Georgia Supreme Court Rules Mortgages Must Have Witness Signatures to Be Enforced - Wells Fargo v. Gordon

February 28, 2013

Vincent Howard and our Moreno Valley foreclosure defense attorneys have written a lot here about sloppy mortgage paperwork. Sometimes, including in many robo-signing cases, bad paperwork slows or stops foreclosures; in other cases, courts have ignored errors or held them harmless. In Wells Fargo Bank NA v. Gordon, sloppy paperwork appears to have helped a Chapter 7 bankruptcy debtor avoid the lien on her home. Denise Codrington of Georgia took out an adjustable-rate mortgage in 2006, and the deed executed at the time omitted the signature of the "unofficial witness." After she filed for bankruptcy, her trustee used that fact in a successful effort to avoid Wells Fargo's lien. After appeals, the Eleventh Circuit asked the Georgia Supreme Court to rule on the importance of the signature, and the state's high court found the deed is not "duly recorded" without one.

The eight-page security deed for Codrington's home incorporated all executed riders, including one setting the terms of Codrington's adjustable-rate mortgage. The security deed itself, however, lacked the signature of an unofficial witness. When Codrington filed for Chapter 7 bankruptcy in 2008, the trustee, Neil Gordon, started an adversary proceeding seeking to avoid Wells Fargo's lien on the home. He claimed the lack of a witness signature meant the deed wasn't "duly recorded" under Georgia law and thus did not provide constructive notice to any subsequent purchaser. The bankruptcy court denied Wells Fargo's motion for summary judgment and then found for the trustee. The district court affirmed that decision and the Eleventh U.S. Circuit Court of Appeals, on appeal, certified two questions to the Georgia Supreme Court: 1) Should the deed be considered "duly filed, recorded and indexed" if missing only the signature, and 2) if not, would a purchaser nonetheless be on inquiry notice?

The Georgia Supreme Court ultimately said no to both questions, siding with the trustee. Georgia law requires that deeds be witnessed by an official witness and an unofficial witness in order to be in recordable form. State law also says that only a recorded deed is sufficient to put subsequent bona fide purchasers on constructive notice. Thus, without a witness signature, Codrington's deed was unrecordable and provided no notice. Wells Fargo argued that the deed could have been recordable because a waiver attached to the deed had all the proper signatures and was incorporated into the deed, but the high court relied on a similar previous case to reject this argument. On the second question, Wells Fargo argued that the fully executed waiver was sufficient to provide "inquiry notice" to a subsequent purchaser, meaning such a person would know enough to ask about a security deed. The high court again disagreed, saying the waiver only generically references the deed and doesn't identify or describe the property.

Vincent Howard and our Long Beach foreclosure defense lawyers are pleased to see the courts upholding the law as it is written. In the early parts of the foreclosure crisis--especially before the robo-signing scandal broke--courts were often willing to rubber-stamp foreclosures and related matters like lien avoidance in bankruptcies. But judges do not appreciate fraud on the court, and they have learned in the past few years to be wary of lenders' efforts to foreclose without showing that they've followed the law. That's why, at Howard Law, P.C., our Chino foreclosure defense attorneys look through clients' cases carefully for this kind of paperwork error--it may turn out to be the basis for the case.

If you are fighting a foreclosure that you believe you could have avoided, or that grew from predatory lending, call Vincent Howard and the team at Howard Law. To learn more or tell us about your case, call us today at 1-800-872-5925 or send us a message online.

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