Partner Peter Lublin and his team remain at the forefront of mortgage default litigation.  Recently, the Supreme Court of Georgia decided two cases discussing the effect forged deeds have on bona fide purchasers.

In the first case, the Supreme Court of Georgia confronted the issue of whether a bona fide purchaser obtained good title from a grantee of a forged deed. See Brock v. Yale Mortgage Corp. et al., 2010 Ga. LEXIS 647 (Ga. Oct. 4, 2010).  Brock involved a loan secured by a property that was titled in the husband and wife as tenants-in-common.  In order to obtain refinancing of the property and obtain the loan solely in the wife's name, the wife needed to have title to the entire property and needed the husband to transfer his interest to the wife.  The wife brought to the closing a forged quitclaim deed from her husband. The mortgage company, unaware of the forgery, accepted the quitclaim deed as a valid conveyance and issued the ex-wife a loan in the amount of $60,000.00.  In furtherance of the debt, the ex-wife executed a promissory note and security deed in the mortgage company's favor.  Following the divorce, the husband discovered the forgery and filed suit to protect his interest in the property.  The mortgage company alleged that they acquired a security interest in the property by virtue of their status as a bona fide purchaser for value.  The trial court granted the lender's motion for summary judgment, determining that the lender held a valid security interest in the entire property.  The husband appealed alleging that, inter alia, even if the lender was a bona fide purchaser for value, it could not acquire a valid security interest in the entire property.

On appeal, the lender argued that they obtained a valid security interest in the entire property, by virtue of its status as a bona fide purchaser for value.  Responding to this argument, the Court held that even if the lender qualified as a bona fide purchaser and had no notice of the forgery, they could not "acquire good title from a grantee in a forged deed, or those holding under such a grantee, because the grantee has no title to convey." Brock, 2010 Ga. Lexis at *8 (citing Second Refuge Church & Co. v. Lollar, 282 Ga. 721 (2007)). 

In deciding that the mortgage lender was unable to acquire good title from the wife, the Court reversed its prior holdings in Bonner v. Norwest, 275 Ga. 620 (2002) and Mabra v. Deutsche Bank, 277 Ga. App. 764 (2006).  Bonner and Mabra, essentially held that a lender who has no knowledge of the forgery is a bona fide purchaser for value, overcoming a forgery defense.  By overruling Bonner and Mabra, the Court has made clear that a lender who is a bona fide purchaser for value will not overcome a claim of forgery.

Two weeks after Brock was decided, the Court looked at another bona fide purchaser issue in Fidelity National Title Ins. v. Keyingham Investments, LLC., 2010 Ga. LEXIS 769 (Ga. Oct. 18, 2010). Fidelity addressed a title company's refusal to issue a mortagee title insurance policy after discovering, post-closing, that the security deed was forged. Id. The Supreme Court, pointing to its prior decision in Brock, held that in the absence of language in a title insurance commitment that plainly excludes coverage for a forgery, a commitment must be construed to provide coverage for forgeries. Id.

Fun Facts: Peter Lublin received his undergraduate education from Duke University and earned his Juris Doctorate from Emory University.  His family's golden retriever is named "Duke" and was born on the date RLSS was founded!