A North Carolina appeals court restores Deutsche Bank’s mortgage lien after a fraudulent satisfaction nearly erased its claim. Find out how the court’s decision impacts the mortgage industry
A North Carolina appeals court just sent a clear message to mortgage professionals: if someone tries to erase your mortgage lien with a fake filing, you’re not out of luck.
On August 20, 2025, the Court of Appeals of North Carolina decided a case that’s worth a look for anyone in the mortgage business. The case involved a Charlotte condo, a paperwork mistake, and a fraudulent satisfaction that almost cost a major lender its claim. For those working with mortgages, it’s a real-world example of how courts step in when fraud threatens a lender’s rights.
Here’s what happened. Deutsche Bank National Trust Company, as trustee for Soundview Home Loan Trust 2006-EQ1 Asset-Backed Certificates, Series 2006-EQ1, and 2006 Master Asset-Backed Securities Trust 2006-HE5 Mortgage Pass Through Certificates, Series HE5, by and through U.S. Bank, National Association, held a deed of trust on a condo at 14716 Via Sorrento Drive in Charlotte, North Carolina, Tax Parcel ID: 223-545-47, Unit 7104 of Belle Vista Condominiums.
The original owners, Cyril N. and Karina C. Gaydos, bought the property in March 2006 with a mortgage from EquiFirst Corporation, Deutsche Bank’s predecessor-in-interest. The initial deed of trust, recorded on June 19, 2006, had a clerical error in the legal description, listing Unit 7301 instead of Unit 7104, but the address and tax parcel number were correct. Within a year, on May 21, 2007, a second general warranty deed was recorded with the correct unit number, and the deed of trust was rerecorded with the corrected legal description.
After the Gaydoses filed for bankruptcy in July 2013, the condominium owners’ association foreclosed on the property due to unpaid assessments. Title was transferred by foreclosure deed on March 13, 2015, to Gaydos & Family 14716 Via Sorrento Condominium, Inc., a business entity associated with the Gaydoses. Around this time, fraudulent satisfactions of the Gaydos deed of trust were recorded as part of a scheme allegedly orchestrated by the Gaydos/Earquhart Defendants.
On July 7, 2015, Meha Bhupendra Shah and Fenil Hiren Kumar Shah purchased the property from Gaydos & Family and took title by general warranty deed, believing there were no outstanding liens. In connection with the purchase, the Shahs executed a note secured by a deed of trust for the property in favor of their mortgagee, U.S. Bank, National Association s/i/i Pinnacle Bank s/b/m Bank of North Carolina. The Shah vesting deed and the Shah deed of trust were recorded on July 8, 2015.
Deutsche Bank filed suit on April 5, 2018, seeking monetary damages from the Gaydos/Earquhart Defendants and a declaratory judgment against all named defendants, including the Shahs, to restore the fraudulently extinguished deed of trust and establish its priority. An amended complaint was filed on May 4, 2018, adding Mortgage Electronic Registration Systems, Inc. (MERS) as a party. The Shah Defendants filed their answer and a motion to dismiss on February 10, 2020. Deutsche Bank voluntarily dismissed its claims against the individual Gaydos defendants, MERS, and John Does #1-10. Both parties moved for summary judgment in 2020.
The trial court heard the motions on July 19, 2021, and entered an order on October 26, 2021, denying the Shah Defendants’ motions to dismiss and granting summary judgment in favor of Deutsche Bank on its claim for declaratory relief. The court ordered that Deutsche Bank’s deed of trust was superior in time and priority over the Shah Defendants’ interest in the property and any subsequent liens or interests granted by the Shahs. Deutsche Bank then obtained a final default judgment against the defaulted Gaydos/Earquhart Defendants on April 5, 2022.
The Shah Defendants appealed, but the Court of Appeals dismissed the first appeal as interlocutory on March 21, 2023. Following a stipulation of voluntary dismissal of remaining claims on May 4, 2023, the trial court entered a final judgment on September 6, 2023. The Shah Defendants appealed again from the summary judgment order.
On August 20, 2025, the North Carolina Court of Appeals affirmed the trial court’s decision. The appellate court held that the intent to encumber the subject property was clear from the deed of trust and related documents, and that the rerecording of the corrected deed of trust was a permissible and effective way to resolve the clerical error. The court further ruled that, where a mortgage is fraudulently satisfied by a third party without the lender’s fault, the original lender’s lien may be restored and keeps priority over subsequent purchasers, even if those purchasers were unaware of the fraud.
For mortgage professionals, this case is a reminder to keep an eye on public records and act quickly if anything looks off. It’s also some reassurance that courts can step in to protect lenders when fraud happens, as long as the lender wasn’t negligent. In a business where paperwork is everything, that’s a lesson worth remembering.
