Waicker v. Banegura

CATHELL, Judge. Gary W. Waicker and Diane L. Waicker, appellants, appeal from a judgment of the Circuit Court for Baltimore County, in favor of Mystic Investments, Inc. (Mystic or Mystic Investments), appellee, finding that Mystic’s lien had priority over a misindexed lien of appellants. 1 Appellants present one issue: “Whether the judgment held by appellants Gary and Diane Waicker has priority over the judgments to which appellee Mystic Investments, Inc., have been subrogated.” We respond to appellants’ issue in the negative, and accordingly affirm the circuit court. I. Facts On or about April 28, 1998, appellants, Gary W. Waicker and Diane L. Waicker, sought to have a deficiency judgment they held from the Circuit Court for Baltimore City against appellees Fabio K. Banegura and Olive K. Banegura, as husband and wife, recorded in the Circuit Court for Baltimore County. When the Waickers’ judgment was indexed and recorded by the Clerk of the Baltimore County Circuit Court, it was misindexed under the name Baneguna rather than Banegura.

The Baltimore County Notice of Recordation, dated April 28,1993, was mailed to appellants and showed that the judgment had been indexed improperly. 2 This cause of action arose when appellants sought to enforce their judgment against the property, then owned by Fabio K. ⁴⁵⁷ Banegura, known as 6612 Loch Raven Boulevard, Baltimore County, Maryland, the property encumbered by Mystic’s Deed of Trust lien. 3 At the time the Waicker judgment was recorded (and misindexed) in Baltimore County, there was a preexisting deed of trust lien on the property in the principal amount of $52,699.01. This mortgage had been previously granted by both Mr. and Mrs. Banegura. Additionally, there were three judgment liens recorded in Baltimore County against Fabio Banegura, individually, that predated recordation of appellants’ judgment in Baltimore County. As of September, 1997, these judgments and their payoff balances were: (1) the Taylor judgment, dated May 14, 1985, in the sum of $3,600.00; (2) the Household Bank judgment, dated April 21, 1986, in the sum of $4,000.00; and (3) the O’Connor, Piper and Flynn judgment, dated November 21, 1986, in the sum of $700.00.

Because these three judgments were against Fabio Banegura individually, they were not liens against the property owned by Fabio and Olive Banegura as tenants by the entirety. On or about September 25, 1997, the Baneguras refinanced their property through Mystic Investments. As part of this planned refinancing, the Baneguras transferred the property to Fabio Banegura, individually, to be deeded immediately by deed of trust to Mystic. 4 During the process leading up to this simultaneous transaction, Mystic Investments conducted a ⁴⁵⁸ search for judgments entered against Fabio and Olive Bane-gura in Baltimore County. Because it had been indexed improperly and recorded under the name Baneguna, appellants’ judgment was not discovered during Mystic Investments’ search.

The Refinance Deed of Trust was in the principal sum of $92,000.00, of which $64,533.87 was used to satisfy the original mortgage lien on the property, and an additional $8,300.00 was used to satisfy the three aforementioned judgments. Believing that their judgment was superior to Mystic Investments’ Deed of Trust, appellants sought to enforce their judgment by execution and judicial sale of the property. Upon learning of appellants’ enforcement action against the property, Mystic Investments filed a Motion to Stay Proceeding and/or Release of Property From Levy pursuant to Maryland Rule 2-643(e). In its motion, Mystic asked the circuit court to enter an order declaring that it had a priority lien on the property to the extent of the prior first mortgage and the three additional judgments under the doctrine of equitable subrogation.

Mystic Investments further alleged that it was entitled to a priority lien because the Waicker judgment had been misindexed. 5 At the hearing on September 11, 1998, appellants argued that, even assuming arguendo that equitable subrogation applied, their judgment lien was senior to the judgments paid by Mystic Investments because only their judgment was against the Baneguras jointly and had attached when the Baneguras ⁴⁵⁹ owned the property as tenants by the entirety. Mystic argued, in relevant part: 6 THE COURT: In this case, you are suggesting there wasn’t even negligence, because the judgment was not indexed correctly, so even— MR. GILLISS [Mystic’s attorney]: Exactly. THE COURT: —so even exercising due diligence, your client could not have found it.

MR. GILLISS: That is correct. But even if there was negligence, it doesn’t make a difference. And later, Mystic argued: I think that the facts, themselves, call out for the court to accept that Mystic had no actual knowledge of that Waicker lien, because if they had, they would have paid it off, as they paid off the others, and there has been an explanation as to why it [the lien] wasn’t discovered[, i.e., the misindexing].

The Circuit Court for Baltimore County issued an order on September 28, 1998, granting Mystic Investments’ motion and giving Mystic a priority interest in the property. In its ruling, the trial court stated, in part: ⁴⁶⁰ Appellants submitted a Motion to Alter, Amend and/or Revise the Judgment, which was denied. ⁴⁵⁹ The fourth consideration concerns the lack of responsibility of Mystic to search the land records. Mystic did do a title search as indicated by the inclusion of a search report by Chicago Title Insurance Company dated 9/19/97. The reason the Waicker judgment was not found by its search is because the judgment was incorrectly filed under the name Baneguna, not Banegura.

Given that Mystic did perform an adequate title search that did not find the misfiled judgment, Mystic cannot be said to have failed in its responsibility to search the land records. ⁴⁶⁰ Appellants do not dispute that Mystic Investments is entitled to equitable subrogation to the extent of the deed of trust lien and the three judgments it paid off as part of the refinancing. The issue before the Court is whether the Circuit Court for Baltimore County erred in holding that Mystic Investments’ Deed of Trust lien has priority over appellants’ judgment lien because appellants’ judgment was misindexed under the name Baneguna rather than the name of the title owners as reflected in the land records of Baltimore County— Banegura — and therefore never attached to the property in Baltimore County titled in the land records to the Baneguras. We hold that generally, absent evidence of actual knowledge, when a judgment is indexed and recorded under a name different than the name of the title holder as reflected in the land records, 7 it fails to become a lien against that real property in respect to subsequent lien-holders or purchasers without actual knowledge. Notice will be found for judgments, which are indexed under incorrect or misspelled names only when the facts and circumstances are such that a party has actual knowledge that the judgment has been indexed under an incorrect or misspelled name or has actual knowledge that the debtor used or was known under the misnomer.

The Circuit Court for Baltimore County correctly ruled that Mystic Investments had a priority interest over appellants because appellants’ judgment was indexed improperly under the surname 8 Baneguna rather than Banegura and because they failed to present any evidence that Mystic actually knew ⁴⁶¹ the judgment was indexed under any name other than Bane-gura.

II

Analysis and Discussion The fundamental purpose of this present action is to determine the priority of judgment liens against a particular piece of real estate. Maryland Code (1974, 1998 RepLVol.), § ll-402(e) of the Courts & Judicial Proceedings Article is critical in making this determination: (c) Judgment of another court. — If indexed and recorded as prescribed by the Maryland Rules, a money judgment constitutes a lien on the judgment debtor’s interest in land located in a county other than the county in which the judgment was originally entered, except a lease from year to year or for a term not more than live years and not renewable. [Emphasis added.] The relevant provisions of the Maryland Rules are Rules 2-621(b) and 2-623(a). They state, respectively: (b) Other counties. Except as otherwise provided by law, a money judgment that is recorded and indexed pursuant to Rule 2-623(a) constitutes a lien from the date of recording in the amount of the judgment and post-judgment interest on the defendant’s interest in land located in the county of recording.

Md. Rule 2-621 (b). (a) Judgment of another court. Upon receiving a copy of a judgment of another court, certified or authenticated in accordance with these rules or statutes of this State, or of the United States, the clerk shall record and index the judgment if it was entered by ... (c) another circuit court of this State....

Md. Rule 2-623(a). 9 The primary goal of section ll-402(c), and Maryland Rules 2-621(b) and 2-623(a) is to provide clear- ⁴⁶³ cut rules for the indexing and recording of judgment liens. Although appellants had a deficiency judgment in Baltimore City against the Baneguras (or Banegunas), 10 it would not constitute a lien against real property titled to the Baneguras among the land records in Baltimore County unless filed and correctly indexed in Baltimore County. Such a requirement is not new in Maryland. “[A] judgment is not a lien on land in another county until a certified copy of the docket entries in the case taken from the court where the judgment was rendered shall be recorded.” Brunsman v. Crook, 130 Md. 661, 663 , 101 A. 1019, 1020 (1917) (quoting 2 Poe on Practice § 377 (3d ed.)). Only if appellants correctly indexed and recorded the judgment in the Circuit Court of Baltimore County under the name Banegura would their judgment rendered and entered in the Baltimore City Circuit Court normally become a lien on property titled to the Baneguras among the land records in Baltimore County. “It is the duty of a person offering an instrument for record to see that it is both properly recorded and properly indexed.” Commonwealth v. Roberts, 392 Pa. 572, 586 , 141 A.2d 393, 400 (1958); see In re 250 Bell Road, 479 Pa. 222 , 228 n. 3, 388 A.2d 297, 300, n. 3 (1978).

The system of indexing and recording judgment liens is designed, at least in part, to provide an organized and efficient method by which the general public can effectively determine whether there are money judgments that act as liens on a particular parcel of land. In the absence of actual knowledge, ⁴⁶⁴ indexing and recording give constructive notice of any and all liens that may affect real property. To promote this goal, judgment liens are indexed and recorded alphabetically by surname. If there is more than one judgment indexed under the same surname against different persons, then they are organized alphabetically by first name.

Additionally, if there is more than one judgment indexed under the same surname and first name against different persons, they are organized alphabetically by middle name. In other words, indexing and recording is done in basic alphabetical order. See Md.Code (1974, 1996 RepLVol.), § 3-302(a) of the Real Property Article (“The clerk of the circuit court ... shall make and maintain a full and complete general alphabetical index of every deed, and other instrument in a well-bound book in his office.” (Emphasis added.)). The indexing requirement of alphabetizing of names in judgment indexes is the foundation by which judgment liens are researched.

The reason is simple. If a judgment is not indexed in the proper fashion, i.e., in alphabetical order, a searcher may never find it. By looking at their plain and unambiguous language we interpret the coordinated workings of section 11-402 of the Courts & Judicial Proceedings Article and Maryland Rules 2-621(b) and 2-623(a), to mean that a money judgment constitutes a lien on the judgment debtor’s interest in real property titled in the land records of a particular county only if correctly indexed and recorded in the name of the owner of record of the property against which the lien is sought to be imposed. 11 See In re Humphrey, 165 B.R. 578, 580 (Bankr.D.Md.1993); Kroop & Kurland v. Lambros, 118 Md.App. 651, 664 , 703 A.2d 1287, 1293 (1998). This interpretation makes obvious sense because of the nature of the alphabetized recording system.

The key word here is “correctly”; if a party, or the clerk of a court, for whatever reason, indexes the ⁴⁶⁵ judgment under a name that is not identical to the name in which real property in the county is held of record, the general public will not be on constructive notice that a judgment lien exists against that particular piece of real estate. There is no designation of, or reference to, any requirement for a property description in the judgment lien index under the Maryland statutes or rules; therefore, correct indexing and recording of names is essential in the Maryland scheme of providing notice of possible liens against a person’s property and may play an integral part in a party’s decision to invest in, or allow credit on, a piece of real property. “[I]t is a well settled rule of law that a judgment is a general lien on all the real estate which the judgment debtor owns at its date, and that it attaches to all that he may thereafter acquire.. .. ” Ahern v. White, 39 Md. 409, 417 (1874). A money judgment entered in one county constitutes a lien on the judgment debtor’s interest in real property titled in his or her name in the land records of another county only if the names of the judgment debtors are indexed and recorded correctly in the other county. Thus, absent actual knowledge of the incorrect indexing by the subsequent party, a judgment indexed under an incorrect name or misnomer generally will not be enforceable as a lien against the property.

Moreover, a court’s ability to ascertain the existence of actual knowledge is limited to the evidence that is presented. We hold that a judgment indexed under an incorrect name of the judgment debtor is presumed to be insufficient to provide notice of a lien on real property titled in the land records under the correct name of the judgment debtor. This presumption will be rebutted only if the facts and circumstances indicate that a party, against whom the alleged prior lien is sought to be enforced, had actual knowledge of the misnomer. In the absence of any such evidence, such an incorrectly indexed judgment will not be accorded priority against innocent third persons.

In Messinger v. Eckenrode, 162 Md. 63 , 158 A. 357 (1932), Susanna Messinger conceded that she never conducted a ⁴⁶⁶ search of the judgment index, that the judgment was indexed under the correct surname and correct middle names of the judgment debtors (although not under the correct first name), and that she knew that the parties commonly went by their middle names under which the judgment was indexed. In other words, Messinger would have had actual knowledge that the indexing was wrong had she conducted a title examination. Under the facts of that case, we held that there was sufficient evidence presented that Messinger, because of her actual knowledge, would have found the judgment if a proper search of the judgment index had been conducted. Crucial to our interpretation was not only that no search was conducted, but that Messinger actually knew the property owners by the names under which the judgment was indexed: “If any one had inspected the index in the clerk’s office, he would have found the name ‘Heagy’ and the Christian names by which they were knoum to the appellant.... ” Id. at 69 , 158 A. at 359 (emphasis added).

In other words, a court may employ a subjective test to consider the independent knowledge of an involved party. Whether a party has actual knowledge that a judgment is indexed under an alternative spelling or incorrect name is the primary factor a court should consider in determining whether, had a title examination been conducted, the party would have found the specific judgment. If the party has actual knowledge that the judgment was indexed, or likely to be indexed, under an incorrect name, the party has a duty to search under that incorrect name because, due to the party’s actual knowledge, the party presumably would have discovered the misindexed judgment. In Messinger , Susanna Messinger was aware that J. Edward Heagy and Mary Edith Heagy went by the names Edward Heagy and Edith Heagy, under which the judgment was indexed; therefore, she had actual notice of the alternate names and would have known that the judgment constituted a lien had she conducted a title examination.

In the case at bar, there is absolutely no evidence of any actual knowledge on the ⁴⁶⁷ part of Mystic Investments. If a party has knowledge that a judgment debtor is known by more than one name, the party has the duty to examine, or cause to be examined, the records under all names known to them. If he or she has no such knowledge, their obligation in examining the judgment records is fulfilled by examining the indexes and records under the name of the title owner of the property as that name is reflected in the land records of the particular county. In Frederick Ward Associates, Inc. v. Venture Inc., 99 Md.App. 251 , 636 A.2d 496 (1994), the Court of Special Appeals dealt with a fact pattern similar to Messinger and the case sub judice.

In Frederick Ward, the Court of Special Appeals considered the effect misnomers in first and middle names had on the indexing and recording of judgment liens. That court held that a judgment indexed and recorded against the name “Chris Walker” did not constitute a lien against “John C. Walker.” The court reasoned: The sole function of a name is to identify the person whom it is intended to designate, and therefore all that is legally necessary in the docketing and indexing of judgments is that the defendant should be individuated with a degree of accuracy sufficient either to lead a reasonably careful searcher to conclude that he is the person who is the object of the search, or to suggest to the searcher the wisdom of inquiry to ascertain the fact. Where there is enough to put an ordinarily prudent person upon guard, inquiry becomes a duty. Id. at 257, 636 A.2d at 498 -99 (quoting Russeck v. Shapiro, 170 Pa.Super. 89, 92 , 84 A.2d 514, 515 (1951) (quoting Coral Gables, Inc. v. Kerl, 334 Pa. 441, 447 , 6 A.2d 275, 278 (1939))).

In Frederick Ward, the Court of Special Appeals noted that “appellant produced no evidence that appellee should have known, at the time the property was conveyed, that John C. Walker and Chris Walker were the same person.” Id. at 256, 636 A.2d at 498 . In the case before us, the court made a factual determination that the judgment against Chris Walker was not prop ⁴⁶⁸ erly indexed so as to provide notice to subsequent bona fide purchasers of property titled to John C. Walker. We cannot conclude that this determination was clearly erroneous. Rule 8-131(c).

Id. at 258 , 636 A.2d at 499 (some citations omitted); see Department of Pub. Assistance v. Reustle, 358 Pa. 111, 114-15 , 56 A.2d 221, 224 (1948); Coral Gables, 334 Pa. at 447 , 6 A.2d at 278 ; Susquebanc Lease Co. v. Lucchesi, 707 A.2d 540, 542 (Pa.Super.1998); Russeck, 170 Pa.Super. at 92 , 84 A.2d at 515 . Frederick Ward Associates had no indication that a judgment against John C. Walker could have been indexed under the name Chris Walker. While the Court of Special Appeals’ specific holding in Frederick Ward was couched in terms of lack of constructive notice, it was also clear that there was no actual knowledge of the misnomer; therefore, the judgment did not constitute a lien.

With our holding in the case sub judice, we limit the holding of Frederick Ward to require, when a judgment lien is misindexed, evidence of actual knowledge of alternate names, or actual knowledge of the misindexing itself by the party against whom the misindexed lien is asserted, in order for the misindexed judgment lien to take priority over subsequently recorded and correctly indexed liens, or to follow the property after transfer by the judgment debtor to a bona fide purchaser for value who does not have actual knowledge of the misindexed lien. No one concise rule can be established concerning the status of a misnomer in a judgment lien by looking to the caselaw of our sister states. As one court has said: “There are in the books many cases dealing with judgments against debtors whose names are entered in abbreviated or incorrect forms, but it is difficult, if not impossible, to deduce from them a simple rule which furnishes the key to a ready solution of each and every case.” Coral Gables, 334 Pa. at 444 , 6 A.2d at 277 . Our neighboring states of Pennsylvania and New Jersey offer insight into the problems of judgments improperly indexed under incorrect first names, with Pennsylvania appar ⁴⁶⁹ ently treating the issue differently depending upon the case.

In Jaczyszyn v. Paslawski, 147 Pa.Super. 97 , 24 A.2d 116 (1942), John Paslawski had a judgment against Nikolai Borys that was entered incorrectly in the judgment index under the name Mikola Borys. 12 Mrs. Jaczyszyn’s attorney searched the judgment index but found no record in favor of Mr. Paslawski against Nikolai Borys. The Pennsylvania Superior Court ruled in Mrs. Jaczyszyn’s favor, holding that the judgment indexed under Mikola Borys did not constitute constructive notice of a judgment against Nikolai Borys. The court reasoned: It was the duty of the plaintiff in the judgment, Mr. Paslawski, to see that [the name recorded in the judgment index] was correctly entered. There was no duty resting on Mrs. Jaczyszyn, or her attorney, to search the records for any other name than the one Borys was always called and known by, Nikolai Borys.

Id. at 101 , 24 A.2d at 118 (citations omitted). In Russeck, 170 Pa.Super. 89 , 84 A.2d 514 , the Pennsylvania Superior Court again was faced with an incorrectly indexed judgment. In that case, the defendant had a judgment against Abraham and Edith Wagner, which was indexed incorrectly under the names Albert and Edith Wagner. The court held that such an indexing failed to constitute constructive notice because of the distinct origins of the names: Albert is an Anglo-Saxon name of Teutonic origin, and by no process can it be demonstrated that it is a variant of the ancient Semitic name of Abraham.

There is no similarity in either the spelling or in the sound which in the use of one might suggest the other. Id. at 92 , 84 A.2d at 516 . The New Jersey Superior Court has also considered whether judgments indexed under incorrect first names are sufficient to attach a lien to property. In Jones v. Parker, 107 ⁴⁷⁰ N.J.Super. 235, 258 A.2d 26 (1969), Jones held a judgment against Asa C. Parker, which was indexed incorrectly under the name Ace Parker.

Subsequently, Parker placed a mortgage against the property and another subsequent judgment was recorded against Parker. The court held that the incorrectly indexed judgment had no priority in respect to the subsequent liens, saying “[ujnless the judgment entered is against the same name as that in which record title to real estate stands, ... no lien exists.” Id. at 242, 258 A.2d at 30 . Similarly, in Venetsky v. West Essex Building Supply Co., 28 N.J.Super. 178 , 100 A.2d 291 (1953), that court held: A judgment indexed under a first name different and distinct from the real first name of the judgment debtor does not constitute a lien upon the debtor’s real estate as against a subsequent purchaser or encumbrancer for value without notice. Judgments being indexed alphabetically in the office of the Clerk of the Superior Court, it is not to be supposed that a proper and adequate judgment search against Clarence F. Gottsleben would reveal a judgment against Fred Gottsleben.

Furthermore, to hold that a bona fide purchaser of real estate would take title thereto subject to a judgment theretofore entered against a former owner where the judgment was not indexed under the correct Christian name of such judgment debtor, would tend to destroy the value of the statutory system of recording land titles and liens and encumbrances thereon and to render titles to real estate most .hazardous and uncertain.. In the language of the court in [Lembeck & Betz Eagle Brewing Co. v. Barbi, 90 N.J.Eq. 373, 106 A. 552 (1919) ]: “An otherwise perfect chain of title search, based upon a search in the real names of the parties as they appear of record, would not be worth the paper it was written on, because you could never tell what outstanding deeds or [e]ncumbrances might exist of record affecting the premises in fictitious names. ⁴⁷¹ “To sustain the Brewing Company’s mortgage as the prior lien would be to sustain the illogical and intolerable situation thus outlined, and would make ducks and drakes of the recording system in New Jersey. A search would be useless, and the result would be confusion and confusion worse confounded.” Id. at 190, 100 A.2d at 297 (some citations omitted). There are, to be sure, states that call for a less-strict application of notice principles, even in cases of misrecording and misindexing of names in judgment or land records.

Collectively, they might support a majority position among the other states of some type of de minimis non curat lex standard, in respect to imposing a duty to find closely related (or sometimes not so closely related) names in respect to misnomer judgments or misindexed judgments. They mainly are determined on a case-by-case factual basis with little clear guidance, and offer, in our view, little support for the reliance on statutorily required recordation and correct indexing that we believe to be of paramount importance to the process of property transfers in this state. That process is vital in assuring the accuracy of titles in Maryland; accuracy is important itself in guaranteeing the marketability of property, and thus the value of property in our state. While few of the out-of-state decisions specifically state that they are relying on the doctrine of idem sonas, 13 they appear ⁴⁷² to be based, at least in appreciable part, on similar principles.

In Susquebanc Lease Co., 707 A.2d 540