Real Property - T. Daniel Brannan and William J. Sheppard

• Publication year: 1997

Real Propertyby T. Daniel Brannan^* and William J. Sheppard^**

I. Introduction

This Article surveys the case law and legislative developments in the Georgia law of real property from June 1, 1996 to May 31, 1997. The authors do not endeavor to chronicle every case decided or address each action by the Georgia Legislature during that period. Instead, they focus on those cases and statutory enactments that are likely to have some particular significance for legal practitioners in their day-to-day practice or that establish some new principle of law. During the past year, some of the more significant developments in real property law have come from the legislature, including the passage of the Georgia Electronic Signature Act.¹

II. Title to Land

During the survey period, there were several interesting cases involving disputes over title to land, including a few cases of first impression for Georgia courts. The issue in one case, Thornton v. Carpenter,² was whether Carpenter qualified as a bona fide purchaser for value of realty and was entitled to protection against the claims of an incompetent grantor seeking to set aside the conveyance. The property at issue was conveyed by Ms. Thornton, an incompetent, to her son and attorney-in-fact.³ The son then sold the property to Moody, who had notice of the claim of another of Ms. Thornton's sons challenging the validity of the conveyance to the first son. Subsequently, Moody conveyed the property by quitclaim deed to Carpenter, and Carpenter later sold a portion of the subject property to Edenfield. The second son, who was appointed as Ms. Thornton's guardian, filed suit against Carpenter and Edenfield seeking to set aside the conveyances and to regain the property.⁴

At trial, apparently in an attempt to show that Carpenter was not a bona fide purchaser, plaintiff contended that Moody was acting as Carpenter's agent for purposes of acquiring the property formerly owned by Ms. Thornton and that, consequently, Carpenter should be charged with notice given to Moody of Ms. Thornton's incompetence. Carpenter submitted an affidavit stating that no agency relationship existed between him and Moody and that he had no knowledge of plaintiff's claims prior to acquiring title to the property. Plaintiff presented no evidence to contradict that affidavit. Plaintiff also contended that Carpenter was put on constructive notice of defects in Moody's title to the property as a result of the initial transfer of the property from Ms. Thornton to her son, who was also her attorney-in-fact. Finally, plaintiff contended that the conveyance by Moody to Carpenter by quitclaim deed should be construed to charge Carpenter with constructive notice of defects in Moody's title. The trial court granted summary judgment, and plaintiff appealed.⁵

The court of appeals agreed that Carpenter was in fact a bona fide purchaser.⁶ First, the court held that an assertion of an agency relationship unsupported by specific facts and made by an outsider to the relationship, is insufficient to refute a denial of an agency relationship made by a purported party thereto.⁷ Because Carpenter's testimony that Moody was not his agent was uncontroverted by any facts presented by plaintiff, no question of fact was presented for trial.⁸ Second, the court rejected the second son's argument that the manner of the conveyance by Ms. Thornton imposed a burden of inquiry upon persons dealing with the property.⁹ The court reasoned that Ms. Thornton conveyed the property to the first son as her son and not as her attorney-in-fact.¹⁰ Finally, the court held that Moody's conveyance to Carpenter by quitclaim deed did not alone constitute notice of any claims against Moody as grantor.¹¹

However, the appellate court disagreed with the trial court about the effect of Carpenter's status as a bona fide purchaser. Rather than relying on Official Code of Georgia Annotated ("O.C.G.A.") section 23-119,¹² the court found that O.C.G.A. section 13-3-24(a)¹³ was controlling.¹⁴ Under section O.C.G.A. 13-3-24, the controlling question was whether Ms. Thornton was lucid at the moment she made the transfer to her first son.¹⁵ Because that issue was for the jury to determine, the court reversed and remanded for trial.¹⁶

Williams v. Brown¹⁷ concerned whether the meaning of the word "children" in deeds conveying remainder interests includes illegitimate children. Two tracts of land were involved—a twenty-five-acre tract and a one-hundred-acre tract. The deed to the twenty-five-acre tract of land stated that the land was transferred to Ralph Miller upon Milton Miller's death. Upon Ralph Miller's death, the land was to be transferred to "his children then living."¹⁸ If none existed, the land reverted to Milton Miller's estate. The deed to the one-hundred-acre tract stated that the land was transferred to Ralph and Eloise Miller upon Milton Miller's death. Upon Ralph and Eloise Miller's death, the land was to be transferred to "their children then living."¹⁹ If no children existed, the land reverted to Milton Miller's estate.²⁰

Eloise Miller predeceased Ralph Miller. At the time of Ralph's death, he and Eloise had no children together, but Ralph had three illegitimate children. The heirs of Milton Miller claimed that those children had no interest in either of the tracts, and the trial court agreed. Ralph's children appealed.²¹

The question before the supreme court was whether the illegitimate children were "children" under either of the deeds. The court declared that it must ascertain the intent of the grantor.²² To do so, the court looked to the law at the time the deeds were drafted.²³ In 1961 the law provided that "children" in instruments of conveyance meant legitimate children unless there was evidence of a specific contrary intent.²⁴ Because the court found no evidence that Milton Miller specifically intended to convey to illegitimate children, the court concluded that Miller could only have meant legitimate children.²⁵ Therefore, the court upheld the trial court ruling that the three illegitimate children were not entitled to any interest in either of the tracts of land.²⁶

Justice Sears disagreed with the majority view that illegitimate children were not "children" under the deed to the twenty-five-acre tract.²⁷ Justice Sears maintained that Milton Miller's intent must be determined by reading the two deeds together.²⁸ One deed conveyed the property to Ralph's and Eloise's ("their") children, while the other conveyed the property to Ralph's ("his") children. Justice Sears opined that the different language in the deeds showed that the grantor specifically intended the twenty-five-acre tract of land to go to all of Ralph's children, regardless of their mother's identity, while the deed to the one-hundred-acre tract showed the grantor's intent to convey that tract only to the children of Ralph and Eloise.²⁹

Further, Justice Sears dissented because the majority opinion was contrary to public policy and to the court's other decisions regarding children bom out of wedlock.³⁰ The concept of virtual legitimization allows an illegitimate child to inherit from the father's estate upon a showing that the child is in fact the father's child and that the father wished the child to share in the estate.³¹ This concept is consistent with principles of equal protection that prevent states from discriminating based on immutable attributes.³² Imposing disabilities on an illegitimate child is contrary to the basic concept that legal burdens should bear a relationship to individual responsibility or wrongdoing.³³ Justice Sears stated that "nothing in our case law prevents the application of these sound principles to the transfer of land deeds," as it is "unduly harsh to make children pay the penalty for the misconduct of their parents."³⁴

The supreme court faced another issue of first impression in Leeds Building Products, Inc. v. Sears Mortgage Corp.³⁵ This case concerned the effect of a recorded security deed that, although defective, appeared proper on its face. In Leeds Building Products, Peach Communities, Inc. ("PCI"), a residential home builder, purchased construction materials on credit from Leeds Building Products, Inc. ("Leeds"). To secure repayment of the purchase price, PCI executed security deeds to Leeds on the properties PCI was developing. However, the unofficial witness to those instruments never saw PCFs representative sign the deeds. Thereafter, the defective deeds were recorded in the land records of the county where the properties were located.³⁶

Plaintiffs purchased or financed purchases of the homes that had been pledged to Leeds by PCI. Prior to purchasing those homes, plaintiffs performed title searches regarding the properties. However, those title searches failed to disclose the existence of Leeds' security deeds, and the debt from PCI to Leeds was not satisfied at the time plaintiffs closed on their respective transactions. Thereafter, Leeds demanded that plaintiffs satisfy the security deeds and stated its intention to foreclose the security deeds if payments were not made. Plaintiffs filed an action seeking damages for Leeds' wrongful declaration of default, wrongful attempt to foreclose, fraud, and litigation expenses.³⁷

The parties filed cross motions for summary judgment, and the trial court granted summary judgment to Leeds. The court of appeals reversed the principal ruling by the trial court and held that although the deeds were properly recorded and facially valid, they did not provide notice of Leeds' claim because they were not properly attested or acknowledged.³⁸

The supreme court noted that it had not previously addressed whether a recorded deed that was not facially defective provided notice to subsequent purchasers sufficient to maintain the priority of the earlier creditor under O.C.G.A. section 44-2-1.³⁹ After a brief analysis, however, the court concluded that "a security deed which has no facial defects...