Lorrin Freeman Wake County Clerk of Court

Laura Riddick Wake County Register of Deeds

This week, Wake County Clerk of Court Lorrin Freeman and Wake County Register of Deeds Laura Riddick both gave presentations at the same meeting of the Wake County Real Property Lawyers Association. They each gave a short talk about their respective offices and recent changes in North Carolina real estate law, complete with very helpful handouts.

Key Developments in North Carolina Real Estate Law

Laura Riddick and Lorrin Freeman pointed out several key developments that intersect with North Carolina real estate law and the offices of the Wake County Register of Deeds and the Wake County Clerk of Court.  Some of those developments include

• E-recording of satisfaction of deeds of trust
• Simplified searches of Wake County Register of Deeds for MERS (Mortgage Electronic Registration System)
• Customer IT Hotline for Wake County Register of Deeds (919) 856-2626
• Confusion about the application of new N.C. Gen. Stat. §161‑10(a)(1), assigning an extra $25 recording fee for certain documents that contain an “additional reference”
• Real Estate Lawyers can now deposit escrow or stakeholder funds with the Clerk of Court
• Preemptive filing of commercial liens with the Clerk of Court
• A new list of Direct Telephone Numbers for the Wake County Clerk of Court

Wake County Real Property Lawyers Association

The Wake County Real Property Lawyers Association is a group of Wake County real estate lawyers, including many Raleigh real estate attorneys, who gather once a month for lunch and a short presentation. Presenters frequently discuss current real estate practices and changes to the North Carolina real estate law.  Most members practice in a particular area of real estate law, such as

• real estate transactions (handling commercial or residential real estate deals);
• land use (helping developers rezone or permit their projects); or
• real estate litigators (handling trials of real estate disputes to Judges and Juries).

In addition, the Association also includes bankers and title insurance folks, who are kind enough to sponsor the association’s meetings.

Get Your Copy of the Handouts

If you are a North Carolina real estate trial lawyer, land use lawyer, or even a real estate closing attorney, but you missed this month’s Wake County Real Property Lawyer’s meeting, you can still get the handouts provided by Wake County Register of Deeds Laura Riddick and the Wake County Clerk of Court Lorrin Freeman.

If you would like a copy of these very helpful handouts, just send us an email and ask us for a copy. We will be happy to get it to you right away. As an extra bonus, if you like, we will also tell you about the special help available to folks dealing with the vagaries of when the extra $25 recording fee under N.C. Gen. Stat. §161‑10(a)(1) should be applied.

To send us an email and get your free copy of the handouts, you should click here.

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Ms. de Ondarza Simmons is a North Carolina real estate trial attorney. She helps people and businesses in Raleigh and throughout North Carolina with residential, agricultural, and commercial real estate disputes, including eminent domain (or land condemnation), adverse possession, judicial partitions / judicial sales, and boundary disputes.  Ms. de Ondarza Simmons is admitted to practice before all North Carolina State Courts as well as the United States District Courts for the Eastern and Middle Districts of North Carolina. You may have a North Carolina real estate dispute that you would like to discuss with a North Carolina Real Estate Trial Attorney. If so, you can call or send us an email to set up an initial consultation. To get started, you should click here.

The Original Post is Located Here: Wake County Clerk of Court and Wake County Register of Deeds update Wake County Real Estate Attorneys

Recently, Google has referred several people to our website who have entered the following search phrase,

“What is the difference between adverse possession and eminent domain?”

de Ondarza Simmons, PLLC helps clients with both. So, we wrote this brief post to help explain the differences. As outlined below, adverse possession and eminent domain are completely separate areas of real estate litigation, with separate rules for each area governing substance, procedure, and admissible evidence.  But both can lead to dispossessing an owner of his or her (or its) real property.  Both can apply to residential, agricultural, or commercial property.  Principally, however, the main difference between adverse possession and eminent domain lies in

• who is acquiring the property, and
• whether the original owner is entitled to any compensation.

Adverse Possession – One Private Property Owner Acquires the Property of Another Private Property Owner

Adverse possession means possessing another’s property under certain conditions for a certain period of time. As a result, two things happen. The title of the original owner of record is extinguished, and a new title is created by law in the adverse possessor.  When that happens, the original owner is not entitled to any compensation for the land.

In adverse possession, the adverse possessor is a private party (an individual human or humans; or a non-governmental entity, like a business or a non-profit).  On the other side, the original owner of record can be either a private party or, under certain circumstances, a unit of government (like the State, a county, or a municipality).

To review the basics, including the elements of adverse possession in North Carolina, you should click here.

Eminent Domain – Government, Utility or other Condemnor Acquires Private Property for Public Purpose

Eminent domain is the ancient and inherent power of the sovereign, or the State, to take property from private property owners. This power pre-dates the United States Constitution and has always belonged the sovereign.  As the saying goes, “All title [in property] descends from the King.”  In America, of course, we no longer have a king, but we do have a sovereign, namely us, “We the People”, and that sovereign is embodied in the United States of America and the individual States of the Union.  So, in America, the Federal Government and the several States have the power to take or condemn private property.

Nevertheless, in America, there do exist important limits on this power. The Fifth Amendment to the United States Constitution, for example states,

“nor shall private property be taken for public use, without just compensation.”

The United States Supreme Court has held that the the Fifth Amendment’s protections apply to the States as well.

The North Carolina Constitution does not contain a similar condemnation clause.  But Article I, section 19 of the North Carolina Constitution does contain the so-called “Law of the Land Clause“, which reads:

“No person shall be taken, imprisoned, or disseized of his freehold, liberties, or privileges, or outlawed, or exiled, or in any manner deprived of his life, liberty, or property, but by the law of the land.”

The North Carolina Supreme Court has consistently held that the Law of the Land Clause incorporates the condemnation clause contained in the Fifth Amendment.

Eminent domain is a legislative power, and the North Carolina legislature, the General Assembly, has granted or delegated the power of eminent domain to State agencies like the North Carolina Department of Transportation (NCDOT), municipalities, and even power companies and transit authorities.  But the Federal and North Carolina Constitutions limit these condemnors’ power by requiring that private property may only be taken

1. for a “public use” and
2. the condemnor must pay “just compensation”.

Over the last 60 years, decisions by the United States and the North Carolina Supreme Courts have broadened the scope of “public use”.  In addition, what constitutes “just compensation” depends on how damages resulting from the taking are measured.  In North Carolina, there are two separate measures of damages.  Which one applies depends on which condemnation statute is used by the condemnor.

For more information on eminent domain in North Carolina, including specific tactics we use to defend property rights of our clients in condemnation cases, you should click here.

Contact Us for an Initial Consultation

You may have an adverse possession or eminent domain case.  Occasionally, adverse possession issues can even arise within an eminent domain case, affecting your damages and just compensation. Whether you have an adverse possession case or an eminent domain case, if you would like to set up an initial consultation with us, you should click here.

The Original Post is Located Here: Adverse Possession and Eminent Domain – What’s the difference?

Aggressive does not mean Obnoxious

Do you need a truly aggressive lawyer for your business or real estate dispute?

Everyone wants an aggressive attorney. But a lot of folks who are not lawyers think that means having a lawyer who is rude to the other side or the other lawyer. They think aggressive means obnoxious. This is nonsense.

An aggressive attorney is one who advances her clients interests by knowing and applying the law and the rules. One set of rules that sounds boring as dirt is the set of rules that governs discovery, the process of requesting and properly objecting to the exchange of information in a lawsuit. It may sound boring, but doing it right can mean the difference between winning or losing your case.

Recent Krispy Kreme Doughnut case, Attorney-Client Privilege, and Work Product Immunity

A recent business litigation case involving Krispy Kreme Doughnuts, illustrates the importance of correctly objecting to discovery requests. In that case, the Plaintiffs propounded discovery to two Krispy Kreme entities and the other 17 defendants.  Some of the defendants claimed that they did not have to produce documents in response to some requests because the documents were protected by the attorney-client privilege and work product immunity. The Plaintiffs then moved to

“strike or limit any objections and “compel[] full responses” to Plaintiffs’ discovery requests.”

The Trial Court granted Plaintiffs motion and ordered Defendants to produce certain documents, and the Defendants appealed.

Appeals from Orders to Compel Discovery Responses

The North Carolina Court of Appeals noted that the North Carolina Supreme Court had previously held that

“[a]n order compelling discovery is generally not immediately appealable because it is interlocutory and does not affect a substantial right that would be lost if the ruling were not reviewed before final judgment.” … However, where “a party asserts a statutory privilege which directly relates to the matter to be disclosed under an interlocutory discovery order, and the assertion of such privilege is not otherwise frivolous or insubstantial, the challenged order affects a substantial right under [N.C. Gen. Stat. '] 1-277(a) and [N.C. Gen. Stat. '] 7A-27(d)(1).” … This Court [the North Carolina Court of Appeals] has applied the reasoning of Sharpe to the common law attorney client privilege.

Discovery Rules Require Specific Objections to each Request

So, an order compelling discovery responses over a proper objection asserting attorney-client privilege or work product immunity is immediately appealable.  But as the Court of Appeals pointed out, the party claiming the privilege or immunity must state its objection properly:

Civil Procedure Rule 34, concerning production of documents, provides in pertinent part:

The response shall state, with respect to each item or category, that inspection and related activities will be permitted as requested, unless the request is objected to, in which event the reasons for objection shall be stated. If objection is made to part of an item or category, the part shall be specified. . . . There shall be sufficient space following each request in which the respondent may state the response. The respondent shall: (1) state the response in the space provided, using additional pages if necessary; or (2) restate the request to be followed by the response. An objection to a request shall be made by stating the objection and the reason therefor either in the space following the request or following the restated request.

N.C. Gen. Stat. § 1A-1, Rule 34(b) (2009) (emphasis added). We conclude that the blanket general objection provided by [this set of Defendants] based on “the attorney/client privilege, the work product doctrine, or any other applicable privilege or doctrine” does not comply with Rule 34 by “stating the objection and the reason therefor either in the space following the request or following the restated request.” Nor does [this set of Defendants'] blanket general objection comply with the holding of [the North Carolina Supreme Court]… that appellants must make an “‘assertion of such privilege [that] is not otherwise frivolous or insubstantial.’”…  We hold that blanket general objections purporting to assert attorney-client privilege or work product immunity to all of the opposing parties’ discovery requests are inadequate to effect their intended purpose and do not establish a substantial right to an immediate appeal.

Lessons from this case

This case goes on to address other discovery rules and lays out a road map for properly asserting objections to discovery based on attorney-client privilege and work product immunity.    If you would like a copy of the case, just send us an email and we will forward you the link to the North Carolina Court of Appeals’ official opinion.  To do that now, you should click here.

Contact Us for an Initial Consultation

You may have a business or real estate dispute.  If that dispute grows into a lawsuit, it will likely involve discovery, and you will need the guidance of an aggressive attorney to help you propound the right discovery requests for your case, to compel the other side to respond, and to properly object to discovery propounded to you.  If you have a business or real estate dispute and would like to set up an initial consultation with us, you should click here.

The Original Post is Located Here: Aggressive Attorneys and the Rules of Discovery

Kristen Fetter appointed as Wake County Trial Court Administrator

Click for Google Street View & Map to Courthouse.

Senior Resident Superior Court Judge Donald W. Stephens recently appointed Kristen Fetter as the new Trial Court Administrator for the 10th Judicial District of North Carolina (the “Wake County Trial Court Administrator” or “Wake County TCA”).

Ms. Fetter is an attorney who worked as a Judicial Assistant to Judge Stephens and the other Superior Court Judges of Wake County before earning her Juris Doctor from the Norman Adrian Wiggins School of Law at Campbell University. As an attorney, she has worked as an Assistant Public Defender and an Assistant District Attorney in Wake County.

As the Wake County Trial Court Administrator, Ms. Fetter now handles the calendaring of civil Superior Court cases in Wake County, including trials and motions.  She also administers the Local Civil Rules for Superior Court in the Tenth Judicial District, which can be found here.  In addition to the Tenth District Local Rules, the rest of the Wake County Local Rules and local forms, including calendar request forms, can be found here.

The Wake County Trial Court Administrator’s Team

Ms. Fetter leads a team of outstanding folks at the Wake County TCA’s Office that includes Lisa Tucker, Michelle Bailey, and Carol McLeod.  Ms. Tucker is a Trial Court Coordinator and manages the District Court calendar for general civil litigation (exclusive of domestic civil litigation, which is handled separately by the Wake County Family Court Administrator, Melissa LeVine).  Ms. Bailey, also a Trial Court Coordinator, manages mediation matters for civil litigation in Superior Court.  Ms. Tucker and Ms. Bailey also assist Ms. Fetter with calendaring issues.  Finally, Ms. McLeod is Arbitration Coordinator for District Court.

Contact Info for the Wake County Trial Court Administrator’s Office

Ms. Fetter can be reached at the Wake County Trial Court Administrator’s Office at

Tel. (919) 792-4775
Fax (919) 792-4951

The mailing address is

P.O. Box 1916
Raleigh, North Carolina 27602

The Office is located on the 10th Floor of the Wake County Courthouse

316 Fayetteville Street
Raleigh, NC 27601

To see a Google street view and map to the Courthouse, click here.

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Ms. de Ondarza Simmons is a North Carolina business and real estate trial attorney. She is admitted to practice before the North Carolina State Courts as well as the United States District Courts for the Eastern and Middle Districts of North Carolina. She is available for referrals for business and real estate litigation in Raleigh and throughout North Carolina. Ms. de Ondarza Simmons is also available for association as local counsel for out-of-state attorneys who wish to appear either as pro hac vice attorney in North Carolina state court or as special appearance attorney in the Eastern District of North Carolina. If she can help you help your client, please click the Contact Us page and call or send us an email.

The Original Post is Located Here: New Wake County Trial Court Administrator

In a real estate dispute where the subject property is owned as tenancy by the entirety, both husband AND wife are necessary parties and must be named in the lawsuit.

In a previous posts we have talked about the importance of correctly naming the right business entity parties in lawsuits. (See Correctly Naming Business Entity Defendants in Business Litigation Complaints & You Cannot Wait until Supplemental Proceedings to Pierce Corporate Veil.)  In this post, we look at a recent case that highlights the importance of naming the right individual human parties in a real estate dispute.

Plaintiffs in Boundary Dispute fail to Name both Husband and Wife as Defendants

In this case, Boone v. Rogers, neighbors sued each other over the location of the dividing line between their properties and the existence of an easement. The Plaintiffs filed their lawsuit against a man who was an owner of the subject property, but they did not name his wife as a defendant, even though the deeds of record for the subject property showed the that he and his wife owned the subject property as tenants by the entirety.

After a District Court jury trial, the jury found in favor of the Defendant husband.  The Trial Court Judge, however, entered a judgment not withstanding the verdict (a “JNOV”) in favor of the Plaintiffs.  The Defendant Husband appealed.

Defendant Husband’s Appeal

The North Carolina Court of Appeals began its opinion by stating its holding directly:

As the trial court entered an order without all of the necessary parties, we vacate and remand.

Rule 19 of the North Carolina Rules of Civil Procedure requires that all necessary parties be joined.  It reads in part,

“those who are united in interest must be joined as plaintiffs or defendants….”

In this case the Court of Appeals quoted from a previous case to explain what the rule actually requires and the effect of failing to follow it:

Rule 19 of the North Carolina Rules of Civil Procedure requires that those who are united in interest must be joined as plaintiffs or defendants. A person is united in interest with a party when that person’s presence is necessary for the court to determine the claim before it without prejudicing the rights of a party or the rights of another who is not before the court. Necessary parties are those who have or claim material interests in the subject matter of a controversy, and those interests will be directly affected by an adjudication of the controversy. When there is an absence of necessary parties, the trial court should correct the defect [on its own] upon failure of a competent person to make a proper motion. A judgment which is determinative of a claim arising in an action in which necessary parties have not been joined is null and void.

Tenancy by the Entirety makes both Husband and Wife Necessary Parties

In the current case, the Court of Appeals then went on to explain that the ownership of the subject property by the Defendant husband and his wife as a tenancy by the entirety meant that he and his wife were united in interest and that she was, therefore, a necessary party, and that Rule 19 required her to have been joined before trial:

Here, defendant and [Defendant's wife] owned the real property as tenancy by the entirety.

When land is conveyed or devised to a husband and wife as such, they take the estate so conveyed or devised, as tenants by the entirety, and not as joint tenants, or tenants in common. This tenancy by the entirety takes its origin from the common law when husband and wife were regarded as one person, and a conveyance to them by name was a conveyance in law to but one person. The estate rests upon the doctrine of the unity of person, and upon the death of one the whole belongs to the other, not solely by right of survivorship, but also by virtue of the grant which vested the entire estate in each grantee. These two individuals, by virtue of their marital relationship, acquire the entire estate, and each is deemed to be seized of the whole, and not of a moiety or any undivided portion thereof.

[Citation omitted.]  [Defendant's wife], as one of the owners of an undivided interest in the real property… has a “material interest[ ] in the subject matter of a controversy, and [her] interests will be directly affected by an adjudication of the controversy.” [Citation Omitted.] Therefore, we “vacate the verdict and judgment below and remand so that a new trial may be had upon joinder of all necessary parties.” [Citation Omitted.]

Lessons from this Case

This case shows the importance of naming all owners of real estate that is in dispute.  In particular, it demonstrates the need to name both husband and wife when the subject property is owned by them as tenancy by the entirety.  But in North Carolina, there is another important reason to join both spouses in almost all real estate litigation, even if only one of them is on the deed. Contact us if you would like to know more.

Link to the Court’s Opinion

If you would like to read the Court’s whole opinion, please click the Contact Us button below and send us a email. We will be happy to reply with the link to the Court’s official opinion.

Contact Us

Contact Us

You may have a residential or commercial boundary dispute involving an individual owner or owners who are married.  de Ondarza Simmons, PLLC handles boundary disputes and real estate litigation in Raleigh and throughout North Carolina.  If we can be of help, please click the Contact Us button below, and call or send us an email.  We will be happy to set up an initial consultation to review your real estate dispute with you.

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The Original Post is Located Here: Correctly Naming Necessary Parties in Real Estate Disputes

Will new enforceable attorneys' fees provisions in business contracts put more money at stake in your business dispute?

In North Carolina, the general rule is that a prevailing party cannot recover attorney’s fees unless there is a statute that says otherwise. Many people do not realize that this has been the rule even for breach of contract claims in which the contract itself called for the award of attorney’s fees. As the North Carolina Supreme Court held in a 1980 commercial equipment lease case,

“[e]ven in the face of a carefully drafted contractual provision indemnifying a party for such attorneys’ fees as may be necessitated by a successful action on the contract itself, our courts have consistently refused to sustain such an award absent statutory authority therefor.”

New North Carolina Statute Allows Certain, Limited Attorneys’ Fees in Business Contracts

On June 27, 2011, the North Carolina Governor signed into law N.C. Gen. Stat. §6-21.6, which makes valid and enforceable certain attorneys’ fees provisions in business contracts entered into on or after October 1, 2011.

The new statute only makes attorneys’ fees valid and enforceable if

1. the contract is a business contract, as opposed to a consumer or employment contract or a contract with a government or governmental agency of the State;
2. the attorneys’ fees are reciprocal and applicable to all parties; and
3. all parties sign the business contract by hand.

The statute permits the court or arbitrator to award reasonable attorneys’ fees based on a non-exclusive list of relevant facts and circumstances.  Included in that list is,

“(7) Offers of judgment pursuant to Rule 68 of the North Carolina Rules of Civil Procedure and whether judgment finally obtained was more favorable than such offers.”

But the statute also says (twice) that the attorneys’ fee award “may not exceed the monetary damages awarded.” The statute has many other terms and two other exceptions. You can read the full statute here.

N.C. Gen. Stat. §6-21.6 only applies to Business Contracts

It is important to note that this new statute only applies to business contracts.  The statute defines “business contract” as

“[a] contract entered into primarily for business or commercial purposes. The term does not include a consumer contract, an employment contract, or a contract to which a government or a governmental agency of this State is a party.”

N.C. Gen. Stat. §6-21.6 also states that it does not apply to contracts of insurance governed by Chapter 58 of the North Carolina General Statutes.  So, for those contracts to which this new statute does not apply, North Carolina law still will not allow the recovery of attorneys’ fees even if parties have entered into a contract that provides for them, unless there is some other statutory basis.

Other Statutory Authority Does Exist for Particular Claims

There are other, long-standing statutes that authorize the award of reasonable attorneys’ fees under certain circumstances.  For example, in breach of contract cases over ”any note, conditional sale contract or other evidence of indebtedness”, N.C. Gen. Stat. §6-21.2 permits the Court to award attorney’s fees pursuant to the specific requirements of the statute.  Another example is the pair of North Carolina eminent domain statutes that permit reasonable attorneys fees in inverse condemnation cases. Finally, the North Carolina Supreme Court had previously carved out an exception to the general rule for actions brought to enforce a marital separation agreement that provides for attorneys’ fees.  The new statute governs business contracts and does not specifically address that judicially created exception.

Contact Us

You may have a dispute with another business entity, in which attorneys’ fees are at issue.  For potential clients with business disputes, we offer an initial consultation. To set up an appointment to discuss your business litigation matter, please click the Contact Us button and call or email us.

The Original Post is Located Here: New Statute Makes Attorneys’ Fees Provisions in Business Contracts Enforceable

Travelers Indemnity Co. of Connecticut v. Triple S Marketing Group, No. COA10-862, unpublished (N.C. App. Jul. 19, 2011)

In this recent unpublished opinion, in a business litigation collections case, the North Carolina Court of Appeals held,

“North Carolina’s supplemental proceedings statutes do not afford a trial court jurisdiction to pierce the corporate veil against a non-party shareholder….”

Background

Do you need to "pierce the corporate veil" and hold shareholders personally liable in your business dispute?

In this case, an workers’ compensation insurance carrier, Travelers, had sued its insured, Triple S, a corporation, claiming that Triple S had improperly categorized some of its employees, and as a result, owed Travelers $213,462.  The parties settled the lawsuit by entering into a consent judgment, under which Triple S agreed to pay the insurance company $203,462.  But Triple S went out of business and did not pay.  When Travelers tried to execute on the consent judgment, Travelers got nothing.  So, Travelers started supplemental proceedings to discover assets and to enforce the judgment. As part of those supplement proceedings, Travelers, for the first time, tried to pierce the corporate veil of Triple S. It tried to do so by filing a motion in the supplemental proceedings asking the court to allow Travelers to execute the judgment on the personal assets of two of Triple S’s principal shareholders, Pamela Bullock and James Trovato, even though Travelers had never named either Ms. Bullock or Mr. Trovato as a defendant, nor mentioned them in the consent judgment, nor even plead a corporate veil-piercing theory in the underlying complain.

The Trial Court granted Travelers’ motion, purportedly under authority of N.C. Gen. Stat. §§1-352 and 1-353, and Triple S appealed.

Supplemental Proceedings Statutes Limited to Property of Judgment Debtors Only

The North Carolina Supplemental proceedings statutes govern the execution of judgments and are located in Article 31 of Chapter 1 of the North Carolina General Statutes (N.C. Gen. Stat. §1-352, et seq.).  N.C. Gen. Stat. §1-352 reads as follows:

When an execution against property of a judgment debtor, or any one of several debtors in the same judgment, issued to the sheriff of the county where he resides or has a place of business, or if he does not reside in the State, to the sheriff of the county where a judgment roll or a transcript of a judgment is filed, is returned wholly or partially unsatisfied, the judgment creditor at any time after the return, and within three years from the time of issuing the execution, is entitled to an order from the court to which the execution is returned or from the judge thereof, requiring such debtor to appear and answer concerning his property before such court or judge, at a time and place specified in the order, within the county to which the execution was issued. (C.C.P., s. 264; 1868‑9, c. 95, s. 2; Code, s. 488, subsec. 1; Rev., s. 667; C.S., s. 711; 1971, c. 268, s. 21.)

(Emphasis added.)

As the Court of Appeals points out,

While section 1-352 sets the return of an unsatisfied judgment as a necessary condition for a judgment creditor to seek relief in supplemental proceedings, section 1-353 affords the trial court authority to grant relief. That section provides as follows:

After the issuing of an execution against property, and upon proof by affidavit of a party, his agent or attorney, to the satisfaction of the court or a judge thereof, that any judgment debtor residing in the district court district as defined in G.S. 7A-133 or superior court district as defined in G.S. 7A-41.1, as the case may be, where such judge or sheriff resides has property which he unjustly refuses to apply toward the satisfaction of the judgment, such court or judge may, by order, require the judgment debtor to appear at a specified time and place, to answer concerning the same; and proceedings may thereupon be had for the application of the property of the judgment debtor towards the satisfaction of the judgment as provided upon the return of an execution, and the judgment creditor is entitled to the order of examination under this section and G.S. 1-352 although the judgment debtor has an equitable estate in land subject to the lien of the judgment, or choses in action, or other things of value unaffected by the lien of the judgment and incapable of levy.

N.C. Gen. Stat. § 1-353 (2009). While these sections provide for “supplemental proceedings, equitable in nature . . . to aid creditors to reach property of every kind subject to the payment of debts which cannot be reached by the ordinary process of execution,” [Citation omitted.] their scope is limited by their plain language; they purport to grant trial courts authority to enter orders affecting the property of judgment debtors only.

(Emphasis added.)

The Court of Appeals’ Due Process Concerns

For the Court of Appeals, the issue was not whether the Trial Court could have pierced the corporate veil in the underlying case, had Travelers named Ms. Bullock and Mr. Tovato as defendants and had them properly served with a complaint that actually sought to pierce the corporate veil.  Instead, the issue was

“whether sections 1-352 and 1-353 afford a trial court jurisdiction to decide the issue of legal and factual distinction between corporation and shareholder in the first instance during supplemental proceedings.”

The Court of Appeals held that they do not.  It noted that “[t]hat issue is one that appears to be as yet undecided in North Carolina…” and then set out its due process concerns, as follows:

Strong concerns for affording civil defendants adequate procedural safeguards are at the heart of many opinions interpreting legislative intent as excluding piercing or impleading in supplemental proceedings….

Similarly, the North Carolina Constitution and the North Carolina Rules of Civil Procedure afford defendants in civil cases certain procedural and substantive safeguards designed to ensure their ability to defend a claim on its merits. The North Carolina Constitution guarantees defendants in civil cases the right to trial by jury. N.C. Const. Art. 1 § 25; N.C. Gen. Stat. § 1A-1, Rule 38(a) (2009). North Carolina’s Rules of Civil Procedure require that defendants be afforded notice of the claims against them per Rule 8(a)(1) and require service of process per Rule 4. They further guarantee that defendants will have the ability to, inter alia: challenge a court’s jurisdiction, Rule 12(b)(1)-(2); challenge the propriety of venue, Rule 12(b)(3); participate in discovery, Rule 26-37; or move for summary judgment, Rule 56. None of these procedural safeguards would be present were we to hold that a trial court could, in supplemental proceedings, grant a motion to pierce the corporate veil and attach a previously agreed upon consent judgment to the personal property of individual shareholders who were neither parties to the underlying action nor named persons in the judgment. We cannot hold that it was the intent of our legislature to so undermine those safeguards when it crafted the phrase “judgment debtor” in sections 1-352 and 1-353. Since we cannot construe these statutes so broadly, we must agree with Triple S that the trial court exceeded its scope by granting Travelers’ motion.

(Emphasis Added.)

Lessons of the Case

First, this case illustrates the standard rule on who to name as defendants; when in doubt, name everybody.  (If you haven’t read it yet, you might look at our recent post on the related issue of Correctly Naming Business Entity Defendants in Business Litigation Complaints).

Second, it suggests a remedy, when a new potential defendant or theory is discovered – move to amend the complaint.  As the Court of Appeals noted,

[b]ecause Travelers neither pleaded its veil-piercing theory nor moved to amend its complaint to include a veil-piercing theory, no proper application was ever made in the underlying proceeding invoking the trial court’s equitable veil-piercing powers.

Contact Us

There are a couple of other key issues and potential solutions in business litigation cases involving business entities who may be going judgment proof.  You may have a dispute with another business entity, in which you have doubts about that business’s ability to pay, even if you win your case.

For potential clients with business disputes, we offer an initial consultation. To set up an appointment to discuss your business litigation matter, please click the Contact Us button and call or email us.

The Original Post is Located Here: You Cannot Wait until Supplemental Proceedings to Pierce Corporate Veil

What is your business entity defendant's real name?

People and businesses frequently have disputes with other businesses. Often, that means you or your business may have to file suit against another business or several other businesses. Who do you sue? The standard answer is: sue everyone. If you don’t, by the time you realize you need to add another defendant, the statute of limitations may have run and you may be time barred from recovering from the actual responsible party. But to sue everybody, you have to know their names.

Businesses’ names frequently sound similar, but each separate business entity actually has its own, unique name. “XYC, Corp.” may not be the same entity as “XYZ, Inc.” and is definitely not the same entity as ” XYZ, LLC”. Similarly, “XYZ, Inc., a Delaware corporation” is not the same entity as “XYZ, Inc., a North Carolina corporation”. So, how do you make sure you get the exact, right name of each business defendant?

Read the Contract… Carefully… ALL of it

First, in a contract dispute, you check the contract. That means reading the entire document – including all attachments and other documents that the parties have incorporated by reference – and checking not just the business names at the top of the first page, but throughout the document, and especially in the signature blocks.  Occasionally, the contract will inadvertently name the defendant businesses differently in different places.  So, a business defendant’s name may appear one way in the beginning of the contract and another way in the signature block.

Check the Secretary of State’s Corporations Database

A second, critical step involves checking the database of businesses that is maintained by state office in charge of chartering and registering business entities. In North Carolina, that office is the North Carolina Secretary of State.  For North Carolina business entities, or foreign business entities authorized to do business in North Carolina, you can search the North Carolina Secretary of State’s “corporations” database for each potential corporation or other business entity by name.

Check the Register of Deeds Assumed Name Database

Certain business entity types require a third step, checking the local register of deeds for a certificate of assumed name.  Chapter 66 of the North Carolina General Statutes requires certain businesses operating under an assumed name (a “dba” or “doing business as” name) to file a certificate containing the following information:

“(1) The name under which the business is to be conducted; and

(2) The name and address of the owner, or if there is more than one owner, the name and address of each.”

The statute requires that this certificate of assumed name be filed in any county in which the business “engages in business”.  North Carolina has, of course, 100 counties, and, therefore, 100 registers of deeds.  Many of those registrars now maintain on-line records.  Wake County Register of Deeds Laura Riddick, for example, has developed an outstanding website with a separate Wake County Register of Deeds Assumed Name Search page.

Other Places Might Also Need to be to Checked

Business disputes depend on the facts.  Each case will require analysis to determine, among other things, the level of research required to ensure that your complaint names the exact, right business entities correctly. This, by the way, is true for the potential defendants as well as for your own business entity, the plaintiff in your case. So, the facts of any given case may require further investigation into the issue of who, exactly, are the parties and what, exactly, are their legal names.  Otherwise, you risk losing the opportunity to hold the right parties accountable.

Free Initial Consultations for Business Disputes

When we represent clients in business litigation, we use the above steps as part of our process for drafting complaints in order to ensure that the proper parties are properly named. You may have a dispute with one or more business entities, which will require efficient, but methodical, investigation before your case can be filed correctly.  For potential clients with business disputes, we offer an initial consultation.  To set up an appointment to discuss your business dispute, please click the Contact Us button and call or email us.

The Original Post is Located Here: Correctly Naming Business Entity Defendants in Business Litigation Complaints

Adverse Possession?

A person (including a business entity) can acquire title to property not just through a deed or under a will, but also through adverse possession.

Adverse possession means possessing another’s property under certain conditions for a certain period of time. As a result, two things happen. The title of the original owner of record is extinguished, and a new title is created by law in the adverse possessor.

Elements of Adverse Possession

In North Carolina, to acquire title by adverse possession, possession must be:

• actual
• hostile
• exclusive
• open and notorious
• continuous and uninterrupted
• for the prescribed time
• under claim or right or color of title for the period required by the statute and
• under known and visible lines and boundaries.

Actual Possession

The general rule is that the adverse possessor has to actually possess all of the property that being claimed, not just part of it. There is an exception, however, if the adverse possessor has “color of title”, which is discussed below.

Hostile

Possession must be hostile to the true owner.  Hostile does not mean aggressive or mean-spirited. Instead, as the North Carolina Supreme Court has stated,

“[t]he requirement that possession must be hostile in order to ripen title by adverse possession does not import ill will or animosity but only that the one in possession of the lands claims the exclusive right thereto.”

In North Carolina, the possessor does not have to have an intent to claim the property as against the owner.  As our Supreme Court has held, the claimant “does not have to be a thief”.  But there is still a wrinkle or two in the law that come up in a certain situations.  So, it is important to discuss with a real estate litigator how the issue of hostility bears on the facts of your individual case.

Exclusive

Generally, possession is exclusive if it is not shared with either the true owner or anyone else. So, exclusive means exclusive to the whole world.  But possession through an agent or a tenant can be exclusive, and it may be possible for more than one person to simultaneously possess exclusively.  Basically, to possess exclusively means to use the property the way people would expect the true owner to use it.

Open and Notorious (Actual or Constructive Notice)

The open and notorious element requires the possession to be substantial and not merely temporary.  In addition, for possession to amount to open and notorious possession, the claimant has to give the true owner notice of the adverse claim.  This means either giving the true owner actual notice or constructive notice (by possessing the property in such a way that the true owner is presumed to know of the adverse claim).  How open and notorious must the possession be?  That depends on the property and the circumstances. But as the North Carolina Court of Appeals has stated,

“[a] claim of adverse possession is based upon an assertion of ownership rights as against all persons, not simply the record owner…. In order to establish ‘open and notorious possession,’ a claimant must show acts of possession of such a nature as to give notice of his claim of ownership to the ‘whole world.’”

Continuous and Uninterrupted (and Tacking)

You need to know that there are also limitations on the doctrine of color of title.  They vary from case to case, so you will need to discuss them with your real estate litigation attorney.

Under Known and Visible Lines and Boundaries

In North Carolina, for possession to be adverse it must be “under known and visible lines and boundaries.”  This so whether or not possession is under color of title.

Contact Us

You may have an adverse possession dispute with a neighboring landowner in North Carolina.  We offer an  initial consultation.  To set up an appointment to discuss your matter, please click the Contact Us page and call or send us an email.

The Original Post is Located Here: The Elements of Adverse Possession in North Carolina

Dougherty Equipment Co., Inc. v. M.C. Precast Concrete, Inc., ___ N.C. App. ____, NO. COA10-646 (N.C. App. Jun. 7, 2011)

Service of Process by FedEx delivery to Corporate Defendant's Receptionist

In a previous post, we examined the current law on Serving a lawsuit with UPS or FedEx (but not FedEx Ground!). In this post, we discuss a recent case revolving around exactly that method of service of process, which is, of course, available in both real estate disputes, like adverse possession or judicial partition in NC cases, as well as in business disputes like this one.

This is a breach of contract case brought in District Court for failure to pay for equipment, goods, and services, in which the plaintiff equipment supplier sought $46,573.17 plus interest. Plaintiff had the summons issued to the defendant corporation’s registered agent, an individual human being who was also the defendant’s president.  The plaintiff then had the summons and complaint served by FedEx Priority Overnight delivery to the registered agent’s address, which was also the defendant’s principal place of business.  The process package was addressed to the registered agent, but FedEx delivered the package instead to defendant’s employee receptionist, who signed for the package.

When the defendant failed to file a timely answer, the plaintiff moved for and received an entry of default and a default judgment.  Later, the defendant appeared through counsel and moved for relief from the judgment and to dismiss the case.

After the hearing on the defendant’s motions, the Trial Court found several facts, including the following:

8. On June 2, 2009, Plaintiff’s counsel filed a sworn Affidavit of Service stating that she had deposited a service letter and a copy of the Summons and Complaint via Federal Express overnight service addressed to Defendant’s registered agent; that the letter, Summons and Complaint were delivered to the registered agent; and that the Federal Express Confirmation form evidencing delivery on May 27, 2009 was attached to the Affidavit as Exhibit A.

9. Attachment A to the Affidavit of Service is an electronic delivery receipt provided by FedEx indicating that the package containing the Summons and Complaint and addressed to [the registered agent] was delivered to the “Receptionist/Front Desk” and was signed for by “C. West.”

The Trial Court ruled that because the process package had not been delivered directly to the registered agent, the plaintiff had not properly served the defendant pursuant to North Carolina Rule of Civil Procedure 4(j)(6)(d).  The Trial Court then determined “the Default Judgment entered in this action is void”, and granted the defendant’s motions for relief and to dismiss the case. The plaintiff then appealed.

The North Carolina Court of Appeals first set out the relevant rules as follows:

Regarding service of process, Rule 4(j)(6)(d) provides that a domestic corporation may be served

[b]y depositing with a designated delivery service authorized pursuant to 26 U.S.C. § 7502(f)(2) a copy of the summons and complaint, addressed to the officer, director, or agent to be served as specified in paragraphs a. and b., delivering to the addressee, and obtaining a delivery receipt.

N.C. Gen. Stat. § 1A-1, Rule 4(j)(6)(d) (2009). Furthermore,

[b]efore judgment by default may be had on service by registered or certified mail, signature confirmation, or by a designated delivery service authorized pursuant to 26 U.S.C. § 7502(f)(2) with delivery receipt, the serving party shall file an affidavit with the court showing proof of such service in accordance with the requirements of G.S. 1-75.10(a)(4), 1-75.10(a)(5), or 1-75.10(a)(6), as appropriate. This affidavit together with the return receipt, copy of the proof of delivery provided by the United States Postal Service, or delivery receipt, signed by the person who received the mail or delivery if not the addressee raises a presumption that the person who received the mail or delivery and signed the receipt was an agent of the addressee authorized by appointment or by law to be served or to accept service of process or was a person of suitable age and discretion residing in the addressee’s dwelling house or usual place of abode.

N.C. Gen. Stat. § 1A-1, Rule 4(j2)(2) (2009) (emphasis added).

The Court of Appeals held that the presumption in Rule 4(j2)(2) should be read in conjunction with the service requirements of Rule 4(j)(6)(d):

Considered as a whole, Rule 4 includes comprehensive provisions for service of process, and the provisions of Rule 4(j2)(2) clearly apply to service made under any of the applicable provisions of Rule 4. See id. Accordingly, in considering whether service was proper under Rule 4(j)(6)(d), the trial court was required to consider the presumption described in Rule 4(j2)(2).

As the Court of Appeals noted, the presumption is rebuttable, but in this case, the Trial Court

concluded that “[w]hether Mr. West was authorized to receive and sign for mail or FedEx packages on behalf of [the registered agent] and/or Defendant . . . is irrelevant to this Court’s inquiry under Rule 4(j)(6)(d)[.]”

To which the Court of Appeals responded,

This conclusion is in direct contravention with Rule 4(j2)(2) which when applied to these facts raises the presumption that Mr. West was “an agent of the addressee authorized by appointment or by law[.]” N.C. Gen. Stat. § 1A-1, Rule 4(j2)(2).

While defendant contends that Mr. West was neither actually nor impliedly authorized to receive service on behalf of defendant, these are disputed facts which the trial court should have considered rather than dismissing such facts as “irrelevant[.]” Plaintiff attempted to present evidence regarding Mr. West’s authority, as plaintiff subpoenaed Mr. West to testify at the hearing, but Mr. West did not appear and defendant filed a motion to quash plaintiff’s subpoena. Plaintiff also requested “continuance of the hearing for the purpose of questioning Mr. West, through discovery or otherwise” regarding his authority “to receive and sign for mail or FedEx packages” for [the registered agent] or defendant, but the trial court denied plaintiff’s request for continuance because it determined that Mr. West’s authority was “irrelevant[.]” In order to rebut the Rule 4(j2)(2) presumption, defendant would have to demonstrate that Mr. West was not “an agent of the addressee authorized by appointment or by law to be served or to accept service of process[.]” N.C. Gen. Stat. § 1A-1, Rule 4(j2)(2). On remand, the trial court must consider the presumption of proper service raised by Rule 4(j2)(2), and this consideration would properly include evidence regarding Mr. West’s authority, or lack thereof, to receive mail or FedEx packages on behalf of [the registered agent] or defendant. Because the trial court determined that evidence regarding Mr. West’s authority was irrelevant, a new hearing will be necessary on defendant’s motions for relief from judgment and to dismiss.

Links to this case

• PDF of the slip opinion
• Westlaw direct link (direct link for those who subscribe to Westlaw) (Not yet available from Westlaw)

The Original Post is Located Here: Presumption of Proper Service on Corporation by FedEx delivery to Receptionist