Title: EILEEN V GRAVES V AMERICAN ACCEPTANCE MORTGAGE
Citation: N/A
Docket Number: 119977
State: Michigan
Issuer: Michigan Supreme Court
Date: October 22, 2002

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____________________________________________________________________________________________________________________________ 
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Michigan Supreme Court 
Lansing, Michigan 48909 
Chie f Justice 
Justices 
Maura D. Corrigan 
Michael F. Cavanagh 
Elizabeth A. Weaver 
Marilyn Kelly 
Clifford W. Taylor 
Robert P. Young, Jr. 
Opinion 
Stephen J. Markman 
FILED OCTOBER 22, 2002  
EILEEN V. GRAVES,  
Plaintiff-Appellant,  
v 
No. 119977  
AMERICAN ACCEPTANCE MORTGAGE  
CORPORATION,  
Defendant-Appellee,  
and  
BOULDER ESCROW, INC., a Nevada Corporation,  
Defendant/Counter and Cross-Plaintiff-Appellee.  
and  
STEVE DIAZ,  
Defendant/Counter and Cross-Defendant.  
PER CURIAM  
The issue before the Court is whether a purchase money  
mortgage has precedence over a prior recorded lien on the same  
property.
 The Court of Appeals has held that it does.  
Because this determination conflicts with the priorities  
established 
by 
our 
race-notice recording statutes,  MCL 
565.29  
and 565.25, we reverse.  
I  
In 1987, a married couple, Eileen Graves and Steve Diaz,  
purchased, by land contract, a residence at 72 West End in  
Waterford. In 1994, they were divorced and, pursuant to the  
judgment of divorce, Diaz was awarded their interest in the  
property.  Graves was to be reimbursed $7,504 by Diaz for  
certain arrearages traceable to child support, rental, and  
land contract payments for another property in Waterford. To  
provide security for the payments, Graves was given a lien on  
the property at 72 West End for $7,504 plus interest.  She  
recorded the lien on September 7, 1994.  Coincidentally, also  
on September 7, 1994, Diaz acquired a mortgage loan on the  
property from American Acceptance Mortgage Corporation.  He  
used the proceeds of the mortgage to pay off the land contract  
and thereby obtained title to the property.  American  
Acceptance recorded the mortgage on October 5, 1994. Before  
recording the mortgage, however, American Acceptance assigned  
its interest to Boulder Escrow, Inc., and Boulder recorded  
that assignment on April 13, 1995.  
On January 11, 1996, because Diaz had defaulted on his  
mortgage obligations, Boulder published a notice of a public  
auction of the property.  On January 12, 1996, Graves,  
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asserting a failure to perform as required under the divorce  
judgment, sued Diaz, American Acceptance, and Boulder to  
foreclose on her judgment lien. Boulder filed a cross claim  
against Diaz for defaulting on his mortgage obligation and a  
counterclaim against Graves asserting the priority of its  
mortgage interest over her judgment lien.  
Both 
plaintiff 
Graves 
and 
defendants 
Boulder 
and 
American  
Acceptance moved for summary disposition on the issue of the  
priority of the mortgage.  The circuit court ruled for Graves,  
holding 
that 
plaintiff’s 
first-recorded 
lien 
was  
constructively known to defendants and, thus, under MCL  
565.29, the lien had priority over the subsequent mortgage.  
The Court of Appeals reversed this ruling, holding that,  
despite the language governing the priority of recorded real  
estate conveyances in MCL 565.29 and MCL 565.25, under the  
authority of Fecteau v Fries, 253 Mich 51; 234 NW 113 (1931),  
the mortgage was a purchase money mortgage that had priority  
over all other liens or interests, even those that were  
recorded previously. 246 Mich App 1; 630 NW2d 383 (2001).  
II  
This appeal involves consideration of a trial court’s  
ruling on a motion for summary disposition, which is reviewed  
de novo on appeal.  Spiek v Dep't of Transportation, 456 Mich  
331, 337; 572 NW2d 201 (1998).  The specific question we  
3  
 
 
  
review, whether a purchase money mortgage takes precedence  
over a previously recorded lien, presents an issue of law that  
is reviewed de novo. Cardinal Mooney High Sch v Michigan High  
Sch Athletic Ass’n, 437 Mich 75, 80; 467 NW2d 21 (1991).  
Determination 
of 
this 
question 
requires 
statutory  
interpretation, a matter that likewise is subject to de novo  
review. 
Smith v Globe Life Ins Co, 460 Mich 446, 458; 597  
NW2d 28 (1999).  
When interpreting statutes, our obligation is to  
determine the legislative intent by examining the words used  
by the Legislature. 
Where the statute is clear and  
unambiguous, “the statute speaks for itself,” and there is no  
room for judicial construction.  Massey v Mandell, 462 Mich  
375, 379-380; 614 NW2d 70 (2000).  
III  
The prioritization of encumbrances on property in  
Michigan is governed by statute.  MCL 565.25 provided in  
relevant part:  
[T]he record of such levies, attachments, 
notices, lis pendens, sheriffs’ certificates, 
marshals’ certificates, and the original papers 
required by statute to be recorded to perfect such 
levies, attachments, notices, lis pendens and  
certificates on record in the office of the  
register of deeds, shall be notice to all persons, 
of the liens, rights and interests acquired by or 
involved in such proceedings, and all subsequent  
owners or incumbrances shall take subject to such  
liens, rights or interests. [Emphasis supplied.]  
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MCL 565.29 states, in relevant part:  
Every conveyance[1] of real estate within the  
state hereafter made, which shall not be recorded  
as provided in this chapter, shall be void as 
against any subsequent purchaser in good faith and 
for a valuable consideration, of the same real  
estate or any portion thereof, whose conveyance 
shall first be duly recorded.  
The clear import of these statutes, described as “race­
notice” 
statutes, 
is 
that the first instrument concerning 
real  
estate to be recorded takes priority over later-recorded  
instruments of whatever sort.  Nowhere do these statutes  
exempt purchase money mortgages from the “first-in-time”  
recording priority.  
There is no dispute that plaintiff recorded her lien  
before the mortgage was recorded by American Acceptance.  
Under the clear terms of our “race-notice” statutes, this  
first-recorded instrument has priority over the subsequently  
recorded instruments regardless of the nature of the later  
encumbrance.  
1 
 Both the land contract and plaintiff’s lien on that 
contract are conveyances as that term is defined in MCL 
565.35:  
The term “conveyance” as used in this chapter, 
shall be construed to embrace every instrument in 
writing, by which any estate or interest in real 
estate is created, aliened, mortgaged or assigned; 
or by which the title to any real estate may be 
affected in law or equity, except wills, leases for 
a term not exceeding 3 years, and executory 
contracts for the sale or purchase of lands.  
5  
 
However, 
defendants 
contend, 
and the Court of Appeals 
has  
agreed, that the later-recorded instrument was a purchase  
money mortgage and, as such, must be given priority over all  
other encumbrances—even those that were previously recorded.  
This argument is predicated not on the statute, but on a  
reading of our case law—in particular, Fecteau, supra.  This  
reliance on Fecteau, rather than on the statute, is not  
justified.  
Fecteau 
involved 
a 
priority 
dispute 
between 
two 
mortgages  
given by the defendant on the same property.  The first  
mortgage was given before the defendant had title to the  
property in order to obtain the down payment on the property  
from a third party.  The second mortgage was a purchase money  
mortgage given to the seller to secure payment of the balance  
of the purchase price.  Although the first mortgage was  
recorded before the purchase money mortgage (by twenty  
minutes), this Court held that the purchase money mortgage had  
priority over the first mortgage “on account of its being a  
part of one and the same transaction by which seizin was  
acquired by the mortgagor.” Id. at 55.  
The Fecteau Court concluded, in part, that it did not  
have to consider the effect of the recording statutes because  
there was actual knowledge of the execution of encumbrances by  
all who could have relied for a defense upon the recording  
6  
 
 
 
 
 
statutes.
 
Thus 
the 
Court 
considered 
extrastatutory  
authorities such as decisions by foreign courts, ALR  
discussions, and United States Supreme Court case law to reach  
its conclusion.  
Regardless of the merits of the policy  
advanced by the authorities cited in Fecteau, because we do  
not have a factual situation that implicates actual knowledge  
defenses to lack of recording, we must rely on the recording  
statutes. Thus, we are not bound by the Fecteau analysis.  
In sum, our Legislature has decided to afford preference  
to the first-in-time recorded encumbrance without giving any  
special preference to purchase money mortgages.  It is our  
responsibility to enforce that legislative policy decision in  
accordance with the statute’s plain language.  Lesner v Liquid  
Disposal, Inc, 466 Mich 95, 105; 643 NW2d 553 (2002).  
Accordingly, we conclude that under the dispositive  
language of the statute, plaintiff’s first-recorded lien on  
the 
land 
contract 
took priority over the subsequently 
recorded  
purchase money mortgage.  We reverse the decision of the Court  
of Appeals and remand this case to the trial court for  
reinstatement of the order granting summary disposition to  
plaintiff.  
CORRIGAN, C.J., and CAVANAGH, WEAVER, 
KELLY, TAYLOR, 
YOUNG, 
and  
MARKMAN, JJ., concurred.  
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