On appeal, the District Court for the Middle District of North Carolina (Eagles, J.) affirmed the ruling of the Bankruptcy Court granting the Defendants’ motion to dismiss and denying the Plaintiff’s motion for summary judgment. The question presented on appeal was whether the omission of the debtor’s name from the notary’s acknowledgment of a deed trust results in an instrument that is effective for recordation and registration. As there were no material facts at issue, the District Court reviewed the Bankruptcy Court’s legal determination regarding the notarial certificate de novo.  In adopting and affirming the Bankruptcy Court’s order, the District Court agreed that the notarial acknowledgment at issue substantially complied with applicable North Carolina law and the deed of trust was not avoidable. The District Court found the notarial certificate contained language showing the debtor, as signor of underlying document, acknowledged or subscribed to the deed of trust and the Plaintiff did not point to any evidence of fraud or misconduct by the notary that would overcome the presumption of regularity afforded the notarial act. The District Court also found the Bankruptcy Court fully explained why cases from other jurisdictions are of limited utility and persuasive value to determining an issue arising under North Carolina law.

      Opinion and Order Granting in Part and Denying in Part Plaintiff's Motion for Summary Judgment and Denying Defendant's Motion for Summary Judgment. The Court considered cross motions for summary judgment from the Plaintiff, Lent Christopher Carr, II, and the Defendant, County of Hoke. The dispute prompting the adversary proceeding involves the Defendant’s secured claim for 2015, 2016, and 2017 real property taxes. After the Plaintiff remitted a check to the Defendant to pay the taxes, the Defendant allegedly issued a tax receipt noting all the taxes as paid in full and issued a satisfaction of judgment marking the 2015 and 2016 taxes as paid in full. The check was later returned unpaid by the issuing bank. The Plaintiff filed the adversary proceeding to object to the Defendant’s claim under 11 U.S.C. § 502(b)(1), arguing that the tax claim is unenforceable under North Carolina law because the tax receipt and the satisfaction of judgment were never revoked and the appropriate records reflect that the taxes were paid.
      The Court considered North Carolina statutes and case law regarding the payment of county taxes, particularly when they are marked as paid but the remitted check is not honored by the issuer. In this situation, North Carolina law requires that the county tax collector promptly notify the taxpayer to request a return of the tax receipt and correct the appropriate records before it can resume collection of the unpaid taxes. See N.C. Gen. Stat. § 105-357(b); Miller v. Neal, 23 S.E.2d 852, 854–55 (N.C. 1943). With respect to the 2015 and 2016 taxes, the Defendant neither corrected the appropriate records as required by § 105-357(b) nor revoked the satisfaction of judgment to show the fact of nonpayment. Under these circumstances, the Defendant cannot collect on the 2015 and 2016 taxes.
      However, the Court determined there is a material factual dispute surrounding the 2017 taxes—for which a judgment was not obtained—that prevents a finding that either party is entitled to judgment as a matter of law. Specifically, the parties set forth competing assertions that create doubt as to whether the tax receipt issued to the Plaintiff referenced full payment of the 2017 taxes, which would trigger the procedural requirements of § 105-357(b). Neither party produced a copy of the document for the Court’s review. The Court also rejected the Plaintiff’s alternative basis for summary judgment, finding the Plaintiff does not qualify as a good faith purchaser because he was charged with notice that the 2017 taxes would become due after the property was conveyed to him and had actual knowledge that the check was returned unpaid.
      Accordingly, the Court granted partial summary judgment for the Plaintiff with respect to the 2015 and 2016 taxes, and denied both cross-motions for summary judgment with respect to the 2017 taxes because of the material fact in dispute.

Order Sustaining Trustee's Objection to Exemption. The Chapter 7 Trustee objected to the Debtor’s claimed exemption of real property held as a tenancy by entirety with his non-filing spouse. Specifically, the Court considered whether the Debtor may exempt entireties property when the Internal Revenue Service holds a valid tax lien against that property and is a priority and general unsecured claimant in the Debtor’s bankruptcy case. Existing caselaw has established that the bankruptcy estate includes interests in entireties property even where only one spouse has filed. While the Debtor may exempt his tenancy by entirety interest in real property pursuant to 11 U.S.C. § 522(b)(3)(B), and thereby prevent the Trustee from distributing it to satisfy creditors, the Debtor may do so only to the extent that the Debtor’s interest “is exempt from process under applicable nonbankruptcy law.” Nonbankruptcy law includes state law and, under North Carolina law, the Debtor may exempt tenancy by entirety interests from the claims of non-joint creditors. Applicable nonbankruptcy law, however, also includes federal law, including the United States Tax Code. Under federal tax law, as interpreted by the United States Supreme Court in United States v. Craft, 535 U.S. 274 (2002), a federal tax lien attaches to the spouse’s interest in entireties property despite the existence of state law limitations on debts held by non-joint creditors. Therefore, the IRS debt for which the Debtor was liable prepetition is not immune or exempt from process under applicable nonbankruptcy law. Accordingly, the Court sustained the Trustee’s objection and the Debtor’s exemption was denied to the extent of the IRS tax lien and any debts held by joint-creditors of the Debtor and his non-filing spouse.

      Order and Opinion Granting in Part and Denying in Part Defendants' Motion to Dismiss Complaint.The Defendants filed a motion to dismiss the entirety of the Plaintiff’s complaint, which objected to the related proof of claim in the underlying bankruptcy case, sought damages for violations of (1) the discharge injunction, (2) the automatic stay, (3) the Fair Debt Collection Act Practices Act (“FDCPA”), (4) the Real Estate Settlement Procedures Act (“RESPA”), and (5) N.C. Gen. Stat. § 45, as well as damages stemming from (6) breach of contract and (7) tortious interference with contract. The Defendants presented four arguments for dismissing the entirety of the Plaintiff’s complaint.
      The Defendants first argued that the Plaintiff failed to state a claim for relief under 11 U.S.C. § 524(i) because the mortgage debt at issue was not discharged, the complaint demonstrated that the Plaintiff failed to make all payments required by the confirmed plan in the Plaintiff’s previous bankruptcy case, and the Defendants correctly applied all tendered payments. The Court first rejected the first assertion, finding that § 524(i) applies, and indeed was designed for long-term debts that are not discharged at the end of a chapter 13 plan. The Court further found, because of the combination of the Defendants’ representations in the previous case that the Plaintiff was then current on payments and the Plaintiff’s pleadings in the complaint that all subsequent payments were made, that the Plaintiff had stated a claim for relief under § 524(i).
      Second, the Defendants argued that the complaint fails to state a claim under 11 U.S.C. § 362 because the facts as alleged do not include an act to collect the mortgage loan by the Defendants prior to entry of discharge in the Plaintiff’s prior bankruptcy case. The Court agreed with the Defendants, finding the Plaintiff failed to allege an act to collect occurred prior to discharge. The Court thus granted the motion to dismiss as to the Plaintiff’s claim for violations of the automatic stay.
      Third, the Defendants argued the objection to claim fails because the Plaintiff has not come forward with plausible facts or evidence to rebut the presumptive validity of the proof of claim. The Court found the Defendants’ motion to dismiss to be premature as to the objection to claim. The Court found the complaint, for purposes of a Rule 12(b)(6) motion to dismiss, stated sufficient facts to make a plausible showing of entitlement to relief in the objection to proof of claim.
      Fourth, the Defendants urged the Court to dismiss the Plaintiff’s remaining non-bankruptcy claims for breach of contract, tortious interference with contract, vicarious liability, and violations of the FDCPA, RESPA, and N.C. Gen. Stat. § 45, under two rationales: (a) the Court does not have jurisdiction to hear the claims because those claims did not arise in and were not related to the Plaintiff’s bankruptcy case and, alternatively, (b) the Plaintiff fails to allege specific damages she sustained as a result of the purported violations. The Court first found it possessed “related-to” jurisdiction over the claims at issue because those claims arose before the petition date in the Plaintiff’s current bankruptcy case and are, therefore, property of the current estate. The Court also found the complaint sufficiently pleaded actual damages as to each of the non-bankruptcy claims.
      Accordingly, the Court granted the Defendants’ motion to dismiss as to count two of the complaint for violations of the automatic stay and denied the motion to dismiss as to all remaining counts.