Special Situations and Entities

Nancy Short FergusonChicago Title Insurance CompanyNovember 7, 2002

PARTIES

CapacityApprovalsCreditors (incl. IRS)Potential claims of others (AIF, fiduciary, principal, offers,SH’s)

IdentifyCurrent legal namesRecord namesIndexingJoinder of othersCompetency

Corps, LLC’s, LP’sNotary Public StandardsMinimum Standards for Indexing Real Property

InstrumentsUCC’s

www.secretary.state.nc.us

Indexing G.S. 161-14.2,G.S. 161-22 &

G.S. 147-54.3(b) and (b1).

Legible signaturesPlus initials in typed names

Plus typed name (if at variance with signature)

DOT - grantor & trustee onlyPartnership & partners

G.S. 161-22(h)

No instrument shall be deemed registered until it has been indexed as provided in this section.

OTHER USEFUL WEB SITES

www.nass.orgwww.banking.state.nc.uswww.piperinfo.com/state/slnc.cfmwww.uscourts.govstatelibrary.dcr.state.nc.us/ncslhome.htm

INDIVIDUALS

Spouse– Getting married soon– Getting divorced soon

Over age 18Competent

Tenancy-by-the-entirety(OR NOT??)

Same timeSame instrumentNo straw man necessaryNOT AUTOMATIC with voluntary partitions (G.S. 39-13.5)N/A when take title prior to marriage

Tenancy-by-the-entirety: Not all-protective anymore

Becomes tenancy in common on divorceUnited States v. CraftRICO (G.S. 75D-8(a))Slayer Statute (G.S. Chapter 31A)

Antenuptial or PreNuptialAgreements

Full disclosureVoluntaryNot unconscionableClear and complete waiverSigned by bothSupport waiver only if will not be reliant on public assistance

Antenuptial or PreNuptialAgreements

Original or Memorandaumrecorded in the Registry of county where property located

Separation (&/or Property Settlement) Agreements

G.S. 52-10 & G.S. 52-10.2

Property Settlement Agreements

Provide property settlement survivesFull disclosureConsiderationNot unconscionableClear and complete waiver languageOriginal or Memorandaum recorded in the Registry of county where property located

Agreements between Spouses(G.S. 52-10)

Full disclosureConsiderationNot unconscionableClear and complete waiver languageOriginal or Memorandaumrecorded in the Registry of county where property located

Final DivorceSevers T/EEnds Marital Rights

Equitable Distribution (G.S. 50-20)Lis PendensMarital property may be in only one name

Court Order - Rule 70

judgment directs a party to execute a conveyance

party fails to comply within the time specified

judge may direct the act to be done If NC property, judge may enter a

judgment divesting title of party and vesting it in others

CAUTION:

Requires CURRENT VESTING

LANGUAGE -

Not just order to convey

PURCHASE MONEY

Conveyance to only one spouseMortgage solely for purchase, not future advance, construction, equity lineSimultaneous recordingRisky because no clear statutory authority

Other Marital Issues

Joint Conveyance

Divorce from Bed and Board

Slayer Statute

ENTITIESALWAYS review the organizational documents for authorityArticles for CORP, LLC, LP must be filed with Secretary of State (or equivalent) of their home stateAnnual Reports– current officers/managers -- legal

reliance– current address– good standing

ENTITIES (cont’d)

Name changes, mergers must be recorded with Registries where property located Self-Dealing is BAD!Property titled in the entity is not subject to claims of creditors or spouses of individual owners (though the individual’s stock or partnership interest may be)

BANKS & LENDERS

NC Banking Commissioner:www.banking.state.nc.usHUD: www.hud.gov/ll/code/llslcrit.html

FDIC (for federal banks):www.fdic.gov/bank/index.html

BANKS & LENDERS(continued)

SBA:www.sba.gov/ADCO/lendingin

us2.htmlComptroller of the Currency, (for federally chartered banks):www.occ.treas.gov

Office of Thrift Supervision (for federally chartered thrifts): www.ots.treas.gov

ENTITIESDissolutions

Title remains vested in entityFor current transaction, either:– Deeds must be consistent with

winding upOR– Entity must bring reports, fees,

taxes current

CORPORATIONS

Articles of Incorp @ Sec/StateMortgage or sale in ordinary course of business– Board without shareholder

approvalSale otherwise than in the usual and regular course of business– Shareholder approval based on

bylaws

CORPORATIONS(cont’d)

Acknowledgments - G.S. 47-18.3, 47-41.01 and 47-41.02

Merger or name change --– Register of Deeds – Secretary of State

LLC’s(Limited Liability Companies)

Arts of Org w/ Sec/StateManagers (which may include officers or directions, depending on the Operating Agreement)Annual Report -- legal reliance on authority“Act apparently for carrying on in the usual way the business of the LLC” by a single manager

LLC’s (cont’d)“[s]ell, transfer, or otherwise dispose of all or substantially all of the assets of the limited liability company prior to the dissolution of the limited liability company,” -- unanimous vote of managers Merger or name change --– Register of Deeds– Secretary of State

GENERAL PARTNERSHIP

Partnership name vs. in names of individualsAssumed Name Certificate G.S. 66-68Not apparently for the carrying on in the usual way of the business of the partnership requires joinder of all general partners -- 59-39 & 59-40

LIMITED PARTNERSHIPCert of LP w/ Sec/State“Limited partnership” in nameMerger or name change --– Register of Deeds– Secretary of State

Not apparently for the carrying on in the usual way of the business of the partnership requires joinderof all general partners -- 59-403(a)

NONPROFIT CORPORATION

Sell, lease, mortgage or encumber any or all property, whether in

the usual course of carrying on its business or not, without

approval except by the Board of Directors unless Articles or Bylaws require otherwise.

55A-12-01(a)

TRUSTSCurrent trusteesPurpose of trust -- still ongoingPassive vs. active trust (Statute of Uses, G.S. 41-7)– Special case: trustee and beneficiary

of deed of trust are sameTrust agreement -- for authority to deal with real property

G.S. 32-26 or G.S. 36A-136(8) (requires Clerk’s order)

TRUSTS (cont’d)

NO self-dealing unless specifically authorized in trust -- incl. mortgage on trust property for individual debt -- 36A-64 et seq.Judgments against beneficiaries of trust can attach to trust property if supplemental proceedings (G.S. 1-315(4))!

“NAKED” or “BLIND”TRUSTS -- G.S. 43-63

Grant to trustee onlyNo beneficiary or specific trust identifiedNo record instrument stating powers“full power to convey or otherwise dispose of the real estate”NOTE: If passive trust, converts to fee so spouse’s and creditors’potential interests must be addressed

BUSINESS TRUSTSG.S. 39-44 et seq.

Memorandum of Trust required G.S. 39-46Trustees sign conveyances if title in trustees’ namesOfficers sign conveyances if title in common name of Business Trust

VOLUNTARY ORGANIZATIONS

Title can be held by trustees or in common nameCharitable, fraternal, religious or social organizations Conveyance must be authorized by “resolution of the body duly constituted and held”G.S. 39-24

CHURCHES & RELIGIOUS ORGANIZATIONS

CHURCHES & RELIGIOUS ORGANIZATIONS

Entity type & name in which title heldTitle limitations in vesting instrumentReversions and restrictions

Type of organization now involved:– Nonprofit corporation -- G.S. Chapter 55A– Religious Societies -- G.S. Chapter 61– Voluntary organization -- G.S. 39-24

CHURCHES & RELIGIOUS ORGANIZATIONS (cont’d)

Local church– Organizational documents /

requirements– Approval by congregation and board– Authorized persons

Connectional churches– Organizational requirements– Due authorization and approval– Web sites

CEMETERIES

CEMETERIES

Cemetery land cannot be sold, mortgage, leased or encumbered (except for road purposes or to purchasers for continued operation of the cemetery). G.S. 65-69Easements for access to family cemeteries G.S. 65-74 & 75State removal of human remains G.S. 70-36

POWERS OF ATTORNEY & ATTORNEYS-IN-FACT

Principal Alive and Well (Exhibit A)Many lenders will not approve closingWhy can’t principal attend in person?Incompetent principal -- durable POAPOA must be recorded in county registry in which property located at or prior to closing

POWERS OF ATTORNEY --Powers of the AIF

POA must give specific authority to deal with real estateNo gifts unless specifically provided in POA or broad POA powers and gift to charitable organization continuing a “personal history” of such giftsNo gifts or transactions to AIF unless specifically authorized in POA (incl. mortgaging property for loan to AIF)

POWERS OF ATTORNEYPowers of AIF

Does not give AIF the authority to act for the Principal in the Principal’s fiduciary capacity -- such as where principal is officer of corporation or is AIF for a third partyRecorded termination requiredStatutory notary forms Military POA’s and acknowledgments– 10 U.S.C. 1044a

DECEDENT’S ESTATEVesting of title at death of decedent in:– Tenancy-by-the-entireties vests in

spouse– Devisees under will (G.S. 31-39)– Intestate heirs (G.S. 28A-15-2(b))

Spousal disclaimer period (G.S. 31B-2)Executor -- power of sale or title or bothCreditors (incl. Medicaid) and taxing authorities

DECEDENT’S ESTATES

Caveats by “natural objects of the decedent’s bounty” -- 3 years from probateContracts to sell signed by decedent prior to death -- G.S. 28A-17-9Judgment and tax liens of devisees/intestate heirs attach to their undivided interest -- Washburn

DECEDENT’S ESTATES

Combined Petition for Possession, Custody and Control and Petition to Sell to Make Assets to Pay DebtsAffidavits of disinterested parties with history of family and relationships for old estates or estates not administered

GUARDIANSHIPS

Special Proceeding -- G.S. 35A-1301 et seqSuperior Court Judge approval for minorsAdult spouse of minor -- joinder or waiver by minor spouse of contingent statutory marital rights onlyCompetent spouse convey separate property with joinder of guardian of incompetent spouse waiving marital rights only

MINORS (cont’d)Contracts voidable until 3 years after later -- become competent or reach age 18Uniform Custodial Trust Act (Chapter 33B)– under $100,000– specific conveyance to the custodian

Uniform Transfers to Minors Act (Chapter 33A – if under $10,000– specific conveyance to trustee

SPECIAL ACKNOWLEDGMENTS

Out of state acknowledgments G.S. 47-2Military POA’s and acknowledgments– 10 U.S.C. 1044a

Register of Deeds Guidebook --from Institute of Government

TERRORISTS

Per Executive Order 13224, issued by President Bush,

Financial Crimes Enforcement Network (FinCEN), Department of Treasury, Office of Foreign Assets Control (OFAC)

www.treas.gov/ofac

REMEMBER!It’s all about:

Protecting your clientTo the best of your ability

Acting Professionally

Finding personal satisfaction in each and every day

Take pride in being a member of this most honorable

profession -- being a lawyer!