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The Inheritance

Tuesday, May 31st, 2011

Where there’s a will, there’s a way.

The former home of Amanda Jones

ATLANTA, GA–For many years until her death in 2005, this was the home of Amanda Jones.

Among her close relations, Ms. Jones had a niece named Lillie Mae Walker. In 1976, Ms. Walker came to live with Ms. Jones. Later, in 1994, Ms. Walker’s daughter, Laurlene Riggins, also moved in. Ms. Riggins provided care for Ms. Jones, who was then 90, and Ms. Walker, then 72.

In 1995, Ms. Jones signed a Last Will and Testament giving a life estate in the property to Ms. Walker, with the remainder interest going to Ms. Riggins.

Ms. Jones had a stepson, named Eugene. In June 2003, she signed a different Last Will and Testament in which she bequeathed the property to Eugene. But then, in October 2003, Ms. Jones signed yet another Last Will and Testament, revoking all previous wills and again bequeathing the property to Ms. Walker as to a life estate, with the remainder going to Ms. Riggins.

Ms. Jones died in April 2005. After her death, Ms. Walker and Ms. Riggins continued to live in the home–but they neglected to file the October 2003 will for probate.

Enter Ellene Jones, Eugene’s wife. In May 2005, Ellene filed the June 2003 will for probate. Without notice to Ms. Walker or Ms. Riggins, the Probate Court named Ellene executrix of Ms. Jones’ estate and, in July 2005, Ellene executed a deed transferring the ‘free and clear’ property to Eugene.

Eugene promptly mortgaged the property, giving a security deed (akin to a deed of trust) to Ameriquest, for $95,500, in August 2005. Ameriquest got a drive-by inspection, never speaking to residents Walker and Riggins.

Ms. Riggins learned of the mortgage in mid-2006, after getting a mortgage-related notice in the mail followed by telephone calls, but Eugene denied any knowledge of it.

So Ms. Riggins got a lawyer, and filed the October 2003 will for probate. The Probate Court revoked Ellene’s appointment, and approved the October 2003 will as Ms. Jones’ true Last Will and Testament. Ms. Riggins was made the new personal representative of the estate, whereupon she deeded property to herself and Ms. Walker.

The Supreme Court of Georgia building

The stage was set for a legal battle between the heirs and the lender (now Deutsche Bank). The lender sued to quiet title, and the trial court ruled for the lender. The heirs appealed.

The Supreme Court of Georgia affirmed the trial court decision. The high court explained that, under Georgia statutes, an innocent purchaser of property from an ‘apparent’ heir of a deceased person is protected “as against unrecorded liens or conveyances.”

The Court reasoned that the lender did not have “actual notice” of the true heirs’ interests because Walker and Riggins had not opened a probate at the time the loan was made. And, the Court said, the lender would not be charged with knowledge it could have gained from parties in possession, but instead acted reasonably in relying on what Eugene told them–which was, “momma…made the will to me” but Ms. Walker “is supposed to live there until she dies.”

The Court concluded, “Ameriquest’s failure to inquire further regarding Walker’s status in the house does not show a lack of good faith.”

Moral: In light of this harsh result, seems the Georgia legislature should do some work on its statutes.

But the real moral here is that anyone with an interest in property under a will should see that the will is promptly probated. Failing to act is risky business.

The case is Riggins v. Deutsche Bank, 708 S.E.2d 266, 288 Ga. 850 (Ga. 2011).

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Mortgages and Deeds / A Contested Deed

Saturday, April 2nd, 2011

It comes to this: Is the deed void, or merely voidable?

LOS ANGELES, CA–Back in the day this two unit income property in South Los Angeles was owned by David and Florence Sims. The couple lived next door.

Back in the day: The Simses' income property

David and Florence did some estate planning and, in September 1991, they created the Sims Family Trust to hold title to their residence and income property. With the trust agreement, the Simses directed that upon their deaths the residence would be gifted to Florence’s daughter, Shirley, and the income property would go to David’s daughter, Yvonne.

David died and, as alleged in court filings, shortly after his death Florence began to show signs of dementia. She was then 86. As her condition deteriorated, Florence came to rely on her granddaughter, Sheron, to help her with medical decisions.

By December 2001, Florence was diagnosed with paranoia, hallucinations, and dementia. She signed a Power of Attorney giving Sheron authority over her health care decisions.

Florence died April 7, 2003.

Later, in November 2003, there were recorded two grant deeds purportedly signed by Florence conveying the residence and income property to Sheron. The deeds were dated and notarized as of January 2, 2002.

Sheron proceeded to refinance the properties, taking subsantial cash “out.” The income property was last refinanced in 2006, when Sheron gave Washington Mutual a deed of trust for $440,000.

By early 2008 Sheron was in default on her loans, and in April 2008 foreclosure notices were posted on both properties.

By this time David’s daughter, Yvonne, and her husband James had opened separate probates for the estates of David and Florence. They were in possession of the properties, and were surprised by the foreclosure notices. Apparently, Sheron had made payments without anyone knowing, until she ran out of money.

Yvonne and James filed complaints to invalidate the newly-discovered deeds of trust. As to the income property, they claimed the Washington Mutual deed of trust is invalid because (a) Sheron may have forged Florence’s signature on the deed giving the property to Sheron, (b) if Florence did in fact sign the deed, she lacked mental capacity to understand what she was doing, and/or (c) if Florence did sign, she lacked capacity to understand the nature and effect of the deed.

Washington Mutual (now known as J.P. Morgan) defended the deed of trust arguing the lender relied on the Florence-to-Sheron deed in good faith and, therefore, it is entitled to favored status as a bona fide encumbrancer.

The trial court ruled in favor of the lender, and dismissed the complaint. The court reasoned the deed may be voidable, but it could not be void because, at the time its loan was made, the deed appeared in county land records and the lender had no reason to question it. Plaintiffs Yvonne and James appealed.

The Ronald Reagan State Building at Los Angeles, home to the Court of Appeal

The Court of Appeal reversed, holding the deed would be void if any of the three grounds alleged by plaintiffs can be proven. “Generally,” the Court explained, “a deed is void if the grantor’s signature is forged or if the grantor is unaware of the nature of what he or she is signing. A voidable deed, on the other hand, is one where the grantor is aware of what he or she is executing, but has been induced to do so through fraudulent misrepresentations.”

And, said the Court, a deed which is “wholly void” cannot ordinarily provide a foundation for good title even in the hands of a bona fide purchaser or encumbrancer.

With that, the case was remanded for trial of plaintiffs’ allegations.

Moral: This decision will not be published in the official reports, because it’s based on established law, but it shows how land records are viewed (void vs. voidable) in a deed contest.

The outcome here will likely turn on medical opinion and testimony of those around Florence in her final years.

The risk of forgery or a void instrument in the chain of title is commonly covered by title insurance.

The (unpublished) case is reported as Casonhua v. Washington Mutual Bank, 2010 WL 4193214 (Cal. App. 2 Dist.).

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Last Wishes

Sunday, July 18th, 2010

A transfer on death deed:  What a difference a day makes.

UNIONTOWN, OH–Charles Morris was dying.

Diagnosed with colon cancer in 2004, his condition worsened until, in the summer of 2006, the end was near.

Charles' house: A dying wish would be tested in court

So Charles sat with a lawyer to draw up a will.  He wanted his house and two cats to go to his ex-wife, Michelle;

his computer and camera equipment to Thomas Hall; and the remainder of his possessions to his nephew, Joseph Mattia.

Because gifts made by a will must go through probate, which could tie up the real property for months, the lawyer suggested Charles sign a transfer on death deed, so that upon his death the house would immediately pass to Michelle outside of probate, without court supervision.

The transfer on death (“TOD”) deed is new.  It’s an alternative to the trust, or joint tenancy with right of survivorship, as a means to transfer a decedent’s real property without necessity of probate.  Ohio’s statute approving the TOD form became effective in 2002.

On August 25, 2006, Charles executed his Last Will and Testament, along with a TOD deed naming Michelle as the transfer on death beneficiary.  It appears the TOD was left with the lawyer for recording.

Days later, on August 30, Charles died.  The next day, August 31, the TOD was recorded with the Recorder Division of the Summit County Fiscal Office.

Soon Charles’ will was filed in court and admitted to probate.  Thomas Hall was appointed executor of the estate.

As instructed by the lawyer, Michelle recorded an affidavit of transfer on death, stating she was the sole surviving beneficiary under the TOD, along with a certified copy of Charles’ death certificate.

Then things got contentious.

Joseph Mattia, the nephew entitled to the remainder (“residue”) of the estate under Charles’ will, filed suit for a judgment that the TOD was invalid, because the deed was not recorded while Charles was living.  Such a judgment would cause the house to be included in the probate proceedings where, as part of the “residue” of the estate, it could be inherited by Joseph.  This leaves Michelle with just the two cats.

Joseph argued for a literal reading of the Ohio statute (Revised Code section 5302.22).  The statute says that a TOD deed must be executed and recorded for the beneficiary to have rights to the property.  So, the argument goes, a deed recorded after the grantor’s death is ineffective.

Michelle countered that the statute should not be so narrowly construed.  She pointed out a grantee can’t control when a deed, filed for record, will be officially “recorded.”  She also invoked the familiar rule that a deed is effective, as between the grantor and grantee, when it is executed and delivered (i.e., entrusted to a third party for recording).

The trial court ruled in favor of Joseph, and the decision was upheld by the Court of Appeals.

Summit County courthouse at Akron, Ohio

The courts relied on language of the statute, which states that a property owner “may create an interest in the real property transferable on death by executing and recording a deed as provided in this section….”  Citing an earlier Ohio case in which the literal interpretation was followed, the appeals court reasoned that a TOD deed may be later revoked by a grantor, so the recording requirement protects the grantor’s true “last wishes.”

Moral:  As of this writing, the TOD deed has been approved by legislatures in more than a dozen states and is under review in the rest.  It may become commonplace.  As with anything new, there may be pitfalls.  When relying on the TOD deed you should get legal advice, follow your state statute, and be mindful of local recording practices.

Such is the power of wishes.

The (unpublished) case is reported as Mattia v. Hall, 2008 WL 186650 (Ohio App. 9 Dist.)

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