The Statewide Title Newsletter and Legal Memorandum

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Issue  214  Article  349
Published:  7/1/2014

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Now that we're not in South Carolina anymore, what are you doing to fix it?
Chris Burti, Vice President and Senior Underwriter

The line between SC and NC was originally surveyed in 1772. This survey was conducted jointly by surveyors appointed by the governor of each state, and subsequently ratified by both state legislatures. The original 1772 survey plat shows trees marked every mile, but is devoid of any reference to bearings and distances and no permanent monuments were set along the line during the course of this original survey. With marked trees being the only evidence left in the field from the original survey, it comes as no surprise that modern surveying techniques and new technology have disclosed substantial variations in the recognized location of the original Boundary.

The Boundary Commissions of North Carolina and South Carolina formed a joint commission to determine the true location of the Boundary. The process has been under way for eighteen years and the common boundary has been surveyed using modern technology to determine the correct line.  The result is that the line is, in certain locations, not where it was thought to have been.  Properties thought to have been in SC will now be recognized as properly being in NC and vice versa.  States have the power to negotiate a new boundary, but must have the consent of the U.S. Congress to do so. Absent such a monumental task, the only alternative to dealing with this issue requires identifying the true Boundary and then dealing with resulting issues in a way that imposes the least harm to affected landowners and next, affected governments. It is important to understand, the Boundary has not 'moved' and to keep the issues in focus such terminology should not be used as it leads to misdirection on the issue, particularly with respect to land title.

This has major ramifications all across the southern boundary of the state, not the least of which is how to document title on parcels that have been treated as being in one state and are now found to be located in the other state such as differences in how title passes by operation of law (no anti-deficiency statute, Tenancy by the Entirety is not recognized, no equivalent N.C.G.S. Section 29-30 marital rights in South Carolina, etc.). Other issues involve the regulatory authority over roads and highways, utilities (Utility service territories and regulation of water, sewer, electric, telephone and cable, plants, lines and easements), property taxes (real, personal and business), ABC taxes, franchise and license taxes, sale of regulated goods (fireworks), etc. In addition to the taxation issues, there also, mail, police, fire and EMT protection/jurisdiction issues, school districts and in-state tuition. Licensing is a major issue, applying to vehicles, drivers, businesses and professions. One doctor's office is now recognized as being in a state where he is not licensed and a Boundary gas station that sells fireworks and alcohol is now not properly licensed and reportedly can't qualify under the laws of the estate where it is actually located.

With regard to the issue of establishing the true boundary line, the surveyors were, not surprisingly, unsuccessful in physically locating any of the old trees, but did find references to some of the original state line boundary trees in land records of the era after 1772 until about 1850 when the trees were likely to have still existed. In some cases they were referenced in available private property surveys conducted after 1772 and were able to establish the original geographic location of 1772 boundary trees by using such instruments and tracing the chain of boundary titles. Representatives from the boundary commission from both states also agree on the geographic position of the two end points.

From the work done locating the positions of the boundary trees it became apparent that the original survey line did not run perfectly straight. This is as would be expected, because the original surveyors used a magnetic compass for direction which would not reasonably be expected to produce a straight line along the extensive length of the Boundary. The line as recovered is actually very close to where it was recognized in many instances, but also significantly different in others resulting in some Boundary properties only slightly shifting where the line already was recognized as crossing through the parcel and others shifting the recognized state entirely. The NC/SC Joint Boundary Line Commission is now working on promulgating legislation for both states to deal with these issues.

The South Carolina Approach:

The South Carolina Boundary commission at the point of this writing is essentially promulgating separate drafts of legislation within the respective areas of taxation, title, mortgages, Medicaid, utilities, recording and in-state tuition. To go into those areas in depth is beyond the scope and space allowed of this article. Focusing on the title legislation, the South Carolina draft limits its application to the South Carolina counties bordering North Carolina east of Greenville County (Spartanburg, Cherokee, York, Lancaster, Chesterfield, Marlboro, Dillon and Horry). Upon enactment of South Carolina legislation approving the clarified boundary, clerks of court and registers of deeds must provide notice of the statute's provisions to attorneys and others using their offices by means they would normally utilize to provide general notices to users such as by postings on their web pages.

The owner of land evidenced by title instruments of record to real property previously believed to be located in whole or in part in North Carolina and which is determined to be located in whole or in part in South Carolina on the effective date of South Carolina legislation approving the clarified North Carolina-South Carolina boundary may record a "a certificate of new recording" for each document that has been previously recorded in North Carolina with the register of the county where the property is located in order to protect its priority for recording in South Carolina. The certificate may be executed by the owner of record in North Carolina or any other person having an interest in the property. The certificate may contain a properly cited derivation clause and if the owner is deceased, disabled or otherwise legally unable to execute a certificate, the person holding legal title to the property or holding a power of attorney may execute it and attaching a document recognized under North Carolina law as showing ownership or authority to act for the record owner. The certificate may reference all recording information regarding all instruments, plats, deeds and estates affecting the property and the location of the original instrument in North Carolina.

This differs significantly in North Carolina in that we already have a statute that would permit anyone to record a certified copy of a document of recorded anywhere including South Carolina, see: N.C.G.S. Section 47-31. If a recordable instrument has never been recorded in either South Carolina or North Carolina, the original instrument must be recorded in South Carolina with the appropriate register or clerk in South Carolina. If the title to the property was derived from an inheritance in North Carolina and no deed of distribution exists as is required in South Carolina, a certificate of new recording may be filed in South Carolina which must include information about the derivation of the title to the property which would be sufficient for someone searching title in North Carolina to determine the chain of title to the property in North Carolina prior to the recording of the certificate in South Carolina. A significant limitation implicit in this provision is that the examiner will need to be fully conversant with North Carolina real property law.

The proposed draft declares that all legal interests in property prior to the effective date of South Carolina legislation approving the clarified North Carolina-South Carolina boundary shall be determined in accordance with North Carolina law. Prior title, liability and casualty insurance policies continue in effect so long as the property owner maintains any payments and other requirements of those policies. Liability and casualty insurance policies may not be cancelled due to the boundary clarification absent a minimum of thirty days' written notice to the owner. Should the insurer be a registered South Carolina insurance carrier, they may not cancel.

The filing of the certificate is not mandatory, is intended to be an aid to filing and research of real property transactions and the failure to file will not defeat title or priority existing in the applicable jurisdiction. Even absent filing a certificate, priority for recording will relate back to the original documents and priority established in the state from which the recording originally existed. No new priority is established by the recording a Certificate of New Recording or failing to do so.

With respect to mortgages in the affected counties, the proposed South Carolina draft would permit or require foreclosure proceedings under the terms of a mortgage on that property to be brought in the state in which the mortgage was entered applying the law applicable to the mortgage when it was entered.

The North Carolina Approach:

One important note: As of now, the Local Government Division North Carolina Department of Revenue has interpreted N.C.G.S. Section 105-287 to permit affected County tax offices to elect, as several have elected, NOT to pursue omitted taxes, nor issue refunds should a taxpayer come forward seeking one on affected properties. They are proceeding under N.C.G.S. Section 105-287, and making the required changes effective for 2014 forward except where the new boundary survey has already incorporated into a recorded plat prior to the recordation of the full survey as it applies to affected counties.

In order to assure appropriate consideration of the title issues affecting land owners an ad hoc committee was formed by the North Carolina Boundary Commission to consider real property title issues associated with the planned realignment of the North Carolina/South Carolina boundary as well as recommending provisions of or drafting a statutory proposal for consideration by the North Carolina/South Carolina Boundary Commission.  This proposal is the work of a diverse group of individuals composed of representatives from the North Carolina Land Title Association, the North Carolina Secretary of State's, the North Carolina Attorney General's office, the Local Government Division, North Carolina Department of Revenue, North Carolina Association of Assessing Officers and the North Carolina Association of Tax Collectors, North Carolina Register of Deeds Association, North Carolina Bar Association, Real Property Section.

With respect to drafting North Carolina title legislation, several differing proposals were suggested early on in the process. Some proposals would have required a chain of title to be searched and the muniments of title recorded as the esc proposal allows and is already permissible under our current recording acts. The proposals implied that the instruments of title revealed by a true 'full' search will be incorporated into a recorded chain of title which might prove prohibitively expensive to landowners. Other proposals suggest a thirty-year search as being sufficient. One problem with this concept is that it ignores the clear implications of the inadequacy of the Marketable Title Act in North Carolina as proof of title as opposed to it being an extremely limited statute of repose. Without discoursing further upon the wisdom or the practicability of using such a remedy, it seems clear that most if not virtually all of affected properties will not be urban or highly developed and a 30-year chain of title will be totally inadequate as the basis for a 'satisfactory' title opinion upon which title companies can lawfully issue title policies. There are simply far too many easements, covenants, interests and property rights that are more than likely to exist and not be cut off by a Marketable Title Act approach.

The realignment of the boundary with our neighboring states has the potential to create very difficult challenges for the citizens or our state who own properties that will be affected.  The purpose of this draft proposal is to ameliorate, to the extent possible, at least some of those challenges in a manner that will not be prohibitively costly for those affected citizens.  The proposed statute currently on the table makes legislative findings to support the necessity of remedial legislation and would adopt a new Article 2 of Chapter 141 of the General Statutes. The new Article incorporates a definitions section in order to create a uniform terminology with respect to realignment issues. It is the hope of the ad hoc committee that South Carolina will at least adopt the same definitions so that the issues may be addressed more consistently across the Boundary.

The proposal essentially employs a three-pronged approach to accomplish this.  First, it provides for the recording by the owner of a Notice of State Boundary Abutter.  Secondly, it provides for an Affidavit of Title of State Boundary Abutter which requires a title examination by a licensed attorney with suitable experience.  Finally, the draft would provide an appeal mechanism for an aggrieved owner claiming a contrary interest in affected land by the creation of a quasi-judicial proceeding before a newly created North Carolina Boundary Realignment Hearing Commission. 

The "Notice of State Boundary Abutter" may be filed by anyone claiming an interest in affected lands and the filing only operates as a record notice of the claimed interest for recording act purposes. In effect, it is just a place holder and does not of itself establish any title contrary to the true ownership. To discourage continued recording in the erroneous jurisdiction, the statute provides that such instruments registered after the effective date of a proclamation effecting a will have no force and effect and do not give notice constructive or actual until properly recorded in the correct North Carolina County. A model form is promulgated but not required and perjury penalties are imposed.

The second prong is to provide a mechanism and procedure for creating a prima facie title record without having to re-record all the instruments (or certified copies) establishing an unbroken chain of title back to the original grant. To accomplish this, provision is made for recording an attorney's opinion on title in the form of an "Affidavit of Title of State Boundary Abutter" that may be relied upon by good faith purchasers for value. The proposed statute provides for minimum standards of competency, for disclosure of competing claims, for notice to known claimants and for liability protection for the certifying attorneys. A model form is promulgated but not required. It would seem evident that due to Unauthorized Practice of Law issues, a South Carolina attorney can't certify title to North Carolina property. However, as the statute would adopt the existing treatment of the property under the laws of the jurisdiction where it had been mistakenly believed to be located as controlling, in the case of South Carolina, a South Carolina licensed attorney with substantial real property experience would be required for an opinion on title to be meaningful. The statute would permit North Carolina attorneys to rely upon such opinions absent actual knowledge of any inaccuracies, however and perjury penalties are imposed.

The third prong was drafted with alternative options for the Boundary Commission or Legislature and would provide a mechanism to resolve title disputes arising from the realignment. One method designed to expeditiously and affordably resolve such disputes without immediate resort to the courts, would create a Hearing Commission composed of three person panels of knowledgeable hearing officers. If adopted, it could serve as an alternative dispute resolution mechanism for all sorts of title disputes beyond boundary realignment. Assuming that there may be budgetary impediments to such a system, the draft includes an alternate method by resorting to a stated right to being a quiet title action. Both options would adopt a reasonable 7-year statute of repose.

One change that the realignment makes necessary will likely have broader application than documenting a record chain of title. South Carolina makes use of mortgages rather than deeds of trust as are most commonly used in North Carolina. The North Carolina practice derives from the old common law doctrines protecting the mortgagor's equity of redemption and making a mortgagee's bidding in the property at foreclosure presumptively invalid. To protect the status quo with respect to affected lands, it is far simpler to change the doctrine and permit the mortgagee to bin in at the foreclosure sale. To accomplish this, Chapter 45 would be modified to permit mortgagees to appoint a trustee who will succeed to all the rights, titles, authority, and duties of the mortgagee under the terms of the mortgage and the mortgagee will be entitled to bid at a foreclosure sale without limitation. In addition the Chapter 45 amendment reinforces that a mortgagee may record the Notice and Affidavit of title provided for in the Chapter 141 amendments. Other changes as are encompassed in the South Carolina proposal were deemed unnecessary. In North Carolina, the case law is clear that an unrecorded mortgage or deed of trust may be foreclosed, therefore the commencement of an action coupled with a filing of a notice of lis pendens and the recording of a sufficient title affidavit will permit the valid foreclosure of affected property in North Carolina.

The proposed legislation would leave tribal lands unaffected. The most current North Carolina Land Title Association proposal for North Carolina boundary legislation is now being circulated. While there will likely be changes in the legislative process, we believe the principal parts will be accepted and suspect that the hearing commission will be the most likely part to be eliminated. Other concerns as discussed above will need to be addressed. Most of them will be able to be incorporated in to this draft in additional sections and may fit within the framework of Chapter 141.

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