LITIGATION ALERT: Shipley Fuels Marketing, LLC v. Medrow

May 1, 2012

(The following article was published in the Commercial Litigation Case Notes section of the May 2012 issue of PAJustice News.)

In a matter of first impression, the Pennsylvania Superior Court in Shipley Fuels Marketing, LLC v. Medrow, 2012 WL 432501 (Pa.Super. 2012) recently held that the critical date for determining the priority of a judgment is the date that the judgment is entered on the court’s judgment index, not the date that it is entered on the court’s general docket. As a consequence, a judgment entered on the court’s general docket was held to be ineffective to establish a lien on real property previously owned by the judgment debtors, where the judgment was not entered on the judgment index until after the deed transferring the property to the new owners was recorded.

The case came before the Superior Court following the trial court’s entry of summary judgment in favor of property owners Andrew Johnson and Dona Saporosa (“Johnsons”). The underlying facts were essentially undisputed. Johnsons purchased a residential property located in Chester County, Pennsylvania from Michael P. and Anne F. Medrow (“Medrows”). Settlement took place on November 16, 2009. On November 30, 2009, Shipley Fuels Marketing, LLC (“Shipley”) filed a Complaint in Confession of Judgment against Medrows pursuant to a personal guarantee wherein Medrows guaranteed a debt owed to Shipley by Lancaster Travel Plaza, a business owned by Medrows. The deed transferring the real property from Medrows to Johnsons was recorded on December 4, 2009. On December 30, 2009, the confessed judgment, which Shipley had filed with the Prothonotary on November 30, was entered in the Chester County judgment index.

In May 2010, Shipley filed a Praecipe for Writ of Revival seeking to revive the purported lien on the property now owned by Johnsons. Shipley named Medrows as defendants and Johnsons as terre-tenants of the real property. Johnsons moved for summary judgment on the basis that no lien existed against their property, insofar as the confessed judgment was not recorded in the judgment index until after the deed conveying the property to Johnsons was recorded. Shipley, however, argued that the entry of the confessed judgment on the Prothonotary’s general docket was sufficient to provide notice of the lien. The trial court granted Johnsons’ motion for summary judgment based on its determination that the lien priority was controlled by the date the judgment was recorded on the court’s judgment index, not the Prothonotary’s general docket. Since the judgment was not entered in the judgment index until December 30, several weeks after the deed transferring the property from Medrows to Johnsons was recorded, the trial court concluded that the judgment against Medrows was ineffective to establish a lien on the property now owned by Johnsons.

On appeal to the Pennsylvania Superior Court, Shipley argued that under the Chester County system, the general docket could easily be searched by computer, either in the Prothonotary’s office or remotely, and that such a search would have revealed the same information to a title searcher as a search of the judgment index. The Superior Court rejected this argument, noting that the law “in clear and unambiguous language” provides that a lien on property is created only when the judgment is entered in the judgment index. As provided for in Pa.R.C.P. 3023(a):

Rule 3023. Judgment. Lien. Duration

(a) Except as provided by subdivision (b), a judgment when entered in the judgment index shall create a lien on real property located in the county, title to which at the time of entry is recorded in the name of the person against whom the judgment is entered.

The Court also seemed to find it significant that the Pennsylvania Supreme Court, through amendments to Rule 3023, specifically suspended certain statutory provisions enacted by the legislature that were inconsistent with the provisions of Rule 3023. See Pa.R.C.P. 3023(b)(3):

(3) Sections 8141(3), (4) and (5) of the Judicial Code, 42 Pa.C.S. §§8141(3), (4) and (5), are suspended in accordance with Article V, Section 10(c) of the Constitution of 1968 and Section 1722(b) of the Judicial Code, 42 Pa.C.S. §1722(b), insofar as they are inconsistent with this rule.

As explained in the Committee Note to the foregoing Rule, those suspended statutes, i.e. 42 Pa.C.S.A. §§8141(3)(4) and (5), provided respectively that the lien of a verdict for a specific sum of money shall have priority from the time it is recorded by the court; the lien of an adverse judgment and other orders shall have priority from the time it is rendered; and the lien of an amicable judgment shall have priority from the time the instrument on which it is entered is left for entry.

As the Superior Court in Shipley went on to note, the suspension of the foregoing statutory provisions by the Supreme Court “demonstrates conclusively the continuing mandate that all judgments, whatever the means of their creation, assume lien status and priority only from the date and time of the entry in the judgment index.” Since under Rule 3023(a), a judgment creates a lien against real property only when title to the real property is held by the debtor at the time the judgment is recorded in the judgment index, and since title to the property at issue vested in the Johnsons no later than the date the deed was recorded on December 4, 2009, the Court held that a judgment entered on December 30, 2009 against the prior property owners could not create a lien against the Johnsons’ property.

Of course, it is likely that each county will have different procedures affecting the timing of recording of judgments in their judgment index. Therefore, since the priority – and indeed very existence — of a lien on real estate may depend on these procedures, a practitioner who is seeking to preserve such a lien may be well advised to ascertain the Prothonotary’s timetable for recording such judgments.

For more information, please contact Steve Lupin at 215-661-0400 or SLupin@HRMML.com.

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