First Citizens National Bank v. Sherwood

ORDER PER CURIAM. 2005, NOW,

AND the Petition for day July, this 20th GRANTED; Appeal Superior Allowance of Order REVERSED; judgment sentence of the Court VACATED; and Allegheny County of Common Pleas of Pleas of this matter is REMANDED to the Court Common hearing Respondents for a new indirect Allegheny County v. Crawford, Commonwealth criminal contempt complaint. Starr, v. 269, (1976); Commonwealth 352 A.2d 52 318(c). (1996); P. Pa. 664 A.2d 1326 Pa.R.Crim. 879A.2d 178 BANK, Appellant, FIRST CITIZENS NATIONAL v. County Arthur Bradford W. SHERWOOD Deeds, Appellees. Recorder of Supreme Pennsylvania. Court of Argued Dec. 2003. July Decided Shaw, Jennings, Esq., Sayre, R. Esq., Alan Richard William National Bank. for First Citizens Scranton, Arthur W. for Sher-

Joseph Ferguson, Esq., G. wood, M.D. Smith, Towanda,

Mark Esq., William for Bradford County Recorder of Deeds. CAPPY, C.J., CASTILLE, NIGRO,

BEFORE: NEWMAN, SAYLOR, LAMB, EAKIN and JJ.

OPINION Chief Justice CAPPY. statutory

This is a construction matter. Specifically, we are asked to a purchaser determine whether of real property has notice of a mortgage constructive when the mortgage is prop- erly defectively recorded but indexed. For reasons that follow, conclude that the applicable statutory authority purchaser mandates such an instance is deemed to have constructive notice. Accordingly, we reverse the order of the Superior Court. (“First Citizens”)

First Citizens National Bank bought a piece of real property, had been by which owned J. Joel Turrell Trustee for (“Turrell”), Genevieve Van Noy virtue of a Sheriffs to purchase, Deed. Prior First Citizens the mortgage searched index and discovered no encum- brances. After the completed, sale was First Citizens learned had Turrell executed a favor Arthur W. (“Sherwood”). Sherwood The County Bradford Recorder of Deeds had recorded the Sherwood-Turrell mortgage. misindexed, The mortgage was however. Instead of being name, indexed under Turrell’s it was indexed under Noy’s Van name. Apparently, First Citizens had not cross-checked the index under Noy’s Van name as well as Turrell’s and thus mortgage. did discover the

Upon discovering Sherwood-Turrell mortgage, First Citizens filed an action title. The trial court quiet granted summary judgment favor First Citizens. It held that indexed, when a lien had been improperly subsequent pur- not be chasers would deemed to have constructive notice of the lien. Accordingly, as the Sherwood-Turrell had indexed, been improperly the trial court concluded First Citizens not be would deemed have constructive notice of it. Court,

Sherwood The appealed. Superior relying heavily case from jurisdictions, law other reasoned that subsequent purchaser shall not be deemed to have notice of a prior lien so long “diligent as a search” would have uncovered the lien. Sherwood, First Citizens Nat’l Bank v. 817 A.2d 504-05 (Pa.Super.Ct.2003). The Superior Court held that the ques one, tion of diligence is a factual dependent upon how accessi ble the records were at the time search was conducted. Of import Superior particular was whether the county’s records computerized were not. As trial court had not conducted factual into inquiry how accessible Brad were, ford County’s records the Superior Court remanded this matter to the trial court for further proceedings.1

First Citizens then filed a Petition for Allowance of Appeal, and granted allocatur. The sole issue before this court is whether a purchaser may be deemed have construc tive notice of the existence of a mortgage when the mortgage is properly recorded but is defectively indexed. As this is a law, question of our standard review is de novo and our scope of is plenary. Jones, review Township v. Buffalo (2002). Pa. 813 A.2d 664 n. 4 analysis

Our focuses on two statutes. first states that when a agreement written relating real property is recorded, effect legal “[t]he agree ments shall be to give constructive notice to subsequent purchasers....” § P.S. goes 357.2 Section 357 on to state Superior neglected 1. The to note in its order that the trial court's clearly order was oversight vacated. This was an on the lower court's part. court, vacating Without the order of the trial the trial court's Yet, stay order would in Superior effect. the thrust of the Court’s opinion obviously original was the that trial court's order was to have Accordingly, no effect. clearly oversight by as this Superior the Court, Superior we will treat the Court’s order as if it had vacated the trial court's order. 2. We note fleetingly argues that First Citizens § that 21 P.S. 357 does apply Eakin, not to this colleague, matter. Our esteemed Mr. Justice § also contends that apply. 357 does not Mr. Justice Eakin offers a ... subsequent purchasers

that shall rights “the if said thereby limited with the same force and effect as joined in execu- subsequent actually ... had the purchasers ” The in applies tion of the second statute [mortgage].... indexed, and mortgage a is properly those instances when to all “shall be notice provides indexing that § 9853. persons recording of of the same.” the are judice, these matter sub we applying statutes Act. Statutory the of our Construction guided by principles construing § 1501 et The seq. polestar See Pa.C.S. and that the of a statute are clear statutes is where words them as 1 Pa.C.S. unambiguous, apply we must written. See 1921(b). granted not the to disre- judiciary liberty is spirit.” the of gard plain pretext pursuing the words “under conflict, Furthermore, Id. the that statutes are in event two “the latest in of final shall prevail.” statute date enactment Pa.C.S. analysis provides position. of his He states that 21 P.S. detailed only rights privileges property "perma- real which a that are of goes subject provision. He nent nature" are to 357's on to reason by permanent rights mortgages and thus the created are nature

provisions apply mortgages. §of 357 cannot argu- appeal colleague’s learned While there is some surface to our ment, adopt we in tension our recent we find that cannot with Pines, Farrell, (2004). In decision in Pines v. 848 A.2d 94 defining recog- mortgage. this wrestled the of a We court nature view, thought nized were on the One that there two schools matter. land, theory", conveyance called a to be a the "title deems (i.e., mortgagee entity loaning money) granting title the which the however, Pines, theory”, stated the land. A.2d at 99. The “lien grant mortgagee property, did title to the but merely history security interest. Id. After detailed recitation of the competing thought, unambiguously en- of these two schools of Pines theory. "mortgages traditionally have dorsed title We stated that acts, conveyances. questions upon been treated as In all spoken conveyance as a of land.” Id. at omitted; (citations emphasis supplied). quotation and internal marks Pines, agree light it difficult with the of our decision in find colleague judice. matter A view taken our learned sub thing, right or transfer title is no but rather resembles a insubstantial permanent point the privilege which is The fact that at one nature. thereby mortgagor may obligations mortgage, fulfill the negate mortgaged property, receive does not the fact title to mortgaging property mortgagee. transfers the title to the 471 conclude that principles, these applying unambiguous. Per plain § 357 is of 21 P.S. language recording agreement of a written legal § effect construc give subsequent purchasers a is to mortgage such as ambiguity There is no mortgage. notice of the tive us into that statute an scope for to read statute. There is no may be whereby subsequent purchaser a equitable exception the mortgage notice was excused from constructive when 21 applying improperly recorded but indexed. properly judice, § matter sub First Citizens must 357 P.S. of the Sherwood-Turrell constructive notice deemed have cavil that the Sherwood-Turrell mortgage beyond it is recorded. was mortgage properly this conclusion via two attempts

First Citizens avoid First, § that P.S. arguments. argues separate has no purchaser that a position subsequent supports is mortgage improperly of a where that mortgage notice indexed, mortgage properly regardless of whether Citizens, § 9853 that a As First states recorded. noted to all persons shall be notice mortgage indexed argues if a mortgage. First Citizens all then the persons, notice to obverse proper indexing is has no notice presumptively a subsequent purchaser true: indexed. mortgage improperly where First, § not create a fails. 9853 does argument This P.S. § not stand for the inference—namely, 9853 does negative purchaser se lacks notice subsequent per proposition indexed. improperly where Furthermore, interpretation if this were a logical even not be entitled to relief. § First Citizens would still P.S. interpretation § of 16 P.S. 9853 is This is because such 357’s dictate that proper at odds P.S. squarely constructive notice of of a constitutes recordation if subsequent purchasers. Accordingly, even First Citizens construction P.S. adopt we were to find 357 and 16 P.S. then we would have to find that § 9853 are in each other. Were we conflict with conflict, prevail 21 P.S. 357 would the two statutes were contest any between the two because it was the statute 1 § enacted later time.3 (stating See Pa.C.S. 1936 that in that another, the event are conflict one two statutes with “the statute latest in date of final shall prevail.”). enactment

First Citizens’ next is that cannot argument we follow the § plain language it conflicts P.S. because Marshall, 570, (1909). v. Prouty brief, 74 A. 550 In this that Prouty declared where a mortgage is defectively wrongly indexed, recorded purchaser a mortgaged premises actual not chargeable without notice is with constructive notice of a mortgage.

Prouty First, does not First support position. Citizens the factual in Prouty quite scenario different from that in was judice. Prouty, matter sub In that instance only was not but improperly defectively indexed also recorded. matter, it question this is that without Furthermore, properly recorded. if Prouty even could for subsequent read to stand proposition purchaser will not be deemed to have constructive notice of a properly recorded but indexed improperly mortgage, it does not control outcome this matter as such a putative holding was effectively abrogated the Legislature when promulgated P.S. 357.4

Finally, concept we address a through runs First arguments Citizens’ to this court. concept This is that we should First it adopt position Citizens’ because is sensible. essence, First us Citizens invites to find in favor because it prudent charge subsequent purchaser with constructive only notice those where situations is both properly recorded and properly indexed.

We cannot accept this invitation. In addressing an construction, statutory issue of this court’s power limited. Legislature Where the has crafted a statute which is clear and 1931; 3. 21 P.S. 357 was into law in enacted 16 P.S. 9853 was enacted in 1875. 4. We that 16 subsequent note 356 was enacted to our decision in Prouty. it simply may apply not decline squarely point, we may Nor options. are better policy find that there because we on the basis unambiguous statute decline to follow regard charted a different course with jurisdictions other have not our role to bluntly, To it is put to the same issue.5 merely Legislature by clear choices made disregard policy If the poor. choices to be may believe these because we statutes to create applicable chooses to amend the Legislature We, Citizens, may First do so. system as envisioned Erie, 553 Pa. however, City v. may Pap’s not. See A.M. 273, (1998), grounds, reversed on other A.2d (2000) (judiciary 146 L.Ed.2d 265 U.S. S.Ct. enactments; separation powers may legislative rewrite legislative on the authority solely confers such doctrine branch). sum, mort- we conclude that since the Sherwood-Turrell recorded, § all per then 21 P.S. 357 subse-

gage properly notice of it. purchasers are deemed to have constructive quent reversed, and Accordingly, Superior order Court for proceedings this matter is remanded to the trial court opinion. consistent this with participate

Former Justice LAMB did not decision this case. in dissenting

Justice EAKIN files a which Justice opinion joins. SAYLOR Although may Superior we understand the frustration of the Court matter, analyzing disapprove this we are constrained to of its reliance jurisdictions regard to this issue. As decisions from other supra, step analyzing matter is to deter- stated first this language Superior mine whether the of the statutes is clear. While the recognized implicat- § § Court that 21 P.S. 357 and 16 P.S. 9853 were matter, hastily analysis ed in this abandoned its of these statutes and examining jurisdictions declare that a turned instead to whether other subsequent purchaser improp- has notice of a which has been law, erly divorcing analysis statutory from indexed. itself Superior language § clearly erred. of 21 P.S. 357 is As it; may ambiguity, apply we not avoid clear and free from must application jurisdictions such an on the basis that other have charted a different course.

474 EAKIN, dissenting.

Justice § that 21 majority’s governs determination 357 is, erroneous; thus, I my judgment, outcome this case respectfully dissent.

First, § does not at all. It apply Statutes, Pennsylvania is found in Title 21 of titled “Deeds and quite related but Mortgages.” involving Statutes these two independent subjects separate chap- are then subdivided into Provisions”; ters: 1 is “Deeds and Chapter entitled General 357, Chapter “Mortgages.” is entitled Section which majority interprets and relies on to resolve this question, is found 2. For issues Chapter Chapter § 1 and regarding mortgages, Chapter presump- 357 do (head- control. tively automatically See Pa.C.S. of statute shall not be considered to ings prefixed chapters construction). control but aid in may Further, § 357 not control as exclude very does terms mortgages. The Deeds under the head- Chapter places and ing sub-heading, respectively: “Registration and Record- ing: Necessity Recording Compulsory Recording.” sub-heading majority Under this same which scope notes “establishes the of those documents to ...” at n. at applies. Majority Op. which 879 A.2d Sherwood, 180 n. 2 First Nat’l Bank v. (citing Citizens 501, 504 n. 5 (Pa.Super.2003)). A.2d Section 356 establishes that to applies agreements writing relating to “[a]ll real ... the property parties executing terms whereof the sell, the same grant, bargain, convey any rights do or or privileges of a nature.” Id. permanent Section 357 immediate- states, ly follows and effect of the of legal recording “[t]he shall to agreements give be constructive notice to subse- quent ... purchasers, mortgagees, judgment creditors and/or ” Id., of the fact of the of such granting rights.... is,

That for to a an apply, mortgage agree- must be sell, ment “grant, bargain, convey ... or rights privi- leges a nature to such real permanent pertaining proper- of ” Id., ty.... § 356. A is not such a for mortgage conveyance, ais document permanent of a nature—it mortgage is not a is repaid. a debt specified until encumbering property a to think of their may come average the homeowner While it is at most a limited permanent, as almost transfer. provisional is not “of is paid, gone—it is the encumbrance

Once debt As is clear and unam- requirement nature.” this permanent a Thus, 1921(b), see it must be applied. 1 Pa.C.S. biguous, that statement majority’s Superior Court’s approval to real Ma- relating property,” § 357 to “all applies writings (citation omitted), at n. at 180 n. 2 jority Op., A.2d sweeping—it ignores very is far too including mortgages writings convey rights itself—the must of section words of statute, us interpret If this let nature. we are permanent a reading truncated of the statute’s terms—to not start with a terms, must, must ask effect to the statute’s we give all rights property. in the Sim- mortgages convey permanent if obligation is basically, not—when the they and most do ply (on of pain is and terminated satisfied paid, 682). of §§ see Consideration statutory penalty, entirety § 357 does unambiguously of shows are mortgages, at all of not and speak to the which permanent “of a cannot deemed nature.” legislature apply Nor it the intent of the this is to mortgages. purpose recording mortgage give The of encumbered, but to the property notice world for that recording necessarily implies proper indexing, go must notice. get Imperfect world where that the mere recordation indexing notice-to hold imperfect an innocent proper indexing places without undue, nay impossible, on notice party puts constructive simply A cannot subsequent purchaser burden that party. filed every mortgages look at one thousands why longstanding office. That is it is a Recorder Deed’s contains, no just notice of that “the record is what principle no that the record of obligation seeing more and less. correct, its holder.” upon an instrument is must rest 476 Marshall, 570, (1909).1 550,

Prouty v. 225 Pa. 74 A. 552 If the misindexed, mortgage is one iswho bound to search existence, for it not of does know its one does not have notice of the record See what contains. McArther v. City Phila of Bd., 139, delphia 415, Tax Review 116 Pa.Cmwlth. 541 A.2d (1988) Neill, 457, 343, n. 1 v. (quoting 417 Pa. Logan 128 18 A. (1889) (“When 344 inquiry neglect becomes duty, make negligent visits the notice of party with constructive such facts disclosed.”) as a proper discharge duty would have of (emphasis original)).2

16 9851 of requires recorder deeds of each county establish and indexes for keep mortgages. A read- ing §of Assembly shows that General intended recording indexing and hand in go hand. See Penn Title Deshler, (Pa.Cmwlth.1995) (“We Ins. Co. v. 661 A.2d (3) construe 9851 to require ] three elements in [§ the record- 1) of ing by deeds and of mortgages [recorder ...: deeds] 2) 3) name of of grantor, name the grantee, and volume instrument.”). page recorded Even if “proper can be recording” interpreted otherwise to require less than indexing, “proper” this is as it only may insofar protect liens; however, one’s title to land or of priority is not notice to the To world. hold that of a mortgage proper indexing without is sufficient to give constructive no- tice to who those search the index produces indefensible result. See (presumption Pa.C.S. ascertaining intent of General Assembly enacting statute is that result is §§ apply mortgages, 1. As 356 and 357 do the constructive notice provision "effectively Prouty. abrogate” Majority does not See certainly at abrogate longstand- 182. Section 357 does the basic and ing principles relied on in case. notice, may charged having Absent actual one have been con- mortgage, structive notice of the but this Court has stated: partyA onis constructive notice of property another's interest real party by where the "could inquiry person have learned who, believe, possession they and of others had reason knew title, might appeared facts which affect and also what appropriate indexes in the office the recorder deeds.” Int’l, Inc., & Mid-State Bank Trust Co. v. Globalnet (1999) added) (citation omitted). (emphasis A.2d absurd, execution, of or unrea- impossible intended be sonable). of on the duty indexing mortgages placed and deeds Deeds, of the mortgagee

Recorder but as between the parties, bears the of ultimately improper indexing. risk Section specifically subject entry addresses the of notice: of “[t]he indexes, mortgages respectively, recorded deeds and in said persons shall be notice to all of of the same.” 16 of Clearly, good indexing P.S. the absence cannot be good protect place notice. order to its interest and those notice, Globalnet, may later search on constructive see who must bear of supra, mortgagee checking the burden indexes after that the proper recordation insure Recorder properly mortgage. Deeds indexed and recorded the This is a small burden indeed for the is an mortgagee—it impossi- ble on the place public. burden It is the mortgagee who asks for the in advancing money. return for It is the mortgagee that files the protect order its (“[A security interest. Prouty, at cannot hide mortgagee] recorder.”). behind the mistake of the It is an easy matter for a or a mortgagee, grantee each instance, particular in person, by representative, either record, to look at the and see that the instrument been has properly entered.... There is reason every why should be duty made the to see that his mortgagee instru- ment is properly any way recorded. This will not inter- that, fere the principle with when the instrument is certified recorded, it shall notice of the contents from the import time of but that must be filing; understood as connection above, with instrument As said properly recorded. contains, just record is notice of no more what and no less. The obligation seeing that the record an instru- ment is correct must rest If he upon holder. himself, to protect fails cannot consequence justly upon purchaser. shifted an innocent (em- Liberati, (Pa.Cmwlth.2003) Antonis v. 821 A.2d 552), phasis original) (quoting Prouty, appeal granted, at (2004). 842 A.2d 407 deeds, not dealing a statute Reliance on transfers, is misplaced. mortgages impermanent and other as notice to the to serve world Allowing improper indexing § 9853 conflicts with that 16 P.S. and the conclusion illogical, fact, majority’s meaning is erroneous. plain § 357’s § 9853 renders 16 P.S. actually abridged reading alone the world gives If recordation meaningless. there is no need then mortgage, constructive notice of must indexing at all—recordation without mortgages index this absurd did intend Surely legislature suffice. result. reasons, hold that First I would Citizens foregoing

For the mort- notice of this National Bank did not have constructive my and offer firm dissent. gage, in the decision participate LAMB did not Former Justice this case. dissenting opinion. joins this

Justice SAYLOR 879A.2d Pennsylvania, Appellee, COMMONWEALTH

v. SHIFFLER, Appellant. Albert S. Pennsylvania. Supreme Court of 30, 2004. Argued Nov. July Decided

Case Details

Case Name: First Citizens National Bank v. Sherwood

Court Name: Supreme Court of Pennsylvania

Date Published: Jul 20, 2005

Citation: 879 A.2d 178

Docket Number: 202 MAP 2003

Court Abbreviation: Pa.