The Statewide Title Newsletter and Legal Memorandum

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Issue  105  Article  183
Published:  4/1/2004

In Rem Jurisdiction and Foreign Courts
Chris Burti, Vice President and Legal Counsel

One title problem that arises frequently enough to be of significant concern is dealing with orders of courts of other states that attempt to transfer title to North Carolina real estate. The indisputable personal jurisdiction over the parties involved may tend to lead the court to try to resolve the matter without carefully considering subject matter jurisdiction or the authority of the court’s agents to act in another jurisdiction. Often, due to the inherent power of judicial authority we tend to assume that if a judicial order is clear and in proper form it may be relied upon. Such is not always the case. We tend to see the issue arise, most commonly, in four fact situations.

The administration of the estate of a decedent domiciled in another state probably gives rise to the most frequent occurrence of the issue. Guardianship proceedings involving incompetents and minors would be next, with domestic and partnership disputes running close behind.

The North Carolina Court of Appeals has filed an opinion on March 2, 2004 that cogently discusses the issues involved and makes clear in what manner a foreign court may act on North Carolina real estate, Green v. Wilson, No. COA03-714. The decision is concise and well reasoned. As such we have restated or quoted substantially all of the opinion in this article.

Plaintiffs in this matter filed an action in New Hanover County seeking a judgment quieting title to certain real property located there. The prior owner of the property, Wadell H. Pate, conveyed it by gift deeds to the plaintiffs, his wife and stepson, prior to his death, testate, in February of 2002. The administratrix of his estate sought to have the deeds reformed alleging that they were procured by undue influence. The administratrix subsequently filed a similar suit in Georgia where the plaintiffs reside. The defendants in the North Carolina suit then filed a motion to stay the proceedings to permit trial in a foreign jurisdiction pursuant to N.C. Gen. Stat. § 1- 75.12, among multiple motions. The trial court granted that motion, staying the proceedings, and found as a matter of law:

"1. That the Richmond County, Georgia Superior Court has personal jurisdiction over the Plaintiffs and Defendants in this action."

"2. That the Court having considered the convenience and the access to another forum, nature of [the] case involved, relief sought, applicable law, possibility of jury view, convenience of witnesses, availability of compulsory process to produce witnesses, cost of obtaining attendance of witnesses, relative ease of access to sources of proof, enforceability of judgment, burden of litigating matters not of local concern, desirability of litigating matters of local concern in local courts, choice of forum by Plaintiffs, and all other practical considerations which would make the trial easy, expeditious and less expensive concludes that Richmond County, Georgia Superior Court is a convenient, reasonable, and fair place for trial."

"3. That it would work substantial injustice for this action to be tried in New Hanover County, North Carolina."

The Court of Appeals noted that "Section 1-75.12 of our General Statutes allows any court of this State, upon motion of a party, to stay proceedings here to allow trial in a foreign jurisdiction when it would work substantial injustice for the action to be tried in a court of this State. Subsection (c) of 1-75.12 states that a party in a proceeding that has been stayed to permit trial in a foreign jurisdiction has an immediate right to appeal. N.C. Gen. Stat. § 1-75.12(c) (2003). Entry of an order under N.C. Gen. Stat. § 1-75.12 is a matter within the sound discretion of the trial judge and will not be disturbed on appeal absent an abuse of that discretion. Home Indemnity Co. v. Hoechst-Celanese Corp., 99 N.C. App. 322, 325, 393 S.E.2d 118, 120, disc. review denied, 327 N.C. 428, 396 S.E.2d 611 (1990)."

The issue presented to and considered by the Court of Appeals was "whether North Carolina has exclusive in rem jurisdiction, and therefore is the proper venue for this action. If the state of Georgia has jurisdiction that may determine title to property located in North Carolina, then the trial court was correct to stay the proceedings here to await the outcome in the Georgia court, for the reasons stated by the trial court. If, however, North Carolina has exclusive in rem jurisdiction, then the Georgia proceeding cannot dispose of a deed executed in North Carolina to convey property located entirely within North Carolina, and the stay was ordered in error. We hold that Georgia does not have in rem jurisdiction, and that North Carolina is the proper venue. Regardless of issues of convenience to the parties, which are valid issues, the North Carolina courts alone have in rem jurisdiction over the subject property to determine title when it is disputed. The trial court therefore erred in staying the proceedings, and we vacate the stay order."

The Court then moves through a definitional analysis of the legal terms. Lawyers tend to become a bit uneasy when in the absence of case law, opinion writers rely on the lexicographer instead of the Law School Dean. However no untoward conclusions are reached in this instance.

"Black's Law Dictionary defines ‘in rem’ as A technical term used to designate proceedings or actions instituted against the thing, in contradistinction to personal actions, which are said to be in personam.

‘In rem’ proceedings encompass any action brought against a person in which essential purpose of suit is to determine title to or affect interests in specific property located within territory over which court has jurisdiction. Black's Law Dictionary 793 (6th ed. 1990)."

The Court cites the case of Hanson v. Denckla, 357 U.S. 235, 2 L. Ed. 2d 1283 (1958), where "the U.S. Supreme Court discussed the effect of in rem jurisdiction, stating that ‘[t]he basis of the jurisdiction is the presence of the subject property within the territorial jurisdiction of the forum State"’ Id. at 247, 2 L. Ed. 2d 1293 (citation omitted). Without question, North Carolina exclusively has in rem jurisdiction of the subject property in the case at bar."

The North Carolina Court of Appeals notes that we "recognize that a foreign court with in personam jurisdiction could render judgments that indirectly affect ownership of property over which that court would have no in rem jurisdiction in certain specific instances. However, a court in a jurisdiction foreign to the subject property could not determine title to the property. An example of the former would be an equitable distribution in which the divorcing couple holds property in North Carolina but bring the divorce action in another state. The foreign court would have the authority, under principles of in personam jurisdiction, to divide the commonly held title. But where the ownership of the deed is in dispute or there is a cloud on the title, a court must have in rem jurisdiction to decide such matters. Our Supreme Court discussed this distinction in the case of McRary v. McRary, 228 N.C. 714, 47 S.E.2d 27 (1948): The Ohio court had jurisdiction to allot alimony to plaintiff herein. Even so, the jurisdiction acquired over the parties was purely in personam. Its judgment cannot have any extraterritorial force in rem. Nor did it create a personal obligation upon the defendant McRary which the courts of this state are bound to compel him to perform. At most it imposed a duty, the performance of which may be enforced by the process of the Ohio court."

The Court next distinguishes what a foreign court may do and what they can not.

"The courts of the situs of lands cannot be compelled to issue their decrees to enforce the process of courts of another state, or the performance of acts required by the decrees of such courts, ancillary to the relief thereby granted, affecting such lands."

"By means of its power over the person of the parties before it, a court may, in proper cases, compel them to act in relation to property not within its jurisdiction, but its decrees do not operate directly upon the property nor affect its title. The court's order is made effectual only through its coercive authority."

"A judgment seeking to apportion the rights of the parties to property outside the jurisdiction of the court rendering it may be given extrastate effect for many purposes, but it does not establish any right in the property itself, enforceable in the state of its situs. McRary v. McRary, 228 N.C. 714, 718, 47 S.E.2d 27, 30 (1948) (citations omitted)."

"This Court applied the reasoning of McRary in the case of Courtney v. Courtney, 40 N.C. App. 291, 253 S.E.2d 2 (1979). In Courtney, a Texas court that had jurisdiction over the parties entered a judgment ordering defendant personally to convey title to North Carolina realty to plaintiff. On appeal, this Court affirmed the trial court's decision, finding that the Texas judgment was effective in North Carolina because it only affected the real estate indirectly and was not an in rem order that improperly purported to vest title. The Court reasoned:
In the instant case, the Texas court has not exceeded its jurisdictional powers nor contravened any law or public policy of North Carolina or Texas. Apparently recognizing its limited jurisdiction, it never attempted to vest any muniment of title in North Carolina realty, as did the Ohio court in McRary. Therefore, the in personam judgment directing the conveyance of North Carolina realty is entitled to full faith and credit in this State Courtney v. Courtney, 40 N.C. App. 291, 298, 253 S.E.2d 2, 5 (1979)."

"Both the McRary and Courtney decisions cited the U.S. Supreme Court decision in Fall v. Eastin, 215 U.S. 1, 54 L. Ed. 65 (1909), and echo its reasoning. In that case, the Court affirmed the Supreme Court of the State of Nebraska, which held that a deed to land situated in Nebraska, made by a commissioner under the decree of a court of the State of Washington in an action for divorce, was not effective in Nebraska because the Washington court lacked in rem jurisdiction.
These and other similar cases define the limits of in personam jurisdiction, where in rem jurisdiction is lacking, to affect title to land. The case at bar falls beyond these clearly defined limits. When title to property is determined, only the court with in rem jurisdiction may serve as a proper forum. North Carolina being the only forum with in rem jurisdiction in the case at bar, it is not a substantial injustice for the case to be tried in New Hanover County, North Carolina."

This reasoning compelled the Court to reverse the judgment of the trial court. As we initially noted this doctrine has direct application to real property practice and is one we are frequently called upon to apply to specific situations.

When the Personal Representative of the estate of a foreign domiciled decedent intends to convey land held in the estate, an ancillary administration is mandated. The power of a Personal Representative to act is derived from the Probate Court through Letters of Administration or Letters Testamentary. As title to land is being conveyed, a court having in rem jurisdiction must make the grant of authority.

A more complex situation arises in the context of guardianship. The guardian must be properly empowered by the Clerk of Superior court and confirmed by a Superior Court Judge in order to convey title to the lands of an incompetent or minor in North Carolina. In the case of a foreign domiciled minor or incompetent, the court with in personam jurisdiction will need to act as well as the court with situs jurisdiction. To complicate matters, our statutes make provision for situations where the residency and land are in different counties within this State. But they do not clearly address the situation of a foreign fiduciary. By inference one would utilize the same procedure, but there is no clear guidance in that respect.

The opinion discusses the issue of domestic orders involving the equitable distribution of real property and we need not embellish. Only slightly different is the situation involving the disposition of partnership property. While a foreign court may order parties to convey and a North Carolina court may implement that judgment, commissioners and receivers derive their authority only from a court having in rem jurisdiction. Such as are commissioned by a foreign court have no authority to act in North Carolina.

It is clear that when dealing with orders of the courts of other states, a real property practitioner will need to dust off the jurisdictional rules and proceed circumspectly.

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