Summary:
Arthur and Lisa Perry claim that a mystery deed of trust appeared in the public records against their home—one tied to a loan that Arthur Perry insists he never applied for, never authorized, and never received. According to the complaint, Mr. Perry purchased the property in 2005 with a legitimate mortgage, but in 2006 a second deed of trust was recorded in favor of Corinthian Mortgage (d/b/a SouthBanc Mortgage).
The problem did not surface until 2019, when the Perrys attempted to sell the property and discovered that the allegedly fraudulent lien prevented the closing.
When they contacted the loan servicer, CitiMortgage, they claim the company acknowledged that it had an incorrect Social Security number for Mr. Perry and struggled to produce documentation supporting the alleged loan.
Litigation followed—first in North Carolina state court in 2022. That case (“Perry I”) ended with a voluntary dismissal with prejudice in December 2023. The Perrys then filed a new federal lawsuit in 2024 (“Perry II”) asserting similar claims against CitiMortgage and other defendants connected to the loan closing and title work.
But that earlier dismissal turned out to be the procedural landmine in this case.
The Federal Case Hits the Pause Button
The federal district court granted a stay of the case pending the outcome of an appeal in the earlier state-court action. The Perrys are currently asking the North Carolina Court of Appeals to reverse a ruling refusing to convert their earlier dismissal from “with prejudice” to “without prejudice.”
That distinction matters enormously. If the dismissal truly was with prejudice, the doctrine of res judicata could bar the Perrys from pursuing the same claims again. Because the state appellate decision could determine whether the federal claims survive at all, the court concluded that a stay was appropriate under the Colorado River abstention doctrine, which allows federal courts to pause proceedings when parallel state litigation could resolve the dispute.
The court emphasized the risk of duplicative litigation and inconsistent rulings if both cases moved forward simultaneously.
No Default Judgment—At Least Not Yet
The Perrys also sought default judgments against two defendants—Corinthian Mortgage and Trust Title—who had failed to appear.
The court declined to enter default judgment for now, relying on a long-standing rule dating back to Frow v. De La Vega (1872): when multiple defendants may share related liability, courts should avoid entering default judgments that might produce inconsistent results.
Here, many of the Perrys’ claims overlap among the defendants, including allegations tied to the validity—or fraudulence—of the disputed deed of trust. Entering judgment against the defaulting parties now could effectively decide issues that remain contested with CitiMortgage.
Accordingly, the motion for default judgment was denied without prejudice until the stay is lifted.
Commentary
Two takeaways jump out of this decision.
1. The Perils of a “With Prejudice” Dismissal
Voluntary dismissals with prejudice are often filed casually—sometimes as part of a negotiated resolution, sometimes simply to end a case that seems unpromising. But once those words appear in the order, they can slam the courthouse door shut for good.
That is exactly the fight now unfolding in the North Carolina Court of Appeals. If the dismissal stands as “with prejudice,” the Perrys may never get to litigate whether this alleged mortgage was fraudulent.
For lawyers, the lesson is straightforward:
be extremely cautious about agreeing to a dismissal with prejudice unless you are certain the case is truly over.
2. A Familiar Consumer Problem: The “Ghost Lien”
Substantively, the allegations are troubling but not unheard of. Consumers sometimes discover years later that their property is encumbered by:
- misindexed mortgages
- identity-theft loans
- recording errors
- or loans tied to incorrect borrower identifiers (such as a wrong Social Security number)
Here, the plaintiffs allege CitiMortgage itself acknowledged maintaining the wrong SSN for Mr. Perry. If proven, that fact could become central to whether the loan was ever properly attributable to him.
But none of those factual issues will be resolved until the procedural question—whether the claims are barred by the earlier dismissal—is answered first.
3. A Quiet Reminder About Default Judgments
The court’s refusal to enter default judgment is also a reminder that default does not automatically equal victory.
When claims against multiple defendants are intertwined—as they often are in mortgage or title disputes—courts frequently delay default judgments to avoid inconsistent outcomes.
In other words: even when one defendant fails to show up, the case may still have to wait for the others.
The Bottom Line
For now, Perry v. CitiMortgage is on hold. The real action has shifted to the North Carolina Court of Appeals, where the fate of the earlier dismissal will determine whether the Perrys’ claims live or die.
Until then, the alleged phantom mortgage—and the question of how it appeared in the first place—remains unresolved.
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