Chase Manhattan Mortgage Corp. v. Shelton
290 Ga. 544
| Ga. | 2012Background
- Marcus Shelton acquired the property by warranty deed on June 30, 1998, and executed Original Security Deeds totaling $213,750.
- In September 1998, Shelton conveyed the property to his wife and two children in three equal parts via quitclaim deeds.
- Choice Capital funded a refinance but required removal of the children from the title; probate petitions for guardianship of property were started but not completed.
- A 2000 quitclaim deed by Shelton’s wife attempted to convey the children’s interests back to Shelton, signed as ‘Guardian of’ each child, but no court ordered guardianship or conveyance was approved.
- Shelton later executed a $252,000 Choice Capital Security Deed; the Original Security Deeds were paid off and canceled in December 2000, with title reverting to Shelton and his two children.
- HFC, via MERS, foreclosed in December 2002; in 2003 the property was conveyed to the Johnsons, who later financed with Chase and a Chase affiliate, and then USAA extended a line of credit.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Bona fide purchaser status of the children | Shelton children held interests; recorded deeds should protect them as bona fide purchasers. | Guardianship issues and lack of authority void transfer; lack of notice to others. | Two-thirds interest not protected; guardianship defects negated bona fide purchaser status. |
| Authority of mother as guardian for conveyance | Mother’s conveyance of the children’s interests was legitimate as guardian. | No court appointed guardian of the property; conveyance unauthorized. | Maternal guardianship not established; conveyance invalid. |
| Effect of 1998 quitclaim on children's two-thirds interest | Equitable title passed to children via Shelton’s initial conveyance and could be encumbered. | 2000 quitclaim back to Shelton limited only wife’s interest; children’s interest remained encumbered or unaddressed. | Children acquired two-thirds interest; further encumbrances limited to Shelton’s one-third. |
| Equitable subrogation applicability | Choice Capital or related parties should be equitably subrogated to prior lien rights. | Subrogation should apply to current lenders if conditions met; no uncured neglect by senior lienholders. | Equitable subrogation not available; no inexcusable neglect by senior lienholders. |
| Unjust enrichment counterclaim timeliness | Counterclaim timely given accrual; equitable relief sought. | Claim accrued by 2003; filed in 2009; no leave for late filing; unjust enrichment not shown. | Counterclaim dismissed as time-barred. |
Key Cases Cited
- Farris v. NationsBank Mtg. Corp., 268 Ga. 769 (1997) (notice requirement for bona fide purchaser)
- United Cos. Lending Corp. v. Coates, 238 Ga. App. 716 (1999) (guardian authority and conveyance validity)
- Davis v. Johnson, 241 Ga. 436 (1978) (equitable subrogation framework)
- Dooley v. Bell, 87 Ga. 74 (1891) (guardian sale authority requires court order)
- Lynn v. Wagstaff Motor Co., 126 Ga. App. 516 (1972) (parents as natural guardians may not divest ward's interests without court appointment)
- Murray v. Chulak, 250 Ga. 765 (1983) (effects of foreclosure on junior liens)
- McDaniel v. Bagby, 204 Ga. 750 (1949) (conveying only title held)