Max Gardner's Dirty Dozen Rules for Ownership of Mortgage Note (Complete Baker's Dozen) 2008

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Max Gardners Dirty Dozen RulesFor The Proof of Ownership in a Mortgage Note

With Respect to a SimpleResidential Mortgage-Backed Securitized Trust

1. UNBROKEN CHAIN OF TRANSFERS AND ASSIGNMENTSIn the case of a Residential Mortgage-Backed Securitized Trust, it is alwaysnecessary for the Trust to establish an unbroken chain of transfers of themortgage note from the originator to the trust. The objective of thesecuritization process is to make the mortgage notes as bankruptcyremote as is legally possible from any claims against the originator. Suchclaims would include those of a Trustee in a bankruptcy proceeding or theFDIC as a conservator in the case of a bank failure. The operativedocument for the mandatory note transfer rules in connection withmortgage notes is the Pooling and Servicing Agreement. The applicablestatutory law includes Articles 3 and 9 of the Uniform Commercial Code,the Pooling and Servicing Agreement, any applicable special local statutesrelated to real estate law. Also, a mortgage note is transferred bynegotiation. Negotiation means the transfer of possession by a personother than the issuer to a person who thereby becomes the holder. A notethis therefore transferred when it is delivered to a third-person for thepurpose of giving that person the right to enforce the note. Under the UCC,a holder-in-due course is party who purchases a note for considerationwithout notice of any claims. If there is lack of adequate considerationfor the transfer, or the transfer is made at the time the note is indefault, then the transferee may not claim holder-in-due course status.

2. ORIGINATOR TO SPONSOR TO DEPOSITOR TO TRUST

In the simplest securitized model, the parties to the mandatory chain oftransfers include the originator, the sponsor, the depositor and thedesignated Trustee for the Trust. Almost every Trust is organized as acommon law trust under the laws of Delaware or New York. The legalrights of common law trust are limited to the rights granted in thestatutory enabling instrument. Those rights will be discussed below.Under this basic model, the typical players are as follows:a. The originator is normally the party who wrote and funded the

original mortgage transaction for the consumer;b. The warehouse lender is generally the entity that provides the interim

funding for the originator (the warehouse lender normally just files a

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UCC-1 financing statement as to the notes or claims perfection bypossession and is rarely an actual transferee of the note);

c. The sponsor is the party who organized the securitization of themortgage and submitted the original registration statements to theSecurities and Exchange Commission;

d. The depositor is the last party in the chain to own the note before itis transferred to the Trust; and

e. The Trustee through a named Trust is the entity that owns thenotes for the benefit of the parties who invested in the varioustranches of bonds issued by the Trust.

f. Each tranche of bond holders has a different interest in the principaland interest income streams generated by the mortgage notes inthe Trust or from fees and charges recovered by the servicers fromthe consumers. The originator may also have a residual interest inthe Trust by virtue of acquiring the lowest-rated tranches of bonds.The rights of these bond holders are specified in the Pooling andServicing Agreement, the Prospectus and the Prospectus Supplement.

g. The issue of ownership of the mortgage notes is not the same aswhether or not the Trust has a perfected security interest in theresidential real estate of the consumers who executed the notes.Perfection should not be confused with transfer, assignment andownership rights in the mortgage notes on the one hand and in thedeed of trust and mortgage on the other.

3. ENDORSEMENT AND TRANSFER OF THE ORIGINAL NOTE

The original mortgage notes may be endorsed to a named transferee byeach necessary party in the chain of transfers but:a. Generally, endorsements must appear at foot of the note if there is

room for such endorsements (some cases have held substantialcompliance is sufficient);

b. If there is not sufficient room at foot or end of the note for suchendorsements, then they may appear on an allonge, which must bepermanently affixed to the note;

c. The endorsements are not required to be notarized;d. The Endorsements do not have to be dated but must be signed by

an authorized agent of transferor;e. If endorsed by an authorized agent, then some proof of the agency

should be referenced and/or attached to the note; andf. The Trust should have a designated document custodian who holds

the original notes for the Trust as well as all of the delivery andreceipt certificates regarding the notes.

4. ORIGINAL NOTES ENDORSED IN BLANK BUT

Original notes may be endorsed in blank by the originator but:a. If the first endorsement is in blank (no payee is named or designated)

then the note becomes a bearer instrument by operation of law;b. There must be both a delivery and an acceptance receipt to

document the transfer and delivery of the bearer note from theoriginator to the sponsor;

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c. There must be a delivery and an acceptance receipt to document thetransfer and delivery of the bearer note from the sponsor to the depositor;

d. There must be a delivery and an acceptance receipt to documentthe transfer and delivery of the bearer note from the depositor tothe Trust; and

e. The designated document custodian for the Trust should maintainpossession of all such documents including the original bearer note.There should only be one original note.

4. THE POOLING AND SERVICING AGREEMENT

The Pooling and Servicing Agreement includes origination and cut-offdates for mortgage notes and transfer and delivery dates for the notesto the Trust but:a. The Trust has no authority to accept an equitable transfer of a note.

Since each transfer must be a true sale for purposes of creating thebankruptcy remote structure, all transfers must following the stepsdesignated in the structure;

b. The Trust has no authority to claim an equitable interest in a notethat has not been transferred to the Trust pursuant to strict termsand guidelines of the Pooling and Servicing Agreement;

c. All steps in the transfer process must be true and complete salesbetween the parties in order to qualify the Trust for what is calledREMIC qualification under the Internal Revenue Code;

d. The Trust has no authority to accept a note for no consideration ascollateral for a mortgage loan obligation since each transfer mustbe a true and bona fide sale between the parties; and

e. The transfers must be to the Trust and the Trustee as the soledesignated agent for the Trust (for example the transfer must be toJohn Smith as Trustee for REMIC Trust 2007-5).

6. ASSIGNMENTS OF THE MORTGAGE OR THE DEED OF TRUSTAssignments relate to real property instruments and have nothing to dowith negotiable instruments or other non-negotiable instruments, whichare regulated by Article 3 of the Uniform Commercial Code.

7. ASSIGNMENTS STRICTLY REGULATED BY STATE PROPERTY LAW

Assignments are strictly regulated by applicable state law. The followingare important concepts as they apply to assignments:a. Statute of Frauds applies to assignments since these are real

property instruments. You cannot assign a mortgage or deed oftrust in blank. There is no such thing as a bearer assignment withrespect to a mortgage or deed of trust. An incomplete instrumentis a real estate document that would fail to transfer any statutoryrights to the grantee.

b. Assignments in the context of Residential Mortgage-BackedSecuritized Trusts apply only to mortgages and deeds of trust. Youcannot assign a note, just like you cannot assign a mortgage ordeed of trust in blank. There is no such thing as a bearermortgage or a bearer deed of trust.

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c. The authority of the assignor must be independently established ofrecord for the assignment of a mortgage or deed of trust to be valid. Ifa party is executing an assignment as a agent for the true assignor ofrecord, then the document evidencing such authority (such as a Powerof Attorney) must be duly executed and in many cases of record.

d. Since we are dealing with real estate instruments, the mortgagesand deeds of trust must be properly assigned to the Trust. In themost simple securitized trust, you would have the following:i. Assignment from Originator to Sponsor;ii. Assignment from Sponsor to Depositor;iii. Assignment from Depositor to the Trust.

e. Since the mortgage or deed of trust follows the note under Articles3 and 9 of the Uniform Commercial Code, the assignments do NOThave to be recorded with the designated land registry unless suchrecording is required by applicable real estate law. In those stateswhere assignments must be recorded, this is a matter of perfectionbetween the Trust and third-parties and has nothing to do with thephysical delivery of the assignments up the proper chain to theTrustee for the Trust.

f. The Pooling and Servicing Agreement has specific time-lines for theexecution and delivery of the assignments to the Trust. The factthat an assignment does not have to be recorded to maintainperfection does not mean the assignments do not have to beproperly delivered in an unbroken chain to the Trustee for the Trust.

g. The Trust has no authority to accept assignments executed ordelivered outside of the mandatory time-lines established in thePooling and Servicing Agreement. As a common law entity, the Trusthas no authority to act outside of the specific authority granted bythe instrument that created and governs the activities of the Trust.

h. The Trust has no authority to assert a claim for an equitableassignment of a mortgage or deed of trust.

i. The Trust has no authority to claim an equitable mortgage or deedof trust on any real property.

8. HOLDER IN DUE COURSE DOCTRINEThe Holder in due course doctrine relates to the notes and has nothingto do with the mortgage or deed of trust. In order to assert a holder indue course status, the transfer of the note to the Trust via the requiredchain must occur before the note is in default and the transferee musttake the note without knowledge or notice of any claims or defects inthe document. If the note is in default during any link in the transferprocess, the holder in due course status is lost.

9. THE A TO D INVALID ASSIGNMENT

Any assignment of a mortgage or deed of trust from the originatordirectly to the Trust is per se invalid. This is the case because such anassignment would disregard two essential players in the chain ofassignmentsthe sponsor and the depositor. Since this aspect of the

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securitization process is controlled by applicable state real estate law,the Trust would have to be able to establish good title to the mortgageor deed of trust from the depositor. This could never be established withan originator assignment directly to the Trust assignment.

10. THE A TO D INVALID NEGOTIATION OF THE NOTE

Any transfer of the mortgage note from the originator directly to theTrust would likewise be per se invalid. This is the case because such atransfer would disregard the true sale of the same note from theoriginator to the sponsor and the subsequent true sale from the sponsorto the depositor. Any late transfer of the note from the originator to theTrust would also be invalid because at that point in time the originatorwould have no ownership rights in the note. Under the Pooling andServicing Agreement, the Trust may only purchase the note from thedepositor. And, since each transfer must constitute a true and completesale between the parties, consistent with the Pooling and ServicingAgreement, the Trust must be able to establish and unbroken chain oftransfers and deliveries from the originator to the Trust. These rulesapply whether or not the notes are endorsed to a named payee in eachinstance or are endorsed in blank at any process in the chain of transfers.

11. AFFIDAVITS

With respect to affidavits, simply attaching documents without firstlaying a proper evidentiary foundation for the admission of thedocuments is simply hearsay. Statements such a person collects andmaintains records and documents of a third-party do not satisfy thebusiness records exception to the hearsay rule. The affiant must be ableto state that the attached documents are created or maintained in theregular course of the affiants business, that there creation andmaintenance are part of the regular course of the affiants business, andthat the records at or about the time the transaction was recorded. Themere filing of records or documents maintained by other entities isinsufficient to qualify the documents as business records. The need forsuch authentication applies to the assignments of the mortgages anddeeds of trust and to the endorsements transfer and delivery receiptsfor the mortgage notes. In addition, if any part of the affidavit is basedon data that is stored in a computer then the data must be furtherauthenticated as to the type of computer, security systems associatedtherewith, regular maintenance, limited access to the data, etc.

12. DESTROYED OR LOST NOTESThe enforcement of lost or destroyed or stolen mortgage notes is anotherissue that comes up in many of these cases. Under Section 3-309 of theUCC, a person not in possession of a mortgage note is entitled to enforcethe instrument if the person seeking to enforce the instrument was inpossession of the instrument before it was lost or who has directly orindirectly acquired ownership of the note from a person who was entitledto enforce the note when the loss of possession occurred and:a. The loss of possession was not the result of a transfer; or

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b. The loss of possession was not the result of a lawful seizureof the note; or

c. The person cannot reasonably obtain possession of the note because:i. It was destroyed;ii. Its whereabouts cannot be determined;iii. It is in the wrongful possession of an unknown party;iv. The unknown party cannot be found;v. The unknown party is not amenable to service of process;vi. A reasonable search has been made for the note; andvii. The note cannot be found after such a search.

d. The person seeking enforcement of the lost note must prove theterms of the instrument AND the persons rights to enforce theinstrument. Such proof would require a complete and unbrokenchain of endorsements, transfers and deliveries from the originatorto the current party seeking enforcement.

e. Court must find that the person against whom enforcement issought is adequately protected by reason of a claim by some otherperson holding the note. Such adequate protection may be providedby any reasonable means.

13. THE AFTER-ACQUIRED PROPERTY DOCTRINE

The After Acquired Property Doctrine. Wikipedia says this is acommon law doctrine which is applicable when real property orpersonal property to which party A obtains title only after falselyselling the property to party B for value. The actual sale occurs whenparty A did not have proper title. An example would be ColonelSanders pretends to sell "My Old Kentucky Home" to Daniel Boonefor $1,000 (US) but does not own the property at the time and thenuses the money to actually buy that same property from the trueowner. The apparent outcome would be that Colonel Sanders andnot Daniel Boone would own the property. Because the result of theset of transactions would be an injustice, a legal concept called the"After-acquired-title doctrine" vests the legal title in the property inparty B even though buying it before party A had legal title to theproperty and therefore, had no right to transfer the title. This is anapplication of the principle of equity to property law. Historically,equity was applied in England in special chancery courts, but in theUS, remedies at both law and equity are given in a single court.

NOTE TO READER:

The above 13th Rule was added from the following web address:http://avvo.com/legal-guides/ugc/max-gardners-dirty-dozen-ruels-for-ownership-of-the-mortgage-note--a-bakers-dozen

with the completion of the missing last sentence obtained fromthe referenced Wikipedias After-Acquired Property Doctrine HERE.

2012 Gardner & Gardner PLLC in lieu of O. Max Gardner III P.C. All Rights Reserved.You may reproduce materials available at this site for personal use and non-commercial distribution.

All copies must include this statement.

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MISSISSIPPI LAW JOURNAL

SOME SUGGESTIONS AB TO OM ARGUMENTS dEN AND WRITTEN BRIEFS IN TH SUPREME COURT OF MISSISSIPPI

W. G. Roberds

MISSISSIPPI SUPREME COURT DECISIONS ON ADMINISTRATIVE LAW

T. C. Kimbrough

THE AFTER-ACQUIRED PROPERTY DOCTRINE AND ITS APPLICATION IN MISSISSIPPI

William N. Ethridge, Jr. INSANITY As A DEFENSE IN CRIMINAL CASES

Ed. H. Green

FARM/ V. STONE, CHAIRMAN, STATE TAX COM MISSION V. I. ,tricker

October, 1945 VOL. Joni No.3

MISSISSIPPI LAW JOURNAL

SOME SUGGESTIONS AB TO OM ARGUMENTS dEN AND WRITTEN BRIEFS IN TH SUPREME COURT OF MISSISSIPPI

W. G. Roberds

MISSISSIPPI SUPREME COURT DECISIONS ON ADMINISTRATIVE LAW

T. C. Kimbrough

THE AFTER-ACQUIRED PROPERTY DOCTRINE AND ITS APPLICATION IN MISSISSIPPI

William N. Ethridge, Jr. INSANITY As A DEFENSE IN CRIMINAL CASES

Ed. H. Green

FARM/ V. STONE, CHAIRMAN, STATE TAX COM MISSION V. I. ,tricker

October, 1945 VOL. Joni No.3

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1m 3 THE AFTER-ACQUIRED PROPERTY DOCTRINE 153 THE AFTER-ACQUIRED PROPERTY DOCTRINE AND

ITS APPLICATION IN MISSISSIPPI William N, Ethridge, Jr,*

Perhaps no other principle of land law in Mississippi has been so af-fected by statute and yet has retained so much of the common law theories as has the after-acquired property doctrine, More importantly, this doc-trine is involved in something like one-half of the titles in the state.

A deed may have the of feet of passing to the grantee a title subse-quently acquired by the grantor. Suppose A executes a warranty deed purporting to convey to B 40 acres of land., and actually A has at that time no title to the land. Subsequently X conveys the 40 acres to A. The Conn would hold that the title subsequently acquired by A after his deed to B flowed on into B and became the title of B. In other words, a grantor who executes a deed purporting to convey land to which he has no title, or to which he has a defective title at the time of the conveyance, will not be permitted when he afterwards acquires a good title to the land, to claim in opposition to his deed against the grantee, B, or against any persons claim-ing title under B.

This doctrine has been based variously by the courts on two reasons : (1) That it would be unjust to permit one, after he has asserted owner-ship of land and made a deed conveying it to another for a valuable con-sideration, to obtain by deed an outstanding title and hold it against his purchaser in spite of the deed he has made to the purchaser. (2) That it prevents a circuity of actions ; in other words, it prevents the necessity of Bis having to sue A after A has acquired a good title to the land.

The doctrine performs the important function of operating as an actual transfer of an after-acquired estate or interest, and the title acquired by the grantor vests in the grantee by operation of law. The courts, for one or both of these reasons, state that the grantor, A, is estopped to deny that B has good title, or conversely, that he is estopped to assert that he, A, has good title. As some of the courts picturesquely put it "the interest, when it accrues, feeds the estoppel."

I. CONVEYANCES WITH COVENANTS

A warranty deed containing a covenant of general warranty, both at common law and under Mississippi statute, operates to estop the grantor from asserting an after-acquired title or interest in the land for the estate which the deed purports to convey, as against the grantee and those claim-ing under him. The statute states this idea: 1

*Wells, Wells, Newman Sz 'Thomas; Jackson, Miss. 'Miss. CODE ANN. (1942) 1 843.

1m3 THE AFTER-ACQUIRED PROPERTY DOCTRINE 153 THE AFTER-ACQUIRED PROPERTY DOCTRINE AND

ITS APPLICATION IN MISSISSIPPI William N, Ethridge, Jr,*

Perhaps no other principle of land law in Mississippi has been so af-fected by statute and yet has retained so much of the common law theories as has the after-acquired property doctrine, More importantly, this doc-trine is involved in something like one-half of the titles in the state.

A deed may have the of feet of passing to the grantee a title subse-quently acquired by the grantor. Suppose A executes a warranty deed purporting to convey to B 40 acres of land., and actually A has at that time no title to the land. Subsequently X conveys the 40 acres to A. The Conn would hold that the title subsequently acquired by A after his deed to B flowed on into B and became the title of B. In other words, a grantor who executes a deed purporting to convey land to which he has no title, or to which he has a defective title at the time of the conveyance, will not be permitted when he afterwards acquires a good title to the land, to claim in opposition to his deed against the grantee, B, or against any persons claim-ing title under B.

This doctrine has been based variously by the courts on two reasons : (1) That it would be unjust to permit one, after he has asserted owner-ship of land and made a deed conveying it to another for a valuable con-sideration, to obtain by deed an outstanding title and hold it against his purchaser in spite of the deed he has made to the purchaser. (2) That it prevents a circuity of actions ; in other words, it prevents the necessity of Bis having to sue A after A has acquired a good title to the land.

The doctrine performs the important function of operating as an actual transfer of an after-acquired estate or interest, and the title acquired by the grantor vests in the grantee by operation of law. The courts, for one or both of these reasons, state that the grantor, A, is estopped to deny that B has good title, or conversely, that he is estopped to assert that he, A, has good title. As some of the courts picturesquely put it "the interest, when it accrues, feeds the estoppel."

I. CONVEYANCES WITH COVENANTS

A warranty deed containing a covenant of general warranty, both at common law and under Mississippi statute, operates to estop the grantor from asserting an after-acquired title or interest in the land for the estate which the deed purports to convey, as against the grantee and those claim-ing under him. The statute states this idea: 1

*Wells, Wells, Newman Sz 'Thomas; Jackson, Miss. 'Miss. CODE ANN. (1942) 1 843.

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154 MISSISSIPPI LAW JOURNAL t V 0 L. XVII

"The word 'warrant' without restrictive words in a conveyance shall have the effect of embracing all of the five covenants known at common law, to wit: seizin, power to sell, freedom from in-cumbrance, quiet enjoyment and warranty of title." This has been upheld in a number of Mississippi cases.' In Kaiser v. Earkart,3 an insane wife and her husband joined in at-

tempting to convey the wife's separate property. Later the wife died, and the property descended to the husband as the sole heir. The Court held that although the wife's title did not pass by the deed because she was in-sane, the title to the lands did pass to the grantee in that deed upon the lands descending to the husband after his wife's death.

In another case a father and his six children, two of whom were min-ors, conveyed to B by warranty deed land they had inherited. The two minors were C and D. On attaining majority, both C and D disaffirmed the deed which they had executed while minors. Afterwards C died. The Court held that when C died and his estate passed to his heirs, his father and his three brothers who had executed the warranty, the title inured to the benefit of B, the grantee in the deed from all of them. The only valid disaffirmance by any of the minors was as to the interest held by D.4

In Ifarrison v. Byers)5 A conveyed land to B by warranty deed. How-ever, at the time of execution of the warranty deed, there was outstanding on the land a properly recorded deed of trust, and theoretically B had con-structive and actual notice of the existence of the deed of trust. But the deed was not made subject to the deed of trust. Later, the beneficiary, C, under the deed of trust foreclosed, and after several intermediate con-veyances, C conveyed to A and wife, allegedly without any consideration passing, The Court held that A was estopped to deny title of B, and that B had full and complete title to the land by operation of law. The ap-parent reason for the decision as to A's wife's interest was the alleged lack of consideration paid by her.

A somewhat similar problem involving tenants in common arose in Gamer v. Garner. A and B were tenants in common. A conveyed to B his, ..41.3, undivided share in the property under a warranty covering the entire property. In other words, apparently A simply forgot to limit his warranty to the one-half interest which he owned at the time. Nor did A make his deed subject to the deed of trust which at the time was outstand-

2Meyers v. American Oil CO., 192 Miss. 180, 5 So. (20 218 (1941) Fletcher v. Wilson, 1 S. & M. 376 (1843).

164 Miss. 492, 1 So. 635 (1886). 4Andrews v. Anderson, 16 So. 346 (Miss, 1894), t.112 Miss. 651, 73 So. 614 (1917), 4 117 Miss. 694, 78 So. 623 (1918).

154 MISSISSIPPI LAW JOURNAL t V 0 L. XVII

"The word 'warrant' without restrictive words in a conveyance shall have the effect of embracing all of the five covenants known at common law, to wit: seizin, power to sell, freedom from in-cumbrance, quiet enjoyment and warranty of title." This has been upheld in a number of Mississippi cases.' In Kaiser v. Earkart,3 an insane wife and her husband joined in at-

tempting to convey the wife's separate property. Later the wife died, and the property descended to the husband as the sole heir. The Court held that although the wife's title did not pass by the deed because she was in-sane, the title to the lands did pass to the grantee in that deed upon the lands descending to the husband after his wife's death.

In another case a father and his six children, two of whom were min-ors, conveyed to B by warranty deed land they had inherited. The two minors were C and D. On attaining majority, both C and D disaffirmed the deed which they had executed while minors. Afterwards C died. The Court held that when C died and his estate passed to his heirs, his father and his three brothers who had executed the warranty, the title inured to the benefit of B, the grantee in the deed from all of them. The only valid disaffirmance by any of the minors was as to the interest held by D.4

In Ifarrison v. Byers)5 A conveyed land to B by warranty deed. How-ever, at the time of execution of the warranty deed, there was outstanding on the land a properly recorded deed of trust, and theoretically B had con-structive and actual notice of the existence of the deed of trust. But the deed was not made subject to the deed of trust. Later, the beneficiary, C, under the deed of trust foreclosed, and after several intermediate con-veyances, C conveyed to A and wife, allegedly without any consideration passing, The Court held that A was estopped to deny title of B, and that B had full and complete title to the land by operation of law. The ap-parent reason for the decision as to A's wife's interest was the alleged lack of consideration paid by her.

A somewhat similar problem involving tenants in common arose in Gamer v. Garner. A and B were tenants in common. A conveyed to B his, ..41.3, undivided share in the property under a warranty covering the entire property. In other words, apparently A simply forgot to limit his warranty to the one-half interest which he owned at the time. Nor did A make his deed subject to the deed of trust which at the time was outstand-

2Meyers v. American Oil CO., 192 Miss. 180, 5 So. (20 218 (1941) Fletcher v. Wilson, 1 S. & M. 376 (1843).

164 Miss. 492, 1 So. 635 (1886). 4Andrews v. Anderson, 16 So. 346 (Miss, 1894), t.112 Miss. 651, 73 So. 614 (1917), 4 117 Miss. 694, 78 So. 623 (1918).

1045 1 THE AFTER-ACQUIRED PROPERTY DOCTRINE 155 ing on the land. It was foreclosed, and A bought at the foreclosure sale. The Court held that A's entire subsequently acquired title at the fore-closure sale inured to B's benefit.

II. CONVEYANCES WITHOUT COVENANTS, OR QUITCLAIM DEEDS

The general rule in the majority of the states is that if a grantor exe-cutes a quitclaim deed, or deed without any covenants, he is not estopped from asserting an after-acquired title or interest in the property affected by that deed. This is based on the idea that a quitclaim deed purports to grant only the right, title and interest of the grantor, and not the fee or any particular estate or interest. The only exception to this, under the majority rule, is that if the quitclaim purports to convey a particular in-terest, it may operate by way of estoppel as to that interest. This would arise under the general rule where A, for example, would quitclaim to B all of his right, title and interest as the heir of As father, C, C being deceased at the time. Assume there is some confusion or dispute as to the propor-tionate interest which A received as the heir of C, then later ascertainment of the true facts, or later judicial decisions as to the interest of A which in-creased A's interest as the heir of C. Assume further that at the time of the deed, A did not know he had an interest as extensive as he actually wound up with. A's quitclaim deed would operate so as to cause whatever interest in C414 estate A received to flow into ft the grantee; this would be the only exception to the general rule.

The Mississippi Legislature, however, did not like the common law limitation of the after-acquired land doctrine, and in 1848 passed the fol-lowing statute:t

"A conveyance of quitclaim and release shall be sufficient to pass all the estate or interest the grantor has in the land conveyed, and shall estop the grantor and his heirs from asserting a subsequently acquired adverse title to the lands conveyed."

The old tale among law students about the darkey insisting upon a special warranty rather than a plain warranty does not indicate the legal situation as far as the after-acquired property doctrine in Mississippi is concerned. A special warranty, being nothing but a quitclaim deed, oper-ates so as to convey any after-acquired title of the grantor, under the statute :a

"The words 'warranty specially,' in a conveyance, shall constitute a covenant that the grantor, his heirs and personal representa-tives, will forever warrant and defend the title of the property unto the grantee and his heirs, representatives, and assigns,

Tifiss. Coot MIN. (1942) 1846. oft 1 844.

1045 1 THE AFTER-ACQUIRED PROPERTY DOCTRINE 155 ing on the land. It was foreclosed, and A bought at the foreclosure sale. The Court held that A's entire subsequently acquired title at the fore-closure sale inured to B's benefit.

II. CONVEYANCES WITHOUT COVENANTS, OR QUITCLAIM DEEDS

The general rule in the majority of the states is that if a grantor exe-cutes a quitclaim deed, or deed without any covenants, he is not estopped from asserting an after-acquired title or interest in the property affected by that deed. This is based on the idea that a quitclaim deed purports to grant only the right, title and interest of the grantor, and not the fee or any particular estate or interest. The only exception to this, under the majority rule, is that if the quitclaim purports to convey a particular in-terest, it may operate by way of estoppel as to that interest. This would arise under the general rule where A, for example, would quitclaim to B all of his right, title and interest as the heir of As father, C, C being deceased at the time. Assume there is some confusion or dispute as to the propor-tionate interest which A received as the heir of C, then later ascertainment of the true facts, or later judicial decisions as to the interest of A which in-creased A's interest as the heir of C. Assume further that at the time of the deed, A did not know he had an interest as extensive as he actually wound up with. A's quitclaim deed would operate so as to cause whatever interest in C414 estate A received to flow into ft the grantee; this would be the only exception to the general rule.

The Mississippi Legislature, however, did not like the common law limitation of the after-acquired land doctrine, and in 1848 passed the fol-lowing statute:t

"A conveyance of quitclaim and release shall be sufficient to pass all the estate or interest the grantor has in the land conveyed, and shall estop the grantor and his heirs from asserting a subsequently acquired adverse title to the lands conveyed."

The old tale among law students about the darkey insisting upon a special warranty rather than a plain warranty does not indicate the legal situation as far as the after-acquired property doctrine in Mississippi is concerned. A special warranty, being nothing but a quitclaim deed, oper-ates so as to convey any after-acquired title of the grantor, under the statute :a

"The words 'warranty specially,' in a conveyance, shall constitute a covenant that the grantor, his heirs and personal representa-tives, will forever warrant and defend the title of the property unto the grantee and his heirs, representatives, and assigns,

Tifiss. Coot MIN. (1942) 1846. oft 1 844.

156 MISSISSIPPI LAW JOURNAL [VOL. XVII

against the claims of all persons claiming by, through, or under the grantor."

Under Section 845 of the Code of 1942, the omission in a deed of any reference to a warranty "operates to transfer the title in possession of the grantor as a quitclaim and release." Section 846 quoted above, applies the after-acquired doctrine to a deed reciting "quitclaim and release."

Section 847 applies the after-acquired doctrine to a deed using words of "grant, bargain and sell :"

"The words 'grant, bargain, sell,' shall operate as an express covenant to the grantee, his heirs and assigns, that the grantor was seized of an estate, free from iticumbrance made or suffered by the grantor, except the rents and services that may be reserved, and also for quiet enjoyment against the grantor, his heirs and as-signs, unless limited by express word contained in the conveyance ; and the grantee, his heirs, executors, administrators, and assigns, may, in any action, assign breaches as if the covenants above mentioned were expressly inserted." In other words, Mississippi statutes have completely changed the

common law doctrine that the after-acquired property principle does not apply to quitclaim deeds. Under Mississippi law, with perhaps two ex-ceptions, any deed, with a warranty, without a warranty, or with any of the usual words operating to convey an interest in land, results in the grantor's after-acquired title as to that interest, whatever it may be, flow-ing on into the grantee of that deed. The effect of this doctrine upon persons executing quitclaim deeds could have and has, in many instances, reached unfair results. Obviously, there are many times at which a man would be willing to execute a quitclaim deed where he has no or a very slight interest, but where he subsequently may desire to procure the com-plete title to the property. The proper definition of a quitclaim deed is one which purports to convey only the grantor's present interest or estate, and so the practical result of the above-quoted Mississippi statute is that a quitclaim deed conveys not only the grantor's present estate, but his future estate in the lands.

There are, however, two probable exceptions to the rule: (1) No recent cases have adjudicated this exception, but it would

appear that if the quitclaim deed is drafted in terms so as to purport to convey "all my tight, title and interest which I presently have in and to" said lands, the effect of that deed would be to convey only the interest in the lands which grantor had at the time of the conveyance. Stated dif-ferently, it is likely that a quitclaim deed in Mississippi conveying only grantor's present interest would not convey an after-acquired title, despite the terms of the above quoted statutes. I say this for several reasons : It is the general rule in other states, even where there are statutes somewhat

156 MISSISSIPPI LAW JOURNAL [VOL. XVII

against the claims of all persons claiming by, through, or under the grantor."

Under Section 845 of the Code of 1942, the omission in a deed of any reference to a warranty "operates to transfer the title in possession of the grantor as a quitclaim and release." Section 846 quoted above, applies the after-acquired doctrine to a deed reciting "quitclaim and release."

Section 847 applies the after-acquired doctrine to a deed using words of "grant, bargain and sell :"

"The words 'grant, bargain, sell,' shall operate as an express covenant to the grantee, his heirs and assigns, that the grantor was seized of an estate, free from iticumbrance made or suffered by the grantor, except the rents and services that may be reserved, and also for quiet enjoyment against the grantor, his heirs and as-signs, unless limited by express word contained in the conveyance ; and the grantee, his heirs, executors, administrators, and assigns, may, in any action, assign breaches as if the covenants above mentioned were expressly inserted." In other words, Mississippi statutes have completely changed the

common law doctrine that the after-acquired property principle does not apply to quitclaim deeds. Under Mississippi law, with perhaps two ex-ceptions, any deed, with a warranty, without a warranty, or with any of the usual words operating to convey an interest in land, results in the grantor's after-acquired title as to that interest, whatever it may be, flow-ing on into the grantee of that deed. The effect of this doctrine upon persons executing quitclaim deeds could have and has, in many instances, reached unfair results. Obviously, there are many times at which a man would be willing to execute a quitclaim deed where he has no or a very slight interest, but where he subsequently may desire to procure the com-plete title to the property. The proper definition of a quitclaim deed is one which purports to convey only the grantor's present interest or estate, and so the practical result of the above-quoted Mississippi statute is that a quitclaim deed conveys not only the grantor's present estate, but his future estate in the lands.

There are, however, two probable exceptions to the rule: (1) No recent cases have adjudicated this exception, but it would

appear that if the quitclaim deed is drafted in terms so as to purport to convey "all my tight, title and interest which I presently have in and to" said lands, the effect of that deed would be to convey only the interest in the lands which grantor had at the time of the conveyance. Stated dif-ferently, it is likely that a quitclaim deed in Mississippi conveying only grantor's present interest would not convey an after-acquired title, despite the terms of the above quoted statutes. I say this for several reasons : It is the general rule in other states, even where there are statutes somewhat

is'451 THE AFTER-ACQUIRED PROPERTY DOCTRINE 157 similar to Mississippi. In McInnis v. Pickett" Chief Justice Campbell said that "the estoppel is co-extensive with the estate, right or interest which a conveyance purports to pass,." (Italics added). The test, according to this case, is what estate or interest the conveyance purports to pass. If a person purports to pass only the interest which he h&i, then he would seem to be bound only by an obligatiorrto convey what he has at the time of the con-veyance, and is not affect e4 by any subsequently acquired interest In Mc-Innis v, Pickett, the plaintef conveyed all of her right, title and interest in the estate of her father, deceased. The Court said that plaintiff was not es-topped from setting up her title to the land by descent cast upon her by the subsequent death of her brother and sister. In Mitchell v. Woodson,w Mitchell bad executed a contract in which he agreed to convey to Woodson "all the right, title or interest he had of, in or to the premises by quitclaim deed." The Court held that Mitchell had simply contracted to convey the interest he had at that time, and that he had a right to acquire for himself an independent title to the land. Both of these cases were decided after Section 846 was enacted."

(2) A second possible exception to the principle that a quitclaim or warranty deed carries the after-acquired title of grantor, may be found where the grantee knew of the deficiencies in the grantor's title. Since the traditional doctrine of estoppel is based upon ignorance and prejudicial action in good faith by the grantee, this exception would seem logically to follow. However, there are no Mississippi decisions so holding.'

III. PEasoils To Wttottt EsToPPEL IS AVAILABLE In the absence of fraud or an attempt to evade creditors, it is settled

in Mississippi that where a husband has executed a deed with covenants of warranty, the acquisition of an adverse title by his wife does not inure to the benefit of the husband's grantee, unless fraud can be shown."

Mortgagors who are smooth enough to talk lenders of money into putting two mortgages on the old homestead are in a less fortunate situa-tion. Suppose A executes a first deed of trust to B, and a second deed of trust to C. Upon failure to meet the payments under the first deed of trust, B forecloses and buys the property at the trustee's sale. Through various intermediate conveyances from B, (the purchaser at the fore-closure sale), the foreclosure title vests in A. Ordinarily the foreclosure of the first deed of trust would cancel and cut off the second deed of trust, but the Mississippi Supreme Court has held that the title reacquired by the

03 So. 660 (Miss 1888). 137 Miss. 567 (1859). 11 ,See also Bramlett v. Roberts, 68 Miss. 325, 10 So. 56 (1890). I2See 31 C J. S., EsToera., 21. iscarter v. Bustarriente, 59 Miss. 559 (1882) ; Cameron v. Lewis, 59 Miss. 134

1 1).

is'451 THE AFTER-ACQUIRED PROPERTY DOCTRINE 157

similar to Mississippi. In McInnis v. Pickett" Chief Justice Campbell said that "the estoppel is co-extensive with the estate, right or interest which a conveyance purports to pass,." (Italics added). The test, according to this case, is what estate or interest the conveyance purports to pass. If a person purports to pass only the interest which he h&i, then he would seem to be bound only by an obligatiorrto convey what he has at the time of the con-veyance, and is not affect e4 by any subsequently acquired interest In Mc-Innis v, Pickett, the plaintef conveyed all of her right, title and interest in the estate of her father, deceased. The Court said that plaintiff was not es-topped from setting up her title to the land by descent cast upon her by the subsequent death of her brother and sister. In Mitchell v. Woodson,w Mitchell bad executed a contract in which he agreed to convey to Woodson "all the right, title or interest he had of, in or to the premises by quitclaim deed." The Court held that Mitchell had simply contracted to convey the interest he had at that time, and that he had a right to acquire for himself an independent title to the land. Both of these cases were decided after Section 846 was enacted."

(2) A second possible exception to the principle that a quitclaim or warranty deed carries the after-acquired title of grantor, may be found where the grantee knew of the deficiencies in the grantor's title. Since the traditional doctrine of estoppel is based upon ignorance and prejudicial action in good faith by the grantee, this exception would seem logically to follow. However, there are no Mississippi decisions so holding.'

III. PEasoils To Wttottt EsToPPEL IS AVAILABLE In the absence of fraud or an attempt to evade creditors, it is settled

in Mississippi that where a husband has executed a deed with covenants of warranty, the acquisition of an adverse title by his wife does not inure to the benefit of the husband's grantee, unless fraud can be shown."

Mortgagors who are smooth enough to talk lenders of money into putting two mortgages on the old homestead are in a less fortunate situa-tion. Suppose A executes a first deed of trust to B, and a second deed of trust to C. Upon failure to meet the payments under the first deed of trust, B forecloses and buys the property at the trustee's sale. Through various intermediate conveyances from B, (the purchaser at the fore-closure sale), the foreclosure title vests in A. Ordinarily the foreclosure of the first deed of trust would cancel and cut off the second deed of trust, but the Mississippi Supreme Court has held that the title reacquired by the

03 So. 660 (Miss

1888). 137 Miss. 567 (1859). 11 ,See also Bramlett v. Roberts, 68 Miss. 325, 10 So. 56 (1890). I2See 31 C J. S., EsToera., 21. iscarter v. Bustarriente, 59 Miss. 559 (1882) ; Cameron v. Lewis, 59 Miss. 134

1 1).

158 MISSISSIPPUT LAW JOURNAL IVOL. XVIT

grantor A after foreclosure of his deed of trust inures to the benefit of the second deed of trust ewned by B."

The after-acquired property doctrine is applicable, it would seem, to any estate or right affected. There are no Mississippi cases specifically ap-plying it to a conveyance of minerals or royalties, but this has been done elsewhere, arid, since the reasons for the doctrine are the same and min-erals are an interest in land, there seems little doubt that the Mississippi Supreme Court would hold that the after-acquired property doctrine ap-plies to minerals. This would probably be followed in a conveyance of royalties. 15

It has been applied in a conveyance of timber." Section 831 of the Code of 1942 provided that any interest in land

possessed presently or in the future may be the subject of conveyance. Although there are no Mississippi decisions applying the after-acquired property doctrine to this situation, it is believed that where a prospective heir conveys the estate which he expects to inherit from his father, who is living, and he later inherits, he is estopped from claiming the title subse-quently acquired; it inures to the benefit of the grantee or his successors. This would also apply to one receiving lands by will.

The doctrine would also apply where A executed a conveyance, not having any title to the property, and subsequently acquires a tax title, either through a sale for taxes or a patent from the State. The tax title would inure to the benefit of the grantee of As deed.

The Supreme Court of the United States has held that where the State claims title under a deed, and has attempted to patent it to an indi-vidual at the time at which it did not actually have the title, the State is subject to all of the estoppels running with a subsequently acquired title in the lands,n Also, if an individual is entitled to a grant or patent of land -from the State or the Federal Government, the legal title acquired by him through the actual issuance of the patent will vest in his grantee.

if a person as an agent for another, executes a deed to lands, and he subsequently acquires in his personal capacity as an individual the title to the land, it is generally held that the after-acquired property doctrine does not apply, because he was acting in two capacities. In. other words, the title he acquired as an individual does not flow with the deed he executed as an agent for another. The rule would be similar if he were acting as a trustee for another persorl t and subsequently received title to the land as an individual and not as-a trustee. Of course, if fraud or bad faith could be shown, the Court would no doubt apply the after-acquired property doc-trine. There are no Mississippi cases dealing with this situation.

'4 Martin v. Raleigh State Bank, 146 Miss. 1, 111 So. 448 (1927). 15 See Corley v. Myers, 22 So, (2d) 234 (Miss. 1945) ; Cook v. Farley, 198 Miss.

638, 15 So. (2d) 352 (Miss. 1943.) "Anderson v. Wilder, 83 Miss, 606, 35 So, 875 (1904). 17 Carver v. Jackson, 4 Pet. 1, 7 ed. 761 (1830).

158 MISSISSIPPUT LAW JOURNAL IVOL. XVIT

grantor A after foreclosure of his deed of trust inures to the benefit of the second deed of trust ewned by B."

The after-acquired property doctrine is applicable, it would seem, to any estate or right affected. There are no Mississippi cases specifically ap-plying it to a conveyance of minerals or royalties, but this has been done elsewhere, arid, since the reasons for the doctrine are the same and min-erals are an interest in land, there seems little doubt that the Mississippi Supreme Court would hold that the after-acquired property doctrine ap-plies to minerals. This would probably be followed in a conveyance of royalties.15

It has been applied in a conveyance of timber." Section 831 of the Code of 1942 provided that any interest in land

possessed presently or in the future may be the subject of conveyance. Although there are no Mississippi decisions applying the after-acquired property doctrine to this situation, it is believed that where a prospective heir conveys the estate which he expects to inherit from his father, who is living, and he later inherits, he is estopped from claiming the title subse-quently acquired; it inures to the benefit of the grantee or his successors. This would also apply to one receiving lands by will.

The doctrine would also apply where A executed a conveyance, not having any title to the property, and subsequently acquires a tax title, either through a sale for taxes or a patent from the State. The tax title would inure to the benefit of the grantee of As deed.

The Supreme Court of the United States has held that where the State claims title under a deed, and has attempted to patent it to an indi-vidual at the time at which it did not actually have the title, the State is subject to all of the estoppels running with a subsequently acquired title in the lands,n Also, if an individual is entitled to a grant or patent of land-from the State or the Federal Government, the legal title acquired by him through the actual issuance of the patent will vest in his grantee.

if a person as an agent for another, executes a deed to lands, and he subsequently acquires in his personal capacity as an individual the title to the land, it is generally held that the after-acquired property doctrine does not apply, because he was acting in two capacities. In. other words, the title he acquired as an individual does not flow with the deed he executed as an agent for another. The rule would be similar if he were acting as a trustee for another persorlt and subsequently received title to the land as an individual and not as-a trustee. Of course, if fraud or bad faith could be shown, the Court would no doubt apply the after-acquired property doc-trine. There are no Mississippi cases dealing with this situation.

' 4Martin v. Raleigh State Bank, 146 Miss. 1, 111 So. 448 (1927). 15 See Corley v. Myers, 22 So, (2d) 234 (Miss. 1945) ; Cook v. Farley, 198 Miss.

638, 15 So. (2d) 352 (Miss. 1943.) "Anderson v. Wilder, 83 Miss, 606, 35 So, 875 (1904). 17 Carver v. Jackson, 4 Pet. 1, 7 ed. 761 (1830).

1945 ) THE AFTER-ACQUIRED PROPERTY DOCTRINE 159 In Meyers v. American Oa Co," the Court recently considered a sit-

nation where the defendant executed a deed of trust covering land to which he subsequently acquired title. His wife did not join in the deed, he did not then own it, and it was not his homestead, Defendant argued that because he the husband, had no title to the property at the time he gave the deed of trust, and because afterwards his family actually moved upon the prop-erty and were making their homestead at the time the husband acquired a subsequent title, the deed of trust should be considered by the court as of the date of the subsequent acquirement of the title by him in order to pro-tect his wife's homestead interest. Therefore, defendant argued, the deed of trust was void because there was no joinder in its execution by the wife, The Court denied this argument and applied the doctrine.

A few general observations It is not necessary that the conveyance should have been made for a valuable consideration; a nominal considera-tion is enough. The rule also applies whether the party assuming to con-vey title acted under an honest mistake or committed fraud. It also ap-plies whether the title subsequently acquired is legal or equitable.

If any of the above-mentioned factual situations exists, the estoppel against the grantor to assert the after-acquired title is held to vest such title in the grantee by operation of law, automatically and without the necessity of any litigation, and to be effective also against bona fide pur-chasers of the title.'

1945 ) THE AFTER-ACQUIRED PROPERTY DOCTRINE 159 In Meyers v. American Oa Co," the Court recently considered a sit-

nation where the defendant executed a deed of trust covering land to which he subsequently acquired title. His wife did not join in the deed, he did not then own it, and it was not his homestead, Defendant argued that because he the husband, had no title to the property at the time he gave the deed of trust, and because afterwards his family actually moved upon the prop-erty and were making their homestead at the time the husband acquired a subsequent title, the deed of trust should be considered by the court as of the date of the subsequent acquirement of the title by him in order to pro-tect his wife's homestead interest. Therefore, defendant argued, the deed of trust was void because there was no joinder in its execution by the wife, The Court denied this argument and applied the doctrine.

A few general observations It is not necessary that the conveyance should have been made for a valuable consideration; a nominal considera-tion is enough. The rule also applies whether the party assuming to con-vey title acted under an honest mistake or committed fraud. It also ap-plies whether the title subsequently acquired is legal or equitable.

If any of the above-mentioned factual situations exists, the estoppel against the grantor to assert the after-acquired title is held to vest such title in the grantee by operation of law, automatically and without the necessity of any litigation, and to be effective also against bona fide pur-chasers of the title.'

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