tag: North Carolina Land Use Litigator: November 2012

BLOGS: North Carolina Land Use Litigator

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Thursday, November 29, 2012, 5:03 PM

How Zoning Rules Can Foment Increased Urban Density: The In-Law Suite

As urban infill becomes the latest wave of "smart" development, and as a boom generation of parents and grandparents transition to an unenviable life stage of less autonomy, counties and municipalities continue to wrangle with ways of dealing with these--and PLENTY of other--zoning bugaboos.

In Raleigh, North Carolina, where the Land Use Litigator lives and works, the progessive City is working its way through the possibility of permitting standalone cottages on single-family residential parcels.  Dubbed by one publication as "granny flats", because "many families build them for older relatives", these one-bedroom "homes" would include plumbing, electricity, perhaps gas.

As with anything new, there are conflicting viewpoints.  Opinions range from claims that permitting these in Raleigh will "lead to urban blight" and return the City to "the middle class flight of the 1970s", to claims that progressive, creative cities like Seattle and Portland effectively use these backyard cottages to "increase downtown density and affordable housing".     

Oh yeah, one more thing: apparently (though we have not verified), "attached dwelling units, often connected by no more than a breezeway, are allowed in Raleigh and also don't require owner occupancy."  So, the lesson, as always, is that a good lawyer can still get your mother-in-law to your backyard.


Mind if I move in?

Mike Thelen practices in Womble, Carlyle's Real Estate Litigation practice group. He regularly represents a wide variety of clients, from local governments to businesses, in land use and land development matters in both state and federal venues throughout North Carolina.

Thursday, November 15, 2012, 3:54 PM

"Novel" Joint Tenancy Argument May Protect Real Property Assets of Madoff Widow

Professor James Webster defines the issue of rights of survivorship, as to a joint tenancy, as follows:
"The most important characteristic of the joint tenancy is the right of survivorship, which means that upon the death of one joint tenant, his interest in property jointly owned enures to the benefit of the surviving joint tenant or joint tenants.  Upon the death of a joint tenant the surviving joint tenant or joint tenants take nothing from the decedent but instead take the whole by virtue of the original conveyance which created the joint tenancy; the surviving joint tenant or joint tenants take the whole which has been owned all the time.  If all joint tenants die except one, the survivor owns the whole property in severalty.  The heirs or spouse of a deceased joint tenant take nothing upon his death.  A joint tenant cannot devise his interest upon his death."
Webster's Real Estate Law In North Carolina, section 7.02[2] (2011).

In other words, if one joint tenant dies, the decedent's ownership interest in that real property essentially evaporates and the surviving joint tenant owns the real property alone and outright.

Dry, though, this topic may be, it's proving instrumental in Trustee Irving Picard's efforts to wrest two properties away from Stephanie Mack, the widow of Bernie Madoff's deceased (by suicide) son Mark Madoff.

As reported today in the Wall Street Journal, "Ms. Mack's lawyers have made novel legal arguments about why the trustee can't touch either the two properties she owned jointly with Mark Madoff."  It seems Ms. Mack's attorneys are arguing that the two pieces of real estate—a loft in Manhattan's SoHo neighborhood and a waterfront house in Nantucket—automatically became hers alone, as joint tenant with a right of survivorship, when Mark Madoff died in December 2010.  Importantly, at the time of her husband's suicide, Ms. Mack was not named in Trustee Picard's lawsuit.  What's amazing, in a morose twist, the deadline for naming Ms. Macks in the lawsuit apparently expired on the day of Mr. Madoff's suicide and, thus, the day Ms. Mack claims title to the two properties vested in her, solely. 

Are you wondering about the value of the homes?  So am I.  The article continues that that the loft was purchased in 2005 for "nearly $6.1 million" and the Nantucket home "cost $6.5 million".

With some sharp legal minds at work on solving Bernie Madoff's mess, wading in the waters of "high" finance, it's good to see a relatively straightforward "joint tenancy" argument hit a Wall Street Journal reporter (and perhaps Mr. Picard, himself) as "novel".


I think he has what we'll call a "solitary tenancy with rights of yard time".

Mike Thelen practices in Womble, Carlyle's Real Estate Litigation practice group. He regularly represents a wide variety of clients, from local governments to businesses, in land use and land development matters in both state and federal venues throughout North Carolina.

Friday, November 9, 2012, 11:54 AM

Pre-Audit Certificates and Oral Municipal Contracts

N.C.G.S. 160A-16 requires that "[a]ll contracts made by or on behalf of a city shall be in writing".  However, that law also permits the express ratification of municipal contracts not made in writing. 

N.C.G.S. 159-28(a), part of the North Carolina Local Government Budget and Fiscal Control Act and the State's "pre-audit requirement" law, provides:  "If an obligation is evidenced by a contract or agreement requiring the payment of money or by a purchase order for supplies and materials, the contract, agreement, or purchase order shall include on its face a certificate stating that the instrument has been preaudited to assure compliance with this subsection."

For our purposes, we're focused on the bolded language, yes, but also on the fact that the bolded language appears to apply "[i]f an obligation is evidenced by a contract".  So, then, what if an agreement is not "evidenced by a contract" -- in other words, it is an oral agreement -- but the oral agreement has been expressly ratified pursuant to N.C.G.S. 160A-16 such that it is valid?  According to a recent pronouncement by the Court of Appeals, that unwritten though expressly ratified agreement may nonetheless require "on its face a certificate stating that the instrument has been preaudited." 

In Executive Medical Transportation, Inc. v. Jones County Department of Social Services, the Court determined that a pre-audit certificate is required for an "oral contract" between a County and private company in which the latter "agreed to provide transportation services to residents of Jones County".  On that  basis, the Court reversed the trial court's refusal to dismiss the private company's breach of contract claim.  In other words, the oral services contract was invalid for lack of a "pre-audit certificate". 

Professor Kara Millonzi of the UNC School of Government gives her always interesting and insighful take on these issues here.  We highly recommend review.


Mike Thelen practices in Womble, Carlyle's Real Estate Litigation practice group. He regularly represents a wide variety of clients, from local governments to businesses, in land use and land development matters in both state and federal venues throughout North Carolina.

Wednesday, November 7, 2012, 5:32 PM

N.C. Court of Appeals Addresses Powers of Attorney In Context of Commercial Development Loans

This week, the North Carolina Court of Appeals addressed the enforceability of personal guaranties of commercial loans executed pursuant to a durable power of attorney.  The opinion in Suntrust Bank v. C&D Custom Homes, LLC, et al. (November 6, 2012) can be found here.

Facts.
The facts are relatively straightforward.  Appellant Sheila Ogle executed a durable power of attorney appointing her husband as her attorney-in-fact.  After that and pursuant to the execution of that "POA", husband entered into a number of loan transactions with Suntrust Bank.  Those loan transactions included "six personal guaranties and one deed of trust in [Sheila's] name."

The notes defaulted and Suntrust Bank foreclosed on the deeds of trust.  Of course, the sales resulted in deficiencies.  Accordingly, the Bank pursued Sheila and her husband, among others, for the deficiency amounts.

The Court granted the Bank's motion for summary judgment "as to all Defendants", including Shelia.  Sheila appealed.

Court's Analysis.
On appeal, the Court reversed as to Sheila and remanded "for entry of summary judgment in her favor". 

So, what happened at the appellate level?  It turns out that the POA contained the following language:

"RESTRICTIONS ON EXERCISE OF POWERS BY ATTORNEY-IN[-]FACT ... The rights, powers, duties and responsibilities herein conferred upon my Attorney-in-Fact shall not be exercised by my Attorney-in-Fact until a physician has certified to my Attorney-in-Fact that in his or her opinion I am no longer able (physically or mentally) to handle my personal and business affairs."
After noting that the POA must be "strictly construe[d]" according to its terms, the Court concluded that there is "no evidence in the record or contention that Appellant was certified physically or mentally incompetent to handle her own affairs by a physician" and, "[a]s such, no power of attorney ever vested in [husband]."

As far as notice and the Bank's claim of husband's "apparent authority" to execute in Sheila's behalf, the Court stressed that the Bank is "deemed to be on notice of any 'limitation or restriction' contained in the POA" in light of the POA's recordation with the register of deeds. 

Impact?
POAs are often employed in the commercial lending context, whether for the execution of spousal guaranties (as in this case) or, at times, the promissory note or deed of trust, itself.  Surely lenders and borrowers and guarantors will now turn back to their loan files.  Heck, we can even add purchasers for value at foreclosure sales to this mix.  I mean, though it appears from the Court's opinion that the foreclosure sales have already taken place and been confirmed, is there not also an issue in this story as to the single deed of trust husband signed in Sheila's name pursuant to the POA?  Is that sale valid?  

These kinds of loan matters tend to be document-intensive, where the devil truly resides in the details.  It may have been that the lenders, borrowers and guarantors had neither the time nor the resources nor, perhaps, the inclination, to always and everywhere scrutinize the countless documents passing hands in the midst of the "go-go" years.  Who knows?  But all litigants should take note that the Court does, in fact, have those things at its disposal.  

Antonin is our favorite strict constructionist, right?

Mike Thelen is a lawyer in Womble, Carlyle's Real Estate and Land Use Litigation practice group. He regularly represents a wide variety of clients, from local governments to businesses, in land use and land development matters in both state and federal venues throughout North Carolina.   
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