FILED SENATE
Mar 31, 2021
GENERAL ASSEMBLY OF NORTH CAROLINA
S.B. 429
SESSION 2021 PRINCIPAL CLERK
S D
SENATE BILL DRS35188-MU-14
Short Title: Comm. Receivership and Real Property Amends. (Public)
Sponsors: Senators Galey and Edwards (Primary Sponsors).
Referred to:
1 A BILL TO BE ENTITLED
2 AN ACT TO MAKE AMENDMENTS RELATING TO THE NORTH CAROLINA
3 COMMERCIAL RECEIVERSHIP ACT, THE VALIDITY OF NOTARIAL ACTS, AND
4 CERTAIN STATUTES AFFECTING REAL PROPERTY.
5 The General Assembly of North Carolina enacts:
6
7 PART I. AMENDMENTS RELATING TO NC COMMERCIAL RECEIVERSHIP ACT
8 SECTION 1. G.S. 1-502 reads as rewritten:
9 "§ 1-502. In what cases appointed.
10 A receiver may be appointed in any of the following cases:
11 …
12 (4) In cases provided in G.S. 1-507.1 and in similar cases, regarding property
13 within this State of foreign corporations.
14 …
15 The provisions of Part 2 of Article 38 of Chapter 1 of the General Statutes apply to the
16 appointment of a receiver of a corporation under this section."
17 SECTION 2. G.S. 1-507.20 reads as rewritten:
18 "§ 1-507.20. Short title; definitions.
19 (a) Short Title. – This Article may be cited as the North Carolina Commercial
20 Receivership Act.
21 (b) Definitions. – The following definitions apply throughout this Article unless the
22 context requires otherwise:Article:
23 …
24 (5) Court. – The superior or district court in which the receivership is pending,
25 except that in the case of a receiver appointed to partition real property
26 pursuant to G.S. 46-3.1, G.S. 46A-28, the term shall mean the clerk of
27 superior court that has jurisdiction over the receiver and the receivership.
28 …
29 (16) Insider. – As to any person, includes the following:
30 …
31 d. An affiliate, or insider of an affiliate, as if such the affiliate were the
32 person.
33 …
34 (24) Property. – All of the debtor's right, title, and interest, both legal and equitable,
35 in real and personal property, regardless of the manner by which any of the
36 same were or are it was or is acquired. The term includes any proceeds,
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1 products, offspring, rents, or profits of or from the property. The term does
2 not include (i) any power that the debtor may exercise solely for the benefit of
3 another person, (ii) a power of withdrawal exercisable by the debtor over
4 property of a trust for which the debtor is not the settlor, to the extent that the
5 power is not subject to the claims of the debtor's creditors pursuant to
6 G.S. 36C-5-505(b), or (iii) if the debtor is an individual, any real property
7 owned jointly by the debtor and the debtor's spouse that is held by them as a
8 tenancy by the entireties, unless the debtor's spouse is also a debtor in the
9 receivership and there is a joint debt owed to one or more creditors.
10 …
11 (27) Receivership property. – In the case of a general receivership, all or
12 substantially all of the nonexempt property of the debtor, or in the case of a
13 limited receivership, the property of the debtor identified in the order
14 appointing the receiver, or in any subsequent order, and, in each case, except
15 for the debtor's property that is wholly exempt from the enforcement of claims
16 of creditors pursuant to applicable law, including without limitation, pursuant
17 to G.S. 1-362, 1C-1601(a), 1C-1602, 25C-4, 30-15, 30-17, 131E-91(d)(5), and
18 135-9. Notwithstanding the foregoing, receivership Receivership property in
19 a general receivership of an individual business debtor shall debtor, however,
20 does not include (i) the principal residence of the individual business debtor
21 if the value of the principal residence is less than the combined amount of all
22 liens and all rights of redemption and allowed claims of exemption in the
23 principal residence and (ii) any consumer good if the value of such the
24 consumer good is less than the combined amount of all liens and all rights of
25 redemption and allowed claims of exemption in such the consumer good.
26 …."
27 SECTION 3. G.S. 1-507.24 reads as rewritten:
28 "§ 1-507.24. Appointment of receivers; receivership not a trust.
29 (a) Action in Which Receivers Appointed. – A receiver may be appointed under this
30 Article by the filing of a civil action by a creditor or other party in interest in which the sole relief
31 requested is the appointment of a receiver or is combined with, or is ancillary to, a civil action
32 that seeks a money judgment or other relief, or in the case of a limited receivership, is part of a
33 power of sale or judicial foreclosure proceeding. However, in the case of an individual business
34 debtor, a creditor to whom only consumer debt is owing may shall not file a civil action or motion
35 to appoint a receiver for the individual business debtor. If the debtor files the complaint
36 commencing a civil action in which the sole relief requested is the appointment of a receiver,
37 then no summons under Rule 4 of the North Carolina Civil Rules of Procedure shall be necessary
38 and the title of the action required by Rule 10 of the North Carolina Civil Rules of Procedure
39 shall be:
40 "In re: ___________ [name of debtor]".
41 (b) Appointment by Judge. – Either a judge of the Superior Court Division or the District
42 Court Division may appoint a receiver for a debtor that is an individual business debtor. Only a
43 judge of the Superior Court Division may appoint a receiver for an entity. Once a receiver is
44 appointed, the following provisions apply:
45 (1) If a receiver is appointed for an individual business debtor or if a limited
46 receiver is appointed for an entity, the clerk shall provide a copy of the order
47 appointing the receiver to the senior resident superior court judge or the senior
48 chief district court judge for the court in which the receivership is pending. If
49 the receivership is pending in the Superior Court Division, the senior resident
50 superior court judge for the court in which the receivership is pending shall
51 designate either one of the resident judges for the court in which the
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1 receivership is pending, or one of the nonresident judges of the Superior Court
2 Division then assigned to the district in which the receivership is pending, to
3 be the presiding judge over the receiver and the receivership. The presiding
4 judge shall retain jurisdiction and supervision of the receiver and the
5 receivership until the receivership is terminated and the receiver discharged
6 pursuant to G.S. 1-507.37, or until the senior resident superior court judge
7 enters an order transferring jurisdiction and supervision of the receiver to
8 another superior court judge. The judge of the Superior Court Division so
9 designated shall retain jurisdiction and supervision notwithstanding the
10 judge's rotation out of the district. If the receivership is pending in the District
11 Court Division, the chief district court judge for the court in which the
12 receivership is pending shall designate one of the judges of the District Court
13 Division to retain jurisdiction and supervision of the receiver and the
14 receivership until the receivership is terminated and the receiver is discharged
15 pursuant to G.S. 1-507.37, or until the chief district court judge enters an order
16 transferring jurisdiction and supervision of the receiver to another district
17 court judge.
18 …
19 This subsection shall does not apply to the appointment of a receiver in a pending action to
20 partition real property pursuant to G.S. 46A-28.
21 …
22 (e) Receiver for Entities and Individual Business Debtors. – In addition to those situations
23 specifically provided for by law, a limited or general receiver may be appointed when an entity
24 or an individual business debtor meets any of the following criteria:
25 …
26 (8) The person is the subject of an action to dissolve such the person.
27 …
28 (k) Bad Faith Filing. – If the court denies a motion to appoint a receiver for an individual
29 business debtor other than on consent of the party or parties seeking the appointment of the
30 receiver and the debtor, and if the debtor does not waive the right to judgment under this
31 subsection, the court may grant judgment against the party or parties seeking the appointment of
32 the receiver for any damages proximately caused by such the filing, including costs and
33 reasonable attorneys' fees, and punitive damages, if the court determines, after notice and hearing,
34 that the motion was filed in bad faith."
35 SECTION 4. G.S. 1-507.30 reads as rewritten:
36 "§ 1-507.30. Duties of debtor.
37 (a) Duties. – In addition to those duties conferred by statute or order of the court, the
38 debtor shall have has the following duties:
39 (1) To assist and cooperate fully with the receiver in the administration of the
40 receivership and the receivership property and the discharge of the receiver's
41 duties, duties and to comply with all rules and orders of the court.
42 (2) To deliver to the receiver, immediately upon the receiver's appointment,
43 appointment and demand, all of the receivership property in the debtor's
44 possession, custody, or control, including all books and records, electronic
45 data, passwords, access codes, statements of accounts, deeds, titles or other
46 evidence of ownership, financial statements, financial and lien information,
47 bank account statements, and all other papers and documents related to the
48 receivership property.
49 (3) To supply to the receiver information as requested relating to the
50 administration of the receivership and the receivership property, including
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1 information necessary to complete any reports or other documents that the
2 receiver may be required to file.
3 (4) To remain responsible for the filing of all tax returns, including those returns
4 applicable to periods which include those in which the receivership is in effect,
5 except as otherwise ordered by the court.
6 (b) Debtor Not Individual. – If the debtor is not an individual, this section applies to each
7 officer, director, manager, member, partner, trustee, or other person exercising or having the
8 power to exercise control over the affairs of the debtor immediately before the appointment of
9 the receiver.
10 (c) Enforcement. – If a person knowingly fails to perform a duty imposed by this section,
11 the court may (i) compel the person to comply with that duty, (ii) award the receiver actual
12 damages caused by the person's failure, failure and reasonable attorneys' fees and costs, and (iii)
13 sanction the person for civil contempt."
14 SECTION 5. G.S. 1-507.40 reads as rewritten:
15 "§ 1-507.40. Turnover of receivership property.
16 (a) Demand by Receiver. – Except as expressly provided in this section, and unless
17 otherwise ordered by the court, upon demand by a receiver: (i) subject to subsection (b) of this
18 section, any person shall turn over to the receiver any receivership property that is within the
19 possession, custody, or control of that person and (ii) any person that owes a debt that is
20 receivership property and is matured or payable on demand or on order shall pay the debt to or
21 on the order of the receiver, except to the extent that the debt is subject to setoff or recoupment.
22 …
23 (c) Turnover Motion by Receiver. – A receiver may seek to compel turnover of
24 receivership property required by subdivision clause (i) of subsection (a) of this section by motion
25 in the receivership. If there exists a bona fide dispute with respect to the existence or nature of
26 the receiver's or the debtor's interest in the receivership property, turnover shall be sought by
27 means of an action under G.S. 1-507.38. Unless a bona fide dispute exists about a receiver's right
28 to possession, custody, or control of receivership property, the court may sanction as civil
29 contempt a person's failure to turn over the property when required by this section.
30 (d) Payment Only to Receiver. – A person that has notice of the appointment of a receiver
31 and owes a debt that is receivership property may shall not satisfy the debt by payment to the
32 debtor."
33 SECTION 6. G.S. 1-507.42 reads as rewritten:
34 "§ 1-507.42. Stays.
35 …
36 (f) Inapplicability of Stay. – The entry of an order appointing a receiver does not operate
37 as a stay of any of the following:
38 …
39 (9) Any other exception as provided in United States Code, Title 11, § 326(b), §
40 362(b), as to the automatic stay in federal bankruptcy cases in effect from time
41 to time.
42 …
43 (h) Enforcement. – If a person knowingly violates a stay under this section, the court may
44 award actual damages caused by the violation, reasonable attorneys' fees, and costs, costs and
45 may sanction the violation as civil contempt."
46 SECTION 7. G.S. 46A-28 reads as rewritten:
47 "§ 46A-28. Court's authority to make orders before final determination of proceeding;
48 notice and hearing.
49 (a) Before final determination of a proceeding to partition real property, on application
50 of any of the parties, the court may make any orders that it finds to be in the best interest of the
51 parties, including, but not limited to, orders relating to possession, payment of secured debt or
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1 other liens on the property, occupancy and payment of rents, the appointment of a receiver
2 pursuant to G.S. 1-502(6) or a limited receiver for the real property pursuant to Article 38A of
3 Chapter 1 of the General Statutes, and access to the property for the purpose of inspecting,
4 surveying, appraising, or selling the property.
5 …."
6 SECTION 8. G.S. 53C-9-401 reads as rewritten:
7 "§ 53C-9-401. Statute Article relating to receivers applicable to insolvent banks.
8 The provisions of G.S. 1-507.1 through 1-507.11, Article 38A of Chapter 1 of the General
9 Statutes, relating to receivers, when not inconsistent with the provisions of this Article, shall
10 apply applies to the liquidation of banks under this Article."
11
12 PART II. AMENDMENTS AFFECTING THE VALIDITY OF NOTARIAL ACTS
13 SECTION 9.(a) G.S. 10B-65 reads as rewritten:
14 "§ 10B-65. Acts of notaries public in certain instances validated.
15 (a) Any acknowledgment taken and any instrument notarized by a person prior to
16 qualification as a notary public but after commissioning or recommissioning as a notary public,
17 or by a person whose notary commission has expired, is hereby validated. The acknowledgment
18 and instrument shall have have the same legal effect as if the person qualified as a notary public
19 at the time the person performed the act.
20 (b) All documents bearing a notarial seal and which that contain any of the following
21 errors are validated and given the same legal effect as if the errors had not occurred:
22 (1) The date of the expirati