Daily Development for
Thursday, August 28, 1997

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

RECORDING ACTS; CONSTRUCTIVE NOTICE; FAULTY ACKNOWLEDGMENT: Defectively acknowledged deed of trust provides constructive notice; and notice is effective from moment of delivery to recorder, notwithstanding later indexing.

Leeds Bldg. Products, Inc. v. Weiblen, 477 S.E.2d 565 (Ga. 1996)

The court indicates that this is a case of first impression in Georgia, and concludes that its decision is consistent with the majority view that improperly acknowledged instruments do provide constructive notice (citing 59 ALR 2d 1316) and that indexing is not required.

Comment 1: On the acknowledgement point, compare the recent decision in Phipps v. CW Leasing, Inc., 932 P.2d 863 (Ariz. App. 1996), which concluded that the acknowledgement requirement *did* establish a standard for constructive notice. Phipps was the DD for 5/26/97, and the editor criticized the result, although the editor believed, like the Phipps court, that the Phipps result probably reflected the common law where specific statutes do not intervene. Of course, all decisions in this area are statutory construction decisions, since the only issue is one of construction of the recording acts, so the distinction is probably meaningless. But in some states construction is required, while in other states the recording acts are specific on the effect of faulty acknowledgement. In some of the latter states, the statutes "cure" such defects after a relatively brief period following recording.

Comment 2: On the indexing point, see Prochaska v. Midwest Title Guarantee Co. Of Florida, 932 P.2d 172 (Wash. App. 1997), the Daily Development for 8/11/97, which concludes that a document delivered to the recorder nine minutes prior to a subsequent transfer to an unknowing party provided constructive notice to that party even though the document could not be discovered through the index until much later.

The editor concurs with the Prochaska result and the result here on this point. A clear rule is all that the industry needs in this area. Parties seeking to record can do no more than deliver the instrument, and they should be protected by doing so. Problems relating to late indexing can be addressed through title insurers, so that the cost is borne by those seeking certainty in real estate investing, rather than innocent recorders or the public coffers.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1-6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Stacy Walter at the ABA. (312) 988 5260 or stacywalter@staff.abanet.org

Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.