June 2000

A PUBLICATION OR THE TITLE COMPANY OF NORTH CAROLINA

   

SARAH FRIEDE JOINS TCNC'S WILMINGTON OFFICE

The Title Company of North Carolina is pleased to announce that Sarah Friede has joined us in our Wilmington office. Sarah will be working with Gary Chadwick in that office serving Southeastern North Carolina.

Sarah is a 1996 graduate of the Villanova University School of Law. She is licensed in North Carolina, California and Pennsylvania. Sarah was in private practice in Wilmington immediately prior to coming with us.

TCNC has more North Carolina attorneys on staff than any other title operation based in the state. As I have stated previously, there is a reason for this. We view the attorney as the key to title business in this state. When title questions arise we want you to have access to a legal staff with experience and ability that can assist you in handling your problems.

TCNC is not aligned with any bank or any realtor based agency.  We are pleased to represent three of the top Title insurance companies in the nation-Old Republic Title, First American Title, and Lawyers Title. This gives you, our approved attorneys, valuable resources in representing your clients. We stand committed to the traditional delivery of real estate services in North Carolina and we are dedicated to preserving the role of the independent attorney in real property transactions.

The Title Company of North Carolina appreciates your business and we continue our pledge to give you the best, most professional service possible. 

 - Alton Russell, President

RESTRICTIONS -KARNER V. FLOWERS

The case of Karner v. Flowers,           N.C.           , 527 S.E. 2d 40 (2000), should be noted. The case reversed and remanded the Court of Appeals' decision at 134 N.C. App. 645, 518 S.E. 2d 563 (1999). In this case, the plaintiffs, in seeking to enjoin the defendant's alleged violation of the restriction that the land be used for "residential use only," moved to join all subdivision owners. This was because the defendant plead an affirmative defense based on a change in circumstances that had made use of the lots for residential purposes no longer feasible.  The Supreme Court stated that, if the restrictive covenant limiting the property to residential use is "removed from a lot within a subdivision, that action extinguishes the restrictive covenant on all properties within the subdivision.  See Tull v. Doctors Bldg., Inc., 255 N.C. 23, 41, 120 S.E. 2d 817, 829-30 (1961)." The right to enforce the restrictions is a "property right with value." Karner 527 S.E. 2d, at 43, quoting Tull. Thus, the restrictive covenant common to all deeds must be either abrogated as to all lots or enforced as to all lots. Id. By operation of law, if the residential restrictive covenant is abrogated as to the lots owned by the defendants, each property owner within the subdivision would lose the right to enforce that same restriction. Therefore, under G.S. 1A-1, Rule 19, these lot owners are necessary parties.  

ESTATES - SALE, LEASE OR MORTGAGE OF REAL PROPERTY BY HEIRS OR DEVISEES

1.     General Comments.

G.S. 28A-17-12 governs the above subject matter.

2.     If the first publication or posting of the general notice to creditors as provided for in G.S. 28A-14-1 occurs within two years after the decedent's death.

This situation is governed by G.S. 28A-17-12(a) and deals with any sale, lease, or mortgage of real property by heirs or devisees of any resident or non-resident decedent.  For brevity's sake, the term "transfer" will be used to describe a sale, lease or mortgage.  G.S. 28A-17-12(a) deals with two situations.

First, if the transfer is made after the decedent's death and before the  first publication or posting of the general notice, the transfer is void as to creditors and the personal representative (the "P.R.").  G.S. 28A-17=12(a)(1).  So, even if the P.R. joins in the transfer, a creditor can take advantage of this rule.

Second, if the transfer is made after the first publication or posting and before the approval of the final account (see G.S. 28A-21-2), the transfer is void as to creditors and the P.R. unless the P.R. joins in the transfer. G.S.28A-17-12(a)(2). If the P.R. has the power to make the transfer by himself by virtue of a power established by the decedent's will or if the P.R. obtains an order to join, clearly he can join in the transfer. However, if the P.R. is not granted such a power in the will or has not obtained an order, it would seem that the P.R. could still join in the transfer under G.S. 28A-17-12(a)(2), since no statute in Chapter 28A expressly restricts G.S. 28A-17- 12(a)(2). E. Urban and G. Whitney, North Carolina Real Estate, 13-39 (Harrison Co. 1996, Supp. 2000). G.S. 28A-13-3(a) sets out a non-exclusive list of P.R. powers. None of those expressly refers to G.S. 28A- 17-12. See G.S. 28A-13-3(a)(1), (7), (12), (27), (31) and (32). However, in reference to a sale or lease, G.S. 28A-13-3(a)(27) refers to all of Article 17 of Chapter 28A. And, G.S. 28A-13-3(a)(32) states that the P.R. can execute all documents, which will accomplish the exercise of the powers vested in the P.R. Arguably, this could include the power in G.S. 28A-17-12(a)(2), if his joinder under that statute is deemed a power. G.S. 28A-15-1's standards and requirements do not expressly limit the P.R.'s joinder under G.S. 28A-17-12(a)(2). Further, G.S. 28A-17-12(a)(2)'s power is not made expressly subject to G.S. 28A-15-1 's standards or to any other provision of Article 17 of Chapter 28A. If the P.R.'s power under G.S. 28A-17-12(a)(2) is not subject to restrictions outside of G.S. 28A-17-12, devisees and heirs cannot complain since their transfer of title under G.S. 28A-17-12 is at issue, so they are in no position to complain. Creditors are in a position to complain, however. That is what makes it somewhat arguable that the P.R. must exercise some standard of care to be joining in the transfer in the "best interest of the administration of the estate."  G.S. 28A-17-12 should be clarified in this regard.  In any event, a purchaser, lessee, or lienor, to the extent any of those parties give value, should be protected under current G.S. 28A-17-12(a)(2) if they have no actual knowledge of a P.R. not acting in the best interests of the estate.

What is the effect of a valid transfer under G.S. 28A-17-12(a)(2) upon an existent lien of a creditor against which the transfer is valid? The answer is, "none." G.S. 28A-17-12(a)(2) governs only the issue of whether the transfer is valid as against the creditor. If the transfer is valid, it is subject to, and not free and clear of, the creditor's lien. A creditor's lien can include a lien of judgment lienor, a mortgagee or a taxing authority by virtue of a federal or state "death tax." G.S. 28A-17-12(a)(2) relates to a transfer of title by an heir or devisee. If land is to be transferred "free and clear" of a lien, it will have to be done by the P.R. transferring the title, probably by virtue of an order. See our April 2000 newsletter regarding a sale by a P.R. Also G.S. 28-19-3, pertaining to "limitations on presentation of claims," contains G.S. 28A-19-3(g). That subsection states that nothing in that section pertaining to presenting claims under G.S. 28A-19-1 affects or prevents any action or proceeding to enforce any mortgage, deed of trust, lien (including a judgment lien) or security interest. Only the right to a deficiency judgment is affected by failure to comply with the claims making procedure of Article 19 of Chapter 28A. It seems compatible with this rule to state that G.S. 28A-17-12(a)(2) has no affect on liens.

G.S 28A-17-12(a)(2) contemplates the fact that the transferring parties might be heirs or devisees as to particular land or heirs as to a portion of the land and devisees as to another portion. A probated will determines whether title is vested in a devisee; otherwise, title vests in the heirs. See G.S. 28A-15-2(b) and G.S. 31-41. Also see G.S. 31-38 and G.S. 31-40 (title presumed in fee; what property passes by will). G.S. 31-12 and G.S. 31-39 require probate of a will in order to pass title and deal with the conflict between title derived from heirs as versus title derived from devisees.

Another issue is, when is a transfer deemed "made" under G.S. 28A-17-12(a)? This reference to a transfer being "made" seems to refer to when the transfer is deemed "made" as between the grantor (grantors) and grantee (grantees). That would be when a valid transfer document is delivered to the grantee (grantees), which is a date perhaps earlier than the date of recordation of the transfer document.

3.     If the first publication or posting of the general notice to creditors as provided for in G.S. 28A-14-1 does not occur within two years after the decedent's death.

This situation is governed by G.S. 28A-17-12(b). This statute deals with the same type of transfers by the same type of heirs or devisees as in G.S. 28A-17-12(a) discussed in 2. above. However, the timing of the transfer described in G.S. 28A-17-12(b) is different. Clearly, if the first publication or posting of notice does not occur within two years of the decedent's death, a transfer by the heirs or devisees made after that two year period is valid, without the joinder of the P.R. G.S. 28A-17-12(b) does not expressly require that the transfer take place after that period. Therefore, it is possible that if the notice does not occur within the two-year period and a transfer is made within the two-year period by the heirs or devisees, the transfer will be valid. It is not clear that G.S. 28A-17-12(b) was intended to have this effect. The statute should be clarified.

The comments made in 2. above regarding the necessity of probate, conflicts between purchasers from heirs and purchasers from devisees, the fact that liens are unaffected and when a transfer is deemed "made" also apply to a transfer under G.S. 28A-17-12{b).

4. Conclusion 

G .S. 28A-17-12 is a well-drawn statute with only a limited need for clarification. Conflicts between (1) a transfer document given by heirs or devisees and (2) a transfer document given by only the P.R. pursuant to a power of sale would seem to be resolved by priority rules under the recording act. G.S. 47-18; G.S. 47-20.  

PAYMENT OF CLAIMS AND G.S. 28A-19-6 

Article 19 of Chapter 28A deals with claims against the estate. G.S. 28A-19-1 sets out a procedure for presentation of claims. G.S.28A-19-3 deals with limitations on such presentations. And G.S. 28A-19-6 deals with order of payment of claims. G.S. 28A-19-3(g), noted in the preceding article above, makes it clear that failure to file a claim does not result in the loss of a lien.  Also, when the personal representative sells estate property, the case of Moore v. Jones, 266 N.C. 149, 36 S.E. 2d 920 (1926), should be noted.  The P.R. attempted to distribute proceeds in the order to set out under then G.S. 28-105.  The case indicates that the order of payment in the lower court case was the order in G.S. 28A-19-6, the apparent successor statute to G.S. 28-105.  In Moore v. Jones, there were costs of administration, a judgment docketed against the decedent and a deed of trust on real property given by the decedent prior to death and recorded after the judgment's docketing. The Supreme Court reversed the lower court and held that the order of payment was (1) the judgment, (2) the deed of trust, (3) the costs of administration, and (4) funeral expenses. In other words, once liens upon the land are paid, the surplus sale proceeds, if any, are distributed under what is now G.S. 28A-19-6 and what was then G.S. 28-105.

BLEVINS V. WELCH AND PRESCRIPTIVE EASEMENTS

   The case reiterates the four elements of a prescriptive easement: (1) an adverse or hostile use; (2) the use has been open and notorious; (3) the use has been continuous and uninterrupted for at least twenty years; and (4) substantial identity of the way claimed to be an easement.      N.C. App.       , 527 S.E. 2d 667 (2000).

In the case, the owner of the dominant estate sued the owners of the servient estate, alleging that the defendants, by blocking access to one of two roads, were in contempt of prior judgment granting plaintiff's predecessors in title a prescriptive easement to use "road" that traversed defendant's property. The District Court held that "road," as used in the prior judgments, was actually both roads, and that defendants were thus in contempt of that judgment. The defendants appealed. The Court of Appeals held that: (1) the prior judgment was ambiguous, thus warranting deference to the trial judge's finding that "road" included both roads; (2) ambiguity in the prior judgment precluded a finding of willfulness on part of defendants; and (3) the trial court lacked authority to award attorney fees. The decision was thus affirmed in part and reversed in part.

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