Sunday, August 12, 2012

Georgia Law Apparently Does Not Permit the Booting of Cars On Private Property

    You may wonder why car booting is in this blog.  Well, the Georgia Code section that deals with alleged trespassing of cars on private property is in the real property section of the Code, OCGA 44-1-13. That Code Section allows the towing of trespassing vehicles on private property.  What it DOES NOT do is allow the booting or immobilization of vehicles on private property in the State of Georgia.  In other words, it appears to be illegal to boot cars in Georgia on private property.  How do I know this even moreso?  Because in 201l Representatives Heckstall and Fludd (Whoever they are, feel free to vote them out of office) introduced bill HB 490 into the General Assembly to amend OCGA 44-1-13 to allow the booting of cars on private property in the State of Georgia.  The law has not been passed, and therefore in my opinion it is illegal to do so in Georgia. Obviously, the General Assembly, or at least Heckstall and Fludd, felt that it was necessary to amend OCGA 44-1-13 so that it would be legal, so it appears obvious that as the statute stands, it is illegal.  Yet it goes on all over the place.

     In its infinite wisdom, the Atlanta City Code purports to regulate "vehicle immobilization" in the City of Atlanta and vehicle booting companies.  It has requirements regarding signs, booting companies, etc.  When I read this I thought, where is the enabling legislation to give this authority to the City of Atlanta?  The City Code does not say when a car may be booted on private property, or put another way, what constitutes a violation permitting a boot.  I searched the Georgia Code and came up empty.  All I could find was OCGA 44-1-13 and the failed attempt to amend it to allow booting on private property.  So unless I am missing something (I am by no means an expert in state and municipality jurisdictional relations, but I did pass the Georgia Bar) vehicle operators in the city of Atlanta are being scammed by parking lot owners and the vehicle immobilization business.  If anyone reads this and can explain how I am wrong I would be happy to apologize and take down this post.  Until then, readers, knock yourselves out fighting City Hall, and raising as much ruckus as you can to fight this. If you do get booted,  I recommend paying with a credit card, not cash, and disputing the charge as soon as possible.  That is what I did.  If you get towed you are probably out of luck but the statute seems incredibly vague as to what and when an actual customer in a shopping center, who was an invitee, becomes a trespasser for leaving the car parked in the lot.  I haven't researched the case law on that important point but I invite anyone to look into it and comment.

    Recently your faithful blogger had the pleasant experience of parking in a parking lot at a small shopping center with a Starbucks in it, buying coffee, walking outside and around the block to make a private phone call, chatting with a friend, and returning to find a boot on my car and a rude, gleeful worker for the booting company sitting in the car, ready to ambush anyone who so much as stepped foot out of the parking lot for a second to put a clamp on their car.  I had walked right by the guy when I went off.  He could have easily had the decency to alert me that walking out of the lot was considered grounds for his services but there's no money in that, right? He pointed out a sign that was on the property warning that the lot was for "current customers" only and that cars could get booted.  But I didn't walk past it and could not read it unless I went well out of my way to go see what it said. Besides, I WAS a current customer who happened to have to make a call outside the shop. I even wanted a refill darn it.  And the lot was not very busy, it might have had 20% of its spaces filled. This man lurking in the lot and booting cars said they had a policy of immediately booting when someone walks off the property. That makes no sense and is patently unreasonable.  I can understand that a shopping center owner wants to protect spaces for shoppers that come by, but the lot was almost empty and the fellow was sitting right on sight.  At least a tow truck would be visible.  Obviously this is a scam to hide in a car with a trunk full of boots and trap unsuspecting actual customers of the shopping center the minute they are out of sight.  The man booting the cars was a complete jerk and was incredibly rude to my wife, which in my experience is a really bad idea, and boorish. 

    Moreover, I can see how this could be a public safety issue actually harming the public, because  people who park in parking lots may become intoxicated and leave their cars overnight because they are too impaired to drive, whether they are towed or not (I have gotten complaints about this, people say "they may as well drive drunk and take the risk", not a good idea, of course, but drunk people have a lot of bad ideas, and it is legal to get drunk).  It seems like getting booted would be a disincentive to refrain from drinking and driving if you feared that your car would be booted or towed.  It is one thing to park illegally, but it is another to be punished for the good deed of not driving and endangering the public.  Is the profit of keeping spaces open and keepijng booting services profitable greater than keeping dangerous drivers off the road?  Luckily I am a caffeine man these days myself, but I was so enraged at this I thought I might have a heart attack in the parking lot myself (I guess caffeine isn't so great either).  Furthermore, these people have cameras on their dashboard as well, and they admit that they tape "video interactions" with their victims.  That is a great invasion of privacy we should all be proud of in America.   

   Finally, the Georgia Home Rule Act delegates specific powers for municipalities to pass laws in certain areas.  However, the Georgia Assembly has expressly limited the ability for local governments to regulate in certain areas, and one of the limits is contained in OCGA 36-35-6(b). It says local government shall not have "The power granted in subsections (a) and (b) of Code Section 36-35-3 (the Home Rule authority) shall not include the power to take any action affecting the private or civil law governing private or civil relationships, except as is incident to the exercise of an independent governmental power." So regulating a private car on a private lot is for the state to make the laws, not the cities.  And the state has chosen to allow towing under certain circumstance and chose not to allow vehicle immobilization, ie, booting. 

   The municipalites would probably argue that their police power to provide "safety" is their excuse, but that seems lame in the face of the danger of motivating drunk drivers to drive after hours.  And what evidence is there that the public safety warrants the obvious trespasses to private property (a car is private personal property) caused by these scammers?  Perhaps on occasion booting might be needed, such as during a festival or a Falcons game, etc.  But that should be the exception, not the rule.  The property owners should have to petition to get the right to boot, and these scamming boot companies should not have free license to make money by hiding in plain sight booting anything they can get their hands on.  If the city actually did its job and regulated the booting companies it licenses it might work but they obviously do not do that.  Since I originally posted this I have been inundated with positive comments from irate folks who got scammed by the booters in outrageous incidents.  These booting companies are basically like the road "checkpoints" you read about in failed states (Afghanistan comes to mind) where you basically have to pay a bribe to somebody to drive up and down the road.  No wonder this city is covered with parking lots instead of parks or public decks maintained by the City. 

    By the way the address was on Moreland Avenue in Little Five Points and the parking company can be found on the internet with several complaints from folks who feel like they were ripped off.  I haven't figured out who the landlord is but I certainly will.  If I were Starbucks I would be none too pleased about how their landlord, its property manager, and this parking company treat their customers.  I should own stock in the Starbucks company I buy so much of their stuff.  Maybe this company has an Atlanta permit but they do not have the amendment to OCGA 44-1-13 effectuated to allow them to boot on private property.  State law trumps municipal law.  I am actually mulling over the merit of filing a class action lawsuit against these scavenger companies and trying to put them out of business.  I wouldn't mind finding out who they work with and adding their private customers to the list of defendants as well.  If I am right about the illegality of this private property booting then the class action seems totally certifiable ( a "class" lawsuit has to be ceritified by the judge based on the similarity of all the claims), because all the victims are substantially similar no matter what their story is and the circumstances.  Maybe they should have gotten towed but not snowed.     

Perhaps I am a little obsessive to get this mad over a $50 boot on my car. But it is that obsession that helps me fight 110 per cent for my clients and to right as many wrongs as possible before I kick the bucket.  

Sunday, July 22, 2012

Wrongful Foreclosure: A Big Day for Homeowners and a Bad Day for Banks and MERS: Foreclosure Wrongful Where Notice of Foreclosure Only Identifed Loan Servicer and Not Actual Holder of Security Deed.

          Last week in Reese v. Provident Funding Associates, LLP, 2012 WL 2849700 (July 12, 2012) the Georgia Court of Appeals reversed a trial court's decision that it was permissible for a loan servicer to send a notice naming it as the holder of a security deed instead of the actual owner of the security deed, over three dissenting judges.  The result was that the homeowner won a suit for wrongful foreclosure against the loan servicer, and a route to wrongful foreclosure claims has been opened for plaintiffs.  This is a huge case because this mortgage was one of the Mortgage Electronic Registration Systems, Inc. ("MERS") deals designed to avoid County taxes.  MERS was named in the security deed as the grantee of the original security deed.  After Provident funded the loan it sold and delivered the note to the Residential Funding Company, LLC ("RFC").  Thus, RFC succeeded Provident as the holder of the note, but Provident remained in place as the loan servicer only. It is likely that RFC sold the note as well and it became part of a package of mortgages that were bundled together and made into securities to be sold to investors like so many residential mortgages were handled before the Great Recession.

        In 2009 the Reese's defaulted and eventually Provident sent notice to them that the property was going to go into foreclosure in a non-judicial sale. The foreclosure took place and the occupants of the home were evicted.  The Reeses filed a claim for wrongful foreclosure claiming that OCGA 44-14-162.2(a) required their foreclosure notice to provide the name of the secured creditor, not just an agent of the creditor, ie, the loan servicer.  The statute in question states clearly that "notice of the initiation of proceedings to exercise a power of sale in a mortgage, security deed or other lien contract shall be given by the secured creditor no later than 30 days before the date of the proposed foreclosure."  The provision then goes on to say that the notice must provide contact information of "the individual or entity who shall have full authority to negotiate, amend and modify all terms of the mortgage with the debtor."  The statute arguably is ambiguous to situations where  the secured creditor is not the only entity with full authority to do what the second sentence requires.  The plaintiff's claimed that the provision as a whole makes clear the secured creditor must be named, perhaps along with the other agent with the authority to modify or amend the note.  The defense argued that the second sentence clarifies that an agent, here Provident, is permitted to be the sole entity on the notice because it has the authority to act as much as the secured creditor.  In essence, the plaintiff's focused on the first sentence and the defendant's on the second sentence.  This was an issue of first impression to the Court of Appeals.

      This is an important question because at least tens of thousands of mortgages in Georgia are handled the way this one was, with some entity other than the ultimate secured creditor listed on the notice.  In fact in this case it is unclear just who the secured creditor was, but it is highly unlikely it was still RFC.  It is impossible to tell how many mortgages and foreclosures in Georgia were handled this way.  Nevertheless, despite the huge problem of wrongful foreclosures in the past, and current mortgages under water that were executed like this one, the court reversed the trial court's decision.  It held that the two provisions in 44-14-162.2(a), read together, provide in plain language that the secured creditor must be named in the notice, and that nothing precludes the secured creditor from being listed alongside the servicer or other nominee.

       Indeed, this notice listed Provident as the secured creditor, which simply was not true.  The court duly noted this total misrepresentation and falsehood in its ruling.  It seemed that the court found that construing the statute the way the banks do it leads to an automatic lie to the debtor that the servicer is in fact the secured creditor.  This obviously was a troubling fact for the court in the case.

     This ruling throws into question the ability to foreclose many real estate mortgages on the books and may cause many wrongful foreclosure suits over foreclosures that have already happened.  The fact is that it might be very difficult for the servicer of a mortgage note to trace back the loan all the way to its ultimate security deed holder.  Having to do this investigation will inevitably lead to transaction costs in time and money for the banks trying to untangle the complicated web of the mortgage securities that were traded all over the world.  However, this is the world the industry created by inventing MERS and RFC in the first place to allow mortgages to be flipped endlessly and lightning fast without paying County recording taxes at all for each transfer.  The rush for money that created the securities investments out of residential mortgages led to this brazen attempt to circumvent taxes and the notice requirements of the statute.  It remains to be seen how big this decision is in the long run, or whether the Georgia Supreme Court will look at the issue any time soon.  But for now, it will allow defaulted debtors to stay in their homes longer, because it will force mortgage servicers to do a lot more homework up front about who actually holds the security deed on the loan that was funded to finance the house.  All in all, it was a gutsy decision by the Court of Appeals, but one that seems obvious based on the reading the statute as a whole, as the court must in following the rules of contract interpretation in Georgia law.  

Sunday, June 19, 2011

Georgia Foreclosure Law, MERS, and Real Estate: Where Are We?

Around the country several courts have been ruling on some of the critical legal problems that have arisen as a result of the Foreclosure Crisis.  The basic problem, trying to avoid legalese, is that for over one hundred years, it was bedrock law in the United States that a mortgage had to be "attached" to the loan it secured in order for it to be enforceable against the property that secured the note.  In other words, the holder of the mortgage had to possess the note as well to foreclose on the home.  For example, the United States Supreme Court case  Carpenter v. Longan 83 U. S. 271 (1872) stated 139 years ago that "the note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity."  In other words, if the note is assigned without the mortgage attached to it, the person left holding the mortgage cannot foreclose on the property, and the note becomes unsecured.  Fast forward to 2011.

In the 90s the lenders got together to solve a problem.  The business of taking mortgages and putting hundreds of them all together in a security instrument, and selling shares of that pool of debt was a huge hit, and generated massive fees.  The debt could be sold over and over just like bonds and a big market began to flourish.  The problem was that every County in the United States taxes the transfer of mortgages on real property, and each mortgage transfer has to be recorded in the property records.  So in order to avoid the taxes and the hassle and cost of recording all these profitable transfers of the notes, they invented MERS, the Mortgage Electronic Registration System.  MERS was made the mortgage holder in a lot of mortgages, perhaps millions.  In foreclosure they serve as the "nominee" of the bank that holds the note.  The argument that this is illegal is a state by state issue, but the gist of it is that the MERS method of handling the mortgage and the debt is illegal because the mortgage and the note get separated  and, under cases like the Carpenter case, the mortgage is null and void, and the loan is unsecured.    MERS is not a bank, and cannot be a lender.  Thus, the argument goes, MERS cannot foreclose on homes.  This is a huge legal problem working its ways through courts in the fifty states.  Courts have come out both ways, with MERS winning some and the homeowners winning others, particularly in New York and Massachusetts.  Last week a big win for MERS occurred in California.  

None of the appellate courts of Georgia have had an opportunity to opine on this legal issue.  In his blog, well known Georgia real estate litigator Hugh Wood has discussed the arguments on behalf of the homeowner under Georgia law.   In different cases MERS is the agent, assignee, or nominee of the lender.  Mostly as the nominee.  Wood has identified several terms of the Georgia law that are, in his opinion, fatal to MERS acting as a nominee for the lender. Click here and you can see the argument laid out in full.  All of the cases about MERS and Georgia law appear to still be pending as of this writing.  In the cases that have gone for MERS, it seems like the courts have basically stretched the meaning of nominee because of a results oriented notion that, notwithstanding the fact that MERS clearly breaks the longstanding law on mortgages and loans having to move together, there are just too many cases out there and too much turmoil in the real estate market to let the old law stop the runaway train.  In other words, one could argue, MERS broke the law so many times that as a state policy issue we have to let it slide and get these houses moving through the market.  This is another version of the "too big to fail" argument the banks succeeded in making to the executive and legislative branches, and now they are making it to the courts. 

Of course, the loan is still in place, so the homeowner still owes the bank the loan, it is simply unsecured.  What a bank could do is sue on the note and levy all of the assets, garnish the wages, and make life miserable on the debt holder unless they surrender the house.  The bank can put a lien on the house after they get the judgment on the note, but that judgment lien all by itself cannot force the homeowner to leave involuntarily like a mortgage foreclosure.  Sooner or later, the bank will get the house, or if the bank gets shut down, the FDIC.  The only question is how long the homeowner gets free housing.  A stubborn homeowner could stay in a house a long time, but it would be awfully difficult to stay afloat financially.  If you live in the house it is not hard to find you.  Most judgment debtors are hard to find, but not a judgment debtor on a residential mortgage that still lives in the house.  Life would probably be simpler walking away from the house and renting something affordable, but for some people there is no place like home. 


Wednesday, June 15, 2011

Office Depot Learns That an Estoppel Certificate Can Stop a Tenant in Retail Lease Suit Over Exclusive Use Provision, and What About No Waiver Clauses in Leases?

Office Depot Brand Briefcase, Minus Form Lease
Office Depot lost an effort to terminate a lease based on the alleged breach of a restrictive covenant by another tenant after having signed an estoppel certificate after the alleged breach occurred.  Office Depot, Inc. v. The District at Howell Mill, 2011 Ga. App. LEXIS 381, Decided May 6, 2011.  Office Depot filed a declaratory judgment action against its landlord for breach of the exclusive use provision (The "Exclusive") of its retail commercial lease. It also sought a judgment that it could not pay rent or terminate the lease based on the alleged breach of the Exclusive.  The landlord counterclaimed for past due rent, attorney fees, and a declaration that it did not breach the lease.  The trial court granted the landlord summary judgment and the Court of Appeals affirmed. 

The record showed that Office Depot had a lease that was executed in 2005 that prevented the landlord from, among other things, leasing space to a business that "primarily" sold school supplies.  Nonetheless, the landlord leased space 18 months later to a store called The School Box which, naturally, sold school supplies.  The School Box opened in November 2006.  In May 2007, the company ELPF agreed to purchase a majority interest in the shopping center. As is usually the case, in connection with the sale of the shopping center the tenants were asked to sign estoppel certificates, which, as the name indicates, are designed to estop the signatories from claiming breaches based on actions prior to the signing.  The purchaser and lenders rely on these certificates to ensure that they are buying a shopping center without any problems.  On April 24, 2007 Office Depot signed an estoppel certificate that stated, among other things, that to Office Depot's knowledge, the landlord was not in violation of any terms of its lease. 

Obviously Office Depot knew that The School Box was in the shopping center selling school supplies at the time it executed the estoppel certificate.  The Exclusive was a standard one that provided the tenant alternative remedies, (1) to pay reduced or "Alternative Rent" and (2) to terminate the Lease.  On December 6, 2007 Office Depot gave notice it would start paying Alternative Rent in 60 days.  It started paying reduced rent in February 2008 and in May 2009 filed its lawsuit against the landlord.  

Office Depot argued that that the reliance on the estoppel certificate was unreasonable because the landlords knew that The School Box violated the lease.  The court disagreed.  The record showed that the review of the School Box lease (which listed many activities besides selling school supplies), a visit to the School Box store, and the fact that Office Depot made no complaints led the purchase ELPF to conclude that the School Box was not in the "primary business" of selling school supplies.  The record showed that the District at Howell Mill made the same conclusion when it entered into the lease.  Thus the court held that, as a matter of law, the landlords had reasonably relied on the estoppel certificate. 

It is unclear that reasonable reliance should even be a defense against an estoppel certificate in a case where the tenant clearly knows what is going on before signing the estoppel certificate.  Instead, it should be clear that the estoppel certificate operates as a waiver, which is the unilateral and knowing relinquishment of a right.  The landlord should be able to assume that if the tenant signed the estoppel certificate well after The School Box entered the shopping center, then they were waiving any rights to contest The School Box's presence, and thus need not show that the reliance was reasonable at all.  I do not know if the landlord raised waiver as an issue, but landlords and banks absolutely have to be able to rely on the fact that at the time the estoppel certificate is signed, all of the tenants in the shopping center are there legally with respect to any restrictive covenants.  

There may have been a clause in the Office Depot lease called a "no waiver" clause.  Depending on the wording of that clause in the lease, the landlord may have been unable to argue that the estoppel certificate is a waiver.  

Practice Point:  In commercial leases the language of the no waiver clause can make a big difference in the arguments available in a lawsuit.  For example, the waiver clause could read as follows:

No waiver by the parties of any right contained herein shall constitute a waiver of any other rights in the lease including subsequent rights related to the same term herein.

I call this the "one waiver" clause.  It means that one action can in fact be a waiver, such as signing an estoppel certificate or accepting one rental payment.  It just means that all other rights are reserved.  

On the other hand, the clause could read like this:  No action by either party to this lease shall constitute a waiver of any of the rights herein.  

This is a true "no waiver clause."  It means that whatever anyone does, it is not a waiver.  I do not favor this clause in leases, as a litigator, because it means that the parties can argue whatever they want to in a subsequent dispute and claim they are not bound by their actions, such as having signed an estoppel certificate.  What good is an estoppel certificate in that instance?

The court ruled that the term had to mean that the tenant could automatically terminate the lease six months after notice only if there actually was a breach.  This reading of the provision is also questionable, however, because it seems to render the clause somewhat superfluous, in that it requires the landlord to file a lawsuit to prevent termination, but only if the landlord has actually breached the lease, in which case, presumably, the landlord would lose every time.  If there is no breach then the landlord apparently does not have to file a suit.  Thus, in other words, that provision really has no meaning at all and requires the landlord to do nothing.

Saturday, April 23, 2011

The Roof, The Roof, The Roof is on Fire...

The Georgia Court of Appeals reversed a Cobb County decision in favor of a commercial tenant, finding that the lease (1) required the tenant to replace the roof of the structure it rented and (2) did not allow early termination to the tenant as a result of the tenant being in default for its failure to replace the roof.  NW Parkway LLC v. Lemser, Case No. A10A1781, Decided March 24, 2011.  The Landlord ended up not only getting a new roof but locked up the tenant for five more years on the lease in a tough market.  The trial court had held that the tenant did not have to replace the roof, relying heavily on the Jacobi v. Timmers Chevrolet case, 164 Ga. App. 198 (1982). 

In Jacobi the Court of Appeals held that the repair and maintenance clauses of a lease did not require the tenant to replace a roof that was in the same condition it had been in when the lease commenced.  The Jacobi case had a lease with common repair and maintenance clauses but also a clause that the tenant should return the building in as good a condition as it got it.  In Jacobi the tenant had not actually occupied the building on the property, it had leased it as a parking lot. Thus, the tenant got the building needing a new roof and turned it back in the same condition. 

In this case, the lease contained a special stipulation that stated that the lessee "shall be responsible for and pay directly, on a timely basis, all expenses for the entire property and building, of any nature whatsoever during the term of this lease" except for the walls, slab and foundation.  The lease also stated that where the rest of the lease conflicted with it, the stipulation governed.  The lease went on to include common maintenance and repair provisions.  Apparently the roof needed replacing during the term but the tenant refused to pay for it.  The landlord got a TRO allowing entry to replace the roof.

The Court of Appeals noted that the Jacobi case did not include a clause like the special stipulation that trumped the maintenance and repair clause.  Reading the plain language of the stipulation, the Court determined that the roof replacement fell within the meaning of "all expenses" related to the building, and that the tenant had to pay for the roof replacement.  Going further the Court noted that the early termination clause required that the tenant not be in default in order to invoke it.  Because the tenant was in default for not paying for the roof, when the time for early termination came, it was not able to terminate the lease.  Therefore, the landlord got the new roof paid for by the tenant and five more years of the tenant being on the hook for the lease. 

Wednesday, November 24, 2010

Title Company Should Have Issued Policy to Cover Forged Closing Documents

An insured's title policy required the title company to insure over forged closing documents according to the Georgia Supreme Court.  In Fidelity National Title Ins. Co. v. Keyingham Investments, LLC, Case No. S09G1783, Decided October 18, 2010, a borrower who executed a security deed was an imposter that absconded with the money after closing, leaving a mortgage on the property that nobody was prepared to pay.   The lender filed a claim with its title insurer, who denied the claim.  The lender then filed suit. 

The crux of the case was the language of the title commitment the title insurance company issued at the closing.  The way title insurance works is that the insured pays a one time premium at the closing on its interest in the property (here that was a mortgage securing a loan to the imposter) and at that time the insurance company issues a title "commitment," also known as a "binder," that commits the insurance company to issue a full policy after closing if certain conditions are met.  Whether those conditions were satisfied so that the policy had to issue is what the court decided in this case.  The reason this was an issue is that the insurance company issued a binder at closing but then found out the borrower was a fraud, so it refused to issue the insurance policy.

As an aside, it has always interested me that in the case of title insurance the party paying for the insurance does not know all of the terms of the contract at the time he or she pays for it.  The buyer of insurance only receives the binder, not the full policy, at the time of purchase.  Nevertheless, the purchaser of insurance is bound by the terms of the policy written after the fact, even though said purchaser has never seen the document before.  Therefore, in this instance, a contracting party is held to have agreed to terms it has never heard of before.  Of course, the purchaser could cancel the policy, but it would be at risk at that time of not having any coverage at all for a defect in the title.  There are forms that are generally used for the boiler plate in these policies that can be found if someone looks for it, but this is never offered to the purchaser.  Also, I have seen policies issued by closing attorneys with exclusions in them that were never disclosed at the closing.  That is malpractice but it has happened. 

At any rate, the insurance company here relied upon the following condition in the binder:  "Documents satisfactory to the Company creating the interest in the land and/or mortgage to be insured must be signed, delivered and recorded."   The insurance company argued that the language "creating the interest in the land and/or mortgage to be insured" meant that a fraud would not be covered because the forged documents would not actually create any interest in the land.   In other words, because the documents were fake, no real interest was created. 

The court brushed off this argument.  The whole purpose of title insurance, it stated, was to protect property interests against fraud and such abuses.  Here the documents were all prepared by Fidelity's agent and signed, delivered and recorded by said agent, thus satisfying the condition of the binder, notwithstanding the forged signatures.  The court noted that other commitments have stated that the document must be signed by a particular person, and that those commitments have been held to exclude forged documents from coverage, because in those cases the acutal named person did not sign.  Here, the commitment did not specify who had to sign, only that they be signed.  Once the agent accepted the signed documents and recorded them, the insurance company had to issue the policy. 

Sunday, October 3, 2010

Easement Over Property to Boat Launch Violates Zoning

The Court of Appeals affirmed summary judgment against a group of landowners in favor of the Lowndes County denying them the use of a boat ramp to a lake.  Dawkins & Smith Homes LLC v. Lowndes County, Ga, Case No. A10A1741, Decided September 15, 2010.  The plaintiffs were a developer and 13 other landowners.  The developer, Dawkins & Smith Homes ("DSH") bought 14 lots, one of which had a boat ramp allowing access from the street to the lake.  The developer sold the other 13 lots during the period from March 2007 through September 2007, and granted a perpetual easement with each lot over the lot with the boat ramp allowing vehicle access to the lake and use of the ramp.   After complaints from neighbors the county informed these landowners that the easements violated a zoning ordinance that had been enacted in 1984 and replaced with a new ordinance in 2006. 

Both the 1984 ordinance and the 2006 one are substantively the same.  The ramp lot was zoned to allow only use for a single family residence and far any accessory uses.  Accessory use was defined as a use which is incidental and subordinate to the principal use of the structure.   The court held that the easements were not incidental to the primary use of the ramp lot as a single family residence.  The ownership of the ramp lot and the easements were totally independent of each other.  The court found that this was different than a single family homeowner giving revocable, temporary permission to friends and family to periodically access the lake.  The landowners argued that the use of the ramp predated the ordinances and thus that the pre-existing use was grandfathered in under the ordinances.  However, the court noted that the prior use was of a totally different character, and did not involve perpetual easements, so the court rejected the argument. 

Monday, July 12, 2010

Landowner Fails in Bid to Keep Out Subdivision Granted Access Over Private Easement

The Georgia Supreme Court upheld the denial of a motion for a permanent injunction and writ of mandamus seeking to prevent a subdivision permit from issuing to a developer.  Danbert v. North Ga. Land Ventures, LLC, Case No. S10A0563, Decided July 5, 2010. In essence, the landowners were trying to get the courts to overturn the decision of Towns County to give the developer a permit.  The facts showed that in 2003, Roger and Theresa Danbert purchased two adjoining land lots in Towns County comprising about 6.5 acres.  Both lots were bordered by an easement now known as Chinquapin Ridge Road, and the Danberts owned the land to the centerline of that road as shown on a recorded plat.  In 2005,  NGLV purchased a 46 acre plot further down the Chinquapin Ridge Road.  The easement along that road was the sole access to the NGLV land.

The Danberts argued that NGLV's submission to Towns County did not meet Section 503 of the Towns County Revised Subdivision Regulations ("Regulations").  That regulation states that "Access to every subdivision shall be provided over a public street or a public access street.  Access cannot be provided over private easement."  The Danberts argued that Chinquapin Ridge Road is not a "public street or a public access street" and that it is a private easement that cannot provide proper access to a subdivision.  The regulations provide no definition of public street or private easement.  The Danbert's deed described the easement only by stating that it is "subject to easements as shown on the plat."  The plats contain no further text on the issue.

In the absence of definitions in the Regulations, the Danberts urged that the term public street used in Section 503 must be synonymous with the definition of the term "public road" used in OCGA § 32-1-3(24) and that further there is no difference in the Regulations between "public street" and "public access street."  They also contended that because there is no record that Chinquapin Ridge Road was dedicated to or accepted by the County, it cannot be considered to be "intended or used" by the public within the meaning of OCGA § 32-1-3(24).  Some case law states that a right of public access to a road does not occur until the road has been dedicated and accepted by the governing body.

The court found several flaws in the Danberts' argument.  First, their contention ignored the fact that the County did not choose to use the term "public road" that was defined in the Georgia Code, but instead chose to use other terms undefined by the Georgia Code.  No evidence indicated that the County felt that the definitions in the Georgia Code were pertinent.  Moreover, the Regulations did not require an express or implied dedication as set forth in the case law because the definition of "street" included a "public or dedicated thoroughfare."  Apparently, the court decided that the inclusion of the term "public ... thoroughfare" instead of referring only to a "dedicated thoroughfare" meant that access in Town County did not have to be through a dedicated road.  Evidence as to whether members of the public had been able to access Chinquapin Road over the easement was conflicting.  Thus, the court held, the trial court did not abuse its discretion to reject an injunction because the trial court concluded that the Danberts failed to show a violation of the Regulations, and that access to NGLV's property by virtue of the easement was over "a public street" or "public access street" under Section 503 of the Regulations.  The bottom line in this case is that the Court went to some length to rule in favor of the development of the land, but limited the scope of the holding to the Regulations of rural Towns County and language identical to them.

Monday, July 5, 2010

Mortgage Company Makes Mistake in Minimum Bid, Pays For It

A mortgage company lost its appeal of a doomed effort to rescind a foreclosure sale after it made a six figure mistake in calculating the minimum bid.  Decisions One Mortgage Co. LLC v. Victor Warren Properties, Case No. A10A0247, 10 FCDR 1990, Decided June 14, 2010.  In this case the company conducted a foreclosure sale and Warren Properties was the high bidder. The winner tendered the funds and received a receipt for the payment for the property.  Several weeks later, however, the company sent the funds back with a letter stating that it had rescinded the sale.  Warren had to file a lawsuit to enforce the sale. 

Decision One pleaded for the court to use its equitable power to rescind the sale.  It submitted an affidavit of a paralegal for the company that was the servicer of the nonjudicial foreclosure process for the law firm that represented Decision One in the foreclosure sale.  The affidavit stated that prior to the foreclosure sale date the servicer was informed by another entity via a program known as MortgageServ of the total debt amount and the servicer was instructed to calculate the opening bid.  Due to a "clerical error" the affiant mistakenly calculated the opening bid at $27,750 when in fact the opening bid should have been $333,000.  When the law firm received the results of the high bid of only $54,000 it was apparent that a mistake had been made.  In other words, Warren bought the property for $279,000 less than the minimum bid was supposed to be.  Now that is a steal! 

The Court of Appeals made short work of Decision One's argument for equity to intervene.  Decision One relied upon a prior case where a contractor was permitted to rescind a bid based on a unilateral miscalculation after establishing four factors:  (1) enforcement of the mistake would have been unconscionable; (2) the mistake related to the substance of the consideration; (3) the mistake occurred regardless of the exercise of ordinary care; and (4) the other party had not been prejudiced.  Here, the court held that Decision One had made no effort to establish that ordinary care had been exercised or that Warren would not be prejudiced by the rescission.  Thus, it upheld the sale of the land. 

Less Than 60 Days to Judgment Day: Court of Appeals Grants Default Judgment for Failing to Answer in 30 Days, In Spite of Acknowledgment of Service, Answer Filed Before Motion

The Court of Appeals affirmed a default judgment in a case where the attorney for the defendant thought he had 60 days to answer the complaint after executing an acknowledgment of service.  Satnum Waheguru Corp. d/b/a/ Foothills Chevron v. The Buckhead Community Bank, Case No. A10A0395, 10 FCDR 1982, Decided June 16, 2010.  In this case, Buckhead Community Bank ("BCB") filed suit on a promissory note against Satnum.  On March 17, 2009 BCB filed suit.  On March 31, 2009, Satnum's counsel signed an "Acknowledgment of Service" of the summons and complaint.  This acknowledgment was filed on April 15, 2009.  On May 26, 2009, counsel for BCB "certified" that it had received Satnum's acknowledgment of service but had not been served with Satnum's answer.  Satnum fileds its answer three days later on May 29, 2009 -- less than 60 days after the signing of the acknowledgment.

On July 8, 2009, BCB moved for a default judgment on the ground that Satnum failed to timely file an answer to the complaint.  Satnum responded that it timely filed its answer within the 60 days as allowed by OCGA § 9-11-4(d).  The trial court ruled that OCGA § 9-11-4(d) was not implicated by the waiver at issue and therefore Satnum was required to answer within 30 days as set forth in OCGA § 9-11-12(a), which it had not done.  The court granted the default judgment.  Satnum appealed, arguing that pursuant to OCGA § 9-11-4(d) he was entitled to a 60 day answer deadline.  The Court of Appeals disagreed.

The court ruled that because there was no statement invoking OCGA § 9-11-4(d), the acknowledgment executed by Satnum had been executed under OCGA § 9-10-73 instead.  OCGA § 9-10-73 simply states that "the defendant may acknowledge service or waive process by a writing signed by the defendant or someone authorized by him."  It does not mention any change in the deadline to answer set forth in OCGA §9-11-12(a).  The procedures for waiving service in OCGA § 9-11-4(d) set forth the way that a plaintiff may avoid the cost of service of a summons and sets forth which defendants have a duty to avoid unnecessary service costs.  Section 9-11-4(d)(3) states that a plaintiff may notify such a defendant of the filing of the action and request that the defendant waive service of a notice and sets forth specific rules for the form of the request.  The rules require that the the request (A) be in writing (B) by first class mail or other reliable means (C) mailed with a copy of the complaint identifying the court (D) make specific reference to this code section and shall inform the defendant, by means of the text prescribed in subsection (l) of the Code section, of the consequences of compliance and of failure to comply with the request; (E) set forth the date the request is sent and (F) allow a reasonable time to return the waiver, at least 30 days from the date sent or 60 days if the addressee is out-of-state.   In turn OCGA § 9-11-4(d)(5) states that a defendant that returns the waiver in a timely manner has until 60 days after the date on which the request was sent to answer the complaint.

The request for acknowledgment of service sent in this case, drafted by BCB and submitted to Satnum, (1) made no reference to OCGA § 9-11-(4) and (2) did not use the form set forth in subsection (l) of the statute.  Therefore, found the court, the answer was due in 30 days and not 60, and the default judgment was affirmed.

What this means is that defendants cannot gain themselves 60 days to answer a complaint merely by offering to acknowledge service of a complaint they know has been filed.  Furthermore, even if a plaintiff requests a waiver of service, agreeing to the waiver is not mandatory unless the plaintiff follows the procedures of OCGA § 9-11-4.  Finally, if the plaintiff does not follow OCGA § 9-11-4 but requests a waiver of service and the defendant agrees to it, the defendant still has only 30 days to answer the complaint absent some other agreement to extend the time to answer.