Homer Simpson purchased a parcel of real property in Springfield. The deed for t
ID: 331251 • Letter: H
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.
Explanation / Answer
This is a case of priority in mortgages.
Basis of the Priority principle : It is a principle of natural justice that if rights are created in favour of two persons at different times, the one who has the advantage in time should also have the advantage in law. This rule, however, applies only to cases where the conflicting equities are otherwise equal.
APPLICABILITY OF THE RULE:
Where the competition is between a mortgagee by deposit of title-deeds and a subsequent purchaser, the principle embodied in Section 48 is applicable.
The right of priority will have to be determined by the combined operation of Section 48 of the Transfer of Property Act and Sections 47 and 49 of the Registration Act. Any undue emphasis upon Section 49 of the Registration Act in isolation would render nugatory and useless the equally important provisions in Section 47 of the Registration Act and Section 48 of the Transfer of Property Act. Once the document is registered, Section 49 of the Registration Act has no relevance and the document takes effect from the date of its execution by reason of Section 47 of the Registration Act will necessarily have to be determined in accordance with the rule embodied in Section. 48 of the Transfer of Property Act.
EXCEPTIONS TO THE RULE
(I) Salvage Charges
(ii) Estoppel
(iii) By the Registration
(iv) By notice
(v) By possession
vi) By decree or order
This is case of "By the registraion" scenario where springfiled bank has the priroty over the first financial services corporation;although it's mortgage was indexed later but it has precedence on its date of deed and hence springfield has the priority and will get the money from foreclosure.
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