Real Property
| Publication year | 2012 |
Real Property
Linda S. Finley
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Given continued economic issues, it is tempting to turn any survey of Georgia real property law into a report solely about foreclosure law. The survey period of this Article—from June 1, 2011, through May 31, 20121 —saw continued dire economic times for Georgia and the entire United States. As this Article was going to print, RealtyTrac, which reports national foreclosure statistics, released its mid-year 2012 foreclosure report showing that foreclosure activity had again increased in 125 of the nation's 212 metropolitan areas.2 Of the metropolitan areas making up the top ten on the foreclosure report, only Atlanta registered an increase in foreclosure during the first half of 2012.3 The courts and the Georgia General Assembly continue to address issues
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concerning the foreclosure process and other real property issues that arise either directly or incidentally because of the foreclosure dynamic. It appears these issues will continue to be around for some time.
With foreclosure on the minds of members of the General Assembly, work was done to lessen its impact on Georgia families and communities. In an effort for communities to keep abreast of who has title to properties that have been foreclosed (and likely to hold those who purchase foreclosed property accountable for conditions of the property), House Bill 1104 was enacted to provide standards for local and county governments that elect to enact ordinances requiring owners to register vacant real property.5 The statute defines "foreclosed real property"6 and "vacant real property"7 and limits the information that the county or municipality may require.8 Fees for registration are limited to a maximum of $100 per registration.9 Penalties for failure to register or failure to update registration information cannot exceed $1,000.10 An owner of vacant property may request exemption from registration if certain requirements are met and may challenge a county's determination that a property is vacant.11
Following a national trend where large-scale lenders are targets of federal investigations,12 the General Assembly expanded the definition of "mortgage fraud."13 Section 16-8-101 of the Official Code of Georgia Annotated (O.C.G.A.)14 was amended to expand the scope of what may be investigated as mortgage fraud by including in the definition of "mortgage lending process:" (1) "the execution of deeds under power of
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sale" (foreclosure deeds); and (2) the execution of assignments vesting the secured creditor with title to the security instrument.15
Although most attention was placed on the provisions regarding residential property, foreclosure of commercial property was not ignored. Senate Bill 33316 amends O.C.G.A. § 44-14-162.317 to require the same notice required in residential foreclosure to be provided to commercial property owners prior to foreclosure sales.18
Following the Federal Protecting Tenants at Foreclosure Act of 2009,19 which provided rights to tenants who reside in property foreclosed during their tenancy,20 House Bill 44521 was enacted to give such tenants similar protection under Georgia law.22 The statute provides various protections to bona fide tenants,23 provides the tenant a period of ninety days before he or she can be evicted,24 and codifies a mechanism for recovery of the security deposit.25
Revisiting the Georgia Supreme Court's 2003 advisory opinion26 —which stated that the preparation and execution of a deed of conveyance by anyone other than an attorney licensed in Georgia constituted an unauthorized practice of law27 —the General Assembly amended O.C.G.A. § 44-14-13 28 to codify the advisory opinion and formally legislate the requirement that only a 'lender or an active member of the State Bar of Georgia" can conduct a closing or disburse settlement proceeds.29 The statute goes further than the advisory opinion, applying the attorney requirement to both new loans and transactions to refinance made by a current or a new lender.30 Civil penalties are enacted for any person violating the statute as $1,000 or double the amount of interest payable on the loan for the first sixty days
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after closing, whichever is greater;31 it also creates a misdemeanor crime punishable by a fine of up to $1,000 and up to twelve months imprisonment for each violation.32
In Chase Manhattan Mortgage Corp. v. Shelton,34 the Georgia Supreme Court addressed the effect of a mortgagor's conveyance of a portion of his equitable interest in a mortgaged property to his minor children on subsequent holders of legal and equitable title.35
On June 30, 1998, Shelton acquired title to the property via warranty deed. On the same day, he executed two security deeds transferring legal title of the property to secure repayment of the debt. In September 1998, Shelton conveyed his equitable interest in the property to his wife and two children (the Shelton children), each of them receiving a one-third interest.36
When Shelton refinanced the property two years later, the new lender, Choice Capital Funding, Inc. (Choice Capital) refused to refinance the property unless the children's names were removed from the chain of title. To this end, the Sheltons hired an attorney to petition the probate court to appoint the children's mother as legal guardian of their interest in the property. However, the probate court never appointed Shelton's wife as the children's conservator.37 In September 2000, Shelton's wife executed and recorded a quitclaim deed purportedly conveying both her interest and the children's interest back to Shelton, signing the deed once for herself and twice as "Guardian of each child.38 Shelton then executed a security deed in favor of Choice Capital and used the loan
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proceeds to pay off the original security deeds, which were cancelled of record in December 2000.39
Choice Capital later assigned the security deed to Household Finance Corporation (HFC), who foreclosed on the property in December 2002. In August 2003, HFC conveyed the property to Brian and Keily Johnson (the Johnsons), who financed the purchase with a loan from Chase Manhattan Mortgage Corporation (Chase) and a Chase affiliate. The Johnsons later paid off the security deed in favor of the Chase affiliate and executed a new security deed in favor of USAA Federal Savings Bank (USAA). In April 2008, the Shelton children, through appointed counsel, sued to quiet title to the property naming the Johnsons and the holders of the two security deeds, Chase and USAA, as defendants. In December 2010, the trial court granted summary judgment in favor of the Shelton children, holding each held clear title to a one-third undivided interest in the property. Chase, USAA, and the Johnsons (appellants) appealed.40
In affirming the trial court's decision, the Georgia Supreme Court rejected the appellants' argument that they were bona fide purchasers such that equity would require their property interests be unaffected by the Shelton children's interest.41 The supreme court noted that bona fide purchaser status requires "lack of actual or constructive notice of the outstanding interest in the property."42 Here, the supreme court reasoned, the chain of title included the 2000 quitclaim deed from Shelton's wife to him, which showed on its face that the mother was the children's purported guardian.43 The supreme court held that under the circumstances, the appellants were "on notice of the need to confirm the mother's legal authority"44 to convey her children's property interest.45
The Georgia Supreme Court also upheld the trial court's finding that the children acquired a two-thirds interest in the property from the original quitclaim deed, noting that it was undisputed that Shelton held equitable title, which is freely transferable, when he transferred it to
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his children in 1998.46 Moreover, because Shelton's wife was never appointed conservator, the 2000 quitclaim deed was only effective in conveying her one-third equitable interest, leaving the children's two-thirds interest intact.47 The court stated, "When the [o]riginal [s]ecur-ity [d]eeds were paid off and cancelled of record in December 2000, legal title automatically reverted to Shelton and his assigns-his two children."48 Thereafter, Shelton could only convey the interest he held.49 Thus, when he executed the new security deed in favor of Choice Capital, he conveyed only his one-third interest in the property, which was all that was assigned to the foreclosing party and ultimately the only interest appellants received.50
Disputes concerning control of church-owned property when a congregation splits from its parent church continue to raise critical property, trust, and First Amendment issues in Georgia courts. In 2011, this Survey addressed the Georgia Court of Appeals decision in Rector, Wardens & Vestryman of Christ Church in Savannah v. Bishop of the Episcopal Diocese of Georgia, Inc. (Christ Church),51 then on appeal to the Georgia Supreme Court.52 The Georgia Supreme Court granted certiorari and issued a long and detailed opinion analyzing the title instruments, Georgia trust statutes, and local and national church documents.53 The issue before the court was not ownership in terms of legal title but rather "[t]he question presented [was] who controls that property."54
The supreme court began its lengthy opinion by recognizing that the First Amendment limits the manner in which secular courts resolve property disputes involving churches and religious organizations.55 Specifically, when secular courts are called to resolve property disputes in hierarchical religious denominations, they must apply "neutral principles of law" to determine who has the right to control church property and "avoid[] any inquiry into religious doctrine."56 This
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neutral...
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