In Harris v. McLeod (N.C. Ct. App. Feb. 4, 2026) (unpublished), the Court of Appeals reversed summary judgment in a dispute over whether an elderly homeowner’s deed to his nephew was an outright conveyance or merely security for a small tax debt—an equitable mortgage in substance if not in form.
This opinion already raised classic equitable concerns. But read in early 2026, it now also resonates with the constitutional questions swirling in Pung v. Isabella County, recently argued before the U.S. Supreme Court—questions about whether the law tolerates the destruction of massive homeowner equity to satisfy relatively trivial debts. That broader constitutional backdrop sharpens the stakes in Harris, and it also highlights a bankruptcy strategy that, tragically, is now likely foreclosed by the debtor’s death.
Summary:
The facts are almost archetypal. An elderly, ill homeowner conveyed his Apex property to his nephew, who paid only about $3,295 in delinquent property taxes. The decedent allegedly believed this was a temporary arrangement: once he repaid the debt, the property would be reconveyed. He promptly tried to repay the amount and reclaim the home. The nephew refused. After the homeowner died, the executor sued, alleging the deed was really security for a debt.
The trial court granted summary judgment for the nephew, but the Court of Appeals reversed, holding:
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The executor’s and friend’s affidavits should have been considered as based on personal knowledge.
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Genuine issues of material fact remained as to whether the transaction created an equitable mortgage rather than a fee-simple transfer.
Key disputed facts included:
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The grantor remained in possession after the deed.
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The consideration ($3,295) was grossly disproportionate to the property’s value.
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The grantor attempted to tender that exact amount shortly after the conveyance.
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The grantor was elderly, illiterate, and in financial distress.
In short, the Court of Appeals recognized the possibility that this was not a sale at all, but rather a distressed homeowner’s attempt to “save his land” through a transaction that equity may treat as a mortgage.
Commentary: Harris Meets Pung v. Isabella County
Although Harris involves a private conveyance rather than a tax foreclosure, the equities are strikingly parallel to the issues now before the U.S. Supreme Court in Pung. There, the Court is considering whether the Constitution permits the government to seize and sell a home worth far more than the tax debt and compensate the owner only based on the depressed auction price rather than fair market value.
During oral argument, several justices expressed discomfort with situations where trivial tax debts result in the destruction of large amounts of homeowner equity, even if longstanding foreclosure traditions permit such sales. (SCOTUSblog)
That tension—between formal legality and substantive fairness—echoes loudly in Harris. Replace the county with a nephew and the tax foreclosure with a “helpful” deed, and the core question becomes the same: Can someone capture a six-figure equity interest by satisfying only a few thousand dollars of debt?
IIn the unlikely event that Pung ultimately pushes constitutional doctrine toward recognizing the equity interest as the true protected property right, that conceptual shift would harmonize with North Carolina’s longstanding equitable mortgage doctrine: substance over form, intent over paperwork, and protection of distressed owners from oppressive transactions.
Put differently, Harris is a private-law cousin to Pung. Both ask whether legal formalities can erase real-world equity.
The Bankruptcy Angle That Now Likely Cannot Be Used
Perhaps the most sobering aspect of Harris is what might have happened had Dennis Junior McLeod filed bankruptcy before his death.
A Chapter 7 Trustee’s Likely Theory: Constructive Fraudulent Transfer
Assuming the transfer occurred prepetition, a Chapter 7 trustee could have examined the conveyance to the nephew (almost certainly an “insider”) under 11 U.S.C. §§ 544 and 548. The facts strongly suggest a classic constructive fraudulent transfer:
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Transfer of real property worth potentially $135,000–$200,000
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Consideration of only ~$3,295 (tax arrears)
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Transfer made while the debtor was elderly, ill, and financially distressed
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Retention of possession after the transfer
Those are the very hallmarks of “less than reasonably equivalent value” while the debtor was insolvent or rendered insolvent—precisely the kind of transfer a trustee exists to avoid.
Indeed, trustees routinely challenge deeds where distressed homeowners deed property to insiders or rescuers who “advance” small sums to cure arrears but end up with title. In bankruptcy, the inquiry would not hinge on subjective intent alone; it would focus on objective value and insolvency—terrain where the estate’s case would likely have been strong.
Insider Status Makes It Stronger
Transfers to relatives are subject to heightened scrutiny. A nephew is not a per se insider under the Code, but the familial relationship and caregiving context could easily support insider status, extending lookback periods and strengthening the trustee’s avoidance case.
The Estate Remedy
Had the transfer been avoided:
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The property (or its value) would return to the bankruptcy estate.
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The nephew would receive a claim only for the amount advanced (plus perhaps interest).
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The debtor’s equity—rather than being lost—would be preserved for creditors (and possibly exemptions).
In many consumer cases, that result aligns perfectly with bankruptcy’s central goal: preventing overreaching creditors (or insiders) from capturing disproportionate value from distressed debtors.
Why That Option Is Likely Gone
But bankruptcy is personal to the debtor. Because Mr. McLeod died before filing, the opportunity to invoke a Chapter 7 trustee’s avoidance powers is likely lost. A probate estate does not wield the strong-arm powers of § 544 or the federal fraudulent transfer remedies of § 548 in the same way a bankruptcy trustee does.
Thus, the estate must now rely on state-law equitable doctrines—like equitable mortgage and fraud—rather than the broader, often more potent, avoiding powers available in bankruptcy.
In a tragic sense, the case illustrates a recurring lesson: timing matters. Filing bankruptcy while the debtor is alive can preserve avoidance remedies that may vanish once death intervenes.
Final Thoughts: Equity, Constitutionality, and the “Tiny Debt–Big Equity” Problem
Viewed through the lens of Pung, Harris becomes more than a family dispute. It becomes part of a larger national conversation about whether the law adequately protects homeowners from losing massive equity to satisfy modest debts—whether through government foreclosure or private “rescue” transactions.
North Carolina’s equitable mortgage doctrine already reflects skepticism toward such outcomes. Bankruptcy avoidance law provides another powerful safeguard. And now, depending on how the Supreme Court ultimately resolves Pung, constitutional law itself may begin to grapple more directly with the same problem: the destruction of homeowner equity that is wildly disproportionate to the debt being enforced.
In Harris, the Court of Appeals wisely declined to resolve those equities on summary judgment. Whether through equity, bankruptcy, or constitutional law, the core principle remains the same: when a debtor’s lifetime asset is exchanged for a few thousand dollars, courts should look very closely at whether that transaction was ever truly meant to be a sale at all.
To read a copy of the transcript, please see:
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