FILED SENATE
Mar 8, 2021
GENERAL ASSEMBLY OF NORTH CAROLINA
S.B. 198
SESSION 2021 PRINCIPAL CLERK
S D
SENATE BILL DRS35044-MUz-7
Short Title: GSC Good Funds Settlement/Comm. Receivership. (Public)
Sponsors: Senators Edwards and Galey (Primary Sponsors).
Referred to:
1 A BILL TO BE ENTITLED
2 AN ACT TO PROVIDE THAT A SETTLEMENT AGENT MAY DISBURSE SETTLEMENT
3 PROCEEDS IN RELIANCE ON A CHECK DRAWN ON THE ACCOUNT OF OR
4 ISSUED BY A LICENSED MORTGAGE LENDER, TO MAKE AMENDMENTS
5 RELATING TO THE NORTH CAROLINA COMMERCIAL RECEIVERSHIP ACT, AND
6 TO MAKE TECHNICAL CHANGES TO VARIOUS LAWS REGULATING FINANCIAL
7 PRACTICES, AS RECOMMENDED BY THE GENERAL STATUTES COMMISSION.
8 The General Assembly of North Carolina enacts:
9
10 PART I. GOOD FUNDS SETTLEMENT ACT AMENDMENTS
11 SECTION 1. G.S. 45A-4 reads as rewritten:
12 "§ 45A-4. Duty of settlement agent.
13 (a) The settlement agent shall cause recordation of the deed, if any, the deed of trust or
14 mortgage, or other loan documents required to be recorded at settlement. The settlement agent
15 shall not disburse any of the closing funds prior to verification that the closing funds used to fund
16 disbursement are deposited in the settlement agent's trust or escrow account in one or more forms
17 prescribed by this Chapter. A settlement agent may disburse funds from the settlement agent's
18 trust or escrow account (to either the applicable register of deeds or directly to a private company
19 authorized to electronically record documents with the office of the register of deeds) as
20 necessary to record any deeds, deeds of trust, and any other documents required to be filed in
21 connection with the closing, including excise tax (revenue stamps) and recording fees, but the
22 settlement agent may shall not disburse any other funds from its trust or escrow account until the
23 deeds, deeds of trust, and other required loan documents have been recorded in the office of the
24 register of deeds. Unless otherwise provided in this Chapter, a settlement agent shall not cause a
25 disbursement of settlement proceeds unless those settlement proceeds are collected funds.
26 Notwithstanding that a deposit made by a settlement agent to its trust or escrow account does not
27 constitute collected funds, the settlement agent may cause a disbursement of settlement proceeds
28 from its trust or escrow account in reliance on that deposit if the deposit is in one or more of the
29 following forms:
30 (1) A certified check;check.
31 (2) A check issued by the State, the United States, a political subdivision of the
32 State, or an agency or instrumentality of the United States, including an
33 agricultural credit association;association.
34 (3) A cashier's check, teller's check, or official bank check drawn on or issued by
35 a financial institution insured by the Federal Deposit Insurance Corporation
36 or a comparable agency of the federal or state government;government.
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 General Assembly Of North Carolina Session 2021
1 (4) A check drawn on the trust account of an attorney licensed to practice in the
2 State of North Carolina;Carolina.
3 (5) A check or checks drawn on the trust or escrow account of a real estate broker
4 licensed under Chapter 93A of the General Statutes;Statutes.
5 (6) A personal or commercial check or checks in an aggregate amount not
6 exceeding five thousand dollars ($5,000) per closing if the settlement agent
7 making the deposit has reasonable and prudent grounds to believe that the
8 deposit will be irrevocably credited to the settlement agent's trust or escrow
9 account;account.
10 (7) A check drawn on the account of or issued by a mortgage banker lender
11 licensed under Article 19A 19B of Chapter 53 of the General Statutes that has
12 posted with the Commissioner of Banks a surety bond in the amount of at least
13 three hundred thousand dollars ($300,000). The surety bond shall be in a form
14 satisfactory to the Commissioner and shall run to the State for the benefit of
15 any settlement agent with a claim against the licensee for a dishonored
16 check.Statutes.
17 (b) If the settlement agent receives information from the lender as provided in
18 G.S. 45A-5(b) or otherwise has actual knowledge that a mortgage broker or other person acted
19 as a mortgage broker in the origination of the loan, the settlement agent shall place an entry on
20 page 1 of the deed of trust showing the name of the mortgage broker or other person who that
21 acted as a mortgage broker in the origination of the loan. Information pertaining to the identity
22 of the mortgage broker or other person who that acted as a mortgage broker in the origination of
23 the loan shall not be considered is not confidential information. The terms term "mortgage
24 broker" and "act as a mortgage broker" shall have has the same meaning as provided in
25 G.S. 53-243.01.G.S. 53-244.030."
26
27 PART II. AMENDMENTS RELATING TO NC COMMERCIAL RECEIVERSHIP ACT
28 SECTION 2. G.S. 1-502 reads as rewritten:
29 "§ 1-502. In what cases appointed.
30 A receiver may be appointed in any of the following cases:
31 …
32 (4) In cases provided in G.S. 1-507.1 and in similar cases, regarding property
33 within this State of foreign corporations.
34 …
35 The provisions of Part 2 of Article 38 of Chapter 1 of the General Statutes apply to the
36 appointment of a receiver of a corporation under this section."
37 SECTION 3. G.S. 1-507.20 reads as rewritten:
38 "§ 1-507.20. Short title; definitions.
39 (a) Short Title. – This Article may be cited as the North Carolina Commercial
40 Receivership Act.
41 (b) Definitions. – The following definitions apply throughout this Article unless the
42 context requires otherwise:Article:
43 …
44 (5) Court. – The superior or district court in which the receivership is pending,
45 except that in the case of a receiver appointed to partition real property
46 pursuant to G.S. 46-3.1, G.S. 46A-28, the term shall mean the clerk of
47 superior court that has jurisdiction over the receiver and the receivership.
48 …
49 (16) Insider. – As to any person, includes the following:
50 …
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1 d. An affiliate, or insider of an affiliate, as if such the affiliate were the
2 person.
3 …
4 (24) Property. – All of the debtor's right, title, and interest, both legal and equitable,
5 in real and personal property, regardless of the manner by which any of the
6 same were or are it was or is acquired. The term includes any proceeds,
7 products, offspring, rents, or profits of or from the property. The term does
8 not include (i) any power that the debtor may exercise solely for the benefit of
9 another person, (ii) a power of withdrawal exercisable by the debtor over
10 property of a trust for which the debtor is not the settlor, to the extent that the
11 power is not subject to the claims of the debtor's creditors pursuant to
12 G.S. 36C-5-505(b), or (iii) if the debtor is an individual, any real property
13 owned jointly by the debtor and the debtor's spouse that is held by them as a
14 tenancy by the entireties, unless the debtor's spouse is also a debtor in the
15 receivership and there is a joint debt owed to one or more creditors.
16 …
17 (27) Receivership property. – In the case of a general receivership, all or
18 substantially all of the nonexempt property of the debtor, or in the case of a
19 limited receivership, the property of the debtor identified in the order
20 appointing the receiver, or in any subsequent order, and, in each case, except
21 for the debtor's property that is wholly exempt from the enforcement of claims
22 of creditors pursuant to applicable law, including without limitation, pursuant
23 to G.S. 1-362, 1C-1601(a), 1C-1602, 25C-4, 30-15, 30-17, 131E-91(d)(5), and
24 135-9. Notwithstanding the foregoing, receivership Receivership property in
25 a general receivership of an individual business debtor shall debtor, however,
26 does not include (i) the principal residence of the individual business debtor
27 if the value of the principal residence is less than the combined amount of all
28 liens and all rights of redemption and allowed claims of exemption in the
29 principal residence and (ii) any consumer good if the value of such the
30 consumer good is less than the combined amount of all liens and all rights of
31 redemption and allowed claims of exemption in such the consumer good.
32 …."
33 SECTION 4. G.S. 1-507.24 reads as rewritten:
34 "§ 1-507.24. Appointment of receivers; receivership not a trust.
35 (a) Action in Which Receivers Appointed. – A receiver may be appointed under this
36 Article by the filing of a civil action by a creditor or other party in interest in which the sole relief
37 requested is the appointment of a receiver or is combined with, or is ancillary to, a civil action
38 that seeks a money judgment or other relief, or in the case of a limited receivership, is part of a
39 power of sale or judicial foreclosure proceeding. However, in the case of an individual business
40 debtor, a creditor to whom only consumer debt is owing may shall not file a civil action or motion
41 to appoint a receiver for the individual business debtor. If the debtor files the complaint
42 commencing a civil action in which the sole relief requested is the appointment of a receiver,
43 then no summons under Rule 4 of the North Carolina Civil Rules of Procedure shall be necessary
44 and the title of the action required by Rule 10 of the North Carolina Civil Rules of Procedure
45 shall be:
46 "In re: ___________ [name of debtor]".
47 (b) Appointment by Judge. – Either a judge of the Superior Court Division or the District
48 Court Division may appoint a receiver for a debtor that is an individual business debtor. Only a
49 judge of the Superior Court Division may appoint a receiver for an entity. Once a receiver is
50 appointed, the following provisions apply:
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1 (1) If a receiver is appointed for an individual business debtor or if a limited
2 receiver is appointed for an entity, the clerk shall provide a copy of the order
3 appointing the receiver to the senior resident superior court judge or the senior
4 chief district court judge for the court in which the receivership is pending. If
5 the receivership is pending in the Superior Court Division, the senior resident
6 superior court judge for the court in which the receivership is pending shall
7 designate either one of the resident judges for the court in which the
8 receivership is pending, or one of the nonresident judges of the Superior Court
9 Division then assigned to the district in which the receivership is pending, to
10 be the presiding judge over the receiver and the receivership. The presiding
11 judge shall retain jurisdiction and supervision of the receiver and the
12 receivership until the receivership is terminated and the receiver discharged
13 pursuant to G.S. 1-507.37, or until the senior resident superior court judge
14 enters an order transferring jurisdiction and supervision of the receiver to
15 another superior court judge. The judge of the Superior Court Division so
16 designated shall retain jurisdiction and supervision notwithstanding the
17 judge's rotation out of the district. If the receivership is pending in the District
18 Court Division, the chief district court judge for the court in which the
19 receivership is pending shall designate one of the judges of the District Court
20 Division to retain jurisdiction and supervision of the receiver and the
21 receivership until the receivership is terminated and the receiver is discharged
22 pursuant to G.S. 1-507.37, or until the chief district court judge enters an order
23 transferring jurisdiction and supervision of the receiver to another district
24 court judge.
25 …
26 This subsection shall does not apply to the appointment of a receiver in a pending action to
27 partition real property pursuant to G.S. 46A-28.
28 …
29 (e) Receiver for Entities and Individual Business Debtors. – In addition to those situations
30 specifically provided for by law, a limited or general receiver may be appointed when an entity
31 or an individual business debtor meets any of the following criteria:
32 …
33 (8) The person is the subject of an action to dissolve such the person.
34 …
35 (k) Bad Faith Filing. – If the court denies a motion to appoint a receiver for an individual
36 business debtor other than on consent of the party or parties seeking the appointment of the
37 receiver and the debtor, and if the debtor does not waive the right to judgment under this
38 subsection, the court may grant judgment against the party or parties seeking the appointment of
39 the receiver for any damages proximately caused by such the filing, including costs and
40 reasonable attorneys' fees, and punitive damages, if the court determines, after notice and hearing,
41 that the motion was filed in bad faith."
42 SECTION 5. G.S. 1-507.30 reads as rewritten:
43 "§ 1-507.30. Duties of debtor.
44 (a) Duties. – In addition to those duties conferred by statute or order of the court, the
45 debtor shall have has the following duties:
46 (1) To assist and cooperate fully with the receiver in the administration of the
47 receivership and the receivership property and the discharge of the receiver's
48 duties, duties and to comply with all rules and orders of the court.
49 (2) To deliver to the receiver, immediately upon the receiver's appointment,
50 appointment and demand, all of the receivership property in the debtor's
51 possession, custody, or control, including all books and records, electronic
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1 data, passwords, access codes, statements of accounts, deeds, titles or other
2 evidence of ownership, financial statements, financial and lien information,
3 bank account statements, and all other papers and documents related to the
4 receivership property.
5 (3) To supply to the receiver information as requested relating to the
6 administration of the receivership and the receivership property, including
7 information necessary to complete any reports or other documents that the
8 receiver may be required to file.
9 (4) To remain responsible for the filing of all tax returns, including those returns
10 applicable to periods which include those in which the receivership is in effect,
11 except as otherwise ordered by the court.
12 (b) Debtor Not Individual. – If the debtor is not an individual, this section applies to each
13 officer, director, manager, member, partner, trustee, or other person exercising or having the
14 power to exercise control over the affairs of the debtor immediately before the appointment of
15 the receiver.
16 (c) Enforcement. – If a person knowingly fails to perform a duty imposed by this section,
17 the c