Lycaste, LLC. v. Newsome (COA25-123) 9/17/2025
Statute of Limitations for Reformation of Deed of Trust
Chris Burti, Vice President and Senior Legal Counsel

The 2025 opinion of the North Carolina Court of Appeals in Lycaste, LLC, substituted for OH Tacoma 1 Subi, A Series of OH Tacoma 1 Trust v. Newsome offers an instructive lesson on two recurring issues in real property and foreclosure litigation: (1) the dangers of incomplete or inaccurate legal descriptions in deeds of trust, and (2) the strict operation of statutes of limitation when lenders or their successors seek equitable remedies such as reformation.

The decision is relevant for attorneys handling mortgage litigation, creditor's rights, and title disputes. The Court affirmed the trial court's grant of summary judgment in favor of property-owning heirs, finding that the lender's attempt to reform a deed of trust more than a decade after the defect was discovered was barred by the statute of limitations. This case underscores how procedural missteps, loan transfers, and unconsummated settlement discussions can combine to extinguish a lender's security interest altogether, leaving successors in interest with little recourse. For practitioners, it is a cautionary tale about diligence, document review, and the unforgiving nature of statutory deadlines.

From 1967 through 1983, Samuel and Zinnie Newsome acquired three tracts of land in Hertford County. In 1984, they purchased a fourth tract adjoining one of the earlier parcels (collectively, the "Property"). All four tracts together make up the family homestead at 517 Hall Siding Road, Ahoskie, NC. In 2005, they borrowed $148,000 from American General Financial Services, Inc. secured by a deed of trust containing a critical defect in the legal description describing only the 1984 tract and leaving the three earlier tracts unencumbered. Samuel passed away in 2006, with his interest vesting in Zinnie. Upon her death in 2017, title passed to her heirs, including defendant Demarcus Newsome. In 2020, the heirs conveyed their interests in the Property to Demarcus and his wife.

In 2016, counsel for Zinnie informed the loan holder at that time of the defect. The loan holder responded by filing an action in August 2018 seeking reformation of the deed of trust. That action was short-lived. When the holder assigned the loan in September 2018, it voluntarily dismissed the suit without prejudice the following month. After a series of assignments and uncompleted settlement attempts the loan was assigned in 2024 during the pending appeal to Lycaste, LLC. During these years, two separate settlement agreements were purportedly reached between the Newsome heirs and lenders. In both instances, the deals collapsed when the note and deed of trust were sold before execution. On February 10, 2024, OH Tacoma (later substituted by Lycaste, LLC) filed the present action seeking reformation of the deed of trust to include all four tracts of the Property and seeking a declaratory judgment recognizing a valid lien on the full Property.

Defendants Demarcus and Keviette Newsome, along with the guardian ad litem for the unknown heirs of Zinnie (collectively, the defendants), answered in May 2024 and moved for summary judgment shortly thereafter. The trial court granted summary judgment in favor of the defendants on September 20, 2024, finding the claims barred by the statute of limitations and the plaintiff appealed. On appeal, the plaintiff raised two main arguments: That the trial court erred by ruling on summary judgment prematurely before discovery was conducted and that the claim for reformation was improperly dismissed as time barred. The Court of Appeals rejected both arguments.

The Court acknowledged that summary judgment can be premature where a party has diligently sought discovery but has not yet received responses citing Poage v. Cox, 265 N.C. App. 229 (2019) and Ussery v. Taylor, 156 N.C. App. 684 (2003). However, the opinion notes in this case that more than seven months passed between complaint filing and the summary judgment hearing and the plaintiff conceded in its brief that at the time of the summary judgment hearing, "Not one request for production or interrogatory had been served. No depositions had been taken (or even noticed)." The Court determined that: "Accordingly, unlike in Ussery, Plaintiff had 'adequate time to develop [its] case' but failed to do so." The Court held that the lack of discovery was not a bar to entry of summary judgment.

The central issue in this case was whether Plaintiff's claim to reform the deed of trust was timely within the applicable statute of limitations. The Court notes: "Statutes of limitations are 'inflexible and unyielding' (Blue Cross & Blue Shield v. Odell Assocs., 61 N.C. App. 350 (1983))." The rule that once pled as an affirmative defense, the burden shifts to plaintiff to show the cause of action accrued within the limitations period was cited from (Scott & Jones, Inc. v. Carlton Ins. Agency, 196 N.C. App. 290 (2009)). The Court observes that equitable estoppel can sometimes toll limitations if a defendant misleads a plaintiff into delaying suit citing; Duke Univ. v. Stainback, 320 N.C. 337 (1987). That said, mere settlement discussions are insufficient citing: Turning Point Indus. v. Global Furniture, Inc., 183 N.C. App. 119 (2007).

Here, the defendants informed the note holder of the defect by September 2016. The note holder, in turn, filed an action in 2018, but voluntarily dismissed. The present action was not filed until February 2024, a point in time that the Court deemed well beyond the three-year limitations period applicable to reformation claims. The plaintiff offered no evidence that the defendants misrepresented or promised not to assert the statute of limitations. The Court noted that while settlement talks and good-faith negotiations occurred, there was no inducement, deception, or bad faith by Defendants that could estop reliance on the statute. Each time settlement documents stalled, it was because the loan was transferred to a new entity, not due to misconduct by the defendants. Thus, the statute of limitations applied inexorably, barring Plaintiff's claim.

The Court of Appeals affirmed the Superior Court's order granting summary judgment to the defendants, concluded that the plaintiff's claim was time-barred, and the absence of discovery did not excuse the delay. This case illustrates how repeated transfers of loans and deeds of trust can fatally undermine enforcement efforts. Successive servicers and trusts each attempted to resolve the defect, but the constant handoffs prevented final settlement. For lenders and their counsel, it underscores the importance of ensuring continuity of litigation strategy and monitoring statute-of-limitations deadlines during servicing transfers. It is important to understand that settlement negotiations do not toll limitations. Even when parties reach tentative agreements, unless the defendant affirmatively misleads the plaintiff into delaying suit, statutes of limitations will run. Practitioners must guard against complacency during "good faith" settlement discussions and file protective actions before deadlines expire.

The root problem here was the incomplete legal description in the original 2005 deed of trust. For closing attorneys and title professionals, this case reinforces the necessity of scrupulous attention to property descriptions. An omitted tract can have catastrophic consequences for lenders years down the line. For heirs inheriting property subject to defective encumbrances, this case demonstrates the significant leverage available when lenders delay corrective action. Once the statute runs, the heirs may own the property free of the lien, even if they or their predecessors originally intended to encumber it.