Real Property - Linda S. Finley

• Publication year: 2006

Real Propertyby Linda S. Finley^*

I. Introduction

This Article discusses case law and legislative developments in Georgia real property law from June 1, 2005 through May 31, 2006. The cases and legislation discussed here were chosen at times for their significance to real property law or to update attorneys who either regularly or from time to time practice or render opinions regarding real property, and at times simply for their unusual or thought-provoking facts.

II. Legislation

The statutes regarding title to manufactured housing (mobile homes) were revisited in the 2006 legislative session.¹ Official Code of Georgia Annotated ("O.C.G.A.") sections 8-2-180 to -183,² which concern the process of converting manufactured homes into real estate, were amended to simplify the process of securitizing manufactured housing for the purpose of mortgage loans.³ In short, the legislature devised a process that eliminates the need for the creation of certificates of title and streamlines the process to avoid the back-and-forth documentation that the original legislation required.

Prior to the amendment, the statutes required numerous convoluted steps to obtain proper securitization.⁴ The prior statutes required that the owner of the mobile home and all holders of security interests therein execute and file a Certificate of Permanent Location ("CPL") in the real estate records of the county where the land was located and with the Commissioner of Motor Vehicle Safety ("CMVS").⁵ The purpose of the CPL was to indicate, of record, that it was the parties' intent that the mobile home was secured as part of the real property. The clerk of court was to record the CPL and provide the owner with a certified copy of that document,⁶ which was then to be delivered to the CMVS, along with a certificate of title (to the mobile home).⁷ Next, the CMVS issued confirmation to the superior court clerk that the CPL had been properly filed and that the certificate of title had been surrendered.⁸ Finally, the clerk of court was to provide a copy of the CMVS documents to the county tax assessor or other entity responsible for tax valuation.⁹

The length of time required to perform the requisite steps limited access to mortgage financing for those who wished to purchase manufactured housing because mortgage lenders want immediate and valid liens on property used to secure mortgage loans at the time of closing.¹⁰ Though the prior statutes remain in effect, enactment of the amendment simplifies the process by providing an alternative means to securitize mobile homes purchased after July 1, 2006.¹¹ The new streamlined process allows mobile homes to be converted to real property using only a certificate of origin (provided by the mobile home manufacturer) to obtain the CPL, and there is no longer a need to obtain a certificate of title from the CMVS.¹² Once the CPL is properly filed with the clerk of court, the process concludes, and "the [mobile] home shall become for all legal purposes a part of the real property on which it is located."¹³

III. Title to Real Property

United Bank v. West Central Georgia Bank¹⁴ was a contest between two lenders over reverter of title under O.C.G.A. section 44-14-80(a)(2), which provides that title to property reverts to the grantor seven years from the conveyance if there is no maturity date stated in the security deed.¹⁵ West Central argued that because the maturity date was stated in the note underlying the security deed and because the note was incorporated into the security deed, the reverter statute should not apply.¹⁶ The court of appeals held that the trial court correctly found that the presence of the date along with its incorporation by reference in the note was sufficient to fulfill the statutory requirement of O.C.G.A. section 44-14-80(a)(1).¹⁷

In Bowman v. Century Funding, Ltd.,¹⁸ the appellate court reviewed the validity of an affidavit of descent to determine whether the sworn averments of the affidavit should have put a subsequent purchaser on notice of other potential claimants to the real property.¹⁹ The plaintiffs in Bowman sued the record owner of the property and the owner's lender for ejectment and fraud arising from transfer of title to real property. The plaintiffs alleged that the language contained in an affidavit of descent should have put subsequent purchasers on notice that not all heirs of a prior title holder who had potential valid claims to the property had been identified.²⁰

The recorded affidavit stated that the prior decedent had been married once; however, under the heading of "Name of each Husband and Wife," the spouse was identified as "N/A."²¹ The court of appeals held that "[a] reasonable person examining this self-contradictory entry concerning the identity of [the] spouse could thus conclude that the document failed in its stated purpose—that is, the specification of 'all the heirs at law of [the decedent].'"²² Accordingly, the court of appeals reversed the trial court's order, concluding that whether the affidavit gave the subsequent purchaser actual or constructive notice of the excluded heirs' claim to the property was a question of fact.²³

In Brandenburg v. Navy Federal Credit Union,²⁴ Navy Federal Credit Union funded a $63,000 home equity line of credit to the borrowers, the former husband of the plaintiff, and the former husband's new wife. Prior to the closing, rather than obtaining a full title examination, the credit union obtained an "ownership report," which on its face stated that the report provided only current owner information and a legal description of the real property offered as security for the loan. If a title examination had been performed, it would have revealed a divorce decree recorded in the real estate records requiring the former wife (a title holder to the property) to convey the property by quitclaim deed to the former husband upon his payment of $40,000.²⁵

Upon discovering that the property had been conveyed as security for a loan without her knowledge (or the transfer of her recorded title interest), the former wife filed an action against her former husband and his new spouse for fraudulent conveyance. A receiver was appointed and the property was sold with the proceeds being held by the receiver. The lender was added as a party to the action and claimed that its security interest was superior to all other claims because the lender acquired its interest as a bona fide purchaser, in good faith, and without notice of the former wife's interest in the property.²⁶ The trial court granted summary judgment to the lender.²⁷ The court of appeals reversed, holding that although the divorce decree was not recorded in the general execution docket, a proper title examination would have revealed the judgment in the deed records and would have placed the lender on notice of the judgment and property interest of the former wife.²⁸

IV. Sale of Real Property

In Snipes v. Marcene P. Powell & Associates, Inc.,²⁹ a real estate broker sued for commission.³⁰ The court of appeals focused on the meaning of the word "introduced" as used in the listing agreement that was prepared using the standard Georgia Association of Realtors form.³¹ Specifically, the agreement provided that the sellers would pay the broker its commission if the property was sold to "any buyer introduced to the Property by Broker within 90 days after the expiration of the Listing Period."³² The court of appeals held that as long as the broker had "some minimal causal connection with the sale, or [was] in the chain of causation leading to the sale," the requirements of the listing agreement were met.³³

The court looked at the "silence" in a contract rather than the contract's specific words in Crowell v. Williams?³⁴ In that case, the sales contract was silent regarding remedies that would be available in the event of default by either the purchaser or the seller. The purchaser defaulted when he could not close the sale of the property, and the seller retained the deposit.³⁵ The court of appeals held that the purchaser was entitled to specify that the deposit would be forfeited in the event of default.³⁶ However, unless the contract provides otherwise, the "seller is required to return any purchase monies paid where the transaction is in effect cancelled or rescinded by the buyer's default in failing to pay the entire purchase price and the seller reasserts possession."³⁷ The court further stated that "the partial payment . . . gives the buyer an equitable interest in the land to the extent of his investment."³⁸ Once the seller rescinded the contract, he could not retain both the land and the funds.³⁹ The seller was required by equity to restore the original status quo by returning the deposit to the purchaser.⁴⁰

In Kennedy v. Droughton Trust,⁴¹ the purchaser brought an action against the seller for specific performance for failing to close the sale of realty. The purchaser made an offer to buy property using a standard Georgia Association of Realtors contract that recited a closing date of December 10, 2003. The portion of the sales contract indicating the time limitation for the seller to accept or reject the offer was left blank. The seller executed the contract on December 11, 2003, and returned it to the purchaser without changing the already-expired closing date. Shortly thereafter, the seller received a higher offer for the property. On December 16, 2003, the purchaser notified the seller of his intent to close the sale and offered dates for the closing. When no response from the seller was forthcoming, the purchaser sent a second letter with a date certain for closing to which the seller again failed to respond. The purchaser then brought suit for specific performance of the sales contract. The trial court granted summary judgment to the seller, finding that the contract had expired on December 10, 2003, and that even if the contract had not expired, the buyer had failed to...