Daily Development for Thursday, August 2, 2007
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

Here one where we need some guidance from New York title mavens.  Did the editor get this right?  Let hope that not all our New Yorkers are ut at the Hamptons and out of email reach.

RECORDING ACTS; RECORDATION:   A deed is deemed recorded from the moment it is delivered to the City Register office not the date the deed is actually recorded by the City Register. 

NYCTL 1998-1 Trust v. Ibrahiem, 832 N.Y.S.2d 767 (Supp. 2007). 

2688 Pitkin Ave, LLC (LLC) intervened in a foreclosure action affecting its property to vacate the judgment of foreclosure and order of sale dated February 3, 2006 because LLC was neither named nor served in the foreclosure proceeding.  LLC acquired title to the property from the Defendant on May 27, 2004 and delivered its deed to the City Register office for recording on June 23, 2004. 

The deed was actually recorded by the City Register on July 12, 2004 at 3:27 pm.  Earlier that afternoon, Plaintiff commenced a foreclosure action on the transferred property and failed to name or serve LLC in the foreclosure proceeding. 

The court commented that if a foreclosure action is commenced prior to the recording of a deed, then the purchaser is considered on notice of the foreclosure action.  If, however, a deed is recorded after the foreclosure action is commenced, then in order for the purchaser to be bound by the proceeding, it must have been named and served in the proceeding. The court found that a deed is deemed recorded from time it is delivered for recording because by statute every instrument that is entitled to be recorded must be recorded. 

Comment 1: Note that the mortgage was recorded, apparently, so the grantee of the deed still took subject to the mortgage, but not to the foreclosure of the mortgage.  Presumably the foreclosure sale purchaser can elect to be subrogated to the position of the mortgagee and reforeclose. 

Comment 2: Although there is a significant split on the issue of whether an instrument is deemed recorded from the time of delivery to the recorder office, this case follows what is likely the majority rule on the point.  But the case goes on to cite with apparent acquiescence  another New York case from an intermediate appellate court that stands for an interesting counterproposition.

The Appellate Division Second Department in the case of Baccari v. De Santi, 70 A.D.2d 198, 431 N.Y.S.2d 829 (1979), assumed the continuing viability of this rule deeming the instrument recorded upon delivery putting the world on constructive notice of its contents with respect to when the clerk fails to record the instrument duly delivered to him for recording. The court distinguished this from an improperly recorded instrument holding that the erroneous indexing by the clerk fails to give constructive notice of the existence and contents of the instrument.

The editor read this authority, and the instant court description of it is correct.  But can this be the New York law?  It would mean that an instrument would be deemed to provide constructive notice to the world from the time it is delivered to the recorder, but if the recorder, some days or weeks later, misindexes the instrument, then it suddenly loses its constructive notice effect.  The editor has not seen this twist in other jurisdictions (which doesn mean that the rule wasn there to be found, and the editor just missed it.)

Comment 3: In fact, most commentary on this area of the rule concludes that it is appropriate to put the risk of improper indexing on the party submitting an instrument for record, as that party is in a better position to go back and check the record later to insure that it is properly indexed. 

In theory, it a good approach.  But how does it work in practice?  Let say you go back to the courthouse and can find your document in the index.  Does this mean that the recorder simply hasn gotten around to recording the instrument, in which case you still enjoy constructive notice status, or does it mean that the recorder has misindexed your instrument (so that you can find it) - meaning that you have fallen out of constructive notice status.

The problem gets even more acute in a jurisdiction like New York, which is a race-notice jurisdiction.  Are you treated as having satisfied the race-notice requirement when you deliver the deed?  What if later the recorder misindexes your instrument?  Are you no longer recorded and so you have lost the race not only as against subsequent takers but also against prior unrecorded interests who managed to record in the interim?

The problem is that there is no good answer to all of this.  The only answer is that clerks should promptly and accurately record in every instance.  Of course, we pay them enough to insure that we get high quality people in these jobs who will perform perfectly ever time.  Don we?

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