Brock v. Yale Mortgage Corp.

• Decision Date: 04 October 2010
• Docket Number: No. S10A0950.,S10A0950.
• Citation: 700 S.E.2d 583,287 Ga. 849
• Parties: BROCK v. YALE MORTGAGE CORPORATION et al.
• Court: Georgia Supreme Court

287 Ga. 849
700 S.E.2d 583

BROCK
v.
YALE MORTGAGE CORPORATION et al.

No. S10A0950.

Supreme Court of Georgia.

Oct. 4, 2010.

Andersen, Tate & Carr, Jason W. Blanchard, Elizabeth Clack-Freeman, Donald L. Swift III, Duluth, for appellant.

Beloin, Brown, Blum & Baer, Frederic S. Beloin, James P. Blum, Jr., Atlanta, for appellees.

HUNSTEIN, Chief Justice.

287 Ga. 849

Appellant Jerry Brock (“Brock”) commenced this action against his ex-wife, Joyce Brock (“Joyce”), and appellee Yale Mortgage Corporation (“Yale”) to, among other things, quiet title in the Suwanee residence he and Joyce once shared (the “property”); set aside a forged quitclaim deed purporting to transfer Brock's interest in the property to Joyce; and set aside a subsequent deed to secure

700 S.E.2d 585

debt Joyce executed in Yale's favor or limit the deed to a one-half undivided interest in the property. ¹ The trial court granted Yale's motion for summary judgment, declaring that Yale holds a valid security interest in the entire property and authorizing foreclosure. Brock appeals, arguing that even if Yale is a bona fide purchaser for value, it did not acquire a valid security interest in the entire property by virtue of such status; Yale's status as a bona fide purchaser for value is a question of fact; and, contrary to the trial court's conclusion, he did not ratify Yale's loan transaction with his then wife. We affirm the order of the trial court insofar as it concluded that Yale holds a valid security interest in a one-half undivided interest in the property. We agree with Brock, however, that Yale could not acquire a valid security interest in the entire property by virtue of its status (if any) as a bona fide purchaser for value and that factual questions exist regarding ratification. As such, we reverse the trial court's order to the extent that it holds that Yale has a valid security interest as to the other one-half undivided interest in the property and remand so that a jury may decide whether Brock ratified the quitclaim deed in his divorce settlement

287 Ga. 850

agreement with Joyce.

Viewed in the light most favorable to Brock, the nonmoving party, Chester v. Smith, 285 Ga. 401, 401-402, 677 S.E.2d 128 (2009), the record shows as follows. The Brocks purchased the property jointly in 1987, financing the transaction with a loan from First Railroad Mortgage Company. In connection with the loan, the Brocks executed a security deed and promissory note in the amount of $56,000 in the lender's favor. The Brocks did not have a joint bank account. Brock maintained a checking account and gave his wife money each month to make the loan payment, but she did not always use the funds for that purpose. As a result, the Brocks' loan, which had been assigned to Atlantic Mortgage & Investment Corporation (“Atlantic”), went into default in October 1996. The following month, Atlantic's counsel sent the Brocks a notice of foreclosure sale by certified mail. Joyce borrowed money from a friend to bring the loan current and stop the foreclosure process. In August 2000, Joyce received a second notice of foreclosure sale from Atlantic's counsel due to her failure to make the required loan payments. Joyce did not tell Brock about the notice. To forestall foreclosure, she worked out a payment plan with Atlantic.

In January 2001, Joyce received a third notice of foreclosure sale after defaulting under the payment plan. Once again, Joyce did not inform Brock of the foreclosure sale notice, but instead contacted Jerri Browning of mortgage broker Capital Lending Group (“Capital”), about obtaining a new loan. Browning assisted Joyce in procuring a loan from Yale. Browning advised Joyce that in order to secure a loan in her name only, Brock would need to convey his interest in the property to her. At Browning's suggestion, Joyce requested a blank quitclaim deed from Yale's closing attorney, who faxed the deed to her. At the February 2001 loan closing, Joyce presented an executed, unrecorded quitclaim deed by which Brock purportedly transferred his interest in the property to her. Yale does not dispute that Brock's signature on the quitclaim deed is forged. Yale loaned Joyce $60,000, of which $15,460 was used to satisfy the Brocks' debt to Atlantic. Joyce received $38,085.44 in cash at closing. Joyce executed a promissory note and deed to secure debt in Yale's favor.

In May 2004, Brock discovered that his wife had spent over $200,000 from his checking account without his knowledge. He filed for divorce shortly thereafter. Around the same time, Brock learned about the 2001 foreclosure proceedings, the forged quitclaim deed, and the Yale loan. According to Brock, he called Yale after learning of the Yale loan, but the representative he spoke with told him she did not have to speak with him and terminated the call. In August 2004, the Brocks executed a settlement agreement in their divorce proceedings

287 Ga. 851

in which Joyce transferred “any and all of her

700 S.E.2d 586

rights, title and interest [in the property], whether legal or equitable” to her husband. The settlement agreement was incorporated into the final judgment and decree in the divorce proceedings.

In January 2005, Brock commenced this action. Yale answered, asserted counterclaims and cross-claims, and thereafter filed a motion for summary judgment seeking a declaration that it held a valid security interest in an undivided one-half interest in the property. In August 2006, Yale amended its motion to seek a declaration that its security interest extended to the entire property. The trial court granted Yale's motion, declaring that Yale holds a one-half undivided interest in the property. After Yale filed an emergency motion for clarification and/or reconsideration, the trial court amended its order to add that Yale also “hold[s] the other one-half undivided interest in the property.” Brock filed an emergency motion for reconsideration, after which the trial court entered a second amended order declaring that Yale “shall have an interest against the entire property and is permitted to foreclose on its interest in the entire property.”

1. We affirm the trial court's order to the extent that it recognizes that Yale's security interest in the property extends at least to a one-half undivided interest in the property. The trial court appears to have concluded that Yale obtained a valid security interest in a one-half undivided interest in the property as a bona fide purchaser for value, but, in our view, whether or not Yale occupies that status is not determinative.

OCGA § 23-3-40 provides that a deed may be cancelled on grounds of forgery. If the forged quitclaim deed is set aside here, however, that would not invalidate the subsequent security deed in its entirety. One holding property with another person as tenants in common cannot convey or affect that person's interest without his or her consent. Booth v. Watson, 153 Ga.App. 672(1), 266 S.E.2d 326 (1980). Yet, a tenant in common may encumber or convey his or her own interest in property without the consent of other cotenants. Motor Aid v. Ray, 53 Ga.App. 772, 774, 187 S.E. 120 (1936). Thus, if a tenant in common purports to convey an interest in the entire property, the deed will affect his or her interest although non-consenting cotenants will not be bound. Chastain v. Schomburg, 258 Ga. 218, 367 S.E.2d 230 (1988); Daniel F. Hinkel, Pindar's Georgia Real Estate Law and Procedure with Forms § 7-84 (6th ed.). It is undisputed that the Brocks acquired the property as tenants in common under a 1987 warranty deed transferring the property to both of them as grantees. See OCGA § 44-6-120. Accordingly, the security deed under which Joyce purported to convey legal title to the entire property to Yale, at a minimum, effectively vested Yale

287 Ga. 852

with a security interest in the one-half undivided interest in the property Joyce indisputably held and was free to convey.

2. The parties vigorously dispute whether the trial court's order should be affirmed on the basis that Yale acquired a security interest in the entire property by virtue of its status as a bona fide purchaser for value. As discussed below, we agree with Brock that Yale could not claim a security interest in the entire property based on such status alone.

As a general rule, “[a] bona fide purchaser for value is protected against outstanding interests in land of which the purchaser has no notice.” Farris v. Nationsbanc Mtg. Corp., 268 Ga. 769, 770(2), 493 S.E.2d 143 (1997); OCGA §§ 23-1-19, 23-1-20. We have long held that “[a] grantee in a security deed who acts in good faith stands in the attitude of a bona fide purchaser, and is entitled to the same protection. [Cits.]” Roop Grocery Co. v. Gentry, 195 Ga. 736, 745(1), 25 S.E.2d 705 (1943). But we have also long recognized that a forged deed is a nullity and vests no title in a grantee. Second Refuge Church, etc. v. Lollar, 282 Ga. 721(3), 653 S.E.2d 462 (2007); Rock Run Iron Co. v. Miller, 156 Ga. 136(1), 118 S.E. 670 (1923). As such, even a bona fide purchaser for value without notice of a forgery cannot acquire good title from a grantee in a forged deed, or those holding under such a grantee, because the grantee has no title to convey. Lollar, supra at 727-728(4), 653 S.E.2d 462 (forged quitclaim deed barred a

700 S.E.2d 587

subsequent purchaser from claiming the protection of bona fide purchaser for value doctrine); Chestnut v. Weekes, 183 Ga. 367(1), (2), 188 S.E. 714 (1936) (deed that was in substance a forgery would be void and...