Judgements, Entireties and Divorce
Chris Burti, Vice President and Legal Counsel

Martin v. Roberts, No. COA05-1161, Filed May 2, 2006 plows a bit of new ground in the context of the effect of the interplay of a consent judgment awarding marital property and a prior judgment against one spouse upon post-divorce Entireties property. While the decision should not be considered unexpected, it appears that we did not have a case directly on point with the facts of the case.

Prior to 1997, the defendant owned a parcel of land in Durham County with his wife as tenants by the entirety. At this time, the couple was in the process of divorcing and in late January of 1997, the couple entered into a Consent Order which provided that the defendant would convey his one-half interest in the tenancy by the entirety to his wife. This did not occur until nearly eight months after the couple's divorce in March of 1998.

In early January of 1997 a judgment was entered against the former husband in excess of sixty-four thousand dollars. This appeal arose out of a 2005 action by the plaintiff seeking to subject real property held by defendant's former wife to an execution sale in order to satisfy plaintiff's judgment lien. The plaintiff sought a declaration that the defendant had an interest in the real property that became subject to the judgment lien upon the couple's divorce in March 1998. Her position was that when the defendant's former wife took title to the defendant's interest in the real property, she did so subject to the plaintiff's lien. The trial court dismissed the plaintiff's motion concluding that the plaintiff's judgment did not constitute an encumbrance upon any portion of the property formerly held by the defendant and his former wife.

The plaintiff’s contentions were that her judgment lien attached to defendant's property upon the date of his divorce, that when he conveyed his undivided interest in the property to his former wife, his former wife took subject the lien because the Consent Order was not a valid conveyance. The Court of Appeals agreed with these contentions.

The judgment against the defendant was properly filed with the Clerk of Superior Court on 9 January 1997. The Court stated that the “plaintiff's judgment lien was perfected as of this date, and it attached to any real property owned by defendant on this date, or acquired thereafter during the next ten years. However, as defendant and his former wife held their real property as tenants by the entirety, plaintiff's judgment lien against defendant could not attach to defendant's interest in his property held as such. Johnson v. Leavitt, 188 N.C. 682, 685, 125 S.E. 490, 492 (1924) (estate ‘may be taken under execution against one of the parties only when the legal personage of 'husband and wife' has been reduced to an individuality’).”

The Court enters upon an extended discourse concerning the effects of judgments and continues through a discussion of the doctrines applicable to the effect of those judgments upon entireties property after divorce. The discussion is straightforward and as it places heavy reliance on the treatment of the topic contained in Webster's Real Estate Law in North Carolina, it should be familiar to most real estate professionals.

The Consent Order entered into by the defendant and his former wife stated, in part: “That it is ordered that Plaintiff shall receive sole ownership of the parties' farm, and that Defendant agrees to transfer his interest in the farm to the person of the Plaintiff, via General Warranty Deed, within thirty (30) days of this Agreement being executed and filed.”

It is well established in North Carolina that a trial court may order the transfer of title, and that a properly constituted order providing for the transfer of title in real property located within the State may effect a conveyance. N.C. Gen. Stat. § 1-228, cited and quoted in the opinion provides that  “Every judgment, in which the transfer of title is so declared, shall be regarded as a deed of conveyance, executed in due form . . . 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.”

The Court of Appeals ruled that the Consent Order was not sufficient as a conveyance of defendant's interest in the tenancy by the entirety property. The order called for the defendant to convey his interest at a future time. The Court also stated the Order was deficient as a conveyance because it failed to provide a legal description or location of the real property. This may be piling on by the Court and not determinative as it tends to run counter to the line of “description” cases in North Carolina. As a general rule, our courts have been extremely reluctant to invalidate conveyances due to insufficient descriptions. Perhaps it would have been better for the Court to abstain from an unnecessary adjudication of this issue that could give rise to unintended results in other cases. It was unnecessary, because as the Court noted, the Order was not filed with the Register of Deeds “thus it did not provide record notice of any purported conveyance from defendant to his former spouse, and it was not valid against creditors of defendant because at most it constituted an unrecorded transfer.” NCGS 1-228 requires judgments affecting title to land to be registered in order be effective as a conveyance.

The Court of Appeals notes that this case is not precisely on point with prior cases in this area of law, but the issues and facts in this case are similar to those in Branch Banking and Trust Co. v. Wright, 74 N.C. App. 550, 328 S.E.2d 840 (1985), and Union Grove Milling and Manufacturing Co. v. Faw, 103 N.C. App. 166, 404 S.E.2d 508 (1991).

In, Branch Banking and Trust Co., the Court held that upon the couple's divorce, the former spouses became tenants in common. When the former wife acquired the property through the equitable distribution award, she took title to the property subject to BB&T's deed of trust granted by the former husband on what became his undivided one-half interest in the tenancy in common. Union Grove Milling and Manufacturing Co., held that the effect of a judgment lien against one spouse on marital property was that it attached immediately by virtue of the divorce decree which converted it into property held as a tenancy in common. Following the divorce, the former entireties property was awarded through an equitable distribution award to the non-debtor spouse who took subject to the lien.

In Martin, the defendant and his former wife held a 113-acre parcel of land as tenants by the entirety. They received an absolute divorce in March 1998. The property was immediately converted to a tenancy in common by operation of law, with each holding an undivided one-half interest. The judgment lien immediately attached to defendant's interest. “‘Once it is established that there has been a tenancy in common, the rule is that the grantee of a tenant in common can take only that tenant's share and step into that tenant's shoes.’ Id. at 169, 404 S.E.2d at 510 (citing Branch Banking and Trust Co., 74 N.C. App. at 552, 328 S.E.2d at 841). Therefore, when defendant conveyed his undivided one-half interest to his former wife…she took title to defendant's interest subject to plaintiff's judgment lien.”

The lesson here is to make certain that either any voluntary conveyance takes place before divorce. One would caution domestic attorneys to perform title searches early on in the process if a property settlement is an objective.

Public Streets or Private Ways
Chris Burti, Vice President and Legal Counsel

Wright v. the Town of Matthews, No. COA05-239, filed April 4, 2006

This appeal stemmed from property owners’ objection that the Town of Matthews violated a zoning ordinance when it issued building permits for houses built on a street named Home Place from 1979 through 1983. The petitioners disputed the Town's reference to Home Place as a public “street.” The Zoning Administrator informed petitioners that he had determined Home Place was a public street within the Town. The petitioners appealed that determination to the Board of Adjustment and then appealed from an order of the trial court affirming the decision by the Board.

The petitioners argued that the trial court erred in concluding that the Board's decision determining that Home Place was a public street of the Town of Matthews, rather than a private right-of-way across petitioners' real property because the decision was not supported by competent, substantial, and material evidence.

The petitioners' property is a 2.59-acre tract in Mecklenburg County. It is bordered on two sides by Home Place. Home Place runs to a public street named Reverdy Lane . The property was conveyed to the petitioners’ predecessors in title by Richard M. Welling and his wife. In 1958, the Wellings and other property owners petitioned the Mecklenburg County Board of Commissioners to request the State to take over Reverdy Lane for a distance of 1 mile which was done and .95 mile of Reverdy Lane was thereafter designated SR 3471. The Wellings subsequently conveyed the property to James and Jane W. Norman. The deed to the Normans excepted to “the 60 foot right-of-way for Home Place for street purposes over the north side and the east side of said tract…”. The petitioners purchased this property in 1984 by deed, which also excepted it.

At, or shortly after, the closing the petitioners also executed an acknowledgment providing that “Home Place does not appear as a dedicated street on a recorded map…such that at some later date we could be called upon to join in the expense of upkeep, or to join in a dedication of said street or to participate in some manner or proceeding to establish a right of way for access to and from our property, Reverdy Lane and Highway #51.”

In 1985, the Town resolved to take over certain streets, including Reverdy Lane. The resolution recognized Reverdy Lane as “SR3471”, noted that its length was “8/10 of a mile”, but did not name Home Place as one of the streets to be added to the town's system. Neither did the agreement between the Town of Matthews and the DOT where Reverdy Lane was transferred from the state to the town. It was, however, colored on the map as one of the roads to be transferred.

In 1994, the successors in interest to Wellings, filed a “Withdrawal of Street Dedication.” for registration. The document stated that, “to the extent any document may appear of record which may constitute an offer or proposal for dedication of all or any” extension or expansion of Reverdy Lane, such offer or proposal was withdrawn, …” The legal description referenced both Reverdy Lane and Home Place as having “a 60 foot private right of way”.

Subsequently, the petitioners made inquiries concerning the status of Home Place. They obtained letters from the state asserting that Home Place was not part of the State Highway System, nor had it ever been. The letters asserted that they were included on the Powell Bill maps of the Town due to a mapping error. The letters asserted that there had been no state maintenance or responsibility for maintenance other than that “occasionally performed as a courtesy to property owners due to damage caused by state equipment turning around on this portion of [the] non-state system street”.

The Town Board held a hearing on the matter in 2004. The Public Works Director for the Town of Matthews, testified that the Town annexed petitioners' property in 1983, that “[t]he Town has continuously maintained the street known as Home Place since the adoption of that resolution in March 1985.” He testified that the Town of Matthews paved Home Place in 1991 and “took action to add Home Place's mileage to the Powell Bill map that was filed with the State.”

The Court of Appeals observed “The Town also submitted into evidence a letter to petitioners from … Secretary of DOT, … . In the letter, Secretary Garrett informed petitioners that DOT could ‘find no evidence of a recorded subdivision plat indicating a measured right-of-way easement for Home Place.’ The letter continued: ‘However, your deed, survey plat and property corners recognize a 60 foot right-of-way all of which are evidence enough for legal certification, and your written approval for the paving of Home Place in 1990 was not required. The same is in evidence for other properties on Home Place. By our definition, this evidence provides a dedicated easement for Home Place.’” This led the Court to note that there was considerable evidence to indicate the municipality was logically led to assume and conclude that Home Place was state maintained and that it was indeed a public street. Petitioners petitioned the trial court for writ of certiorari to review the Board's decision and the trial court affirmed the decision of the Board.

The zoning ordinance for the Town of Matthews defines a public street as: “A public right-of-way not less than 30 feet in width set aside for public travel and either which has been accepted for maintenance by the State of North Carolina or by the Town of Matthews, has been established as a public street prior to the adoption date of this section, or which has been dedicated for public travel by the recording of a plat of subdivision which has been approved by the Board of Commissioners.” The zoning ordinance also defines a private street as “an interior circulation road designed and constructed to carry vehicular traffic from public streets within or adjoining a site to private residences or to parking and service areas and which is not maintained by the public.”

The applicable standard of review for construction of ordinances is de Novo.” Therefore, the Court of Appeals had to determine “whether there is substantial evidence in the whole record to support the Board's determination that Home Place is a public right-of-way ...” The petitioners received the property by deed clearly containing language excepting the right-of-way for Home Place. The survey, which the petitioners received when they purchased the property, reflects a 60-foot right-of-way for Home Place. The Court determined that the “record contains additional evidence to suggest and support the conclusion that the North Carolina Department of Transportation had maintained Home Place as a public street, possibly as early as 1979, and that the Town of Matthews maintained Home Place as a public street from 1985 until the present time. It thus appears both the North Carolina Department of Transportation and the Town of Matthews accepted Home Place for maintenance as a public street and that the evidence indicates Home Place falls within the definition of a public street according to the Matthews Code, Section 1-6.”

However, the court determined that the evidence was not sufficient to support the Board's findings and conclusion that Home Place is actually a public street. The Court notes that a private street may become a public street by condemnation, prescription, dedication, gift, or sale. The Court of Appeals found it unclear from the findings of the Board and the order of the trial court by which of these three methods they concluded that Home Place became a public street. The Court found no evidence in the record that Home Place was ever the subject of a condemnation proceeding therefore Home Place could only have become a public street by way of dedication or prescription.

With appropriate citations the court determined that there was insufficient evidence of an express dedication of Home Place because the deed failed to specify whether such right-of-way was for purposes of a public or private street. As such, the language of the deed did not create an offer of dedication for a public street, but only a private right-of-way. The Court determined that there was no evidence in the record of Home Place having been dedicated to public use through any statutory procedure. Any expansion of the dedication of Reverdy Lane created by erroneous mapping by the County was expressly disavowed by the “Withdrawal of Street Dedication” .

The Court notes that an “offer of dedication may also be implied through ‘conduct of the owner manifesting an intent to set aside land for the public’ Department of Transp., 163 N.C. App. at 265, 593 S.E.2d at 137 (citations omitted). … Dept. of Transportation v. Kivett, 74 N.C. App. 509, 513, 328 S.E.2d 776, 779 (1985).” The opinion asserts that “neither the Board nor the trial court made any findings regarding ‘acquiescence in the public's use of the property, under circumstances indicating that the use was not permissive[,]’”  The failure to make definitive findings from the evidence and to draw proper conclusions required a new hearing for further findings detailing whether or not Home Place became a public street by means of implied dedication.

They also addressed prescriptive easements but concluded that “there was no substantial, competent, and material evidence that the state maintained Home Place for the requisite twenty-year time period. Nor was there evidence that the Town of Matthews has maintained Home Place for twenty years. Although there was evidence that the Town of Matthews began maintenance of Home Place in 1985, the hearing before the Board took place on 5 February 2004, before expiration of the twenty-year time period.”

The Court made an additional comment in its first footnote. “We note that an offer of dedication of streets to the use of the public may also arise by the recording of a plat denoting lots and streets and a subsequent sale of a lot in a subdivision referring to such recorded plat. (citations omitted). Here, however, there is no evidence in the record that a dedication of Home Place arose through the recording of a subdivision plat. …” This footnote ignores the holding in Dept. Of Transportation v. Haggerty, 492 S.E.2d 770 (N.C.App. 1997) which presented the issue of implied dedication arising from an unrecorded plat referenced in the deeds chain of title. While there does not appear to be evidence of this in the record, if the description references the survey showing the street and if it is not restricted to private use, it would support finding an offer of dedication accepted by the Town’s maintenance.

The Court was also a bit dismissive on the issue of condemnation. The power of taking has been liberally construed in favor of the State and its agencies by our courts and has been liberally authorized by the Legislature. One may fairly say that N.C.G.S. Section 40A-51 provides a public condemnor with a right of condemnation without action. This statute requires a property owner to file an action for compensation “within 24 months of the date of the taking of the affected property or the completion of the project involving the taking” where “property has been taken by an act or omission of a condemnor…and no complaint containing a declaration of taking has been filed”. Since the record clearly reflects that the Town paved Home Place more than two years prior to the petitioners filing the Board appeal, the Court could have simply disposed of this case in favor of the Town based upon this statute.

Clearly whether a street is a public way or not is not so clear unless made so expressly. Clearly also, our courts seem unwilling to create public ways without compensation unless the owners have made their intentions clear.