Opinion ID: 1974823
Heading Depth: 2
Heading Rank: 1

Heading: the barnacle mortgage

Text: We must decide whether the mortgage, if defective, although recorded, affords constructive notice to a bona fide purchaser. The general purpose of land-recording statutes is to provide a public record of transactions affecting title to land. When dealing with priority problems, courts must decide whether the emphasis of their decisions should be placed on protecting those who warrant protection, such as a purchaser without notice, or in punishing those who fail to record. Strict adherence to either approach may result in an overly rigid and unforgiving body of applicable law. The definition of constructive notice is not one on which all authorities agree. See 5 H. Tiffany, The Law of Real Property, § 1284 at 50 (B. Jones ed. 1939) (noting that the cases and textbooks are absolutely lacking in harmony). Constructive notice has been interpreted as both record notice and all notice that is inferred as a matter of law. Because we are analyzing notice derived from the record, constructive notice, as applied in title-priority questions, is notice of all claims which are revealed by the record regardless of whether or not [the purchaser] ever looks at the record or ever sees the information contained therein. In other words, notice of all properly recorded claims is inferred, as a matter of law. Indeed, a better label for this type of notice would be `record notice' or, more specifically, `notice inferred from the record.' [Such an inference] is absolutely necessary for the proper operation of the recording system. Without it a subsequent purchaser could, quite intentionally, avoid any inspection of the record and claim bona fide purchaser status because he or she had not otherwise personally received actual notice of the claim. If such a principle were allowed to exist, there would be no purpose in enacting a statute designed to give notice of land transactions to the public. 6A Powell, The Law of Real Property, ¶ 905[1] at 82-40,41 (1991). General Laws 1956 (1984 Reenactment) § 34-13-2 provides in part: Recording as constructive notice.  Such record or filing shall be constructive notice to all persons of the contents of such instruments   . Section 34-13-2 by its terms gives the broadest possible effect to constructive notice   . Speedy Muffler King, Inc. v. Flanders, 480 A.2d 413, 415 n. 1 (R.I. 1984). The purpose of    constructive notice is to bind subsequent purchasers and all other affected parties by restrictions that are clearly set forth in prior conveyances or other instruments appropriately recorded. Id. at 415. In analyzing the meaning of appropriately or properly ( see Powell quoted above) recorded, we must review the applicable statutes. General Laws 1956 (1984 Reenactment) § 34-11-1 provides that [e]very conveyance of lands    by way of mortgage    shall be void unless made in writing duly signed, acknowledged as hereinafter provided, delivered, and recorded    Provided, however, That the same, if delivered, as between the parties    or those having notice thereof, shall be valid and binding though not acknowledged or recorded. (Emphasis added.) General Laws 1956 (1984 Reenactment) § 34-12-1 provides in part that [a]cknowledgment of any instrument    shall be made by all the parties executing the instrument   . The trustee contends that because the mortgage lacks Lapides's signature and the appropriate acknowledgment of the signature, the mortgage is defective and cannot afford constructive notice to a subsequent purchaser. Because this is an issue of first impression, it is necessary to review the rulings of other jurisdictions in this area. It appears that a clear majority of jurisdictions hold that when an instrument is defective because it lacks a signature, because it is not signed by the appropriate number of witnesses, or because it is not properly acknowledged, although recorded, the instrument does not impart constructive notice. Connecticut National Bank v. Lorenzato, 221 Conn. 77, 81, 602 A.2d 959, 961 (1992) (an imperfectly executed instrument is a nullity and is, therefore, incapable of giving constructive notice[,] id. at 82, 602 A.2d at 962); see also In re Ryan, 851 F.2d 502 (1st Cir.1988) (reviewing cases from thirty-four jurisdictions and concluding that as a general rule instruments not properly acknowledged do not provide constructive notice). Jurisdictions have held that when the defect is cured by an attached rider to the recorded instrument, the instrument does impart constructive notice. Connecticut National Bank v. Lorenzato, 221 Conn. 77, 602 A.2d 959 (1992); Tri-County Produce Distributors, Inc. v. Northeast Production Credit Association, 160 So.2d 46 (Fla. 1963). In In re Sandy Ridge Oil Co., 510 N.E.2d 667 (Ind. 1987), the court recognized that recorded, defective instruments do not afford constructive notice but held that an instrument that lacked the signature of the drafter did afford constructive notice. The court concluded that the absence of the drafter's signature, although contrary to an Indiana statute, bore no relationship to the conveyance and thus would not be subject to the majority rule. See also Bown and Sons v. Honabarger, 171 Ohio St. 247, 168 N.E.2d 880 (1960). It is necessary to point out that our corrective statute, § 34-11-36, would not be in issue because it is invoked after a period of ten years, and in this case only five years have passed since the recording of the instrument. Our research has unearthed a line of cases that we find enlightening. `Where an instrument is executed by several parties, the acknowledgment by one is, in the absence of a contrary provision of the statute, sufficient as to its validity and recordability as to him.'    Where a real estate mortgage is acknowledged by some mortgagors, but not all, the mortgage is entitled to be recorded and upon recording is constructive notice of the interest of those persons who acknowledged the instrument, and the priorities that are attendant therewith. Prudential Insurance Co. of America v. Holliday, 191 Neb. 144, 146, 214 N.W.2d 273, 275 (1974); see also Keese v. Beardsley, 190 Cal. 465, 213 P. 500 (1923); Bell v. Sage, 60 Cal. App. 149, 212 P. 404 (1922); People ex rel. Oaklawn Corp. v. Donegan, 226 N.Y. 84, 123 N.E. 71 (1919); Rork v. Shields, 16 Tex.Civ.App. 640, 42 S.W. 1032 (1897). We find this reasoning to be quite persuasive. When a mortgage is executed by several parties, proper execution by at least one of the parties would evidence that party's interest in the property. The recorded instrument would not be wholly defective as one of the parties would meet the requirements for a valid execution. This would impart notice of an interest in the property. [The statute] might be construed as requiring all persons executing an instrument to acknowledge it, but the provisions concerning the recording of instruments must be construed in the light of their purpose, that is, to give notice to subsequent claimants of the acts of prior owners, alienating or incumbering the title. An acknowledged instrument carries with it the proof of its due execution by the person who so acknowledges it. Keese, 190 Cal. at 472, 213 P. at 502. In the case at bar it should be noted that Barnacle executed and acknowledged the mortgage deed. Through inadvertence Lapides did not sign the mortgage instrument, but according to the tenor of the notary public's form of acknowledgment, both Barnacle and Lapides appeared before the notary, were known to him, and acknowledged said instrument to be their free act and deed. Thus, we have one party who executed the instrument acknowledging it and the other party purporting to acknowledge it but having failed to sign. This would seem to meet the requirement of giving constructive notice to one who searched title (or one who should have searched the title) that the named mortgagee had a significant interest in this property. We are well aware of the majority rule and have reviewed many cases expressing the belief that a defectively executed instrument does not impart constructive notice. A well-beaten path, although more traveled, is not necessarily the correct or best reasoned one. We are of the opinion that those courts that have rushed into a determination that an instrument not executed by all parties named therein is a nullity have created a forfeiture for no reasonable or necessary purpose. Indeed, the Supreme Court of Indiana has commented upon this rule both critically and persuasively. The thrust of the argument is that Indiana Courts have for 135 years ruled that documents which were not entitled to be recorded do not constitute constructive notice. The rationale for this rule remains unexplained today, just as it was in 1853. Judges are often called upon to extinguish the substantial property rights of a citizen. Doing so on the basis of a rule for which there appears no basis is especially difficult. In re Sandy Ridge Oil Co., 510 N.E.2d at 671. The rule that a recorded defective instrument does not afford constructive notice has long been questioned. Id. at 670. If we were to adopt the majority view, a disturbing situation could arise. If there is a valid recording, a failure to search the record does not protect the prospective bona fide purchaser. However, following the majority view, if there is a defectively executed instrument recorded in the proper chain of title, failure to search the record would result in protection whereas actual discovery of the instrument would result in a duty to inquire. Adopting the majority view would result in rewarding a failure to search the chain of title. We would thus be protecting a party that failed to protect itself, most probably resulting in an unfair and an unjust windfall. What legal maxim would be served in penalizing those who search while rewarding those who do not? We find none of any value. The overriding consideration should be that the instrument would give the purchaser a `definite and tangible clue, which, if diligently followed up, would ordinarily bring the truth of the matter to light.' C. Johnson, Purpose and Scope of Recording Statutes, 47 Iowa L.Rev. 231, 241 n. 57 (1962). We conclude that a technical deficiency that would be subject to reformation in equity ought not to create a windfall for junior encumbrancers or those who would become bona fide purchasers. A reasonable title searcher, when confronted with this instrument along with its purported acknowledgment, would be placed upon notice to inquire further concerning the validity of the instrument. Such inquiry would establish that the mortgagee had a valid interest in law that could be further perfected in equity. To suggest that such an interest is a nullity because of the missing signature is to exalt form over substance. The Barnacle instrument was recorded in the proper chain of title and therefore would be readily discoverable by a title search. This is not an instance wherein the instrument was misfiled and could not be discovered, nor was the instrument wholly void of a signature or acknowledgment. The instrument would most assuredly give a purchaser a definite clue about an interest in the property. Our decision is restricted to a question of notice; and if a prospective bona fide purchaser had searched this title, he or she would have discovered this instrument. This discovery would have put the purchaser on notice of a possible claim. Limited to the particular facts of this case, we conclude that this instrument, filed in the land evidence records, would impart constructive notice to a subsequent purchaser. We find no sound reasoning in allowing a title searcher to pass by this instrument and claim no knowledge of an interest in the property. Consequently, discovered or undiscovered, this instrument would destroy a purchaser's claim that he or she is bona fide. Therefore we answer the first certified question in the affirmative.