Court Opinion

ID: 9616497
Source: CourtListenerOpinion
Date Created: 2023-08-22 04:47:21.67942+00
Date Added: 2024-06-11T09:56:51.971367
License: Public Domain

Ingram, Justice,
dissenting.
Under the facts of this case, a mother-in-law permitted record title to real property to be placed in her son-in-law’s name "because his income or credit rating was thought necessary [by the mother-in-law] to satisfy the mortgage lender at the time of purchase...” She now wants to urge a secret equity in the property against the lender’s assignee because the loan was not paid by her son-in-law. The majority hold that the mother-in-law’s possession was enough to put the lender on notice of her secret equity. In my opinion, this scrambles, rather than balances, the real equities in the case.
I believe the correct result would be that the lender and his assignee are insulated, by the doctrine of equitable estoppel, from the mother-in-law’s claim. Under these facts, the mother-in-law was bound to know a lender would be extending credit to her son-in-law on the faith of his record ownership of the property as opposed to hers which apparently she concealed until after the loan was made and a default occurred. Meanwhile, the mother-in-law stood by and did nothing to assert the existence of the secret equity which she now claims. I would direct her claim to her son-in-law who failed to pay the loan, rather than to the lender who had no actual or constructive notice of the secret equity claimed by the mother-in-law.
The majority place the burden on the lender to discover the mother-in-law’s secret equity arising solely from her possession. The son-in-law told the lender his mother-in-law was living on the land without charge as *330his tenant. The effect of the majority decision is that one who loans money on real estate cannot rely on record title and the representations made to it by the record title borrower, explaining possession of his property by someone within his family circle as his tenant. The lender must now go upon the land to be encumbered to ascertain if any third party is in possession, even a member of the borrower’s family. If so, the lender must obtain a quitclaim deed or at least an affidavit from the family member in possession that he or she has no secret equity in the property. Otherwise, the loan deed may be set aside and canceled at the behest of the holder of the secret equity. I do not think this is a correct equitable result.
It is significant to me that this mother-in-law had ample opportunity to tell the attorney representing the lender of her equity in the property before the loan was closed but she did not do so. I believe her silence, in these circumstances, was misleading and that she had a duty to reveal her claimed ownership at that time. Having failed to do so, I would hold that she is now estopped in equity to set aside the loan deed her son-in-law made on the property. Code. § 37-109. I agree that, ordinarily, possession is sufficient notice of whatever title, if any, the possessor may have, but, under the facts of this case, it is not strong enough to overcome the inequity to the lender and his bona fide transferee for value of being misled by these intrafamily dealings. The interest of the lender and his transferee in this case should be superior to that of the cestui que trust, who stood silently by and permitted the lender to act to its prejudice when she had an opportunity to assert her interest. Equity must blush because of its unwarranted intrusion here. See Code § 37-111. Therefore, I dissent to the majority opinion and regret the effect it will have on the real estate practice of law in this state.