Case Law Briefs - February 2019
Chris Burti, Vice President and Senior Legal Counsel

MTGLQ Investors, L.P. v. Curnin (COA 18-349) 12/18/2018

Sufficient Legal Description for Deed of Trust

The Property at issue is described in the subject deed of trust as follows:

ALL  THAT  TRACT  OR  PARCEL  OF  LAND  LYING  IN THE  COUNTY  OF  BRUNSWICK,  IN  THE [STATE]OF NORTH  CAROLINA,  IN  THE  MUNICIPALITY  OF  THE VILLAGE   OF   BALD   HEAD   ISLAND   AND   MORE SPECIFICALLY  IDENTIFIED  AS  LOT # 333  LOCATED IN STAGE I OF THE DEVELOPMENT.

Being that parcel of land conveyed to Peter C. Curnin from PC Construction Inc. by that deed dated 12/13/2001 and recorded 12/13/2001 in Deed Book 1531, at Page 66 of the Brunswick County, NC Public Registry.

The opinion notes that: "the legal description includes the Property's lot number ("LOT # 333") and the phase of the development ("STAGE I").  However, it does not include any reference to the book and page numbers where a title searcher could find the map of Stage I as recorded in the Brunswick County Map Book."

The plaintiff holder of the note sought to quiet title, asked for reformation of the deed of trust and appealed the trial court's summary judgment order in favor of the defendant borrowers. Fortunately, the Court of Appeals correctly concluded that the Deed of Trust adequately described the Property sufficiently to create a lien on that Property without the need for reformation and held the plaintiff was entitled to summary judgment on its quiet title claim.

The opinion states that; "Here, the Deed of Trust's description, set forth above, contains the Property's lot  number  and  the  correct  subdivision as well as  a  reference  to  the  deed  in  which Defendant  obtained  title  to  the  Property.    This description describes the Property with certainty as it could only refer to the Property.  There is no other Lot # 333 in Stage I of the development.  And, in addition to the legal description set forth above, the Deed of Trust also identifies the real estate securing the loan by its correct street address and tax parcel number ..."

The opinion is helpful in that it sticks to well established deed construction doctrine.

Dill v. Loiseau (18-361) 1/15/2019

Radical Change to a General Scheme of Development or Waiver

This case runs through a traditional analysis of an action seeking a declaratory judgment finding that that claims of radical change to covenanted property, general scheme of development and waiver resulted in the unenforceability of covenants. It is useful in that it covers so many possible challenges to enforcement of covenants.

In affirming the trial court's determination that the covenants remained enforceable, the opinion is consistent with prior North Carolina law in holding that all lots in a subdivision did not have to be restricted for a general scheme of development doctrine to apply: that action on uncovenanted property did not apply; that the radical change doctrine requires evidence of change so radical as to effectively destroy the essential purposes of the development and that there was no evidence that there had been such a radical change in the character of a majority of the covenanted lots; that evidence of change so radical as to effectively destroy the essential purposes of the development scheme applies with equal force to the plaintiff's waiver argument and that a minor violation to a single lot did not rise to that level.

Jackson v. Don Johnson Forestry, Inc. (18-354) 1/15/2019

Timber Rights, Life Tenant vs. Remaindermen

Traditional doctrine holds that absent some express grant, a life tenant's right to cut timber is limited such as needed to "'clear tillable land to be cultivated for the necessary support of [her] family,' and she may 'also cut and use timber appropriate for necessary fuel' or to build structures on the property...Further, a life tenant is permitted to harvest and sell sufficient timber needed to maintain the property...However, a life tenant commits waste if she cuts timber merely for sale, to sell the timber trees, and allow them to be cut down and manufactured into lumber for market[:]" (citations omitted). Here the decedent's will expressly devised the life tenant the "unfettered right to cut and sell any tree with a diameter of twelve (12) inches or more (hereinafter the "Large Trees") during her life tenancy."

The timber was clear cut pursuant to a timber cutting contract executed by the life tenant's Attorney in Fact. The remaindermen alleged that the contract was unauthorized and the trial court issued summary judgment on several issues. The Court of Appeals affirmed in part, reversed in part and remanded holding that the devise of cutting rights was valid according to cited precedent; that the remaindermen had no standing to challenge the validity of the execution of the contract as that was solely the right of the life tenant's estate; that they did have claim for any trees cut under twelve inches in diameter and that their allegations were sufficient to survive summary judgement and that the timber cutter had a right of contribution from the estate of the deceased life tenant for any wrongfully cut timber.

The court also determined that the double damages remedy of N.C.G.S. Section 1-539.1 does not apply as the timber cutter was lawfully on the land and not a "trespasser to the land" citing Matthews v. Brown, 62 N.C. App. 559 (1983).

Lamb v. Styles (COA 18-350) 2/5/2019

Surveyors' Duty of Care to Third Parties

The Court of Appeals opined that a surveyor does not owe a duty of care to landowners that are not in privity with the surveyor and who do not rely on the survey. Additionally, the only damages alleged were litigation costs of an action in which the defendant surveyor was not a party. Failing to cite any statute entitling the plaintiffs to recover their litigation costs from defendants prevented a recovery for damages.  Finally, the Court expands a rule in holding that a plat that is deficient and is clearly marked as such, is not a cloud on title.

"In the case before us, there are doubts about whether the recorded plat was 'apparently valid' as Defendants failed to conduct a complete survey and noted the deficiency of their work directly on the plat with the annotation "per parol evidence from William and Harold Holt." Nevertheless, a muniment of title is '[d]ocumentary evidence of title, such as a deed or a judgment regarding the ownership of property. ... The deficient nature of Defendants' survey would make the recorded plats insufficient evidence of title and would not create a cloud on title..." (citations omitted)

Thus, where the surveyor relied on the client's parol statements in setting out the boundary line between the properties and conspicuously noted such on the plat, the defendants were not the proximate cause of Plaintiffs' alleged damages. 

In re: George (COA 18-611) 2/19/2019

HOA Foreclosure Purchaser has Good Title with Defective Service

This is the second opinion to come down recently from the North Carolina Court of Appeals where a good faith purchaser was determined to hold good title resulting from a foreclosure where service was found to be insufficient under Rule 4 of the North Carolina Rules of Civil Procedure, but was determined to satisfy U.S. Constitutional requirements. See: In re Ackah, ___N.C. App. ___, (2017), affirmed per curiam, 370 N.C. 594 (2018).

What primarily varies in this divided opinion from the issues discussed in Ackah is that the Court delved into the issue of what constitutes a good faith purchaser under N.C.G.S. Section 1-108 in the face of an extremely low bid price. In this case the record reflected that the HOA indebtedness was approximately $205.00, the high bid was $2,650.22 and the value of the property was approximately $150,000.

The dissenting Judge was of the opinion that this fact coupled with the trustee's failure to properly serve the respondents rendered the equities in their favor sufficiently to set the deed aside. The opinion writer and concurring Judge deemed the purchaser to be in good faith irrespective of the grossly low bid, because "Section 1-108 does not require that the purchaser at a judicial sale have paid "a valuable consideration" in order to be protected, so long as purchaser believed in good faith that the sale was properly conducted.". Citing Swindell v. Overton, 310 N.C. 707 (1984) the court stated: "Indeed, as long as the purchaser at a judicial sale believed in good faith that the sale was proper, the 'inadequacy of the purchase price realized [from the sale] . . . will not be sufficient to upset a sale.'"

If this case is appealed and affirmed, it and Ackah will provide title examiners with better guidance through foreclosure files that frequently do not show absolutely that service was proper beyond affidavits stating that it was, but also do not evidence that service was actually improper. Failure to exercise due diligence in attempting Rule 4 service may render the posting ineffective under North Carolina law, but posting after a failure to serve by certified mail where it is returned 'unclaimed,' has been determined to meet minimum Constitutional requirements. It may well be that a title insurer will not be willing to assume the risk of the cost of a challenge in such cases for a purchaser at such a sale when reported in the Attorney's Preliminary Opinion on Title, but likely will be willing to insure when the sale is a couple of links back in the chain of title.