This opinion affirms summary judgment for Deutsche Bank and clarifies how courts properly evaluate deed description ambiguities, corrections under N.C.G.S. Section 47-36.1, and equitable principles in disputes between innocent purchasers and prior lienholders following fraudulent satisfactions. The decision reinforces the long-standing doctrine in North Carolina that when a description in an instrument can be reasonably construed to identify the intended property, courts will seek to uphold its validity even where errors create apparent inconsistencies. Further, when a deed of trust is fraudulently satisfied of record by unauthorized third parties, the prior lien is restored to its original priority unless the mortgagee was negligent.

This case will be of particular interest to real estate litigators, transactional attorneys, and lenders, as it directly addresses issues of patent vs. latent ambiguity in legal descriptions, the effectiveness of corrective recordings, and priority in equity when fraud disrupts the chain of title.

The facts relevant to the summary judgment issue were not in dispute. The litigation arose over title to a condominium unit that the appellants' predecessors in title (predecessors) purchased in 2006 from the developer. They executed a note secured by a deed of trust in favor of the plaintiff's predecessor-in-interest to fund the purchase. While the documents correctly listed the property address and tax parcel number, the legal description mistakenly referred to "Unit 7301" rather than Unit 7104. Unit 7301 was a separate condominium within the same complex that has a different address and different tax parcel number. Subsequently, a second warranty deed was recorded clarifying that Unit 7104 was intended, and the deed of trust was rerecorded with a corrected legal description pursuant to N.C.G.S. Section 47-36.1.

The sequence of events culminating the appeal are as follows:

The predecessors, borrowers on the note, filed bankruptcy (2013).

The condominium association foreclosed (2015) and conveyed the property to "Gaydos & Family 14716 Via Sorrento Condominium, Inc.," an entity tied to the predecessors.

Around the same time, fraudulent satisfactions of the plaintiff's deed of trust were recorded, falsely indicating the mortgage had been paid.

In July 2015, the appellants purchased the property by warranty deed, financing through a new deed of trust with U.S. Bank as lender. They were bona fide purchasers without notice of Deutsche Bank's unreleased lien.

The plaintiff later discovered the fraud and filed suit (2018) seeking, among other relief, a declaratory judgment restoring its lien and confirming priority over the appellants' mortgage. The plaintiff alleged the predecessors had fraudulently satisfied its deed of trust. Claims included damages against the fraud participants and declaratory relief against the appellants and their lender. The trial court granted the plaintiff summary judgment, declaring its lien valid and prior in time to the appellants' interests. Default judgment was entered against the fraud participants ultimately resulting in this appeal and opinion affirming the trial court.

The appeal raised three interrelated legal questions: Was the original deed of trust void due to a patent ambiguity in the legal description? Could the rerecorded deed of trust under N.C.G.S. Section 47-36.1 cure the error? Should the appellants, as innocent purchasers, prevail in equity over the plaintiff?

Relying upon Overton v. Boyce, 289 N.C. 291(1976) the appellants argued that North Carolina law requires a deed or deed of trust to describe land sufficiently to identify it, or to reference extrinsic sources by which identification can be made. The opinion notes that our courts seek to uphold deeds if possible, assuming the parties intended a valid conveyance, citing Chicago Title Ins. Co. v. Wetherington, 127 N.C. App. 457 (1997). The Court found that the dead in question describe two parcels of land and that the court must determine if this created a patent or latent ambiguity. The court observed:

Patent ambiguity exists when the instrument itself reveals such uncertainty that the court cannot ascertain intent by reference to anything extrinsic. A patently ambiguous deed is void citing Overton, 289 N.C. at 294.

Latent ambiguity arises when words are clear on their face but create confusion when applied to external facts. Latently ambiguous deeds are enforceable if extrinsic evidence clarifies intent citing, Bradshaw v. McElroy, 62 N.C. App. 515 (1983).

The appellants argued that the conflicting references (Unit 7104 by address and parcel, Unit 7301 by legal description) made the instrument patently ambiguous and thus void. They relied heavily on Overton, where a deed's vague reference to "pocosin land" adjoining another's tract was deemed fatally uncertain. The Court disagreed observing that unlike Overton, the predecessors' deed of trust consistently referenced the correct street address and tax parcel number, and contemporaneous loan documents clearly identified Unit 7104. The error, listing Unit 7301 in the legal description, was inconsistent, but not fatal.

The Court distinguished:

Bank of America, N.A. v. Schmitt, 263 N.C. App. 19, 823 S.E.2d 396 (2018) upholding a deed of trust encumbering two tracts where the various identifiers could be harmonized.

In re Thompson, 253 N.C. App. 46, 799 S.E.2d 658 (2017) holding a scrivener's error in a plat reference created only a latent ambiguity.

In re Reed, 233 N.C. App. 598, 758 S.E.2d 902, 2014 WL 1464183 (unpublished) - misspelling "Navajo" as "Navahjo" was a correctable latent ambiguity.

Unlike those cases, Unit 7301 was a real, separate property, creating a direct conflict. Still, the Court emphasized that deeds are construed as a whole, not in isolation. Relying on MTGLQ Inv'rs, L.P., 263 N.C. App. at 195 the Court posited that the description must be considered withing the context of the entire deed of trust. The Court of Appeals determined that reading the deed with its riders, references to the note, and simultaneous warranty deed, the intent to encumber Unit 7104 was evident, concluding that the ambiguity was not patent and that the deed of trust was valid.

The Court also addressed the effectiveness of the corrective recording pursuant to N.C.G.S. Section 47-36.1. That statute permits "obvious typographical or other minor error[s]" in recorded instruments to be corrected by rerecording with a statement of explanation. The closing attorney initialed the correction and attached a statement clarifying that the unit number was corrected.

The appellants argued that legal descriptions cannot be altered under that statute, citing Green v. Crane, 96 N.C. App. 654, 386 S.E.2d 757 (1990). There, a rerecorded joinder agreement improperly added a six-acre tract - an enlargement, not a correction. The Court distinguished Green: here, the correction did not add property but merely aligned the unit number with the already-referenced address and parcel. This was the type of "minor error" contemplated by the statute. Although later statutory amendments (e.g., N.C. Gen. Stat. § 47-36.2) have narrowed the scope of permissible corrections, those amendments did not apply retroactively per 2017 N.C. Sess. Laws 2017-110, sec. 5. The Court of Appeals concluded that the rerecorded deed of trust validly corrected the scrivener's error.

Having determined that the deed of trust was valid, the last issue to be resolved in the appeal was the application of the Doctrine of Equity to determine priority as between innocent parties. The appellants argued that even if the plaintiff's lien was valid, equity should protect them as innocent purchasers for value, since the lender was better positioned to prevent the fraudulent satisfaction. They invoked the principle from Johnson v. Schultz, 364 N.C. 90, (2010), that between two innocent parties, the one whose conduct enabled the loss should bear it. The Court rejected this analogy. Unlike Johnson, which involved embezzlement by a closing attorney engaged by the buyer, the lender had no dealings with the appellants. Instead, the fraud was perpetrated entirely by the predecessors.

The Court deemed the issue under these facts controlled by Household Realty Corp. v. Lambeth, 188 N.C. App. 545, quoting Union Cent. Life Ins. Co. v. Cates, 193 N.C. 456 (1927):

"[A]s between a mortgagee, whose mortgage has been discharged of record solely through the act of a third person, whose act was unauthorized ... 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." (Lambeth, 188 N.C. App. at 549).

The Court reasoned that only if the mortgagee was negligent in permitting the fraudulent release would priority shift and that in this instance, there was no evidence the lender was negligent or complicit and that the lender's lien was properly restored by the trial court to its original priority, superior to the appellants' interests.

This opinion has several implications for real property practitioners.

Courts remain reluctant to declare deeds void for patent ambiguity where other identifiers (addresses, parcel numbers, contemporaneous documents) reveal intent. Practitioners should nevertheless ensure consistency between legal descriptions and other identifiers to avoid litigation.

While amendments to N.C.G.S. Section 47-36.1 and enactment of N.C.G.S. Section 47-36.2 are intended to prevent certain abuses by restricting certain corrections, this case underscores the effectiveness of prompt re-recording in the past. Counsel should be attentive to the temporal applicability of curative statutes.

Lenders can take comfort that fraudulent satisfactions will not automatically divest their priority. Unless negligence is shown, earlier liens retain superiority over later innocent purchasers.

Purchasers relying solely on public record satisfactions risk hidden defects. Title insurers and closing attorneys must carefully examine the history of satisfactions and assignments, particularly where satisfactions appear out of sequence or involve related entities.