Summary:
In State ex rel. Jackson v. MV Realty PBC, LLC, the North Carolina Business Court granted sweeping partial summary judgment in favor of the Attorney General, holding that MV Realty’s Homeowner Benefit Agreements (“HBAs”) were the product of multiple unfair and deceptive trade practices under Chapter 75.
At bottom, MV Realty’s business model was simple—and abusive. Homeowners were paid a few hundred or a few thousand dollars up front in exchange for signing a 40-year exclusive real estate brokerage agreement, backed by draconian “early termination fees,” threats of litigation, and—most critically—the recording of memoranda falsely claiming that these obligations were covenants running with the land. The court had little trouble concluding that this scheme was unlawful.
The Business Court ruled, as a matter of law, that:
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The HBAs were personal services contracts, not real covenants, and therefore could not “touch and concern” the land.
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Recording memoranda asserting otherwise created a false cloud on title, constituting an unfair and deceptive trade practice.
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MV Realty’s routine filing of lis pendens in breach-of-contract suits seeking only money damages was improper and deceptive.
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The so-called “Early Termination Fees” were unenforceable penalties, not valid liquidated damages.
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MV Realty also violated North Carolina’s Telephone Solicitation Act through massive robocalling campaigns and calls to numbers on the Do-Not-Call Registry without provable consent.
In short, the court dismantled the legal scaffolding MV Realty relied upon to intimidate homeowners and lock them into long-term obligations they neither understood nor could realistically escape .
Commentary:
This opinion has practical impact for consumer bankruptcy attorneys, mortgage lawyers (both sides), bankruptcy trustees, title examiner, and any court confronting attempts to repackage predatory contracts as “real property interests.” It is also a roadmap for how the Attorney General can—and should—ensure that these findings remain effective notwithstanding bankruptcy filings.
1. Why This Matters in Consumer Bankruptcy Cases
For bankruptcy practitioners, the most important takeaway is the court’s unequivocal holding that MV Realty’s agreements do not create property interests.
That matters because:
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There is no valid lien.
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There is no covenant running with the land.
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There is no secured claim.
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There is, at most, a disputed unsecured claim for breach of a personal services contract, and even that claim is undermined by the court’s ruling that the ETF is an unenforceable penalty.
Practically, this gives debtor’s counsel several powerful tools:
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Claim objections: Any proof of claim asserting secured status, lien rights, or damages based on an ETF should be objected to aggressively.
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Lien avoidance and declaratory relief: If memoranda remain of record, debtors can seek declaratory relief confirming that no enforceable interest exists.
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Stay and discharge enforcement: Post-petition or post-discharge collection efforts premised on these agreements are fertile ground for stay-violation and discharge-violation litigation.
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Chapter 13 treatment: Even if a claim survives as unsecured, it is subject to ordinary plan treatment—and likely to receive pennies, if anything.
Equally important is the court’s emphasis on consumer sophistication. The Business Court repeatedly highlighted the imbalance between MV Realty and individual homeowners. Bankruptcy courts, which see this imbalance every day, should take note.
2. Using This Opinion Affirmatively for Debtors
Consumer attorneys, both in bankruptcy cases and elsewhere, should not treat this decision as merely defensive.
It can be used affirmatively to:
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Reassure hesitant homeowners that bankruptcy will not “lock in” these agreements.
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Push back against title insurers or closing attorneys who still fear recorded memoranda.
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Support motions to reopen cases where debtors paid ETFs prepetition under coercion.
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Bolster fee applications in cases where significant work is required to unwind these abusive contracts.
This is also a rare case where a state court UDTP ruling directly strengthens bankruptcy outcomes, rather than existing in a silo.
3. The Attorney General’s Role Going Forward—Including in Bankruptcy
The opinion also raises an important structural question: how does the State ensure these protections are not diluted by bankruptcy proceedings?
There are several answers.
First, the AG should continue to assert that:
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Actions to enforce Chapter 75, including injunctive and declaratory relief, fall squarely within the police and regulatory power exception to the automatic stay.
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Findings that the memoranda are false and deceptive are not dischargeable “claims,” but regulatory determinations that bind successors and bankruptcy courts alike.
Second, in any future bankruptcy (its previous bankruptcy having been dismissed on May 24, 2024, via an order in the U.S. Bankruptcy Court for the Southern District of Florida) involving MV Realty or related entities, the AG should insist that:
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No plan or settlement may revive or recharacterize HBAs as property interests.
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No sale “free and clear” can launder unenforceable interests into something marketable.
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Any attempt to monetize these agreements is inconsistent with North Carolina public policy as articulated by the Business Court.
Third—and critically—the AG should coordinate with consumer bankruptcy trustees and debtor’s counsel to ensure that these rulings are actually enforced at the household level, not just preserved in reported decisions.
4. Practice Note for Chapter 7 Trustees: Avoidance and Estate-Value Opportunities
Although this opinion arises from a state enforcement action, it provides Chapter 7 trustees with a ready-made roadmap for avoidance actions that directly benefit unsecured creditors—and, incidentally, clean up the damage inflicted on consumer debtors.(I know, I know- it goes against the very nature of Chapter 7 trustees to do anything that might help consumer debtors, but perhaps their own pecuniary interest might override that aversion.)
Most importantly, the Business Court’s holding that MV Realty’s memoranda did not create covenants running with the land supports the conclusion that the recorded “liens” were void ab initio, not merely avoidable. Trustees can rely on this finding in exercising their § 544(a) strong-arm powers, both to defeat asserted secured claims and to clear title where sale proceeds were reduced or diverted based on a false encumbrance.
The Court’s ruling that the Early Termination Fees were unenforceable penalties also tees up classic preference (§ 547) and constructive fraudulent transfer (§ 548) claims where homeowners paid ETFs or settlement amounts prepetition. Payments extracted under a legally void penalty, particularly from insolvent consumers, are difficult to defend as reasonably equivalent value and often result in the recipient receiving more than it would in a Chapter 7.
Finally, where sale proceeds were escrowed, withheld, or paid under threat of an asserted lien, trustees should consider § 542 turnover and, in appropriate cases, § 544(b) actions grounded in the underlying Chapter 75 violations. Framed correctly, these are not debtor-relief cases—they are estate-value recovery actions that prevent a predatory creditor from leaping ahead of legitimate unsecured creditors.
5. The Bigger Picture
This case fits into a broader and increasingly familiar pattern: financial actors attempting to extract long-term value from homeowners by skirting traditional lending, brokerage, and consumer-protection rules, then trying to dress those arrangements up as “innovative” real estate products.
The Business Court was not fooled. Nor should bankruptcy courts be.
For consumer bankruptcy attorneys, this opinion is both a sword and a shield. For the Attorney General, it is an opportunity—and an obligation—to ensure that bankruptcy does not become the place where unlawful business models go to be quietly resuscitated.
And for homeowners who were told they had “no way out,” it is a long-overdue reminder that North Carolina law still draws a sharp line between legitimate contracts and predatory fiction.
A Final Note of Congratulations
This decision also warrants a well-deserved tip of the hat to Jeff Jackson and the North Carolina Department of Justice team that brought and litigated this case with persistence and clarity of purpose. Brian Rabinovitz, Asa Edwards and Keith Clayton, in particular, deserve recognition for translating complex real-estate and consumer-protection law into a compelling case that exposed this scheme for what it was. Asa’s recent transition from the North Carolina consumer bar to public service only underscores the depth of practical experience brought to bear here. This win stands squarely in the long and proud tradition of North Carolina Attorneys General taking an active, progressive role in defending consumers and protecting the integrity of the marketplace—and it will have lasting ripple effects well beyond this single case.
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