Frank v. Storer
308 Md. 194, 1986 Md. LEXIS 343, 517 A.2d 1098 (1986)
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Rule of Law:
A legal instrument that has been copied into the land records and assigned a liber and folio number is considered a recorded instrument and provides constructive notice, even if it is not indexed in the general alphabetical index, unless the legislature explicitly provides otherwise.
Facts:
- In July 1980, Hy Wayne and Marie Wayne (the Waynes) became holders of a promissory note from Lawrence E. Storer and Dottie L. Storer (the Storers), secured by a deed of trust on two lots in Montgomery County and one lot in Prince George's County.
- On December 30, 1980, the Storers, the trustees (Morton Frank and Edith C. Rollins), and the Waynes entered into a Modification Agreement to substitute a new property, the Waterford Lot in Prince George’s County, as security for the deed of trust.
- On January 28, 1981, the Modification Agreement was copied into the land records of Prince George’s County, stamped with a liber number (5366) and folio numbers (172-174), but was not indexed in the general alphabetical index.
- The original Modification Agreement was "red tagged" by the clerk’s office, indicating it had not been indexed due to missing a recording reference to the original deed of trust, and was returned to the submitting firm, Bell, Cornelius & Shore, who were assumed to be agents of the trustees and Waynes.
- On August 18, 1981, the Storers conveyed the Waterford Lot to Robert G. Glenn (Glenn).
- Glenn allegedly did not discover the existence of the Modification Agreement or the Waynes’ lien at the time of this property transfer.
Procedural Posture:
- On February 4, 1985, the trustees (Morton Frank and Edith C. Rollins) initiated foreclosure proceedings against the Waterford Lot in the Circuit Court for Prince George’s County.
- Robert G. Glenn moved to dismiss the foreclosure proceedings, arguing the Modification Agreement was not validly recorded.
- The Circuit Court for Prince George’s County granted Glenn's motion and dismissed the foreclosure, finding that the unindexed and "red tagged" instrument did not provide constructive notice to Glenn.
- The trustees (appellants) appealed the Circuit Court's decision to the Court of Special Appeals.
- The Court of Special Appeals affirmed the Circuit Court's judgment, holding that the grantee, having knowledge of the indexing defect, failed to correct it and thus could not claim constructive notice.
- The trustees (appellants) petitioned for certiorari to the Court of Appeals of Maryland.
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Issue:
Does a modification agreement that was copied into the land records and assigned a liber and folio number, but was not indexed and was returned to the submitting party due to a perceived deficiency, constitute a "recorded" instrument that provides constructive notice to subsequent purchasers under Maryland law?
Opinions:
Majority - Rodowsky, Judge
Yes, a modification agreement that has been copied into the land records and assigned a liber and folio number, but was not indexed, constitutes a "recorded" instrument and provides constructive notice to subsequent purchasers under Maryland law. The Court reaffirmed its prior holding in Standard Finance Co. v. Little, which established that indexing is not an essential part of the "recording" process itself under Maryland statutes. The Court emphasized that while indexing is important for discoverability, the legislature has not made it a prerequisite for an instrument to be considered recorded and effective. Despite numerous amendments to recordation statutes since Standard, the General Assembly has not reallocated the risk of a clerk's failure to index from the subsequent purchaser to the party presenting the instrument. The Court found the lower courts' distinction—that the grantee's knowledge of the indexing defect altered the outcome—to be unsupported by Standard and the statutory framework. The Court also addressed other alleged deficiencies, such as the absence of attorney certification or election district reference, stating that these provisions authorize the clerk to refuse recording, but if the clerk does record the instrument, its validity and constructive notice effect are not undermined, especially considering the existence of curative statutes for other formal defects.
Analysis:
This case strongly reinforces the principle of legislative supremacy in defining recordation requirements, particularly in real property law where stability and predictability are paramount. By upholding Standard Finance Co. v. Little, the Court of Appeals clearly places the risk of unindexed, but copied, instruments on subsequent purchasers rather than the initial recording party. This decision underscores the importance for purchasers to conduct thorough due diligence beyond just index searches, potentially requiring examination of the land record volumes themselves or obtaining title insurance. It also signals that, absent explicit legislative action, courts will defer to established interpretations of recording statutes, even if modern indexing practices make unindexed records difficult to discover.
