Angelos v. Maryland Cas. Co

In Angelos v. Maryland Cas. Co., 38 Md. App. 265, 380 A.2d 646 (1977), on July 18, 1975, a real property owner executed a third mortgage against his property. The third mortgage, which was in favor of a lawyer who was representing the owner, was not recorded at the time of execution, but was recorded a little more than a month later, on August 27, 1975. In the interim, a lawsuit had been filed against the property owner. On February 2, 1977, a judgment was entered against the property owner in the lawsuit. After the property was sold in a second mortgage foreclosure sale, the circuit court was asked to decide the priorities between the third mortgage holder and the judgment creditor with respect to the surplus proceeds of the sale. The circuit court ruled that the judgment creditor took priority over the mortgage holder. On appeal, the Court reversed, holding that, under RP section 3-201, the third mortgage took effect against the judgment creditor as of the date it (the third mortgage) was executed. Accordingly, it was inconsequential to the issue of priority that the lawsuit resulting in the judgment had been filed before the third mortgage was recorded. The Court of Appeals reviewed a circuit court's determination of lien priority between the holder of a third mortgage and a judgment creditor. 38 Md. App. at 266. The homeowners executed a third mortgage, in favor of the third mortgagee, on their residence and a week later Maryland Casualty Company sued the homeowners, prior to the recordation of the third mortgage. Id. at 267. The trial court gave the judgment creditor priority over the third mortgagee based upon the doctrine of lis pendens because, although it had not yet acquired a judgment against the homeowners prior to the recordation of the third mortgage, it initiated litigation before the deed of trust was recorded. Id. The Court of Appeals reversed the circuit court, opining: We need not decide the unlikely prospect that the petition for an ex parte injunction to restrain the sale of land preserving an asset for a general creditor was sufficient to comply with the Feigley requisite that the proceeding relate directly to the property in question, since Angelos' property interest was acquired through a mortgage obtained prior to the commencement of the litigation upon which Maryland Casualty's lis pendens claim rests, and therefore is not subject to the operation of the doctrine. Md. Code, Real Prop. Art. 1-101(c) defines the term "deed" as used in the Real Property Article to include, among other things, "mortgage". Subsequent 3-201 states that: "Every deed or mortgage, when recorded, takes effect from its effective date as against the grantor,... and every creditor of the grantor with or without notice." Although the mortgage was recorded after the suits were filed, under the statute it took effect against Maryland Casualty as of the date of mortgage, which was (assuming the title report to the correct) nearly a month before the suits were filed. Id. at 268-69.