June 2001
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June 2001 |
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A PUBLICATION OR THE TITLE COMPANY OF NORTH CAROLINA |
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DECEDENTS'
ESTATES-PERSONAL REPRESENTATIVE'S POWER TO SELL REAL PROPERTY; The Title Company of North Carolina published an
article on this subject in its April, 2000 newsletter. House Bill 716,
introduced on March 21, 2001, deals with this subject and other subjects.
The current status of this bill, as of June 13, 2001, is that it is in the
Senate Judiciary Committee. A copy of this bill can be obtained by calling
919-733-5648 or by accessing the bill on the following web site:
www.ncleg.net. The purpose of this article is to set forth what we
feel our revised changes of certain portions of the bill should look like.
To save space, we are not setting
forth a copy of the bill as introduced. The bill uses the phrase, "without a court
order." In the context of the bill, it is unclear whether
"without a court order" means (1) that the will must
specifically grant the power to act, and specifically state "without
a court order" or (2) that the will must specifically grant the power
to act but need not specifically spell out that thc power to act is
"without a court order." Therefore, we believe that a definition
of "without a court order" should be added to G.S. 28A-1-1
as follows: (7) "Without a court order", as used in G.S. 28A-13-3(a)(1), G.S. 28A-13-3(c), G.S.
28A-15-2(b), G.S. 28A-17-8.1 and G.S. 28A-17-10, means a provision in a
validly probated will which expressly states that a personal
representative can perform an act without a court order or expressly
grants a power to the personal representative which does not expressly
require the personal representative to obtain a court order before
performing an act. G.S. 28A-13-3(a)(1) is to be amended to make it clear
that the procedure in G.S. 28A-13-3(c) applies unless the will authorizes
the P.R. to act without a court order. The statute pertains to taking
possession, custody or control over real property. The bill makes two changes in G.S. 28A-13-3(c). The
first is to make subsection (c) consistent with the proposed changes in
G.S. 28A-13-3(a)(1). The second change allows combination of a G.S.
28A-15-1(c) proceeding and a G.S. 28A-13-3(c) proceeding to avoid two
separate proceedings. A comparable change is proposed for G.S. 28A-15-1(c)
as noted below. G.S. 28A-15-1(c) will be amended if the bill is
passed to eliminate any inference that separate proceedings under G.S.
28A-15-1(c) and G.S. 28A-13-3(c) must be conducted. The proceedings can be combined. This is consistent
with proposed changes in G.S. 28A-13-3(c). However, we believe that G.S.
28A-15-1(c) should be further clarified. Our changes are to clarify
matters in obvious ways, making helpful reference to G.S. 28A-17-8.1 and
G.S. 28A-17- 10. Our proposal appears as follows: (c)
If
it shall be determined by the personal representative that it is in the
best interest of the administration of the estate to sell, lease,
mortgage, exchange, partition or grant options with respect to any real
estate or interest therein to obtain money for the payment of debts and
other claims against the decedent's estate, the personal representative
shall institute a special proceeding before the clerk of superior court
for such purpose pursuant to Article 17 of this Chapter, unless the
transaction is conducted pursuant to G.S. 28A-17-8.1 or G.S. 28A-17-10
without a court order. If a special proceeding has been instituted by the
personal representative pursuant to G.S. 28A-13-3(c), the personal
representative may petition to sell, lease, mortgage, exchange, partition
or grant options with respect to any real estate or interest therein
pursuant to this subsection aspart of the proceeding under G.S. 28A-13-3(c) and is not
required to institute a separate special proceeding. Section 1.2 of the bill proposes changes to G.S.
28A-15-2(b), dealing with title to real property in a decedent's estate
situation. The bill proposes to amend G.S. 28A-15-2(b) to make an
exception to vestiture of title in the devisees by stating that this
vestiture of title is subject to the P.R. (who is not devised title) and
his power to sell pursuant to proposed G.S. 28A-17-8.1 and proposed G.S.
28A-15-2(c). G.S. 28A-15-2(c) would require notice to the devisees. The
proposal for G.S. 28A-15-2 also does not, but should, state what happens
to title vested in heirs as affected by a court ordered sale and should
address transfers other than a sale, as our subdivision (3) does. Also, we
feel that the bill should make some attempt to deal with pre-existing
liens against an heir or devisee. See
our article in our January, 2000 newsletter and E. Urban and G. Whitney, North
Carolina Real Estate §13-43 (Harrison Co. 1996). Therefore, we
believe that instead of the bill's version of G.S. 28A-15-2(b) and (c),
G.S. 28A-15-2(b) should appear as follows: (b) Real Property - Subject to the powers
of the personal representative referred to in subdivisions (1) through (4)
of this subsection and subject to any rights or interests of any party
created by the exercise of any of those powers, the title to and right of possession of real property of a decedent is
vested in his heirs as of the time of his death; but when title to real
property is not devised to the personal representative, the title to and
right of possession of real property of a decedent devised under a valid
probated will becomes vested in the devisees and shall relate back to the
decedent's death, subject to the provisions of G.S. 31-39. (1) In the case of a valid probated will devising real property, the devisees shall be divested of title upon a sale of real property without a court order made pursuant to authority granted by that will as provided in G.S. 28A-17-8.1 or pursuant to an order as provided in Article 17 of this Chapter, and the personal representative may, without the joinder or consent of the devisees in the deed, execute a deed in favor of a purchaser for value who shall take title free of any rights of the devisees and of any party claiming through or against any devisee including, but not limited to, a party holding a docketed judgment against a devisee. (2)
In
the case of an intestacy as to real property, the heirs shall be divested
of title upon a sale of real property pursuant to an order as provided in
Article 17 of this Chapter and the personal representative may, without
the joinder or consent of the heirs in the deed, execute a deed in favor
of a purchaser for value who shall take title free of any rights of the
heirs and any party claiming through or against any heir including, but
not limited to, a party holding a docketed judgment against an heir. (3) The interest of any heir or devisee and any
party claiming through or against any heir or devisee, including, but not
limited to, a party holding a docketed judgment against an heir or
devisee, shall be subject to the personal representative's right to lease,
mortgage, exchange, partition or grant options pursuant to this Chapter. (4) The
personal representative may take possession, custody and control of real
property without a court order pursuant to authority granted by that will
or pursuant to an order pursuant to G.S. 28A-13-3(c). Section
1.4 of the bill introduces new G.S. 28A-17-8.1. Section 1.3 of the bill
would repeal existent G.S. 28A-17-8. We believe that proposed G.S.
28A-17-8.1 should be reconsidered. In our proposal, subsections (a) and
(b) of the bill have been combined to clarify and eliminate repetition.
Subsection (c) of the bill is unnecessary. However, our new suggested
subsection (b) is necessary and overrides Montgomery v. Hinton, 45 N.C. App. 271, 262 S.E. 2d 697
(1980), discussed in TCNC's April 2000 newsletter. The deleted version of
the bill's subsection (c) assumes the availability of G.S. 32-27(2)
notwithstanding Montgomery v.
Hinton. If that is desirable, our suggested subsection (b) is
necessary since the case requires title to be vested in the P.R. in order
for G.S. 32- 27(2) to be used by the P.R. Existing subsection (c) of the
bill could be construed to apply only if title is vested in the P.R.,
because of Montgomery v. Hinton. Subsection
(d) of the bill has been deleted. Subsection (d) of the bill would
apparently change existing law as to "specifically devised
property" and require the P.R. to get the joinder or consent of the
devisees even when the will did not require it. Aside from possible
disputes over what this term means in every case (is "all my land
located in Mecklenburg County" specifically devised?), this is an
unwise change in the law in a case where the will is clear and could
hamstring the P.R. and force him to get a court order, at much expense to
the estate. Therefore,
we believe that new G.S. 28A-17-8.1 should appear as follows: §28A-17-8.1.
Sale or other disposition pursuant to authority in will.
(a) A personal representative has the power to sell,
lease, mortgage, exchange, partition, grant options with respect to,
or otherwise
dispose of the real property of a decedent without a court order if
authorized to do so by the will of the decedent, regardless of whether
title to the real property was devised to the personal representative. A
sale, lease, mortgage, exchange, partition, grant of option or other
disposition of real property pursuant to this subsection shall not require
a proceeding under this Article or any of the procedures set forth in
Article 29A of Chapter 1 of the General Statutes, entitled "Judicial
Sales", but the personal representative shall include in the next
account, whether annual or final, a record of any receipts and
disbursements incident to any such transaction. (b) If all of the powers in G.S. 32-27 in its entirety
or in G.S. 32-27(2) alone are incorporated into a valid probated will as
powers granted to the executor, the executor shall have the powers set
forth in G.S. 32-27(2) whether or not title to the real property is
devised to the personal representative. (c)
A
transaction by the personal representative pursuant to the exercise of a
power in accord with subsection
(a) or subsection (b) may be for any reason that the personal
representative deems to be for the best interest of the estate, including
the payment of debts and other claims against the decedent's estate, the
payment of specific cash bequests to devisees, or the distribution of cash
to residuary devisees. (d)
A
personal representative authorized by the will of a decedent to exercise a
power specified in subsection (a) or subsection (b) without a court order
may request the clerk of superior court to issue an order to exercise such
a power. Upon such a request the procedure for the sale shall be as
provided in Article 29A of Chapter 1 of the General Statutes, entitled
"Judicial Sales" or by any other method of sale specified in the
order and the procedure for the exercise of any other power specified in
subsection (a) or subsection (b) shall be by any method specified in the
order. (e) A purchaser, lessee, mortgagee, beneficiary
of a deed of trust, exchangee, party to a partition, recipient of an
option or any other disposition
of real property or any successor to such a party can conclusively assume
that a transaction pursuant to this section is for the best interest of
the estate and is valid. While the bill does not include a G.S. 28A-17-4.1, we believe such a section would be helpful. This addresses the P.R. selling property free and clear of liens against the decedent. It is believed that the current law probably allows this, but it should be spelled out. See E. Urban and G. Whitney, North Carolina Real Estate §13-42 (1996). Further, subsection (c) takes the position that a sale that would ordinarily not require a proceeding and order will require such a proceeding and order in order to be a sale free and clear of liens against the decedent. (Liens against an heir or devisee are dealt with by our proposed G.S. 28A-15-2(b) as noted above.) G.S. 28A-17-4.1 might appear as follows: 28A-17-4.1 Sale free and clear of liens against the
decedent. (a) Definitions. As used in this section: (1) "lien" shall mean any voluntary or involuntary lien of
specific or general nature constituting a lien prior to the decedent's
death against the real property owned by the decedent to be sold by the
personal representative of the decedent's estate. "Lien" shall
not include the lien for advalorem taxes pursuant to Chapter 105 or
assessments pursuant to Chapter 160A or Chapter 153A having super priority
pursuant to law. (2)
"A sale free and clear of any lien" shall mean a sale
pursuant to this section and other provisions of Article 17 of Chapter 28A
free and clear of any lien which is not to be completely discharged of
record as a result of full payment of the amount secured thereby. (b) A sale of the decedent's real property by the
personal representative pursuant to a petition filed in accord with this
Article shall be a sale free and clear of any lien if the lien claimant is
made a party to the proceeding by service of summons in the manner
required by law and if an order is entered stating that the sale is to be
free and clear of liens. To the extent that a lien has not been filed as
in the case of a claim of lien pursuant to G.S. 44A-7, et.
seq., service of summons
shall be as in the case of service against unknown parties in the manner
required by law if the lien claimant is unknown to the personal
representative. (c)
In
order for a sale by a personal representative under circumstances that
make G.S. 28A-17-8.1 or G.S. 28A-17-10 otherwise applicable to be a sale
free and clear of any lien, the personal representative shall file a
petition pursuant to this Article and shall follow the procedure in this
Article, including the procedure in subsection (b).
(d)
After
a sale free and clear of any lien, the proceeds of the sale shall be
distributed in accord with G.S. 28A-19-6. The balance shall be distributed
to the heirs or devisees otherwise entitled to the real property sold. We are certain that our proposals can be improved upon. Our concern is that while House Bill 716 represents an excellent first step, further clarification is needed so that title examiners and title insurers can deal with real property conveyances by a P.R. with some degree of certainty. We invite you to direct comments to the Senate Judiciary Committee Chairman: The Honorable Sen. Dan Clodfelter, 406 Legislative Office Building, Raleigh, North Carolina 27601-2808. ANTI-LAPSE
STATUTE AMENDED-AGAIN
In
our July, 2000 newsletter, we discussed the "anti-lapse
statute." The statute appears in G.S. 31-42 and, as of July, 2000,
was just amended effective January 1, 2001. The amendment applied to
decedents dying on or after that date. The newsletter discussed several
fact situations and differences between the old and new versions of G.S.
31-42. G.S.
31-42(a) has been amended again by House Bill 182, approved and signed
into law on May 17, 2001. The act applies to estates of decedents dying on
or after that date. The last sentence of G.S. 31-42(a) has been amended to
read as follows, with the italicized words constituting the added
language: In
the case of the class devise, the issue shall take whatever share the
deceased devisee would have taken had the devisee survived the testator;
in the event the deceased class member leaves no issue, the devisee's
share shall devolve upon the members of the class who survived the
testator and the issue of any deceased members taking by substitution.
The change was recommended by the General Statutes Commission to clarify the law to expressly state what the statute previously intended. RESTRICTIVE
COVENANTS-RESUBDIVISION AND ASSESSMENTS In our last issue we discussed restrictive covenants,
re-subdivision and the issue of application of the requirement that one
dwelling be located upon each lot. After that article, the case of Claremont
Property Owners Association, Inc. v. Gilboy, N.C.
App. ,
542 S.E. 2d 324 (2001), was published. In that case, 180 acres were subdivided and subjected
to recorded restrictive covenants. Paragraph 16A provided that cost of
maintenance of subdivision roads would be divided by the number of lots
with each lot owner paying a prorata share. Paragraph 16B stated that each
lot was made subject to a lien to secure payment and the lien would run
with the land and be enforceable notwithstanding any change of ownership.
Paragraph 16 also stated that the developers had to pay on the same basis
until a lot was sold. Paragraph 16D provided that the developers may
assign to an association of property owners the right to maintain
subdivision roads and collect costs thereof from lot owners. In 1990, such
an assignment occurred. The subdivision was developed in phases with the
developer periodically recording new phase plats. In 1993 and 1994, plats
were recorded depicting Lots 109 and 110 as separate lots. The developer
paid to the owners association road maintenance fees for each lot
individually. In 1995, the
plats were amended by a new plat depicting Lot 120 as a combination of
Lots 109 and 110. However, the developer continued to pay two road
maintenance fees as before. DEED
OF TRUST - TITLE INSURANCE
COMPANY ASSIGNEE SUES MORTGAGOR The case of Investors Title Ins. Go. v. Montague, N.C. App. , 543 S.E. 2d 527 (2001), deals with an action by a title insurance company to recover money spent on a claim. The court held that, where Investors Title paid a claim under an owner's policy insuring Holmes by paying off and taking an assignment of an outstanding deed of trust (and the note), in order to be paid by Montague (the original borrower who was not released on an assumption of the loan and remained a surety on the debt), Investors Title had to assign the note and deed of trust to Montague (who would be entitled to foreclose against Holmes). Also, G.S. 45-21.16(a) and G.S. 45-45.1(2) were found to be inapplicable. The result of the case is no surprise. |