We receive frequent questions concerning instruments found in a chain of title conveying real estate held as custodian under the Uniform Gifts to Minors Act (UTMA). Jimenez v. Brown, 131 N.C.App. 818, 509 S.E.2d 241 (1998), is not very recent but seems to give a great deal of reassurance to practitioners discovering these conveyances during a title examination. Most attorneys understand the provisions of the Act, but many have reservations about the validity of conveyances from custodians when required to certify title containing them.

On 15 January 1974, a personal injury judgment was entered against the defendant in Florida for $1,418,350.16, plus six-percent interest. The defendant paid no part of the original judgment and left the state of Florida after the judgment was entered. The original plaintiff, Gutierrez, was advised by defendant's attorney that, after diligent efforts to locate defendant, it appeared that defendant had left the country and would not return. The plaintiff died in 1981 and his assets, including the unpaid judgment, were distributed one-half to plaintiff Sonia Jimenez and one-half to plaintiff Nancy Serra as beneficiaries of the estate. In 1994, plaintiffs brought suit on the original judgment in Florida. Attorneys for plaintiffs located the defendant in the State of North Carolina. Service of process was attempted by sending suit papers by certified mail and regular mail to defendant's Rocky Mount address. All attempts at serving defendant by mail failed and a private service agent personally served defendant with a copy of the summons and complaint on 16 September 1994. The Florida court found that defendant was avoiding service of process and had actual knowledge of the suit. The court entered a judgment of default against defendant and final judgment was rendered in the sum of $3,215,977. In 1997, plaintiffs filed an action on the Florida judgment in North Carolina and sought an order attaching the assets of defendant.

The plaintiffs alleged in their affidavit that defendant was "[a] resident of the state who, with intent to defraud his creditors, or to avoid service of summons . . . keeps himself concealed therein." as grounds for attachment. The assistant Clerk of Superior Court for Wilson County entered orders of attachment for various bank accounts and safety deposit boxes. The defendant filed a Motion to Vacate Order of Attachment. After hearing arguments of counsel and reviewing the record and affidavits, the Superior Court denied defendant's motion and ordered the attachment of assets of the defendant held by the a bank in the name of the defendant as depositor or custodian for Sean E. Brown. The judge made conclusions of law in accordance therewith. The defendant appealed this order, arguing, among other issues, that the trial court erred in attaching two bank accounts that "are titled in Defendant's name, as custodian for his son, Sean E. Brown, under the North Carolina Uniform Transfers to Minors Act."

The Court of Appeals cited NCGS Sec. § 33A-9 and held as follows,

"(a) Custodial property is created and a transfer is made whenever:

. . .

(2) Money is paid or delivered, or a security held in the name of a broker, financial institution, or its nominee is transferred, to a broker or financial institution for credit to an account in the name of the transferor, an adult other than the transferor, or a trust company, followed in substance by the words: "as custodian for _________ (name of minor) under the North Carolina Uniform Transfers to Minors Act."

Furthermore, an account set up under this section "is irrevocable, and the custodial property is indefeasibly vested in the minor." NCGS Sec. 33A-11(b) (1987). This section further provides that the custodian has all the rights and authority provided for by the Act. See id. Such rights and authority include the authority to take control of the custodial property and to collect, manage, or invest it in the best interests of the minor. NCGS Sec. 33A-12(a) (1987). The custodian is required to keep custodial property "separate and distinct from all other property" and to keep sufficient records of all transactions with respect to the property. NCGS Sec. 33A-12(d)-(e) (1987)."

The Court points out that the Act limits when an outside party may make a claim against the custodial property. NCGS Sec. 33A- 17(a) limits claims to those based on, "(i) a contract entered into by a custodian acting in a custodial capacity, (ii) an obligation arising from the ownership or control of custodial property, or (iii) a tort committed during the custodianship." This is an exclusive list of when such a claimant may recover against custodial property. The Court states that a "tort committed prior to the custodianship is not enumerated within this list; therefore, if the accounts are set up under UTMA, they are not subject to attachment."

The signature card for the account listed the depositor as "Bruce E. Brown custodian for Sean E. Brown Under the N.C.U.T.M.A." and the section entitled "Ownership Type," the card was marked "X" in the blank next to" Custodian Under N.C.U.T.M.A." The Court came to the conclusion that the account was properly created pursuant to UTMA, not subject to attachment because it was the minor's property and the judgment of the trial court was reversed on this issue.

The Court clearly honored the express provisions of the act that provide that property is indefeasibly vested in the minor when so titled. It would appear that as long as the statutory provisions of Chapter 33A are closely followed, that title examiners and real property attorneys may also rely on NCGS Sec. 33A-13(a) which empowers the custodian as follows:

"A custodian, acting in a custodial capacity, has all the rights, powers, and authority over custodial property that unmarried adult owners have over their own property, but a custodian may exercise those rights, powers, and authority in the capacity of a custodian only."

This provision clearly means that the custodian has the legal authority to convey real property held as custodian, and that any spouse of the custodian will not be required to join in the conveyance. The custodian is always liable to the minor for any actions taken with respect to the minor’s property that are in breach of the fiduciary responsibility. As a result, it can be assumed that any such conveyance may be voided if made without sufficient consideration and to a party with actual knowledge of the defect.

Employee of the Month

I’d like to introduce you to Leslie Bringle, our featured employee for September. Leslie received her degree in Information Systems at Rowan Cabarrus Community College, and joined the Statewide team in April of 1999.

Leslie is an Underwriter, and is located in our corporate office in Salisbury. She processes and reviews the final title policies for distribution to attorneys. Sometimes Leslie has to work directly with our client attorneys in order to resolve problematic transactions. When increased volume requires additional teamwork, Leslie assists with processing and reviewing commitments.

(Often you hear me refer to the "Statewide team," or a "team member," or "teamwork." We each do feel like we’re a proud member of a team, and willing to help each other accomplish what needs to be done. Each employee of Statewide works together, in order to meet our client expectations and provide you with the best possible service. I might also add, we enjoy it- and we enjoy each other!)