Suntrust Bank, N.A. v. John Northen
67 Collier Bankr. Cas. 2d 68
4th Cir.2012Background
- Two contiguous parcels, Tract I (six lots) and Tract II (two lots) in Orange County, NC, owned by McCormick; 1995 deed recorded on PIN index only against Tract II.
- 1999 SunTrust deed of trust encumbered both tracts but was recorded only against Tract II on the PIN index; Tract I PIN not shown.
- 2004 separate deed of trust on four lots in Tract I secured by $60,000; recorded on PIN index for Tract I.
- 1999 lien later at issue in bankruptcy; Trustee seeks to avoid lien on Tract I under § 544(a)(3) as to Tract I.
- Orange County uses PIN index as official recording index; grantor/grantee index remains unofficial for brief interim period.
- District court and appellate court affirm that a bona fide purchaser would rely on official index; lien must be recorded in PIN index to provide notice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can the trustee avoid SunTrust’s lien under § 544(a)(3)? | SunTrust | Trustee | Yes; lien avoided because not recorded in PIN index for Tract I. |
| Does North Carolina's official PIN indexing system foreclose notice from non-PIN records? | SunTrust | Trustee | Yes; a bona fide purchaser relies on official PIN index; absence of PIN recording defeats notice. |
Key Cases Cited
- Hill v. Pinelawn Memorial Park, Inc., 282 S.E.2d 779 (N.C. 1981) (recording statute provides constructive notice; pure race principles)
- Turner v. Glenn, 18 S.E.2d 197 (N.C. 1942) (one place to record; registrations determine title status)
- Havee v. Belk, 775 F.2d 1209 (4th Cir. 1985) (trustee takes status of bona fide purchaser; state law governs reach of notice)
- Cuthrell v. Camden Cnty., 118 S.E.2d 601 (N.C. 1961) (substantial compliance; official indexing requirement)