How to access the above link?
Return to nccourts.org
Return to the Opinions Page
CITIFINANCIAL MORTGAGE CO.
f/k/a ASSOCIATES MORTGAGE
AND FINANCIAL SERVICES, INC.,
Plaintiff,
v
.
Henderson County
No. 04 CVS 1311
RONNIE GRAY, TERESA R. GARREN
and husband, CLINT S. GARREN,
Defendants.
Ferikes & Bleynat, PLLC, by Joseph A. Ferikes, for plaintiff-
appellee.
Biggers & Associates, PLLC, by William T. Biggers, for
defendant-appellant Ronnie Gray.
SMITH, Judge.
Defendant Ronnie Gray (Gray) appeals a judgment entered in
favor of plaintiff Citifinancial Mortgage Company (Citifinancial)
which reformed several real property instruments. We affirm.
The pertinent facts may be summarized as follows: On 9 June
1997, Danny M. Banks and his wife, Dawn V. Banks (Banks), conveyed
a 3.43-acre tract of land to plaintiff to secure a loan in the
amount of Ninety Thousand Four Hundred Seventy-five and 87/100
Dollars ($90,475.87), via a Deed of Trust recorded in Book 701,
Page 459, Henderson County Registry. Sometime prior to January 15,1999, defendants Clint S. and Teresa R. Garren (Garrens) agreed to
purchase a one-acre portion of the Banks' 3.43-acre tract of land.
Citifinancial had consented to this transaction and agreed to
record a Release Deed releasing said one-acre tract from the Deed
of Trust recorded in Book 701, Page 459, Henderson County Registry.
However, no deed of release was recorded.
On 15 January 1999, the Banks conveyed the entire 3.43 acres
to the Garrens by General Warranty Deed recorded in Book 976, Page
399, Henderson County Registry. On 8 February 1999, a deed was
recorded in Book 978, Page 488, Henderson County Registry, which
corrected the prior conveyance and provided that the deed from the
Banks to the Garrens conveyed only the one-acre parcel of land,
rather than the entire 3.43-acre tract conveyed in the previous
instrument. Also, on 15 January 1999, the Garrens conveyed the
entire 3.43-acre tract of land to plaintiff to secure a loan in the
amount of Sixty Thousand Seven Hundred Seventy-six and 72/100
Dollars ($60,776.72), via a Deed of Trust recorded in Book 800,
Page 420, Henderson County Registry.
Had there been no errors made in these prior transactions, the
status of the parties would have been that the Banks owned an
approximate 2.6-acre parcel of land subject to the Deed of Trust
recorded in Book 701, Page 459, Henderson County Registry; and, the
Garrens would have owned an approximate one-acre parcel of land
subject to the Deed of Trust recorded in Book 800, Page 420,
Henderson County Registry. The Banks defaulted in 2003, and plaintiff sought foreclosure
of the Banks' property by filing foreclosure proceedings under
Docket #03 SP 391, Henderson County, North Carolina. However, the
Substitute Trustee erroneously filed the foreclosure proceedings on
the entire 3.43-acre tract and named the following people as having
an interest in the property: Danny Banks, Dawn Banks, Teresa
Garren, Clint Garren, Michael Ledbetter and Amy Ledbetter. (The
Ledbetters are not involved in or parties to this lawsuit). All of
these parties had the same designated address for service: Post
Office Box 1151, Mountain Home, N.C. All the notices were returned
by the Post Office as not deliverable. On 24 June 2003, the
assistant clerk of superior court entered an order allowing
foreclosure. The clerk's order indicates that all of the parties
were served pursuant to the provisions of N.C. Gen. Stat. §
45-21.16 (2005) by the Sheriff of Henderson County posting notice
of foreclosure. The Return of Service indicates that all six (6)
of the respondents were served by posting the Notice on the front
door of 231 Hyder Drive, Mountain Home, North Carolina 28758, on
May 16, 2003. However, the Garrens' address was not 231 Hyder
Drive, but was 233 Hyder Drive, Mountain Home, North Carolina
28758.
Thereafter, at the foreclosure sale, plaintiff was the highest
bidder and the substitute trustee conveyed to plaintiff by deed the
entire 3.43-acre tract of land. On 26 September 2003, plaintiff
conveyed the entire 3.43-acre tract of land to defendant Gray by
Special Warranty Deed. On 2 September 2004, plaintiff filed a complaint to judicially
reform the asserted errors made during the course of these various
transactions. In its complaint, plaintiff first requested a
declaratory judgment to reform the deed of conveyance from
plaintiff to defendant Gray on the grounds that plaintiff had only
contracted to sell defendant Gray a 2.6-acre tract of land; but
instead, due to a mistake, conveyed to Gray the entire 3.43-acre
tract of land. Plaintiff's second claim requested a separate
declaratory judgment against the Garrens, wherein plaintiff alleged
that, due to a mistake, it had inadvertently foreclosed upon the
property of the Garrens. Plaintiff sought a declaratory judgment
to correct the previous judgment foreclosing upon the property of
the Garrens in File #03 SP 391, Henderson County. Additionally,
plaintiff sought a declaratory ruling that the Deed of Trust on the
Garrens' property still constituted a valid and continuing first
deed of trust and first lien of record upon the property. Finally,
plaintiff asserted a third claim for relief against all defendants
and sought a declaratory ruling correcting the previous mistakes,
and reforming the various instruments referenced in the Complaint
to place the parties in legal positions in accordance with their
original intentions. Defendant Gray filed an answer generally
denying that any mistakes were made in the various proceedings and
conveyances.
Following a bench trial, which only included the testimony of
plaintiff's litigation specialist, Deborah Guffey, the trial court
made the following pertinent findings of fact: 1. On June 9, 1997, a Deed of Trust was
recorded in the Henderson County, North
Carolina Register of Deeds office
(hereinafter, “Henderson Registry”) in Book
701, page 459 with the grantor of said deed of
trust being Danny M. Banks, and wife, Dawn D.
Banks, and the beneficiary being Associate
Financial Services of America, Inc. (now known
as CitiFinancial Mortgage Co.)(hereinafter
“Associates” or [“]CitiFinancial”). This deed
of trust conveyed a 3.43 acre tract of land to
secure a loan in the amount of $90,475.87.
2. Sometime prior to January 15, 1999,
defendants Teresa R. Garren and husband, Clint
S. Garren (hereinafter, “Garrens”) agreed to
purchase a 1 acre portion of the 3.43 acre
tract described in Book 701, Page 459,
Henderson Registry. Prior to January 15,
1999, Citifinancial had consented to this
transaction and agreed to record a Release
Deed releasing said 1 acre tract from the deed
of trust recorded in Book 701, page 459,
Henderson Registry.
3. The Release Deed to release said 1 acre
tract from the deed of trust recorded in Book
701, page 459, Henderson Registry was never
recorded.
4. On January 15, 1999, Banks, in error,
recorded a deed conveying 3.43 acres to the
Garrens by deed recorded in Book 976, page
399, Henderson Registry. Thereafter, on
February 8, 1999, a deed of correction was
recorded in Book 978, page 488, Henderson
Registry, correcting the deed from Banks to
Garren recorded in Book 976, page 399 from
3.43 acres to 1 acre.
5. On January 15, 1999, the Garrens, as
grantors, conveyed a deed of trust to
Associates as beneficiary of the 3.43 acre
tract to plaintiff to secure a loan in the
amount of $60,776.72. This deed of trust was
recorded in Book 800, page 420, Henderson
Registry. The description of the property in
said deed of trust was in error as it should
only have been the 1 acre tract described in
the Deed of Correction recorded in Book 978,
page 488, Henderson Registry.
6. Thereafter, on May 13, 2003, a Notice of
Hearing on foreclosure of the deed of trust
recorded in Book 701, page 459 was filed in
the office of the Clerk of Henderson County,
North Carolina bearing docket number 03 SP
391.
. . . .
10. The Garrens never received proper and
legal service of process with regard to the
foreclosure bearing docket number 03 SP 391,
Henderson County, and therefore the purported
foreclosure as to the Garrens and/or their 1
acre tract of land as described in Book 978,
page 488 is ineffective and of no force and
effect.
Based upon, inter alia, the above findings, the trial court
concluded, in pertinent part, that:
2. This Court has the equitable power to
reform any and all deeds and deeds of trust
referred to herein in order to reflect the
true intentions of the parties and to restore
property inadvertently foreclosed upon as
stated herein.
Accordingly, the trial court ordered, in relevant part, that:
1. The deed of trust recorded in Book 800,
page 420, Henderson Registry is hereby
reformed to reflect the true intentions of the
parties so that the property described therein
is that certain 1 acre tract recorded in Book
978, page 488, Henderson Registry.
2. The Order allowing foreclosure of the deed
of trust recorded in Book 701, page 459,
Henderson Registry of a 3.43 acre tract said
Order bearing docket number 03 SP 391 is
hereby reformed to be effective only as to an
approximate 2.6 acre portion of said property.
The 2.6 acre tract can be determined by
reference to the Banks' original deed recorded
in Book 868, page 787, Henderson Registry,
less the 1 acre portion conveyed to the
Garrens by deed recorded in Book 978, page
488, Henderson Registry. Any purported
foreclosure of the Garrens 1 acre tract is
hereby declared null and void.
3. The deed dated August 15, 2003 from Kellum
and Pettit, P.A., Substitute Trustee, to
Associates Mortgage and Financial Services,
Inc. n/k/a Cityfinancial Mortgage Company,
Inc. purporting to convey 3.43 acres to
Citifinancial and recorded in Book 1150, Page
503, Henderson Registry, is hereby reformed
and amended to reflect only a conveyance of
the property the substitute Trustee acquired
by foreclosure in 03 SP 391 which included all
that property described in Book 701, Page 459,
Henderson Registry, less the property
described in Book 978, Page 488, Henderson
Registry [2.6 acres].
4. The deed dated September 26, 2003 from
plaintiff to defendant Ronnie Gray purporting
to convey 3.43 acres to Gray and recorded in
Book 1155, page 691, Henderson Registry is
hereby reformed and amended to reflect only a
conveyance of the property plaintiff acquired
by foreclosure in 03 SP 391 which included all
that property described in Book 701, page 459,
Henderson Registry, less the property
described in Book 978, Page 488, Henderson
Registry [2.6 acres].
Defendant Gray filed timely notice of appeal.
This Court has stated that, in a bench trial,
in which the superior court sits without a
jury, 'the standard of review is whether there
was competent evidence to support the trial
court's findings of fact and whether its
conclusions of law were proper in light of
such facts. Findings of fact by the trial
court in a non-jury trial . . . are conclusive
on appeal if there is evidence to support
those findings. A trial court's conclusions
of law, however, are reviewable de novo.'
Luna v. Division of Soc. Servs., 162 N.C. App. 1, 4, 589 S.E.2d
917, 919 (2004) (quoting Shear v. Stevens Building Co., 107 N.C.
App. 154, 160, 418 S.E.2d 841, 845 (1992)). In addition, findings
of fact to which error is not assigned are binding on this Court. Johnson v. Herbie's Place, 157 N.C. App. 168, 180, 579 S.E.2d 110,
118, disc. review denied, 357 N.C. 460, 585 S.E.2d 760 (2003).
In defendant's first argument on appeal, Gray contends the
trial court erred by equitably reforming the following written
instruments because plaintiff failed to present clear and
convincing evidence of any mistake in: (1) the 15 January 1999 deed
of trust in which the Garrens conveyed the entire 3.43-acre tract
of land to plaintiff to secure a loan, which was reformed to
reflect 1.0 acre; (2) the foreclosure of the deed of trust,
recorded in Book 701, Page 459, Henderson County registry that
conveyed 3.43 acres, which was reformed to reflect 2.6 acres and
also decreed that the Garrens 1.0 acre was unaffected; (3) the 15
August 2003 deed in which, after the foreclosure sale, the
substitute trustee conveyed to plaintiff the entire 3.43 acre tract
of land, which was reformed to reflect 2.6 acres; and (4) the 26
September 2003 deed in which plaintiff conveyed the entire 3.43-
acre tract of land to Gray, which was reformed to reflect 2.6
acres.
It is a well-settled principle of our jurisprudence that:
. . . a Court of Equity, or a court exercising
equitable jurisdiction, will decree the
reformation of a deed or written instrument,
from which a stipulation of the parties, with
respect to some material matter, has been
omitted by the mistake or inadvertence of the
draughtsman, is well settled, and frequently
applied. The equity for the reformation of a
deed or written instrument extends to the
inadvertence or mistake of the draughtsman who
writes the deed or instrument. If he fails to
express the terms as agreed upon by the
parties, the deed or instrument will be so
corrected as to be brought into harmony withthe true intention of the parties. All the
authorities are agreed, says Hoke, J., in King
v. Hobbs, 139 N.C. 170, 51 S. E. 911, that a
deed or written instrument will be reformed so
as to express the true intent of the parties
when by a mistake or inadvertence of the
draughtsman a material stipulation has been
omitted from the deed or instrument as
written. If the deed or written instrument
fails to express the true intention of the
parties, it may be reformed by a judgment or
decree of the Court, to the end that it shall
express such intent whether the failure is due
to mutual mistake of the parties, to the
mistake of one, and the fraud of the other
party, or to the mistake of the draughtsman.
Crawford v. Willoughby, 192 N.C. 269, 271, 134 S.E. 494, 495
(1926)(internal citations omitted).
Accordingly, our Supreme Court further articulated:
The party asking for relief by reformation of
a deed or written instrument, must allege and
prove, first, that a material stipulation, as
alleged, was agreed upon by the parties, to be
incorporated in the deed or instrument as
written, and second, that such stipulation was
omitted from the deed or instrument as
written, by mistake, either of both parties,
or of one party, induced by the fraud of the
other, or by the mistake of the draughtsman.
Equity will give relief by reformation only
when a mistake has been made, and the deed or
written instrument because of the mistake does
not express the true intent of both parties.
Id. at 271-272, 134 S.E. at 495-96.
In the case sub judice, there was competent record evidence
presented of mistake due to the inadvertence of the draftsmen of
the challenged instruments. Therefore, the trial court did not err
by utilizing its equitable powers to reform the instruments in
order to effectuate the original intent of the parties.
Specifically, the duly recorded document entitled “ExplanationStatement to Correct Obvious Minor Error(s) Made in an Instrument
as Originally Recorded Re: Book 976 Page 399” put all purchasers on
constructive notice that the conveyance from the Banks to the
Garrens should have been the one acre tract that the Banks agreed
to sell and the Garrens agreed to purchase.
(See footnote 1)
See Kraft v. Town of
Mt. Olive, __ N.C. App. __, __, 645 S.E.2d 132, 136 (2007) (“[T]his
Court has held that a purchaser will have constructive notice of
all duly recorded documents that a proper examination of the title
should reveal.”)(citing Stegall v. Robinson, 81 N.C. App. 617, 619,
344 S.E.2d 803, 804 (1986)).
Additionally, at the hearing, plaintiff's default litigation
specialist, Deborah Guffey, testified as follows:
Q: Okay. Now, subsequent to that, did
[plaintiff] get information regarding the fact
that Mr. Banks wanted to convey a portion of
this property to one of his relatives, Ms.
Garren?
A: Yes. . . . . They went to a branch and got
approval for a loan, the Garrens did, and for
the one acre.
Q: And what was supposed to happen with regard
to the fact that there was already a deed of
trust on this property of 3.43 acres?
A: We were supposed to do a partial release of
that, of the one acre.
. . . .
Q: Was it the intention of [plaintiff] at that
time to release this one acre from the effects
of the deed of trust recorded in Book 701 at
page 459, - -
. . . .
A: Yes. We were to do that partial release.
. . . .
Q: And the description of that property, is
that stated in that deed book and page number
as 3.43 acres?
A: Right; yes, sir.
Q: Was that in error?
A: Yes, sir. It was only supposed to be one
acre.
Q: So you acknowledge that -- the security was
only supposed to be one acre and they [the
Garrens] were supposed to only own one acre at
that time?
A: Yes sir.
On direct examination, Guffey further testified as follows
regarding the transaction from plaintiff to Gray:
Q: Was it just the Banks property that was
supposed to be advertised and sold?
A: Yes, sir.
Q: And that was the roughly 2.6 acres?
A: Yes.
Q: And as far as you know, is that what he
did?
A: Yes.
Q: And I believe there was an offer received
by Mr. Gray to purchase the property . . . .
A: Yes, sir.
Q: And then a deed was prepared and a deed --
and property sold to Mr. Gray?
A: Yes, sir.
Q: Was the deed in error?
A: Yes.
Q: Why was the deed in error?
A: The legal description's wrong.
Q: How is it wrong?
A: It's conveying more property than we had a
right to sell.
Q: Did it convey the entirety of the 3.43
acres?
A: Yes, sir.
Q: And was it only supposed to contain the
property of Mr. Banks, which was approximately
2.6 acres?
A: Yes, sir.
Consequently, the record evidence reveals the following essential
facts and circumstances surrounding the intent and understanding of
the parties to the subject instruments, which adequately show the
mistake of the draftsman who was entrusted to prepare the
instruments. Bank of Union v. Redwine, 171 N.C. 559, 566, 88 S.E.
878, 882 (1916)(citation omitted): (1) The Garrens agreed to
purchase and the Banks agreed to sell a one-acre tract of the
Banks' 3.43-acre tract of land; (2) Plaintiff agreed to release
only one acre of the 3.43-acre tract of the Banks' land; (3) TheGarrens therefore had notice from the deed they received from the
Banks that it incorrectly conveyed the entire 3.43 acres; (4)
Regarding the Garren's deed of trust to plaintiff of 15 January
1999, the Garrens knew that they could only convey the one-acre of
land as collateral for the deed of trust and plaintiff knew it
could receive only the one-acre tract of land as collateral; (5)
Plaintiff had both actual and constructive notice that the
conveyance from the substitute trustee to it of the entire tract of
3.43-acres, instead of the 2.6 acres, was in error, and the
substitute trustee had constructive notice of the same; and (6)
plaintiff had actual and constructive notice of the proper amount
of acreage to deed to Gray, and Gray had constructive notice of the
same.
Thus, the parties on both sides of the transactions of each
instrument possessed mutuality regarding one of the essential terms
of the transaction, namely, the amount of acreage to convey. Each
instrument in the chain of title bears evidence of a facial
mistake, and the record reveals no reason other than inadvertence
or oversight on the part of the drafter of the instruments to
explain the omission of the accurate and bargained for acreage of
land. See Bank of Union, 171 N.C. at 566, 88 S.E. at 882 (holding
that reformation of the deed was proper where the deed bore
evidence of a facial mistake and that in the absence of a mistake
of the draftsman of the instrument, the record revealed no other
evidence to explain the same); see also Rutledge v. Smith, 45 N.C.
283, 285 (1853)(plaintiff had “plain equity” to have mistakecorrected where omission of word “heirs” in deed of trust was an
oversight.). Consequently, the record contains competent evidence
to support the trial court findings that the subject instruments
were in error and the findings, in turn, support the conclusion
that the trial court had the equitable authority to reform the
challenged instruments in order to reflect the true intention of
the parties. The relevant assignments of error are overruled.
Defendant next contends the trial court erred by finding that
the Garrens never received proper service of process and therefore
the purported foreclosure as to the Garrens' one-acre tract of land
was ineffective. Defendant contends that the trial court could not
have decided the issue of whether the Garrens received proper
service, because this issue was not properly before the trial
court. We note that plaintiff made no allegation in the complaint
that the Garrens failed to receive proper service. However,
plaintiff offered evidence to the trial court regarding the failure
of notice to the Garrens to which defendant did not object.
Pursuant to N.C. Gen. Stat. § 1-A, Rule 15(b) (2005), the trial
court could properly decide the matter. However, even if the
matter was not properly before the trial court, defendant is still
not entitled to any relief because, as discussed previously, we
concluded that the trial court had the equitable authority to
reform the instruments due to the multiple draftsmen errors in the
chain of title. Additionally, we concluded that plaintiff had
actual and constructive notice of the acreage to be conveyed to
defendant and Gray had constructive notice of the acreage thatshould have been conveyed to him. Regardless of whether the
foreclosure was effective or ineffective, the trial court still
retained the authority to reform the instruments. The deed to
defendant Gray by plaintiff was properly reformed to reflect the
true intentions of the parties.
In defendant Gray's final argument on appeal, he contends the
trial court erred by bifurcating the trial into two parts.
However, this argument was not properly preserved for appellate
review. “Assignments of error . . . in support of which no reason
or argument is stated or authority cited, will be taken as
abandoned.” N.C.R. App. P. 28(b)(6); Wilson Ford Tractor, Inc. v.
Massey-Ferguson, Inc., 105 N.C. App. 570, 574, 414 S.E.2d 43, 46,
aff'd, 332 N.C. 662, 422 S.E.2d 576 (1992). As defendant has not
cited any authority in support of this argument, it is deemed
abandoned and we do not address it.
Affirmed.
Judges MCGEE and STEPHENS concur.
*** Converted from WordPerfect ***