Daily Development for Thursday, April 17, 2003
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
dirt@umkc.edu

DEEDS; DELIVERY:  Deed was not effectively delivered were it was
signed and handed to one grantee, but never recorded.

James v. Mabie, 819 So.2d 795 (Fla.App. 1 Dist. 2002).

This 2-1 decision tells an interesting tale, but appears to the editor to
come to the wrong conclusion.

Mabie, an experienced attorney, apparently had extensive dealings with
Urquardt and his company, Work Enterprises.  In 1992, Mabie handed
Urqhardt a deed to the property in which the company was located.  The
deed named Work as a 75% owner and one Eugene James as a 25%
owner.  James also had dealings with Work.  Apparently it was
Urquardt's intent to pay for the property by retiring mortgages against the
property, and indeed Urquardt thereafter made some payments on the
mortgages.

In 1993, Work Enterprises entered into a lease of the property.  In 1994,
the tenant discovered that Work did not have record title and contacted
Mabie.   Mabie then notified the tenant that he had taken over ownership
of the property and that the tenant should remit payments to him.    Later,
Mabie executed a separate lease with the tenant.   Urquardt knew of all of
this and apparently made no objection.  It should be noted that Urquardt
and Work had debt obligations to Mabie at this point.  Further, the tenant
was not getting along with Urquardt and preferred not to deal with him.

Apparently many people knew of the deed and urged Urquardt to record
it, but he never did.  Both Mabie and Urquardt passed away.  In 1997,
Work, which had extensive liabilities to Eugene James, the named
cotenant, quitclaimed its interest in the property to him.

A real estate broker present at the time the deed was handed over gave
some vague testimony about the fact that the parties did not expect title
to pass until Urquardt had paid the mortgage.  There was also evidence
that Urquardt wanted the deed in order to show it to some unnamed
person.

Held: No intent to deliver - deed void.

Comment: The case is so "fact driven" that it likely establishes little
precedent.  But the notion that an experienced lawyer would execute a
deed to another person and leave it with that person without objection for
more than a year, during which that person made mortgage payments on
the property, and that nevertheless the grantor had no delivery intent,
strikes the editor as absurd.  To pile on more data, the dissent indicates
that Mabie declared the gain on the sale of the property on his income tax
return for 1993.  Further, the "star witness" - the realtor whose
"uncontroverted" testimony (he was the only one present still alive) was
critical to the majority view, also was the one who advertised the place
for lease delivered the potential tenant to Urquardt (and not to Mabie.)

All deed delivery cases are sui generis, but it does seem that when a
competent and knowledgeable party hands over a deed with no good
explanation, and the parties later behave in ways that suggest that
ownership has passed, then all presumptions should favor the conclusion
that delivery has occurred.  The later ambiguous dealing between
Urquardt and Mabie may suggest an informal "transfer back," but there
apparently was never a formal conveyance.  And in any event Urquardt's
company owned only 75% of the property.

VENDOR/PURCHASER; FRAUD: Grantee's reliance upon fraudulent
representation that escrow has closed and grantee is owner of property
was not reasonable where grantee should understand that a co-grantee
was required to execute note and mortgage before title would pass.

 Smith v. Smith, 820 So.2d 64 (Ala. 2001).

This is another one of those tales of the old South.  It would have taken
one brief paragraph in the New York Supplement, but in Alabama they
still know how to spin a yarn.  Since it's rare that a court overturns a jury
judgment for trial on the grounds that the victim's reliance was not
reasonable, it's worth reporting.

The grantees here were obviously simple people who had little
sophistication in business matters.  They verbally agreed to acquire a lot
on which they would locate their mobile home.   A closing was
scheduled at an attorney's office.  Only one grantee appeared, as her
husband was a truck driver and was on the road.  She testified that she
indicated at the closing that she alone was buying the property and that
she wished her husband to appear on the deed only so that he could take
in the event of her death.

Apparently the papers were not written up this way.  There was an
executed deed made out to the husband and wife with mutual life estates
with the remainder to the survivor, but the note and mortgage had spaces
for the signatures of both husband and wife.  Although wife testified
throughout that it was her intent to buy the property herself, she did agree
to ask her husband to come in and sign the papers.  He saw the papers,
but never got in to sign them, perhaps because of other financial
problems the couple was suffering.  At some point in the drama, the
couple's mobile home was removed from the lot and returned to the
seller of that home.

As the husband never executed the note and mortgage, the attorney,
holding the deed from seller in escrow, never recorded it, and, the court
accurately concludes, never delivered it.

The wife continued to make payments on the mortgage note, despite the
fact that her husband had never executed it.  Further, an employee of the
attorney serving as escrow in the closing transferred to the sellers the
case down payment that the purchaser wife had delivered into escrow.

About six months after the original "closing meeting," the sellers (using
the letterhead of a related company) sent a letter to Buyers that
commenced with "Dear Landowner," and instructed them to redirect
their payments on the note to another company.  Buyers did so, for the
next three months.

It was during that three month period that the mobile home was removed
from Buyers' lot.  Sellers, discovering it was gone, claimed that they had
concluded that buyers had elected not to go ahead with the purchase and
resold the property to others, who promptly put their mobile home on the
property.  This so distraught the original Buyer wife when she saw
strangers on her land that she had a doctor prescribe "nerve pills."

A jury found that there had been a breach of contract and fraud on the
part of the sellers - the fraud being the misrepresentation that buyers were
owners of the property in order to induce them to continue the payments
on the mortgage even when sellers were of the view that there had been
no closing.  The jury awarded significant punitive damages against both
companies related to the sellers.

On appeals: held:   affirmed in part and reversed in part.  The Alabama
Supreme Court affirmed the finding that there had been no delivery of
the deed, and that there had been a contract of sale that had been
breached when the sellers took it upon themselves to conclude that
Buyers had abandoned the property and sold the land to others.  But the
court held that the trial court should have given a directed verdict on the
fraud claim.

The Supreme Court acknowledged that there was sufficient evidence to
support the conclusion that the "Dear Homeowner" letter was given with
fraudulent intent, but concluded that Buyers were unreasonable in relying
upon that fraud, since they should have known that they couldn't
possibly be owners of the land because the condition that husband
execute the note had never been met.

The case was decided  per curiam, with one of the nine judges specially
concurring in the result and two dissenting on the fraud ruling.

Comment 1: There was a verbal contract, and there was part
performance, whether or not everyone signed sufficient documents at the
closing office.  Thus, the breach of contract claim was made.  But the
editor thinks that the reversal of the fraud verdict also went beyond the
function of the reviewing court.  Had the editor been on the jury, he
might not have found intent to defraud based upon the facts as reported,
but believes that there was sufficient evidence to so find.  The conclusion
that the reliance by the Buyers on the representation that they were the
owners of the property, however, seems absurd.

Comment 2: The Buyers clearly were simple people.  Their position that
the wife alone was buying the property was not an unreasonable or
impossible position, and would have obviated any requirement that the
husband execute the note.  It is true that he should have executed the
mortgage, but it seems improper under the circumstances to conclude
that they were unreasonable in their  understanding that this was a mere
formality and that they really owned the land regardless of this detail.  In
fact, under the terms of the contract, they did have a right to own the land
and in fact the sellers were regularly accepting their tendered
performance.  At least they had equitable title.

Courts shouldn't achieve their view of justice be distorting the law.
This precedent isn't likely to affect many other cases, but courts should
still state conclusions that make good sense.

Readers are encouraged to respond to or criticize this posting.

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