IN THE COURT OF APPEALS OF NORTH CAROLINA

No. COA14-1111

Filed: 7 April 2015

THE BANK OF NEW YORK MELLON 

F/K/A THE BANK OF NEW YORK AS 

SUCCESSOR TO JP MORGAN CHASE 

BANK NATIONAL ASSOCIATION AS 

TRUSTEE FOR THE BENEFIT OF THE 

CERTIFICATE OF HOLDERS OF EQUITY 

ONE ABS, INC. MORTGAGE PASS 

THROUGH CERTIFICATES SERIES 

2003-2

Plaintiff

v.

Durham County

No. 12 CVS 2253

JUNE WITHERS, CHARLES L. STEEL, 

IV, SOLELY IN HIS CAPACITY AS 

GUARDIAN OF THE ESTATE OF JUNE 

WITHERS, RHONDA WITHERS, 

MARGARET YOUNG, ROBERT YOUNG, 

SHELIA SMITH, FAYE KEARNEY, 

ROBERT KEARNEY, NORTH CAROLINA 

DEPARTMENT OF REVENUE, BRANCH 

BANKING AND TRUST COMPANY AND 

HSBC MORTGAGE SERVICES, INC.

Defendants

Appeal by defendants from an order for summary judgment to quiet title under 

the doctrine of equitable subrogation entered 9 May 2014 by Judge Howard E. 

Manning, Jr. in Durham County Superior Court. Heard in the Court of Appeals 17

February 2015.
BANK OF NEW YORK MELLON V. WITHERS

Opinion of the Court

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Ragsdale Liggett, by Dorothy Bass Burch and Ashley H. Campbell, for The 

Bank of New York Mellon, plaintiff-appellee.

Berman & Associates, by Gary K. Berman, for Margaret Young, Shelia Smith, 

and Faye Kearney, defendant-appellants.

CALABRIA, Judge.

In 2002, June (“June”) Withers was the sole owner of the property located at

121 West Cornwallis Road in Durham, NC (the “property”). At the time, June and 

her daughter, Rhonda (“Rhonda”) Withers, sought a home loan from Popular 

Financial Services (“PFS”) to refinance the prior deed of trust on the property from 

Accredited Home Lenders (“AHL”). To qualify for the loan, June and Wanda agreed 

to two conditions: (1) that PFS would have a first position lien on the property through 

a deed of trust executed by June and Rhonda Withers and (2) that June would execute 

a quitclaim deed with June as grantor and June and Rhonda as joint tenants. 

Accordingly, PFS instructed the closing attorney Natasha Newkirk (“Newkirk”) to 

prepare a deed with June as the grantor and June and Rhonda as joint tenants and 

to pay the prior deed of trust to AHL in full. 

Newkirk prepared a quitclaim deed that not only included June and Rhonda

as grantees, but also mistakenly included June’s three other daughters, Margaret 

Young (“Young”), Shelia Smith (“Smith”), and Faye Kearney (“Kearney”). Therefore, 

June conveyed an undivided interest to June, Rhonda, Young, Smith, and Kearney 

as tenants in common. On 10 January 2003, Newkirk recorded both the erroneous 
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quitclaim deed and the deed of trust in Durham County. Therefore, June and Rhonda 

shared only a two-fifth interest in the property instead of the entire property. 

Newkirk, as directed by PFS, also paid the AHL deed of trust in full. PFS assigned 

the PFS deed of trust to the Bank of New York Mellon (“plaintiff”). 

On 6 March 2012, plaintiff filed an action against the five tenants seeking, 

inter alia, to reform the deed of trust to include the portions of property held by 

Young, Smith, and Kearney so as to impose a constructive trust on the entirety of the 

property or, in the alternative, to equitably subrogate the deed of trust to the prior 

deed of trust held by AHL. June passed away on 28 December 2013. Rhonda 

executed a quitclaim deed to plaintiff transferring the entirety of her interest in the 

property, including any interest obtained following the passing of her mother, June. 

Therefore, the only remaining defendants were Young, Smith, and Kearney. 

Plaintiff and the remaining defendants filed motions for summary judgment. 

After a hearing, the trial court denied plaintiff’s attempts to reform the deed of trust 

and to impose a constructive trust and granted defendants’ motions for summary 

judgment on those issues. At the same time, the trial court granted plaintiff’s motion 

for summary judgment to quiet title under the legal doctrine of equitable subrogation. 

Defendants appeal. 

On appeal, defendants argue the trial court erred in granting summary 

judgment on the equitable subrogation claim for three reasons. First, defendants 

contend that plaintiff and defendants never agreed that Newkirk would use the funds 
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to pay the prior deed of trust to AHL in full. Second, defendants maintain that 

plaintiff was not “excusably ignorant” of Newkirk’s mistake. Third, defendants claim 

plaintiff had an adequate remedy at law.

The standard of review for summary judgment is de novo. In re Will of Jones, 

362 N.C. 569, 573, 669 S.E.2d 572, 576 (2008). Summary judgment will be upheld 

when the record indicates that there is no genuine issue of material fact and a party 

is entitled to judgment as a matter of law. Forbis v. Neal, 361 N.C. 519, 523–24, 649 

S.E.2d 382, 385 (2007) (citations and quotations omitted). 

Equitable subrogation is a 

general rule [that] one who furnishes money for the 

purpose of paying off an encumbrance on real or personal 

property, at the instance either of the owner of the property 

or of the holder of the encumbrance, either upon the 

express understanding or under circumstances from which 

an understanding will be implied, that the advance made 

is to be secured by a first lien on the property, will be 

subrogated to the rights of the prior lienholder as against 

the holder of an intervening lien, of which the lender was 

excusably ignorant. 

Peek v. Wachovia Bank & Trust Co., 242 N.C. 1, 15, 86 S.E.2d 745, 755 (1955). It 

applies “when one person has been compelled to pay a debt which ought to have been 

paid by another and for which the other was primarily liable.” Trustees of Garden of

Prayer Baptist Church v. Geraldco Builders, Inc., 78 N.C. App. 108, 114, 336 S.E.2d 

694, 697–98 (1985) (citations omitted). 
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Equitable subrogation is based in equity and the purpose is “the doing of 

complete, essential, and perfect justice between all the parties without regard to form, 

and its object is the prevention of injustice.” Journal Pub. Co. v. Barber, 165 N.C. 478, 

487–88, 81 S.E. 694, 698 (1914). “When the equities of a case favor equitable 

subrogation, the party in whose favor the right of subrogation exists is entitled to all 

of the remedies and security which the creditor had against the person whose debt 

was paid.” Am. Gen. Fin. Servs., Inc. v. Barnes, 175 N.C. App. 406, 409, 623 S.E.2d 

617, 619 (2006) (citing Trustees of Garden of Prayer Baptist Church, 78 N.C. App. at 

114, 336 S.E.2d at 698) (quotations omitted). The doctrine of equitable subrogation 

requires “both that the money should have been advanced for the purpose of 

discharging the prior encumbrance, and that [such money] should have actually been 

so applied.” Peek, 242 N.C. at 15–16, 86 S.E.2d at 756 (internal quotations and 

citations omitted).

In the present case, plaintiff’s predecessor in interest, PFS, loaned June and 

Rhonda Withers $63,425.00 to pay the prior deed of trust to AHL in full for the 

property at 121 West Cornwallis Road in exchange for a first position lien on that

property. PFS provided the funds, directed the closing attorney to pay the prior deed 

of trust in full, and the closing attorney followed their directions regarding using the 

funds to pay the prior deed of trust to AHL in full. As part of the transaction, PFS 

required June to execute a quitclaim deed transferring the property to June and 

Rhonda as joint tenants. The closing attorney failed to follow PFS’ instructions and
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mistakenly prepared the quitclaim deed with June as grantor and all three 

daughters, along with June and Rhonda, as joint tenants. When the closing attorney 

prepared the quitclaim deed, she directly contradicted PFS’ instructions. As a result 

of this oversight, the deed of trust from PFS secured only two-fifths of the property, 

instead of the entire property. Since equity requires that the funds were advanced 

for the purpose of discharging the prior encumbrance, equity would not allow the 

attorney’s mistake to defeat the agreed purpose of the transaction, which was to 

secure a loan by granting a first position lien on the property at 121 Cornwallis Road. 

Therefore, as a matter of law, the trial court correctly applied the doctrine of equitable 

subrogation to allow PFS, and its successor in interest, plaintiff, to an equitable 

subrogation of their rights to AHL to claim a first position lien on the entire property. 

Defendants contend that despite satisfying all the requirements of equitable 

subrogation, plaintiffs should not receive an equitable benefit because there are

adequate remedies at law. According to defendants, equity does not apply when the 

party seeking equity has a full and complete remedy at law. Daugherty v. Cherry 

Hospital, 195 N.C. 97, 102, 670 S.E.2d 915, 919 (2009) (citations and quotations 

omitted). As a general rule, “[e]quity supplements the law. Its office is to supply 

defects in the law where, by reason of its universality, it is deficient, to the end that 

rights may be protected and justice may be done as between litigants.” Town of 

Zebulon v. Dawson, 216 N.C. 520, 522, 5 S.E.2d 535, 537 (1939). However, the 

remedies defendants identify are inadequate because of the failure to account for the 
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unique nature of real property. According to the Supreme Court of North Carolina, 

“[l]and is an extremely important and long-valued asset in this state and throughout 

this country.” Powell v. City of Newton, 364 N.C. 562, 572, 703 S.E.2d 723, 730 (2010) 

(Martin, J. concurring). In fact, “it has long been established, both in this state and 

throughout this country, that land is a special and unique asset . . . .” Id. at 573–74, 

703 S.E.2d at 731 (Hudson, J. dissenting). Due to land’s unique nature, damage 

claims against individuals are an inadequate substitute for a first position lien on

real property.

Since land is unique and the remedies at law identified by defendants are

inadequate, the doctrine of equitable subrogation applies. Therefore, as a matter of 

law, the trial court correctly concluded that plaintiff was entitled to equitable 

subrogation. The trial court correctly granted summary judgment in favor of plaintiff 

since it was entitled to judgment as a matter of law and no issues of material fact 

existed. Accordingly, we affirm the trial court’s judgment. 

Affirmed.

Judges McCullough and Dietz concur.