Also known as: reverter guarantees · possibility of reverter
Written by attorneys — see sources below.
A mortgage clause protecting the mortgagee against a loss occasioned by the occurrence of a terminating event under a possibility of reverter.
Renata Russo conveyed land to a buyer for use as a restaurant only, retaining a possibility of reverter. She later mortgaged her interest to Riverside Healthcare under a loan containing a reverter guarantee clause. When the buyer ceased restaurant operations, the reverter triggered and title returned to Renata, allowing Riverside Healthcare to enforce the guarantee and recover its secured amount from the restored fee interest.
Robert Rivera held a fee simple conditional and mortgaged it to Radiance Media with a reverter guarantee in the mortgage. Upon Robert's death without qualifying issue, the possibility of reverter became possessory. Radiance Media invoked the guarantee to obtain payment from the value of the land that passed under the reverter.
Rita Russell owned a fee tail estate subject to a possibility of reverter and granted a mortgage containing a reverter guarantee to Redline Automotive. After Rita's death her surviving spouse asserted dower rights. The reverter guarantee allowed Redline Automotive to protect its lien priority against the spouse's subordinate claim.
Ravi Reddy conveyed a fee tail preserved for one lifetime only and later mortgaged his retained interest with a reverter guarantee to Radiant Technologies. Upon the life tenant's death the reverter ripened. Radiant Technologies used the guarantee to secure repayment from the restored estate before any other claims attached.
Raphael Rivera granted a fee simple conditional and took back a mortgage containing a reverter guarantee from Roberto Reyes. When the condition failed the possibility of reverter vested in Raphael. The guarantee clause permitted Raphael Rivera to collect the loan balance directly from the value of the revested fee.
A city received land subject to a possibility of reverter and later mortgaged its interest under a loan with a reverter guarantee. When a court-ordered integration triggered the reverter the mortgagee invoked the guarantee to recover its funds from the restored title before the land reverted to the original donor's estate.
In 1911, United States Senator Augustus O. Bacon executed a will that devised a tract of land to the Mayor and Council of the City of Macon for use as a park and pleasure ground exclusively for white people, with control vested in a Board of Managers composed entirely of white persons, and the will expressed the Senator's view that the two races should be forever separate while providing that the property under no circumstances was to be devoted to any other purpose. The city accepted the trust and initially operated the park on a segregated basis, but after it began allowing Negroes to use the park, members of the Board of Managers sued in state court to remove the city as trustee and appoint new trustees, prompting Negro citizens to intervene in the proceedings. Following the city's resignation as trustee, the Georgia courts appointed private trustees, but in Evans v. Newton the United States Supreme Court held that the park must be operated without racial discrimination, leading the Georgia Supreme Court to determine that the purpose of the trust had become impossible to fulfill and to remand the case for further proceedings. The trial court declined to apply the cy pres doctrine, ruled that the trust had failed, and determined that the property had reverted to Senator Bacon's heirs, a decision affirmed by the Supreme Court of Georgia; petitioners, the Negro citizens of Macon who had sought integration of the park, challenged the termination of the trust, and the United States Supreme Court granted certiorari to review the case.
View caseIt protects the mortgagee from loss when a terminating event causes a possibility of reverter to become possessory and removes the mortgaged interest from the security.
Yes. The clause ensures the mortgagee can reach the value of the land once the reverter vests even though the original security was a future interest.
The guarantee preserves the mortgagee's priority because surviving-spouse interests are expressly subordinate to any possibility of reverter that restricts the deceased spouse's estate.
…into an arrangement that creates a private right to compel or enforce the reversion of a public facility. Whether the right is a possibility of reverter, a right of entry, an executory interest, or a contractual right, it can be created only with the consent of a public body or official, for example the official action involved in Macon’s…