Opinion ID: 2805594
Heading Depth: 2
Heading Rank: 3

Heading: The Priority of the Deeds of Trust

Text: The Virginia recording act, Code § 55-96, governs issues of priority. The statute provides: 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. Accordingly, the Deutsche Bank Deed of Trust does not impair Arrington's priority if she is either (1) a purchaser for valuable consideration without notice or (2) a lien creditor, and the Deutsche Bank Deed of Trust was not duly admitted to record before she qualified as either. If she is a lien 8 creditor and the Deutsche Bank Deed of Trust has not been duly admitted to record, then it is irrelevant whether she had notice of Deutsche Bank's interest. See Neff v. Newman, 150 Va. 203, 211, 142 S.E. 389, 391 (1928) (discussing statutory predecessors to Code § 55-96); see also Cavalier Serv. Corp. v. Wise, 645 F. Supp. 31, 36 (E.D. Va. 1986). Deutsche Bank argues that Arrington is not a lien creditor because her deed of trust was executed to purge a contempt order, which it contends is not a judgment. Further, Deutsche Bank contends that that even if Arrington did obtain a judgment, she did not record the judgment on the judgment lien docket of Bedford County. 5 We disagree. First, the essence of a mortgage or deed of trust is that it creates a lien on property to secure a debt. Interstate R.R. Co. v. Roberts, 127 Va. 688, 692, 105 S.E. 463, 464 (1920); see High Knob Assocs. v. Douglas, 249 Va. 478, 484 n.4, 457 S.E.2d 349, 352 n.4 (1995) (A deed of trust merely creates a lien on property to secure a debt.). Although the Code does 5 In its first assignment of error, Deutsche Bank argues that the circuit court failed to determine whether Arrington was a purchaser for valuable consideration without notice or a lien creditor. Although the final order entered by the circuit court did not use those terms, it did recite that Arrington had establish[ed] a lien against the Property. Regardless, the circuit court's failure to explicitly rule on the question is not dispositive. As explained below, Arrington is a lien creditor for purposes of Code § 55-96(A), and the Deutsche Bank Deed of Trust is void against her as a lien creditor. 9 not define lien creditor for purposes of Code § 55-96(A), the term is not ambiguous. See Black's Law Dictionary, supra, at 450 (defining lien creditor as [a] creditor whose claim is secured by a lien on the debtor's property; specif., someone who is (1) a creditor that has acquired a lien by attachment, levy, or the like . . . .). To rule that Arrington is not a lien creditor would require us to ignore the fundamental nature of a deed of trust and the plain meaning of lien creditor. Moreover, Arrington is a lien creditor because she obtained a judgment and subsequently obtained a lien against the Property to secure the benefit of her judgment. Code § 8.01-426 provides that a decree or order requiring the payment of money, shall have the effect of a judgment . . . and be embraced by the word 'judgment' where used in this chapter or in Chapters 18, 19, or 20 of this title or in Title 43. The November 17, 2004 final decree of divorce, which ratified and incorporated the separation and property settlement agreement, and the December 4, 2008 order, which ordered Plucky to make certain payments for the benefit of Arrington, fit this statutory definition of judgment. Therefore, Arrington is a judgment creditor. See Code § 8.01-427 (The persons entitled to the benefit of any decree or order requiring the payment of money shall be deemed judgment creditors.). 10 Ordinarily a judgment does not become a lien on real estate until such judgment is recorded on the judgment lien docket of the clerk's office of the county or city where such land is situated. Code § 8.01-458; see Matney v. Combs, 171 Va. 244, 250, 198 S.E. 469, 472 (1938). However, in the present case, the circuit court awarded Arrington a deed of trust to secure the previous judgments, and Arrington recorded her deed of trust in the land records of Bedford County, thereby obviating the need to record the judgments on the judgment lien docket. As explained above, her deed of trust is a lien on the Property. See Interstate R.R. Co., 127 Va. at 692, 105 S.E. at 464. When Riemenschneider conveyed the Property to Plucky by general warranty deed on July 6, 2009, Code § 55-52 provided that the Arrington Deed of Trust had the same effect as though Plucky held legal title at the time he executed the Arrington Deed of Trust on March 19, 2009. At that moment, Arrington became a lien creditor. The remaining question is whether the Deutsche Bank Deed of Trust was duly admitted to record before Arrington qualified as a lien creditor. The word duly means [i]n a proper manner; in accordance with legal requirements. Black's Law Dictionary, supra, at 610; see also Webster's Third New International Dictionary 700 (1993) (defining duly as in a due manner, time, or degree: as is right and fitting: properly, 11 regularly, sufficiently). The Deutsche Bank Deed of Trust was recorded before Plucky acquired legal title of record; therefore, it is outside Arrington's chain of title. See Code § 55-105. Because the Deutsche 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 Arrington acquired her interest. Finally, because Arrington is a lien creditor, whether she had actual or constructive notice of the Deutsche Bank Deed of Trust is irrelevant. See Code § 5596(A)(1). Therefore, Arrington qualifies as a lien creditor under Code § 55-96(A)(1), and as a result, the Arrington Deed of Trust has priority over the Deutsche Bank Deed of Trust. 6