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Issue  1  Article  1
Published:  8/1/1995

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House Bill 459, Pertaining to Cancellation of Deeds of Trust, Passes
Ed Urban

1. GENERAL COMMENTS

House Bill 459 was ratified June 20, 1995. It pertains to certain types of cancellation of mortgages and deeds of trust and to recording satisfactions.

2. G.S. 45-37(a)(5) - "notice of satisfaction"

G.S. 45-37(a)(5) has been amended, effective October 1, 1995. That section pertains to cancellation by means of exhibition to the register of deeds of a form notice of satisfaction. The statutory form is set out in G.S. 47-46.1. The amendment deletes reference to a fee as provided in G.S. 161-10, and the amendment expressly states that no fee shall be charged for recording or certifying acknowledgments pursuant to G.S. 45-37(a)(5).

The amendment deletes reference to a "record of satisfaction" as described in G.S. 45-37.2. Instead, G.S. 45-37(a)(5) now states that cancellation shall occur "as required by G.S. 45-37.2." G.S. 45-37.2 is discussed in 7. below.

The amendment also states that the register of deeds need not verify authority of the person executing the notice of satisfaction. (For a deed of trust, the trustee must execute the form.)

3. G.S. 45-37(a)(6) [ New ] - certificate of satisfaction by owner of note; "Affidavit of lost note"

G.S. 45-37(a)(6) is a new method of record cancellation. It becomes effective October 1, 1995. Pursuant to G.S. 45-37(a)(6), cancellation of a mortgage or deed of trust or other instrument can be effected by a "certificate of satisfaction." A form is set forth in new G.S. 47-46.2. Substantial compliance is required. The owner of the note, bond or other evidence of indebtedness secured by the deed of trust or mortgage can execute the certificate. If available, the note, bond or other evidence of indebtedness (with an endorsement of payment and satisfaction by the owner of the note, bond or other evidence of indebtedness) must accompany the certificate.

If the evidence of indebtedness cannot be produced, an "affidavit of lost note," signed by the owner of the note, bond, or other evidence of indebtedness, shall be delivered to the register of deeds (in lieu of the evidence of indebtedness) certifying that the debt has been satisfied and stating (1) the date of satisfaction; (2) the fact that the evidence of indebtedness cannot be found and (3) that the affiant is the current owner of the evidence of the indebtedness. A form of affidavit is set forth in new G.S. 47-46.3. Substantial compliance is required.

Upon exhibition of (1) the certificate of satisfaction and accompanying evidence of indebtedness endorsed paid and satisfied or (2) the certificate of satisfaction and the affidavit of lost note, the register of deeds is required to record the certificate of satisfaction and either the accompanying evidence of indebtedness or the affidavit of lost note and shall cancel the mortgage, deed of trust, or other instrument as required by G.S. 45-37.2. No fee shall be charged for recording or acknowledgment.

Most importantly, G.S. 45-37(a)(6) provides that the register of deeds shall not be required to verify the authority of the person executing the certificate of satisfaction. This provision probably allows the closing attorney, the parties to the current transaction, and subsequent purchasers for value, lien creditors and their successors and assigns to rely upon such a satisfaction and cancellation, even though G.S. 47-17.2 codifies the rule that an assignment of deed of trust need not be recorded. G.S. 45-37(a)(6) is silent as to the effect of an existent recorded assignment of, for example, a deed of trust. Such assignments should not be ignored.

4. G.S. 47-46.2 form "certificate of satisfaction"

North Carolina, ______________ County.

I, ________________(name of owner of the note or other indebtedness secured by the deed of trust or mortgage), certify that I am the owner of the indebtedness secured by the hereafter described deed of trust or mortgage and that the debt or other obligation in the amount of ___________ secured by the (deed of trust) (mortgage) (other instrument) executed by ___________(grantor) (mortgagor),

_____________ (trustee) (leave blank if mortgage), and _______________(beneficiary) (mortgagee), and recorded in ____________ County at ____________(book and page) was satisfied on ___________ (date of satisfaction). I request that this certificate of satisfaction be recorded and the above-referenced security instrument be cancelled of record.

______________________________

(Signature of owner of note)

[ Acknowledgment before officer authorized to take acknowledgments]

5. G.S. 47-46.3 form "Affidavit of lost note"

[ Name of affiant ] personally appeared before me in ____________ County, State of

_________________, and having been duly sworn (or affirmed) made the following affidavit:

1. The affiant is the owner of the note or other indebtedness secured by the deed of trust, mortgage or other instrument executed by _____________ (grantor, mortgagor), ______________(trustee), and _______________ (beneficiary, mortgagee), and recorded in _____________ County at ____________ (book and page); and

2. The note or other indebtedness has been lost and after the exercise of due diligence cannot be located.

3. The affiant certifies that all indebtedness secured by the deed of trust, mortgage or other instrument has been satisfied and the affiant is responsible for cancellation of the same.

_______________________________

(Signature of the affiant)

Sworn to (or affirmed) and subscribed before me this ______ day of ____________, 19__.

[ Signature and seal of notary public or other official authorized to administer oaths].

6. G.S. 45-37(a)(2) amendment

G.S. 45-37(a)(2), which deals with cancellation by exhibition of the mortgage or deed of trust and note, etc. with an endorsement of payment or satisfaction, was amended effective January 1, 1996. The amendment amends the lead in paragraph of G.S. 45-37(a)(2) to require endorsement of payment and satisfaction thereon to be "dated on or before December 31, 1995." And, if the endorsement is undated, G.S. 45-37(a)(2) cannot be used. It seems as though this change means that G.S. 45-37(a)(2) cannot be used for endorsements after December 31, 1995.

7. G.S. 45-37.2 - recording satisfactions of mortgages and deeds of trust

G.S. 45-37.2 was amended effective October 1, 1995.

G.S. 45-37.2(a) states that when a notice of satisfaction pursuant to G.S.

45-37(a)(5) or a certificate of satisfaction pursuant to G.S. 45-37(a)(6)is recorded, the register of deeds shall make an entry of satisfaction on the notice or the certificate and record and index the instrument.

G.S. 45-37.2(b) states that when any other method of satisfaction is used, the register of deeds shall record a "record of satisfaction" consisting of either a separate instrument or all or a portion of the original deed of trust or mortgage

rerecorded and shall make the appropriate entry of satisfaction under G.S. 45-37 on each record of satisfaction.

A separate instrument or original deed of trust or mortgage rerecorded pursuant to this subsection shall contain (i) names of all parties to the original instrument, (ii) the amount of the obligation secured, (iii) the date of satisfaction of the obligation, (iv) a reference by book and page number to the record of the instrument satisfied, and (v) the date of recording the notice of satisfaction.

G.S. 45-37.2(c) states that, when practical, the register of deeds may make marginal notation of satisfaction in addition to the above.


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