Farm Bureau Finance Co., Inc. v. Carney, 12727

• Decision Date: 21 January 1980
• Docket Number: No. 12727,12727
• Citation: 605 P.2d 509,100 Idaho 745
• Court: Idaho Supreme Court
• Parties: FARM BUREAU FINANCE COMPANY, INC., a corporation, Plaintiff-Appellant, v. Brent L. CARNEY and Debbie K. Carney, husband and wife; Idaho Title & Trust Company, and Utah Mortgage Loan Corporation, Defendants-Respondents.

Page 509

605 P.2d 509

100 Idaho 745

FARM BUREAU FINANCE COMPANY, INC., a corporation, Plaintiff-Appellant, v. Brent L. CARNEY and Debbie K. Carney, husband and wife; Idaho Title & Trust Company, and Utah Mortgage Loan Corporation, Defendants-Respondents.

No. 12727.

Supreme Court of Idaho.

Jan. 21, 1980.

Kenneth E. Lyon, Jr., Pocatello, for plaintiff-appellant.

Thomas R. Linville of Eberle, Berlin, Kading, Turnbow & Gillespie, Boise, for defendants-respondents.

BAKES, Justice.

This case involves the relative priorities of competing encumbrances on a particular piece of property. The following sequence of events transpired. Sam and Jolene Hendricks, the original owners, executed two deeds of trust on the property as security for loans. The first was executed to Mortgage Insurance Corporation (MIC); the second was to plaintiff appellant Farm Bureau Finance Company (Farm Bureau). Both were recorded, in the order of their execution. Subsequently, the Hendrickses sold the property to defendant respondents Brent and Debbie Carney. The Carneys financed the purchase price by means of a loan from defendant respondent Utah Mortgage Loan Corporation (Utah Mortgage), executing a deed of trust on the property to secure the loan. This deed of trust named defendant respondent Idaho Title & Trust Company as trustee and Utah Mortgage as beneficiary. Idaho Title & Trust conducted a title search which disclosed the trust deed from the Hendrickses to MIC, but not the one from the Hendrickses to Farm Bureau. Utah Mortgage then recorded its deed of trust from the Carneys and paid off the Hendricks loan from MIC. Subsequently, the Hendrickses filed for bankruptcy.

Farm Bureau thereafter discovered the recorded interest of Utah Mortgage and informed Idaho Title & Trust of Farm Bureau's earlier recorded interest. When Idaho Title & Trust refused to accept Farm Bureau's position that it had a prior lien, Farm Bureau initiated this action to foreclose on the property, naming Utah Mortgage, Idaho Title & Trust, the Carneys, and the Hendrickses as defendants. Utah Mortgage, Idaho Title & Trust, and the Carneys answered, claiming the acknowledgment on the Hendricks trust deed to Farm Bureau was fatally defective; that because of the defective acknowledgment the trust deed was not entitled to recording; and that actual recordation of the defective instrument did not impart constructive notice of its existence. The Carneys counterclaimed for judgment quieting title to the property in them.

Pursuant to a motion for summary judgment, the trial judge entered a memorandum decision in which he concluded that the defendants had no actual knowledge of Farm Bureau's prior lien; that the certificate of acknowledgment on the Hendricks trust deed was fatally defective; and that as a result the recording of the defective instrument did not impart constructive notice of its existence. Having determined that no genuine issue of material fact existed, the court granted summary judgment for all answering defendants and quieted title in the Carneys.

Plaintiff appellant Farm Bureau appeals, urging that summary judgment was improper because a genuine issue of material fact existed as to whether the defendants had actual knowledge of the Hendricks trust deed. Farm Bureau also maintains that acknowledgment of the deed was not defective and therefore imparted constructive notice to respondents. We agree and reverse.

First, if there exists a genuine issue of material fact with respect to respondents' actual knowledge of the Hendricks trust deed, then summary judgment was improperly granted. When a subsequent encumbrancer or purchaser has actual knowledge of a prior interest, it makes no difference whether the prior interest was properly acknowledged and recorded. I.C. §§ 55-606, 55-812. A duly recorded interest is effective against prior unrecorded interests only where the recorded interest is taken for a valuable consideration and in good faith, I. e., "without knowledge, either actual or constructive, that unrecorded interests exist." Langroise v. Becker, 96 Idaho 218, 220, 526 P.2d 178, 180 (1974); Garmo v. Clanton, 97 Idaho 696, 551 P.2d 1332 (1976).

In granting summary judgment for respondents, the trial court stated: "Through supporting affidavits filed with this Motion it is clear that the subsequent purchasers of this property did not have actual notice of the first Deed of Trust from the defendants Hendricks to the plaintiff (Farm Bureau)." We disagree. While the affidavits of Brent Carney and the branch manager of Utah Mortgage unequivocally state that neither the Carneys nor any agent of Utah Mortgage had actual knowledge of the Hendricks trust deed, the affidavit of Sam Hendricks, one of the grantors of the deed of trust, filed in opposition to the motion for summary judgment is somewhat conflicting. It reads in part as follows:

"When we decided to sell the . . . property we notified the Naegle Real Estate Company handling the sale about the second mortgage with Farm Bureau Finance. They checked with someone and then assured us nothing was on the title.

"Also, we told the company who sold the house, Skyline Realty, and they checked with someone at the courthouse and again we were told the title showed nothing.

"We did nothing to hide the fact there was a second mortgage with Farm Bureau Finance Company. We told everyone involved in the real estate transaction about their mortgage, but we were told as above there was nothing there to show the mortgage on the records."

Appellant contends the language, "(w)e told everyone involved in the real estate transaction about (Farm Bureau's second) mortgage" is sufficient evidence to place actual notice in issue. We agree. Respondents contend the statement upon which appellant relies is qualified by the remainder of the sentence, "but we were told As above there was nothing there to show the mortgage on the records." (Emphasis added.) In their view, the "as above" qualification indicates Hendricks meant only the two real estate agencies by his reference to telling "everyone involved" about the trust deed. It seems to us a more reasonable interpretation is that the sentence indicates Hendricks told Everyone involved about the trust deed and that two of the several parties in turn informed him there was no indication of it in the county records. While a mere scintilla of evidence will not create a genuine issue to the defeat of a motion for summary judgment, Jones v. Jones, 100 Idaho 510, 601 P.2d 1 (1979); Johnson v. Gorton, 94 Idaho 595, 495 P.2d 1 (1972), "(s)ummary judgment should be granted only when the pleadings, depositions, admissions and affidavits, Liberally construed in favor of the party opposing summary judgment, show that no genuine issue as to any material fact exists." State Tax Comm'n v. Western Electronics, Inc., 99 Idaho 226, 227, 580 P.2d 72, 73 (1978) (emphasis added). The affidavit filed by appellant sets forth facts known to the affiant which, when construed in favor of appellant, directly contradict those set forth in the affidavits of respondents. Actual knowledge of the Hendricks trust deed being in issue, the granting of summary judgment was error.

The second issue raised by appellant Farm Bureau relates to whether the acknowledgment and recording of the Hendricks trust deed was sufficient to impart constructive notice to the respondents. In their respective answers, respondents raised by way of affirmative defense that the acknowledgment on the Hendricks trust deed was so patently defective as to render the acknowledgment void; that the trust deed in this posture was not entitled to recordation; and that, as a result, respondents could not be charged with constructive notice of its contents.

Idaho Code § 55-805 provides:

"Acknowledgment Necessary To Authorize Recording. Before an instrument may be recorded, unless it is otherwise expressly provided, its execution must be acknowledged by the person executing it . . . or the execution must be proved and the acknowledgment or proof, certified in the manner prescribed by Chapter 7 of this title . . . ."

Idaho Code § 55-709 provides:

"Certificate Of Acknowledgment. An officer taking the acknowledgment of an instrument must endorse thereon a certificate substantially in the forms hereinafter prescribed."

The prescribed form for the certificate required in this case is set out in I.C. § 55-710:

"Form Of Certificate. The certificate of acknowledgment, unless it is otherwise in this chapter provided, must be substantially in the following form:

"State of Idaho, county of ________, ss.

"On this ______ day of ________, in the year of ____, before me (here insert the name and quality of the officer), personally appeared ________, known to me (or proved to me on the oath of ________), to be the person whose name is subscribed to the within instrument, and acknowledged to me that he (or they) executed the same."

The status of the record for purposes of summary judgment declared that the Hendricks-to-Farm Bureau trust deed was signed by the Hendrickses in the presence of the notary and one Bruce Christiansen, the Farm Bureau agent who was consummating the loan transaction with the Hendrickses. ¹ The certificate of acknowledgment attached to the trust deed was as follows:

"On this 22 day of June , in the year 1973, before me Ena Horman , a notary public in and for said State of Idaho, personally appeared ____________ known to me (or proved to me on the oath of Bruce Christiansen ) to be the person ____ whose name ______ subscribed to the within instrument and acknowledged to me that he executed the same.

"IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.

Ena Horman

Notary Public for Idaho,

Residing at Rigby, Ida

My commission expires April 75"

(The blanks which were filled in were in the handwriting of the Notary Public.)

Idaho has generally...