SunTrust Bank, N.A. v. Macky (In re McCormick)

SunTrust Bank, N.A. v. Macky (In re McCormick), No. 10-2027, --- F.3d ----, 2012 WL 414667 (4th Cir. Feb. 10, 2012).
The same notice imputed to a bona fide purchaser is that which is enjoyed by a trustee pursuant to 11 U.S.C. § 544(a)(3), thus permitting the trustee under applicable North Carolina law to rely exclusively on the recording county's official index to discover liens. Any liens not found there do not provide the requisite notice to the trustee.
Procedural context:
The bankruptcy court avoided a financial institution's lien against estate property based upon North Carolina law and 11 U.S.C. § 544(a)(3). The district court and the United States Court of Appeals for the Fourth Circuit affirmed.
In 1994, prior to his bankruptcy, the debtor and his spouse purchased two parcels of property referred to as Tract I and Tract II. Both were placed on the recording county's official parcel identifier number ("PIN") index. The recording county also maintained a traditional, but unofficial, grantor/grantee index. In 1999, an entity that later merged with Suntrust Bank, N.A., loaned debtor and his spouse money secured by a deed of trust covering Tracts I and II. When the instrument was recorded, however, only the PIN number for Tract II was used, meaning the deed of trust's effect as to Tract I would not have appeared in the PIN index. After debtor's 2006 involuntary bankruptcy commenced, the trustee disposed of Tract I. He then sought to avoid Suntrust's lien on the proceeds by reference to section 544(a)(3), noting the lienholder's failure to record the Tract I lien in the official PIN index. Suntrust opposed the avoidance action, asserting, inter alia, that (1) the description in the deed of trust included both Tracts I and II, and (2) the unofficial grantor/grantee index would have disclosed both encumbrances.
Hon. Paul V. Niemeyer, Hon. G. Steven Agee, and Hon. James A. Wynn, Jr.

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