Brant v. Hargrove

• Decision Date: 07 May 1981
• Docket Number: CA-CIV,No. 1,1
• Citation: 129 Ariz. 475,632 P.2d 978
• Parties: Edmund BRANT and Dolores Brant, his wife, Plaintiffs-Appellees, v. Roger T. HARGROVE, personal representative and special administrator of the Estate of Anastasia Nealon, aka Anastasia Mercer, deceased; William Henry Brophy College, an Arizona non-profit corporation; Cecilia Rodney, Clara Erickson, Theresa Freitas, Bruno Nittler, Joseph Nittler and Rudolph Nittler, Defendants-Appellants. 4419.
• Court: Arizona Court of Appeals

Page 978

632 P.2d 978

129 Ariz. 475

Edmund BRANT and Dolores Brant, his wife, Plaintiffs-Appellees, v. Roger T. HARGROVE, personal representative and special administrator of the Estate of Anastasia Nealon, aka Anastasia Mercer, deceased; William Henry Brophy College, an Arizona non-profit corporation; Cecilia Rodney, Clara Erickson, Theresa Freitas, Bruno Nittler, Joseph Nittler and Rudolph Nittler, Defendants-Appellants.

No. 1 CA-CIV 4419.

Court of Appeals of Arizona, Division 1, Department B.

May 7, 1981.

Rehearing Denied June 17, 1981.

Review Denied July 14, 1981.

Jeffrey M. Proper and McLoone, Theobald & Galbut, P. C. by Martin R. Galbut, Phoenix, for plaintiffs-appellees

Romley & Sherk by Roger T. Hargrove, Phoenix, for defendants-appellants.

OPINION

HAIRE, Presiding Judge.

This appeal is from a judgment entered in a deed of trust foreclosure action.

Plaintiffs-appellees, Edmund Brant and Dolores Brant, commenced this action to recover the amount due on a promissory note and to foreclose a deed of trust on certain real property situated at the southwest corner of the intersection of McDowell Road and 24th Street, in Phoenix, Arizona. Among the various defendants were the appellants, who were the personal representative and heirs of the estate of Anastasia Nealon Mercer.

Prior to trial the trial court granted the Brants' motion for partial summary judgment to the effect that the deed of trust constituted a valid lien upon the subject property. Shortly thereafter the matter proceeded to trial upon the only remaining issue, the appellants' affirmative defense of usury.

The principal issues raised by appellants concern two of the trial court's findings: 1) that the deed of trust constituted a valid lien upon the subject real property, and 2) that the underlying loan transaction was not usurious.

We will consider first whether the trial judge erred in finding that the deed of trust constituted a valid lien. On its face the deed of trust appeared to be regularly executed and acknowledged by the trustors, Nick Mercer and his wife, Anastasia Mercer, who owned the property as joint tenants with the right of survivorship. Appellants contended, however, that Anastasia's purported signature on the deed of trust was not genuine. In considering whether the trial judge properly granted summary judgment concerning the validity of the lien, we will assume that the record before him presented a genuine issue of fact concerning the validity of Anastasia's signature, ¹ and proceed to discuss the principal rationale urged by appellees in support of the trial court's ruling.

The appellees contend that the question of the validity of Anastasia Mercer's signature was immaterial because the uncontroverted evidence shows that, at all times pertinent to the subject loan transaction, the property was owned by Nick and Anastasia Mercer as joint tenants with the right of survivorship. ² They urge that, notwithstanding the invalidity of Anastasia's signature, the deed of trust constituted a valid lien against the interest of Nick Mercer, the executing joint tenant. From this premise the appellees urge that upon the death of Anastasia, prior to the commencement of these foreclosure proceedings, Nick Mercer became the owner of the entire property as the surviving joint tenant. Through the application of the doctrine of after-acquired property, ³ appellees urge that after the death of Anastasia the trust deed lien attached to the entire property.

The validity of appellees' argument depends upon whether the execution by Nick Mercer of the deed of trust constituted a valid lien upon his joint tenancy interest in the property. If so, the question becomes whether the joint tenancy was severed by the granting of the valid trust deed lien by the one joint tenant. A severance would result in the creation of a tenancy-in-common to which no right of survivorship could attach, and the lienholder's rights would therefore have been limited to one-half of the property. On the other hand, if no severance occurred by reason of the execution of the deed of trust by the one joint tenant, the right of survivorship would remain intact and the lien would extend to the entire property upon the subsequent death of the non-executing joint tenant (Anastasia).

We will first consider whether at the time of its execution the deed of trust constituted a valid lien against the joint tenancy interest of Nick Mercer.

As drafted, the deed of trust named both Nick Mercer and Anastasia Mercer as trustors and provided signature spaces for execution by both of them. The validity of Nick Mercer's signature and his acknowledgment have not been questioned. The executed acknowledgment clause also included Anastasia Mercer's name, although, as indicated above, there was expert testimony that her signature on the deed of trust was not genuine. Appellants' initial contention, apparently based upon a conditional delivery theory, is that the deed of trust was absolutely null and void, even as against Nick Mercer, because it was not executed by both of the intended trustors. In support of their contention, appellants cite Modular Systems, Inc. v. Naisbitt, 114 Ariz. 582, 562 P.2d 1080 (App.1977), in which the court stated:

"The general rule is where an instrument has been executed by only a portion of the parties purported to be bound thereby, the instrument is incomplete and never takes effect as a valid contract even against those who have executed it. (Citations omitted)." 114 Ariz. at 585, 562 P.2d at 1083.

While this principle is undoubtedly generally valid, it cannot operate in favor of Nick Mercer under the facts of this case. See Tracy-Collins Trust Company v. Goeltz, 5 Utah 2d 350, 301 P.2d 1086 (1956). If we assume that Anastasia's signature on the deed of trust was neither genuine nor authorized, then the only reasonable inference under the evidence here is that it was an unauthorized signature affixed by Nick Mercer. Although the appellee-lenders might not have entered into this transaction had they been aware of the problem with regard to Anastasia's signature, the undisputed facts are that they had no knowledge in that regard. Based upon the assumed due execution of the deed of trust, they entered into the transaction and advanced the full amount of the loan funds based upon the security apparently afforded by the deed of trust. While obviously the deed of trust could not constitute a valid lien against Anastasia's joint tenancy interest in the property, to hold that it was invalid as against the interest of the executing joint tenant, Nick Mercer, would be to lend the aid of the court in the perpetration of a fraud on his behalf. The defense of conditional delivery would not be available to Nick Mercer under these circumstances, Tracy-Collins Trust Company v. Goeltz, supra. Unquestionably Nick Mercer, as a joint tenant, could legally convey or encumber his joint tenancy interest in the property without Anastasia's consent or knowledge. See Cooley v. Veling, 19 Ariz.App 208, 505 P.2d 1381 (1973). We therefore hold that the deed of trust was not void, but rather was merely inoperative for the purpose of creating an encumbrance against the interest of the non-signing joint tenant. As against the joint tenancy interest of Nick Mercer, the deed of trust constituted a valid encumbrance at the time of its delivery.

The next question presented concerns whether Nick Mercer's interest, and therefore the deed of trust lien, extended to the entire fee interest in the property upon the subsequent death of Anastasia, or whether Anastasia's interest in the property became a part of her estate, free and clear of the lien created by the deed of trust. The resolution of this question requires that we determine whether under Arizona law the granting of a deed of trust lien by one joint tenant operates to sever the joint tenancy relationship.

This is a question of the first impression in Arizona, and requires an examination of the fundamental nature of the joint tenancy relationship. The major characteristic of the joint tenancy relationship, the right of survivorship, is authorized by Arizona statute, A.R.S. § 33-431 B, and our case law recognizes this type of ownership, even between husband and wife, when the granting instrument clearly evidences an acceptance of the right of survivorship by both spouses. See In re Estate of Baldwin, 50 Ariz. 265, 71 P.2d 791 (1937).

The creation of a joint tenancy with the right of survivorship, however, must occur in accordance with the common law "four unities" concept. See generally, Brown v. Navarre, 64 Ariz. 262, 169 P.2d 85 (1946). The question of what action on the part of the joint tenants, acting together or separately, is sufficient to accomplish a severance of the joint tenancy has not been the subject of extensive litigation in Arizona. The decisional law of Arizona, as in other jurisdictions, generally articulates the principle that action by a joint tenant which interferes with or destroys the continued coexistence of any one of the unities of time, title, interest and possession severs the joint tenancy relationship, leaving the joint tenants as tenants in common, without the right of survivorship.

All jurisdictions appear to recognize and apply this severance principle to situations in which a joint tenant has made an absolute conveyance of his entire joint tenancy interest so as to destroy all four unities. However, the principle has not been consistently applied where the conveyance or interference with the joint tenant's ownership interest has fallen short of destroying all of the unities. Thus, a lease by a joint tenant of his interest for a term of years, although obviously destroying the unities of interest and possession has been held not to sever the joint tenancy relationship. Tenhet v. Boswell, 18 Cal.3d 150, 554 P.2d 330, 133 Cal.Rptr. 10 (1976). The court articulated the time-worn concept that ...