Suntrust Mortgage, Inc. dba Bancfinancial et al v. Gunter et al

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
No.5:08-CV-369-F
JOAN D. PULS,
Appellant.
v.
SUNTRUST MORTGAGE, INC. d/b/a
BANCFINANCIAL,
Appellee.
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ORDER
This matter is before the court on appeal from the December 3 1, 2007 and April 22, 2008
orders ofthe United States Bankruptcy Court for the Eastern District of North Carolina. For the
reasons discussed below, the court affirms the decisions ofthe Bankruptcy Court granting
summary judgment to Appellee SunTrust Mortgage, Inc. ("SunTrust"), denying summary
judgment to Appellant Joan D. PuIs ("PuIs"), and denying Pul's motion for a new trial or to alter
or amend judgment.
I. PROCEDURAL AND FACTUAL HISTORY
This matter stems from SunTrust's February 2007 action in the Superior Court of
Brunswick County, North Carolina, against Cathy Allen Gunter and PuIs to quiet title to real
property located in Brunswick County. Gunter was the record owner of the property at that time,
and she filed a petition for relief under chapter 7 ofthe Bankruptcy Code soon after SunTrust
filed the action to quiet title. As such, the action was removed to this court, and then transferred
to the Bankruptcy Court as an adversary proceeding in Gunter's chapter 7 proceeding.
The real property at the center of this action is located at 41 Richmond Street, Ocean Isle
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Beach, North Carolina ("the Property" or "the Richmond Street property"). Gunter acquired title
to the Property by virtue of a general warranty deed from L.M. Branch a/k/a Larry M. Branch
a/k/a Larry "Will" Moore Branch ("Branch"). The Deed was dated August 16, 2005 and
recorded August 17,2005 in Book 2216, Page 62 of the Brunswick County Public Registry. In
connection with Gunter's purchase of the Property, on or about August 16,2005, Gunter
borrowed the sum of $600,000.00 from SunTrust (the "Loan"), and the Loan was secured by a
deed of trust encumbering the Property. The Deed of Trust was recorded on August 17,2005, in
Book 2216, Page 65 of the Brunswick County Public Registry.
More than a year prior to the sale ofthe Property to Gunter, PuIs initiated a civil action
against Branch and Britt Investments ofNC, Ltd, before Clerk of Superior Court of Mecklenburg
County, Case No. 04-CVS-9399 ("Mecklenburg County Action") on May 24, 2004, seeking,
inter alia, a money judgment for breach of contract. On November 10, 2004, in connection with
the Mecklenburg County Action, PuIs caused the Clerk of the Superior Court for Mecklenburg
County Action to issue an Order of Attachment seeking to attach property of Branch in the
amount of $50,000.00 (the "Order of Attachment").
Upon issuance, the Order of Attachment was sent to the Brunswick County Sheriff's
Office to be served. Sergeant Steven M. Trull of the Brunswick County Sheriff's Office, the
supervisor of the civil division, testified in state court that he had no specific memory of the
Order of Attachment, but he did testify about the routine or practice that the civil division
normally follows upon receipt of such orders. Specifically, he testified that any civil process that
is sent to the Sheriff's Office goes to the civil clerk, who logs it into the civil division's computer
to show when it was received and the officer to which it is assigned. The civil clerk will then
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insert the paper in the assigned officer's box. He also testified that the assigned officer will make
service of the paper, and then the clerk notes in the computer who made service, how it was
made "and what happened with the paperwork from there." Transcript of Sgt. Trull [DE-2-20] at
p. 7-8. Sgt. Trull also testified that for Orders of Attachment regarding real property, he levies
on the property by signing the Order of Attachment. Id. at pp. 11-12. If the Order of Attachment
originates from another county, he then takes "it to the clerk's office for them to file or make a
copy of or file it whatever appropriate places they do so." Id. at p. 13. Sgt. Trull testified that his
actions with regard to Orders of Attachment are "routine." Id. at p. 14.
Sgt. Trull also testified about records that are kept in the ordinary course of business of
the Sheriffs Department; namely, the "Civil Paper" that is a computer print-out of the computer
records maintained by the Sheriffs Department with regard to each civil process that comes to
the Sheriffs Department. Sgt. Trull testified that according to the Sheriffs Office records, the
Order of Attachment was received by the civil division on November 16,2004, and was assigned
to him. According to the records of the Sheriffs Office, Sergeant Trull "served" the Order of
Attachment on November 16,2004, and "the levy" occurred on November 17,2004. The
records also indicate that the Order of Attachment came with a self-addressed stamped envelope,
and it was "returned to the clerk or attorney, whichever the envelope was addressed for, [on]
November 19, 2004." Id. at p. 11. According to PuIs, however, the endorsed Order of
Attachment was misplaced at some point. There is no dispute that the endorsed Order of
Attachment was not (l) properly noted on the Brunswick County judgment docket, (2) properly
indexed by the Brunswick County Clerk of Superior Court, or (3) docketed or indexed in
Mecklenburg County.
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Regardless, on December 17, 2004, PuIs filed a Notice of Issuance of Order of
Attachment and Notice of Lis Pendens in Brunswick County which was docketed on the
Brunswick County lis pendens docket and which described the real property at issue in this
action. On March 8, 2005, Branch filed a Motion to Quash Orders of Attachment and Cancel
Notices of Lis Pendens on substantive grounds in the Mecklenburg County Action, which was
denied by a July 14,2005, Order by Judge Albert Diaz. On August 16,2005, Branch, as already
described, transferred the real property to Gunter.
On October 18, 2006, PuIs obtained a Judgment in the Mecklenburg County Action in the
sum of $408,814.73, plus interest at the legal rate from and after October 18, 2006 ("the
Judgment"). The Judgment was filed in Mecklenburg County on October 19, 2006, and was
transcribed and docketed in Brunswick County on November 30, 2006.
On January 4, 2007, PuIs caused the Clerk of Superior Court of Mecklenburg County to
issue a Writ of Execution directing the Sheriff of Brunswick County to attempt to satisfy the
Judgment. Thereafter, on January 17,2007, the Brunswick County Sheriff issued a Notice of
Sale indicating that on February 19,2007, at noon, all "title and interest ofthe defendant Larry
'Will' Moore Branch former owner of [the Property]" would be sold by the Sheriff at auction
subject to all prior liens and interests (the "Execution Sale"). Ex. G to the Adv. CompI. [DE-l
5].
On February 9, 2007, SunTrust filed this action against Gunter and PuIs in the Superior
Court of Brunswick County seeking to quiet title to the Property and seeking to enjoin the sale of
the Property. On February 22,2007, Gunter filed a petition for relief pursuant to chapter 7 ofthe
Bankruptcy Code. This action was removed to this court on April 10, 2007, and subsequently
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transferred to the United States Bankruptcy Court for the Eastern District of North Carolina.
On April 30, 2007, PuIs filed a Motion for Relief from Stay, arguing (1) the automatic
stay should be lifted so the state court could adjudicate the quiet title action; (2) mandatory
abstention was appropriate under 28 U.S.C. § 1334(c)(2); (3) permissive abstention was
appropriate under 28 U.S.C. § 1334(c)(1), and (4) equitable remand pursuant to 28 U.S.C. § 1452
was appropriate. The Honorable A. Thomas Small, Bankruptcy Judge, denied the Motion for
Relief from Stay on June 28, 2007, finding that the matter was a core proceeding, that the subject
Property was property of the estate, and that the court could hear the matter expeditiously to
determine the priority and validity of the claimed liens.
On October 26,2007, PuIs and SunTrust filed competing Motions for Summary
Judgment, and on November 29,2007, the chapter 7 Trustee filed a Notice of Abandonment with
regard to the Property. Judge Small held a hearing on the Motions for Summary Judgment on
December 13,2007. By virtue of the practice in the Eastern District, the Property was deemed
abandoned on December 17,2007.
On December 21, 2007, after the Property was abandoned, Judge Small allowed
SunTrust's Motion for Summary Judgment and denied Pul's Motion for Summary Judgment. .
On December 31, 2007, PuIs filed a Motion to Amend Order and a Notice of Appeal. In the
Motion to Amend the Order, and in the hearing on the Motion held by Judge Small, PuIs argued
that the circumstances of the case had changed, and the abandonment of the Property by the
Trustee divested the bankruptcy court of jurisdiction of the court and/or made remand or
abstention proper. The Motion to Amend Order was denied by Judge Small on April 22, 2008.
On May 21, 2008, an Order was entered consolidating the records of the base case and the
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adversary case for appeal.! The record on appeal was transmitted to this court on July 30, 2008.
II. ANALYSIS
Appellant PuIs presents the following issues on appeal: (1) whether the Bankruptcy Court
should have abstained from the proceeding; (2) whether the Bankruptcy Court erred in finding
that the statutory requirements for levy were not met and that no judgment lien arose in PuIs'
favor from the Order of Attachment; (3) whether the Bankruptcy Court erred in not finding that
Sun Trust's claims attacking the Order of Attachment were time-barred, or barred by the
doctrines of waiver or laches; and (4) whether the Bankruptcy Court erred by failing to find that
the Order of Attachment and Notice of Lis Pendens were effective to put Sun Trust on notice of
the pendency of the Mecklenburg County Action and the Order of Attachment.
A. Abstention/Jurisdiction
PuIs argues that the Bankruptcy Court erred by failing to abstain from hearing the
removed state court proceeding under 28 U.S.c. § 1334(c)(2), or, alternatively, 28 U.S.C. §
1334(c)(1). The parties' arguments implicate both the jurisdiction of this court and the standard
of review this court should employ in this proceeding, and for that reason, the court will address
the abstention arguments first.
By way of background, district courts have original, but not exclusive, jurisdiction of all
civil proceedings arising under title 11 or arising in a case in title 11 (referred to as "core
I Judge Small declined to consolidate the actual appeals, because the consolidation is a
matter to be determined by the district court. The court agrees with Judge Small's observation
that the appeals include common issues of fact and law, and consolidation of the appeals would
avoid significant duplication of effort and expense. Therefore, this court hereby
CONSOLIDATES the appeals in the adversary proceeding with the appeal in the bankruptcy
case.
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proceedings") as well as civil proceedings "related to" cases under title 11 (referred to as "non
core proceedings"). 28 U.S.C. § 1334(a), (b); 28 U.S.C. § 157 (a), (b). When this court sits as an
appellate court over the Bankruptcy Court's decisions in "core proceedings," it applies a de novo
standard of review to the legal conclusions, and this court reviews the underlying findings of fact
for clear error. Spence v. Educ. Credit Mgmt., 541 F.3d 538, 544 (4th Cir. 2008). When this
court reviews the Bankruptcy Court's decisions in non-core proceedings, it must undertake a de
novo analysis of both the law and the factual findings to which the appellant objects. In re Apex
Exp. Corp., 190 F.3d 624, 630 (4th Cir. 1999).
For a case or claim to "arise under title 11" it must be "a cause of action created by the
Bankruptcy Code, and which lacks existence outside the context of bankruptcy." In re Kirkland,
600 F.3d 310, 316 (4th Cir. 2010). See also Woodv. Wood (In re Wood), 825 F.2d 90,97 (5th
Cir. 1987)( "Ifthe proceeding involves a right created by the federal bankruptcy law, it is a core
proceeding; for example, an action by the trustee to avoid a preference."). A proceeding"
'arising in' Title 11 is one that is "not based on any right expressly created by title 11, but
nevertheless, would have no existence outside the bankruptcy .... [A] controversy 'arises in title
11' when it would have no practical existence but for the bankruptcy." Valley Historic Ltd.
P'ship v. Bank of New York, 486 F.3d 831,835-36 (4th Cir. 2007). See also Wood, 825 F.2d at
97 ("Ifthe proceeding is one that would arise only in bankruptcy, it is also a core proceeding; for
example, the filing of a proof of claim or an objection to the discharge of a particular debt."). A
non-exhaustive list of "core" proceedings is set forth in 28 U.S.C. § 157(b)(2). The list includes:
(1) matters concerning the administration of the estate; (2) allowance or disallowance of claims
against the estate or exemptions from property of the estate, and estimation of claims or interests
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for the purposes of confirming a plan under chapter 11; (3) determinations of the validity, extent,
or priority ofliens, and (4) other proceedings affecting the adjustment of the debtor-creditor
relationship.
In contrast to core proceedings, a proceeding that is related to a case under title II-in
other words, "non-core"- is one where" 'the outcome of that proceeding could conceivably have
any effect on the estate being administered in bankruptcy. '" In re Celotex Corp., 124 F.3d 619,
625-26 (4th Cir. 1997)(quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir.
1984)(emphasis removed). See also Wood, 825 F.2d at 97 ("If the proceeding does not invoke a
substantive right created by the federal bankruptcy law and is one that could exist outside of
bankruptcy it is not a core proceeding; it may be related tot he bankruptcy because of its potential
effect, but under section 157(c)(1) it is an "otherwise releated" or non-core proceeding.").
In assessing whether a proceeding is "core" or "non-core", a court must keep in mind the
Supreme Court's decision in Northern Pipeline Construction Company v. Marathon Pipe Line
Company, 458 U.S. 50 (1982). As the Fourth Circuit has explained, in Northern Pipeline:
the Supreme Court struck down portions of the Bankruptcy Act of 1978 as
violative of Article III of the Constitution. The chief basis for the plurality
opinion was that the Bankruptcy Act of 1978 allowed non-article III courts (i.e.,
bankruptcy courts) to hear claims based upon state-created private rights that
arose independent from and antecedent to the bankruptcy proceedings and
involved strangers to the bankruptcy action. In the wake of the Northern Pipeline,
Congress enacted the core/non-core distinction [set forth in 28 U.S.C. §
157(b)(2)] to try and remedy the defects in the bankruptcy system.
In re Apex Exp. Corp., 190 F.3d at 631 (internal citations omitted). The distinction between
"core" and "non-core" is "far from clear," and § 157(b)(2) "must be interpreted keeping in mind
(1) that Congress passed it in response to the defects revealed by Northern Pipeline, and (2) that
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Northern Pipeline remains good law." Id. 	Otherwise, "a broad reading of the literal terms of the
statutory text could lead to the result that courts treat just about every dispute as 'core.' " Id.
With this distinction between "core" and "non-core" proceedings in mind, the court turns to the
parties' arguments regarding abstention.
1. Mandatory abstention
PuIs argues that mandatory abstention under 28 U.S.C. § 1334(c)(2) is applicable to the
case at bar. Section 1334 (c)(2) provides:
Upon timely motion of a party in a proceeding based upon a State law claim or
State law cause of action, related to case under title 11 or arising in a case under
title 11, with respect to which an action could have not have been commenced in a
court of the United States absent jurisdiction under this section, the district court
shall abstain from hearing such a proceeding if an action is commenced, and can
be timely adjudicated, in a State forum of appropriate jurisdiction.
28 U.S.C. § 1334(c)(2). Thus, for mandatory abstention to apply, "the proceeding must '(I) be
based on a state law claim or cause of action; (2) lack a federal jurisdictional basis absent the
bankruptcy; (3) be commenced in a state forum of appropriate jurisdiction; (4) be capable of
timely adjudication; and (5) be a non-core proceeding.' " Barge v. Western S. Life Ins. Co., 307
B.R. 541, 546 (S.D. W.Va. 2004)(quoting In re Dow Corning Corp., 113 F.3d 565, 570 (6th Cir.
1997)).
It is apparent that prior to the abandonment of the Richmond Street property, the
adversary proceeding was a matter falling under 28 U.S.C. § 157(b)(2)(K): determination of the
validity, extent, or priority ofliens. See, e.g., In re Toledo, 170 F.3d 1340, 1347 (lIth Cir.
1990)(explaining that 28 U. S.C. § 157(b)(2)(K) encompasses proceeding to determine the
validity, extent or priority ofliens on the estate's property). Mandatory abstention, therefore, was
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unwarranted while the Richmond Street property remained in the estate.
Whether this matter remained a "core" proceeding after the Richmond Street property
was abandoned, however, is a much closer question. There is a split in authority as to whether
the liens referred to in 28 U.S.C. § 157(b)(2)(K) must relate only to the property of the estate or
can also relate to the property of the estate or the debtor. 	Veldeckens v. GE HFS Holdings, Inc.,
(In re Doctors Hosp. 1997, L.P.), 351 B.R. 813, 844 (S.D. Tex. 2006)(recognizing "[t]here is a
split of authority on whether the liens referred to in 28 U.S.C. § 157(b)(2)(K) must relate only to
property of the estate or can also relate to either property of the estate or of the debtor" and
collecting cases). Moreover, even if the adversary proceeding can conceivably fit within one of
the other categories set forth in 28 U.S.C. § 157(b)(2), this court must keep in mind the Fourth
Circuit's admonition that § 157(b)(2) must be interpreted while keeping in mind Northern
Pipeline.
Therefore, the court will assume, for purposes of this proceeding, that once the Richmond
Street property was abandoned, the proceeding no longer remained a "core" proceeding. Even
assuming that the abandonment of the Richmond Street property caused the adversary proceeding
to morph into a "non-core" proceeding, mandatory abstention remained inappropriate? Under
2 In addition to arguing that mandatory abstention is applicable, PuIs appears to make
contradictory statements regarding jurisdiction in her brief [DE-9] before this court. On page 20,
Appellant asserts in a heading: "The Bankruptcy Court erred by failing to abstain (mandatory
abstention) from hearing the removed state court proceeding under 28 U.S.C. § 1334(c)(2)
because said proceeding is "related to" Gunter's bankruptcy case, but does not "arise under" Title
11 or "arise in" a case under Title 11." Later, Appellant argues that the adversary proceeding is
not "related to" the bankruptcy case "because the outcome of that proceeding would not have an
effect on the estate being administered in bankruptcy as [Debtor] intended to surrender the real
property from the outset of her bankruptcy case and the Trustee ultimately abandoned the
property." Appellant's Brief [DE-9] at p. 23.
Again, even assuming assuming that the abandonment of the Richmond Street property
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the unique circumstances of this case, the court finds that the motion for mandatory abstention
was not timely. See 28 U.S.C. § 1334(c)(2)(stating that one of the requirements for mandatory
abstention is a timely motion by the party seeking the abstention). PuIs had knowledge of the
Notice of Trustee's Intent to Abandon Property prior to the Bankruptcy Court's December 13,
2007, hearing on the parties' motions for summary judgment, yet failed to indicate her belief that
(1) the abandonment would deprive the Bankruptcy Court of jurisdiction or (2) mandatory
abstention would be necessary upon the abandonment of the Richmond Street property. Counsel
for PuIs later told the Bankruptcy Court that he felt raising such arguments at the summary
judgment hearing, prior to the Richmond Street property actually being abandoned, would be
premature because someone could have filed an objection to the Notice of the Abandonment or
the Trustee could have withdrawn the notice. See Transcript on Mot. for New Trial [DE-3-36] at
pp. 17-18. However, given the property, by operation oflaw and the policies of this District, was
likely to be deemed abandoned just four days after the hearing, the court is puzzled by PuIs'
failure to raise the issue. Indeed, PuIs did not raise the issue immediately after the property was
abandoned, but instead waited until after the Bankruptcy Court issued an adverse ruling to her.
PuIs' timing gives the appearance that she was less concerned with issues of comity and more
caused the adversary proceeding to morph into a "non-core" proceeding, neither the Bankruptcy
Court nor this court were deprived of jurisdiction over the adversary proceeding, despite PuIs'
arguments to the contrary. The adversary proceeding plainly remained "related to" the main
bankruptcy case. See 28 U.S.C. § 1334(b); In re Celotex Corp., 124 F.3d at 625-26 ("The usual
articulation of the test for determining whether a civil proceeding is related to bankruptcy is
whether the outcome of that proceeding could conceivably have any effect on the estate being
administered in bankruptcy")(emphasis in original). That is, the adversary proceeding
conceivably has an effect on the estate: it determines whether SunTrust is a secured creditor or
the largest unsecured creditor.
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concerned with getting a second bite at the apple in another forum. Again, under the unique
circumstances of this case, this court cannot find Pul's motion to be timely.
2. Permissive abstention
In the alternative, PuIs also contends that the Bankruptcy Court should have voluntarily
abstained from hearing the adversary proceeding under 28 U.S.C. § 1334(c)(1). Under that
section, a federal court may voluntarily abstain from hearing core and non-core proceedings "if
the interests of justice" require or "in the interest of comity with State Court or respect for State
law." Courts consider several factors when determining whether to voluntarily abstain from a
proceeding, including: (1) the court's duty to resolve matters properly before it; (2) the
predominance of state law issues and non-debtor parties; (3) the economical use of judicial
resources; (4) the effect of remand on the administration of the bankruptcy estate; (5) the
relatedness or remoteness of the action to the bankruptcy estate; (6) whether the case involves
questions of law better addressed by the state court; (7) comity considerations; (8) any prejudice
to the involuntarily removed parties; (9) forum non conveniens; (10) the possibility of
inconsistent results; (11) any expertise of the court where the action originated; and (12) the
existence of the right to a jury trial. Sowell v. Us. Bank Trust Nat 'I Ass 'n, 317 B.R. 319, 323
(ED.N.C. 2004)(adopting the test set forth in Blanton v. IMN Fin. Corp., 260 B.R. 257, 265
(M.D.N.C.2001)).
Whether this court considers the state of the proceeding when it was first removed and
transferred to the jurisdiction of the Bankruptcy Court, or later when the trustee abandoned the
subject property, this court is ofthe opinion that permissive abstention is not warranted in this
case.
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First, when the case was first removed to this court, and PuIs moved the Bankruptcy
Court to remand or voluntarily abstain from the proceeding, neither the interests of justice nor the
interests of comity required either this court or the Bankruptcy Court to abstain. The three
reasons raised by PuIs in favor of voluntary abstention were (1) the availability of a jury trial, (2)
the matters involved in the dispute involve only state law and (3) the case could be more
expediently addressed in state court. PuIs' argument concerning a jury trial, however, does not
carry very much weight because she contends that the facts in the proceeding are not in dispute
and the matter can be resolved by a court, whether is be federal or state, in its entirety without the
use of a jury. See Mot. to Modify Stay [DE- 3-8] ,-r 10. Moreover, the court does not find the
state law issues to be so novel as to overwhelm the equitable reasons for retaining jurisdiction:
the economical use of judicial resources and this court's duty to resolve matters properly before
it, including the priority and validity of liens of property belonging to the estate.
Second, the court does not perceive that the abandonment of the subject property, at the
late stage of the adversary proceedings, requires the voluntary abstention of this court. At this
late stage of the proceedings, the consideration of comity and judicial economy does not favor
PuIs. Finally, even ifthis court assumes that the proceeding is no longer a "core" proceeding,
there remains a very real potential affect on the bankruptcy estate. It is undisputed that the
resolution of the adversary proceeding will result in SunTrust having either a fully secured claim
or being the largest unsecured creditor of the estate. In sum, the court finds that neither the
interests of justice nor the interests of comity require the court to abstain.
B. Substantive Arguments
Having determined that it retains jurisdiction over this matter, and assuming this matter is
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a non-core proceeding, the court now turns to its de novo review of the facts and conclusions of
law.
In this case, both parties contend there are no genuine issues of material fact. The parties,
however, have a very different view of at least one determinative fact: whether a "levy," within
the meaning of the North Carolina General Statutes, occurred. The parties, in tum, base a
majority oftheir arguments on their respective starting premises. SunTrust, for its part argues,
inter alia, that PuIs never obtained a valid lien, enforceable against third parties, by virtue of the
Order of Attachment in the Mecklenburg County because there is no evidence that a "levy,"
within the meaning of the North Carolina General Statutes, took place. PuIs, however, contends
that the evidence mandates a finding that a "levy" took place, and any defects in the levy process
amount to non-jurisdictional procedural defects which do not invalidate the Order of Attachment.
According to PuIs, because there was a valid "levy," she has a lien that relates back to the filing
ofthe Notice ofIssuance of Order of Attachment on the lis pendens docket in Brunswick County.
To put the parties' various arguments in context, it is first necessary to review the relevant
provisions of the North Carolina General Statutes.
1. North Carolina law on attachment and levy
North Carolina General Statute § 1-440.1 provides:
Attachment is a proceeding ancillary to a pending principal action, is in the nature
of a preliminary execution against property, and is intended to bring property of a
defendant within the legal custody of the court in order that it may subsequently
be applied to the satisfaction of any judgment for money which may be rendered
against the defendant in the principal action.
"Under the statutory scheme, an attachment lien cannot be sought without an underlying lawsuit
and remains wholly dependent upon the lawsuit's success for conversion into an enforceable
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judgment lien." Ivester v. Miller, 398 B.R. 408, 416 (M.D.N.C. 2008)(citing Edwards v.
Brown's Cabinets & Millwork, Inc., 63 N.C. App. 524, 528, 305 S.E. 2d 765,786 (N.C. app.
1983)).
North Carolina General Statute § 1-440.15 provides for the method of execution of orders
of attachment, and states, in pertinent part:
The sheriff to whom the order of attachment is directed shall note thereon
the date of its delivery to him and shall promptly execute it by levying on the
defendant's property as follows:
(1) The levy on real property shall be made as provided by G. S. 1-440.1 7.
N.C. Gen. Stat. § 1-440.15(1). Section 1-440.17, in turn, provides:
(a) In order to make a levy on real property, the sheriff need not go upon the
land or take control over it, but he
(1) Shall make an endorsement upon the order of attachment or shall
attach thereto a statement showing that he thereby levies upon the
defendant's interest in the real property described in such endorsement or
statement, describing the real property in sufficient detail to identify it
clearly, and
(2) Shall, as promptly as practicable, certify such levy, and the
names of the parties to the action, to the clerk of the superior
court of the county in which the land lies.
(b) Upon receipt of the sheriff's certificate, the clerk shall docket the levy, as
provided by G.S. 1-440.33.
N.C. Gen. Stat. § 1-440.17 (emphasis added). Thus, to "levy" on real property, the sheriff must
make an endorsement AND certify the levy to the clerk of court.
Additionally, North Carolina General Statute § 1-440.33 provides when lien of
attachment begin, and specifically provides:
(b) When the clerk receives from the sheriff a certificate of levy on real property
as provided by G.S. 1-440.17, the clerk shall promptly note the levy on his
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judgment docket and index the same. When the levy is thus docketed and
indexed,
(1) The lien attaches and relates back to the time of the filing of
the notice of lis pendens if the plaintiff has prior to the levy
caused notice of the issuance of the order of attachment to be
properly entered on the lis pendens docket of the county in
which the land lies, as provided by subsection (a) of this section.
(2) The lien attaches only from the time of the docketing of the
certificate of levy if no entry of the issuance of the order of
attachment has been made prior to the levy on the lis pendens
docket of the county in which the land lies.
N.C. Gen. Stat. § 1-440.33(b)(emphasis added).
2. Application of North Carolina's statutory scheme
As this court has observed, both parties say there is no genuine issue of material fact,
even as they clash over whether the evidence supports a finding that a "levy" within the meaning
of § 1-440.17 occurred. This court is of the opinion that there is not a genuine issue of material
fact, albeit for a different reason. This court finds that a factfinder could find-but would not be
obligated to do so-that Sgt. Trull both endorsed the Order of Attachment and certified the levy to
the clerk of court. Even if a fact-finder could find that Sgt. Trull both endorsed the Order of
Attachment and certified the levy to the clerk of court, it does not change the following
undisputed fact: the Clerk of Court for Brunswick County did not index or docket the certificate
oflevy.
Under the express terms of the North Carolina General Statutes, a lien attaches to
property subject to an order of attachment when the clerk of court dockets and indexes the
certificate of levy. N.C. Gen. Stat. § 1-440.33. If a notice of lis pendens previously has been
filed, the lien relates back to the time of the filing of the lis pendens. N.C. Gen. Stat. § 1
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440.33(b)(l). If a notice of the issuance of an order of attachment has not been filed, then the
lien attaches "only from the time of the docketing of the certificate of levy." N.C. Gen. Stat. § 1
440.33(b)(2). Thus, a lien attaches "[w]hen the levy is thus docketed and indexed." N.C. Gen.
Stat. § 1-440.33(a). It follows from the plain language of the statute that if the levy is not
docketed by a clerk of court, then a lien enforceable as to third parties does not attach. A lien
arising by virtue of the Order of Attachment and subsequent levy, but no docketing and indexing
of the levy, would attach, if at all, upon the entry of judgment. Without the indexing and
docketing of a levy-as required by the North Carolina General Statutes for an attachment
lien-the judgment lien has nothing to which it may relate back. See, e.g., Voehringer v. Pollock,
224 N.C. 409, 411,30 S.E.2d 372, 376 (l944)("The jurisdiction of the Court derived from a levy
under a warrant of attachment dates from the levy, but the lien becomes effective to third parties,
when certified to the Clerk ojSuperior Court and indexed in the manner prescribed in the
statute. ")(emphasis added).3
Here, it is undisputed that the alleged certificate of levy has never been docketed and
indexed by the Brunswick County Clerk of Court. Consequently, under the express terms of
North Carolina law, no attachment lien arose. Thus, even if PuIs can be considered to have a
judgment lien, this judgment lien has no attachment lien, enforceable against third parties-such
3 Voehringer cites N.C. Gen. Stat. § 1-449, a prior version of Sections 1-440.17 and 1
440.33. The former statute provides, in pertinent part:
Where the sheriff or other officer levies an attachment upon real estate, he must
certify the levy to the clerk of the superior court of the county where the land lies,
with the names of the parties, and the clerk must note the same on his judgment
docket and index it on the index to judgments, and the levy is a lien only from the
date of entry by the clerk, except that if it is so docketed and indexed within five
days after being made it is a lien from the time it was made.
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as SunTrust-to which it may relate back.
Nevertheless, PuIs argues that this court should look to N.C. Gen. Stat. § 1-440.9 to "fix"
this "procedural defect" and determine that PuIs is entitled to a lien against the real property.
Section 1-440.9 provides:
The court of proper jurisdiction, before which any matter is pending under the
provisions of this Article, shall have authority to fix and determine all necessary
procedural details in all instances in which the statute fails to make definite
provision as to such procedure.
N.C. Gen. Stat. § 1-440.9 (emphasis added). This court does not perceive N.C. Gen. Stat. § 1
440.9 as authorizing it, after the fact, to articulate alternate procedures for the creation and
attachment of a lien to the subject property. Rather, that appears to be a privilege that would be
enjoyed only by the Mecklenburg County Superior Court, the court before whom "the
matter"-the suit between PuIs and Branch and the accompanying ancillary proceeding-was
pending. This court does not-and it appears no other superior court in North Carolina, other than
the Mecklenburg County Superior Court in the original action between Puis and Branch-have
the power to deem that a lien was created in contravention of the express statutes of North
Carolina.
Moreover, the court does not agree that SunTrust is barred by the doctrines of waiver,
laches, or time limitations from asserting that no attachment lien arose in favor of PuIs as to third
parties. PuIs contends that SunTrust was obligated to raise the issue of any failure to docket and
index the certificate of levy in the underlying Mecklenburg County proceeding between PuIs and
Branch. Citing N.C. Gen. Stat. § 1-440.434 , PuIs contends that SunTrust's only remedy was to
4 Section 1-440.43 provides:
Any person other than the defendant who claims property which has been
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make a motion in the Mecklenburg County proceeding, and relies on Edwards v. Brown's
Cabinets, 63 N.C. App. 524,305 S.E.2d 765 (1983) as support for this proposition. As SunTrust
notes, however, in this case-as opposed to Edwards-nothing ever happened that would require
an actual attack on the Order of Attachment itself. In Edwards, the levy-although procedurally
defective-was docketed and indexed as required by the North Carolina General Statutes.
Therefore, a lien attached to the property subject to an order of attachment, and because a notice
of lis pendens already had been filed, the lien related back to the date of the filing of the notice of
lis pendens. In this case, as a matter of law there is no attachment lien that is enforceable as to
third parties because the levy-if it occurred-was not docketed and indexed as required to create
an enforceable lien against third parties as provided in N.C. Gen. Stat. § 1-440.33. In this case,
unlike Edwards, the Order of Attachment does not need to be attacked because, as a matter of
law, the failure to docket and index the levy means that the lien did not attach.
Furthermore, as SunTrust notes, the Notice of Lis Pendens, upon which PuIs relies to
establish the effective date of her lien, is void under plain language of North Carolina law.
Under North Carolina General Statute § 1-119, a "notice of lis pendens is of no avail unless it is
followed ... by personal service on the defendant within 60 days after the cross-indexing." N.C.
attached, or any person who has acquired a lien upon or an interest in such
property, whether such lien or interest is acquired prior to or subsequent to the
attachment, may
(1) Apply to the court to have the attachment order dissolved or modified,
or to have the bond increased, upon the same conditions and by the same
methods that are available to the defendant, or
(2) Intervene and secure possession of the property in the same manner
and under the same conditions as is provided for intervention in claim and
delivery proceedings.
N.C. Gen. Stat. § 1-440.43.
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Gen. Stat. § 1-119(a). North Carolina General Statute § 1-116.1, in turn, provides that a copy of
a notice of lis pendens shall be served on the other party, and "[i]f filed by the plaintiff at or after
service of summons but before the filing of the complaint, service shall be in the manner
provided as the complaint." N.C. Gen. Stat. § 1-116.1(2). Thus, taken together, N.C. Gen. Stat.
§§ 1-116.1 (2) and 1-119(a) mean that in this case the Notice of Lis pendens is "of no avail" if it
was not served on Branch within 60 days of the cross-indexing in the manner set forth in Rule 4
of the North Carolina Rules of Civil Procedure. See N.C. R.Civ.P. 4G)(describing the various
ways to effect service of a summons and complaint under North Carolina law). By PuIs own
admission, she did not effect service in accordance with Rule 4, but rather, Rule 5 of the North
Carolina Rules of Civil Procedure. Accordingly, under the plain language of the North Carolina
General Statutes, the Notice of Lis Pendens, upon which she relies to establish that an attachment
lien arose, is "of no avail."
Because no attachment lien arose in favor of PuIs, SunTrust is entitled to summary
judgment.
III. CONCLUSION
For the foregoing reasons, this court hereby CONSOLIDATES the appeals in the
adversary proceeding, Adversary Proceeding No.07-00074-5-ATS-AP, with the appeal in the
bankruptcy case, Case No. 07-00348-5-ATS. Moreover, because the breadth of the thoroughness
of the briefs and the record, the Request for Oral Argument [DE-18] by Joan D. PuIs is DENIED.
After a de novo review of the facts and conclusions of law, it is hereby ORDERED that:
(1) this court has jurisdiction over the adversary proceeding, and that neither mandatory
abstention nor permissive abstention is warranted in this action;
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(2) no attachment lien arose in favor of Joan D. PuIs, and therefore SunTrust is entitled to
summary judgment on its claim;
(3) record title to the entire fee simple interest in the property at 41 Richmond Street,
Ocean Isle Beach, North Carolina, is vested solely in Cathy Allen Gunter, subject to the valid
liens ofthe Deeds of Trust held by SunTrust Mortgage, Inc., and is not subject to any lien, claim
or interest asserted by Joan D. PuIs, and
(4) any lien claimed by Joan D. PuIs is unenforceable against the property at 41
Richmond Street, Ocean Isle Beach, North Carolina.
SO ORDERED.
tI
This the :zo 	day of August, 2010.
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