Source: https://www.beiramee.com/blg-blog-post/tag/Recording+Act
Timestamp: 2019-04-25 09:44:57+00:00

Document:
In Deutsche Bank National Trust Company v. Arrington, a priority dispute concerning real property, the Supreme Court of Virginia held that the after-acquired property statute, which validated prior conveyances where the grantor subsequently obtains an interest in property, “only applies between the parties to a deed and does not affect the rights of third parties or influence the relative priority of their interests.” Op. at 12. The Court further held that a bank whose deed of trust was recorded first, but was made by a grantor outside the chain of title, was not “duly admitted to record” and therefore was not entitled to priority against lien creditors.
In Arrington, the Court considered a priority dispute between a Bank’s deed of trust, and a subsequently recorded deed of trust in favor of the borrower’s former spouse (Wife) to secure payments as part of a contempt order. Specifically, a divorce decree provided that certain property held by the couple would be conveyed solely to Husband, and that Husband would make several payments over time to Wife for ten years. Following the entry of this divorce decree, in 2004, Wife conveyed her interest by deed of gift to Husband, which was recorded in the land records.
The following year, in 2005, Husband conveyed the Property to Third Party by general warranty deed, which was also recorded in the land records. Despite such conveyance, which had divested Husband of record title, in 2006, Husband executed a deed of trust in favor of Bank, which was also recorded in the land records.
Thereafter, in 2009, because he had fallen behind in his payments to Wife as provided in the divorce decree, to purge his contempt, the court required Husband to execute a deed of trust in favor of Wife (“Wife’s Deed of Trust”), which was recorded in the land records to secure repayment of amounts referenced in the divorce decree.
Prior to Wife’s recording her deed of trust, Third-Party executed a general warranty deed re-conveying the property back to Husband, which was recorded in the land records. Immediately thereafter, Wife’s Deed of Trust was recorded, together with a copy of the divorce decree and contempt order.
Bank filed a complaint seeking a declaration that the Bank Deed of Trust was a valid first priority lien on the Property. In response, Wife filed an answer requesting a declaration that Wife’s Deed of Trust was a valid first priority lien. Upon cross-motions for summary judgment, the trial court held that Wife’s Deed of Trust enjoyed priority, because when she recorded her deed of trust, Husband was the record owner of the property, whereas when the Bank recorded its deed of trust, Third Party was the record owner of the property. The trial court also held that the after-acquired property statute, Virginia Code § 55-52, could not elevate the Bank Deed of Trust in priority over Wife’s Deed of Trust. On appeal, the Supreme Court of Virginia affirmed.
When a deed purports to convey property, real or personal, describing it with reasonable certainty, which the grantor does not own at the time of the execution of the deed, but subsequently acquires, such deed shall, as between the parties thereto, have the same effect as if the title which the grantor subsequently acquires were vested in him at the time of the execution of such deed and thereby conveyed.
Determining that the statute applied not only to deeds, but also to deeds of trust, see Op. at 7, the Court explained, “[r]ead in its entirety, Code § 55-52 provides that when a grantor purports to convey property — without holding title — to a grantee, the grantor cannot thereafter deny that title has actually passed to the grantee. . . . Code § 55-52 governs the rights of a grantee vis-à-vis the grantor. It does not purport to affect the deeds of third parties, in this instance [Wife], or influence the relative priority of their interests.” Op. at 5-6.
Every (i) such contract in writing, (ii) deed conveying any such estate or term, (iii) deed of gift, or deed of trust, or mortgage conveying real estate . . . shall be void as to all purchasers for valuable consideration without notice not parties thereto and lien creditors, until and except from the time it is duly admitted to record in the county or city wherein the property embraced in such contract, deed, or bill of sale may be.
Id. Under the Recording Act, the Court explained, the “[Bank] Deed of Trust does not impair [Wife’s] priority if she is either (1) a purchaser for valuable consideration without notice or (2) a lien creditor, and the [Bank] Deed of Trust was not ‘duly admitted to record’ before she qualified as either. If she is a lien creditor and the [Bank] Deed of Trust has not been ‘duly admitted to record,’ then it is irrelevant whether she had notice of Bank's interest.” Op. at 8-9.
After easily determining Wife to be a lien creditor under her deed of trust, see Op. at 10-11, the Court determined that the Bank Deed of Trust was void as to Wife, because it was not “duly admitted to record” as it was recorded prior to Husband holding record title. Op. at 12. “Because the [Bank] Deed of Trust was not properly recorded in the chain of title, it was not ‘duly admitted to record’ even though it was recorded before [Wife] acquired her interest. Finally, because [Wife] is a lien creditor, whether she had actual or constructive notice of the [Bank] Deed of Trust is irrelevant. See Code § 55-96(A)(1). Therefore, [Wife] qualifies as a lien creditor under Code § 55-96(A)(1), and as a result, the [Wife] Deed of Trust has priority over the [Bank] Deed of Trust.” Id.
Accordingly, the Supreme Court affirmed, concluding that the Wife’s deed of trust was entitled to priority.

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