Bank of Am., N.A. v. Schmitt
263 N.C. App. 19
| N.C. Ct. App. | 2018Background
- Gary and Mary Schmitt own two contiguous tracts in Macon County: Tract B (18.14 acres, includes their home) and Tract C (17.33 acres, vacant).
- In 2008 the Schmitts executed a deed of trust to Bank of America (the 2008 Deed of Trust) that described the property in three ways: (1) by legal description referencing Tract C, (2) by listing parcel I.D. numbers for both Tract B and Tract C, and (3) by the street address for Tract B.
- In 2015 BANA sued for a declaratory judgment (and alternatively reformation) seeking a ruling that the 2008 Deed of Trust encumbered both tracts; the Schmitts counterclaimed for reformation to show the deed was intended to cover Tract B only.
- The trial court submitted both construction and reformation issues to a jury; the jury found the deed encumbered only Tract C and denied reformation for both parties.
- The trial court entered judgment on the jury verdict; BANA filed post-trial motions which were denied, and appealed.
- The Court of Appeals held deed construction is a question of law for the court, concluded as a matter of law the 2008 Deed of Trust intended to encumber both tracts, and affirmed the denial of the Schmitts’ reformation claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether interpretation of the 2008 Deed of Trust is a question for the jury or the court | Construction is for the court; trial court erred by submitting to jury | Construction could involve extrinsic evidence and thus factual issues for a jury | Interpretation of the deed is a question of law for the court; submitting to the jury was error |
| Whether the 2008 Deed of Trust encumbers Tract B, Tract C, or both | Deed language (parcel numbers, address, uniform instrument language) evidences intent to encumber both tracts | Deed’s primary legal description references only Tract C, so it should encumber only Tract C | As a matter of law the deed’s four-corners (parcel IDs, address, uniform-instrument/occupancy language) show intent to encumber both Tract B and Tract C |
| Whether BANA’s claim to reform the deed to include both tracts is necessary | Not necessary because the deed already encumbers both tracts as written | -- (moot given Schmitts’ counterclaim) | BANA’s reformation claim is moot because the court construes the deed to encumber both tracts |
| Whether the Schmitts proved mutual mistake to reform the deed to cover only Tract B | N/A | The parties mutually intended only Tract B to be collateral; deed should be reformed to reflect that intention | Schmitts failed to prove mutual mistake by clear, strong, and convincing evidence; reformation denied |
Key Cases Cited
- Brown v. Hodges, 232 N.C. 537 (1950) (construction of deeds historically a question of law for the court)
- Mason-Reel v. Simpson, 100 N.C. App. 651 (1990) (statutory intent interpretation remains judge's responsibility)
- Runyon v. Paley, 331 N.C. 293 (1992) (extrinsic evidence may resolve ambiguity but determination of intent is judge's task)
- Sudds v. Gillian, 152 N.C. App. 659 (2002) (elements required to reform an instrument for mutual mistake)
- Textile Ins. Co. v. Lambeth, 250 N.C. 1 (1959) (reformation requires clear, strong, and convincing proof)
- Metro. Prop. & Cas. Ins. Co. v. Dillard, 126 N.C. App. 795 (1997) (definition of mutual mistake for reformation)
- Inland Harbor v. St. Joseph, 366 N.C. 376 (2012) (reformation characterized as judicial/equitable remedy)