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Issue  131  Article  219
Published:  6/1/2006

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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.

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