Case Name: AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION v. ORENSTEIN
Court: Michigan Court of Appeals
Jurisdiction: Michigan
Decision Date: 1978-02-07
Citations: 81 Mich. App. 249
Docket Number: Docket No. 77-2223
Parties: AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION v ORENSTEIN
Judges: Before: T. M. Burns, P. J., and R. B. Burns and W. R. Brown, JJ.
Reporter: Michigan appeals reports; cases decided in the Michigan Court of Appeals.
Volume: 81
Pages: 249–259

Head Matter:
AMERICAN FEDERAL SAVINGS AND LOAN ASSOCIATION v ORENSTEIN
Opinion of the Court
1. Vendor and Purchaser — Investigation of Title — Duty of Purchaser — Inquiry Notice — Due Diligence.
A purchaser of real estate has the duty to investigate the title of his vendor and to take notice of any adverse rights or equities of third parties which he has the means of discovering and as to which he is put on inquiry; if he fails to inquire with due diligence he is chargeable, as a matter' of law, with notice of the facts which the inquiry would have disclosed.
2. Mortgages — Priorities—Subordination Clause — Ambiguities— Inquiry Notice — Summary Judgment.
Summary judgment granting a plaintiff mortgagee priority over the mortgage of a defendant was improper where the judgment was based upon a subordination clause in the defendant’s mortgage which was so obviously ambiguous that it should have put plaintiff on inquiry notice of a third-party interest in the realty.
Concurrence in Part, Dissent in Part by W. R. Brown, J.
3. Judgment — Final Judgment — Prior Orders — Appeal by Right— Court Rules.
An otherwise nonñnal judgment is considered to be ñnal only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment; upon entry of a ñnal judgment all prior nonñnal rulings and orders are incorporated into the final judgment and are ñnalized for purposes of appeal and upon perfection of an appeal by right from a ñnal judgment a party may seek review of any prior ruling in the case affecting the 'party that would otherwise be only a nonñnal order (GCR 1963, 518.2).
References for Points in Headnotes
[1, 2, 5, 8] 55 Am Jur 2d, Mortgages §§ 324, 325, 1096-1099.
66 Am Jur 2d, Records and Recording Laws §§ 102, 104, 105.
[2, 5, 8] 55 Am Jur 2d, Mortgages §§ 343, 344.
46 Am Jur 2d, Judgments §§ 457, 675.
47 Am Jur 2d, Judgments § 926.
55 Am Jur 2d, Mortgages § 99.
55 Am Jur 2d, Mortgages §§ 328, 345.
55 Am Jur 2d, Mortgages § 175.
4. Mortgages — Discharge of Mortgage — Forged Instrument— Rights of Parties.
A forged document purporting to be a discharge of a mortgage and duly recorded as such does not affect the rights of one mortgagee over the rights of another mortgagee.
5. Property — Recording Statutes — Property Interests — Extrinsic Evidence.
One important purpose of the recording statutes is to impart certainty so that parties can rely on the public record of outstanding property interests; it is impermissible to resort to extrinsic evidence to determine what property interests are protected by recording, the constructive notice imparted by the record of an instrument being strictly limited to that which is set forth on its face.
6. Mortgages — Recording Statutes — Waiver of Priority — Constructive Notice — Statutes.
A recorded waiver of priority of a mortgage is constructive notice thereof to all persons dealing with the mortgage (MCLA 565.391; MSA 26.701).
7. Mortgages — Subordination Clause — Ambiguities—Construction.
An ambiguous subordination clause in a recorded mortgage should be construed against the party who drafted the clause.
8. Mortgages — -Defects in Title — Discharge of Mortgage — Inquiry Notice — Reliance on Record.
A party who has searched the record regarding a particular piece of property and in reliance on a discharge of mortgage contained therein has attained the status of a bona ñde mortgagee without notice of defects in the title should not be charged with inquiry notice as to a more subtle defect earlier in time; for purposes of inquiry notice, a mortgagee is fully entitled to rely on an apparently perfect legal title as shown by the records.
Appeal from Oakland, Robert L. Templin, J.
Submitted October 18, 1977, at Detroit.
(Docket No. 77-2223.)
Decided February 7, 1978.
Leave to appeal denied, 402 Mich 945.
Complaint by American Federal Savings and Loan Association against Charles Orenstéiñ and others for foreclosure Of a mortgage and fór a declaratory judgment that á mortgage held by Orenstein was a nullity. A partial summary judgment was entered declaring plaintiffs mortgage to be senior to defendant’s and a subsequent judgment of foreclosure was entered in favor of plaintiff. Defendant appeals.
Reversed and remanded.
Smith, Miró, Hirsch & Brody (by David M. Miro and Martin C. Weisman), for plaintiff.
Schlussel, Lifton, Simon, Rands, Kaufman & Lesinski (by T. John Lesinski and Joseph F. Galvin), for defendant.
Before: T. M. Burns, P. J., and R. B. Burns and W. R. Brown, JJ.
Circuit judge, sitting on the Court of Appeals by assignment.

Opinion:
R. B. Burns, J.
We concur in the opinion of Judge Brown, except as to his discussion and resolution of the substantive issue. The reader is referred to Judge Brown's opinion for the facts in the instant case.
The trial court granted summary judgment because it found the subordination clause unambiguously subordinated Orenstein's mortgage to that of plaintiff. However, each party on appeal has presented reasonable interpretations of the same clause which are at variance with each other. If the clause is interpreted, as plaintiff suggests, as subordinating Orenstein's mortgage not only to the interests of the New York State Teacher's Retirement System and the General Electric Pension Trust, but also to an unspecified, yet-to-be-incurred interest of $4,125,000, then one immedi ately encounters an obvious ambiguity. If Orenstein's mortgage is subordinate to three interests, why are only two numerals listed?
Judge Brown's argument that the ambiguity must be resolved against the drafter of the clause, Orenstein, rests on the premise that a title searcher is never chargeable with inquiry notice when an ambiguity is encountered. This is not the law.
"It is the duty of a purchaser of real estate to investigate the title of his vendor, and to take notice of any adverse rights or equities of third persons which he has the means of discovering, and as to which he is put on inquiry. If he makes all the inquiry which due diligence requires, and still fails to discover the outstanding right, he is excused, but, if he fails to use due diligence, he is chargeable, as a matter of law, with notice of the facts which the inquiry would have disclosed.
"The questions in such cases are: First, whether the facts were sufficient to put the party on inquiry; and, second, did he fail to exercise due diligence in making the inquiry?" Schweiss v Woodruff, 73 Mich 473, 477-478; 41 NW 511, 512-513 (1889). (Emphasis in original.)
Cases in which a title defect would prevent a diligent title searcher from discovering the deed or recognizing its applicability must be distinguished from those in which the deed would have been discovered and a possible error revealed. Schweiss v Woodruff, supra at 478-479; 41 NW at 513; see, e.g., Savidge v Seager, 175 Mich 47; 140 NW 951 (1913); Van Slyck v Skinner, 41 Mich 186; 1 NW 971 (1879). In Patterson v Miller, 249 Mich 89, 96; 227 NW 674, 677 (1929), the ambiguity contained in a subordination clause was so subtle that the Court indicated that a covenant would have had to have been read into the clause to give it the asserted meaning.
The ambiguity in the instant subordination clause was so obvious as to put a prudent person on inquiry notice. Whether plaintiff would have discovered that the Orenstein mortgage would be superior or inferior to its own is a fact which is in dispute. Summary judgment was therefore improper.
Reversed and remanded for trial.
T. M. Burns, P. J., concurred.