O.C.G.A. § 23-2-34 (2019)

Annotations

JUDICIAL DECISIONS ANALYSIS GENERAL CONSIDERATION APPLICATION OF SECTION 1. PRIVIES BONA FIDE PURCHASERS General Consideration This section is not limited by its terms to one remedy but applies to any equitable relief. Volunteer State Life Ins. Co. v. Powell-White Co., 187 Ga. 705, 1 S.E.2d 662 (1939). Privity denotes successive relationship to the same right in the same property. Hilton v. Hilton, 202 Ga. 53, 41 S.E.2d 880 (1947). The mere fact that plaintiff grantee and defendant grantee had entered into an agreement with the common grantor whereby each was to purchase separately from the common grantor one half of a described city lot, could not possibly constitute each grantee ‘‘an original party’’ to the deed of conveyance to the other within statute permitting reformation. Hilton v. Hilton, 202 Ga. 53, 41 S.E.2d 880 (1947). It is an elementary principle of law that a privy, either in law, fact, or estate, has no greater right than the one with whom he is in privity, accordingly, since the plaintiff ’s father would have been estopped in law to attack and thus question the validity of the divorce which he procured from the plaintiff ’s mother, it logically follows that the plaintiff himself is also estopped to do so. Phillips v. Phillips, 211 Ga. 305, 85 S.E.2d 427 (1955). Lack of standing in equity. - Decedent’s estate administrator lacked standing to challenge the three assignments of the security deed in a non-judicial foreclosure sale because the administrator was not a party to the assignment contracts, and the administrator did not have standing in equity to seek relief because the administrator was not seeking reformation of the deed and did not allege mutual mistake. Shannon v. Albertelli Firm, P.C., No. 14-11832, 2015 U.S. App. LEXIS 7552 (11th Cir. May 7, 2015) (Unpublished). Reformation of agreement was not permitted against bona fide pur-

chaser of promissory note. - In a suit on a promissory note by a lender’s assignee, although some evidence supported the borrowers’ claim that terms in a Forbearance Agreement (FA) binding the guarantors were the product of mutual mistake and release of the guarantors was intended, the trial court erred in reforming the FA because the borrowers had not overcome the presumption that the assignee was a bona fide purchaser for value without notice of the mistake. Hamilton State Bank v. Kelly Capital Invs., LLC, 335 Ga. App. 252, 779 S.E.2d 757 (2015). Cited in Harrison v. Hester, 160 Ga. 865, 129 S.E. 528 (1925); Sapp v. Ritch, 169 Ga. 33, 149 S.E. 636 (1929); McCollum v. Loveless, 187 Ga. 262, 200 S.E. 115 (1938); Thomas v. Lambert, 187 Ga. 616, 1 S.E.2d 443 (1939); Ayers v. Carden, 212 Ga. 510, 93 S.E.2d 694 (1956); Empire Land Co. v. Stokes, 212 Ga. 707, 95 S.E.2d 283 (1956); Lanier v. American Cas. Co., 226 F. Supp. 630 (N.D. Ga. 1964); DOT v. Brooks, 254 Ga. 303, 328 S.E.2d 705 (1985); Anderson v. Streck, 190 Ga. App. 224, 378 S.E.2d 526 (1989); Yeazel v. Burger King Corp., 241 Ga. App. 90, 526 S.E.2d 112 (1999). Application of Section 1. Privies Section extends equitable relief to privies to contract. - The general rule, which allows only the parties to a judgment to attack and thus question its validity, has been relaxed in this state by this section, however, the privity either in law, in fact, or in estate, which will permit one to attack and thus question the validity of a judgment to which he is not a party has no personal basis as a mere matter of sentiment, but rests upon some actual mutual or successive relationship as to the same right of property. Phillips v.

Application of Section (Cont’d) 1. Privies (Cont’d) Phillips, 211 Ga. 305, 85 S.E.2d 427 (1955). Section extends no rights to one not privy under original contract. - Primarily the right to reform a contract belongs to the original parties thereto. The recognized extension in favor of those in privity with the original contractors does not mean that the terms of a contract can be altered and reformed by one who does not claim as a successor under the contract sought to be reformed, but under another contract, setting up different and inconsistent rights. In such a case, the subsequent grantee’s quarrel is with the person from whom he derived his title, rather than with the one holding adversely under a prior and different contract, to which he was admittedly neither party nor privy. Rawson v. Brosnan, 187 Ga. 624, 1 S.E.2d 423 (1939); Hilton v. Hilton, 202 Ga. 53, 41 S.E.2d 880 (1947). In a quiet title action, the trial court properly granted summary judgment to the adjoining landowners as the suing neighbor was not entitled to reformation of corrective deeds entered into between the suing neighbor’s predecessor in title and the adjoining landowners since the suing neighbor was not a party to the corrective deeds. Moore v. McBryar, 290 Ga. App. 725, 659 S.E.2d 789 (2008). Requirement of privity of contract, etc., applies to remedy of reformation and to remedy of cancellation. - Where personal property is sold, and a bill of sale with warranty of title is executed by the vendor, and the property is again sold with warranty of title, the last vendee and his vendor may join in an equitable petition against the original vendor, having for its purpose the reformation of the original bill of sale by including certain items of property omitted therefrom by mutual mistake. Chapman v. Cassels Co., 180 Ga. 349, 179 S.E. 91 (1935). When the absolute title to property is apparently in a vendor or mortgagor, the vendee or mortgagee is protected, unless the one seeking to set up a lien or trust against the property can show that the vendee or mortgagee had notice of trust

funds having gone into the property. Tattnall Bank v. Harvey, 186 Ga. 752, 198 S.E. 724 (1938). The mere fact that purchaser might have had some knowledge of a mingling by his vendor of trust funds with his own is not sufficient to charge the vendee with notice that trust funds had been diverted in the purchase of a particular piece of land. Tattnall Bank v. Harvey, 186 Ga. 752, 198 S.E. 724 (1938). After the original vendor of the land died intestate, and there was no administrator or personal representative of the decedent at the time the suit was brought, a suit could be maintained against the sole heir at law of the intestate, as the heir was apparently the only party who was interested in resisting the suit. Steadham v. Cobb, 183 Ga. 30, 196 S.E. 730 (1938). The rule requiring mutuality or privity of contract or estate, applies not only to the equitable remedy of reformation but to that of cancellation or other equitable relief against the effect of an instrument. Volunteer State Life Ins. Co. v. Powell-White Co., 187 Ga. 705, 1 S.E.2d 662 (1939). Where the plaintiff in ejectment was the prior grantee of the tract sued for, not being a privy in law, fact, or estate with the defendant, who held under a subsequent deed from the common grantor, the defendant could not defend by reforming the plaintiff ’s deed so as to strike therefrom, as having been included by mutual mistake, the tract subsequently conveyed to the defendant. Volunteer State Life Ins. Co. v. Powell-White Co., 187 Ga. 705, 1 S.E.2d 662 (1939). A petition in equity by a husband seeking to cancel two concurrent verdicts and a decree obtained in the same court in a former divorce suit by the wife against her former husband, and to have declared the continued existence of the former marriage, thereby establishing incapacity of the wife to marry at the time of her marriage to the plaintiff, was subject to a general demurrer (now motion to dismiss). Martocello v. Martocello, 197 Ga. 629, 30 S.E.2d 108 (1944). Taking as true for purposes of a Chapter 7 trustee’s motion for judgment on the pleadings a bank’s contention that the

parties involved in the sale, financing, and purchase of the property at issue intended that the property be conveyed to the debtor wife alone and intended that the security deed encumber the entire property rather than only an undivided one-half interest, the bank was not entitled to reformation of a special warranty deed (SWD) under Georgia law because as a security deed grantee, it was not an original party to the SWD or in privity with any party to the SWD. Bank of Am., N.A. v. Adams (In re Adams), 583 B.R. 541 (Bankr. N.D. Ga. 2018). Privy applied to Internal Revenue Service. - Internal Revenue Service, by reason of the fact that it was asserting a tax lien against property that inadvertently had been omitted from a conveyance deed, was a privy in law that was bound under Georgia law by a reformed conveyance because O.C.G.A. § 23-2-34 provided that equity will grant relief as between the original parties or their privies in law, in fact, or in estate, except bona fide purchasers for value without notice. Nat’l Assistance Bureau, Inc. v. Macon Mem’l Intermediate Care Home, Inc., No. 5:06-cv-301 (CAR), 2009 U.S. Dist. LEXIS 66362 (M.D. Ga. June 8, 2009). Children who were remaindermen, and would receive whatever assets of a marital trust that their mother did not appoint or distribute by will, were privies in estate with their mother. Richardson v. Bridges, 260 Ga. 62, 389 S.E.2d 215 (1990). Bona Fide Purchasers Section protects interests of bona fide purchasers. - Where a husband contracts to buy land for value and directs conveyance thereof to his wife, no inference will arise that the wife is a purchaser for value, without notice of equities in favor of the vendor as against the vendee; and if the deed to the wife does not express the true agreement between the husband and the vendor, on account of mistake of the draftsman and mutual mistake of the vendor and the original vendee, the deed may be reformed so as to speak the true agreement. Cain v. Varnadore, 171 Ga. 497, 156 S.E. 216 (1930).

It is a rule in equity that a bona fide purchaser without notice, to be entitled to protection, must be so, not only at the time of the contract or conveyance, but until the purchase money is actually paid. Ross v. Rambo, 195 Ga. 100, 23 S.E.2d 687 (1942). A partial payment of the purchase money before notice of the equitable title of the true owners, although not sufficient to invest the vendee with the character of a bona fide purchaser as regards the entire estate purchased, will entitle him to invoke the aid of the equitable principle that he who asks equity must do equity and to be reimbursed for the amount actually paid before. Ross v. Rambo, 195 Ga. 100, 23 S.E.2d 687 (1942). When a husband fraudulently seeks and obtains a divorce from his wife in a court of his selection, he and his privies in law, in fact, or in estate, are thereafter conclusively estopped to assail the validity of the decree to the prejudice of innocent parties. Phillips v. Phillips, 211 Ga. 305, 85 S.E.2d 427 (1955). Creditor could not prevail on the creditor’s claim for equitable reformation of a security deed executed by a debtor that did not own the property because nothing in the chain of title provided constructive notice to a potential purchaser of the property of the creditor’s equitable interest in the property. Stearns Bank, N.A. v. Rent-A-Tent, Inc. (In re Rent A Tent, Inc.), 468 B.R. 442 (Bankr. N.D. Ga. 2012). While it is the rule that a bona fide purchaser of property in which trust funds have been invested is protected, the beneficiary of a trust estate may at his option, within a reasonable time, ‘‘affirm or reject an unauthorized investment by the trustee,’’ and equity will aid the beneficiary in recovering the funds or property, or enforcing a lien for the wrongfully used funds, provided that the assets can be traced and remain in the hands of a person ‘‘affected with notice of the misapplication.’’ Tattnall Bank v. Harvey, 186 Ga. 752, 198 S.E. 724 (1938). Constructive and inquiry notice. - Purchasers of land are charged with constructive notice of recorded instruments and also recognizes the concept of inquiry notice. For a discussion of the balance

Bona Fide Purchasers (Cont’d) between these concepts, see Stearns

Bank, N.A. v. Rent-A-Tent, Inc. (In re Rent A Tent, Inc.), 468 B.R. 442 (Bankr. N.D. Ga. 2012).

RESEARCH REFERENCES Am. Jur. 2d. - 27 Am. Jur. 2d, Equity, § 261. C.J.S. - 31 C.J.S., Equity, § 133 et seq. ALR. - Right of one who, with knowledge of outstanding equity, derived his interest in real property from or through a bona fide purchaser, to same protection as latter, 63 A.L.R. 1362. Bona fides of purchaser of bill or note on an executory consideration, 100 A.L.R. 1357. Right of lessee to equitable relief against forfeiture for breach of conditions as affected by lessor’s giving a lease to or entering into other contractual obligations with a third person, 166 A.L.R. 807. What constitutes notice to subsequent purchaser of real property of option to purchase contained in unrecorded lease, 17 A.L.R.2d 331. Motor vehicle certificate of title or similar document as, in hands of one other

than legal owner, indicia of ownership justifying reliance by subsequent purchaser or mortgagee without actual notice of other interests, 18 A.L.R.2d 813. Rights as between purchaser of timber and subsequent vendee of land, 18 A.L.R.2d 1150. Relative rights in real property as between purchasers from or through decedent’s heirs or devisees and unknown surviving spouse, 39 A.L.R.2d 1082. Extension of time or forbearance to sue as consideration constituting mortgagee bona fide purchaser, 39 A.L.R.2d 1088. Knowledge or notice of inadequacy of consideration for conveyance in chain of title as affecting bona fide status of purchaser, 42 A.L.R.2d 1088. Relative rights as between purchaser of chattel from one who had previously bought it with stolen money, and victim of the theft, 62 A.L.R.2d 537.

ARTICLE 3 FRAUD Cross references. - Pleading requirements in actions involving fraud, § 9-11-9. Deceptive or unfair trade or business practices generally, § 10-1-370

et seq. Further provisions regarding fraud in contracts, §§ 13-4-60, 13-5-5. Fraudulent entries in elections, § 21-2-562 et seq. Equitable estoppel, § 24-14-29.

RESEARCH REFERENCES Am. Jur. Proof of Facts. - Fraudulent Misrepresentation as to Use to Which Real Property Could Be Put, 38 POF2d 91.

Fraudulent Representations Inducing the Purchase of a Small Business, 30 POF3d 1.