Friday, June 14, 2013

Decided case: Johnson v Johnson

Lillian R. Johnson, an elderly widow, sued her son, Randy L. Johnson, arising from a deed that was prepared in 2005.

Lillian owned a 100-acre family farm in Delta County, Michigan. In April 2004, she secured a mortgage on five acres of the parcel as collateral for a loan to provide funds for Randy to construct a barn. Because that improvement increased the value of her farm, resulting in higher property taxes, Lillian wished to take steps to remedy the situation.

She and her son traveled to a lawyer’s office (without an appointment) to speak with an attorney. Lillian testified:
  • The purpose of the consultation was to prepare a deed conveying the five acres to Randy
  • She did not go in to see the lawyer, but waited in the car while Randy spoke to the lawyer.
  • The lawyer prepared a deed.
  • A legal secretary came out to the car to obtain her signature and to notarize it.
There apparently was no evidence that there was any discussion between Lillian and Randy about the deed or the import of what she was signing. It turned out that the deed that was prepared conveyed the entirety of the 100-acre farm to Randy, while reserving a life estate to Lillian. (The interest conveyed to Randy is legally called a "remainder.") It also appears uncontested that the lawyer told Randy that the transaction would have the greatest flexibility if the deed were not recorded until after Lillian passed away.

The opinion relates that the deed remained in Lillian’s safe for some period of time. She asserted that Randy thereafter removed the deed from her safe without her permission. It was recorded in March 2006. Lillian learned in 2009 that she no longer held the fee interest in the farm, but rather held only a life estate.

She filed a quiet title action in the circuit court. The claims raised included fraud, unconscionability, and lack of delivery of the deed. Under Michigan law, a deed must be “delivered” to the grantee in order to become effective.

The Court of Appeals agreed with the trial court that delivery requires more than having the deed in the grantee’s hands. It cited a number of earlier Michigan cases that establish that the purpose of the requirement of delivery is to demonstrate an intent by the grantor to convey the property, to “perfect the transaction.” The Court noted that the fact that Lillian continued to manage the property and continued to pay all of the expenses, as well as the fact that she had included it in her will, were evidence of a lack of intent to make a present conveyance of the remainder interest at the time that the deed was signed or thereafter.

The Court of Appeals held that the trial court had failed to consider the recognized principle that recording a deed gives rise to a presumption of delivery. With such a presumption, Lillian would have the burden of proving that there was no intent of delivery. The Court of Appeals remanded the case to the trial court for a further hearing on that issue.

Lessons to be learned from this case include:
  • Preparing a deed but instructing the client not to record it is a strategy that is fraught with peril.
  • Even if it could be shown that the son's later steps to obtain the deed and to record it were done without the permission of the mother, the presumption in favor of delivery still applied and made it more difficult to enforce the transaction as intended.
  • Whether or not he is regarded as representing the grantor, a lawyer who is requested to prepare a deed to convey land from a grantor to a grantee should at the very least speak with the grantor to ensure that the deed as written accomplishes the result that she wants to achieve.

Johnson v Johnson, unreported decision
Michigan Court of Appeals, May 28, 2013

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