SC Supreme Court Decides Family Equitable Mortgage Case

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…and dirt lawyers are gratified to see the deeds called deeds!tug o war

On Oct. 28, the South Carolina Supreme Court decided a family dispute surrounding a transaction between a deceased brother and his sister and held that two deeds to the sister were, in fact, deeds, and did not constitute an equitable mortgage*.

While Justice Kittredge’s dissent suggested the Court established a “categorical rule” that only evidence created contemporaneously with a conveyance can be considered in support of an equitable mortgage, the majority, in a footnote, disagreed with Justice Kittredge’s interpretation and signified subsequent events and writings may assist in determining the intent of the parties at the time of the conveyance.

After two appeals, the facts remain murky.

Kenneth Walker owned and lived on a 200-acre farm in Colleton County. In 1996, he conveyed 26.52 acres to his sister, Catherine Brooks. The stated consideration was $13,250, although Brooks testified she paid nothing. In 2002, Walker conveyed an additional 15.16 acres to Brooks for the stated consideration of $5.00.

According to Brooks, her brother conveyed the property to her because she supported him emotionally and financially. She testified that she paid his debts, paid his electric and telephone bills, bought his groceries, gave him cash for living expenses, helped him receive social security benefits and served as trustee for those benefits.

In 2004, at Walker’s request, Brooks wrote a note stating that Walker intended proceeds from sand removal and soil and waste water discharge onto the property would be paid to Brooks until she received $60,000. Walker and Brooks also generated a ledger that began with an entry of $60,000 and ended with an entry of $27,400.

It is clear that Brooks did not exercise control over the property.

deed - definitionBefore Walker died, his attorney sent a letter to Brooks referring to this note and ledger, and requesting her to tender a deed in exchange for $2,893.87. This amount was inexplicable, according to the Court.  After Walker’s death, his son and personal representative offered to pay Brooks $27,400 in exchange for a deed. Brooks refused, and this dispute arose.

The special referee held that the note and ledger showed that Walker was indebted to Brooks at the time of his death, and the conveyance was intended as security for the debt. He found the existence of an equitable mortgage, and held that the estate was entitled to the property upon payment of $27,400. The Court of Appeals reversed, and the Supreme Court granted certiorari.

The Supreme Court, referring to a C.J.S. article and a prior case, indicated that the existence of an equitable mortgage must be shown by clear and convincing evidence, and that the intent of the parties must be evaluated at the time of the conveyance.  The court referred to the personal representative’s “self-serving testimony” and the fact that Brooks did not exercise control over the property as the only evidence that the parties intended to establish an equitable mortgage at the time the property was conveyed. The existence of the note and ledger were discounted as not being contemporaneous with the deeds.

Justice Kittredge would have reinstated the trial court’s finding of an equitable mortgage, denouncing the Court’s “categorical rule” in the face of these “equitable, fact intensive inquiries.” He found the existence of the note and ledger persuasive that the parties intended that the conveyance was, in legal effect, a mortgage.

Like dirt lawyers everywhere, I like certainty when it comes to deeds and find the Supreme Court’s holding comforting.

 

 

*Walker v. Brooks, Appellate Case No. 2013-001377

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