United States District Court, E.D. Pennsylvania
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.
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
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.
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
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
On August 24, 2005, at the Moores' request, Harleysville
executed a release of mortgage, which was recorded on
September 6, 2005.
release describes the land released as “Lot 2, Map
L4SW4B, Block 5, Lot 1A.” It lists the address as 215 East
20th Street,  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. It recites the
property's UPI as “Map L4SW4B, Block 5, Lot
1.” 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.
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.
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.
the Moores filed their Chapter 13 bankruptcy petitions,
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
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.
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. 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. 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. He concluded that the parties to the
Harleysville release had intended to release only Lot 1A.
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, ...