1 | NC Connection | Sept 2015 We Know North Carolina invtitle.com

Corporations have been called the most successful legal fiction. Ambrose Bierce said a corporation was “An ingenious device for obtaining individual profit without individual responsibility.” From a title perspective, we don’t need to be corporate experts. We simply need to confirm that the entity in the chain of title is valid and in good standing.

In most states, the recording of corporations and limited liability companies is available online through the Secretary (or sometimes “Department”) of State. In North Carolina, both domestic and foreign entities are listed at https://www.secretary.state.nc.us/search/index/corp. An entity “chain of title” showing origination, domestication, mergers, acquisitions, and so on are usually listed under the entity name.

Keep in mind that the name must be exact because anything “distinguishable on the record” is sufficient to create a separate entity. “Exact Corporation” and “Exxact Corporation” are not the same. This can require you to search for corporate changes or require correction deeds. Most

states also require a current list of officers and directors. It is a good idea to check the officers and directors as well. If your documents are not being signed by one of those persons, a resolution or corporate affidavit of authority should be required.

(Continued on page 2)

Insuring Entities or Who, Who, Who Are You?

Jane S. Barkley, Esq., Senior Commercial Title Attorney jbarkley@invtitle.com

Insuring Entities... 1-3, 5-6

NC Fun Facts 3

Claims Corner 6-8

Are Your Trust Accounts Protected?

8-9

Branch Profile 10

Investors Trust 10

THE NC CONNECTION

North Carolina Resources

CFPB/ALTA Best Practices

invtitle.com/cfpb/nc: CFPB and ALTA

Best Practice articles, manuals,

solutions, and other resources.

Events & Education

invtitle.com/events/nc: CLE/CPE credit

available through live and online courses.

Articles & Newsletters

invtitle.com/resources/nc: for a

comprehensive directory of past

newsletters, select Articles and

Newsletters / Article Directory.

Forms

invtitle.com/resources/nc: for a

complete list of forms, select the Forms

category.

Tools

invtitle.com/resources/nc: for a

complete list of frequently-used tools,

view the tools box on the right.

iTracs

invtitle.com/itracs: proactively

manage your accounts and resolve

critical issues such as disbursement

errors and account irregularities.

EFLITE

invtitle.com/eflite: prepare and

submit forms online.

VIP invtitle.com/vip: business solutions and

purchasing power

2 | NC Connection | Sept 2015 We Know North Carolina invtitle.com

“effective against lien creditors or purchasers for a valuable consideration from the entity formerly owning the property, only from the time of registration of a certificate …in the county where the land lies.” NCGS § 47-18.1(a).

The following documents establish the authority of the corporation to conduct the proposed transaction and should be reviewed prior to closing:

Articles of Incorporation certified by the Secretary of State.

Bylaws set forth the procedures for the shareholders and/or directors to follow to complete the transaction.

Certificate of Good Standing or Existence from the State of incorporation.

Resolution authorizing the proposed transaction.

The certificate of existence “may be relied upon as conclusive evidence that the domestic or foreign corporation is in existence or is authorized to transact business in this State.” NCGS § 55-1-28(c).

This article will provide the title insurer’s perspective to insuring real estate transactions involving corporations, limited liability companies, and partnerships.

CORPORATIONS

A corporation is a legal entity able to purchase, hold, mortgage, lease, exchange, and sell real estate. The board of directors of a North Carolina corporation may act without approval of its shareholders if the transaction is in the usual and regular course of business. NCGS § 55-12-01. If such sale, lease, or exchange is not in the ordinary course of business, the transaction will need approval of the corporation’s board of directors and shareholders. NCGS § 55-12-02. Such approval is usually evidenced by a shareholder resolution.

Foreign corporations have the same rights to convey property as allowed for domestic corporations. NCGS § 55-15-05. They do not have to qualify to do business solely to hold title or convey real property. Holding title to property is not transacting business, and without more, would not require a certificate of authority from the Secretary of State.

If a corporation, domestic, foreign, or nonprofit changes its name by amendment or merger, they must file a certificate of the change with the register of deeds of each county where they own real estate. NCGS § 55D-26. Upon merger, the real estate and other property of each corporation is vested in the surviving corporation by operation of law “without reversion or impairment”. NCGS § 55-11-06(a)(2). The transfer is

THE NC CONNECTION

If the corporation has been dissolved either voluntarily or administratively by the Secretary of State, it does have the right to “wrap up” its business affairs which would include selling off assets and real property. NCGS § 55-14-05. We can insure those transactions, but we must have sufficient evidence of the nature of the corporate status. We suggest that you include a statement in the deed that explains that the transfer is being made for the purposes of winding up the corporation affairs and complies with NCGS § 55-14-05. If you have a question about a corporation status, contact one of our title attorneys.

If the corporate charter has been suspended for failure to file tax returns or pay taxes under Chapter 105, “Any act performed or attempted to be performed during the period of suspension is invalid and of no effect”. NCGS § 105-230(b).

(Continued on page 3)

Insuring Entities... cont. from page 1

3 | NC Connection | Sept 2015 We Know North Carolina invtitle.com

Insuring Entities... cont. from page 2

name is accurate on all the closing documents to avoid claims in the future.

It is important to use the correct notary acknowledgement for corporations. The corporate seal is no longer required. See North Carolina General Statutes Chapter 10B for notary requirements. NCGS § 10B-41.

A word about powers of attorney: we receive a lot of inquiries regarding the authority of a lender/corporation to delegate by a power of attorney to another entity or person to sign documents, usually in connection with a foreclosure or real estate owned (“REO”) transaction. The powers of attorney are usually recorded in one county alone. The recording in one county is allowed in North Carolina. A corporation may convey an interest in real property by instrument duly executed by an officer, manager, or agent by a signed and attested resolution of the board of directors authorizing the named parties to execute the documents of conveyance. NCGS § 47-18.3. Most of these servicing agreements will contain a list of people authorized to sign. It is a good practice to attach a copy of

The general rule was that the corporation would need to pay all taxes and fees, including reinstatement fees, to be able to conduct business and complete a real estate transaction. NCGS § 105-232(a). A recent North Carolina Court of Appeals case, however, has reached a different conclusion concluding that NCGS § 55-14-05 trumps NCGS § 105-230(b) and that the revenue suspension does not invalidate the transfer of property, if it was done for purposes of winding up. LE Oceanfront, Inc., et al v Lands End of Emerald Isle Association, Inc., COA14-287 (12/31/2014). If there is a sale involving a corporation under a revenue suspension, you will need to get the approval of your title insurance underwriter.

It is also essential that the corporation be in good standing if it is the grantee of real property. If it is dissolved, it cannot take title and the rules of winding up will not apply. Piedmont and Western Investment Corp. v. Carnes-Miller Gear Co. 96 N.C.App. 105, 384 S.E.2d 687 (1989), cert. denied, 326 N.C. 49, 389 S.E.2d 93 (1990). We cannot stress enough that we have to verify the corporate

the recorded power of attorney to the current transaction documents.

LIMITED LIABILITY COMPANY

A limited liability company is also a legal entity able to purchase, receive, lease, or otherwise acquire, and own, hold, improve, use, sell, convey, mortgage, and exchange real estate. NCGS § 57D-2-03. Unless otherwise stated in the Articles of Organization or Operating Agreement, a written agreement or approval of all members will be required to sell, transfer or otherwise dispose of all or substantially all of the assets of the limited liability company prior to dissolution. NCGS § 57D-3-03.

Unlike a corporation, the limited liability company is owned by members instead of shareholders. The authority to manage the affairs of the limited liability company is vested in the managers and it can be member managed or manager managed. NCGS § 57D-3-20(d). All the members are managers unless the operating agreement says otherwise.

(Continued on page 5)

NC FUN FACTS

Jockey's Ridge is found in the Outer Banks coastal region of NC and is the tallest natural sand dune in the Eastern US. It came into being about 7,000 years ago when sand was pushed onto the beaches by storms. On July 25, 1974, Jockey's Ridge was approved as a National Natural Landmark and approx. 152 acres were acquired in 1975 to create Jockey's Ridge State Park. One popular legend concerning the naming results from the practice of racing Spanish Mustangs which came from the ships wrecked offshore. Riders, or jockeys, used the flats at the base of the big dune as the race course. Today, the dune is a popular place for hang gliding lessons. Visit http://www.jockeysridgestatepark.com/ to learn more.

THE NC CONNECTION

Jockey’s Ridge

4 | NC Connection | Sept 2015 We Know North Carolina invtitle.com

THE NC CONNECTION

Pre-recorded courses available at your

convenience.

invtitle.com/events/nc

SoftPro TRID (Closing Disclosure)

Presenter: Gina Webster (non-credit - 80 min)

This course reviews ProForm updates related to preparing

the Closing Disclosure Form and associated documents.

Integrated Disclosures—General Rules (TRID Module I)

Presenter: Holly Szczypinski, Esq. (1 hr CLE/CPE Gen)

This first segment of the three-part series will cover the rules associated with the new

disclosures that are Effective October 3rd, 2015.

Integrated Disclosures—Loan Estimate (TRID Module II)

Presenter: Jon Biggs, Esq. (1 hr CLE/CPE Gen)

This second segment of the three-part series will cover all of the relevant rules associated with

the new Loan Estimate form.

Integrated Disclosures—Closing Disclosure (TRID Module III)

Presenter: Holly Szczypinski, Esq. (1 hr CLE/CPE Gen)

This third segment of the three-part series will cover the rules associated with the new Closing

Disclosure.

An Entity by Any Other Name

Presenter: Jane Barkley, Esq. (1 hr CLE/CPE Gen)

A title insurance perspective on insuring real estate transactions involving legal entities such as

corporations, limited liability companies, partnerships and churches.

Ethics and Standards of Practice (Commercial Transactions Focus)

Presenter: Steve Brown, Esq. (1 hr CLE/CPE Ethics)

This presentation will examine certain scenarios where technology and response to a new

regulatory environment may be changing standards of care for real estate attorneys in ways

they may not recognize.

...and many more!

5 | NC Connection | Sept 2015 We Know North Carolina invtitle.com

Insuring Entities cont. from page 3

the articles of organization and operating agreement to determine the powers and limitations on managers.

Like corporations, limited liability companies may “wind up” their affairs in accordance with NCGS § 57D-6-07. And, like corporations, the rules for charter suspension by the NC Department of Revenue would also apply, subject to LE Ocean-front, Inc., et al v Lands End of Emerald Isle Association, Inc., COA14-287 (12/31/2014). Again, if there is a sale involving a limited liability company under a revenue suspension, you will need to get the approval of your title insurance underwriter.

PARTNERSHIPS

A partnership is an association of two or more persons to carry on as co-owners of a business for profit. NCGS § 59-36(a). Although a writing creating the partnership is not required, when dealing with real estate, title companies will require a written agreement.

Every partner is an agent of the partnership and any partner may act for and bind the partnership so long as the act carries on the usual business of the partnership. NCGS § 59-39. If a partner acts outside the usual business or without authority, that act does not bind the partnership. This is why we would require a written partnership agreement!

Where title to property is in the partnership name, any partner may convey title (this includes sale, lease, mortgage, or any other encumbrance) to such property by a conveyance executed in the partnership name. NCGS § 59-40. This

Managers of a limited liability company can be individuals, corporations, trusts, estates, or other entities. Any documents that must be executed must take this fact into account and properly list the managers in their correct capacity. The manager binds the limited liability company unless the manager so acting has, in fact, no authority to act for the limited liability company in the particular matter and the person with whom the manager is dealing has knowledge of the fact that the manager has no authority. NCGS § 57D-3-31.

Foreign limited liability companies do not have to obtain a certificate of authority from the North Carolina Secretary of State, if it is not conducting business in the state. Owning and selling real property is not considered doing business. NCGS § 57D-7-01.

The following documents establish the authority of the limited liability company to transact the real estate transactions:

Articles of Organization certified by the Secretary of State.

Operating Agreement sets forth procedures and members to authorize the proposed transaction.

Certificate of Good Standing or Existence from the State of organization.

Resolution of members authorizing the proposed transaction.

The title examiner should verify that the limited liability company is in good standing and review

ability, however, is subject to the same condition: that the act be in the usual business of the partnership or that the partner have authority to act under NCGS § 59-39.

A partner is co-owner with his partners of specific partnership property holding as a tenant in partnership. NCGS § 59-55. This tenancy is not assignable or subject to attachment or execution except in a claim against the partnership. It is not subject to dower, curtesy or widows allowance, so we would not require joinder by the spouses of the partners. NCGS § 59-55(b)(5). Partnership property vests in the surviving partners unless there are no surving partners. In that scenario, the property would vest in the last surviving partner’s personal representative. A general partnership is not terminated on dissolution but continues until the winding up of partnership affairs is completed. NCGS § 59-60. See also, NCGS § 59-65.

If title to the partnership property, however, is held in the individual names of the partners, even if the names are followed by the partnership name, we may need to review the documents prior to closing to verify that the property properly vested in the partnership. Accordingly, we may require satisfaction of individual liens against a partner and joinder by a spouse in deeds and deeds of trust. Questions on partnership matters should be directed to underwriting counsel.

(Continued on page 6)

THE NC CONNECTION

6 | NC Connection | Sept 2015 We Know North Carolina invtitle.com

Insuring Entities... cont. from page 5

partnership. The limited partner does not manage and is generally only liable to the extent of their contribution to the partnership.

In North Carolina, a foreign limited partnership is required to secure a certificate of authority from the Secretary of State to conduct business here. While general partnership rules would apply to the limited partnership, the certificate may allocate authority in a way that is not apparent between the general and limited partners. This can be problematic in real estate transactions.

In preparing the title opinion, the attorney should review the following:

Certificate of Limited Partnership or similar document to establish the legal entity.

If the partnership is engaging in business under an assumed name, they must file a Certificate of Assumed Name in the office of the register of deeds for each county in which the partnership is conducting business. NCGS § 66-68.

There is a case from the North Carolina Supreme Court that is an excellent discussion of the Uniform Partnership Act and applies it to the specific facts of the case. I recommend it as a good review of partnership law. Simmons v. Quick-Stop Food Mart, Inc., 307 NC 33, 296 SE2d 275 (1982).

LIMITED PARTNERSHIPS

A limited partnership is a partnership of general partners and limited partners. The general partner, usually a corporation or limited liability company, manages the

Limited Partnership Agree-ment to confirm the authority of the general partners to enter into the proposed transaction and authority to execute the necessary documents.

Certificate of Good Standing or Existence from the State of organization.

Resolutions of Partners authorizing the proposed transaction.

Incumbency Certificate authorizing the individuals acting on the Partnership’s behalf.

General Partner’s Certificate certifying the authenticity of all the Partnership documents.

For more on this topic— view the on-demand course: An Entity by Any Other Name

THE NC CONNECTION

they once did. Despite all of our

prevention efforts, claims still

occur every day. So, what are

the most common claims we

see at Investors Title today?

Let’s look at the top five

categories.

(Continued on page 7)

CLAIMS CORNER: You Mean You Really Get Claims on Title Insurance Policies?

by Carol Hayden, Esq., VP — Senior Claims Counsel

title insurance premium really

helps protect owners and lenders.

Certifying attorneys work hard to

prevent title defects through a

vigorous due diligence process

including a title exam,

undertaking curative measures

prior to closing, and obtaining

various affidavits from buyers and

sellers. The NC real property

bar, RELANC, and the NC Land

Title Association have all had an

influential role in promoting

statutory changes to prevent

hidden mechanic’s liens. In the

past, mechanic’s liens were one

of our top claims but they no

longer present the huge problem

When people ask what I do

professionally, I reply that I am a

claims attorney for a title

insurance company. The most

common response I get is: “Isn’t

that boring? You mean you

really get claims on title

insurance policies?”

Sometimes, the value of title

insurance to owners and lenders

gets lost in the shuffle of closing

activities. Title insurance

marketing and customer service

focus on policy production. We

get busy with important logistics:

searching for prior policies,

getting quotes, issuing opinions,

and sometimes forget that the

7 | NC Connection | Sept 2015 We Know North Carolina invtitle.com

Don’t get behind! The insured

lender may submit a claim!

These claims are usually easily

fixed. The certifying attorney

promptly submits their final

opinion upon notification of the

claim, the policy is issued, and

the claim resolved. Sometimes,

however, there is a reason the

final opinion has not been

submitted, especially if a title

defect is discovered post-closing.

In the rush to record, don’t forget

to update first! Promptly notify us

upon discovery of a title defect.

It’s often easier to fix those

defects right after closing than

two years down the road.

3. Errors with Legal

Descriptions

Claims for legal description errors

come from both owners and

lenders. Sometimes, the error is a

simple and obvious typo that can

be easily remedied with a

corrective affidavit, but at times

the error is more significant: no

legal was attached to a deed or

deed of trust, the wrong legal was

attached, the wrong lot was

1. Prior Deeds of Trust

By far, the largest number of

claims submitted result from

prior, un-cancelled deeds of

trust. These claims range from

no loss to huge losses. In many

cases, we are able to research

prior closings, find evidence of

payoffs, and either a) request

cancellations; or b) indemnify

and continue to insure. In a

substantial number of claims,

however, the prior lender has

already begun foreclosure

against the new owner or ahead

of our insured deed of trust.

This scenario can happen for a

number of reasons: due to a

prior deed of trust being missed

in a search; due to an indexing

error by which it couldn’t be

found; due to failure to obtain

and/or record a subordination;

because a prior home equity line

of credit (HELOC) was paid off,

but the lender was not asked to

close the line of credit and

extended further credit; or when

the paid-off lender was asked to

close a HELOC account but

didn’t. Each example requires

investigation for possible

defenses, provision of a defense

– if covered, and/or payoff of a

valid prior lien.

2. The Final Policy

Insured closing protection letters

are commonly issued to lenders

prior to closing. Lenders

frequently file claims, if they

haven’t received their policy

within 90 days after closing.

Closing attorneys get busy with

urgent closings on their calendar

and sometimes put post-closing

activities on the back burner.

Then, it’s easy for the final

opinion preparation to pile up.

conveyed, the legal description

was incomplete, or the metes

and bounds description doesn’t

close. These errors can result

in allegations of loss of priority

of a deed of trust,

unenforceability of a deed of

trust, or failure of a deed to

convey title, although there are

often equitable defenses to such

allegations. If covered, the

instrument can often be

reformed to cure the defect;

however, in some instances,

there may be no coverage.

Example: the legal descriptions

for two houses are switched by

the developer. Owner A

purchases lot one but is deeded

lot two, and Owner B purchases

lot two but is deeded lot one.

Although Owner A has been

living in lot one, he has title to lot

two, and his title insurance

policy reflects ownership of lot

two – no covered title defect,

although there is still a problem.

A survey would certainly have

revealed the property that each

party was actually acquiring.

(Continued on page 8)

THE NC CONNECTION

You Mean You Really Get Claims… cont. from page 6

8 | NC Connection | Sept 2015 We Know North Carolina invtitle.com

in wrong capacity; and

h) improper notary execution.

Sometimes the defective

instrument can be re-executed by

the appropriate party. But, what if

the issue is discovered after the

party is deceased? Reformation

actions can often remedy these

defects, but priority or validity

issues may arise.

5. Prior Real Estate Taxes and

Assessments

Sometimes special assessments

are just missed. In many cases,

though, the governmental

authorities have not given correct

information regarding outstanding

taxes or assessments, and

payoffs are not made or fall short

as a result. Fortunately, more

and more counties are keeping

better electronic records with

easy access for the public. Many

attorneys have standard closing

And, in fact, many description

errors could be prevented by

obtaining a survey prior to

closing. I may be preaching to

the choir, but the importance of

surveys cannot be

overemphasized!

4. Grantor/Grantee and

Execution Errors

This category of errors comes in

several forms, including:

a) failure of a co-owner (tenant

in common, tenants by the

entireties, holder of a life estate,

or a remainderman) to execute

a deed or deed of trust;

b) failure of all the heirs to

execute a deed; c) incorrect

grantor name listed in an

instrument; d) incorrect grantee

name listed in an instrument; e)

failure of a spouse to grant their

marital interest; f) incapacity of

grantor; g) document executed

documents that include an

indemnity signed by sellers, who

agree to pay any pro-rata taxes

or assessments that were

unknown at the time of closing

but which were seller’s

responsibility and related to their

tenure of ownership. This

document certainly helps us

recover these kinds of losses.

I could go on and on: prior

judgments, boundary disputes,

unknown easements,

encroachments, lack of legal

access, recording errors, prior

outconveyances, fraud,

forgery… I’ve seen it all in my

job and can assure you that

claims are not boring!

~

THE NC CONNECTION

You Mean You Really Get Claims... cont. from page 7

attorney’s local jurisdiction. The fraudster offers the attorney the opportunity to earn a fee contingent upon successful closing and typically includes a signed engagement letter to make the transaction appear legitimate. Often, the documentation sent to the attorney is on official-looking letterhead and includes email addresses, a physical address, a website address, telephone numbers, company names, and the names of real people who are recognizable and appear legitimate.

Usually within a day or two, the fraudster follows up with a second email notifying that the

In recent years, many attorneys have been targets of trust account scams established through email, typically involving an intricate scheme using documentation that appears to be genuine and often refers to legitimate companies.

Nowadays, real estate attorneys must vigilantly defend their trust accounts against many types of fraud risks. One common scheme in particular is aimed directly at attorney trust accounts. The scenario begins with an attorney receiving an email from a potential client seeking local representation to settle a collection against a debtor party located in the

closing date has been reached, and that the debtor will be sending a certified check to the attorney to cover closing costs. The second email directs the attorney to deduct his fees for administering the closing and to wire the remaining funds to a designated bank (typically an international one) and account number.

Upon receiving the certified check, the attorney does as directed and deposits the money into the trust account, initiates the international wire, and deposits the contingent fee into the operating account. The money is delivered to the scammer and the file appears to

(Continued on page 9)

Are Your Trust Accounts Protected?

by Todd Murphy, SVP — Finance

9 | NC Connection | Sept 2015 We Know North Carolina invtitle.com

THE NC CONNECTION

While scams like this and others are prevalent today, there are things you can do to protect your business:

Be suspicious of emails from clients you do not know

Avoid acting quickly to wire funds

Evaluate checks and certified checks carefully

be closed; however, a few days after depositing it, the certified check is returned by the bank to the attorney as bad or counterfeit. The wired funds are now long gone, of course, and cannot be retrieved. The bank puts the attorney on notice that he is responsible for replacing the wired money with legitimate funds.

and/or have bank review suspicious checks

Call to confirm parties on each matter

Avoid email links through websites

Avoid international wires

Keep proper insurance coverage (E&O, Cyber, Surety/Fidelity)

Reconcile accounts daily to monitor for fraudulent activity

Encrypt email

Keep anti-virus and phishing filters updated

While doing all of these things can seem overwhelming, Investors Title offers services that can help you with protecting your trust accounts.

Investors Title offers iTracs®, a trust account reconciliation service. This service helps you better manage your accounts on a daily basis which can help avoid costly mistakes and fraud while saving you time and money. For more information, please contact itracs@invtitle.com or visit www.invtitle.com/itracs.

To help with other email encryption, insurance coverage, and compliance services, Investors Title offers its VIP program to connect you with vendors who can help you run and protect your business at pre-negotiated volume pricing. In addition to fraud-related services, VIP offers discounts on shipping, office supplies, and travel. Learn more at: www.invtitle.com/vip.

Are Your Trust Accounts Protected? cont. from page 8

iTracs® offers customized escrow accounting services with the following available features:

Daily or monthly reconciliation options

Automated matching of receipts and disbursements

Three-way reconciliation

Customized timely alerts of irregularities or critical errors

Daily monitoring to help you detect potential problems before they become unrecoverable

Consulting and training

Audit assistance

Cleaning up old problems and catching up prior months’ reconciliations

Integration with your bank’s positive pay system

Reverse positive pay

Separation of conflicting duties

10 | NC Connection | Sept 2015 We Know North Carolina invtitle.com

Having opened in Oct. 1979, the Wilmington branch will soon celebrate 36 years of operations! Its current team members include Jodi Sollosi as the office manager and Rosie Howell, underwriter. Angie Willis is the marketing manager.

In a 28-page decision, the North Carolina Court of Appeals has ruled that the administrators of an estate will need to re-litigate a lower court’s decision that resulted in a significant financial award to them for estate taxes that were incurred because of gifts that the decedent allegedly made during life and joint property he owned with a non-spouse at the time of his death. The case developed after Johnnie Fortner, Sr., died intestate in January 2007. Before his death, Fortner and Lynda Hornbuckle Fortner had held themselves out to the public as a married couple for nearly 20 years, but they never married. In the Fall of 2006, Fortner executed several real estate deeds that conveyed several parcels he owned either to Lynda or to her son, Jonathan. He gave those deeds to Lynda in a manila envelop, told her to put them in a safe place, and “keep [her[ mouth shut” about the apparent gifts. Those deeds were only recorded in February 2007, two weeks after Fortner died. In June 2011, Fortner’s sons, as administrators of Fortner’s considerable estate, filed suit attempting to collect the estate taxes that were attributable to the transferred real estate because those

parcels had been included in his taxable estate. The administrators also sought to

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Investors Trust: Fortner v. Hornbuckle attach a nearly $250,000 joint checking account at the State Employees’ Credit Union “for the payment of [Fortner’s] debts.” At the trial level, a jury ruled in favor of the administrators, awarding them more than $850,000 for the taxes that the estate incurred by including the real estate in Fortner’s taxable estate. The jury also awarded the full value of the joint checking account to the administrators. Lynda and her son appealed, and the appellate court reversed. In reaching its decision, the appellate court said there was “sufficient evidence” that Fortner never intended to relinquish control of the real estate, so the question of whether the deeds constituted completed gifts had been properly put before the jury. But both that issue and the questions surrounding the ownership and taxation of the joint account had been presented with jury instructions that were confusing and would “likely mislead [them].” Accordingly, the Court concluded that “the trial court committed prejudicial error in its instructions [and] we remand this matter for a new trial.”

--Fortner v. Hornbuckle, No. COA13-1209, N.C. Ct. App. 8/5/15

This article is provided for informational purposes only and does not constitute legal advice.

wilmington@invtitle.com 800.653.4842 / F 800.659.3084

Wilmington Branch

THE NC CONNECTION

11 | NC Connection | Sept 2015 We Know North Carolina invtitle.com

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