Daily Development for Wednesday, June 18, 2003
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

Attorney is liable when recorder fails to properly index a recorded
document and the interest is lost due to transfer to a BFP.

Antonis v. Liberati, 821 A. 2d 666 (Pa. Cmnwlth.  2/4/03)

Attorney was retained by client to assist in the recording of a mortgage
for his client mortgagee.  Attorney delivered the deed in proper form for
recordation.  Thereafter, client contacted attorney several times for
reassurance that the mortgage had been recorded, and attorney reassured
client that "everything was in order."

In the process of recording the documents, however, a clerk in the
Recorder's office misspelled the name of the mortgagor.  As a result,
mortgagor later was able to sell the property to a party who had no actual
or constructive notice of the mortgage.  Mortgagor later died without
having paid the note secured by the mortgage.

A Pennsylvania trial court ruled that the bona fide purchaser cut off the
rights of the client mortgagee.

Client then sued the recorder and lawyer for the loss, as well as the
mortgagor's estate.

The trial court found for client against all parties, but the Pennsylvania
Commonwealth Court, on appeal, reversed the judgment against the
recorder, finding that, by established precedent in Pennsylvania, the
recorder is not liable for the negligent act of its subordinate, despite the
fact that a Pennsylvania statute states "it shall be the duty of the recorder
to index in its appropriate place and manner very deed and mortgage
thereafter recorded in his office, at the time the same is recorded, and in
case he neglects to do so he and his sureties shall be liable in damages to
any person aggrieved by such neglect."  The appeals court held that this
statute does not impose liability for negligent indexing, and in any event
the recorder is protected by the Pennsylvania Tort Claims Act.

This was good news for the recorder, and consistent with authority
nationwide.  But the court had a different message for the lawyer.

The lawyer argued either that he was entitled to a judgment or a new
trial.  He claimed that the trial court erred both in finding that he had any
duty beyond delivery to the recorder and in refusing to admit expert
testimony on the question of duty.  The lawyer further argued that the
mortgagor's fraud should have been identified as an intervening cause of
the injury.

The appeals court disagreed.  Expert evidence is not required, it said
when the issue of negligence is clear enough to be decided as a matter of
law.  Like the trial court, it relied upon language in a 1909 Pennsylvania
decision that was the basis for the original finding that the BFP beat the
mortgagee.  In that case, the court said that the mortgagee ought to
protect itself:

     "It is an easy matter for a mortgagee. . . either in person, *or by a
     representative,* to look at the record and see that the instrument
     has been properly entered . . . there is every reason why it should
     be made the duty of the mortgagee to see that his instrument is
     properly recorded. . . The obligation of seeing that the record of
     an instrument is correct must properly rest upon its holder.  If he
     fails to protect himself, the consequence cannot justly be shifted
     upon an innocent purchaser."

Comment 1: The rule that a BFP prevails over a the holder of a recorded
but improperly indexed instrument is probably a minority rule, but it is
one that most commentators view as a more appropriate result, for much
the same reason as set forth in the excerpt from the earlier Pennsylvania
opinion above.  Although, in many circumstances, it might not be said
that checking the record to ascertain proper indexing is "an easy thing," it
certainly is much something that the party interested in recording can
accomplish to protect against fraud, while the BFP is completely

Comment 2: The loose language of the 1909 Pennsylvania Supreme
Court that checking for indexing error is "an easy thing" belies modern
day realities, when, especially in Pennsylvania in recent history,
recorder's offices have lagged more than a year behind in filing and
indexing documents delivered for record.  It does seem erroneous for a
modern court to rely upon this offhand remark about the simplicity of the
task placed upon the mortgagee's lawyer and to fail to take testimony on
the real burden that is involved.

Nevertheless, one suspects that the attorney in fact made no effort of any
kind to check back with the recorder, and would not have found an error
even if the misindexing had occured within 24 hours of recording.  This
is probably consistent with the practice in most areas.  In fact, in most
areas, the attorney relies upon a closing agent even to deliver the
documents for record.  Under those circumstances, would the attorney be
liable for failing to check whether the agent did its job properly?  One
suspects that the answer would be "yes" in this court.

Comment 3: What's wrong with this picture?  What's fundamentally
wrong is that there is a functional disconnect between recorder's offices
in many areas and attorneys working on real estate transactions.  The
recorders seems focused on efficiency and cost control, and increasingly
are imposing greater burdens upon attorneys and others in the real estate
business to assist them in those goals while not working to assist
practitioners in carrying out their client's business goals.  We have been
seeing burdensome templates and filing memoranda, varying from
county to county, and filing standards that impose, for instance, different
margin requirements from one county to the next, necessitating separate
and different originals in matters involving multi-county filings.  We
have seen recorders demanding that attorneys commit their clients to one
of a limited list of characterizations of a legal instrument, without any
recognition that instruments might have several characterizations or that
"none of the above" may be the most accurate description.

Now that there is a national recording group - the Property Records
Industry Association (PRIA), it is hoped that there will be greater
cooperation with the practicing bar.  Even though initial relations could
be described as careful, it is hoped that more recent developments,
particularly PRIA's active participation in the drafting of the Uniform
Electronic Real Property Recording Act, will lead to more affirmative
interaction.  Unfortunately, as reported here recently, PRIA has shown
great resistance to the development of any national standards for the
recording industry generally and seeks substantial control over even the
establishment of statewide standards.  The problem, at least at the top,
appears to some concern that lawyers desire to seek efficiency and
facilitate transactions may lead to  a situation in which recorders are left
to do the most difficult tasks without adequate income to support their

If lawyers want recorders on their side, and they should, the best
approach should be to work with recorders to insure that they have
adequate funding to work with new electronic recording methodologies,
and to develop those methodologies with an eye to certainty and safety
instead of  cost cutting for institutional survival.  The recorders, for their
part, need to recognize that their function is to facilitate transactions, not
to wrap them in lead lined red tape.    There's a solution to everyone's
objectives here, but thoughtful people need to get together to find it.

Readers are encouraged to respond to or criticize this posting.

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