Pease & Elliman Realty Trust v. Gaines

• Decision Date: 11 September 1981
• Docket Number: 61944,Nos. 61943,s. 61943
• Citation: 160 Ga.App. 125,286 S.E.2d 448
• Court: Georgia Court of Appeals
• Parties: , 33 UCC Rep.Serv. 412 PEASE & ELLIMAN REALTY TRUST v. GAINES et al.; GAINES v. PEASE & ELLIMAN REALTY TRUST

Page 448

286 S.E.2d 448

160 Ga.App. 125, 33 UCC Rep.Serv. 412

PEASE & ELLIMAN REALTY TRUST v. GAINES et al.;

GAINES v. PEASE & ELLIMAN REALTY TRUST

Nos. 61943, 61944.

Court of Appeals of Georgia.

Sept. 11, 1981.

Rehearings Denied Oct. 22, 1981.

Certiorari Denied Dec. 3, 1981.

Joseph R. Manning, Barry B. McGough, Richard P. Reinhart, Atlanta, for appellant in no. 61943.

Aaron I. Alembik, Warren S. Shulman, Ruby C. Bell, Irwin W. Stolz, Jr., Atlanta, Seaton D. Purdom, Decatur, for appellees in no. 61943.

Irwin W. Stolz, Jr., Warren S. Shulman, Joycelyn L. Fleming, Ruby C. Bell, Atlanta, Seaton D. Purdom, Decatur, for appellants in no. 61944.

Aaron I. Alembik, Keith Bell, Barry B. McGough, Joseph R. Manning, Atlanta, for appellee in no. 61944.

QUILLIAN, Chief Judge.

This is an appeal from the denial of cross-motions for summary judgment by plaintiff, Pease and Elliman Realty Trust, and defendant, Gaines and others. We granted interlocutory appeal to both sides to determine the validity of the trial court's denial of those motions.

Delta Equities, Inc., a Fulton County corporation, purchased a tract of land in Richmond County in 1970 for ultimate use as the site for construction of an apartment complex. Subsequently, in February 1971 Delta purchased from the Atlanta Gas Light Company (AGLC), gas furnaces, ranges, hot water heaters, air conditioning units, water coolers, and thermostats, for installation in the apartments, for the sum of $283,719.06. Delta, by and through its President, Lester B. Colodny, on February 12, 1971, executed a promissory note, a deed to secure debt, a financing statement, and a security agreement to AGLC. The security agreement provided, in part: "when installed the Collateral (referring to all appliances purchased from AGLC) shall not lose its identity as personalty..." However, at the same time Delta signed a UCC Financing Statement which contained the following: "If collateral is goods which are or are to become fixtures, check [this] box and complete [this section]. The described goods are affixed or are to be affixed to: (general description of real estate and name of record owner)." The fixture box was checked and that section was filled out to refer to the collateral purchased from AGLC and the description of the land purchased by Delta from Southeastern.

Colodny, for Delta, executed a Deed to Secure Debt to AGLC of the same date, which was made subject to a former Security Deed from Delta to Goodrich Investors Group of September 21, 1970 for $2,100,000.00. Thereafter, on October 19, 1972 Delta, through its President (Colodny) and Secretary (Richard Feldman, one of the defendants) transferred the subject property to a "local realty group" compose of Colodny, Feldman, Gaines, Vlass, and Data Centers. That conveyance was made subject to a prior security deed from Delta dated September 25, 1972 to G.I.T. Realty for $2,600,000.00.

On December 16, 1972, the "local realty group" transferred the subject property to "The Calcutta, a joint venture" by warranty deed, the only exception on this conveyance being the security deed to G.I.T. of September 25, 1972. "The Calcutta" joint venturers were Colodny, Feldman, Gaines, Vlass, Data Centers, and Calcutta Apartments Associates.

Thereafter, on December 29, 1972, Delta again transferred this same property to "The Calcutta," by warranty deed, subject to a security deed of December 22, from Delta to G.I.T. to secure a loan of $1,000,000.00.

On August 29, 1973, "The Calcutta," through its "Managing Venturer," "Lester B. Colodny," transferred this property to Clayton Equities, Inc. without noting any exceptions. On that same date, Clayton Equities, through its President, Lester B. Colodny, transferred this property to the plaintiffs, Pease & Elliman Realty Trust, with warranty deed and without noting any exceptions, liens, security deeds, or other encumbrances.

In summary: Delta conveyed this property to the Goodrich Investors Group on September 21, 1970 with a deed to secure debt; to AGLC on February 12, 1971 with a deed to secure debt; by warranty deed to the local realty group (Colodny, Feldman, Gaines, Vlass, and Data Centers) on October 19, 1972; to G.I.T. on September 25, 1972 and December 22, 1972 by deeds to secure debt; and to "The Calcutta" on December 29, 1972 by warranty deed. The Calcutta transferred the property to Clayton Equities on the same date Clayton Equities conveyed the property to the plaintiffs, August 29, 1973, both by warranty deed.

Upon default by Delta in payment of the promissory note, AGLC accelerated maturity of the note and notified the present owners, plaintiffs Pease & Elliman. Plaintiffs notified defendants of the AGLC claim and requested notification of any defense, and that recourse would be sought against defendants for breach of warranty of title. All defendants who responded asserted the defense of improper recordation. Plaintiff consulted counsel and compromised the claim by AGLC to prevent foreclosure. Plaintiff paid the agreed sum of $260,000 to AGLC to discharge its claim of "lien" and brought this action for breach of warranty of title. All defendants are plaintiff's immediate or remote grantors. Defendants Vlass and Feldman subsequently filed for bankruptcy and were discharged from any indebtedness to plaintiff.

Cross-motions for summary judgment were filed and denied. Both parties appeal. At issue is the validity of the claims of AGLC represented by the security agreement, the financing statement, and the deed to secure debt. All other deeds to secure debt are not in issue in this appeal. Held :

1. The first issue to be resolved is the viability of the Deed to Secure Debt. (a). Delta obtained the collateral property from AGLC and executed the deed to secure debt and financing statement on February 12, 1971. The AGLC agent testified he took both instruments to "the Clerk's Office for the Richmond County Superior Court," the county where the land is located. He gave both documents to "Mrs. Lillian Fulcher" and told her "we wanted them recorded and indexed in the realty with the deed and the financing statement." Both instruments were subsequently recorded in the personalty book of the clerk's office, stamped with the date, hour, and place of recording, and returned to AGLC. AGLC was billed at a later date. We find this to be a proper filing.

Where a deed is filed for record in the office of the clerk of the superior court of the county in which the land lies, "it takes effect, as against third persons without notice, from the time it is so filed, and it is admissible in evidence as 'a registered deed,' without further proof of its execution, although the clerk may have failed to record it or may have recorded it in the wrong book." Durrence v. Northern Nat. Bank, 117 Ga. 385(1), 43 S.E. 726; Accord, Greenfield v. Stout, 122 Ga. 303, 305(2), 50 S.E. 111; Willie v. Hines-Yelton Lumber Co., 167 Ga. 883(5), 146 S.E. 901; McEntyre v. Burns, 81 Ga.App. 239(1), 58 S.E.2d 442; National Cash Register Co. v. Sikes, 94 Ga.App. 391, 393, 94 S.E.2d 782; Pindar, Ga.Real Est.Law 661, 1059; §§ 19-128, 26-97. The presentation of the instruments to the office of the clerk constituted a proper filing. Albany Nat. Bank v. Ga. Banking Co., 137 Ga. 776(2a), 74 S.E. 267; 8 EGL 414, Deeds § 128; Code Ann. § 67-2501 (Code § 67-2501); Code Ann. § 109A-9-403(1) (Ga.L.1962, pp. 156, 415 through 1964, pp. 70, 74).

"If the clerk keeps one book... in which are entered notations of filing for record of deeds and mortgages and other liens on realty... and another book as part of his docket in which are entered notations of filing for record of deeds and mortgages and other liens on personalty, both books will constitute the docket; and an entry of filing which states the day and hour of filing, made in either book, of an instrument retaining title in a vendor as security for the purchase-price of personalty and also creating a mortgage on realty by the purchaser as additional security for such purchase-price, will comply with the statute... [and] an entry, in the book relating to personalty, of an instrument of the character above described, which states the day and hour of the filing, will be sufficient relatively to the mortgage clause as to realty, and will be notice to a subsequent purchaser of the realty, although no such entry is made in the other book." Touchstone Live Stock Co. v. Easters, 172 Ga. 454(1, a & b), 157 S.E. 683; Accord, Thomas v. Hudson, 190 Ga. 622, 626-627(1), 10 S.E.2d 396; National Cash Register Co. v. Sikes, 94 Ga.App. 391, 393, 94 S.E.2d 782, supra. Accordingly, the deed to secure debt was properly recorded and notice to the world. Greenfield v. Stout, 122 Ga. 303(2), 50 S.E. 111, supra.

(b) Even though the deed to secure debt was properly recorded, defendants contend it was not legally enforceable. We agree. The face of the deed shows the recording tax imposed by Code Ann. § 92-164 (Ga.L.1953, pp. 379, 383; 1955, pp. 288, 289) was not paid. Our Code provided: "[f]ailure to pay the tax levied by this law [§§ 92-161 through 92-814] shall constitute a bar to the collection of the indebtedness secured by any instrument required by this law to be recorded..." Code Ann. § 92-171 (Ga.L.1953, pp. 379, 386); note subsequent statutes (Code Ann. §§ 91A-3202, 91A-3209) are inapplicable as they were codified following recordation of the security instruments at issue herein.

It is not contested that the recording tax was not paid. Neither can it be contested that the statute makes the deed to secure debt unenforceable where the tax was not paid. Thus, although the general warranty of title covenants the right of quiet enjoyment and of freedom from incumbrances (Code Ann. § 29-303 (Code § 29-303)), it is only "a covenant against the valid claims of all persons..." (Emphasis supplied.) Pindar, Ga.Real Est.Law 697, § 19-168 (see FN 654: "A purchaser cannot maintain an action for recovery of...