This a relatively unique set of facts, but one that is occurring more often over the last several years.  The property owner and chapter 7 debtor was the record owner of the lot encumbered by a judgment lien transferred from Florida.  In the Chapter 7 petition, the debtor indicated his intention to “surrender” the property to the judgment lien holder.  However, no deed was ever executed and he remains the record owner of the property.  The assessments have not been paid since the bankruptcy.

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In this case, a surrender is not a surrender. “Property interests are created and defined by state law.” (Butner v. United States, 440 U.S. 48, 55, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979)).  The debtor continues to own the property until there is a formal transfer of title.  (See In re Phillips, 368 B.R. 733, 744 (Bankr.N.D.Ind.2007). In re Plummer, 2014 WL 1248039 (Bankr. M.D. Fla. Mar. 25, 2014)).  The discharge does not extinguish the debtor’s ownership of the lot and it does not eliminate the association’s lien on the real property.

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The Chapter 7 discharge did not void the transferred Florida judgment against the debtor, and that judgment would be first lien against the property under NCGS 47F-3-116.  It is still in the Association’s best interest to initiate foreclosure proceedings.  Otherwise, the parties will continue to let the lot sit in limbo until there is a tax foreclosure.  If the time comes, we can provide further guidance regarding the effect of a forced sheriff’s sale by the Florida judgment creditor on the association’s lien.

Posted in Bankruptcy-Creditor's Rights, Community Association, Real Property, Special Assets Collection |

The North Carolina Court of Appeals confirmed yesterday that a decision binding a property owners’ association is not binding on the individual lot owners who were not a part of the underlying litigation.  The Court’s decision in Hedgepeth v. Parker’s Landing Property Owners Association, Inc. was the result of a second round of litigation initiated by a purchaser of property at a foreclosure sale.  Hedgepeth sought to develop the property he acquired, but was unable to do so without first obtaining a right-of-way across a neighboring subdivision.

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In the first lawsuit, filed in federal court, Hedgepeth sought a declaratory judgment that he had a right of ingress and egress to his property over Parker’s Landing Drive so that he could subdivide and develop his property.  The federal court ruled on summary judgment that Parker’s Landing Drive was not subject to an easement benefitting the Hedgepeth property.  However, the court found that Hedgepeth was entitled to an implied easement over a 25-foot right-of-way over the Parker’s Landing subdivision, but that the easement was restricted to the use necessary for the farming or cultivation of the Hedgepeth property, consistent with the use when the common title to the two tracts were severed in 1894.

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Subsequently, Hedgepeth filed a complaint against the POA and individual lot owners seeking a declaration of the rights of the parties and to enjoin the defendants from interfering with Hedgepeth’s easement.  Individual lot owners likewise filed lawsuits to enjoin Hedgepeth from constructing a roadway across the lots.  Hedgepeth filed motions to join the individual lot owners in the various lawsuits, as well as motions for summary judgment in the numerous pending lawsuits.

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The trial court consolidated the pending cases and denied Hedgepeth’s pending motions for summary judgment.  Hedgepeth appealed the denial of his motions for summary judgment.

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The Court of Appeals noted that although the denial of summary judgment is interlocutory, a motion for summary judgment based on res judicata or collateral estoppel may affect a substantial right, making such a denial immediately appealable.  The Court found that the issue litigated before the federal court was the existence and location of any easements across the Parker’s Landing property, and consequently, the federal court’s decision as it related to the 25-foot easement constituted res judicata between Hedgepeth and the POA.  Notably, however, the Court concluded that the federal court’s decision was only binding on the POA, not individual lot owners, for the purposes of res judicata and collateral estoppel.  The Court further noted that owners of property affected by an easement must be made parties to the litigation to be bound by a judicial decision.

Posted in Uncategorized |

A New York appellate court recently affirmed the trial court’s decision granting summary judgment in favor of Defendant, Emerald Green Property Owners Association (“Association”) finding that a clear and unambiguous provision allowed the members to amend the original terms 40 years after the original Declaration.

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The Association’s Declaration of Covenants, Easements, Restriction and Charges (“Declaration”) provided that, “ ‘[t]hese covenants, restrictions, easements reservations, . . . charges and conditions are to run with the land and shall continue in full force and effect for a period of twenty (20) years from the date hereof, after which time the same shall be automatically extended for two (2) additional successive periods of ten (10) years unless an instrument signed by a majority of the then owners of the lots, and signed by [d]eclarant, has been recorded in the Sullivan County Clerk’s Office agreeing to change said covenants and restrictions in whole or in part’ (emphasis added).” Goldman v. Emerald Green Prop. Owners Ass’n, Inc., 116 A.D.3d 1279, 1280, 984 N.Y.S.2d 459 (2014).

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In September 2009, the Association drafted “what it deemed to be a consistent set of covenants and restriction and sent ballots to, among others, those property owners whose lots were subject to the 1969 declaration.” Id. In a majority vote, the owners approved the new declaration and the Association began collecting assessment pursuant to this newly adopted declaration. The plaintiffs challenged the validity of the new declaration and stopped paying assessments in 2009. The Association, in turn, placed a lien on the plaintiffs’ property, and the plaintiffs filed suit seeking a declaratory judgment which would determine they were not bound by the provisions of the new declaration. The plaintiffs’ argued that any modification “could only take place during the initial 20-year period.” Id.

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In its opinion, the Court relied on basic principles of contract law, finding the language in the original Declaration was “clear and unambiguous.” Id. “[G]iving due consideration to the punctuation employed,” the Court held that the new declaration was enforceable, “assuming, of course, that the required number of votes we cast and the appropriate procedures were followed.” Id.

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Posted in Uncategorized |

In an unpublished opinion released today, a unanimous panel of the North Carolina Court of Appeals in Hometrust Bank v. Tsiros (COA14-267) reversed  Summary Judgment against local lender in an appeal of a deficiency action argued before the Court by Dungan, Kilbourne & Stahl, P.A..

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The Superior Court in Buncombe County had ruled that the Defendant, George Tsiros, had not been served with notice of the foreclosure hearing and therefore could not be held accountable for a deficiency of under N.C.G.S. §45-21.16(b). Citing a recent opinion issued by the Court, Hometrust v. Green (2013; also argued by Dungan, Kilbourne & Stahl, P.A.), the Court of Appeals determined the Defendant had actual notice of the hearing and could be held liable.  The Court of Appeals held that summary judgment had been appropriate to end any claim against Tammy Tsiros.

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Our attorney, James W. Kilbourne, Jr., again argued Hometrust Bank v. Tsiros on behalf of the bank. The decision becomes final when the mandate issues.

Posted in Appeal, Collections / Special Assets |

Judge Linda McGee, who has served on the Court of Appeals since 1995, was appointed Chief Judge of the North Carolina Court of Appeals by Chief Justice Sarah Parker effective August 1, 2014.  She replaces Chief Judge John C. Martin, who is retiring.  Judge McGee, a native of Marion, North Carolina, is the second woman to hold the position of Chief Judge.  Her appointment marks just the second time in North Carolina history that the positions of Chief Justice and Chief Judge of the Court of Appeals are both held by women.

Posted in Appeal |