The call came in late on Friday afternoon. He answered the phone himself, having let the secretary leave early.

“Newsome, Newsome, Newsome and Newsome. How may I help you?”

“May I speak, please, with Mr. Newsome?”

“I’m sorry, sir, but he’s no longer with us.”

“Then may I speak with Mr. Newsome?”

“He retired two years ago.”

“Well, how about Mr. Newsome?”

“He’s in Chicago finishing up depositions.”

“What about Mr. Newsome?”

“Speaking.”

Carl Newsome, long a Henny Youngman fan, loved to do that. He was indeed the fourth generation of the Newsome family in the firm, but it was now only he and his father. His grandfather, who had started the firm, was deceased. His uncle had retired. His father really was in Chicago finishing up depositions.

“Mr. Newsome, my name is Wiley Wood. I live in Chicago, but I’m looking for an attorney there in Stapleton for a real estate deal with a short turn-around. You do that type work?”

“Yes sir, Mr. Wood; I do. What are you looking at?”

“I’m buying two properties there in Stapleton. One is a house and the other is a small undeveloped parcel next door. The seller is ‘motivated’ as they say; I understand that he’s under pressure to sell to pay off a loan coming due. He’s giving me a good deal, but I have to close by end of next week .”

“Mr. Wood, I’m sure I can help you get this done. Who’s the seller? I need to make sure I don’t have a conflict.”

“Jasper Haynes. He owns the house and the lot. I seem to recall that his wife may own part of it, too. You’ll have to figure that out when you run title. Jasper is the only person I’ve been dealing with.”

“Yeah, I know Jasper, but I don’t represent him, so I’m good on conflicts. You have a term sheet you can send me?”

“Well, actually, it’s just the terms written down on a piece of paper that Jasper and I signed. I’ll email you that. The other piece of this is that I’m financing the purchase with a bank here in Chicago. They told me that I can pick whatever attorney I want to represent me and to close the loan. You handle that, too?”

“I can do that. You have to understand though, that we have to be clear on who I’ll represent. The bank will require that I be clear that I represent them. Practically, it may not be a big deal if you’re OK with signing the bank’s form loan documents and you’re not interested in negotiating them. You and the bank will have the same interest in getting the title conveyed directly, so that part won’t be a problem Legally, though, everyone’s got to be clear that I represent the bank. ”

“I understand. I’ve closed deals like this with this bank before, and we didn’t have a problem. I’ll give the bank your contact information so they can work directly with you on their part of it.”

“That’ll work. If you’ll email me the deal terms, and your lender gets the loan package to me on time, we should be able to make close by the end of next week, Mr. Wood. Will you be here for the closing?”

“Yes, I was planning to be there. I would like to push for Thursday to give us a day’s leeway, since I understand Jasper’s loan has to be paid off by Friday.”

“Good. I’ll look forward to meeting you. I’ll go ahead and call Mr. Haynes and see if I can get the information from him to go ahead and run title.

***

Carl called Jasper Haynes as soon as he hung up with Wood.

“Mr. Hayes, this is Carl Newsome, an attorney here in town. I understand that you’re selling some property to a Mr. Wiley Wood? Mr. Wood just called me and asked me to close it for him. I thought I’d go ahead and call you and see if I could get a jump on it, since I understand you all need to close next week.”

“Yes, sir. That’s correct. I have a loan with Short Falls Bank coming due end of next week, and with the banking world being like it is, my banker told me there’s no way they’ll extend me. So I gotta get ‘em paid off with this sale. Tell me what I can get to you to get going.”

“Well, Mr. Wood is sending me the terms. The most time-sensitive thing right now is the title search. I understand that you’re selling your house and a vacant property next door? Can you send me deeds or anything on those?”

“Yeah, selling the house and a lot next door. We thought that it might all go commercial one day, but time just ran out on us. I think I can send you copies of the deeds. I own the house with my wife Mildred. The lot next door I own in a limited liability company that I formed with my brother Jarvis. Name of the company is Haynes Brothers Investments, LLC.”

“Go ahead and send me those deeds as soon as you can. Based on what you’re telling me, we’ll need to get the deed for the house signed by you and Mildred. As for the limited liability company, does it own any other property?”

“Nope. This is it. Again, we had hoped to do some more, but we never did.”

“That means that we’ll have to have Jarvis’s consent to the sale. Either he’ll have to sign everything or we’ll have to get him to sign a consent to the deal authorizing you to sign the deed and everything else.”

“If it’s all the same to you, let’s just go the consent route. Get me whatever you need Mildred and Jarvis to sign and I’ll get it all signed and back to you.”

“They won’t be at closing?”

“Naw. Mildred’s leaving town this weekend—going to be out of the country for two weeks. Jarvis is in Phoenix and can’t travel in for this because of work. No problem getting them to sign stuff, though.”

“Well, under the circumstances I guess that’s all we can do. Go ahead and email those deeds to me as soon as you can.”

* * *

Over the weekend Carl got the term sheet and lender contact information from Wood. He went on the Secretary of State website and confirmed that Haynes Brothers Investments, LLC did exist and that Jasper Hayes was the registered agent. Carl drafted and emailed the limited liability company certificate for Jasper and Jarvis Haynes to sign, certifying that they were the only two members and managers and authorizing Jasper to sign on behalf of the company. He called the lender, Jesse Orr, first thing Monday morning.

“Yeah, Carl, we’re fine with you guys closing the loan. We just need to get an insured closing letter from you. We don’t have any relationships in your neck of the woods, so this will work out well for us. We figured that Mr. Wood knew folks down there so it would be easiest if we let him pick counsel. I know that time is of the essence, so I’m pushing to get the loan package out to you not later than tomorrow”

Hanging up the phone, Carl immediately went on line and emailed Orr the insured closing letter. He then headed to the courthouse to run title. The one property was indeed owned by Jasper and Mildred as tenants-in-common and was subject to a loan from Short Falls Bank. The Haynes Brothers property was vested in the limited liability company and was also subject to a security deed to Short Falls Bank. Back at the office he called the Short Falls Bank loan officer and requested the payoff information. The loan officer confirmed that the loan matured on Friday of that week and emphasized that it would not be extended, confirming the urgency.

That afternoon Carl drafted up the deed from Mildred to Mr. Wood for her undivided one-half interest in the house. Mid-afternoon he got the loan package from Orr. Nothing else was required from Mildred, so he emailed the deed on to Jasper for him to get Mildred’s signature, with detailed instructions about required witnesses and notaries.

Everyone agreed that the closing would be at Carl’s office at 2 PM Thursday afternoon. Carl received the payoff letter from Short Falls Bank that morning. The letter stated as the payoff amount the greater of a stated amount of principal and interest or the net loan proceeds. Just to make sure, it also included this provision: ‘**Please Note- payoff is greater of Net Loan Proceeds or the Total Payoff Amount Quoted Above. NO FUNDS TO BE DISBURSED TO SELLERS .” Carl read the payoff letter and put it in the closing file on his secretary’s desk. His secretary always prepared the HUD-1. He also left a note reminding her to pay the tax liens on the retail property that he had discovered during the title search.

Jasper Haynes appeared promptly for closing; Mr. Wood shortly thereafter. Carl introduced himself and took them back into the conference room. He took from Haynes the executed, witnessed and notarized deed signed by Mildred and the limited liability company certification signed by Jarvis. Carl’s secretary made copies of each gentleman’s driver’s license. The parties signed the conveyance and loan documents by 2:45, and Carl called Jesse Orr to say he was ready to fund, faxing to him copies of the “marked” long-form title insurance commitment including the two properties and the signed HUD-1, together with a copy of the promissory note signed by Wiley Wood. The loan proceeds hit Carl’s escrow account at 3:15 and the loan payoff to Short Falls Bank went out by 3:30, confirmed at 3:55. Like clockwork.

***

Carl had a phone message waiting for him when we got to the office one morning a couple of weeks later. It was from Mildred Haynes. “Probably wants a copy of the closing documents,” Carl surmised to himself. He called her as soon as he got to his desk.

“Mrs. Haynes, Carl Newsome here, returning your call. What may I do for you?”

She sounded strangely anxious but got right to it. “Mr. Newsome, I saw in the real estate transaction section of the paper this weekend that my house was sold to a Mr. Wiley Wood a couple of weeks ago. You know anything about that? Your name was on the deed”

Carl started to go numb in his left arm. “Well, yes, Mrs. Haynes, I closed that sale, of your house and the lot next door with your husband and Mr. Wood. Your husband brought the deed you had signed.”

Her voice got stronger. “I never signed any such thing, Mr. Newsome. I knew he was up to something, but I couldn’t figure out what. How’d he get his brother’s signature on the deed for the lot next door?”

“I drafted up a document that said his brother authorized the sale of the property and Jasper to sign all the documents. Jasper got it signed and brought it to closing, too.”

“Mr. Newsome, he did no such thing. His brother Jarvis has been on a trip to Asia for the past three weeks. He’s been totally out of contact ever since he left: no phone, no email, no nothing. There is no way he could have signed anything.”

The numbness moved up to his shoulder. “Mrs. Haynes, if what you’re telling me is true, your husband forged two documents, or had someone forge them, to be able to sell the two properties without you or your brother-in-law knowing about it. Why would he do that?”

She hesitated. “Well, I’m not totally sure, but I have an idea. He has a gambling problem, and I picked up a while back that he owed a bunch of money to someone he knows up in Chicago. I never met the man, but I know they would go to Vegas every so often together.”

“Chicago? You remember a name?”

“Not his. For some odd reason, though, I remember the name of the guy he worked for. I heard Jasper say something about a ‘family office.’ I had never heard of such a thing, but I think he works for this guy who has so much money that he needs somebody to look after it full-time. Anyhow, Jasper’s gambling buddy is that somebody. He works for a guy named Wiley Wood. Don’t know why I remember that. Must be because first time I heard it, I tried to picture what it would like if Wiley Coyote and Woody Woodpecker had a baby together; stuck with me ever since. I remember Jasper saying that Wiley was old and ill and there was a good chance that when he died his gambling buddy stood a good chance of inheriting a good chunk.”

“Wiley Wood is an older man, you say?”

“Oh, yes. Jasper met him one time. Said he was probably in his seventies then, and that was six or seven years ago.

Carl was dizzy now. The guy in his office for the closing had been fifty, at the oldest. He ended the discussion with Mrs. Haynes somehow. He never was able to remember how. All of sudden, he just realized he was sitting there in a daze, having hung up the phone. He went to his secretary’s files and pulled out the copy of Wiley Wood’s driver’s license. Just as he remembered, based on the birth date on the license Wood was about 49. He looked about that age, too.

Carl didn’t get much billable work done that next week. He called Jarvis Haynes, having called Mildred back for his number. He confirmed that not only had he not signed anything for the sale of the property, he and Jasper had been in a fight for several years about what to do with the property and as a result had not spoken in three years. They had just been paying taxes on the property, but he had not received a bill from Jasper for two or three years. That helped explain the tax liens. He tracked down Wiley Wood in Chicago. He indeed had a family office, having made millions as the chief executive officer of a real estate development company in the Chicago area in the sixties and seventies. He also knew nothing about the deal, and he couldn’t ask his office manager because, interestingly, he was in Vegas.

Carl called his errors and omissions insurance company. He was now on medication.

Short Falls Bank called on Wednesday. The payoff amount they had received was about $75,000 less than the net sale proceeds on the HUD-1 and they wanted to know where the rest of it was. Carl immediately knew what had happened: his secretary had missed the note on the payoff letter. The Short Falls Bank officer made it very clear that not only would they not be releasing their security deed; they would be looking to Newsome, Newsome, Newsome and Newsome for the rest of their money.

Then on Thursday Jesse Orr called Carl checking on the status of the recorded documents and the title insurance policy. Carl had anticipated this call.

“Mr. Orr, uh, we can’t issue the policy. We found out after the fact that several—perhaps all—of the closing documents were forged: the deed from Mildred, the authorization from the limited liability company and your security deed itself. Since we know that now, the title company has instructedus that we can’t issue the policy. We’d be insuring documents that we know from the outset were forged.”

“What about the marked title commitment you sent us? We closed relying on that and you have to issue the policy.”

“Well, Mr. Orr, since the security deed was forged, we don’t think we’re obligated on the commitment.”

Mr. Orr graphically expressed his disagreement.

***

These facts provide a setting in which to discuss several recent Georgia cases of some import.

The Mistaken Payoff. Trey Inman & Associates, P.C. v. Bank of America, No. A10A1844, October 13, 2010 (Ga. App.), involved a payoff letter from the Bank that stated as follows:

Principal Balance: $159,181.20, Interest accrued to 03/28/2008: $1,485.69, Total: $160,666.89 or 100% Net Sales Proceeds whichever is greater . . . Please Note – payoff is greater of Net Sales Proceeds or total Payoff Quote Amount. NO FUNDS TO BE DISBURSED TO SELLER

At the closing, the law firm, contrary to the Bank’s instructions, disbursed $160,852.60 to the Bank and $76,122.31 to the seller. The Bank subsequently demanded return of the $76, 122.31. The firm refused the request, claiming that the funds were no longer in its possession. The Bank sued the firm for conversion. The trial court granted the Bank’s motion for summary judgment and the Court of Appeals affirmed after attending to the law firm’s various arguments.

Carl did the right thing calling his malpractice carrier.

Forged Deed on Undivided Interest. Brock v. Yale Mortgage Corp., 287 Ga. 849, 700 S.E.2d 583 (2010) involved a loan secured by a property that immediately before closing was owned by a husband and wife as tenants-in-common. The wife brought to closing a forged quitclaim deed from the husband. The lender disbursed funds required to pay off a prior loan and then disbursed the remaining proceeds to the wife. The husband, having discovered what his wife had done, filed suit to, inter alia, set aside the forged deed and either set aside the security deed or limit its encumbrance to a one-half undivided interest in the property. The trial court granted the lender’s motion for summary judgment, determining that the lender held a valid security interest in the entire property. The husband appealed on various grounds, including arguments that (a) even if the lender was a bona fide purchase for value, it could not acquire a valid security interest in the entire property and (b) the lender’s status as a bona fide purchase for value is a question of fact that may not be determined on summary judgment.

The Georgia Supreme Court affirmed the trial court’s order to the extent that it recognized the lender’s security deed as encumbering the wife’s one-half interest. Responding to the argument that the lender, as a bona fide purchase for value, also had a security interest in the one-half interest purportedly conveyed by the fraudulent deed, the Court noted that “even a bona fide purchaser for value without notice of forgery cannot acquire good title from a grantee in a forged deed, or those holding under such a grantee, because the grantee has no title to convey.” (citing various cases).

According to Jeff Schneider of Weissman, Nowack, Curry & Wilco P.C., this case constitutes a significant reversal of Georgia case law. The lender in this case, relying on Bonner v. Norwest, 275 Ga. 620 and Mabra v. DeutscheBank, 277 Ga. App. 764, argued that Georgia law has heretofore recognized that a lender, despite an underlying forgery, can obtain a first-priority security interest in the property. According to Jeff, the two decisions of Bonner and Mabra have commonly been used for the proposition that, despite an acknowledged forgery, a lender may be entitled as a bona fide purchaser to hold a security interest in the property in its entirety. The Court in this case expressly overrules Bonner and Mabra, making it clear, according to Jeff, that the Supreme Court now concludes that the bona fide purchaser for value doctrine will not overcome a forgery.

Forged Limited Liability Company Authorization. Ly v. Jimmy Carter Commons, LLC, 286 Ga. 831, 691 S.E. 2d 853 (2010), concerned a lender’s initiation of foreclosure proceedings against a retail property owned by a limited liability company. The borrower filed an action to enjoin the foreclosure and cancel the security deed. The trial court granted summary judgment to the borrower.

The limited liability company had two members and managers, one of whom produced consents purportedly signed by the other authorizing him to sign the loan documents. The trial court determined that the operating agreement of the company required the approval of both members, that the absent member had no dealings with the lender and did not authorize the transaction, that the consents were forged and that the member who signed the loan documents was therefore without authority to bind the company. The Court of Appeals, reversing the trial court, reasoned that “even if all that is true, there is still a genuine issue of material fact as to whether

[the lender] had knowledge that the unanimous consent documents were ineffective and did not give [the signing member] the authority to act alone”, citing O.C.G.A. § 14-11-301(b) (2).

Refusal to Deliver Title Insurance Policy due to Fraud. Keyingham Investments, LLC v. Fidelity National Title Insurance Company, 298 Ga. App. 467, 680 S.E.2d 442 (Ga. App. 2009), aff’d Fidelity National Title Insurance Co. v. Keyingham Investments, LLC, No. S0G1738 (Ga., October 18, 2010) addressed a title company’s refusal to issue a mortgagee title insurance policy after discovering, post-closing, that the security deed was forged. The lenders agreed to make a real property-secured loan to a person they thought was Michael Shanahan. Before closing, the lenders received a title insurance commitment from Fidelity National Title, signed by the closing attorney as agent. The commitment contained the customary requirement of the execution, recording and delivery of a security deed in favor of the lenders “satisfactory to the Company creating the interest in the mortgage to be insured”. At closing, the closing attorney checked the identity of the man who claimed to be Michael Shanahan and, satisfied with identification produced, including a driver’s license with photo, closed the transaction. In fact, the man was not Shanahan but was an imposter with false identification papers. The closing attorney closed and funded the transaction. No one discovered the fraud until the loan went into default. Fidelity thereafter instructed the agent to withhold delivery of the loan policy.

The lenders made a claim under the title insurance commitment issued in connection with the closing. Fidelity denied the claim. The lenders sued Fidelity for breach of contract. Each party moved for summary judgment, Fidelity arguing that the conditions set forth in the title commitment were not met when the forgery was discovered before the policy issued. The trial court agreed with Fidelity, concluding that the forgery meant that the conditions of the title commitment were not met.

The Court of Appeals reversed. The plain meaning of the title commitment condition required that the documents be satisfactory to Fidelity and signed, delivered and recorded. Therefore the issue was whether the language or form of the executed documents satisfied Fidelity’s agent; not, as argued by Fidelity, whether the documents in fact created the insured’s interest. Here, the documents were accepted, delivered and recorded to the satisfaction of the title insurance agent. “The Commitment’s conditions were undisputedly fulfilled to the satisfaction of Fidelity, who cannot now complain that such documents failed to satisfy its requirements.”

Interestingly, the Court contrasted this case with Glass v. Stewart Title Guaranty Co., 181 Ga. App. 804, 354 W.E.2d 187 (1987), in which the title commitment required that the documents or security deed had to be executed by a particular person. In Glass, “when the title commitment required that the deed by signed by Sherrill Y Wilson, the forged signing of that deed by another person did not fulfill the requirements of the condition.”

The Supreme Court, on certiorari, affirmed the Court of Appeals but addressed Glass differently, concluding that “in the absence of language in a title insurance commitment that plainly excludes coverage for a forgery, a commitment must be construed to provide coverage for forgeries. Glass is disapproved to the extent it stands for the contrary proposition.”