Source: https://www.floridabar.org/the-florida-bar-journal/failure-to-deliver-the-problem-with-pocket-deeds-and-a-review-of-alternatives/
Timestamp: 2019-09-20 03:44:03
Document Index: 188429942

Matched Legal Cases: ['art, 241', '§9', '§4', 'art, 241', '§9', '§18', '§787', '§787', '§4']

Failure to Deliver: The Problem with “Pocket Deeds” and a Review of Alternatives – The Florida Bar
Failure to Deliver: The Problem with “Pocket Deeds” and a Review of Alternatives
Vol. 93, No. 2 March/April 2019 Pg 28 Kara L. Stachel Real Property, Probate and Trust Law
A common issue plaguing estate planning attorneys and title attorneys is the “pocket deed” (a nondelivered deed), which is a deed executed by a titleholder during his or her life, where the grantor instructs the deed to be delivered to the grantee upon the titleholder’s death or some other condition. The titleholder’s intention, in these types of cases, is typically to retain ownership of the property until death and to then have the deed delivered to the grantee at a later time. The problem with this type of deed is that “[w]ithout delivery, nothing passes to the grantee.”[1] If the grantor dies after he or she executes the deed, but prior to delivery of the deed to a grantee, the conveyance is ineffective. This article discusses the various consequences that arise from pocket deeds, including ineffective delivery by the grantor and acceptance by the grantee, and how delivery and acceptance of title may be made during the grantor’s lifetime to avoid these issues, while still allowing the grantor to retain ownership of the real property that is described in the deed.
• The Conveyance of Real Property Is Effectuated by Both the Delivery of a Deed from the Titleholder of the Real Property and Acceptance by the Grantee — Delivery of a deed by the titleholder/grantor and acceptance by the grantee is essential to transfer title to the grantee.[2] In Bould v. Coe, 63 So. 2d 273 (1953), grantors, Mr. and Mrs. Coe, executed a deed to Mrs. Bould. Mr. Coe passed away and was survived by Mrs. Coe, who intended to hold onto the deed until her death, at which time she intended it to be given to Mrs. Bould. The Florida Supreme Court held there was no delivery, even though it was evident Mrs. Coe intended Mrs. Bould to take possession of the subject property upon Mrs. Coe’s death.[3] Similarly, in Jeffords v. Jeffords, 148 So. 2d 43 (Fla. 1st DCA 1962), the court held:
It has long been the law of Florida that it is essential to the validity of a deed of land that there be a voluntary delivery of it by the grantor to the grantee or to someone on his behalf, and an acceptance thereof by him with the mutual intention of the parties to pass title to the land. A deed takes effect upon delivery and nothing passed until delivery is effectuated.
In Jeffords, appellees, Louise Jeffords, the widow of grantor, S.M. Jeffords, and children of Roy Harold Jeffords, a deceased son of S.M. Jeffords, disputed whether a deed from S.M. Jeffords, purporting to convey his homestead property, was validly delivered to Roy Harold Jeffords. Louise Jeffords testified the deed was executed by her and her husband, S.M. Jeffords, but remained in her personal possession until after her husband’s death. After the death of S.M. Jeffords, the deed was delivered to co-appellee, Roy Harold Jeffords’ wife, Lillie Bell Jeffords, “with instructions that it be placed in the bank for safekeeping, but not recorded….” Instead, the deed was recorded several months later “without the knowledge or consent of Louise Jeffords.”[4] Moreover, the notary testified he prepared the deed at issue and signed the deed as a notary and witness at Louise and S.M. Jeffords’ home, where they also signed the deed at issue. He testified that he forgot his notary seal at the time and took the deed to his office to affix the notary seal. He further testified that prior to leaving the Jeffords home, after he executed the deed, S.M. Jeffords asked the notary to give the deed to the grantee without recording it and that he followed these directions by mailing the deed to Roy Harold Jeffords after affixing the notary seal. Based on the conflicting testimony of Mrs. Jeffords and the notary, the court held a genuine issue of material fact existed, reversed the order of summary final judgment in favor of appellees and, importantly, noted:
While having no bearing on the issue immediately before us, we take this opportunity to observe that this case provides a classic example of the confusion, expense, bitterness and delay that so often results when a layman undertakes to practice law. It seems clear that witness H.N. LeRoy, armed with a commission as a notary public, considered himself fully competent to prepare a deed carrying out the intentions of Mr. and Mrs. Jeffords. The ineptness with which he performed that service raises a strong inference that he lacked that training in the law which is so essential to the equipment of one who undertakes to perform that type of service.[5]
The actions of the notary demonstrate the importance of hiring a competent attorney to handle real estate and estate planning matters. Specifically, had the Jeffords hired an attorney to handle this matter and had the attorney taken over contract of the deed by placing it in escrow until a specified time or occurrence, they likely would have avoided the consequences that followed the execution of their deed.
• The Delivery Requirement Can Be Satisfied, Even When a Condition Is Imposed by the Grantor, When the Proponent of the Deed Can Demonstrate the Grantor Relinquished All Control as to Satisfaction of the Condition Requirement, and the Ability to Revoke the Deed — The requirement for a condition precedent to be satisfied, such as payment for a conveyance of real property, is certainly not unusual; however, instances in which the condition is not to be satisfied until after the death of the grantor may be sufficient to satisfy the delivery requirement of a deed to a grantee. The proponent of the deed bears the burden of proving 1) the condition was dependent upon some action or nonaction by the grantee; and 2) the grantor had relinquished all control over the satisfaction of the condition and the ability to revoke the deed.[6]
Videon v. Cowart, 241 So. 2d 434 (Fla. 1st DCA 1970), involved a dispute between siblings, as to the delivery of a deed executed by their father. T.B. Videon executed a deed on February 15, 1963, purporting to transfer title to real property to his daughter, Ruth, the conveyance of which was conditioned on her relinquishing any claim she might have to any other assets left in his estate. He kept the deed in his sole possession and control until November 29, 1963, when he gave the deed to his son, Buddy, and instructed him to put documentary stamps on the deed, which he did. T.B. Videon then gave the subject deed to his wife, Hattie, with instructions to hold the deed until his death and to then give it to Buddy. He also informed Ruth of the condition of the conveyance — that Ruth was to renounce any claim to all remaining assets in her father’s estate. On or about the day after T.B. Videon’s death, the deed was given to Buddy, who then gave the deed to Ruth. Ruth recorded the deed in January 1969 and T.B. Videon’s son, Otis, filed this action contesting the validity of the delivery of the deed.[7]
Both parties cited Ralph E. Boyer’s Florida Real Estate Transactions §9.04(5)(a), stating:
If the deed is deposited with a third party to be given to the grantee upon the happening of a certain event, there is no contingency at all. Delivery of such deeds is absolute as of the time they are deposited with the custodian. Further, the essence of an effective delivery is the surrender of control by the grantor. Where the deed is to become effective upon the performance of a condition by the grantee, then the grantor has no control over the situation. Control is vested in the grantee, and thus the grantor has sufficiently divested himself of control.[8]
The court held that although there was a condition to be satisfied by the grantee before she could take the deed and that the condition would not be satisfied until after the grantor’s death, the grantor had relinquished all control and ability to revoke the deed before he died. The court found the grantor’s relinquishment of control was determinative of the delivery requirement element being satisfied.[9]
• A Deed Does Not Have to be Delivered Directly to the Grantee, by the Grantor, to Satisfy the Delivery Requirement; Rather, an Unconditional Delivery to a Third Party, Such as an Escrow Agent, Is Sufficient — Physical delivery of a deed to a grantee is not necessary to effectuate a valid transfer of title; however, it is imperative for the grantor to demonstrate the unconditional intent to convey the property.[10] The general rule is that “[a] grantor’s recording of a deed, in the absence of fraud on the grantor, is generally presumed equivalent to delivery.”[11] If, however, a deed is delivered to a third party with conditions or pending further instructions for delivery to the grantee, then title remains with the grantor and does not transfer to the grantee. Moreover, if title is still in the name of the grantor, then the grantor may revoke the deed.[12]
In Sargent v. Baxter, 673 So. 2d 979 (Fla. 4th DCA 1996), John Smith executed a quitclaim deed naming his daughter, Connie Sargent, as the grantee. Smith instructed his attorney to not record the deed, stating that he would follow up with further instructions later. Smith died prior to the deed being recorded and prior to any instructions being made to Smith’s attorney to record the deed. The unrecorded deed was mailed to Connie Sargent, after Smith’s death, who then recorded it. After Sargent recorded the deed, the personal representative of Smith’s estate also executed a quitclaim deed, transferring the same property to himself, and recorded it.[13]
The court in Sargent recognized constructive delivery of a deed, but held the unconditional delivery intent of the grantor to the grantee to be essential for effectuating a transfer of title. The court found that Smith did not fulfill the necessary intent requirement to transfer title to Sargent due to Smith retaining control of the deed.[14] The court further stated that Smith’s attorney, as an agent of Smith, was bound by Smith’s instructions and any instructions by any other messenger were ineffective to satisfy Smith’s intent requirement for delivery of the deed. Moreover, the agency relationship between Smith and his attorney terminated upon the death of Smith.[15]
The lesson to be learned from Sargent, when dealing with deeds placed in escrow for any reason, is to ensure the grantor relinquishes all power he or she had to revoke the deed at the time the deed is placed in escrow to avoid issues with delivery that may frustrate the intent of the grantor.
• Constructive Delivery Will Satisfy the Delivery Requirement, Provided, the Grantor’s Intent to Affect a Conveyance by Relinquishing Control Over the Deed Can Be Established — Although manual delivery or exchange of possession of a deed is not necessary to effectuate a conveyance of title, the grantor must demonstrate an unambiguous intent to convey his or her interest to satisfy the delivery requirement in the absence of a physical delivery. Moreover, if a grantor dies after delivery to the grantee, but prior to recording of the deed, evidence of the transfer is necessary to evidence a valid conveyance.[16] Practically, this can be established by words or acts, such as by recording the deed in the public records of the county in which the property is located.[17] In Lance v. Smith, 167 So. 366 (Fla. 1936), the Florida Supreme Court cited Gulf Red Cedar Co. v. Cranshaw, 53 So. 812 (Ala. 1910), stating, “[t]he test of delivery of a conveyance is whether the grantor intended to reserve to himself the locus poenitentiae, and, if he did, there is no delivery; but if he parts with the control of the deed, or evinces an intention to do so, and to pass it to the grantee, though he may retain the custody or turn it over to another, or place it upon record, the delivery is complete.”
In Kerr v. Fernandez, 792 So. 2d 686 (Fla. 3d DCA 2001), J.M. Fernandez, Jr., prior to his death, conveyed several properties by constructive delivery to different grantees. One deed was the subject of that litigation, which purported to transfer a parcel of real property to his sister, Lutgarda Kerr, and his daughter, Sylvia Sheppard, as grantees. All of the deeds were stored in the grantor’s closet in his home in Key West, until such time as they could be physically delivered to the named grantees, including Sylvia Sheppard, who was out of town at the time the deeds were executed.[18] Prior to Sylvia Sheppard’s return to Key West, J.M. Fernandez, Jr., suffered a stroke and died, having never been able to physically deliver the deed to his daughter; however, the deed was delivered after his death by a third party.[19] In this case, the court held, based on the trial testimony, that all involved parties agreed J.M. Fernandez, Jr., intended at all times to deliver the deed to his sister and daughter, but was unable to due to his illness and eventual death, and the conveyance to Lutgarda Kerr and Sylvia Sheppard was a valid conveyance by constructive delivery.[20]
Howarth v. Moreau, 430 So. 2d 576 (Fla. App. 1983), is an example of a case in which the court invalidated a deed due to the conditional delivery made by the grantor and highlights the risks involved with pocket deeds. Mary S. Howarth and her mother owned real property as joint tenants with rights of survivorship, until it was erroneously conveyed to a trust. The trust was subsequently declared a legal nullity, putting title to the subject real property back into Howarth’s and her mother’s names. Howarth’s mother then executed a deed conveying her one-half interest to Mary Moreau, but instructed her attorney, Sidney Taylor, not to deliver the deed until either the statute of limitations to file an appeal as to nullification of the trust had expired or any appeal of the decision had concluded. An appeal was filed and Howarth’s mother passed away during the pendency of the litigation. Moreover, the issue of whether the quitclaim deed to Moreau was unconditionally delivered during the grantor’s life was contested in the appeal. Taylor testified, stating he was given an order by the grantor to destroy the original deed, but that he was unable to because he was no longer in possession of the document due to a discovery request in the appeal, for which the deed was given to Moreau for inspection.[21] The court ultimately held delivery of the deed prior to the grantor’s death had not been effectuated due to its conditional delivery to Moreau for inspection purposes and due to the failure to deliver the deed to the grantee during the grantor’s lifetime; therefore, the conveyance of the one-half interest was not valid.[22]
• Life Estate and Enhanced Life Deeds Offer Viable Alternatives to a Titleholder Who Wants to Retain Ownership or Control Over Real Property, But Also Wants to Avoid Leaving the Burden of Probate on His or Her Heirs — Property owners often want to retain possession and control of their real estate while they are alive, which is usually the motive for not delivering deeds conveying title to the grantees until after their death. Litigation and disputes arising from these situations are costly but may be avoided by creating a life estate or enhanced life estate for the grantor using a deed, will, or trust agreement (assuming the grantor is not prohibited from conveying the property due to its homestead status or the grantor being survived by a spouse or minor children).[23]
A life estate retained by a grantor in a deed entitles the grantor to remain in possession of the subject real property until his or her death and gives the grantee (a/k/a remainderman) the grantor’s remainder interest in the property. Upon the death of the grantor/life tenant, the right of possession of the property passes to the remainderman without the necessity of probate. The disadvantage to this option is the grantor/life tenant loses control of the fee simple title and, therefore, lacks the ability to sell, convey, mortgage, or lien the property without the consent and joinder of the grantee/remainderman. Moreover, the life tenant owes a fiduciary duty to the remainderman to maintain the property in good repair and may be liable to the remainderman for the failure to do so and any diminution in value, during his or her lifetime.[24] Further, the grantor/life tenant is not permitted to make improvements to the property without the consent of the remainderman and may be liable for ameliorative waste if improvements are made without the remainderman’s consent. [25]
A second option, which enables the grantor/life tenant to maintain more control over the subject property and still avoid probate, is an enhanced life estate deed, a/k/a “Lady Bird.” The enhanced life estate provides the life tenant/grantor the additional benefit of the ability to maintain control over the fee simple and to convey, sell, mortgage, or otherwise dispose of the fee simple title to the subject property, without the consent of the beneficiaries.
Practitioners should err on the side of caution when preparing an enhanced life estate deed, as statutory language creating an enhanced life estate has not been established and an enhanced life estate deed may not be insurable; however, an example of language that may be used to create an enhanced life estate in real property is:
“A,” an unremarried widower, grantor to “A,” for a life estate, without any liability for waste, with full power and authority in said life tenant to sell, convey, mortgage, lease or otherwise dispose of the property described herein, in fee simple, with or without consideration, without joinder of the remainderman, and with full power and authority to retain any and all proceeds generated thereby, and upon the death of the life tenant, the remainder, if any, to “B,” a single person, as grantee.[26]
Another disadvantage to life estates and enhanced life estates is that liens against a life tenant will attach to the life tenant’s interest and will remain attached to the real property for which the life tenant has an interest until the death of the life tenant or a release is obtained, even if the life tenant conveys his or her interest.[27] Moreover, a lien will attach to a remainderman’s interest, even while the life tenant is alive. As such, unless the life tenant holds an enhanced life estate and conveys the subject real property during his or her lifetime, thereby divesting any judgements or liens against the remainderman, releases of any liens or judgments will be necessary to clear title.[28] Further, a lien against either a life tenant or remainderman of a life estate may be levied upon at any time, as long as the lien remains valid.[29]
Parties to life estate and enhanced life estate deeds should be especially mindful of documentary stamp taxes owed for the transfer of interest in these deeds and the necessity for all remaindermen to participate in the conveyance of the subject real property. If the grantor is also named the life tenant in a life estate or enhanced life estate deed, only minimal documentary stamp taxes will be required to be paid upon the initial transfer; however, the full amount of the documentary stamp taxes for the life estate or enhanced life estate deed will be owed upon the death of the grantor. Additionally, even in the case of an enhanced life estate deed, once the grantor passes, if the deed names more than one remainderman, all remaindermen will have to join in any conveyance.
• Land Trusts Offer the Same Benefits as Life Estate and Enhanced Life Estate Deeds, with the Added Benefit of Privacy — Land trusts are a viable alternative to pocket deeds and may also be beneficial for any landowner, grantee, or beneficiary of an estate attempting to avoid the pitfalls of probate; however, consideration should be taken as to the restrictions on alienation under Fla. Const. art. X, §4(c).[30] Specifically, a land trust avoids probate when the trust document establishes the successor beneficiary(ies). The successor beneficiary of a land trust then becomes the owner of the trust immediately after the passing of the initial beneficiary, without the necessity for probate. Additionally, the beneficiary is easily changed by the trustee of the land trust via an amendment to the trust.
Upon the death of the initial beneficiary(ies), the successor or contingent beneficiary(ies) then automatically takes ownership of the trust, without the necessity of any court proceedings. Moreover, the land trust provides an element of privacy because the beneficiaries of the land trust are not a matter of public record; therefore, the settlor of the land trust is able to confidentially add or remove beneficiaries.[31]
Documentary stamp taxes should also be taken into consideration when real property is transferred to a land trust. Documentary stamp taxes will not be owed when the property is transferred to a land trust in which the grantor of the property is also the sole trustee and beneficiary; however, if the beneficial ownership changes, documentary stamp taxes will need to be paid. In cases in which the new beneficiary has paid consideration to the grantor, documentary stamp taxes will be owed based on the consideration amount. In cases in which the beneficiary does not pay consideration, but the property is encumbered by a mortgage, documentary stamp taxes will be calculated based on the beneficiary’s proportionate share of the mortgage.[32] Alternatively, in cases in which there is only a change in the trustee, but not the beneficiary, documentary stamp taxes will not be owed since the beneficial interest otherwise stays the same.[33]
Estate planning attorneys and real property attorneys should carefully advise their clients regarding real property conveyances and the importance of title insurability issues and litigation risks relating to real property conveyances, regardless of whether those conveyances are to take place during or after one’s lifetime. Any condition precedent to a conveyance should be meticulously noted in an agreement signed by the grantor, and the satisfaction of the condition should be carefully documented. Further, the documentation and deed should be provided to an escrow agent to avoid doubt as to the grantor’s relinquishment of control over the deed, as well as confirmation obtained from a title insurance underwriter, confirming the conveyance is insurable, as well as to ensure any other conditions required for insurability are satisfied; otherwise, the conveyance could require a court order, which is the very thing the parties want to avoid. The deed should then be recorded as soon as possible after the satisfaction of the condition to demonstrate the delivery and acceptance of the deed to the grantee and to avoid loss or destruction of the deed. Moreover, in cases in which a condition for insurability is not satisfied, the grantor should be informed of the failure to satisfy the condition, and the deed should be returned to the grantor.
[1] McCoy v. Love, 382 So. 2d 647, 649 (Fla. 1979).
[2] Ellis v. Clark, 23 So. 410, 412 (Fla. 1897).
[3] Bould v. Coe, 63 So. 2d 273-4 (1953).
[4] Jeffords, 148 So. 2d at 44.
[6] Videon v. Cowart, 241 So. 2d 434 (Fla. 1st DCA 1970).
[7] Id. at 435.
[8] Id. (citing Florida Real Estate Transactions §9.04(5)(a)).
[9] Id. at 435-6.
[10] See Howarth v. Moreau, 430 So. 2d 576 (Fla. 5th DCA 1983).
[11] Sargent v. Baxter, 673 So. 2d 980 (Fla. 4th DCA 1996) (citing Wise v. Wise, 184 So. 91, 96 (Fla. 1938)); Smith v. Owens, 108 So. 894 (Fla. 1926); Ellis v. Clark, 23 So. 410, 412 (Fla. 1897)).
[12] Sargent, 673 So. 2d at 980; see also Loubat v. Kipp, 9 Fla. 60, 67 (1860).
[13] Sargent, 673 So. 2d at 980.
[14] Id. at 981; see also Lance v. Smith, 167 So. 366, 369 (Fla. 1936), and Parramore v. Parramore, 371 So. 2d 123, 124 (Fla. 1st DCA 1978) (holding that delivery fails where the grantor intended to deliver a deed but failed to do so due to a mishap or impediment).
[15] Sargent, 673 So. 2d at 981.
[16] T.N. 10.02.01.
[17] Kerr v. Fernandez, 792 So. 2d 686 (Fla. 3d DCA 2001); Parramore, 371 So. 2d at 123; Smith, at 108 So. 891, 893 (citing Gulf Red Cedar Co., 53 So. at 812).
[18] Kerr, 792 So. 2d at 686.
[19] Id. at 686-7.
[20] Id. at 687-688.
[21] Howarth v. Moreau, 430 So. 2d 577-8 (Fla. App. 1983).
[23] At the time this article was written, the Title Standards Committee of the Real Property Probate and Trust Law Section of The Florida Bar had drafted, but not published, additional title standards regarding enhanced life estate deeds.
[24] See Wagner v. Moseley, 104 So. 2d 86 (Fla. 2d DCA 1958); see also Sauls v. Crosby, 258 So. 2d 326, 327 (Fla. 1st DCA 1972).
[25] 1A R. Boyer, Florida Real Estate Transactions §18.07[3] (1987) (citing Sauls v. Crosby, 258 So. 2d 326 (Fla. 1st DCA 1972)).
[26] Suzanne M. Barry, Enhanced Life Estates Deed Growing in Popularity, 9 In the Title Corner 4 (Old Republic Title) (2006).
[27] 50 C.J.S., Judgments §787.
[28] For purposes of this article, the divesting of any liens attaching to a remainderman named in an enhanced life estate deed assumes the liens were not levied upon prior to the death of the life tenant holding an enhanced life estate.
[29] See Aetna Insurance Company v. LaGasse, 223 So. 2d 727 (Fla. 1969); see also Carroll & Associates, P.A. v. Galindo, 864 So. 2d 24 (Fla. 3d DCA 2003), and 50 C.J.S. Judgments §787.
[30] If the property is homestead, and the settlor is survived by a spouse or minor child, the devise restrictions under Fla. Const. art. X, §4(c), will restrict or prohibit the homestead from passing through the trust upon the death of the settlor.
[31] When preparing a land trust, naming the successor trustee to the deed may avoid the necessity of having to record any portions of the trust, in order to satisfy title insurance underwriting conditions, when the initial trustee is no longer able to serve as the trustee of the trust.
[32] See Fla. Admin. Code R. 12B-4.013(29)(a)-(c).
[33] See Fla. Admin. Code R. 12B-4.013(29)(a).
KARA L. STACHEL is the managing partner at Stachel Law Planning, PLLC, focusing on real estate law and probate. She thanks Robert Beharriell and Tara Wood for their helpful suggestions and comments.