part of a scheme allegedly orchestrated by the
Gaydos/Earquhart Defendants.
Just two months later, on 7 July 2015, the Shahs purchased the subject
property from Gaydos & Family and took title by general warranty deed (the “Shah
vesting deed”) under the belief that there were no outstanding liens. In connection
with the purchase, the Shahs executed a note secured by deed of trust for the subject
property in favor of their mortgagee (the “Shah deed of trust”). The Shah vesting
deed and the Shah deed of trust were recorded on 8 July 2015.
A. Validity of Deutsche Bank’s Interest
The Shah Defendants first challenge the validity of Deutsche Bank’s interest
in the subject property, arguing that the Gaydos deed of trust never encumbered the
subject property because (1) the Gaydos deed of trust as initially recorded was
patently ambiguous and void as a result of the incorrect unit number in the attached
legal description, and (2) efforts to correct and rerecord the Gaydos deed of trust were
of no consequence. We disagree.
“In order to be valid, a deed or deed of trust must contain a legal description of
the land ‘sufficient to identify it’ or refer ‘to something extrinsic by which the land
may be identified with certainty.’” MTGLQ Inv’rs, L.P. v. Curnin, 263 N.C. App. 193,
-9- DEUTSCHE BANK NAT’L TR. CO. V. GAYDOS
195, 823 S.E.2d 409, 411 (2018) (quoting Overton v. Boyce, 289 N.C. 291, 293, 221
S.E.2d 347, 349 (1976)). “The entire deed should be considered when determining the
identity of the land conveyed.” Id. “The courts seek to sustain a deed if possible on
the assumption that the parties intended to convey and receive land or they would
never have been involved in the first place.” Chicago Title Ins. Co. v. Wetherington,
127 N.C. App. 457, 462, 490 S.E.2d 593, 597 (1997) (citation and quotation marks
omitted).
“When it is apparent upon the face of the deed, itself, that there is uncertainty
as to the land intended to be conveyed and the deed, itself, refers to nothing extrinsic
by which such uncertainty can be resolved, the description is said to be patently
ambiguous.” Overton, 289 N.C. at 294, 221 S.E.2d at 349. As the Court in Overton
explained, “[a] patent ambiguity is such an uncertainty appearing on the face of the
instrument that the court, reading the language in the light of all the facts and
circumstances referred to in the instrument, is unable to derive therefrom the
intention of the parties as to what land was to be conveyed.” Id. (emphasis in original)
(citation, quotation marks, and parenthesis omitted). “Patent ambiguities arise when
the uncertainty as to the meaning of a contract is so great as to prevent the giving of
any legal remedy, direct or indirect.” Thomco Realty, Inc. v. Helms, 107 N.C. App.
224, 227-28, 418 S.E.2d 834, 836 (1992) (citation and quotation marks omitted).
On the other hand, “[a] description is latently ambiguous if it is insufficient in
itself to identify the property but refers to something extrinsic by which identification
- 10 - DEUTSCHE BANK NAT’L TR. CO. V. GAYDOS
might possibly be made.” Bradshaw v. McElroy, 62 N.C. App. 515, 516, 302 S.E.2d
908, 910 (1983) (citation and quotation marks omitted). “Latent ambiguities arise
when there is confusion as to how to apply the words of an instrument to the object
or subject which they describe. While an instrument containing a latent ambiguity is
still enforceable (if extrinsic evidence exists to clarify the ambiguity), a patently
ambiguous instrument is void.” Thomco Realty, Inc., 107 N.C. App. at 227, 418 S.E.2d
at 836.
In arguing the Gaydos deed of trust is patently ambiguous, the Shah
Defendants rely on Overton, in which the Court reviewed a deed purporting to convey
a Chowan County tract of land described only as “a certain tract of Pocosin Land
adjoining the lands of the late Henderson Luton & others, containing, by estimation,
Three Hundred and Nineteen Acres.” Overton, 289 N.C. at 291, 221 S.E.2d at 348.
Upon review, the Court in Overton explained: “[a]ll that the deed tells us about the
land is that it is ‘pocosin land,’ i.e., swamp land, in Chowan County, it adjoins the
lands of the late Henderson Luton and contains, by estimation, 319 acres[,]” id. at
294, 221 S.E.2d at 349 (emphasis omitted); “[i]t is a matter of common knowledge
there are numerous, extensive tracts of pocosin land in Chowan County[,]” id. at 294,
221 S.E.2d at 349-50; and there were three separate recorded deeds conveying large
tracts of Chowan County land to Henderson Luton, with each tract having one or
more boundaries running along or through pocosin land, see id. at 294-95, 221 S.E.2d
at 350. Because the deed left the reader in doubt as to the exact area and boundaries
- 11 - DEUTSCHE BANK NAT’L TR. CO. V. GAYDOS
of the land intended to be conveyed and “refer[red] to nothing extrinsic to which one
may turn in order to identify with certainty the land intended to be conveyed[,]” the
Court held the deed was patently ambiguous and void. Id. at 294, 221 S.E.2d at 349.
Unlike in Overton, “[i]n the present case, the location and/or boundaries of the
[property identified in the deed of trust] are not in dispute.” Schmitt, 263 N.C. App.
at 22, 823 S.E.2d at 398. The Gaydos deed of trust appears on its face to clearly
identify the property to be encumbered. The ambiguity is revealed upon application
of the legal description when it becomes evident that two separate condominium units
are identified—the subject property by tax parcel number and address, and Unit
7301. The Shah Defendants assert that “[i]t is entirely unclear what property is being
. . . encumbered given the conflicting descriptions” and “[f]rom the face of the [initial
Gaydos vesting deed] and the [Gaydos deed of trust], it is just as plausible that the
parties sought to convey and encumber Unit 7301 as it is that they sought to convey
and encumber the [subject property].” The Shah Defendants contend there is nothing
extrinsic referenced in the recorded documents to clarify the ambiguity and thus
conclude that “under the Overton framework, . . . the legal descriptions in the [initial
Gaydos vesting deed and the Gaydos deed of trust] are patently ambiguous and, as
such, are void.”
On the other hand, Deutsche Bank contends any ambiguity is, at most, a latent
ambiguity, and the inclusion of the street address and tax parcel number for the
subject property are “refer[ences] to extrinsic data which describe the [s]ubject
- 12 - DEUTSCHE BANK NAT’L TR. CO. V. GAYDOS
[p]roperty with certainty” and resolve the ambiguity. Deutsche Bank relies on
Schmitt, 263 N.C. App. at 23, 823 S.E.2d at 399, as an example of this Court
prioritizing tax parcel numbers and the street address in an inconsistent legal
description. Deutsche Bank also relies on In re Thompson, 253 N.C. App. 46, 799
S.E.2d 658 (2017) (“Thompson”), and In re Reed, 233 N.C. App. 598, 758 S.E.2d 902,
2014 WL 1464183 (2014) (unpublished) (“Reed”), to argue “ambiguities caused by
scrivener’s errors in legal descriptions were latent rather than patent ambiguities
and did not void the deeds of trust at issue” where the tax parcel numbers included
in the deeds of trust resolved the ambiguity created by the errors. Upon review of
those cases, we agree with the Shah Defendants this case is distinguishable.
In Schmitt, this Court discussed whether a deed of trust that referenced two
separate tracts of property encumbered either tract individually, or both tracts,
where the deed of trust included a legal description of one tract, the address for a
second tract, and the parcel numbers for both tracts. Schmitt, 263 N.C. App. at 22-
23, 823 S.E.2d at 398. Upon review of the entire deed to discern the parties’ intent,
this Court determined as a matter of law the deed evinced an intent to encumber both
properties and was sufficient to do so where the “descriptions did not conflict . . . but
rather identif[ied] the entirety of [both tracts] as the property encumbered by the
deed of trust.” Id. at 24, 823 S.E.2d at 399 (emphasis added) (citation, quotation
marks, and brackets omitted). Thus, in Schmitt, the Court did not give the tax parcel
number or address priority over a conflicting description. See id. There is no
- 13 - DEUTSCHE BANK NAT’L TR. CO. V. GAYDOS
contention in this case the Gaydos deed of trust was intended to encumber both
properties identified in the attached legal description, and, in contrast to Schmitt, the
identification of both the subject property by tax parcel number and address and the
identification of Unit 7301 are in conflict.
Similarly, in Thompson and Reed, the tax parcel numbers, and the address in
Thompson, were not prioritized over a conflicting description of another existing
property. In both Thompson and Reed, the deeds of trust at issue contained what this
Court held to be scriveners’ errors in the description of the encumbered property.
Thompson, 253 N.C. App. at 52, 700 S.E.2d at 663; Reed, 2014 WL 1464183, at *4. In
Thompson, the error was the identification of a plat number in a non-existent “Section
II-C” instead of an existing “Section III-C,” 253 N.C. App. at 49, 799 S.E.2d at 661,
and in Reed, the error was the misspelling of Navajo in the street address as
“Navahjo[,]” 2014 WL 1464183, at *4. In both cases, the errors in the deeds of trust
resulted in the identification of property that did not exist, and this Court determined
based on information included and referenced within the four corners of the deeds of
trust, including tax parcel numbers, the intent of the parties was clear and the deeds
of trust contained a description of land sufficient to identify the encumbered property
despite the scriveners’ errors. Thompson, 253 N.C. App. at 52-53, 700 S.E.2d at 663-
64; Reed, 2014 WL 1464183, at *4. Here, even if the inclusion of Unit 7301 was merely
a scrivener’s error, it is an existing condominium within the same complex as the
subject property, and the identification of both Unit 7301 and the subject property in
- 14 - DEUTSCHE BANK NAT’L TR. CO. V. GAYDOS
the legal description attached to the Gaydos deed of trust are in conflict. Since the
subject property is identified in the attached legal description only by tax parcel
number and address, the tax parcel number and address are part of the conflicting
descriptions and do not provide clarity.
Although we agree with the Shah Defendants Schmitt, Thompson, and Reed
are distinguishable, and including the subject property’s tax parcel number and
address in the attached legal description is not enough on its own to resolve the
ambiguity created by the inclusion of Unit 7301, we disagree the conflicting
descriptions in the attached legal description create a patent ambiguity in this case
that results in a void deed of trust.
The legal description attached to the Gaydos deed of trust is not considered in
isolation when determining whether the subject property is sufficiently identified to
create a valid lien on the property; it must be considered within the context of the
entire deed of trust. See MTGLQ Inv’rs, L.P., 263 N.C. App. at 195, 823 S.E.2d at
411. Apart from the conflicting identifications in the attached legal description, the
Gaydos deed of trust, including the attached adjustable rate rider and the attached
condominium rider, consistently identify the subject property by address and tax
parcel number, reinforcing the intent to encumber the subject property and indicating
the inclusion of Unit 7301 in the attached legal description was wrong. Moreover,
the attached legal description also references the loan number for the note secured
by the Gaydos deed of trust and the initial Gaydos vesting deed recorded
- 15 - DEUTSCHE BANK NAT’L TR. CO. V. GAYDOS
simultaneously with the Gaydos deed of trust. Documents executed in connection
with the loan and included in the record, including the note, clearly identify the
subject property. And although the initial Gaydos vesting deed included a single
reference to Unit 7301 in the legal description, the deed also correctly identified Unit
7104 in a brief description at the top of the deed, corresponding to the tax parcel
number and address provided throughout the deed and demonstrating the intent to
convey the subject property. We are satisfied from our review of the Gaydos deed of
trust, and the documents referenced therein the intent to encumber the subject
property is clear.
And perhaps most important, the Gaydos deed of trust was corrected to
identify Unit 7104 in the attached legal description and rerecorded on 21 May 2007,
within one year of its initial recording. Assuming the Gaydos deed of trust was
ambiguous as initially recorded, any ambiguity was resolved by the rerecording of the
deed of trust with the corrected legal description.
Although the Shah Defendants acknowledge North Carolina General Statute
Section 47-36.1 provides “a process for correcting errors in recorded documents[,]”
they assert curative efforts to correct the Gaydos deed of trust were ineffective
because a legal description cannot be changed via North Carolina General Statute
Section 47-36.1. In support of their contention a legal description cannot be changed
via North Carolina General Statute Section 47-36.1, the Shah Defendants cite to the
statute and Green v. Crane, 96 N.C. App. 654, 386 S.E.2d 757 (1990). But neither the
- 16 - DEUTSCHE BANK NAT’L TR. CO. V. GAYDOS
statute nor Green stand for such a broad rule.
When the Gaydos deed of trust was corrected and rerecorded on 21 May 2007,
North Carolina General Statute Section 47-36.1 stated that:
[A]n obvious typographical or other minor error in a deed or other instrument recorded with the register of deeds may be corrected by rerecording the original instrument with the correction clearly set out on the face of the instrument and with a statement of explanation attached. The parties who signed the original instrument or the attorney who drafted the original instrument shall initial the correction and sign the statement of explanation. If the statement of explanation is not signed by the parties who signed the original instrument, it shall state that the person signing the statement is the attorney who drafted the original instrument. The statement of explanation need not be acknowledged. Notice of the correction made pursuant to this section shall be effective from the time the instrument is rerecorded.
N.C. Gen. Stat. § 47-36.1 (2007).
In Green, this Court reviewed a joinder agreement rerecorded under North
Carolina General Statute Section 47-36.1 in an attempt to correct the omission of a
six-acre tract the defendants had admitted was “inadvertently left out.” 96 N.C. App.
at 658, 386 S.E.2d at 759. Although the trial court found the rerecorded joinder
agreement was sufficient to incorporate the additional six-acre tract, this Court
reversed the trial court, holding the rerecorded joinder agreement that added to the
description of property and enlarged the property was “not the correction of an
obvious typographical or clerical error.” Id.
In contrast to Green, the rerecorded deed here does not add to the legal
- 17 - DEUTSCHE BANK NAT’L TR. CO. V. GAYDOS
description or enlarge the property to be encumbered. Here, the rerecorded Gaydos
deed of trust corrected the unit number in the attached legal description by crossing
out “7301” and replacing it with “7104[,]” thus aligning the unit number with the
subject property already identified by tax parcel number and address throughout the
Gaydos deed of trust. In compliance with North Carolina General Statute Section
47-36.1, the rerecorded Gaydos deed of trust includes a statement of explanation
stating that “THIS DEED OF TRUST IS BEING RE-RECORDED TO CORRECT
THE UNIT NUMBER ON THE EXHIBIT ‘A’ LEGAL DESCRIPTION[,]” and the
correction in the legal description is clearly marked and initialed by the closing
attorney. We are satisfied the correction of the unit number in the legal description
attached to the Gaydos deed of trust was a correction of “an obvious typographical or
other minor error” and complied with North Carolina General Statute Section 47-
36.1 (2007).3
Having determined the intent to encumber the subject property is clear from
the Gaydos deed of trust and documents referenced therein, and the rerecorded
3 We note that the statutes governing corrections of errors in recorded instruments have been amended
several times since the rerecording of the Gaydos deed of trust, and our holding may be different if limitations adopted in the amendments applied to the instant case. See N.C. Gen. Stat. § 47-36.2(a)(4) (2023) (defining an “obvious description error” to exclude “any error in the legal description that operates to convey any interest in real property that the grantor, trustor, mortgagor, or assignor owned at the time of conveyance but did not intend to convey”). But amendments to North Carolina General Statute Section 47-36.1, and the more recently enacted North Carolina General Statute Section 47- 36.2, do not apply retroactively, see 2017 N.C. Sess. Laws 2017-110, sec. 5, and the amendments have consistently provided that “[n]othing in this section invalidates or otherwise alters the legal effect of any instrument of correction authorized by statute in effect on the date the instrument was registered.” N.C. Gen. Stat. § 47-36.1(a) (2023).
- 18 - DEUTSCHE BANK NAT’L TR. CO. V. GAYDOS
Gaydos deed of trust was sufficient to correct the incorrect listing of the Unit 7301 in
the attached legal description, we hold the Gaydos deed of trust was not void as
patently ambiguous, and the Gaydos deed of trust was a valid lien encumbering the
subject property.
B. Equity
The Shah Defendants alternatively argue, even if the Gaydos deed of trust was
a valid lien encumbering the subject property, the Shahs were innocent third-party
purchasers for value, and Deutsche Bank was in the best position to discover the
recordation of the fraudulent satisfactions of the security instrument and should bear
any loss between the parties. The Shah Defendants rely on “the equitable principle
that where one of two persons must suffer loss by the fraud or misconduct of a third
person, he who first reposes the confidence or by his negligent conduct made it
possible for the loss to occur, must bear the loss.” Johnson v. Schultz, 364 N.C. 90,
93, 691 S.E.2d 701, 704 (2010) (citation omitted). In Johnson, the Court addressed
“how North Carolina law allocates the risk of loss between a buyer and a seller when
the closing attorney in a residential real estate transaction embezzles the sales
proceeds.” Id. at 91, 691 S.E.2d at 703. The Court held that
after considering the procedures customarily used for residential real estate closings and applying long-standing principles of equity, we hold that buyers must bear the loss caused by the misconduct of their own retained attorney. We stress that it is the buyer alone in most residential real estate transactions who is legally deemed to repose confidence in the closing attorney through the existence of
- 19 - DEUTSCHE BANK NAT’L TR. CO. V. GAYDOS
the attorney-client relationship.
Id. at 96, 691 S.E.2d at 705-06.
Unlike Johnson, this case does not involve loss in a real estate transaction
between the parties, Deutsche Bank and the Shah Defendants. In fact, there is no
indication Deutsche Bank ever had dealings with the Shahs before filing this case.
As detailed above, the record shows Deutsche Bank was assigned the Gaydos deed of
trust in July 2014, over eight years after the Gaydoses executed the deed of trust in
favor of Deutsche Bank’s predecessor-in-interest after the Gaydoses had entered
bankruptcy. Within months of the assignment to Deutsche Bank, the condominium
owners’ association foreclosed on the subject property, the owners’ association
conveyed the property to Gaydos & Family, fraudulent satisfactions of the Gaydos
deed of trust were filed, and the Shahs purchased the property from Gaydos & Family
unaware the satisfactions were fraudulent.
In circumstances in this case, where two innocent parties are victims of a
fraudulent satisfaction scheme of a third-party, our Courts have acknowledged a
different long-standing rule in North Carolina:
As between a mortgagee, whose mortgage has been discharged of record solely through the act of a third person, whose act was unauthorized by the mortgagee, and for which he is in no way responsible, and a person who has been induced by such cancellation to believe that the mortgage has been canceled in good faith the equities are balanced, and the lien of the prior mortgage, being first in order of time, is superior.
- 20 - DEUTSCHE BANK NAT’L TR. CO. V. GAYDOS
Household Realty Corp. v. Lambeth, 188 N.C. App. 545, 549, 656 S.E.2d 336, 339-40
(2008) (quoting Union Cent. Life Ins. Co. v. Cates, 193 N.C. 456, 462, 137 S.E. 324,
327 (1927) (citation and ellipses omitted)).
The discharge of a perfected mortgage upon public record by the act of an unauthorized third party entitles the mortgagee to restoration of its status as a priority lienholder over an innocent purchaser for value. The owner of a mortgage, however, will lose priority over an innocent purchaser if the mortgagee is negligent with respect to the release of the mortgage.
Id. at 551, 656 S.E.2d at 340 (citation and quotation marks omitted).
Nothing in the record tends to show Deutsche Bank was involved in, aware of,
enabling, or negligent regarding the fraudulent satisfactions filed to extinguish the
Gaydos deed of trust. Even on appeal, the Shah Defendants merely speculate that
Deutsche Bank “had the superior ability to discover and guard against the fraud and
commercial relationship with a party who may have been involved in the underlying
fraudulent scheme.” (Emphasis added.).
Applying the rule from Household Realty Corp., we hold the trial court
correctly restored the fraudulently satisfied Gaydos deed of trust held by Deutsche
Bank to its superior position in priority over the interests acquired by, or granted by,
the Shahs as a subsequent innocent purchaser for value. See id. The Shah
Defendants’ equity argument is overruled.
IV. Conclusion
The Gaydos deed of trust, recorded on 19 June 2006 and rerecorded on 21 May
- 21 - DEUTSCHE BANK NAT’L TR. CO. V. GAYDOS
2007, created a valid lien encumbering the subject property. The Gaydos deed of trust
was properly restored to its superior priority over any subsequently acquired
interests in the subject property after fraudulent satisfactions were filed to
extinguish the Gaydos deed of trust. We affirm the trial court’s entry of summary
judgment in favor of Deutsche Bank, the holder of the Gaydos deed of trust.
AFFIRMED.
Judges TYSON and GORE concur.
- 22 -