Question

Homer Simpson purchased a parcel of real property in Springfield. The deed for the property was properly recorded and indexed by the county recorder. Subsequently, Simpson borrowed $50,000 from The Springfield Savings Bank, secured by a mortgage that was properly recorded; however, the county recorder did not list the mortgage in its index for recorded documents. Simpson sold the property to Ned Flanders and executed and delivered a deed for the property to them. This deed was properly recorded and indexed at the county recorder’s office. Ned Flanders borrowed money from First Financial Services Corporation, secured by a mortgage on the property that was properly recorded and indexed at the county recorder’s office. Subsequently, Springfield Savings Bank’s mortgage from two years earlier was finally indexed by the county recorder. Three months later, Springfield Savings Bank brought a foreclosure action on the property for Simpsons' default on its loan and claimed that its mortgage had priority over the Flanders’ deed and First Financial’s mortgage. Flanders and First Financial argued that Springfield Savings Bank’s mortgage did not have priority because it was not indexed, and therefore when they conducted their title search, Springfield Savings Bank’s mortgage did not appear in the index. Flanders and First Financial filed motions for summary judgment. Was Springfield Savings Bank’s mortgage on the property properly recorded and indexed and thus gave notice of its existence to subsequent parties? Explain.

Answer 1

The statute says that in real property no conveyance of an interest shall be liable for the third parties until it is recorded according to law. It is a state statute that requires a mortgage or deed to be recorded or indexed in the recorder’s office where all the records of real property are recorded.

The case is about the importance of recording a mortgage property and how a mistake in indexing it at the country record’s office can make it disappear from the priority list at the time of claiming the loan.

Mr B purchased a parcel of property which properly recorded but the mortgage remained unrecorded in the country record’s office.

Later the property was sold by B to I and was executed and delivered a deed of the property to them. This deed was also properly recorded and indexed at the country recorder’s office. I borrowed some money secured by a mortgage from a CFFS corporation which was properly indexed and recorded.

The mortgage which was not recorded earlier in HS bank was finally recorded now and HS bank bought a foreclosure action on the property for B’s default on its loan and claimed priority for its mortgage over the deed of I and mortgage of CFFS corporation.

According to the recording statute, the property has no conveyance until it is recorded according to the law. It requires a mortgage or deed to be recorded or indexed properly at the recorder’s office to make it liable and valid for the claim.

As HS bank did not record the mortgage they do not have priority over the other deeds and mortgages. Hence cannot give notice of its existence to subsequent parties