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REPUBLIC MORTGAGE CORPORATION v. BEASLEY et al.
43297.
Action for damages. Fulton Civil Court. Before Judge Camp.
DEEN, Judge.
1. Where a petition was filed, general demurrers interposed and sustained with leave to amend, an amendment filed, and the original demurrers renewed to the petition as amended, all prior to September 1, 1967, it was not error for the trial court, on September 6, to pass on such demurrers rather than declaring them moot under the new Civil Practice Act.
2. An action for fraud and deceit must affirmatively allege, among other facts, some action taken by the plaintiff which was directly induced by the defendant's misrepresentations. This petition fails to show any act done by the plaintiff which would have made it possible for the defendant to implement the alleged misrepresentations.
3. Where an act alleged to be a breach of the attorney-client relationship might or might not with equal consistency have been the cause of the plaintiff's loss, the petition fails to show that such act was the proximate cause of the loss.
Republic Mortgage Corp. filed suit against McLean and his attorney, Beasley, alleging generally in a two-count petition that it had been damaged by the failure of the latter to record a security deed executed to the plaintiff by Federal Mortgage & Discount Co., Inc., as a result of which the maker of the note and deed to secure debt, who is insolvent, sold the property to an innocent purchaser and plaintiff lost its security. The petition shows generally that McLean, represented by Beasley, had obtained a judgment against Townsend, president of Federal Mortgage & Discount Co. and Berger, president of Republic Mortgage Corp., in their individual capacities. The judgment debtors were anxious that the judgment not be placed on the execution docket, and an agreement was entered into by which Townsend would pay off the judgment at the rate of $1,000 per month and that defendants would not have it recorded. Beasley had physical possession of the security deed which also was not recorded. Some time later Republic Mortgage Corp. sought to foreclose on the property described therein and it was discovered that it was presently owned by the Salvation Army, an innocent purchaser, thus destroying the lien of the unrecorded security instrument. The plaintiff contends in Count 1 that as consideration for allowing Townsend to pay off the judgment by instalments and as additional security for McLean the defendants demanded physical possession of the security deed and also that the plaintiff executed and delivered an assignment of the deed to secure debt to him by virtue of a "Moratorium and Hypothecation Agreement" which is attached as an exhibit to the petition, that Beasley assured Berger, plaintiff's president and one of the judgment debtors, that he would promptly record the same and that he was given a check by the trustee in bankruptcy for this purpose; plaintiff relied on Beasley to record the deed; Beasley represented that he would do so, but falsely and fraudulently and with the present intention of deceiving plaintiff, took the deed and did not record it because he hoped this would generate friction between Berger and Townsend which he might use to the advantage of other clients. Count 2 alleges that on March 30, 1965 (more than a year later), Republic Mortgage Corp. employed Beasley to foreclose its security deed against Federal Mortgage & Discount Co.; Beasley did nothing until April 12, 1965, at which time he wrote the plaintiff advising it that on the previous Friday, Williams Street Realty Co., transferee of the property from Federal Mortgage Discount Co., had recorded a deed in favor of the Salvation Army, a bona fide purchaser for value. With the letter Beasley returned the retainer which had been given him on March 30. This count proceeds on the theory that Beasley, as attorney for the plaintiff in this transaction, was acting in a fidu-
ciary capacity toward it and was negligent in failing to record the deed, failing to advise that the deed had not been recorded, failing to act for approximately two weeks following his employment, and accepting employment in a situation where he had a conflict of interests.
The trial court sustained the general demurrers as renewed to the petition as amended and plaintiff appeals.
1. Code Ann. 81A-186 provides that after September 1, 1967, the Civil Practice Act shall be effective in all further proceedings in actions then pending "except to the extent that in the opinion of the court its application in a particular action pending when this Title takes effect would not be feasible or would work injustice, in which event the former procedure applies." The trial court thus has an option as to which law to apply to proceedings pending on the effective date of the Act. Where, as here, prior to such date a petition had been filed, general demurrers thereto sustained with leave to amend, an amendment filed and the original demurrers renewed to the petition as amended, it was not error to apply the same rules on September 6, 1967, in passing on the renewed demurrers as in passing on the original demurrers. This court on appeal will consider the same rules of procedure followed by the trial court in determining (a) whether he was authorized to apply the rules of procedure which he in fact applied, and (b) whether under such application, if authorized, his decision was correct. Cf. Abercrombie v. Ledbetter-Johnson Co., 116 Ga. App. 376 (157 SE2d 493).
2. The correctness of the judgment of the trial court must be determined under the rules of procedure in effect when the petition and demurrers were filed, and the petition construed most strongly against the pleader. Under such construction, an allegation that something was done by a party and an allegation elsewhere that the party did not do that thing are utterly repugnant, and the construction adverse to the pleader's interest must be adopted. Duggar v. Quarterman, 191 Ga. 314 (4), 318 (12 SE2d 302); Independent Life &c. Ins. Co. v. Pantone, 80 Ga. App. 426 (1) (56 SE2d 153). Although it is alleged in the plaintiff's petition that the security deed from Federal Mortgage & Discount Co., Inc., to Republic Mortgage Corp. was physically delivered to Beasley upon his demand to hold it as security and his promise to record it immediately, it is elsewhere alleged that John K. Calhoun, attorney for the trustee in bankruptcy in the U. S. District Court (but in what proceeding in that court, if any, it does not appear) gave the note and security deed to Beasley, Calhoun having received it along with other documents under a trust receipt. It is not alleged that Calhoun was acting as agent for the plaintiff, grantee of the security deed, nor does it appear why Calhoun had the document in his possession. Accordingly, the physical delivery of the security deed to the defendant was not the act of the plaintiff.
It is further alleged that "plaintiff executed and delivered to defendant Beasley a certain assignment of the deed to secure debt from Federal Mortgage & Discount Co., Inc. to Republic Mortgage Corp. by virtue of an instrument entitled Moratorium and Hypothecation Agreement, a copy of which is hereto attached as plaintiff's Exhibit A and incorporated by reference herein as fully as if set forth at length herein." The attached agreement is indeed signed by Republic Mortgage Corporation, but makes no commitment whatever on behalf of Republic. On the contrary, it recites that "Federal Mortgage & Discount Co., Inc., does herewith assign and hypothecate to John McLean and Ben Beasley that certain note . . . and . . . deed to secure debt securing the same." It therefore appears that plaintiff's conclusion that it hypothecated these instruments to Beasley or McLean is based on the terms of the attached agreement which shows nothing of the kind, and that physical possession of the papers was delivered by a third person unconnected with the transaction.
As we have said, Count 1 is an action based on fraud and deceit based on a promise, made in bad faith, to record the plaintiff's security deed delivered by it to the defendant, failure to do which resulted in the plaintiff suffering injury when the property was subsequently transferred by the grantor to a bona fide purchaser for value. The essential allegations of such an action are: "(1) That the defendant made the representations; (2) that at the time he knew they were false; (3) that he made them with the intention and purpose of deceiving the plaintiff; (4) that the plaintiff relied on such representations; (5) that the plaintiff sustained the alleged loss and damages as the proximate result of their having been made." McBurney v. Woodward, 84 Ga. App. 807, 814 (67 SE2d 398). The petition here not only fails to show why the plaintiff corporation should have attempted to hypothecate its property for the benefit of its president as an individual, but also fails to show that it did so. Count 1 fails to meet the fourth element of the action attempted to be set forth by failing to allege any act on its part done in reliance on the defendant's representations.
3. Additionally, Count 2, which attempts to set forth an action for damages based on a breach of the defendant's duty to it under a contract of employment as its attorney dated March 30, 1965, is subject to a like defect. Where the allegations of the petition are at variance with the exhibits attached thereto, the exhibit must control. Equitable Credit Co. v. Murray, 79 Ga. App. 795 (2) (54 SE2d 650); Atlanta Journal Co. v. Doyal, 82 Ga. App. 321, 325 (60 SE2d 802); Harris v. Ackerman, 88 Ga. App. 128 (1) (76 SE2d 132). The negligence alleged is that defendant did not, immediately on his employment, take certain steps to secure the plaintiff's interest, as a result of which "the property secured by said deed to secure debt had been sold to an innocent purchaser on the preceding Friday," that is, the Friday preceding April 12, 1965, and subsequent to the March 30 date of employment. However, a letter attached to the petition reveals that the sale of the property to the Salvation Army on that date was not a sale made by Federal Mortgage & Discount Co., Inc., but by Williams Street Realty Co. to whom Federal, the owner, had previously transferred title. Whether this latter transaction predated the commencement of employment, and whether it was a bona fide sale to an innocent purchaser do not appear; it must therefore be assumed that these facts existed. Nowhere is it alleged that Federal sold directly to the Salvation Army, or that its transferee, Williams Street Realty Co., had not by its purchase wiped out the lien of the security deed prior to any employment by the plaintiff of the defendant. It cannot therefore be assumed that any negligence of the defendant as plaintiff's attorney in delaying two weeks before bringing the foreclosure action was any part of the proximate cause of plaintiff's loss, and no right of action is set out based on an attorney-client relationship.
The trial court did not err in dismissing the petition on general demurrer.
Judgment affirmed. Jordan, P. J., and Pannell, J., concur.
Hugh G. Head, Jr., Cotton & Katz, Richard A. Katz, for appellees.
O'Kelley, Hopkins & Van Gerpen, William C. O'Kelley, for appellant.
ARGUED JANUARY 9, 1968 -- DECIDED FEBRUARY 9, 1968 -- REHEARING DENIED FEBRUARY 23, 1968 -- CERT. APPLIED FOR.
Friday May 22 18:49 EDT


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