The Trusted Adviser February 2010 | Volume 3 • Number 2



Chain of Title; Notice

Weathersby v JP Morgan Chase Bank, NA, 906 NE2d 904 (Ind Ct App, 2009).

Facts:In 1997 the Blair Family Trust acquired a property at 5285 Adams Street in Gary, Indiana, through warranty deed. Two chains of title arose at this point: In one, the Blair Family Trust quitclaimed the property to the 5285 Adams Trust; the deed was dated October 1998 and recorded later that month. Attorney Michael Defline as trustee of the 5285 Adams Trust, then transferred the property to Tony Blair (deeded and recorded in June 1999), who transferred the property to Bessie Lewis (deed November 1999, recorded January 2000). Lewis then gave a mortgage to JP Morgan Chase Bank, N.A. (Chase) in November 1999, and the mortgage was recorded in January 2000.

Meanwhile, acting as trustee of the Blair Family Trust, Defline also transferred the property by quitclaim deed to Financial Help Consulting Services (FHCS) in July of 1998. The deed was not recorded until November of 1998. As a result, the Blair Family Trust transferred the property to FHCS prior to transferring it to the 5285 Adams Trust, but the deed to FHCS was only recorded after the deed to the 5285 Adams Trust. FHCS eventually deeded the property back to the Blair Family Trust, who then mortgaged it to Harjit Sahi (Sahi). Sahi foreclosed in May 2003, obtained a sheriff's deed, and then transferred the property to Adrienne Weathersby in 2005. Wheathersby ,mortgaged the property with PHH Mortgage Services, who then assigned the mortgage to the Mortgage Electronic Registration Systems, Inc. (MERS).

Weathersby and Lewis, as well as their respective mortgagors, entered into a dispute regarding the identity of the valid owner of the property. Chase filed a declaratory judgment complaint against Weathersby and MERS, and then filed a motion for summary judgment. The trial court granted the motion.

Holding:Reversed and remanded. The court reminded the parties that when considering chain of title and actions to quiet title or equivalent claims, the party must recover on the strength of their title, not the weakness of the other party's. In other words, Weathersby and MERS could not simply show that Chase and Lewis did not have title and prevail, and vice-versa. The prevailing party would have to show a valid title of its own.

Furthermore, Weathersby and MERS appealed largely based on the theory of notice - stating that Lewis could not be a bona fide purchaser if she had notice of the outstanding rights of Weatherby's predecessor and that, if Lewis was not a bona fide purchaser, declaratory judgment should be given to the effect that the property is owned by Weathersby. Weathersby advanced the theory that, because all instruments were recorded, Lewis had notice of the outstanding rights of other parties on that property. The court, however, found that instruments recorded outside the chain of title could not serve as constructive notice, though they are binding on those with actual notice. The court based this decision on the fact that it has been recognized in Indiana courts in the past that instruments outside the chain of title would not always be found in a traditional title search.

As such, the court ruled that there was not sufficient evidence to determine whether Lewis had actual notice of the interests of the parties in the second chain of title, which would deny her classification as a bona fide purchaser. Therefore, summary judgment was premature.






THE TRUSTED ADVISER is published by Attorneys’ Title Guaranty Fund, Inc., P.O. Box 9136, Champaign, IL 61826-9136. Inquiries may be made directly to Mary Beth McCarthy, Corporate Communications Manager. ATG®, ATG® plus logo, are marks of Attorneys’ Title Guaranty Fund, Inc. and are registered in the U.S. Patent and Trademark Office. The contents of the The Trusted Adviser © Attorneys' Title Guaranty Fund, Inc.

[Last update: 1-18-10]