First Citizens National Bank v. Sherwood

*474Justice EAKIN,

dissenting.

The majority’s determination that 21 P.S. § 357 governs the outcome in this case is, in my judgment, erroneous; thus, I respectfully dissent.

First, § 357 does not apply to mortgage recording at all. It is found in Title 21 of Pennsylvania Statutes, titled “Deeds and Mortgages.” Statutes involving these two related but quite independent subjects are then subdivided into separate chapters: Chapter 1 is entitled “Deeds and General Provisions”; Chapter 2 is entitled “Mortgages.” Section 357, which the majority interprets and relies on to resolve this mortgage question, is found in Chapter 1, not Chapter 2. For issues regarding mortgages, Chapter 1 and § 357 do not presumptively or automatically control. See 1 Pa.C.S. § 1924 (headings prefixed to chapters of statute shall not be considered to control but may aid in construction).

Further, § 357 does not control as its very terms exclude mortgages. The Deeds Chapter places § 357 under the heading and sub-heading, respectively: “Registration and Recording: Necessity of Recording and Compulsory Recording.” Under this same sub-heading is § 356, which the majority properly notes “establishes the scope of those documents to which § 357 applies. ...” Majority Op. at 469 n. 2, 879 A.2d at 180 n. 2 (citing First Citizens Nat’l Bank v. Sherwood, 817 A.2d 501, 504 n. 5 (Pa.Super.2003)). Section 356 establishes that § 357 applies to “[a]ll agreements in writing relating to real property ... by the terms whereof the parties executing the same do grant, bargain, sell, or convey any rights or privileges of a permanent nature.” Id. Section 357 immediately follows and states, “[t]he legal effect of the recording of such agreements shall be to give constructive notice to subsequent purchasers, mortgagees, and/or judgment creditors ... of the fact of the granting of such rights.... ” Id., § 357.

That is, for § 357 to apply, a mortgage must be an agreement to “grant, bargain, sell, or convey ... rights or privileges of a permanent nature pertaining to such real property.... ” Id., § 356. A mortgage is not such a conveyance, for *475a mortgage is not of a permanent nature—it is a document encumbering a property until a specified debt is repaid. While the average homeowner may come to think of their mortgage as almost permanent, it is at most a limited and provisional transfer.

Once the debt is paid, the encumbrance is gone—it is not “of a permanent nature.” As this requirement is clear and unambiguous, see 1 Pa.C.S. § 1921(b), it must be applied. Thus, the majority’s approval of the Superior Court’s statement that § 357 applies to “all writings relating to real property,” Majority Op., at 469 n. 2, 879 A.2d at 180 n. 2 (citation omitted), including mortgages is far too sweeping—it ignores the very words of the section itself—the writings must convey rights of a permanent nature. If we are to interpret this statute, let us not start with a truncated reading of the statute’s terms—to give effect to all the statute’s terms, as we must, we must ask if mortgages convey permanent rights in the property. Simply and most basically, they do not—when the obligation is paid, the mortgage is satisfied and terminated (on pain of statutory penalty, see 21 P.S. §§ 681, 682). Consideration of the entirety of § 357 shows unambiguously that it does not speak at all to the recording of mortgages, which are not and cannot be deemed “of a permanent nature.”

Nor was it the intent of the legislature to apply this to mortgages. The purpose of recording a mortgage is to give notice to the world that a property is encumbered, but proper recording necessarily implies proper indexing, for that is where the world must go to get that notice. Imperfect indexing is imperfect notice-to hold that the mere recordation of a mortgage without proper indexing places an innocent party on constructive notice puts an undue, nay impossible, burden on that party. A subsequent purchaser simply cannot look at every one of the thousands of mortgages filed in the Recorder of Deed’s office. That is why it is a longstanding principle that “the record is notice of just what it contains, no more and no less. The obligation of seeing that the record of an instrument is correct, must properly rest upon its holder.” *476Prouty v. Marshall, 225 Pa. 570, 74 A. 550, 552 (1909).1 If the mortgage is misindexed, such that one who is bound to search for it does not know of its existence, one does not have notice of what the record contains. See McArther v. City of Philadelphia Tax Review Bd., 116 Pa.Cmwlth. 139, 541 A.2d 415, 417 n. 1 (1988) (quoting Logan v. Neill, 128 Pa. 457, 18 A. 343, 344 (1889) (“When inquiry becomes a duty, neglect to make it visits the negligent party with constructive notice of such facts as a proper discharge of the duty would have disclosed.”) (emphasis in original)).2

16 P.S. § 9851 requires the recorder of deeds of each county to establish and keep indexes for mortgages. A reading of § 9852 shows that the General Assembly intended recording and indexing to go hand in hand. See Penn Title Ins. Co. v. Deshler, 661 A.2d 481, 487 (Pa.Cmwlth.1995) (“We construe [§ ] 9851 to require three (3) elements in the recording of deeds and mortgages by a [recorder of deeds] ...: 1) name of the grantor, 2) name of the grantee, and 3) volume and page of the recorded instrument.”). Even if “proper recording” can be otherwise interpreted to require less than proper indexing, this is only “proper” insofar as it may protect one’s title to land or priority of liens; however, it is not notice to the world. To hold that the recording of a mortgage without proper indexing is sufficient to give constructive notice to those who search the index produces an indefensible result. See 1 Pa.C.S. § 1922 (presumption in ascertaining intent of General Assembly in enacting statute is that result is *477not intended to be absurd, impossible of execution, or unreasonable).

The duty of indexing mortgages and deeds is placed on the Recorder of Deeds, but as between the parties, the mortgagee ultimately bears the risk of improper indexing. Section 9853 specifically addresses the subject of notice: “[t]he entry of recorded deeds and mortgages in said indexes, respectively, shall be notice to all persons of recording of the same.” 16 P.S. § 9858. Clearly, the absence of good indexing cannot be good notice. In order to protect its interest and place those who may later search on constructive notice, see Globalnet, supra, the mortgagee must bear the burden of checking the proper indexes after recordation to insure that the Recorder of Deeds properly indexed and recorded the mortgage. This is a small burden indeed for the mortgagee—it is an impossible burden to place on the public. It is the mortgagee who asks for the mortgage in return for advancing money. It is the mortgagee that files the mortgage in order to protect its security interest. Prouty, at 551 (“[A mortgagee] cannot hide behind the mistake of the recorder.”).

It is an easy matter for a mortgagee, or a grantee in each particular instance, 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. This will not in any way interfere with the principle that, when the instrument is certified as recorded, it shall import notice of the contents from the time of filing; but that must be understood as in connection with an instrument properly recorded. As said above, the record is notice of just what it contains, no more and no less. 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.

Antonis v. Liberati, 821 A.2d 666, 670 (Pa.Cmwlth.2003) (emphasis in original) (quoting Prouty, at 552), appeal granted, 577 Pa. 673, 842 A.2d 407 (2004).

*478Reliance on 21 P.S. § 357, a statute dealing with deeds, not mortgages and other impermanent transfers, is misplaced. Allowing improper indexing to serve as notice to the world is illogical, and the conclusion that 16 P.S. § 9853 conflicts with § 357’s plain meaning is erroneous. In fact, the majority’s abridged reading of § 357 actually renders 16 P.S. § 9853 meaningless. If proper recordation alone gives the world constructive notice of a mortgage, then there is no need to index the mortgages at all—recordation without indexing must suffice. Surely the legislature did not intend this absurd result.

For the foregoing reasons, I would hold that First Citizens National Bank did not have constructive notice of this mortgage, and offer my firm dissent.

Former Justice LAMB did not participate in the decision of this case. Justice SAYLOR joins this dissenting opinion.

. As §§ 356 and 357 do not apply to mortgages, the constructive notice provision of § 357 does not "effectively abrogate” Prouty. See Majority at 182. Section 357 certainly does not abrogate the basic and longstanding principles relied on in that case.

. Absent actual notice, one may have been charged with having constructive notice of the mortgage, but this Court has stated:

A party is on constructive notice of another's interest in real property where the party "could have learned by inquiry of the person in possession and of others who, they had reason to believe, knew of facts which might affect title, and also by what appeared in the appropriate indexes in the office of the recorder of deeds.”

Mid-State Bank & Trust Co. v. Globalnet Int’l, Inc., 557 Pa. 555, 735 A.2d 79, 85 (1999) (emphasis added) (citation omitted).