House Bill 545, Session Law 2008-194

This legislation contains many clarifying and amendatory provisions. Among the many miscellaneous provisions, were two notary validation amendments and several substantive changes pertaining to the Register of Deeds. The substantive changes consist of amendments further enabling or clarifying electronic document recording, changing the re-recording statute and codifying the definition of “indexing” for recording notice conforming to the decision in Pottle v. Link, COA07-359, filed on December 18, 2007.

Of particular concern to practitioners should be the revision to N.C.G.S. Section 47-36.1 which can be fairly said to eliminate its effectiveness as a corrective statute. Although the statute was originally clearly a corrective statute, the language enabling its corrective affect has been deleted suggesting that the resulting legal affect is that it is no longer a corrective statute, but rather a notice statute despite some allusions to “corrective affidavits”. The provision was originally adopted to permit the attorney drafting an instrument to make minor corrections without requiring re-execution and acknowledgment. It has been observed that many of the attempts to "correct" defective instruments under the statute as it existed were not effective as they often exceeded the limited scope of the statute. Even if some were effective, they would be effective only from the date the "corrected" document was recorded and as there was no relation back provision any intervening matters of record would defeat the corrective effect.

Some real estate practitioners assumed that if a deed of trust referenced an attached description exhibit and it turned out not to be attached upon recording, that it would be an acceptable practice to re-record the instrument with the description attached pursuant to N.C.G.S. Section 47-365.1. The statute does not give guidance as to what constitutes an “obvious” error, however Green v. Crane, 96 N.C.App. 464 (1990) has shown us that an omitted description should not be considered as being within the purview of the statute. In Re: Hudson, NO. COA06-345, filed on April 3, 2007 may very well prove to be a ‘must read’ decision for real property practitioners. The North Carolina Court of Appeals affirmed the decision of the Superior Court invalidating a deed of trust due to description issues in a de novo hearing on the appeal of the ruling of the Clerk of Superior Court in a foreclosure proceeding. The court ruled that the Statute of Frauds requires that the description must be attached to the deed of trust at the time of it its execution for the instrument to be valid. This ruling lends ammunition to the implications of Green as being a prohibition of the practice of subsequent rerecording with a new attachment if the attachment is necessary to the validity of the conveyance.

The existing statute has been construed strictly by the courts, thus we infer that an error must be obvious on its face or, at the very least, should not change the obligations of the grantor before the statute could be used. Where the instrument contains information on its face that is sufficient to describe the property, the attachment is arguably surplusage and re-recording with the attachment would be harmless clarification. The old statute provided:

"§ 47‑36.1.  Correction of errors in recorded instruments.

Notwithstanding G.S. 47‑14 and 47‑17, an obvious typographical or other minor error in a deed or other instrument recorded with the register of deeds may be corrected (emphasis added) by rerecording the original instrument with the correction clearly set out on the face of the instrument and with a statement of explanation attached. The parties who signed the original instrument or the attorney who drafted the original instrument shall initial the correction and sign the statement of explanation. If the statement of explanation is not signed by the parties who signed the original instrument, it shall state that the person signing the statement is the attorney who drafted the original instrument. The statement of explanation need not be acknowledged. Notice of the correction made (emphasis added) pursuant to this section shall be effective from the time the instrument is rerecorded."

The new statute, effective October 1, 2008, provides:

  
SECTION 7.(c)  G.S. 47‑36.1 reads as rewritten:

"§ 47‑36.1.  Correction of errors in recorded instruments.

Notwithstanding G.S. 47‑14 and G.S. 47‑17, notice of typographical or other minor error in a deed or other instrument recorded with the register of deeds may be given by recording an affidavit. If an affidavit is conspicuously identified as a corrective or scrivener's affidavit in its title, the register of deeds shall index the name of the affiant, the names of the original parties in the instrument, the recording information of the instrument being corrected, and the original parties as they are named in the affidavit. A copy of the previously recorded instrument to which the affidavit applies may be attached to the affidavit and need not be a certified copy. Notice of the corrective information as provided by the affiant is deemed to have been given as of the time the corrective affidavit is registered. Nothing in this section invalidates or otherwise alters the legal effect of any instrument of correction authorized by statute in effect on the date the instrument was registered. "

It seems obvious that the Legislature’s elimination of the language giving corrective effect and substitution of language only providing for notice will be deemed significant when interpreted by courts inclined to strict interpretation is in Greene and In re: Hudson. The statute will be useful to provide clarification concerning errors that are not substantive. An example would be a deed of trust calling for an attached description but including a property address in the description section that is sufficient to pass title. Even though sufficient a corrective affidavit would eliminate question as to the appropriate metes and bounds description. Another example would be the instance where a typographical error in the map reference does not create any ambiguity in the description but the drafter wishes to give notice of the correct reference.

The Statute provides that “Nothing in this section invalidates or otherwise alters the legal effect of any instrument of correction authorized by statute in effect on the date the instrument was registered.” Thus, it is clear that the amendment does not foreclose the common law methods of correcting such errors such as filing a correction deed, making corrective changes evidenced by re-execution and acknowledgement on original instrument and re-recording, or by a reformation action because the word "statute" is used rather the word "law". These methods have always been the preferred method of correction as there is no question as to their effectiveness if done carefully.

The practice of re-recording conveyances pursuant to N.C.G.S. Section 47-36.1 as a result of description errors should always have been considered judiciously.  The new provisions make it prudent where title insurance is to be secured that a consultation with underwriting counsel should be considered essential to discuss the effect, if any, of a corrective affidavit upon the title to the proposed insured land