COA: Incorrect Property Description On Deed of Trust Renders Deed Defective
By Amanda Ray
Lenders should take care to ensure that details on their deeds of trust are correct, lest they lose priority if the borrower defaults. Today the COA held that a deed of trust with an incorrect description is defective. The case is Fifth Third v. Miller.
Miller executed a promissory note and deed of trust on his property in favor of Fifth Third. The Fifth Third deed of trust contained an incorrect description of the property and also failed to name a trustee. A few months later the Millers executed another promissory note and deed of trust on their property in favor of BB&T to secure an equity line of credit. The Millers defaulted on both notes.
Fifth Third claimed that it should be allowed to reform the deed to correct the errors and that its interest in the property was superior to BB&T's. It also claimed that BB&T was not a bona fide purchaser for value because it had constructive notice of the Fifth Third deed. The COA held that the deed did not meet the requirement of N.C. Gen. Stat. ยง 47-20(a) that a deed must have a sufficient property description in order to be properly registered, and thus the deed was defective and did not provide constructive notice to BB&T. The COA also denied Fifth Third's request to reform the deed because to do so would injure the rights of BB&T, who was an innocent bona fide purchaser.
Miller executed a promissory note and deed of trust on his property in favor of Fifth Third. The Fifth Third deed of trust contained an incorrect description of the property and also failed to name a trustee. A few months later the Millers executed another promissory note and deed of trust on their property in favor of BB&T to secure an equity line of credit. The Millers defaulted on both notes.
Fifth Third claimed that it should be allowed to reform the deed to correct the errors and that its interest in the property was superior to BB&T's. It also claimed that BB&T was not a bona fide purchaser for value because it had constructive notice of the Fifth Third deed. The COA held that the deed did not meet the requirement of N.C. Gen. Stat. ยง 47-20(a) that a deed must have a sufficient property description in order to be properly registered, and thus the deed was defective and did not provide constructive notice to BB&T. The COA also denied Fifth Third's request to reform the deed because to do so would injure the rights of BB&T, who was an innocent bona fide purchaser.
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