North Carolina real estate attorneys have taken the brunt of the Federal Trade Commission’s recent foray into the real estate practice.  The letter received by the Ethics Committee of the North Carolina State Bar dated 7/14/01,[1] created quite a stir among real estate and non real estate attorneys.  Many real estate practitioners were surprised to find that their daily practice interfered with the flow of national commerce.  Many practitioners felt that they in fact facilitated the flow of commerce and without their expertise; commerce would come to a halt. 

The selling of mortgages and the originating of loans is a business that is now in the stream of federal commerce, but it is also governed by laws of the locus.  If one can make the analogy that federal commerce is like a meandering oceanic stream, one could also analogize that a mortgage loan in this stream is a ship, captained by the bank or broker.  The ship’s destination is to deliver a loan to a person who resides in a specific locality, say a harbor.   Every harbor has pilots to guide a ship in to her moorings.  Real ship captains realize that harbor channels shift with the forces of the tides or are dredged and changed from season to season.  These ship captains hire pilots to guide their craft through the changing channels to their moorings.  Pilots are experts of their trade and specialists of their harbor.  They know the currents, shoals, sand banks and rocks that can damage or sink a ship.  A person can not just decide one day that they are a pilot. They must have experience as an apprentice before they are able to take a test to be certified to pilot a ship. 

State real property law is similar to the changing shoals and conditions in that harbor.  Real estate attorneys are like harbor pilots in that they trained to guide their closing to a satisfactory result.  They have studied the laws that affect their locality and put their livelihoods on the line each time they close a loan. 

The federal government has grown from the infancy of the Articles of Confederation to a miraculously workable Constitution.  The Commerce Clause, and Full Faith and Credit Clause, are necessary tools to govern the ‘united’ States.  They are, however, not omnipotent and there are vestiges or remains of state power, in effect, islands in the stream of federal commerce, that must be found and safely navigated in order to successfully close a real estate transaction. 

One well known shoal or island is the Uniform Enforcement of Foreign Judgments Act.[2]  Many people believe that because of the Full Faith and Credit Clause of the United States Constitution, any judgment from another state can be enforced in North Carolina by getting the Clerk of Superior Court to index it, or by ‘recording’ it in the register of deeds. 

Fortunately it is not that simple and there are issues that may be questioned before that judgment is final. A Virginia court is not the proper forum to decide
North Carolina real property issues.[3] The Virginia court does not have subject matter jurisdiction to render a binding decision on
North Carolina real property law affecting property within her boundaries.[4]  Imagine a foreign state ruling that a judgment against one spouse attaches to property owned as tenants by the entirety.  The
Virginia court, however, could decide issues as to equitable distribution compelling one party to convey their interest in real estate,[5] but the judgment must be legitimized.

It is in the interest of due process and notice that
North Carolina has adopted the Uniform Enforcement of Foreign Judgments Act.  The Act allows a copy of an authenticated foreign judgment to be filed in the Office of the Clerk of Superior Court.[6] Along with this judgment the attorney or creditor must file an affidavit stating that the judgment is final and that it remains unsatisfied.[7]  Notice, pursuant to the rules of civil procedure, must be promptly given to the defendant along with the particulars of the judgment, where it has been filed, and that he or she has 30 days from the receipt of the notice to seek relief from enforcement.[8]  Upon proper service and with a lack of response by defendant, the judgment will be enforced like any other domestic judgment.[9]  

The judgment debtor may file a motion for relief from, or notice of defense to said judgment, alleging that the judgment has been appealed, or on any grounds for which relief from a judgment may be allowed in
North Carolina.[10]  Upon the filing of a defense to enforcement the creditor may move for enforcement of said judgment in the proper division of the court where said action would have been heard in
North Carolina.[11] Judgments that are contrary to the public policies of
North Carolina will not be enforced.[12] 

The Act protects citizens of this state from enforcement of judgments were there was no subject matter or personal jurisdiction.  It does not give North Carolina citizens another bite at the apple, but allows them the constitutional protections afforded by both the
United States and North Carolina Constitutions.  The act can be a substantial shoal to the unwary captain, but can be safely navigated, or used as a beacon to correctly pilot a ship to its proper destination.

A foreign executor or administrator is an example of a shifting shoal.  While the executor or administrator is acting in the state where he was appointed, he or she is able to exercise the powers that he or she was given.  Cross the state line and those powers generally become ineffective unless the laws of the ancillary jurisdiction provides otherwise.   The administration in the foreign state is distinct from any administration in
North Carolina.[13]  Succinctly stated:  “ . . . that administration of an estate granted here, although general in its terms, is necessarily limited to the property in this State, and gives no authority to an administrator to administer property in another government.” [14] 

The shifting shoal could be a
North Carolina deed signed by a foreign executor, exercising a valid power to sell the real estate as evidenced by a properly probated will in another state.  The will has no effect in
North Carolina because it has not been probated here.  The will could even be probated in North Carolina and the exercise of power by the executor would be without effect, until the executor is appointed to act as such in
North Carolina.  Once the executor is properly appointed, however, he or she could exercise the power to sell the real estate.

A foreign executor or administrator needs to open an ancillary administration in
North Carolina if they wish to act as such in this state.[15] The process is almost identical to a domestic administration and provides a well-charted course to clear any title objections.

Analogies are slippery at best, but they are useful tools of comparison and sometimes amusing.  Real property law is similar to that beautiful harbor we can all see in our minds.  The water appears to be deep, and the sunset looks pretty reflected on its surface.  But underneath that water are sharp rocks massaged by dangerous currents.  Perhaps one of Patrick O’Brian’s characters stated it best when he said: “It is a foolish captain who wrecks his ship to save a pilots fee.”  The practice of real property law involves all areas of legal practice and when done properly it appears effortless to the uninitiated.  The client seldom realizes that the closing attorney has successfully navigated a course of legal obstacles, but that is the beauty of expertise.