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In re Moore

United States District Court, E.D. Pennsylvania

March 16, 2017

IN RE TIMOTHY CHARLES MOORE
v.
FIRST NIAGARA BANK, N.A. EMBASSY BANK FOR THE LEHIGH VALLEY
v.
TIMOTHY CHARLES MOORE, REBECCA JO MOORE
v.
EMBASSY BANK FOR THE LEHIGH VALLEY, FREDERICK L. REIGLE and UNITED STATES TRUSTEE IN RE RICHARD T. MOORE EMBASSY BANK FOR THE LEHIGH VALLEY
v.
RICHARD T. MOORE, CAROL J. MOORE
v.
FIRST NIAGARA BANK, N.A., FREDERICK L. REIGLE and UNIED STATES TRUSTEE Bankruptcy Nos. 13-11090, 14-11692

          MEMORANDUM OPINION

          Savage, J.

         For the second time, Embassy Bank for the Lehigh Valley appeals from a Bankruptcy Court order directing the proceeds from the sale of the debtors' land to First Niagara Bank. The crux of the dispute is whether First Niagara's predecessor, Harleysville National Bank, had released its mortgage on the debtors' land before Embassy Bank recorded its security interest in the same land. The release contained conflicting descriptions of the land released. Depending on which description controls, the release covered or did not cover the land which Embassy Bank claims is subject to its lien.

         Bankruptcy Judge Richard Fehling awarded the proceeds to First Niagara after finding that the release did not cover the land. Because Judge Fehling did not explain why he did not use the metes and bounds property description in the exhibit to the release to determine what property had been released, we remanded the case. On remand, Judge Fehling determined that it would constitute manifest error to rely on the metes and bounds description which had been mistakenly attached to the release.

         We conclude that Judge Fehling appropriately considered the circumstances surrounding the execution of the release in determining what land the parties intended it to cover. He found that the parties had not intended to release the entirety of the land described in the metes and bounds description because the body of the release described only a portion of the land. His findings are not clearly erroneous. Therefore, we shall affirm.

         Background[1]

         On May 7, 2002, Timothy C. Moore and Carol J. Moore (the Moores) acquired a parcel of land located at 215 East 20th Street in Northampton, Pennsylvania. The property, previously referred to as Lots 8 and 9 of Laubach Estates, had a uniform parcel identifier (UPI) of Map L4SW4B, Block 5, Lot 1. On July 6, 2004, the Moores granted a mortgage in the property to Harleysville.[2]

         The Moores later subdivided the land into two lots. On March 23, 2005, they recorded a subdivision map, designating one lot as Lot 1A, and the other as Lot 1 (residual Lot 1).[3] On August 24, 2005, at the Moores' request, Harleysville executed a release of mortgage, which was recorded on September 6, 2005.

         The release describes the land released as “Lot 2, Map L4SW4B, Block 5, Lot 1A.”[4] It lists the address as 215 East 20th Street, [5] the same address as the original lot before subdivision. It attaches and incorporates the May 7, 2002 deed conveying the original Lot 1 to the Moores. The deed identifies the land as Lots 8 and 9 of Laubach Estates and describes it by metes and bounds.[6] It recites the property's UPI as “Map L4SW4B, Block 5, Lot 1.”[7] In other words, the body of the release describes the land as only Lot 1A, but the deed attached to the release describes the land as including both residual Lot 1 and Lot 1A.

         On April 11, 2006, the Moores executed a deed conveying residual Lot 1 to themselves. In describing the land, the deed refers to the recorded subdivision plan. It recites the UPI as Map L4SW4B, Block 5, Lot 1. On May 31, 2006, the Moores granted two mortgages in residual Lot 1 to Wachovia Bank. On August 21, 2007, seeking to refinance the Wachovia mortgages, they applied for a commercial loan in the amount of $136, 000.00 from Embassy Bank. The Moores and Embassy Bank agreed to secure the loan by a first mortgage lien on residual Lot 1.

         Embassy Bank did not order a full title search or purchase title insurance because bank policy did not require a full title search or title insurance for commercial loans of $150, 000.00 or less. Instead, it relied on a limited search going back only to April 11, 2006, the date the Moores reconveyed residual Lot 1 to themselves. Consequently, Embassy Bank was unaware of Harleysville's 2004 lien.

         After the Moores filed their Chapter 13 bankruptcy petitions, [8] they moved to sell residual Lot 1 free and clear of liens. Granting their motions, the Bankruptcy Court directed that the net proceeds from the sale be distributed to the lienholders according to the priority to be determined later. Residual Lot 1 was sold for $125, 000.00, which was not sufficient to satisfy both First Niagara's and Embassy Bank's claims.

         Judge Fehling held a hearing on the cross-motions for distribution of the proceeds. He concluded the Harleysville release applied only to Lot 1A and Embassy Bank was not a bona fide purchaser. Had Embassy Bank performed a thorough title search, it would have discovered that Harleysville released its lien only on Lot 1A, not on residual Lot 1, giving First Niagara, as Harleysville's successor in interest, a senior lien on residual Lot 1. Accordingly, Judge Fehling determined that First Niagara's interest was senior to Embassy Bank's and directed distribution of the sale proceeds to First Niagara.[9]

         Embassy Bank appealed the ruling. In March 2016, we vacated and remanded to the Bankruptcy Court to reconcile the different descriptions of the land in the release.[10] On remand, in his attempt to resolve the conflicting descriptions, Judge Fehling acknowledged that a more precise description of land is generally given greater weight than less specific ones. A metes and bounds description trumps a street address or a less precise descriptor.[11] However, he explained that when a recorded document is ambiguous, the court must examine the intent of the parties to resolve the ambiguity. In doing so, Judge Fehling found that the metes and bounds description of original Lot 1 was negligently and carelessly included in the release.[12] He concluded that the parties to the Harleysville release had intended to release only Lot 1A.

         Embassy Bank appeals again, arguing that the mistaken inclusion of residual Lot 1 in the Harleysville release does not warrant directing distribution of proceeds to First Niagara. According to Embassy Bank, ...


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