Wednesday, October 15, 2008

Foreclosure Rescission :: The Lender Get Out of Jail Free Statute

I am constantly asked why lenders can unilaterally rescind a foreclosure sale [in Georgia] within Thirty (30) days of a foreclosure sale for a good reason, bad reason or no reason. The answer, I suppose, is rooted in OCGA § 9-13-172.1, which is more of a tribute to the lobbying efforts of McCalla, Raymer than English common law.

The types of errors that occur in Georgia non-judicial foreclosure sales are, bankruptcy shortly prior to the sale (unknown to the lawyer crying the sale), a reinstatement or loan modification agreed to by the lender (unknown to the lawyer crying the sale) or some other similar error.

OCGA § 9-13-172.1 became law on July 1, 2003 via HB 301. It just simply provides that a lender may “unilaterally,” rescind the foreclosure sale for the reasons stated in OCGA § 9-13-172.1. It appears not to be “mutual.”

Since it was placed in the Civil Practice Act at Chapter 9 and not Real Property at Chapter 44, it is difficult to locate. For those having difficulty locating it, here it is:

§ 9-13-172.1. [Rescission].
(a) As used in this Code section, 'eligible sale' means a judicial or nonjudicial sale that was conducted in the usual manner of a sheriff´s sale and that was rescinded by the seller within 30 days after the sale but before the deed or deed under power has been delivered to the purchaser.
(b) Upon recision of an eligible sale, the seller shall return to the purchaser, within five days of the recision, all bid funds paid by the purchaser.
(c) Where the eligible sale was rescinded due to an automatic stay pursuant to the filing of bankruptcy by a person with an interest in the property, the damages that may be awarded to the purchaser in any civil action shall be limited to the amount of the bid funds tendered at the sale.

(d) Where the eligible sale was rescinded due to:
(1) The statutory requirements for the sale not being fulfilled;
(2) The default leading to the sale being cured prior to the sale; or
(3) The plaintiff in execution and the defendant in execution having agreed prior to the sale to cancel the sale based upon an enforceable promise by the defendant to cure the default, the damages that may be awarded to the purchaser in any civil action shall be limited solely to the amount of the bid funds tendered at the sale plus interest on the funds at the rate of 18 percent annually, calculated daily. Notwithstanding any other provision of law, specific performance shall not be a remedy available under
this Code section.
History. Added by 2003 Ga. Laws 173, § 1, eff. 7/1/

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It has only been discussed in one case, Harpagon Company, LLC v. Gelfond, et al, 279 Ga. 59, 608 S.E.2d 597 (2005). In Harpagon, Supra, the discussion, in a Concurrence, only discussed whether it may be applied in the context of a tax sale, as opposed to the context of a foreclosure sale.

Hugh Wood, Atlanta, Georgia

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Harpagon, Supra, states as follows:

279 Ga. 59
GELFOND et. al.
No. S04A1605.
Supreme Court of Georgia.
February 7, 2005
Reconsideration Denied March 7, 2005.
Robert J. Proctor, Bradley A. Hutchins, Alexander N. Sedki, Proctor & Chambers, Atlanta, for Appellant.
Kenneth I. Sokolov, Fine & Block, Francis X. Moore, Frank X. Moore & Associates, William A. Castings Jr., City of Atlanta Law Department, Atlanta, for Appellee.
[279 Ga. 59] HINES, Justice.
This is an appeal by plaintiff, The Harpagon Company, LLC. ("Harpagon"), from the grant of summary judgment in favor of defendants, Alicia Gelfond as the Executrix of the Estate of William A. Gelfond et al. (collectively "Gelfond"), in a petition, pursuant to OCGA § 23-3-40 et seq., to quiet title to real property acquired by quitclaim deed following
Page 598
a tax sale. For the reasons which follow, we affirm the judgment in favor of the defendants Gelfond.
William A. Gelfond owned commercial real estate located at 587 Virginia Hill Avenue in Fulton County ("Virginia Hill property"); he also owned real property located at 759 Adair Avenue in Fulton County ("Adair Avenue property"). On March 11, 1994, he conveyed his interest in the Adair Avenue property to THR Development Group I, Inc. ("THR"). Mr. Gelfond died in 1996. His wife, Alicia Gelfond, was appointed executrix of his estate. On December 15, 1999, and on March 31, 2000, the Fulton County Tax Commissioner issued writs of fieri facias ("fi.fas.") for allegedly unpaid 1999 ad valorem taxes on the Virginia Hill property. Both fi. fas. named "William A. Gelford (sic)" as the defendant in fi. fa. They described the property by reference to an assigned 14-digit parcel identification number. The fi. fas. were transferred to Vesta Holdings, as nominee for Heartwood 11, Inc. ("Heartwood"). A tax sale was scheduled. The advertisement for the tax sale inaccurately listed THR as owner and defendant in fi. fa., and contained an inaccurate legal description of the property to be sold; even though the parcel identification number in the advertisement referred to the Virginia Hill property, the legal description was of the Adair Avenue property Gelfond had sold to THR.
The sheriff levied upon the Virginia Hill property and sold it to the highest bidder, Heartwood. The prepared tax deed of the sale erroneously named THR as owner/grantor and described the conveyed real estate as the Adair Avenue property previously conveyed [279 Ga. 60] by William A. Gelfond to THR. Heartwood conveyed by quitclaim deed its interest purchased at the tax sale to Harpagon. On August 11, 2003, Harpagon filed the present petition to quiet title to the Virginia Hill property. Two days later, on August 13, 2003, the Sheriff of Fulton County "administratively cancelled" the tax deed at the request of Gelfond's estate, citing procedural error in the conducting of the sale. [1] In the present action, Gelfond moved for judgment on the pleadings, or in the alternative, for summary judgment, asserting that Harpagon had no title, record or prescriptive, because the tax deed had been cancelled. Harpagon moved for partial summary judgment, arguing that the sheriff lacked authority to "administratively cancel" the tax deed, and that the right of redemption was barred pursuant to OCGA § 48-4-45 before the cancellation took place. After consideration of the pleadings, evidence, and argument, the trial court concluded that Harpagon's title was defective in that it did not acquire title from the grantor of the Virginia Hill property and that Gelfond has superior title. Consequently, the trial court ordered that the tax sale and tax deed were void and of no force and effect, awarded fee simple title of the Virginia Hill property to Gelfond free and clear of adverse claims of Vesta Holdings, Heartwood, Harpagon, or their successors in title.
1. In its order, the trial court cited, inter alia, Canoeside v. Livsey, 277 Ga. 425, 589 S.E.2d 116 (2003), for the proposition that "when property is sold at a tax sale as the property of someone other than the actual title holder, the sale is void." Harpagon contends that the trial court erred in relying on Canoeside v. Livsey because its holding applies only to non-judicial tax sales. Citing Bibb National Bank v. Colson, 162 Ga. 471, 134 S.E. 85 (1926), Harpagon argues that the owner of the property at the time of the tax sale is irrelevant because the tax liability attaches to the property at the time fixed by law for its valuation in each year and remains until the taxes are paid. But Harpagon's arguments are unavailing.
Harpagon can have no greater interest in the Virginia Hill property than its grantor, Heartwood. See McDaniel v. Bagby, 204 Ga. 750, 755(1), 51 S.E.2d 805 (1949); Copelin v. Williams, 152 Ga. 692(1), 111 S.E. 186 (1922); Clarence L. Martin, P.C. v. Wallace, 248 Ga.App. 284, 288(1), 546 S.E.2d 55 (2001). So the salient issue is whether Heartwood validly acquired the Virginia Hill property via the tax sale and the resulting tax deed. Pretermitting the questions of the effects of the misrepresentation of the owner and defendant in fi.fa. and the erroneous legal description
Page 599
of the property in the [279 Ga. 61] advertisement for the tax sale, Harpagon's arguments ignore the fact that the resulting tax deed in favor of Heartwood is fatally defective. Not only does the deed name the wrong owner, but it is impossible to determine with certainty the parcel of property it purports to convey. The property is described as "That tract or parcel of land conveyed by deed to THR DEVELOPMENT GROUP, INC. Recorded at Book 18165/Page 240 per Records of Fulton County, Georgia." But this is the Adair Avenue property. The deed also states that the property is known as "Virginia Ave." The Adair Avenue property was in the "Virginia Avenue Subdivision."
A description of property contained in a deed must be sufficient to identify the land being sold. See generally Pirkle v. Turner, 277 Ga. 308(1), 588 S.E.2d 733 (2003); Head v. Lee, 203 Ga. 191, 198(2)(b), 45 S.E.2d 666 (1947); Mull v. Mickey's Lumber & Supply Co., Inc., 218 Ga.App. 343, 344(2), 461 S.E.2d 270 (1995). "This court has often held that the description in an entry of levy on land and in a deed is sufficient where it furnishes a key whereby the identity of the land may be made certain by extrinsic evidence." GE Capital Mortgage Services, Inc. v. Clack, 271 Ga. 82, 84, 515 S.E.2d 619 (1999), quoting Head v. Lee, supra. at 191(2)(b), 45 S.E.2d 666.
Harpagon cites the parcel identification number on the instant tax deed as providing such a key. But the tax deed contains contradictory keys. Again, the deed erroneously lists the property owner as THR and incorporates by reference a legal description of the Adair Avenue property owned by THR. This directly conflicts with the parcel identification number referencing the Virginia Hill property. To accept Harpagon's argument would be to conclude that the deed conveys two parcels of property. The parcel identification number renders the deed internally inconsistent, even when an attempt is made to reconcile the inconsistencies. Thus, the identity of the property sought to be conveyed remains in question. Compare Adams v. City of Ila, 221 Ga.App. 372(1), 471 S.E.2d 310 (1996); Lawyers Title Ins. Corp. v. Nash, 196 Ga.App. 543, 396 S.E.2d 284 (1990).
2. Harpagon contends the trial court erred in granting Gelfond summary judgment based on Canoeside v. Livsey, supra, because it did not have a full opportunity to respond to the issues raised by that case. But, as has been discussed, the fatal flaws of the conveyance in this case go well beyond what was at issue in Canoeside v. Livsey. What is more, the sufficiency of the tax deed was clearly in question, and Harpagon had a full and fair opportunity to address that issue. Compare Dixon v. MARTA, 242 Ga.App. 262, 529 S.E.2d 398 (2000).
3. Harpagon also complains that the trial court erred by denying its motion for summary judgment on the issue of whether the sheriff had authority to administratively cancel the tax deed. However, it is unnecessary to address the sheriff's actions in this regard because the [279 Ga. 62] tax deed, in substance was void, and therefore, the propriety of the administrative cancellation of the tax deed is irrelevant. See Division 1, supra.
4. For the reasons outlined in Division 1, there is no merit to Harpagon's contention that it was due summary judgment on the issue of whether Gelfond's interest has been extinguished, that is, whether Gelfond's right to redeem the Virginia Hill property is barred under OCGA § 48-4-45. 5. In addition to refund of the purchase price of $230,000, Harpagon contends it was entitled to interest pursuant to OCGA § 48-4-42 because of the administrative cancellation of the deed. However, by its own terms, the statutory provision for interest is applicable to instances when the delinquent taxpayer opts to exercise his or her right to redeem the property. That is plainly not the situation in this case.
Judgment affirmed.
All the Justices concur.
CARLEY, Justice, concurring.
This case raises certain interesting and important questions, such as: whether our recent holding in Canoeside Properties v. Livsey, 277 Ga. 425, 428(2), 589 S.E.2d 116 (2003) that, "when property is sold at a tax
Page 600
sale as the property of someone other than the actual title holder, the sale is void[,]" applies only in the context of non-judicial tax sales; and, whether OCGA § 9-13-172.1 or any other statutory provision grants to the sheriff the administrative authority to cancel a tax deed. However, as the majority notes at pp. 4-5 in Division 1 and subsequently in Division 4,
[p]retermitting th[os]e questions, ... the ... tax deed in favor of [Appellant's grantor] is fatally defective. Not only does the deed name the wrong owner, [as in Canoeside Properties v. Livsey, supra], but it is impossible to determine with certainty the parcel of property it purports to convey.
"A grant of summary judgment must be affirmed if right for any reason, whether stated or unstated. [Cit.] It is the grant itself that is to be reviewed for error, and not the analysis employed. [Cit.]" Albany Oil Mill v. Sumter EMC, 212 Ga.App. 242, 243(3), 441 S.E.2d 524 (1994). Accordingly, if the tax deed is void for lack of a sufficient description, then the grant of summary judgment in favor of Appellees was correct regardless of any reason proffered by the trial court.
"If two clauses in a deed are utterly inconsistent, the former shall prevail...." OCGA § 44-5-34. Pursuant to this provision, "[w]here a deed contains two descriptions of the land conveyed, one general and the other particular, if there is any repugnance, the particular [279 Ga. 63] description will prevail. [Cit.]" Harlan v. Ellis, 198 Ga. 678, 681(2), 32 S.E.2d 389(1944). However, the deed in this case is utterly inconsistent in its description as to which of two separate properties was actually conveyed. Reading the deed as a whole, it is impossible to determine whether the conveyance is of the Virginia Hill property or the Adair Avenue property. " ' "It is undoubtedly essential to the validity of a grant that there should be a thing granted, which must be so described as to be capable of being distinguished from other things of the same kind...." ' [Cit.]" Carter v. Ray, 70 Ga.App. 419, 423(1), 28 S.E.2d 361 (1943). As the majority points out, to give effect to this instrument "would be to conclude that the deed conveys two parcels of property." Majority opinion, p. 6. "But where there is more than one lot of land answering the description, ... the deed ... would be void for uncertainty, the grantee ... having no election as to which piece he ... will take. [Cit.]" Blackwell v. Partridge, 156 Ga. 119, 129(2), 118 S.E. 739 (1923).
Therefore, based upon the principle of "right for any reason," I concur in the affirmance of the grant of summary judgment in favor of Appellees, and write separately so as to emphasize that the questions raised by Appellant regarding the permissible scope of certain decisional and statutory authority must await resolution in a subsequent appeal.
I am authorized to state that Chief Justice FLETCHER joins in this concurrence.
[1] The parties offer OCGA § 9-13-172.1 as possible statutory authority for the sheriff's action.

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Hugh Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084
Phone: 404-633-4100
Fax: 404-633-0068

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Anonymous said...

As I read it, this only limits damages in certain cases where the seller has rescinded the sale. It does not say that only the seller can rescind. It can be assumed that it specifies that if the sale is rescinded outside of these specific circumstances that the seller may be open to paying other damages or a suit for specific performance.
It does not appear to remove the possibility for a rescission by the buyer.

The Shadburn Family said...

My lender is going to rescind a foreclosure that was done while my loan mod was in review. What proof should I ask for that the title and mortgage are back in my name? Thank you

Hugh Wood said...

To Shadburn: They owe you nothing; no documents - nothing. It is unilateral on their part. They don't even have to talk to you - they just do it. Check the title at the course house after they "undo," the sale.

Corlin Divabla said...

Not all loans are the same, in fact they can differ significantly. Know what to look for with an unsecured personal loan and above all, know where to look for the best one.
see more at- loan rescission