In January 2000, McGuire Properties, Inc. (McGuire) and its president, George Nemchik, assisted Portfolio Homes Development Company, LLC (PHDC), which had been formed by James O. Sissine, Jr., in obtaining a construction loan from First Capital Bank for development of a 12-lot luxury home subdivision owned by PHDC. McGuire served as manager of PHDC, Nemchik personally guaranteed the loan, and PHDC executed security deeds naming as grantees First Capital and Nemchik. In January 2002, David R. Byers and Sharon L. Byers (Byers) made a lot deposit and, on March 14, 2002, entered into a contract for the purchase of Lot 6 with Portfolio Homes, Inc., which was a separate corporation from PHDC.
On April 5, 2002, McGuire and Nemchik entered into an agreement with PHDC and Sissine to end their business relationship. The agreement provided, among other things, that Nemchik would be released from his guaranty in exchange for cancellation of his security deed and that McGuire’s management fee would be evidenced by a promissory note in the amount of $704,000 and secured by a new security deed. That security deed was properly filed for record in Fulton County on April 29, 2002 and, along with three other prior security deeds, encumbered
At the time of closing, neither the law firm handling the closing nor the independent title examiner had discovered the McGuire security deed, and neither Byers nor SunTrust Bank were informed of its existence. Sissine executed an affidavit stating that there were no unpaid or unsatisfied security deeds other than those listed in the “Title Commitment.” The McGuire security deed was not indexed in the Fulton County records until June 26, 2002 due to a lengthy delay between filing and indexing in that county. Byers completed construction of a house on Lot 6. After PHDC declared bankruptcy in March 2003, McGuire began in July 2003 to advertise Lot 6 for foreclosure pursuant to the power of sale contained in its security deed.
Byers and SunTrust (Appellants) brought suit against McGuire and Nemchik (Appellees) and others, seeking several types of relief, including cancellation of the McGuire security deed based upon alleged fraud, a decree to quiet title, equitable subrogation, and a temporary restraining order to prevent McGuire from proceeding with the foreclosure, the latter of which was granted by a consent order. Appellees answered, and McGuire also counterclaimed, seeking a quiet title decree and other relief. On cross-motions for summary 'judgment, the trial court entered an extensive order granting summary judgment in favor of Appellees as to the complaint and in favor of McGuire on its quiet title counterclaim. Appellants appealed from this order to the Court of Appeals, which transferred the case to this Court. See
Hunstein v. Fiksman,
1. [I]n the absence of fraud, a deed which, on its face, complies with all statutory requirements is entitled to be recorded, and once accepted and filed with the clerk of court for record, provides constructive notice to the world of its existence. . . . [Appellants are] in no better position because [they] closed on [the] property after the [McGuire security] deed was filed with the clerk of court, but before the deed was indexed. ... “ ‘(A) deed takes effect, as against the interests of third persons without notice, from the time it is “filed for record in the clerk’s office; . . .” (A)ll that is required of the grantee and all that he can do is to file his deed for record.’ ” [Cit.]
Leeds Bldg. Products v. Sears Mortgage Corp.,
“Constructive fraud consists of any act of omission or commission, contrary to legal or equitable duty, trust, or confidence justly reposed, which is contrary to good conscience and operates to the injury of another.” OCGA § 23-2-51 (b). OCGA § 51-6-4 “puts acts of omission, where it is one’s duty to interfere, on the same footing as acts of commission.”
Markham v.
O’Connor,
[fin the case where one, in the presence of the true owner, and with his knowledge, sets up a title to property and sells it to another, there is a direct denial of the true owner’s right. The sale, without more, is antagonistic to the title of the true owner. And if he stand silently by and permit the sale without announcing his right, he is estopped. . . . But when the right set up is only a lien or incumbrance, the simple sale of the title is not inconsistent with the lien; mere silence, in the presence of such an act, will not estop; one is not bound upon all occasions to give warning to incautious people.
Markham v. O’Connor,
supra at 198 (1). Thus, even if Appellees knew at all times that PHDC was in financial trouble and that Byers would soon be purchasing Lot 6 despite the failure of PHDC as owner to execute the March 14 contract, that knowledge alone would hardly estop McGuire from claiming an interest in that lot pursuant to its security deed. Appellees had “a right to assume, if nothing appear to the contrary, that the purchaser^] [have] been informed of the lien, [have] examined the record, and that the sale and purchase are in view of the truth of the case.”
Markham v. O’Connor,
supra. Compare
Shellnut v. Shellnut,
a distinction between mere silence and a deceptive silence accompanied by an intention to defraud, which amounts to a positive beguilement. [Cits.] ... No duty to speak arises from the mere fact that a man is aware that another may take an action prejudicial to himself if the real facts are not disclosed. [Cit.]
Wiser v. Lawler,
“Acquiescence or silence, when the circumstances require an answer, a denial, or other conduct, may amount to an admission.” OCGA § 24-3-36. Thus,
[w]hen a mortgagee is present at an auction sale of the property by the mortgagor, and it is announced at the sale by the auctioneer that the title is perfect and clear, or unincumbered, and he fails to make any correction of said announcement, and a purchaser buys under the impression that he is getting an unincumbered title, and takes a deed, and pays his money under such impression, the mortgagee is estopped from setting up his mortgage, even though the mortgage was duly recorded at the time of the sale.
Markham v. O’Connor,
supra at 183 (1). However, Appellees were not present at the closing, signed none of the closing papers, and did not speak to Byers before or during the closing. Thus, Appellees, like Byers, had the right to assume that PHDC and Sissine would not commit the crime set forth in
Moreover, OCGA § 51-6-4 (b) “is inapplicable . . . where [the purchaser] relied upon his own investigation or was not shown to have placed any reliance on the statement, action or inaction of the one claimed to be estopped. [Cits.]”
Anderson v. Manning,
Accordingly, we do not find any evidence of constructive fraud or of fraud by silence on the part of McGuire or Nemchik as its agent which would require the denial of their motions for summary judgment.
2. Appellants further contend that the McGuire security deed constituted a fraudulent conveyance under subsections (2) and (3) of former OCGA § 18-2-22. That statute “was repealed on July 1, 2002, when Georgia enacted the Uniform Fraudulent Transfers Act, OCGA § 18-2-70 et seq., but this repeal did not extinguish causes of action that arose under OCGA § 18-2-22 before that date. [Cit.]”
Gerschick v. Pounds,
The following acts by debtors shall be fraudulent in law against creditors and others and as to them shall be null and void: ... (2) Every conveyance of real or personal estate . . . had or made with intention to delay or defraud creditors, where such intention is known to the taking party; a bona fide transaction on a valuable consideration, where the taking party is without notice or ground for reasonable suspicion of said intent of the debtor, shall be valid; and (3) Every voluntary deed or conveyance, not for a valuable consideration, made by a debtor who is insolvent at the time of the conveyance.
“A party relying on . . . subsection [(2)] must establish two elements: (1) the requisite intent of the grantor and (2) grantee’s knowledge of grantor’s intent. [Cit.]”
Stokes v. McRae,
As for former OCGA § 18-2-22 (3), a critical requirement of that subsection is that the deed be without any valuable consideration.
Brown v. C & S Nat. Bank,
Accordingly, the trial court correctly granted summary judgment in favor of Appellees with respect to Appellants’ fraudulent conveyance claims.
3. Appellants urge that Lot 6 must be released because equity considers that done which ought to be done and decrees accordingly, and because Appellees’ agreement with PHDC and Sissine required only that First Capital be paid enough proceeds from the first lot sale to secure a lot release, with the remainder to go to PHDC. However, the McGuire security deed, as quoted above, includes two separate requirements for the release of Lot 6. That lot must not only have been released from the senior security deeds, the proceeds of its sale must have been applied to the senior secured loans. Under Appellants’ construction of the McGuire security deed, any application of the sale proceeds would be acceptable so long as the lot was released from all senior security deeds and, therefore, inclusion in the McGuire security deed of the requirement for application of the sale proceeds would be meaningless. See OCGA § 13-2-2 (4);
Wiggins v. Southern Bell Telephone & Telegraph Co.,
4. As for the claim that SunTrust is entitled to equitable subrogation, we have consistently described that doctrine as follows:
“Where one advances money to pay off an encumbrance on realty either at the instance of the owner of the property or the holder of the encumbrance, either upon the express understanding or under circumstances under which an understanding will be implied that the advance made is to be secured by the senior lien on the property, in the event the new security is for any reason not a first lien on the property, the holder of the security, if not chargeable with culpable or inexcusable neglect, will be subrogated to the rights of the prior encumbrancer under the security held by him, unless the superior or equal equity of others would be prejudiced thereby; knowledge of the existence of an intervening encumbrance will not alone prevent the person advancing the money to pay off the senior encumbrance from claiming the right of subrogation where the exercise of such right will not in any substantial way prejudice the rights of the intervening encumbrancer.” [Cit.] (Emphasis omitted.)
Bankers Trust Co. v. Hardy,
Where, as here, the party claiming subrogation advanced the money to pay a debt without any legal obligation and was not compelled to do so for the preservation of his own rights or property, subrogation may nevertheless arise if “ ‘he advanced money
The trial court held that the doctrine of equitable subrogation is inapplicable “where, in connection with the purchase of property, a lender loans money which results in a senior security deed being released from the subject property but does not result in a junior lien being released from the property. [Cit.]” However, this Court has held that equitable subrogation applies even where a senior encumbrance is satisfied out of purchase money.
McCollum v. Lark,
supra at 300;
Peagler v. Davis,
“[t]he courts incline rather to extend than restrict the principle. The doctrine has been steadily growing and expanding in importance, and becoming general in its application to various subjects and classes of persons, the principle being modified to meet the circumstances of cases as they have arisen.” [Cit.]
Davis v. Johnson, supra at 439. See also Bankers Trust Co. v. Hardy, supra at 562 (equitable subrogation is “founded upon the dictates of refined justice, and its basis is the doing of complete, essential, and perfect justice between the parties, and its object is the prevention of injustice. [Cits.]”).
The undisputed evidence of the circumstances surrounding the May 10, 2002 closing shows a clear understanding at least with PHDC that the advance made by SunTrust was to be secured by the senior encumbrance on the property. The fact that such advance did not fully satisfy the First Capital security deed does not violate the rule that, “[w]here less than the total amount of [the] debt is tendered, subrogation is not permitted. [Cit.]”
Jessee v. First Nat. Bank of Atlanta,
The fact that [SunTrust] has not paid the entire indebtedness is not a matter about which [McGuire], as a junior lienholder, can complain. [Cit.] Moreover, [First Capital’s] rights will not be prejudiced by [SunTrust’s] subrogation because [First Capital] agreed to release its entire lien [on Lot 6] in exchange for [a specified] partial payment of the debt.
Dietrich Indus. v. United States, supra at 572-573 (II) (B) (3).
Accordingly, the trial court erred both in granting summary judgment in favor of Appellees and in denying summary judgment to SunTrust on its claim for equitable subrogation.
5. Appellants further contend that McGuire is not entitled to maintain its counterclaim for quiet title relief, because it is not in possession of Lot 6.
The Quiet Title Act of 1966 “eliminates the requirement of possession. See OCGA § 23-3-61.”
Smith v. Ga. Kaolin Co.,
Thus, the trial court correctly held that McGuire is entitled as a matter of law to a decree in quia timet that the McGuire security deed is valid and enforceable against Lot 6. Based on our discussion in Division 4 above, however, the trial court erred in that decree to the extent that it held that the SunTrust security deed is subordi nate to the McGuire security deed and that McGuire, in its superior position, is entitled to the proceeds of a foreclosure sale to the full extent of the indebtedness.
6. Appellants assert that the trial court erroneously denied their motion for summary judgment with respect to McGuire’s counterclaims for damages resulting from slander of title and for attorney’s fees pursuant to OCGA § 13-6-11. However, the damages counterclaim was deleted in an amendment to McGuire’s answer and, therefore, is moot.
Furthermore, a plaintiff-in-counterclaim cannot recover attorney’s fees under OCGA § 13-6-11 unless he asserts a counterclaim which is an independent claim that arose separately from or after the plaintiffs claim.
Sanders v. Brown,
Judgment affirmed in part and reversed in part.