April 2002
|
April 2002 |
|
A PUBLICATION OR THE TITLE COMPANY OF NORTH CAROLINA |
|
FEDERAL
TAX LIENS AGAINST ONE SPOUSE WHERE PROPERTY IS VESTED AS TENANTS BY THE
ENTIRETY AND U.S. V. CRAFT; 535
U.S. _____ [U.S. SUPREME COURT, 2002 U.S. LEXIS 2790, APRIL 18, 2002] In
this case, the IRS assessed the unpaid taxes against the husband. Once
assessed, 26 U.S.C. §6321 provides that the lien attaches to "all
property and rights to property, whether real or personal, belonging to
"the person liable to pay the tax. Apparently, a notice of federal
tax lien was filed only against the husband. (In North Carolina, a notice
of lien would be filed in the clerk of superior court's office where the
land is located. 26 U.S.C. §6323(f) and G.S. 44-68.12.) The property was
owned by the husband and wife as tenants by the entirety and was located
in Michigan. In
the case, after the notice of the lien was filed, the husband and wife
jointly executed a quitclaim deed purporting to transfer the husband's
interest in the property to the wife for one dollar. When the wife
attempted to sell the property a few years later, a title search revealed
the lien. The IRS agreed to release the lien and allow the sale with the
stipulation that half of the net proceeds be held in escrow pending
determination of the Government's interest in the property. The
characteristics of, and each spouse's rights in, the tenancy by the
entirety were not significantly different from those outlined in G.S.
39-13.6 and North Carolina cases. After
its analysis in a 6 to 3 vote, the court stated, "[w]e therefore
conclude that respondent's husband's interest in the entireties property
constituted 'property' or 'rights to property' for the purposes of
the federal tax lien statute." (Emphasis added.) The court added,
"[w]e express no view as to the proper valuation of respondent's
husband's interest in the entireties property, leaving this for the Sixth
Circuit to determine on remand." Justice
Thomas wrote an excellent dissenting opinion. It makes the majority
opinion look ridiculous. The dissenting opinion's main argument is that
whatever rights the husband had should not result in a lien upon the
title to the entireties property. Therefore,
if you find a notice of federal tax lien docketed against only one spouse
and the title is vested in both spouses as tenants by the entirety and the
lien has not expired, it should be reported in your opinion and should be
removed of record by settlement with the government when (1) those spouses
convey, lease or mortgage the property to the proposed insured(s) or (2)
those spouses convey, or one spouse conveys, the property to one of the
spouses who subsequently conveys, leases or mortgages the property to the
proposed insured(s). If you are relying upon a prior owner's policy issued
by our company or any other company, the named insured(s) in that prior
policy should be checked for liens. However, we are not requiring that you
go back behind that prior policy and check that prior
policy's insureds' grantors, or those grantors' predecessors in title, for
liens not reflected in the prior policy. A federal tax lien's period is
effectively 10 years and 30 days from the date of assessment. (That is the
period within which the lien can be refiled.) We will include additional
comments on these liens in our next issue. NEW LAWS There
have been several new statutes enacted. These bills can be accessed at www.ncleg.net.
We will briefly touch on several below.
AD VALOREM TAXES G.S.
161-31 became effective November 16, 2001. G.S. 161-31(a) states that the
board of county commissioners by resolution may require the register of
deeds not to accept any deed for recording unless the tax collector has
certified that there are no delinquent city or county ad valorem taxes or
other taxes with which the tax collector is charged. G.S. 161- 31(b) makes
G.S. 161-31(a) applicable only to certain counties: Alleghany, Anson,
Beaufort, Cabarrus, Camden, Cherokee, Chowan, Currituck, Forsyth, Graham,
Granville, Harnett, Haywood, Jackson, Lee, Madison, Montgomery, Pasquotank,
Perquimans, Pitt, Stanly, Swain, Vance, Warren, and Yadkin. As
part of the same bill, G.S. 161-14(a), pertaining to the register of deeds
being required to register documents, was made subject to new G.S. 161-31.
Oddly, the bill (House Bill 108) repeals the change to G.S. 161-14(a) on
July l, 2002, but says nothing about G.S. 161-31 "sunsetting." G.S.
105-375(i) was amended effective July l, 2002 and applies to an in rem tax
foreclosure begun on or after that date. It changes from six to three
months after the indexing of the judgment the period before which
execution cannot issue. ANNEXATION Effective
October 15, 2001, G.S. 160A-58.1(b1) was added authorizing a city that has
entered into an annexation agreement to annex certain non-contiguous areas
without complying with general annexation standards in G.S. 160A- 58.1
(b)(2). ENVIRONMENTAL
LAW – LAND USE RESTRICTIONS AND PUBLIC HEALTH House
Bill 1301 is an act to clarify the circumstances in which land-use
restrictions and recordation of those restrictions in the office of the
register of deeds are required in connection with the cleanup of a release
from a petroleum underground storage tank in order to protect the
environment and public health, to ensure enforceability of restrictions,
and to provide notice to subsequent owners of the property; and to make
conforming changes to related statutes. Various sections of the extensive
bill require, depending upon circumstances outlined in the bill, the owner
to record in the register of deeds' office certain documents such as
"NOTICE OF CONTAMINATED SITE" (G.S. 143B-279.10; G.S.
143B-279-10 refers to current or future use restrictions provided in G.S.
143B-279.9); "NOTICE OF RESIDUAL PETROLEUM" (G.S. 143B-279.11)
which must set out any restrictions on current or future use of the
property imposed by the Secretary; plats showing the site of contamination
(G.S. 143B-279.11 (c)); and cancellation of notices when the offending
hazard is removed (G.S. 143B-279.10(f); G.S. 143B- 279.11 (g)). The
"NOTICE OF CONTAMINATED SITE" recorded pursuant to G.S.
143B-279.10 is indexed in the grantor index under the names of the owners
of the land. G.S. 143B-279.10(c). Subsequent deeds, etc. must refer to the
book and page of its recording when the site is subject to current or
future land use restrictions. G.S. 143B-279.10(e). The Secretary of
Environment and Natural Resources
can cancel the notice by recorded cancellation indexed in the grantor
index under the name of the owner(s) in the notice and in the grantee
index in the name "Secretary of Environment and Natural
Resources." The register of deeds shall make a marginal entry on the
Notice showing the date of cancellation and the book and page of
recordation of the Secretary's statement. G.S. 143B-279.10(f). The
"NOTICE OF RESIDUAL PETROLEUM" pursuant to G.S. 143B-279.11,
which can set out restrictions on current or future use of the property,
is recorded and indexed under the name(s) of the owner(s) of the real
property. G.S. 143B-279.11(e). When the residual petroleum is eliminated,
the Secretary can record a cancellation of the notice which is indexed in
the manner of the cancellation discussed above in G.S. 143B-279.10(f).
G.S. 143B-279.11(g). G.S.
47-29.1 lists the statutes under which environmental filings must be
filed. EQUITABLE
DISTRIBUTION
House
Bill 1084 has made certain changes in the equitable distribution laws. The
bill became law on August 10, 2001. New G.S. 50-20(1) states that a pending equitable distribution action does not abate upon the death of a party. Conforming changes were made to G.S. 50-20(c) which requires all listed factors to be considered. G.S. 50-20(c)(11b) lists property considerations to be considered in the event one party dies prior to the entry of the equitable distribution order. Conforming changes have been made to recently enacted G.S. 30-3.2(d) and G.S. 30-3.3(a), as well as the addition of G.S. 29-14(c). ESTATES AND
PERSONAL REPRESENTATIVES House
Bill 1070 rewrote G.S. 28A-13-3(c). It authorizes combining a proceeding to
exercise possession, custody and control over estate real property with a
pending proceeding under G.S. 28A-15-1(c) to sell, lease or mortgage real
property. G.S. 28A-15-1(c) has been similarly amended to provide the same
where there is a pending petition under G.S. 28A-13-3(c). These amendments
were taken out of controversial House 8ill 716 which deals with amending
the personal representative's power to sell, mortgage and convey real
property without a court order. The North Carolina Land Title Association
and Real Property Law Section are working with the Estate Planning and
Fiduciary Law Section to come up with an unambiguous House Bill 716.
As of April 18, 2002, memos have been exchanged and a resolution of
differences of opinion and requests for clarification appears eminent.
JUDICIAL AND EXECUTION SALES
PROCEDURE REVISED Lengthy Senate
Bill 681 is effective January 1, 2002. It applies to judicial sales when
the original order of sale is issued on or after that date and to
execution sales when the execution is originally issued on or after that
date. The title of the bill describes its purpose: An
act to amend the law governing judicial sales and execution sales to
provide for a rolling upset bid procedure and to conform the time periods
for posting and publishing notice of sale to the law governing foreclosure
sales under a power of sale, as recommended by the General Statutes
Commission. With
respect to judicial sales, G.S. 1-339.17(a)(1 ), pertaining to posting of
notice, changes the requirement to 20 days immediately preceding the sale
instead of 30 days. G.S. 1-339.17(b)(1 ), pertaining to the period between
the first and last publications, reduces the period to 7 days instead of
22 days. G.S.1-339.25,
pertaining to upset bids in a public sale, now states that there are no
resales (except as in G.S. 1-339.27A, which is new and pertains to
ordering resales after sale or upset bid, and G.S. 1-339.30), but there
may be successive upset bids, "each of which shall be followed by a
period of 10 days for a further upset bid. If a timely motion for resale
is filed under G.S. 1- 339.27A, no upset bids may be filed while the
motion is pending. If an upset bid or a motion for resale under G.S.
1-339.27A is not filed within 10 days following a sale, resale, or prior
upset bid, the rights of the parties to the sale or resale become
fixed." G.S. 1-339.25(a). G.S. 1-339.25(d1 ), (d2), (d3), (d4) and
(d5) and (e) have been added. They pertain
to notice of upset bid and the related procedures. Other conforming
changes to the judicial sales statutes were made. G.S.
1-339.52 pertains to posting and publishing notice of sale in an execution
sale proceeding. G.S. 1-339.52(a)(1 ) requires the posting at least 20
days, instead of 30 days, immediately prior to the sale. In G.S.
1-339.52(b), as in the case with judicial sales as noted above, the period
between first and last publications has been shortened from 22 days to 7
days. G.S. 1-339.64(a) has been amended to state that there "shall be
no resales; however, there may be successive upset bids, each of which
shall be followed by a period of 10 days for a further upset bid. If a
timely motion for resale is filed under G.S. 1-339.66A, no upset bids may
be filed while the motion is pending. If an upset bid or a motion for
resale under G.S. 1-339.66A is not filed within 10 days following a sale,
resale, or prior upset bid, the rights of the parties to the sale or
resale become fixed. "G.S. 1- 339.66A, entitled "Ordering resale
of real property after upset bid," is new. G.S.
1-339.64(e), (f), (g), (h) and (i) have been added. These govern notice of
upset bid and the related procedures. G.S.
46-28.1(e) has been amended to conform to these changes. LENDERS AND HOME LOANS G.S.
24-1.1A(a1) is effective October l, 2001 and applies to loans applied for
on and after that date. It states that: Subject
to federal requirements, at the time a person applies with a lender for a
home loan, the lender shall provide the applicant with information and
examples of amortization of home loans reflecting various terms in a form
made available by the Commissioner of Banks and, for fixed rate home loans only, shall provide the
person an amortization schedule for the person's home loan at closing. The
Commissioner of Banks shall develop and make available to home loan
lenders materials necessary to satisfy the provisions of this subsection.
NOTARIES G.S.
10A-16 validates certain acts of notaries and has been amended by House
Bill 700. Those acts include an acknowledgement by a notary whose
commission has expired. G.S. 10A-16(a). G.S. 10A-16(b) lists defects in
the notarization, including an error in the expiration of the notary's
commission and the amendment adds reference to a notary's seal "that
does not bear the name of the notary exactly as it appears on the
commission, as required by G.S. 10A-11 , or where the signature does not
comport exactly with the name on the notary commission or on the notary
seal, as required by G.S. 10A-9" as defects cured by G.S. 10A-16. It
should be recalled that G.S. 10A-16(c) validates a deed of trust in which
the notary was named as trustee only. G.S. 10A-16(d) was amended to state
that the curative provisions of G.S. 10A-16 apply to notarial acts
performed on or before April 15, 2001, in lieu of February 28, 1999. House
Bill 955 amends other
provisions of the law of notaries effective January 1, 2002, G.S. 10A-4(c)
was amended and G.S. 10-9(g) through [j) were added as were G.S. 10A-12(f)
and (g). These are changes to inhibit the unauthorized practice of law.
RIGHTS OF WAY – NEW G.S. 136-96.1 AND
G.S. 136-44.7[c] New
G.S. 136-96.1 became effective December 19, 2001 , along with new G.S.
136-44.7(c). G.S.
136-96.1(a) provides that a special proceeding under Article 3 of Chapter
1 of the General Statutes may be brought to declare a right of way
dedicated to public use if: (1) the landowners of tracts constituting
two-thirds of the road frontage of the land abutting the right of way in
question join in the action; (2) the right of way is depicted on an
unrecorded map, plat, or survey; (3) the right of way has been actually
open and used by the public; and (4) recorded deeds for at least three
separate parcels abutting the right of way recite the existence of the
right of way as a named street or road. G.S. 136-96.1 (a)(2) does not
require the plat or survey to comply with any statutory or regulatory
requirements governing plats or surveys. G.S.
136-96.1(b) provides that in a special proceeding brought pursuant to G.S.
136-96.1, the clerk of court shall issue an order declaring the right of
way to be dedicated to public use upon finding that provisions of G.S.
136-96.1 (a) have been proven. G.S.
136-96.1(c) states that any right of way established under G.S. 136-96.1
that is proposed for addition to the state highway system shall meet the
requirements of G.S. 136-102.6. G.S.
136-96.1(d) provides that G.S. 136-96.1 shall not apply to any right of
way established by adverse possession or by TRUSTS AND
TRUSTEES House
Bill 1070 has made substantial revisions to Article 3 of Chapter 36A,
effective January l, 2002. "Trustee" does not include a trustee
in a deed of trust. G.S. 36A-22.1 (6). G.S.
36A-23.1(a) allows the clerk to determine issues involving the
administration and distribution of trusts, the declaration of rights and
the determination of other matters involving trustees and trust
beneficiaries, to the extent those matters are not otherwise provided for
in the trust instrument. Those areas include proceedings to appoint or
remove a trustee, to ascertain beneficiaries, to determine distribution of
a trust or trust powers, and to construe trust documents. All known
beneficiaries, trustees or co-trustees not joined as petitioners shall be
joined as respondents. G.S. 36A-26.1. A hearing and determination is as
provided in G.S. 1-301.3. Appeal to a superior court judge is determined
under G.S. 1-301.3. See G.S.
36A-27. G.S. 36A-26.3 sets forth extensive, special rules when parties are
represented by others, such as an attorney-in-fact. A
special or successor trustee is vested with title of the predecessor
trustee. A predecessor trustee shall execute such documents transferring
title to trust property to facilitate the trust's administration. If the
predecessor trustee fails to do so, the clerk can transfer title. G.S.
36A-40. G.S.
28A-22-10 and G.S. 36A-141 were added by the bill, effective September 14,
2001. G.S.
28A-22-10 provides that when the facts at the time of distribution of
property to a trust are such that the trust would be inoperative under the
terms of the instrument creating the trust for any reason, including the
death of a beneficiary, renunciation by a beneficiary, the exercise of a
right to withdraw the property by a beneficiary, or the attainment of a
stipulated age by a beneficiary, the personal representative or the
trustee authorized or required to make the distribution of that property
to the trust may distribute the property directly to the person or persons
entitled to it under the terms of the instrument creating the trust
without the interposition of the establishment of the trust. If only a
portion of the trust would be inoperative, the property distributable to
that portion of the trust may be distributed directly to the person or
persons entitled to the property under the terms of the instrument
creating the trust. G.S. 36A-141 provides for the same rule for
non-testamentary trusts. UNIFORM
ELECTRONIC TRANSACTIONS ACT Senate Bill 1023 became effective October 1, 2001. G.S. 66- 313(e) was added to state that the article does not apply to notices of default, acceleration, repossession, foreclosure or eviction, or certain rights to cure. RESTRICTIVE
COVENANTS – ENFORCEMENT AND MEDEARIS v. TRUSTEES OF MYERS PARK BAPTIST CHURCH, ET AL This
case was discussed in our February, 2002 newsletter. The Supreme Court has
denied discretionary review. |