Camden County et al v. Northeastern Community Development Corporation et al

Filing 51

CONSENT ORDER; ENTRY OF DEFAULT JUDGMENT - Signed by Chief Judge James C. Dever III on 10/18/2017. (Briggeman, N.)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
NORTHERN DNISION
No.2: 15-CV-21-D

CAMDEN COUNTY,
A BODY POLITIC AND
POLITICAL SUBDIVISION
OF THE STATE OF
NORTH CAROLINA;
EAST CAROLINA BEHAVIORAL
HEALTH, AN AREA MENTAL
HEALTH AUTHORITY AND
POLITICAL SUBDNISION OF
THE STATE OF NORTH CAROLINA;
andPASQUOTANKCOUNTY, ·
A BODY POLITIC AND
POLITICAL SUBDIVISION OF THE
STATE OF NORTH CAROLINA,
Plaintiffs,

v.
NORTHEASTERN COMMUNITY
DEVELOPMENT CO~PORATION;
UNITED STATES DEPARTMENT OF
AGRICULTURE; UNITED STATES
INTERNAL REVENUE SERVICE;
NORTH CAROLINA
DEPARTMENT OF COMMERCEDIVISION OF EMPLOYMENT
SECURITY; SOUTHERN BANK AND
TRUST COMPANY,
Defendants,
CHARLES THOMAS STEELE, JR.,
TRUSTEE,
INTERVENOR/DEFENDANT

CONSENT ORDER;
ENTRY OF DEFAULT
JUDGMENT

On motion of all parties Plaintiff, and Defendants United States Department of
Agriculture, Charles Thomas Steele, Jr., Trustee ("TRUSTEE"), United States Internal
Revenue Service, North Carolina Department of Revenue, and the North Carolina
Department of Commerce-Division of Employment Security, and after careful review by
the Court of the record proper, including Pleadings, Pleading Exhibits, Briefs in support
of and in opposition to Defendants United States Department of Agriculture and its
Trustee's Motion for Summary Judgment as well as Exhibits tendered with the same, and
the stipulations of the parties contained herein, the Court makes the following Findings
of Fact, Conclusions of Law, and Entry of Judgment.
FINDINGS OF FACT

1. On March 19, 2015, Camden County, East Carolina Behavioral Health, and
Pasquotank County (collectively "Plaintiffs") filed an action for declaratory
judgment and to quiet title against the United States Department of Agriculture
("USDA"), United States Internal Revenue Service ("IRS"), the Northeastern
Community

Development Corporation

("NCDC"), The

North Carolina

Department of Revenue ("NCRev"), The North Carolina Department of
Commerce-I:)ivision of Employment Security ("Commerce") and Southern Bank
and Trust Company ("BANK") in Camden County Superior Court.
2. On April16, 2015, the IRS and USDA removed the case to this Court.
3. The IRS timely answered, denying the relief requested by Plaintiffs and asking that
the Court dismiss Plaintiffs' claims.

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4. The USDA and TRUSTEE timely answered, moved to dismiss and asserted
counterclaims for a declaration that Plaintiffs' exercise of their possibility of
reverter contained in a Deed accepted by USDA as security was an
unconstitutional taking by the government; for quiet title to the property at issue,
for breach of contract and inverse condemnation, to which Plaintiffs timely replied
seeking dismissal of these claims. On all counterclaims excepting breach of
contract, USDA moved for summary judgment on September 20, 2016.
5. After proper service on Defendants NCDC and BANK, neither filed an answer nor
made an appearance or otherwise offered a defense. Accordingly, by Motion of
Plaintiffs, an entry of default was had on each of the said NCDC and BANK on
December 1, 2015 properly entered by the Clerk of this Court.
6. By Order of May 17,2017, Chief United States District Court Judge, James C. Dever
III, in a written opinion, denied Defendant USDA's Motion for Summary
Judgment and opined in so doing:

... Defendant had no property interest in the Property beyond fee simple
determinable subject to the Sellers' possibility of reverter. Therefore, Plaintiffs did not take
any property owned by Defendant. As for the second prong, the possibility of reverter was
not triggered by any act or omission of Plaintiffs. Rather, when the NCDC ceased to use
the property to operate a child care facility, the estate fee simple determinable automatically
expired and effected the reversion of the fee simple absolute to the holder of the reverter
(Order Page 9).

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To the extent the parties dispute ownership of the Property, the Sellers (Plaintiffs)
own the Property in fee simple absolute, unencumbered by the USDA's lien, by operation
of the possibility of reverter (Order Page 8).
7. The relevant facts which gave rise to the aforementioned Order are:
A. On June 27, 2002, Albemarle Hospital (predecessor to Pasquotank County),

Albemarle Mental Health Center (predecessor to East Carolina Behavioral
Health), Pasquotank County and Camden County executed and delivered a
Deed for 1.66 acres of undeveloped land in Camden County, North Carolina
(the "subject property") to NCDC, restricting the use to "construction and
operation of a child care facility for a period of twenty-five years from [the
closing date]." This Deed was recorded in Book 159, Page 388 of the Camden
County Public Registry on June 27, 2002.
B. On December 17,2002, the USDA loaned NCDC $600,000 secured by a Deed of
Trust of record in Book 166, Page 420 in the Camden County Public Registry.
C. NCDC thereafter used said proceeds to build a child care facility on the

property.
D. In August of 2013, NCDC ceased operating a child care facility on the subject
Property and Plaintiffs asserted their ownership pursuant to the Possibility of
Reverter.
8. On or about July 15, 2013, Defendant United States Internal Revenue Service filed
a Notice of Federal Tax Lien in the amount of $181,391.35 in the Office of the Clerk

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of Superior Court of Camden County under File No. 13-M-40 directed toward the
purported tax liability of Defendant NCDC to the United States Treasury.
9. On or about August 6, 2013, Defendant United States Internal Revenue Service
filed a Notice of Federal Tax Lien in the amount of $2,109.54 in the Office of the
Clerk of Superior Court of Camden County under File No. 13-M-43 directed
toward the purported tax liability of Defendant NCDC to the United States
Treasury.
10. Defendant NCRev filed a "Certificate of Tax Liability" in the Office of the Clerk of
Superior Court of Camden County in the amount of $33,156.31, under file number
13-M-47 on October 28, 2013, directed toward the purported tax liability of
Defendant NCDC to the State of North Carolina.
11. On or about November 14, 2013, Defendant Commerce filed a "Certification of
Unemployment Insurance Tax Delinquency" in the amount of $7,953.93 in the
Office of the Clerk of Superior Court of Camden County under file number 13-M49 directed toward the purported liability of Defendant NCDC in failing to pay
unemployment insurance requirements.
12. All filings purporting to establish a lien or encumbrance by any of Defendants
occurred subsequent to the recording of the Deed of conveyance by Plaintiffs to
NCDC and the recording thereof in the Camden Registry, which contained the
Possibility of Reverter in favor of Plaintiffs directly or its successors in interest.
13. In seeking qeclaratory relief and quiet title, Plaintiffs wish to establish their title
by reversion free and clear of all liens of Defendants.
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)

14. As evidenced by the signatures of the parties, through their duly authorized
representatives, the non-defaulting Defendants and Plaintiffs stipulate to these
Findings of Fact and request the resolution hereinafter decreed whereby Plaintiffs
will take title to the Property free of any obligation whatsoever that might
otherwise arise from the Defendants' referenced liens, provided such liens shall
not be extinguished from the records of Camden County as satisfied, leaving
Defendant lien holders free to pursue such other assets of Defendant NCDC as
may secure their respective obligations.
15. Plaintiffs' pending motions for entry of default judgment declaring title in
Plaintiffs free and clear of any claim of defendant NCDC by virtue of the
Possibility of Reverter and Defendant Southern Bank and Trust by virtue of its
judgment lien being junior to the Possibility of Reverter, are ripe for adjudication.
CONCLUSIONS OF LAW

By and with the consent of the parties, and based upon the preceding Findings of Fact,
the Court concludes as a matter of law the following:
1. The court has jurisdiction over the parties and the subject matter of this action.
2. The resolution consented to is just and reasonable and within the authority of the
Court t6 adjudicate.
3. Plaintiffs and non-defaulting Defendants are entitled to the relief hereinafter
granted.
4. Plaintiffs are entitled to default judgment as to Defendant NCDC and BANK by
virtue of their defaults .and in reliance upon the facts above stipulated to by those
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Defendants consenting hereto as otherwise found by this Court as to all other
Defendants.
5. By its joinder in this Consent Order, Defendants USDA and TRUSTEE consents to
the dismissal of their claim for Breach of Contract with prejudice.
NOW, THEREFORE, it is hereby ordered, adjudged and awarded by declaration as
follows:
1. By virtue of the Possibility of Reverter recited in this judgment as it relates to all
parties, Plaintiffs and Defendants, Plaintiffs have fee simple title to the subject
property more particularly described in Deed Book 159 at Page 388 of the Camden
County Public Registry free and clear of any encumbrance of any kind, or any
cause, including but not limited to liens, deeds of trust, judgment liens, claims for
unjust enrichment, betterments, unjust taking, and inverse condemnation.
2. The claim of Defendants USDA and TRUSTEE for Breach of Contract is dismissed
with prejudice.
3. Provided, however, the liens of record of each of the said Defendants are not
extinguished by this judgment as to any other properties of Defendant NCDC.
4. To this end, this judgment shall be recorded in the Camden County Public Registry
and indexed in the names of all parties to this action as record evidence that
Plaintiffs' title to the subject property is superior to and not encumbered by, any
lien of any kind or description belonging to or asserted by Defendants.
5. The parties have agreed to, and shall, bear their own costs and fees in litigating
this case.
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This the ___1£__ day of October, 2017.

;jL

kvL.A

By:
James C. Dever, III
Chief United State District Court Judge for the Eastern District of North Carolina.

WE CONSENT TO AND ASK FOR THIS
Plaintiffs:

Camden County
East Carolina Behavioral Health
Pasquotank County
By: /s/ JohnS. Morrison
JohnS. Morrison, Attorney for Plaintiffs
Defendants:

United States Department of Agriculture
By: /s/ James K. Pendergrass, Jr.
James K. Pendergrass, Jr., Attorney for USDA and TRUSTEE
United States Internal Revenue Service
By: /s/ C. Michael Anderson
C. Michael Anderson, Assistant United States Attorney, Attorney for IRS
North Carolina Department of Commerce-Division of Employment Security
By: /s/ Timothy Melton
Timothy Melton, Attorney for North Carolina Department of Commerce
North Carolina Department of Revenue
By: /s/ David D. Lennon
David D. Lennon, Assistant Attorney General, Attorney for NC Dept. of Revenue

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