January 13, 1978
Subject:
Mortgages and Deeds of Trust: Discharge of Instrument by Acknowledgment.
Requested By:
Mrs. Mary B. Carriker Register of Deeds Union County
Question:
Where a deed of trust and note secured thereby have been lost and the trustee is absent or has otherwise been rendered incompetent, may the party secured by that deed of trust acknowledge satisfaction of the instrument under N.C.G.S. 45-37-(a)(1)?
Conclusion:
No.
N.C.G.S. 45-37(a)(1) provides that acknowledgement of satisfaction of a deed of trust, mortgage or other instrument may be made by (a) the trustee, (b) the mortgagee, (c) the legal representative of a trustee or mortgagee or (d) a duly authorized agent of any of the above.
Unless the secured party falls into one of the above listed categories, he may not acknowledge satisfaction but must use some other method under N.C.G.S. 45-37 to discharge the instrument of record. The statute must be strictly complied with. Mills v. Kemp, 196 N.C. 309, 145 S.E. 557 (1928).
The secured party in a deed of trust is generally not the trustee. Nor is there anything in the question asked to indicate that the secured party is a legal representative of the trustee or a duly authorized agent or attorney. The question then is whether the secured party in a deed of trust is a mortgagee?
"In costruing a statute it will be presumed that the legislature comprehended the import of the words employed by it to express its intent. Accordingly, technical terms must ordinarily be given their technical connotation." 7 Strong’s N.C. Index 2d, Statutes, § 5 (1968).
Technically, the secured party in a deed of trust in not a mortgagee, but a beneficiary of cestui que trust. Osborne, Mortgages, § 17 (2nd ed 1970).
There are three parties to a deed of trust – the grantor or trustor, the trustee and the cestui que trust (beneficiary). There are only two parties to a mortgage, the mortgagor and the mortgagee.
The Courts clearly recognize a difference between the true mortgage and a deed of trust as evidenced by the following statement, "Upon the execution of a mortgage or deed or trust on real estate, legal title to the land vests in the mortgagee or trustee, as the case may be." Simms v. Hawkins, 1 N.C. App. 168, 160 S.E. 2d 514 (1968). (Emphasis added).
Unlike the trustee or mortgagee, the secured party does not hold legal title. Webster, Real Estate Law in North Carolina, § 228-230 (1971). Thus, the secured party in a deed of trust is not synonymous with a mortgagee.
As a further indication that the Legislature did not intend for the secured party to have authority to acknowledge satisfaction of a deed of trust, N.C.G.S. 45-37.1 was enacted to validate cases (prior to 1930) where the secured party/beneficiary had made the acknowledgment. If the secured party had such authority there would be no reason or need for the validating statute.
In conclusion, the secured party in a deed of trust must not acknowledge satisfaction of that instrument under N.C.G.S. 45-37(a)(1).
Since the instruments are missing and since the trustee is absent or otherwise incompetent the appropriate procedure would be to appoint a substitute trustee under N.C.G.S. 45-10 or 45-11. That person could then acknowledge satisfaction of the note and deed of trust in accordance with those provisions and N.C.G.S. 45-37(a)(1) [*4] .
Rufus L. Edmisten Attorney General
Lucien Capone, III Associate Attorney General