Den-Mark Properties, LLC v. SunTrust Bank et al

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
DEN-MARK PROPERTIES, LLC
DEBTOR
___________________________________________
CASE NO. 08-04084-8-RDD
DEN-MARK PROPERTIES, LLC
Plaintiffs
v.
SUNTRUST BANK and
SOUTHLAND ASSOCIATES, INC.
Defendants and Third-Party Plaintiffs
v.
DEN-MARK CONSTRUCTION, INC.
Third-Party Defendants
___________________________________________
ADVERSARY PROCEEDING
NO. 08-00196-8-RDD
SO ORDERED.
SIGNED this 27 day of March, 2009.
________________________________________
Randy D. Doub
United States Bankruptcy Judge
____________________________________________________________
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MEMORANDUM OPINION IN SUPPORT OF ORDER GRANTING
SUMMARY JUDGMENT IN FAVOR OF DEN-MARK PROPERTIES,
LLC AND DENYING MOTION FOR RECONSIDERATION
Pending before the Court is the Motion for Summary Judgment and the accompanying
Memorandum of Law (collectively, the “Summary Judgment Motion”) filed by Den-Mark
Properties, LLC (“Den-Mark LLC”) and the Memorandum of Law of SunTrust Bank in
Opposition to Motion for Summary Judgment by Den-Mark Properties, LLC (the “Opposition”)
filed by SunTrust Bank (“SunTrust”) and Southland Associates, Inc., as Trustee 	(“Southland,”
collectively referred to herein with SunTrust as the “Defendants”). On January 15, 2009, the
Court conducted a hearing on this matter in Greenville, North Carolina.
In addition, on January 28, 2009, the Defendants filed a Motion to Reconsider the ruling
from the bench on the Summary Judgment Motion and an accompanying memorandum of law
(collectively, the “Reconsideration Motion”). Subsequently, on February 3, 2009, Den-Mark
LLC filed its Response to the Reconsideration Motion. The Court conducted a hearing on the
Reconsideration Motion on March 3, 2009 and the parties stipulated on the record the extent to
which Den-Mark LLC is attempting to set aside the Second Deed of Trust.
PROCEDURAL HISTORY
1. 	On September 24, 2008, Den-Mark LLC filed a complaint against SunTrust and
Southland requesting the Court to invalidate a second deed of trust, to determine that the
claims of the Defendants are unsecured with respect to certain properties, and to require
amounts held in escrow resulting from the sale of certain properties be paid to Den-Mark
LLC.
2. 	On October 22, 2008, Den-Mark filed its Summary Judgment Motion.
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1The Amended Answer was filed on behalf of SunTrust and Southland. Southland is the trustee under the
Second Deed of Trust (hereinafter defined).
2Based on the pleadings, the Defendants had knowledge of the hearing schedule and Den-Mark LLC’s
alleged insufficient discovery responses well in advance of the hearing. However, the Defendants waited until a few
days prior to the hearing to file their Motion to Compel. Similarly, the original Answer to the Complaint was filed on
October 27, 2008, yet the Defendants did not inform the Court of their concern regarding discovery until a Motion to
Continue was filed on November 17, 2008, the date before the first scheduled hearing. But for the Motion to
Continue, the Defendants failed to timely file any documents responsive to the Summary Judgment Motion.
Federal Rule of Civil Procedure 56(f), made applicable by Federal Rule of Bankruptcy Procedure 7056.
applies to continuance requests in connection with motions for summary judgment. More specifically, Fed. R. Civ.
Pro. 56(f) provides: “[s]hould it appear from affidavits of a party opposing the motion that the party cannot for
reasons stated present by affidavit facts essential to justify the party’s opposition, the court may refuse the
application for judgment or may order a continuance to permit affidavits to be obtained or depositions to be taken or
discovery to be had or may make such other order as just.” (emphasis added). Fed. R. Civ. Pro. 56(f) provides a
mechanism for parties to obtain further discovery. In re Hopkins, 153 B.R. 793, 802 (Bankr. M.D. Tenn. 1993). The
burden is placed on the Defendants to show why they could not oppose the summary judgment by affidavit and how
a postponement will rebut Den-Mark LLC’s assertion that there is no genuine dispute of fact. Id.
3
3. 	On October 27, 2008, SunTrust filed its Answer to the Complaint.
4. 	On October 29, 2008, the Court set a hearing on the Summary Judgment Motion for
November 18, 2008 at 10:00 a.m. in Greenville, North Carolina.
5. 	On November 14, 2008, SunTrust amended its answer 1 and filed a counterclaim against
Den-Mark LLC and a third-party complaint against Den-Mark Construction, Inc. (“Den-
Mark Construction”) alleging that a second deed of trust was valid against certain
properties owned by Den-Mark LLC even though Den-Mark Construction executed the
second deed of trust. The Defendants allege this error is not fatal as it was either a
scrivener’s error, a mutual mistake, or a mistake of the parties. The Defendants requested
that the Court reform the deed of trust and deny Den-Mark LLC’s request for funds held
in escrow.
6. 	The Defendants filed a Motion to Continue the November 18, 2008 Hearing on
November 17, 2008 on the basis that additional discovery was necessary. The Motion to
Continue requested that the hearing be continued for at least sixty (60) days. 2
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The Court recognizes the importance of discovery but notes that the Defendants failed to satisfy the
affidavit requirements of Fed. R. Civ. Pro. 56(f). Because the Summary Judgment Motion was filed at such an early
stage in the case, the Court made “such other order as just” in allowing the continuance for discovery to be
completed.
3Den-Mark LLC stated that the documents speak for themselves and, as of the hearing date, it did not intend
to conduct any discovery in connection with this adversary proceeding.
4
7. 	At the hearing on November 18, 2008, counsel for the Defendants stated that request for
production of documents and the first set of interrogatories were served on counsel for
Den-Mark LLC on November 14, 2008. Counsel for SunTrust and Southland asserted
that since he had just served the discovery request, Den-Mark LLC had not had the
opportunity to respond to the requested discovery.3
8. 	At the hearing on November 18, 2008, the Court allowed the Motion to Continue the
Hearing and, at the request of counsel for the Defendants, reset the hearing for January
15, 2009.
9. 	On November 24, 2008, Den-Mark LLC filed its Reply to the Counterclaim and Den-
Mark Construction, Inc. filed its Answer to the Third-Party Complaint.
10. 	On January 12, 2009, approximately two months after the November 18, 2008 hearing,
the Defendants filed a Motion to Compel alleging that Den-Mark LLC’s discovery
responses were insufficient. The Motion to Compel states that counsel for Den-Mark
LLC advised counsel for the Defendants that the discovery responses were mailed on
December 19, 2008. The Defendants allege that “[u]pon receipt of the responses, it was
readily apparent that insufficient responses were given to satisfy the obligations under the
Federal Rules of Civil Procedure.” Motion to Compel, para. 12.
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4 The Defendants’ joint Opposition to the Summary Judgment Motion was filed on January 14, 2009, 83
days after Den-Mark LLC filed and served the Summary Judgment Motion on the attorneys for SunTrust. Although
not raised by Den-Mark LLC, with respect to SunTrust, which was properly served, the Opposition was not timely
filed. Pursuant to E.D.N.C LBR 7007-1(b), a party may file a written response to any motion within twenty (20)
days after service of a motion. No extension of time was moved for, other than the motion to continue the hearing
on November 18, 2008. Accordingly, Den-Mark LLC would have been entitled to summary judgment against
SunTrust based on its untimely response. Fed. R. Bankr. Pro. 7056(e)(2) states “...an opposing party may not rely
merely on allegations or denial in its own pleading; rather, its response must - by affidavits or as otherwise provided
in this rule - set out specific facts showing a genuine issue for trial. If the opposing party does not so respond,
summary judgment should, if appropriate, be entered against that party.” However, the Court finds that the entry of
summary judgment in favor of Den-Mark LLC against both Defendants is proper on substantive grounds.
5
11. 	On January 14, 2009, the Defendants filed their Response to the Motion for Summary
Judgment and its Memorandum of Law in Opposition to the Summary Judgment Motion
(collectively, the “Response”).4 Included as part of the Response was the Affidavit of
Ronald H. Garber, Esquire. Mr. Garber is a North Carolina licensed attorney who is
representing SunTrust and Southland in this case. His affidavit asserts that in his
opinion, evidence exists based on Den-Mark LLC’s operating reports that Den-Mark
Construction and Den-Mark LLC are alter egos and act as agents for one another. In
addition, he asserts that based on a letter, dated March 19, 2003 on Central Carolina Bank
stationery, the parties recognized that certain properties were owned by Den-Mark LLC.
More specifically, the letter states “Central Carolina Bank requests an insured closing
protection letter from the title company. In addition, please note that some of the
properties are owned by Den-Mark Properties, LLC and these will need to be
hypothecated in the deed of trust.” Defendant’s Exhibit 2 to the Response. That letter
also shows a handwritten note above the subject property/collateral description stating
“owned by Den-Mark Properties.”
12. 	Also on January 14, 2009, Den-Mark LLC filed a supplement to its Motion for Summary
Judgment including an affidavit from Harold E. Russell, Jr., Esquire.
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STANDARD FOR SUMMARY JUDGMENT
“[S]ummary judgment is proper ‘if the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, if any, show that there is no genuine issue as
to any material fact and that the moving party is entitled to judgment as a matter of law.” Celotex
Corp. v. Catrett, 477 U.S. 317, 322 (1986). In making this determination, conflicts are resolved
by viewing all facts and all reasonable inferences in the light most favorable to the non-moving
party. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962). If there is no genuine issue of
material fact, and the issue to be decided is a matter of law, a ruling on a motion for summary
judgment is appropriate.
DISCUSSION
Den-Mark LLC, as a debtor-in-possession and pursuant to Sections 1107(a) and
544(a)(1) of the Bankruptcy Code, seeks to invalidate a second deed of trust held by SunTrust, as
successor-in-interest to Central Carolina Bank, in connection with the Real Properties
(hereinafter defined). Den-Mark LLC alleges that the second deed of trust was not executed by
the entity that owned the Real Properties at the time the deed of trust was signed and the
purported lien attached. More specifically, Den-Mark Construction, Inc. (“Den-Mark
Construction”) executed the second deed of trust. However, numerous properties listed in said
deed of trust were not owned by Den-Mark Construction. Den-Mark LLC asserts that since it
owned the subject Real Properties, Den-Mark Construction was unable to grant a lien to
SunTrust. Accordingly, Den-Mark LLC argues that the second deed of trust should be
invalidated to the extent that Defendants assert a lien against any of the Real Properties listed on
the second deed of trust that Den-Mark LLC actually owned.
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5The Second Deed of Trust was executed by Den-Mark Construction; however, SunTrust’s admission only
goes to the fact that the Second Deed of Trust is not executed by Den-Mark LLC.
6 To date, Den-Mark LLC has not challenged the validity of the purported first lien that SunTrust holds
against some or all of the properties at issue in this proceeding.
7
In response, the Defendants allege that Den-Mark LLC should be estopped from denying
the pledge of real property as security regardless of whether the properties were owned by Den-
Mark Construction or Den-Mark LLC. SunTrust and Southland assert that Den-Mark LLC
would be unjustly enriched if the second deed of trust was held invalid. The Defendants assert
that the parties intended for a lien to attach to the real properties and that a scrivener’s error or
mutual mistake of the parties must have happened. The Defendants allege that such a mistake is
not fatal to the second deed of trust’s validity. To the contrary, SunTrust and Southland assert
that the second deed of trust should be reformed to reflect that parties’ original intent.
SunTrust also claims that even if reformation is not allowed, the fact remains that Den-
Mark LLC is an alter-ego of Den-Mark Construction and Den-Mark Construction was acting in
the capacity of an agent when it executed the second deed of trust.
UNDISPUTED FACTS
1. 	On March 21, 2003, a second deed of trust in the amount of six hundred thousand dollars
($600,000.00) in favor of Central Carolina Bank, a division of National Bank Commerce,
encumbering certain real property located in Wake and Franklin Counties (the “Second
Deed of Trust”) was executed.5
2. 	In 2004, Central Carolina Bank’s parent, National Commercial Financial Corp., merged
with SunTrust. The parties agree that SunTrust is the current holder of the Second Deed
of Trust.6
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7The parties stipulated to the list of properties in open court at the hearing on the Reconsideration Motion
held in Wilson, North Carolina on March 3, 2009.
8
3. 	The Second Deed of Trust is recorded in Book 9986, Pages 1331-1339 in the Office of
the Wake County Register of Deeds and in Book 1325, Page 976-984 in the Office of the
Franklin County Register of Deeds.
4. 	The Summary Judgment Motion only applies to the following nineteen (19) properties
purportedly encumbered by the Second Deed of Trust: 7
Lot 17 Green Estates Sub. 	215 Broken Arrow Trail, Youngsville
Lot 47 Pigeon Point 	65 Beaver Ridge Drive, Youngsville
Lot 17 Pigeon Point 	185 Eagleston Ridge, Youngsville
Lot 3 Cedar Creek West 	1760 Mays Crossing, Franklinton
Lot 4 Cedar Creek West 	30 Hill Road, Franklinton
Lot 5 Cedar Creek West 	40 Hill Road, Franklinton
Lot 8 Cedar Creek West 	10 Cedarhurst Road, Franklinton
Lot 25 Flaherty Farm 	617 Flaherty Avenue, Wake Forest
Lot 28 Flaherty Farm 	629 Flaherty Avenue, Wake Forest
Lot 34 Flaherty Farm 	653 Flaherty Avenue, Wake Forest
Lot 50 Flaherty Farm 	608 Groveton Trail, Wake Forest
Lot 52 Flaherty Farm 	616 Groveton Trail, Wake Forest
Lot 54 Flaherty Farm 	624 Groveton Trail, Wake Forest
Lot 80 Wallridge Subdivision 	601 Flicker Court, Wake Forest
Unit 1A Highgate Park Townhomes 201 Highgate Circle, Wake Forest
Lot 2 Green Subdivision 	172 N Taylor Street, Wake Forest
Lot 2 Green Subdivision 	714 N Taylor Street, Wake Forest
Lot 2 Green Subdivision 	716 N Taylor Street, Wake Forest
Lot 2 Green Subdivision 	718 N Taylor Street, Wake Forest
(collectively referred to herein as the “Real Properties”).
ANALYSIS
In order to determine the relative rights of the parties to a deed of trust, this Court
looks to North Carolina law. Kirkhard v. Boardwalk Development Company, Inc. (In re
Boardwalk Development Co.), 72 B.R. 152, n. 3 (Bankr. E.D.N.C. 1987) (citing Butner v. United
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8The Defendants admit to the existence of a deed of trust with the same time and date stamps but do not
admit that Den-Mark Construction was listed as the grantor on that document.
9
States, 440 U.S. 48 (1979) and In re Cunningham, 48 B.R. 509, 512 n.1 (Bankr. M.D. Tenn
1985)).
North Carolina General Statute § 22-2 provides that “all contracts to sell or convey any
lands . . . shall be void unless said contract or some memorandum or note thereof, be put in
writing and signed by the party to be charged therewith or by some other person by him thereto
lawfully authorized.” A deed of trust is a transfer of interest in land that must satisfy the
requirements of the Statute of Frauds. In re Hudson, 182 N.C. App. 499, 503, 642 S.E.2d 485,
488-89 (2007).
Den-Mark Construction did not hold record title to the Real Properties at the time of the
execution or subsequent recording of the Second Deed of Trust. The Real Properties were either
owned in fee by Den-Mark LLC or Dennis and Starlette Cyrus. Attached to its Summary
Judgment Motion, Den-Mark LLC provided the Court copies of the deeds setting forth the
record owners of the Real Properties that are subject to its Summary Judgment Motion. The
Defendants’ Opposition did not dispute that Den-Mark Construction was not the record title or
fee owner of the Real Properties.
In connection with the Second Deed of Trust, Den-Mark LLC attached a copy of the
recorded deed of trust to its Summary Judgment Motion. The Amended Answer admits that a
deed of trust was recorded at 11:06:08 a.m. on March 21, 2003 in Office of the Wake County
Register of Deeds and at 11:35 a.m. on April 4, 2003 in the Office of the Franklin County
Register of Deeds.8 The Second Deed of Trust provided by Den-Mark LLC includes the same
time and date references as described by the Defendants in their Amended Answer. As was the
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case with the deeds, the Defendants did not present any documentation disputing the accuracy of
the Second Deed of Trust as it appears in the public record. Accordingly, the Court having
reviewed the requisite pleadings and accompanying exhibits finds that the Second Deed of Trust
was executed by Den-Mark Construction and based on the undisputed copy of certain deeds
presented to the Court, Den-Mark Construction did not own the Real Properties at the time the
Second Deed of Trust was executed and recorded. Since Den-Mark Construction did not own
the Real Properties, a land records search of the record title owner would not have revealed the
Second Deed of Trust. See affidavit of Harold E. Russell.
The North Carolina recordation statute, N.C.G.S. § 47-20, is essentially a “race”
recordation statute whereby the one who is first to record in the proper register of deeds has
priority. In re Price, 97 B.R. 264, 265 (Bankr. E.D.N.C. 1986). Section 47-20 of the North
Carolina General Statutes provides that upon proper registration, the encumbrance is valid
against lien creditors or purchasers for value. N.C.G.S. § 47-20. The word creditor in this
section includes, but is not limited to, liens obtained by the judicial process. Comm. Credit Co. of
Lenoir, Inc. v. Norwood, 257 N.C. 87, 91, 125 S.E.2d 369, 372 (1962).
The Second Deed of Trust was not properly recorded as it purported to secure property
that was not owned by the party signing the deed of trust. Consequently, a judgment lien creditor
of Den-Mark LLC or purchaser for value from Den-Mark LLC would have had priority over
SunTrust, and its successors, or assignees on the Real Properties.
Sections 1107(a) and 544(a)(1) of the Bankruptcy Code, permit Den-Mark LLC, as a
debtor-in-possession, to step into the shoes of a judgment lien creditor as of the date of the
petition.
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Pursuant to Section 1107(a) of the Bankruptcy Code, a debtor becomes a “debtor-in-
possession” upon the filing of the Chapter 11 bankruptcy petition. A debtor-in-possession has
all the rights and powers of the Chapter 11 trustee, including those under 11 U.S.C. § 544(a). 11
U.S.C. § 1107(a); see also In re Millerburg, 61 B.R. 125 (Bankr. E.D.N.C. 1986) (recognizing
that a debtor-in-possession assumes the position of a hypothetical judgment lien creditor as of
the date of the filing of the petition).
Section 544(a)(1) of the Bankruptcy Code provides:
The trustee shall have, as of the commencement of the case, and without regard
to any knowledge of the trustee or of any creditor, the rights and powers of, or
may avoid any transfer of property of the debtor or any obligation incurred by the
debtor that is voidable by (1) a creditor that extends credit to a debtor at the time
of the commencement of the case and that obtains, at such time and with respect
to such credit, a judicial lien on all property on which a creditor on a simple
contract could have obtained such a judicial lien, whether or not such a creditor
exists. (emphasis added).
Therefore, pursuant to Section 544(a)(1) of the Bankruptcy Code, Den-Mark LLC, as
debtor-in-possession, assumes the position of the hypothetical judgment lien creditor as of the
date of the filing of the petition, and pursuant to federal law has no knowledge of the incorrect
fee owner that was set forth in the Second Deed of Trust and has a hypothetical judgment lien as
of the date of the filing of the petition. In re Millerburg holds that notice and knowledge are not
factors to be considered for purposes of the debtor-in-possession’s position as a hypothetical
judicial lien creditor under Section 544(a)(1). 61 B.R. 125 (Bankr. E.D.N.C. 1986). Therefore,
Den-Mark LLC stands in the shoes of a hypothetical judgment lien creditor.
The Second Deed of Trust executed by Den-Mark Construction was recorded on March
21, 2003 in the Office of the Wake County Register of Deeds and on April 4, 2003 in the Office
of the Franklin County Register of Deeds. Since the Second Deed of Trust was not executed by
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9 Exhibit 2 attached to the Opposition is the first page of a letter on stationery from CCB - Central Carolina
Bank, dated March 19, 2003. The letter is addressed to Mr. James Warren and states that the borrower is Den-Mark
Construction, Inc. and the subject property/collateral is “25 properties located in Wake and Franklin Counties.”
There is a handwritten notation above the word properties that states “owned by Den-Mark Properties.” At the
hearing on January 15, 2009, the Defendants provided a copy of the documents and Responses of Den-Mark LLC to
the SunTrust’s First Request for Production of Documents. The Defendants allege that the title policy, settlement
statement, and other documents provided by Den-Mark LLC reference Den-Mark Construction and that such
reference is evidence that both parties had knowledge of the mistake.
12
the record fee owner of the Real Properties, it was not executed by the party to be charged. The
Second Deed of Trust was not in the chain of title related to each of the Real Properties and
would not have provided notice of the lien to judicial lien creditors. By standing in the shoes of
the hypothetical judgment lien creditor, Den-Mark LLC’s interest in the Real Properties has
priority over the Defendants. Accordingly, the Court finds that the Second Deed of Trust is
invalid and does not establish a valid lien against the Real Properties. Consequently, since the
Second Deed of Trust was not executed by the party holding fee title to be charged, the Second
Deed of Trust would not be effective against a judgment lien creditor of Den-Mark LLC, which
judgment lien creditor would take priority over the Second Deed of Trust.
The Defendants assert that the Second Deed of Trust may be reformed based on a
scrivener’s error or a mutual mistake between the parties as to which Den-Mark entity intended
to create the lien. 9 In such circumstances, the Defendants assert that the deed of trust can be
reformed.
The Fourth Circuit in In re Hartman Paving, Inc. considered whether a deed of trust can
be reformed when a debtor-in-possession steps into the shoes of a bona fide purchaser pursuant
to 11 U.S.C. § 544(a)(3). 745 F.2d 307, 309 (4th Cir. 1984). The court found that as a bona fide
purchaser, the debtor-in-possession is unable to invalidate a deed of trust where the debtor was
an original party of the deed and had actual notice of the mistake. Id. at 310. There is no
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“innocence” as to the mistake as the debtor-in-possession has imputed knowledge of the mistake.
Id. This knowledge prevents a debtor-in-possession from preventing the reformation of a deed
of trust under North Carolina Law. Id.; see also In re Law Developers, No. 08-00965-8-JRL,
2008 Westlaw 2570863 (Bankr. E.D.N.C. June 24, 2008).
The Hartman Court specifically focused on Section 544(a)(3) of the Bankruptcy Code.
In the situation where the debtor-in-possession is a bona fide purchaser under Section 544(a)(3),
reformation may be permitted. However, a debtor-in-possession also has the ability to step into
the shoes of the hypothetical judgment lien creditor under Section 544(a)(1). See Den-Mark
Construction, Inc. v. SunTrust Bank (In re Den-Mark Construction, Inc.), 398 B.R. 842 (Bankr.
E.D.N.C. 2008); Law Developers, 2008 Westlaw 2570863.
Under Section 544(a)(1) a debtor-in-possession has the rights of a judgment lien creditor
and knowledge of the mistake is not imputed on the debtor-in-possession. Law Developers, 2008
Westlaw 2570863 * 5. 	The Law Developers’ court went on to say that notice and knowledge
are not considerations when a court is considering reformation under Section 544(a)(1). Id.
(citing Millerberg, 61 B.R. 125); see also 11 U.S.C. § 544(a)(1). Accordingly, the debtor-in-
possession has no knowledge when stepping into the shoes of a hypothetical judgment lien
creditor that extends credit at the commencement of the case. Law Developers, 2008 Westlaw
2570863 * 5. Therefore, regardless of the harshness of the result, the Defendants’ right of
reformation was cut off as of the petition date and the Second Deed of Trust is void to the extent
that it purports to grant a lien to SunTrust or Southland in connection with the Real Properties.
Lastly, the Defendants argue that Den-Mark LLC and Den-Mark Construction were alter
egos and agents of one another. Because North Carolina is a pure race jurisdiction, this defense
is without merit. Purchasers and those seeking to encumber property rely on the status of the
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public record. Chrysler Credit Corp. v. Burton, 599 F.Supp. 1313, 1318 (M.D.N.C. 1984). “The
law contemplates that a purchaser of land will examine each recorded deed and other instrument
in his chain of title and charges him with notice of every fact affecting his title which an accurate
examination would disclose.” Id. (citing Hensley v. Ramsey, 283 N.C. 714, 730, 199 S.E.2d 1, 2
(1973)). A purchaser is considered on notice of “any fact or circumstance affecting his title
which is reasonably disclosed by the instruments in his line of title. Chrysler v. Burton, 599
F.Supp. at 1318 (quoting Turner v. Glenn, 220 N.C. 620, 18 S.E.2d 197 (1942)).
The public record in this case reflects that SunTrust does not have a valid lien against the
Real Properties owned by Den-Mark LLC. See affidavit of Harold E. Russell. To the extent that
Mr. Russell’s title search reflects a search of the public records related to the Real Properties, the
Defendants failed to present any contradictory evidence that his affidavit was incorrect. Mr.
Russell’s affidavit states “the deed of trust in favor of Central Carolina Bank is not revealed in a
search of ‘Den-Mark Properties, LLC’ as Grantor, and therefore is not in the chain of Den-Mark
Properties, LLC.” Affidavit of Harold E. Russell, para. 3(b). There is no dispute that his review
of the chain of title failed to find the Second Deed of Trust in the chain of title for the Real
Properties. Nothing in the record before this Court would have provided notice to a reasonably
prudent person that this title search was incomplete or incorrect. Accordingly, based on the
North Carolina’s recordation requirements, SunTrust’s allegation that Den-Mark LLC and Den-
Mark Construction are alter egos of each other is not relevant.
CONCLUSION
Based on the foregoing, summary judgment is GRANTED in favor of Den-Mark
Properties LLC. The deed of trust recorded in Book 9986, Pages 1331-1339 in the Office of the
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Wake County Register of Deeds and Book 1325, Pages 976-984 in the Office of the Franklin
County Register of Deeds is avoided to the extent of the Real Properties and such deed of trust
does not perfect a second lien in favor of SunTrust against the Real Properties.
Furthermore, the Court hereby directs the Clerk of Court to schedule a pre-trial
conference in connection with the third-party complaint pending against Den-Mark
Construction, Inc.
As the issue before the Court on the Reconsideration Motion was clarified and stipulated
to by the parties for the purpose of consideration in Den-Mark LLC’s Summary Judgment
Motion, the Reconsideration Motion is DENIED.
It is further ordered that the Order entered on March 19, 2009 in this Adversary
Proceeding is incorporated herein upon its entry by this Court.
SO ORDERED.
END OF DOCUMENT
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