February 2003

A PUBLICATION OR THE TITLE COMPANY OF NORTH CAROLINA

     

(See TCNC Website: www.oldrepublictitle.com/nc for our newsletters, newsletter index and forms)

 

 

FINANCIAL STRENGTH OF OLD REPUBLIC

 

Old Republic National Title Insurance Company has received the Standard & Poor’s highest title insurance company rating for the tenth consecutive year, which is an AA-. However, the rating of financial strength does not end there. Moody’s Investor Services gave Old Republic a financial strength rating of A1—this being the title industry’s only A1 rating. A further feather in the cap is the rating Fitch Ratings gave Old Republic—a very strong AA- rating, the only such rating in our industry.

 

These ratings show that Old Republic National Title Insurance Company is on top of its game with unequaled ratings which show its secure claims-paying ability and high financial stability in the title industry. The chart below indicates just how strong a leader in the title industry Old Republic is and will remain for a long time to come.

 

Company

Standard & Poor’s

Moody’s

Fitch Ratings

Demotech

OLD REPUBLIC NATIONAL TITLE INSURANCE COMPANY

 

AA-

 

A1

 

AA-

 

A”

 

Chicago Title Insurance Co.

A

A2

A

A”

Commonwealth Land Title Ins.

A-

Baa1

A

A”

Fidelity National Title Ins.

A

A2

A

A’

First American Title Ins. Co.

A-

A3

A

A”

Lawyers Title Ins. Corp.

A-

Baa1

A

A”

Security Union Title Ins. Co.

A

A2

A

A’

Stewart Title Guaranty Co.

A-

A2

A+

A”

Ticor Title

A

A2

A

A’

Transnation Title

A-

Baa1

A

A”

Ratings are as of 1/30/03

 

 

 

SINGLE RISK RETENTION LIMIT OF OLD REPUBLIC GROWS TO $100 MILLION

 

Rande Yeager, President and CEO of Old Republic Title Insurance Group, has recently announced that the Board of Directors has approved an increase in Old Republic’s single risk retention limit to $100 million. The previous increase was in 1994, and was only raised from $15 million to $25 million. Yeager states, “Our old limit presented barriers for our owned and agency operations in the commercial marketplace.” He continues, “I am certain that the increased limit, along with the experience, knowledge and capabilities of employees and agents of Old Republic Title Insurance Group, will enhance our success in the high-liability market.”

 

If you have any questions, please contact The Title Company of North Carolina’s attorneys.

 

 

JUDGMENTS AND ORDERS PERTAINING TO TRANSFER OF TITLE – DOES THE JUDGMENT DO IT OR IS A DEED REQUIRED?

 

Summary

 

A judgment in a case where proper service of process exists can (1) direct the owner to transfer an interest in title; (2) direct a person to transfer the interest on behalf of the owner or (3) actually transfer the title. It is critical to review the contents of the judgment to see if the judgment transfers title or if a deed is required. Further, if a spouse’s title is transferred to a third party pursuant to the above, the non-owner spouse’s marital rights must be considered.

 

1. General Comments

 

G.S. 1A-1, Rule 70 is entitled “Judgment for specific acts; vesting title” and deals with transfer of title. G.S. 1-228 pertains to a judgment transferring title. Title transfers pursuant to G.S. 1A-1, Rule 70 and G.S. 1-228 are specifically referred to in several statutes governing domestic relations such as G.S. 50-13.4(e) and G.S. 50-13.4(f)(2) (actions for minor child support), G.S. 50-16.7(a) and G.S. 50-16.7(c) (alimony and post separation support) and G.S. 50-20(g) (equitable distribution). However, G.S. 1A-1, Rule 70 and G.S. 1-228 are not limited to domestic relations or family law situations.

 

If a judgment is the last link in the chain of title, or a recent link in the chain of title of record less than seven years, it is important for the title examiner to review the file to verify proper service of process upon the defendant(s) and, therefore, jurisdiction. If the judgment has been of record more than seven years, it is still important to ascertain these matters but reliance upon color of title can expedite things and remove the necessity of examining service of process if the title insurer agrees in the particular case.

 

As will be noted below, G.S. 1A-1, Rule 70 and G.S. 1-228 clearly apply to transfers of title as if a deed is given. Since G.S. 1A-1, Rule 70 refers to “a conveyance of land” and vesting title, an argument can be made that G.S. 1A-1, Rule 70 and G.S. 1-228 can authorize a deed of trust as well. The statutes could be clearer, however.

 

2. Judgment Directing a Party to Convey;  Appointing Someone to Convey for Owner

 

The first sentence of G.S. 1A-1, Rule 70 provides that:

 

If a judgment directs a party to execute a conveyance of land or to deliver deeds or other documents or to perform any other specific act and the party fails to comply within the time specified, the judge may direct the act to be done at the cost of the disobedient party by some other person appointed by the judge and the act when so done has like effect as if done by the party.

 

Note how the above quoted rule deals with a situation where the judgment directs a party to do something as opposed to the judgment actually transferring title. If R is the party who is appointed to make the conveyance for O, the title holder ordered to make the conveyance, the instrument (for example, a deed) would come from O, by R. The person appointed might be called a receiver. The title examiner realizes that the prior deed to O, the party ordered to make the conveyance, will be indexed in the grantee index under O’s name, and the deed from R, the person appointed to make the conveyance for O, will be indexed in the grantor index under O’s name. See G.S. 161-22.1.

 

A conveyance of the interest of O by R will be subject to the marital rights of O’s spouse under G.S. 29-30 unless steps are taken to extinguish those rights as discussed in 3 below in reference to when the judgment itself actually transfers title.

 

3. Judgment Actually Transferring Title

 

G.S. 1A-1, Rule 70 goes on to provide in part that:

 

If real or personal property is within the State, the judge in lieu of directing a conveyance thereof may enter a judgment divesting the title of any party and vesting it in others and such judgment has the effect of a conveyance executed in due form of law.

 

It is noted that the rule quoted immediately above is different from the first rule quoted in 2 above. The first rule permits an order appointing R to make the conveyance for O. The second rule permits the judgment or order to actually make the conveyance.

 

When the second rule quoted above is used, G.S. 1-228 is important. G.S. 1-228 provides as follows:

 

Every judgment, in which the transfer of title is so declared, shall be regarded as a deed of conveyance, executed in due form and by capable persons, notwithstanding the want of capacity in any person ordered to convey, and shall be registered in the proper county, under the rules and regulations prescribed for conveyances of similar property executed by the party. The party desiring registration of such judgment must produce to the register a copy thereof, certified by the clerk of the court in which it is enrolled, under the seal of the court, and the register shall record both the judgment and certificate. All laws which are passed for extending the time for registration of deeds include such judgments, provided the conveyance, if actually executed, would be so included.

 

So, the second rule of G.S. 1A-1, Rule 70 quoted above provides for the judgment transferring title to be registered (recorded) as if the judgment was a deed. It would be indexed in the grantor index under O’s name.

 

G.S. 50-13.4(e) and G.S. 50-13.4(f)(2) allow the court in a  child support action to enter an order transferring title as provided in G.S. 1A-1, Rule 70 and G.S. 1-228. G.S. 50-16.7(a) and 50-16.7(c), pertaining to alimony and support, and G.S. 50-20(g), pertaining to equitable distribution, provide for the same with respect to a judgment transferring title.

 

At the time an order transferring title under these statutes or in any other situation is entered, title to the real property might be vested in (1) the husband and wife, (2) the husband, or (3) the wife. It is noted that G.S. 1A-1, Rule 70 states that when a judgment transfers title the owner is divested of title, title is vested in the party mentioned in the judgment “and such judgment has the effect of a conveyance executed in due form of law.” G.S. 1-228 states that the judgment “shall be regarded as a deed of conveyance, executed in due form and by capable persons…” When a judgment transfers title held by one spouse under G.S. 50-13.4(c) and 50-13.4(f)(2), G.S. 50-16.7(a) and G.S. 50-16.7(c), G.S. 50-20(g) or in another type of action, when, if at all, must the grantee be concerned about surviving spouse rights under G.S. 29-30? G.S. 29-30(a) provides that this interest is a life estate in one-third in value “of all the real estate of which the deceased spouse was seized and possessed of an estate of inheritance at any time during coveture,” except for four exceptions involving real estate as to which the surviving spouse:

 

(1) Has waived his or her rights by joining with the other spouse in a  conveyance thereof, or

(2) Has release or quitclaimed his or her interest therein in

accordance with G.S. 52-10, or

(3) Was not required by law to join in conveyance thereof in order to bar the elective life estate, or

(4) Is otherwise not legally entitled to the election provided in this section.

 

Assuming that there is no waiver, release or quitclaim by the non-owner spouse there is nothing in G.S. 1A-1, Rule 70 or G.S. 1-228 to constitute an exception within G.S. 29-30(a)(3) or (4). And, if there is no joinder, it has been held that where a married person conveys separate property without permission or joinder of their spouse and the non-owner spouse survives the owner spouse, the conveyed property is subject to the non-owner spouse’s elective life estate. Melvin v. Mills-Melvin, 126 N.C. App. 543, 486 S.E.2d 84 (1997).

 

Several examples of situations giving rise to the determination created by G.S. 29-30 can be given, where spouse A and spouse B are married to each other:

 

·        Example 1: Title is vested solely in spouse A. The judgment transfers title to X.

 

·        Example 2: Title is vested solely in spouse A. The judgment transfers title to spouse B.

 

·        Example 3: Title is vested in spouse A and spouse B as tenants by the entirety. The judgment transfers title to spouse B.

 

In Example 1, it would seem that X takes title subject to spouse B’s G.S. 29-30 rights unless (1) spouse B joined in the judgment to release spouse B’s G.S. 29-30 interest; (2) spouse B separately waived, released or quitclaimed spouse B’s G.S. 29-30 interest or (3) the judgment also expressly transferred, waived or released spouse B’s G.S. 29-30 interest. In order for (3) to occur, it would seem that spouse B would have to be a party to the underlying action, which would be difficult unless B had liability in the underlying action.

 

In Example 2, the transfer of title by judgment from spouse A to spouse B can be for child support, spouse support, equitable distribution or for any other reason allowed by law. However, unless the judgment provides otherwise, as long as spouse A and spouse B remain married, spouse A will have rights under G.S. 29-30 after the transfer of title. It is noted that, while G.S. 39-13.3(a) states that when one spouse conveys title to the other spouse the title is vested in the grantee, G.S. 39-13.3(a) does not say that the grantee holds title free of the grantor’s G.S. 29-30 rights. Therefore, if the intent of the judgment is to completely bar those rights, the judgment should go on to state: “The transfer of title by this judgment also releases any right, title and interest, including, but limited to, those rights under G.S. 29-30, which [A] now has or may hereafter acquire solely by reason of [A’s] marriage to [B].”

 

In Example 3, the transfer can also take place for the reasons outlined in our discussion of Example 2. G.S. 39-13.3(c) states that a conveyance from one spouse to the other spouse of title held by the spouses as tenants by the entirety vests title in the grantee. However, G.S. 39-13.3(c) does not state that the grantee acquires title free and clear of the grantor’s G.S. 29-30 rights. Therefore, the judgment should contain a clause as set forth above in our discussion of Example 2.

 

It would seem that, if the intent of the law is to exempt G.S. 1A-1, Rule 70 and G.S. 1-228 transfers from G.S. 29-30, G.S. 29-30(a) should be amended to add the following exception:

 

(2a) Has been divested of title by a judgment pursuant to G.S. 1A-1, Rule 70 and G.S. 1-228 or by an execution sale pursuant to a docketed judgment.

  

 

4. The Difference Between a Judgment Requiring a Party to Transfer Title and a Judgment That Actually Transfers Title

 

G.S. 1A-1, Rule 70 provides that a judgment transferring title “has the effect of a conveyance executed in due form of law.” G.S. 1-228 states that such a judgment “shall be regarded as a deed of conveyance, executed in due form.” These statutes in their current form seem to overrule earlier cases. These cases seemed to require that the judgment not only state that the title was divested “out of the defendant” and was vested in the plaintiff, but also had to declare that it “shall be regarded as a deed of conveyance.” See Morris v. White, 96 N.C. 91, 2 S.E. 254 and Evans v. Brendle, 173 N.C. 149, 91 S.E. 723 (1917).

 

Sometimes a judgment will blur what has occurred regarding transfer of title. The judgment might say something as follows: “The title of A is hereby transferred and conveyed to B. A is directed to execute a deed to B if B so desires.” The second sentence should be regarded as surplussage as opposed to requiring A to execute a deed in order to effect title transfer. After all, the first sentence of the judgment should be enough. See Evans v. Brendle, 173 N.C. 149, 91 S.E. 723 (1917) where the judgment stated: “[The defendant] shall execute and deliver to [B], her heirs, a deed to the land, which is described as follows: [legal description]. It is further ordered…that the title to the said tract of land be and the same is hereby divested out of the defendant…and that the title to the same is hereby vested…in [B] and her heirs.” But for the fact that the judgment did not continue and say, as discussed above, that it “shall be regarded as a deed of conveyance” as, apparently, the statute then required, the judgment would have transferred title without the necessity of an actual deed. If the judgment clearly transfers title, extra language requiring the owner to execute a deed should be interpreted as an unnecessary “over precaution” and not as a condition to passage of title.

 

Sometimes, the judgment will require the giving of a deed, but will not constitute a transfer of title.

 

For example, in one case, a consent judgment was entered confirming an agreement between the propounders of a will (the party offering it for probate) and the caveator of the will (the party seeking to dispute it). The agreement provided that in exchange for the caveator paying the propounders $3500, the propounders “shall execute and deliver to the caveator…a fee simple deed” to the property. The order decreed that the parties comply with the agreement. If the $3500 was not paid within 90 days of the consent judgment, “then the propounders shall not be required to transfer said real property to the caveator…” The court held that the consent judgment was not sufficient to transfer title within the contemplation of G.S. 1-227 (now G.S. 1A-1, Rule 70) and G.S. 1-228. In the Matter of the Will of Amos Gaston Smith, 249 N.C. 563, 107 S.E.2d 89 (1959). Domestic law or family law attorneys frequently draw judgments that require a deed but do not act as a deed. In view of G.S. 1A-1, Rule 70 and G.S. 1-228, this does not seem prudent, particularly where joinder of the non-owner spouse is not required because the title transfer will be to one of the spouses and the judgment can contain appropriate language to eliminate the owner-grantor’s future marital rights.

  

 

FORECLOSURES – UPSET BIDDER DEFEATS UNJUST ENRICHMENT CLAIM

 

The case of HomeQ v. Watkins, __N.C. App. __, 572 S.E.2d 871 (2002) is noted. In that case, the plaintiff, HOMEQ d/b/a The Money Store, commenced a power of sale foreclosure of a second lien deed of trust in the amount of $56,650. That deed of trust was subject to a first lien deed of trust securing CCB in the amount of $93,350. On September 14, 2000, plaintiff submitted the highest bid of $45,000 at plaintiff’s foreclosure sale. Eight days later, on September 22, 2000, plaintiff paid CCB $121,519.58 to satisfy CCB’s first lien deed of trust. On the same day, and within the upset bid period in G.S. 45-21.27, the defendant submitted a proper upset bid of $47,250. In a subsequent action by the plaintiff against the defendant for unjust enrichment, the court ruled against the plaintiff. The court noted that with this new bid, the last prior bidder is “released from any further obligation.” G.S. 45-21.27(f). In order to claim unjust enrichment “more must be shown than that one party voluntarily benefited another or his property.” Collins v. Davis, 68 N.C. App. 588, 591, 315 S.E.2d 759, 761 (1984). “In order to properly set out a claim for unjust enrichment, a plaintiff must allege that property or benefits were conferred on a defendant under circumstances which give rise to a legal or equitable obligation on the part of the defendant to account for the benefits received.” Norman v. Nash Johnson & Sons’ Farms, Inc., 140 N.C. App. 390, 417, 537 S.E.2d 248, 266 (2000). The plaintiff could have protected itself by submitting its own upset bid. The plaintiff did not. In support of the trial court’s holding that unjust enrichment did not occur, even though the defendant was enriched, the Court of Appeals cited the case Williams v. Williams, 72 N.C. App. 184, 187, 323 S.E.2d 463, 465 (1984), which states in part “[t]he mere fact that one party was enriched, even at the expense of the other, does not bring the doctrine of unjust enrichment into play.”

 

 

FORECLOSURES – STANDING TO OBJECT

TO FAILURE TO COMPLY WITH REQUIREMENTS

 

Beneficial Mortgage Co. of N.C. v. Nader Hamidpour, Atlantic Mortgage and Investment Corp., 149 N.C. App. ______, ______ S.E. 2d ______ (2002), a second lien deed of trust holder (Beneficial) was deemed not to have standing to collaterally attack a foreclosure of the first lien deed of trust for being defective.  The problem was that the foreclosure sale by the first lienholder was defective due to failure to post the notice of sale for 20 days as required by G.S. 45-21.17 and that the sale was conducted on a legal holiday as prohibited by G.S. 45-21.23.  According to the Court of Appeals, only the mortgagor could contest the sale under G.S. 45-21.21.  The expensive litigation in this case is a good reason for the first lien lender to give notice to the second lien lender even though the statutes do not require the notice unless the second lien lender files a request for notice.

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