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Issue  225  Article  363
Published:  1/1/2016

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COA - Invalid Acknowledgment Renders Deed "Void"
Chris Burti, Vice President and Senior Legal Counsel

The Court of Appeals opinion in Quinn v Quinn (COA 14-979) filed October 6, 2015, states "This case would make a good bar exam question..." Unfortunately, the Court got an important analytical part of the answer wrong and that error will likely lead to significant adverse repercussions for real property practitioners. The opinion results from the plaintiff's appeal of the trial court's order granting summary judgment in favor of defendants in the underlying quiet title action.

It appears that the opinion writer gets bogged down in the allegations of fact in the record on appeal and in an unnecessary attempt to justify the conclusion as to the outcome, muddles the legal issues. When the minor contradictory allegations and evidentiary offers of fact are ignored, the consistent facts alleged by each of the parties make it seem clear that it was essentially undisputed that the plaintiff made a deed to his brother in an exchange of land and one of the defendant's notarized that deed. It is also noted in the opinion that the brother's reciprocal deed was recorded. The court deemed the deed to have been a gift because of the plaintiff's allegations to that effect, but why the any court would consider any such an exchange of land a gift is not clear. It seems clear that both parties allege that the deed as signed and acknowledged was a conveyance to the brother of the locus in quo and not one to the defendants. However, the deed, as recorded, purported to grant the land to the defendants.  It was supposed by the defendant that the first page may have been slip sheeted in an effort by the grantee to avoid the need to pay for and record a deed of gift to the defendants.

Per the opinion, the plaintiff filed a complaint for a declaratory judgment "alleging solely 'technical' issues regarding the recorded deed from himself to defendants; plaintiff does not allege that the recorded deed is fraudulent or in any way not the deed he originally executed in 1999. Defendants denied that plaintiff had executed a deed to them as grantees. The plaintiff filed a motion for summary judgment and the trial court entered an order granting defendants' motion to dismiss plaintiff's claim and denying defendants' motion to dismiss plaintiff's claims for quiet title and ejectment. On 27 February 2014, the trial court granted summary judgment on plaintiff's claim for quiet title and ejectment in favor of defendants; the trial court also granted summary judgment in favor of defendants on their claim of quiet title and ordered that any '"cloud on title" of the Defendants by any claim of the Plaintiff . . . is hereby removed.' Thus, because the recorded deed was not determined to be void, all claims were resolved. Plaintiff appeals only the summary judgment order in which the trial court dismissed plaintiff's claims for quiet title and ejectment and granted summary judgment for defendants on their counterclaim to quiet title and remove any cloud on title." Id.

If the original deed was actually a grant to the defendants, the notarization by the defendant would have rendered the recordation a nullity and if slip sheeted, the purported grant to the defendants would have been a nullity unless authorized by the plaintiff. If slip sheeted by someone other than the Grantee, the equitable remedy of reformation would have been available and summary judgment would have been inappropriate. The court address both outcomes correctly analyzing that in either event, defendants could not prevail on their title claims derivative of the grant itself. However the Court's conclusions characterizing the deeds are in error based upon erroneous interpretations of the cited cases.

The court's error lies in its conclusion that "either way, the deed would be void." While an altered deed would be void as a conveyance to the slip sheeted grantees, the unaltered deed itself was not void. If the deed had been to the party taking the acknowledgment, it would have been invalidly recorded and not effective as to purchasers for value (not at issue in this case) but would have been valid as against the grantor. The court states: "Thus, if defendant Patricia Quinn did acknowledge the recorded deed to herself, the whole deed fails. See also Lance v. Tainter , 137 N.C. 249, 250, 49 S.E. 211, 212 (1904)". This citation does not support the Court's statement. While the headnote to the cited case suggests that such deeds are void, what this case actually (in its entirety) said was:

  CLARK, C. J. This is an action by the plaintiff, as trustee in bankruptcy of two bankrupts, to have canceled a deed in trust executed by them jointly, because it was acknowledged by both grantors, and privy examination of their wives was taken, before the trustee named in said deed, who was a notary public. The trustee in the deed being an interested person, the acknowledgment and privy examination before him were absolutely void. Long v. Crews, 113 N. C. 25G, 18 S. E. 499, and cases cited; 1 Devlin, Deeds, §§ 476, 477; 1 Cyc. 553, and notes.

The acknowledgment being a nullity, so was the probate by the clerk based thereon, and the registration. Long v. Crews, supra; Barrett v. Barrett, 120 N. C. 129, 26 S. E. 691, 36 L. R. A. 226; Todd v. Outlaw, 79 N. C. 235; Robinson v. Willoughby, 70 N. C. 358; 1 Devlin, supra, $ 478.

Code, § 1254, provides that "no deed of trust or mortgage for real or personal estate shall be valid at law to pass any property as against creditors or purchasers for a valuable consideration from the donor, bargainor or mortgagor, but from the registration of such deed of trust or mortgage in the county where the land lieth." The bankrupt law of 1898, section 67a (Act July 1, 1898, c 541, 30 Stat. 564 [U. S. Comp. St. 1901, p. 3449]), provides that "claims which for want of record or for other reasons would not have been valid liens as against the creditors of the bankrupt, shall not be liens against his estate, " and section 70e (30 Stat. 565 [U. S. Comp. St 1901, p. 3452]) provides that "the trustee may avoid any transfer by the bankrupt of his property which any creditor of such bankrupt might have avoided, and may recover the property so transferred." It follows, therefore, that this instrument, not having been legally acknowledged, probated, nor registered, is invalid against the creditors of the bankrupt, and should be canceled as a cloud upon the title which might injuriously affect the administration of the estate in the plaintiff's hands. The demurrer that the complaint did not state a cause of action was properly overruled.

        No error.

The Supreme Court in Lance v. Tainter, only found the deed to be ineffective "to pass any property as against creditors or purchasers for a valuable consideration from the donor..." due to the invalid registration and did not address the issue of its effect as between the parties. However, the North Carolina Supreme Court has clearly and consistently held that "as between the parties, a mortgage or deed is valid without registration." McBrayer v. Harrill, 152 N.C. 712, 68 S.E. 204.

The probate of a deed or mortgage is a judicial act; hence, if the probate or the grantor's acknowledgment be taken by an officer who is disqualified, the probate or certificate of acknowledgment will be void, and the registration of the instrument will be ineffective to pass title, and may be regarded a nullity as to subsequent purchasers or incumbrancers. Nemo debet esse judex in propria sua causa. Todd v. Outlaw, 79 N. C. 235; White v. Connelly, 105 N. C. 65, 11 S. E. 177; Blanton v. Bostic , 126 N. C. 418, 35 S. E. 1035; Allen v. Burch, 142 N. C. 524, 55 S. E. 354; Attorney General v. Knight, 169 N. C. 333, 342, 85 S. E. 418, Ann. Cas. 1917D, 517, L. R. A. 1915F, 898... G.S. § 47-20 does not protect every creditor against unrecorded mortgages. It protects only (1) purchasers for a valuable consideration from the mortgagor, and (2) creditors who have 'first fastened a lien upon it [the property] in some manner sanctioned by law.' M. & J. Finance Corp. v. Hodges, 230 N.C. 580, 55 S.E.2d 201 203...But, as between the parties, a mortgage or deed is valid without registration. Wallace v. Cohen, 111 N. C. 103, 15 S. E. 892; Deal v. Palmer, 72 N. C. 582; Leggett v. Bullock, 44 N. C. 283.

ญญญญญญญญญญญญญญญญญญญญญญญญญญญญThe Court of Appeals opinion conflates the issues of the validity of the instrument with the effectiveness of its recording as follows:

B. Validity between the Parties
Defendants next contend that even if "the recording of the deed is not valid" the deed is still "[v]alid [b]etween the [p]arties" and cites to Patterson v. Bryant, 216 N.C. 550, 5 S.E.2d 849 (1939), which stated that an unrecorded deed is valid as between the parties to the deed. See at 553, 5 S.E.2d at 851. Of course, one problem here is determining who the "parties" to the deed actually were. We know that plaintiff was a party, but defendants may not have been. If plaintiff did sign the deed to defendants as recorded. If plaintiff did not sign the deed as it was recorded but instead signed a deed to Thomas Quinn, the deed is void here too as plaintiff did not sign this deed. See generally N.C. Gen. Stat. ย§ 22-2 (2013). Patterson is inapplicable as it does not address when the deed itself is void, but rather when multiple valid deeds are filed regarding the same property; Patterson does not address a deed that was not properly executed or acknowledged as the recorded deed is here. See id., 216 N.C. 550, 5 S.E.2d 849. In other words, in Patterson the issue was a faulty recording of a deed, here the issue is a faulty deed itself. See id. The recordation or non-recordation of this deed does not change the defect in its creation and cannot make it valid "between the parties", whomever they may be. 

As noted above, McBrayer makes it clear the deed is not void as to any grantee by virtue of an invalid notary acknowledgment, it is merely treated as unrecorded and invalid as to third parties which are protected under the recording acts. Clearly, the court is wrong where it declares that "the deed was void because defendant Patricia Quinn could not take under the deed as notary". However, it appears from the record on appeal that she admits that she did not notarize a deed to herself. Thus, it leaves no room for any other conclusion but that the deed was, in fact altered as the deed as recorded contains her notary certificate of acknowledgment.

If the deed was altered without the consent of the grantor, the altered deed is a nullity as it would be treated the same as any forged deed. The Court's pronouncement that "the deed is void here too as plaintiff did not sign this deed..." is not helpful, because the plaintiff likely did sign the unaltered deed and acknowledged its execution, but it was apparently altered before recording. The reason for our taking issue with this statement is that the Grantee of the deed that the plaintiff admitted to signing was not a party to this proceeding. This case cannot be determinative of that party's right to claim title by virtue of the admitted deed and the statements of this Court color that right adversely where it states that it was a gift deed and implicitly, that the deed as executed and delivered did not operate as a deed.

Otherwise, the court's analysis with regard to the issue of alteration of a deed is almost spot on and determinative of the issue of validity of the instrument of record as an effective conveyance in this case.

Lastly, defendants contend that even if the grantee on the deed was changed after plaintiff executed it, the change will not "put title back" to plaintiff. Defendants note quite correctly that plaintiff alleged in his complaint that he signed the deed to defendants. Of course, we also have defendant's sworn testimony that the deed plaintiff signed was to Thomas Quinn, not defendants. Yet this issue of fact is not material because the deed fails either way. Defendants' argument is as follows:

[Plaintiff] signed a deed for the property to someone. If the front page was changed to a new grantee, that would not put title back into [plaintiff]. See Dugger v. McKesson, 100 N.C. 1, 11, 6 S. E. 746, 750 (1888). In the case of Bowden v. Bowden [,] 264 N.C. 296, 300, 141 S. E. 2d 296, 300, (1965) the court found that the alteration of a deed by adding another grantee does not ordinarily divest the title and estate conveyed to the original grantee in the deed in its original form. In Bowden, supra, the court found that the burden of proof as to such alteration is on the party attacking the altered deed.

Bowden states that "[w]here it has been established that alterations were made after execution and delivery of a deed, the burden is upon those claiming under the altered deed to prove that the alterations were made with the knowledge and consent of the grantor." Bowden, 264 N.C. at 301, 141 S.E.2d at 626. Defendants are the parties "claiming under the altered deed" so the burden is on them to show "that the alterations were made with the knowledge and consent of the grantor." Id.

Defendants have not forecast any evidence plaintiff knew that the first page of the deed was switched after he executed it or that he consented to this change. In fact, defendant Patricia Quinn stated that she did not believe that plaintiff was aware of the change. The evidence only supports two scenarios here: either the first page of the deed was switched after it was executed by the grantor and notarized, and plaintiff was not aware of the change or the deed was actually recorded as it was executed, but that means the deed was notarized by defendant Patricia Quinn and fails for that reason.

We only differ in that we suggest that it might have been clearer had the Court said; "Lastly, defendants contend that even if the grantee on the deed was changed after plaintiff executed it, the change will not "put title back" to plaintiff and while that contention is true as far as it goes, neither did the deed, if altered, put title into the defendants."

The defendants argued that the corrective provisions of N.C.G.S. Chapter 10B somehow validated an acknowledgment taken by a disqualified notary and the Court properly disposed of that argument as clearly the cited corrective provisions do not explicitly or implicitly correct a defective notarization where there has not been substantial compliance with the requirements of the Act.

Ultimately, the opinion concludes:

"Despite the conflicting evidence, there is no genuine issue of material fact as to the validity of the deed. The deed is void, whether due to notarization by Patricia Quinn if the deed was to her and her husband or due to the fact that the deed was materially altered after execution without plaintiff's knowledge or consent. Either way it is not valid as between plaintiff and defendants and case law regarding later changes to the grantees with the grantor's knowledge is inapplicable. However, we must reverse the trial court's order granting summary judgment in favor of defendants because there is a genuine issue of material fact as to whether defendants acquired title to the land by adverse possession under color of title. In addition, if a jury were to determine that defendants did not acquire title by adverse possession, defendants' counterclaims for unjust enrichment and betterments must then be determined. For the foregoing reasons, we reverse and remand.

There are issues resulting from a remand that the Court does not address in this conclusion and, perhaps, should have discussed. First, in order for a defective conveyance to constitute color of title in North Carolina, "the defect must not be so obvious that a man of ordinary capacity could not be misled by it..." McConnell v. McConnell, 64 N.C. 342 (N.C., 1870). It would seem that since the deed as recorded is argued to be color of title, the issue of whether the disqualified acknowledgment was so obvious that an ordinary person would recognize the defect would need to be considered by the trial court.  Second, it would seem that the original grantee of the deed as admitted by both parties would need to be joined as a necessary party because as noted above, the deed as admitted was effective to convey title to the original grantee without recording and clearly the defendants, not having paid consideration, are not a person protected by the recording Acts.

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