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Quote of the Day - A deed without a name. - William Shakespeare
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Playing Fast And Loose With Deeds Will Land You Without Land

You are about to get sued and you own a bunch of property.  What do you do?  First, here's a caveat:  if you transfer the property to someone else in the face of litigation, then you run the risk of entering into what's called a fraudulent transfer, which would likely be set aside by a court except in certain circumstances.*  In this case, that issue didn't come up.  What happened, however, is George Lee and his family put their resources together and bought a number of parcels of property.  There were a lot of transactions between family members, but one in particular ended up in court.

Back in 2002, George Lee and his wife Kathy transferred their interest to their niece, Fue Sue Lee, and signed over a quitclaim deed to her, making the transfer as a gift.  Fue Sue also signed the deed acknowledging her acceptance of the gift, but then sent it to relatives for them to record.  Before those relatives recorded the deed someone added other relatives, Ge Lee and Vong Lee, as grantees on the original quitclaim deed.  Later in 2005, George had Fue Sue execute a deed reconveying the property back to him and Kathy.

You guessed correctly what comes next.  Ge, Vong and Fue Sue filed suit to quiet title in their name.  Now there's a surprise. 

Once you're over that initial shock, what do you think happened?  After all, we've got a deed with someone else's (well, two someone elses) name (ok, names) on it.  Plus, they were added to a quitclaim deed, which is a deed where the original owners give up all rights to the property.  So why would it matter how many names were added?  The now former owners really can't complain, can they?

They certainly did, and asked the trial court to find that the initial transfer to Fue Sue was valid despite the alteration, but then invalid against all subsequent transfers.  Now here's an interesting twist to think about first before we get to the actual result:  What if Fue Sue had sold the property to Ge Lee and Vong Lee for money -- after she recorded an unaltered quitclaim deed?  Don't you just love law-school type questions?

First let's get to what actually happened with the altered deed.  Both the trial and appellate court held that the initial transfer from George and Kathy to Fue Sue was valid, but the supposed subsequent transfer to Ge and Vong was invalid because on the initial deed, George and Kathy didn't agree to that subsequent transfer - it wasn't signed by "the parties to be charged (George and Kathy)."  Well, it was actually signed by them, but the subsequent transferrees were added without their knowledge.

In other words, the subsequent transfer didn't satisfy the statute of frauds, which requires that all real property transfers be in writing and signed by the parties to the deal.

Now, to get to that law school question.  Yes, if Fue Sue had transfered the property to Ge and Vong in a separate transfer, the case would have probably turned out that George and Kathy were out of luck and Ge and Vong owned the property, maybe even together with Fue Sue if they had handled it right.  If they had only consulted a lawyer instead of trying to get fancy with the deeds.

Go figure.

____________________

*What circumstances?  There are too many to detail here, so the best way to find out is to talk with a lawyer.

Printer friendly page Permalink Email to a friend Posted by J. Craig Williams on Sunday, August 02, 2009 at 07:15 Comments Closed (1) |
 
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