Opinion ID: 1460423
Heading Depth: 2
Heading Rank: 2

Heading: Aurora

Text: Aurora first challenges the district court's ruling that the property was subject to forfeiture. Aurora claims that the lis pendens notice, which referred only to Jeffrey Grossman's interest in the property, could not affect the interest of Bette Grossman, the record owner. Alternatively, Aurora claims that because Jeffrey Grossman had no recorded interest, he had no interest in the house that could be forfeited. We disagree. The interests subject to forfeiture encompass all the fruits of a defendant's crimes, including assets held in the name of third parties. 21 U.S.C. § 853(c). Jeffrey Grossman admitted that funds from his illegal activity funded the construction of the house and agreed that it was subject to forfeiture. Lastly, Aurora asserts that the government's lis pendens was ineffective constructive notice because it was filed under Jeffrey Grossman's name, outside the chain of title. Further, Aurora claims that because Van Buren County has no tract index, the government's lis pendens could not be discovered by a prudent title search. The government counters that a recorded interest is sufficient constructive notice. Because it filed its lis pendens in the book of levies first, the government claims that it has priority to the property regardless of how the filing was indexed. We must determine whether the government's lis pendens served as constructive notice under Michigan law. A lis pendens is a public notification that warn[s] all persons that certain property is the subject matter of litigation, and that any interests acquired during the pendency of the suit are subject to its outcome. Black's Law Dictionary (8th ed.). The effect of a lis pendens is to give notice to interested parties that the property is subject to a lawsuit. See Continental Paper & Supply Co. v. City of Detroit, 451 Mich. 162, 545 N.W.2d 657, 662 (Mich. 1996). However, to give notice to interested parties, a lis pendens must be recorded in accordance with Michigan law. Mich. Comp. Laws. § 565.25 sets forth Michigan's race-notice statute, which establishes that recorded instruments generally serve as constructive notice: (1) In the entry book of deeds, the register shall enter all deeds of conveyance absolute in their terms, and not intended as mortgages or securities, and all copies left as cautions. In the entry book of mortgages the register shall enter all mortgages and other deeds intended as securities, and all assignments of any mortgages or securities. In the entry book of levies the register shall enter all levies, attachments, liens, notices of lis pendens, sheriffs' certificates of sale, United States marshals' certificates of sale, other instruments of encumbrances, and documentation required under subsection (2), noting in the books, the day, hour, and minute of receipt, and other particulars, in the appropriate columns in the order in which the instruments are respectively received. . . . (4) The instrument shall be considered as recorded at the time so noted and shall be notice to all persons except the recorded landowner subject to subsection (2), of the liens, rights, and interests acquired by or involved in the proceedings. All subsequent owners or encumbrances shall take subject to the perfected liens, rights, or interests. Mich. Comp. Laws. § 565.28 requires each party named in an instrument accepted for recording to also be entered into an alphabetical grantor-grantee index: Each register of deeds shall keep a proper general index to each set of books in which he or she shall enter alphabetically the name of each party to each instrument recorded by the register of deeds, with reference to the book and page where the instrument is recorded. . . . Finally, Mich. Comp. Laws. § 565.29 summarizes the effect of these Michigan recording statutes by stating that recordings not performed in accord with the provisions of Chapter 565 are ineffective against subsequent purchasers in good faith and for a valuable consideration: Every conveyance 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 be first duly recorded. The fact that such first recorded conveyance is in the form or contains the terms of a deed of quit-claim and release shall not affect the question of good faith of such subsequent purchaser, or be of itself notice to him of any unrecorded conveyance of the same real estate or any part thereof. The government argues that the chain of title is irrelevant, relying heavily on a negative inference created in Graves v. Am. Acceptance Mortg. Corp., 469 Mich. 608, 677 N.W.2d 829 (2004). In Graves, amicus and one of the parties advanced arguments that a property interest must be recorded in the grantor-grantee index. The court declined to review this argument and there is no discussion of it in its opinion. The government also relies on Cipriano v. Tocco, 772 F.Supp. 344 (E.D.Mich.1991), Schepke v. Dept. of Nat. Resources, 186 Mich.App. 532, 464 N.W.2d 713 (1990), and Thomas v. Bd. of Supervisors, 214 Mich. 72, 182 N.W. 417 (1921). In each of these cases, a tract index was available as an additional method of title searching. In Van Buren County, however, the grantor-grantee index is the only searchable method. We construe the Michigan statutes together to mean that an interest must be recorded within the chain of title, in the grantor-grantee index, to have priority over a bona fide purchaser. The register of deeds is required to keep a grantor-grantee index, and under M.C.L. 565.29, it is only effective against a bona fide purchaser if it is in the grantor-grantee index. This position is also supported by Michigan case law. See Bristol v. Braidwood, 28 Mich. 191, 193 (Mich.1873) (prior mortgage might describe the same land, yet, if executed by some one having no connection with the real title, but outside of the chain of title, it could in no way defeat or affect the [later filed] mortgage or impair its security); Meacham v. Blaess, 141 Mich. 258, 104 N.W. 579, 580 (1905) (the record of deeds not in [the] chain of title [of a party] is no notice [to that party]); Schweiss v. Woodruff, 73 Mich. 473, 41 N.W. 511, 513 (1889) (The question . . . is whether the record contains sufficient [information] to apprise a party that some right or title is claimed or attempted to be conveyed in the premises, and, if it does, the purchaser is bound to use reasonable diligence to ascertain what it is that is so claimed or attempted to be conveyed.). Because the government's lis pendens was recorded outside the chain of title and because Van Buren County has no tract index, there was no way for Aurora to learn of the government's interest. The idea that the government's filing could be constructive notice defies logic. We find that the district court erred by dismissing Aurora's case.