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Issue  44  Article  99
Published:  3/1/1999

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Deed of Trust Validity Issues - Enderle and Putnam Revisited
Chris Burti, Vice President and Legal Counsel

In the process of issuing final title policies we frequently come across errors in the filling out of deed of trust forms. The FNMA form contains the following language: " This debt is evidenced by Borrower’s note dated the same date as this Security Instrument … ." The two most difficult errors to deal with are the omission of the date on the deed of trust and different parties executing the note and the deed of trust. An example of the latter most frequently occurs when one spouse is the borrower on the note and the other is required to execute the deed of trust. Our ability to deal with these two issues from an insurance perspective is governed by case law. Foreclosure of Deed of Trust of Enderle, 110 N.C.App. 771, 431 S.E.2d. 549, (1993), and Putnam v. Ferguson, N.C.App. , 502 S.E.2d. 386, (1998), address the issue of the misidentified note maker and are the leading cases we rely upon.

Putnam is the most recent case and relies on Enderle. In Putnam property was conveyed to Greg Ferguson, Trustee for Leslie and Marilyn Ferguson. The Fergusons executed a purchase money note and the Trustee executed the Deed of Trust. It is probable that a printed form was used. The Putnam court states; " the deed of trust identifies Greg Ferguson as the debtor, while the promissory note is from Leslie and Marilyn Ferguson. As in Enderle, the deed of trust "did not properly 'identify the obligation secured.' " Id. Accordingly, the deed of trust is invalid. Since the deed of trust is invalid, plaintiff [mortgagee] does not have a valid lien." Enderle also dealt with the issue of whether a deed of trust is invalidated by failure of consideration when the grantor is not indebted to the beneficiary. Citing 55 Am.Jur.2d Mortgages 146 (1971) the Enderle court opines; "[m]ortgages may be executed to secure the obligations of third persons" and "[a]n undertaking ... to be personally responsible for the payment of the debt of the third person is not essential to the validity".

While the cases do not address the consequences of a missing date, a date is not, of itself, essential to the validity of a deed of trust. If the deed of trust contains a blank for the date of the note that is correctly filled in, the lack of a date of the deed of trust itself does not affect its validity. However, when a form containing language similar to that quoted above is used, it becomes an Enderle problem because the note is misidentified. If the deed of trust was intended to be dated the same as the date of acknowledgment a NCGS Sec. 47-36.1 re-recording may be sufficient to correct the problem of a missing date.

With respect to the misnomer issue we point out that the Putnam court states; "there was no reference [emphasis added] to the Leslie and Marilyn Ferguson note in the deed of trust." While many lenders will not permit any modification of the language in the deed of trust, it would seem that the correct note information could be included in the space provided for the description and thereby "reference" the note. After recording it probably would not be a "minor typographical error" to include such information and, therefor, would require re-acknowledgment, re-recording and title update to correct.

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