Busted

May 9, 2018 § Leave a comment

In 1972, Carroll and Susan O’Brien purchased 104 acres of land in Simpson County as joint tenants with right of survivorship. The purchase money came from Susan’s inheritance.

Fifteen years later, in 1987, the couple was divorced by judgment on the ground of irreconcilable differences. Their PSA, which was incorporated into the judgment, included the following provision:

It is agreed between the parties that all real property jointly owned by these parties shall remain as same now is, with each party owning a one-half undivided interest in all real property and that said real property cannot become community property by any future marriages by either spouse. No disposition of any land holdings may be made while both parties are alive unless by mutual agreement in writing.

It is obvious from the language above that their intent was that the ultimate survivor would become sole owner of the property.

Only problem is that Carroll had a different idea. In 1995, using an old power of attorney (POA) that Susan had signed back in 1970, he quitclaimed the Simpson County property to himself and his new wife, Socorro. Contrary to the express language of the PSA, Carroll had not sought or obtained Susan’s “mutual agreement in writing” to dispose of his interest in the real estate. He did not execute the deed as Susan’s attorney-in-fact. There were a couple of later conveyances in 2000 and 2007, resulting in the property being conveyed solely to Socorro.

Carroll died in November, 2012.

Susan filed suit to void the deeds and remove clouds on her title to the property. She alleged breach of fiduciary duty by his self-dealing use of the POA, lack of authority to convey, fraud, and unjust enrichment. Socorro filed a denial, along with affirmative defenses of equitable estoppel, laches, and waiver, and demanded one-half of the ad valorem taxes back to 1995.

Susan filed a motion for summary judgment. The chancellor found that no written agreement was ever made to allow Carroll to convey any interest in the property, and that all of his attempts to convey the property after the divorce would be cancelled and set aside. Socorro appealed.

The COA unanimously affirmed in the case of O’Brien, Individually and as Executrix of the Estate of O’Brien v. Westedt, handed down April 10, 2018. There are some legal points of interest to property lawyers.

Citing Mosby v. Mosby, 962 So. 2d 119, 124 (¶15) (Miss. App. 2017), the court affirmed the chancellor’s decision:

¶12. Susan responds that the Mosby case clearly stands for the principle that conveyances which thoroughly frustrate the intent of a divorce decree shall be set aside. Id. She claims that, based on the trial court’s interpretation and application of Mosby to the undisputed facts of the case, she was entitled to a judgment as a matter of law. She contends that the property settlement agreement is clear that neither she nor Carroll could dispose of any interest in the real property while both were alive without the written agreement of the other. As previously quoted, the agreement states that “[n]o disposition of any land holdings may be made while both parties are alive unless by mutual agreement in writing.”

¶13. The chancery court noted that in “Mosby, a divorced husband attempted to thwart the intent of the divorce decree by conveying his one-half interest in the property to his second wife while retaining a life-estate in himself in a scheme to avoid splitting the equity in the property with his first wife.” Id. Based on the Mosby case, the court found that the property settlement-agreement provision governed, and all attempts by Carroll to convey the property after his divorce from Susan should be canceled and set aside. We agree. See also McKinney v. King, 498 So. 2d 387, 388 (Miss. 1986) (holding that, “[i]t is fundamental law that an agent owes his principal absolute good faith and fidelity, and he cannot in the exercise
of his authority as agent acquire property or interest therein rightfully belonging to his principal without full disclosure and free consent of his principal.”).

¶14. The property-settlement agreement clearly contemplated that the property would pass by survivorship unless both parties agreed otherwise in writing. “[P]roperty settlements under divorce actions are binding on the parties if fair, equitable and supported by consideration.” Weeks v. Weeks, 403 So. 2d 148, 149 (Miss. 1981). Socorro does not claim that the property-settlement agreement entered into by Carroll and Susan was unfair, inequitable and not supported by consideration at the time Carroll and Susan executed it. The contract was enforceable, and the conveyances were void; therefore, the original joint tenancy with rights of survivorship was still intact at Carroll’s death, and Susan is entitled to the entire property.

A few thoughts:

  • I am going to presume that the concept of keeping the property jointly titled post-divorce originated with the clients, and not the lawyers. Perhaps neither had the funds to buy out the other’s interest. Whatever, I don’t think it’s usually best to leave the parties in a joint ownership arrangement after a divorce.
  • Regardless of the wisdom or lack thereof behind the property arrangement, I give full credit to the lawyer who drafted it. The provision leaves no doubt about what the parties intended, and it left no wiggle room that Carroll could have used to justify his actions.
  • This case also highlights that you need to discuss with your divorce clients how to tidy up their affairs after divorce. They need to do a credit check to make sure there are no joint credit accounts of which they were unaware. They need to cancel all previous wills. They need to execute a cancellation of all prior powers of attorney and file the cancellation with the chancery clerk among the property records. They need to check and change life insurance beneficiaries as necessary. They need to close all joint banking and securities accounts. It’s an important subject about which I’ve posted here before.
  • Righting wrongs and making sure that equity is done are core functions of chancery court.

 

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