>Daily Development for Tuesday,August 12, 2008
>by: Patrick A. Randolph, Jr.
>Elmer F. Pierson Professor of Law
>UMKC School of Law
>Of Counsel: Husch Blackwell Sanders
>Kansas City, Missouri
>dirt@umkc.edu
>
>JOINT TENANCIES; SEVERANCE; MORTGAGES: Joint tenancy not severed when joint tenant executes security deed.
>
>Biggers v. Crook, 656 S.E.2d 835 (Ga. 2008).
>
>Appellee and decedent inherited real property which they took as joint tenants with rights of survivorship.  Before he died, decedent executed a promissory note in favor of a creditor and signed a deed to secure debt against the property in order to secure payment of the note.  After decedent died, the creditor claimed an interest in the property. 

>
>In a question of first impression, the Georgia Supreme Court held that a joint tenant’s execution of a security deed in real property was a severance of the joint tenancy as it was not a sufficient transfer of all or part of the joint tenant’s interest in the property as would sever a joint tenancy with right of survivorship.   Although the court was construing statutory language, the decision relies on out of state authority and it appears to contribute to the common law in this area.

>
>The creditor asserted that when decedent granted her a deed to secure debt, he legally severed his interests as co-tenant.   The court disagreed.  The court, relying on authority from the California Court of Appeals, reasoned that the conveyance “carrie[d] none of the incidents of ownership of the property, other than the right to convey upon default on the part of the debtor in the payment of his debt.”   When the decedent died, his death terminated his interest that was encumbered by the security agreement and extinguished the security interest held by the creditor.   Therefore, the deed to secure debt did not sever the joint tenancy between decedent and appellee.

>
>Comment 1: This in fact is a very difficult issue for many courts.  They recognize that to hold that there is no severance leaves the mortgagee unsecured at the critical time - the death of their debtor.  They are concerned that this almost certainly was not the intent of the mortgagee at the time of the mortgage.  It probably wasn’t the intent of the mortgagor to expose the mortgagee to this risk.  Remember, as prior recent postings have indicated, courts in this area often try to discern the intent of the grantor in determining whether a given grant constituted a severance. 

>
>The problem with finding that there is a severance, and thus protecting the mortgagee, is that if the mortgagor repays the debt, as the mortgagor likely intended, and then dies, the property passes as a tenancy in common and the other joint tenant is denied his survivorship right. 

>
>According to Stoebuck and Whitman, The Law of Property, it is “well settled” in  those states that use the “title theory” of mortgages that a mortgage is a severance, but that Stoebuck and Whitman maintain that the cases are split in “lien” and “modified title” states.  The treatise really cites very little authority to support any firm conclusion. 

>
>Some “lien theory” cases, including Hamel v. Gootkin, 202 Cal. App. 2d 27 (1962),  relied upon by the Georgia court, find no severance because the transfer of a lien is not the transfer of an ownership interest, even if the form of the security instrument is a deed of trust or, as in the instant case, a Georgia “deed to secure a debt.”   A few other cases cited by Stoebuck and Whitman, including dicta in an earlier California case, and cases in Arizona, Illinois, Iowa and Oklahoma,  attempt to use a “partial severance” concept - permitting severance only to the extent necessary to protect the mortgagee, and, once the debt is paid, restoring the survivorship completely.   The Georgia court apparently rejects this notion without comment.

>
>Comment 2: To the editor, the mortgagee ought to be aware of the state of the title and, just as it can demand a mortgage to secure the debt, can demand a severance to make the mortgage a safer one, or else can demand consent of the other joint tenants to some arrangement that gives it good security.  Given that the mortgagee is in a position to protect itself, there is no reason for the courts to go out of their way to protect the mortgagee.  For that reason, the editor would find no severance in any case.  None of this reasoning found its way into the Georgia decision, which is based pretty much on technical analysis and some weak precedent.  Still, to the editor, the outcome is the right one.               

>
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