Amoskeag Bank v. Chagnon, 89-014

• Decision Date: 11 April 1990
• Docket Number: No. 89-014,89-014
• Citation: 572 A.2d 1153,133 N.H. 11
• Parties: AMOSKEAG BANK v. Regis J. CHAGNON d/b/a Manchester Mortgage Co., Brad Morrow d/b/a Morrow Millwork and Sundeen Lumber Company, Inc.
• Court: New Hampshire Supreme Court

Page 1153

572 A.2d 1153

133 N.H. 11

AMOSKEAG BANK v. Regis J. CHAGNON d/b/a Manchester Mortgage Co., Brad Morrow d/b/a Morrow Millwork and Sundeen Lumber Company, Inc.

No. 89-014.

Supreme Court of New Hampshire.

April 11, 1990.

Vincent J. Nardi and Elizabeth Cazden (orally), Manchester (Vincent J. Nardi and

Elizabeth Cazden, on the brief), for Regis J. Chagnon d/b/a Manchester Mortg. Co.

McSwiney, Jones, Semple & Douglas P.C., Concord (Ronna F. Wise orally, and George B. Waldron, Jr., on the brief), for Brad Morrow d/b/a Morrow Millwork.

Kfoury & Elliott P.A., Manchester (Charla Bizios Labbe, on the brief and orally), for Sundeen Lumber Co., Inc.

Scott A. Ewing, Manchester, for Amoskeag Bank, filed no brief.

JOHNSON, Justice.

This case involves the conflicting claims of three junior creditors, Regis J. Chagnon d/b/a Manchester Mortgage Co. (Manchester Mortgage), Brad Morrow d/b/a Morrow Millwork (Morrow), and Sundeen Lumber Company, Inc. (Sundeen), to the surplus funds of a mortgage sale. Amoskeag Bank filed a bill of interpleader with the superior court to determine the distribution of the surplus funds among the junior creditors. Manchester Mortgage appeals the December 12, 1988 decision of the Superior Court (Manias, J.), to distribute the surplus funds first to Morrow and then the balance to Sundeen, reserving no money for Manchester Mortgage. We affirm.

The lower court found the following facts:

"Amoskeag Bank held the first mortgage on the subject property; this mortgage deed was given on May 14, 1986. On February 24, 1987, Manchester Mortgage recorded a mortgage deed to secure a note in the amount of $25,196.72 with the registry of deeds. Although the mortgage deed was properly executed and acknowledged, through inadvertance [sic], the document that was recorded did not contain the [acknowledgment] page but rather, the signature page of the promissory note. On March 11, 1987, Morrow filed a writ of attachment in the amount of $18,000 to secure a debt of $17,967.49. Morrow's attorney performed a title search and was aware of [Manchester Mortgage's] mortgage deed as filed. On August 26, 1987, Sundeen Lumber filed an attachment on the property in the amount of $18,000 to secure a debt of $16,655.21 plus interest and costs. Sundeen did not perform a title search. Pursuant to foreclosure proceedings, Amoskeag Bank performed a title search and contacted creditors regarding the proceeds remaining after Amoskeag satisfied its mortgage. Manchester Mortgage then corrected the recorded instrument on September 28, 1987."

The documents Manchester Mortgage actually recorded were: (1) the first page of a mortgage from Thomas Robinson Associates, Inc. (T.R.A.) to Manchester Mortgage, with a description of property on Knox Road in Bow; (2) the same page, re-typed; (3) the signature page of a promissory note, the maker being T.R.A.; and (4) the record of a corporate vote of T.R.A. authorizing the President "to borrow such sums as he sees fit to complete the construction project located on Knox Rd., Bow...." The mortgage's signature and acknowledgment page was not recorded. T.R.A. asserted no claim to these funds and is not a party to this proceeding.

The superior court ruled that neither Morrow nor Sundeen had actual or constructive notice of Manchester Mortgage's mortgage because it was so defectively recorded. Morrow adopts this reasoning on appeal. Manchester Mortgage, on the other hand, argues that: (1) Morrow had actual notice of the defectively recorded deed because it performed a title search and was obliged to inquire as to the validity of the deed; (2) Sundeen had constructive notice of the defectively recorded deed, and thus must be charged with notice of what it would have learned had it performed a title search; and (3) under the operation of constructive notice, Sundeen must be placed in Morrow's position and therefore was also obliged to inquire as to the validity of the deed. Sundeen agrees with Manchester Mortgage that what was disclosed by Morrow's title search obligated Morrow to inquire further, and thus put Morrow on notice of the existence of the mortgage. But since Sundeen did not perform a title search, Sundeen argues that the defective recording of the deed protects it from constructive or actual notice of the mortgage.

Although Morrow performed a title search and saw the defectively recorded mortgage, we hold that Morrow was not obligated to inquire further, since it was an attaching creditor, not a prospective bona fide purchaser.

The statutes applicable to this case are RSA 477:3-a and 477:7. RSA 477:3-a reads:

"Every deed or other conveyance of real estate and every court order or other instrument which affects title to any interest in real estate, except probate records and tax liens which are by law exempt from recording, shall be recorded at length in the registry of deeds for the county or counties in which the real estate lies and such deed, conveyance, court order or instrument shall not be effective as against bona fide purchasers for value until so recorded."

RSA 477:7 reads:

"No deed of bargain and sale, mortgage nor other conveyance of real estate, nor any lease for more than 7 years from the making thereof, shall be valid to hold the same against any person but the grantor and his heirs only, unless such deed or lease be attested, acknowledged and recorded, according to the provisions of this chapter."

New Hampshire is a "race-notice" jurisdiction. That is, a purchaser or creditor has the senior claim if he or she records without notice of a prior unrecorded interest. The purpose then of the recording statutes recited above is to provide notice to the public of a conveyance of or encumbrance on real estate. The statutes serve to protect both those who already have interests in land and those who would like to acquire such...