Michigan Supreme Court
Lansing, Michigan 48909
____________________________________________________________________________________________
Chie f Justice Justices
Maura D. Corrigan Michael F. Cavanagh
Opinion
Elizabeth A. Weaver
Marilyn Kelly
Clifford W. Taylor
Robert P. Young, Jr.
Stephen J. Markman
____________________________________________________________________________________________________________________________
FILED OCTOBER 22, 2002
EILEEN V. GRAVES,
Plaintiff-Appellant,
v No. 119977
AMERICAN ACCEPTANCE MORTGAGE
CORPORATION,
Defendant-Appellee,
and
BOULDER ESCROW, INC., a Nevada Corporation,
Defendant/Counter and Cross-Plaintiff-Appellee.
and
STEVE DIAZ,
Defendant/Counter and Cross-Defendant.
____________________________________
PER CURIAM
The issue before the Court is whether a purchase money
mortgage has precedence over a prior recorded lien on the same
property. The Court of Appeals has held that it does.
Because this determination conflicts with the priorities
established by our race-notice recording statutes, MCL 565.29
and 565.25, we reverse.
I
In 1987, a married couple, Eileen Graves and Steve Diaz,
purchased, by land contract, a residence at 72 West End in
Waterford. In 1994, they were divorced and, pursuant to the
judgment of divorce, Diaz was awarded their interest in the
property. Graves was to be reimbursed $7,504 by Diaz for
certain arrearages traceable to child support, rental, and
land contract payments for another property in Waterford. To
provide security for the payments, Graves was given a lien on
the property at 72 West End for $7,504 plus interest. She
recorded the lien on September 7, 1994. Coincidentally, also
on September 7, 1994, Diaz acquired a mortgage loan on the
property from American Acceptance Mortgage Corporation. He
used the proceeds of the mortgage to pay off the land contract
and thereby obtained title to the property. American
Acceptance recorded the mortgage on October 5, 1994. Before
recording the mortgage, however, American Acceptance assigned
its interest to Boulder Escrow, Inc., and Boulder recorded
that assignment on April 13, 1995.
On January 11, 1996, because Diaz had defaulted on his
mortgage obligations, Boulder published a notice of a public
auction of the property. On January 12, 1996, Graves,
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asserting a failure to perform as required under the divorce
judgment, sued Diaz, American Acceptance, and Boulder to
foreclose on her judgment lien. Boulder filed a cross claim
against Diaz for defaulting on his mortgage obligation and a
counterclaim against Graves asserting the priority of its
mortgage interest over her judgment lien.
Both plaintiff Graves and defendants Boulder and American
Acceptance moved for summary disposition on the issue of the
priority of the mortgage. The circuit court ruled for Graves,
holding that plaintiff’s first-recorded lien was
constructively known to defendants and, thus, under MCL
565.29, the lien had priority over the subsequent mortgage.
The Court of Appeals reversed this ruling, holding that,
despite the language governing the priority of recorded real
estate conveyances in MCL 565.29 and MCL 565.25, under the
authority of Fecteau v Fries, 253 Mich 51; 234 NW 113 (1931),
the mortgage was a purchase money mortgage that had priority
over all other liens or interests, even those that were
recorded previously. 246 Mich App 1; 630 NW2d 383 (2001).
II
This appeal involves consideration of a trial court’s
ruling on a motion for summary disposition, which is reviewed
de novo on appeal. Spiek v Dep't of Transportation, 456 Mich
331, 337; 572 NW2d 201 (1998). The specific question we
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review, whether a purchase money mortgage takes precedence
over a previously recorded lien, presents an issue of law that
is reviewed de novo. Cardinal Mooney High Sch v Michigan High
Sch Athletic Ass’n, 437 Mich 75, 80; 467 NW2d 21 (1991).
Determination of this question requires statutory
interpretation, a matter that likewise is subject to de novo
review. Smith v Globe Life Ins Co, 460 Mich 446, 458; 597
NW2d 28 (1999).
When interpreting statutes, our obligation is to
determine the legislative intent by examining the words used
by the Legislature. Where the statute is clear and
unambiguous, “the statute speaks for itself,” and there is no
room for judicial construction. Massey v Mandell, 462 Mich
375, 379-380; 614 NW2d 70 (2000).
III
The prioritization of encumbrances on property in
Michigan is governed by statute. MCL 565.25 provided in
relevant part:
[T]he record of such levies, attachments,
notices, lis pendens, sheriffs’ certificates,
marshals’ certificates, and the original papers
required by statute to be recorded to perfect such
levies, attachments, notices, lis pendens and
certificates on record in the office of the
register of deeds, shall be notice to all persons,
of the liens, rights and interests acquired by or
involved in such proceedings, and all subsequent
owners or incumbrances shall take subject to such
liens, rights or interests. [Emphasis supplied.]
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MCL 565.29 states, in relevant part:
Every conveyance[1] of real estate within the
state hereafter made, which shall not be recorded
as provided in this chapter, shall be void as
against any subsequent purchaser in good faith and
for a valuable consideration, of the same real
estate or any portion thereof, whose conveyance
shall first be duly recorded.
The clear import of these statutes, described as “race
notice” statutes, is that the first instrument concerning real
estate to be recorded takes priority over later-recorded
instruments of whatever sort. Nowhere do these statutes
exempt purchase money mortgages from the “first-in-time”
recording priority.
There is no dispute that plaintiff recorded her lien
before the mortgage was recorded by American Acceptance.
Under the clear terms of our “race-notice” statutes, this
first-recorded instrument has priority over the subsequently
recorded instruments regardless of the nature of the later
encumbrance.
1
Both the land contract and plaintiff’s lien on that
contract are conveyances as that term is defined in MCL
565.35:
The term “conveyance” as used in this chapter,
shall be construed to embrace every instrument in
writing, by which any estate or interest in real
estate is created, aliened, mortgaged or assigned;
or by which the title to any real estate may be
affected in law or equity, except wills, leases for
a term not exceeding 3 years, and executory
contracts for the sale or purchase of lands.
5
However, defendants contend, and the Court of Appeals has
agreed, that the later-recorded instrument was a purchase
money mortgage and, as such, must be given priority over all
other encumbrances—even those that were previously recorded.
This argument is predicated not on the statute, but on a
reading of our case law—in particular, Fecteau, supra. This
reliance on Fecteau, rather than on the statute, is not
justified.
Fecteau involved a priority dispute between two mortgages
given by the defendant on the same property. The first
mortgage was given before the defendant had title to the
property in order to obtain the down payment on the property
from a third party. The second mortgage was a purchase money
mortgage given to the seller to secure payment of the balance
of the purchase price. Although the first mortgage was
recorded before the purchase money mortgage (by twenty
minutes), this Court held that the purchase money mortgage had
priority over the first mortgage “on account of its being a
part of one and the same transaction by which seizin was
acquired by the mortgagor.” Id. at 55.
The Fecteau Court concluded, in part, that it did not
have to consider the effect of the recording statutes because
there was actual knowledge of the execution of encumbrances by
all who could have relied for a defense upon the recording
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statutes. Thus the Court considered extrastatutory
authorities such as decisions by foreign courts, ALR
discussions, and United States Supreme Court case law to reach
its conclusion. Regardless of the merits of the policy
advanced by the authorities cited in Fecteau, because we do
not have a factual situation that implicates actual knowledge
defenses to lack of recording, we must rely on the recording
statutes. Thus, we are not bound by the Fecteau analysis.
In sum, our Legislature has decided to afford preference
to the first-in-time recorded encumbrance without giving any
special preference to purchase money mortgages. It is our
responsibility to enforce that legislative policy decision in
accordance with the statute’s plain language. Lesner v Liquid
Disposal, Inc, 466 Mich 95, 105; 643 NW2d 553 (2002).
Accordingly, we conclude that under the dispositive
language of the statute, plaintiff’s first-recorded lien on
the land contract took priority over the subsequently recorded
purchase money mortgage. We reverse the decision of the Court
of Appeals and remand this case to the trial court for
reinstatement of the order granting summary disposition to
plaintiff.
CORRIGAN , C.J., and CAVANAGH , WEAVER , KELLY , TAYLOR , YOUNG , and
MARKMAN, JJ., concurred.
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