Court uholds notice by filing a copy of lost deed plus affidavit of lost instrument; court raises bar for notice inquiry

MANUFACTURERS ACCEPTANCE CORPORATION v. U.S. BANK NATIONAL ASSOCIATION (Tenn. Ct. App. November 14, 2008).

In this declaratory judgment action, the Trial Court granted defendant summary judgment on the issue of priority of liens on real property. On the Petition to Set Up a Lost Instrument, the Trial Court following an evidentiary hearing, held that defendant was entitled to set up the lost instrument by a copy of its original. On appeal, we affirm the Trial Court's decision in establishing the lost instrument, but vacate the summary judgment on the issue of the priority of liens and remand for trial on that issue.

Opinion may be found at the TBA website:
http://www.tba2.org/tba_files/TCA/2008/manufacturerscorp_111408.pdf


"Plaintiff argues that defendant should have been precluded from setting up the lost
deed of trust because it had failed to record the deed and the ineffective attempt to record a copy of the deed by filing an affidavit of lost instrument in the Knox County Register of Deeds office in 2004 constituted 'reprehensible negligence'. No case is cited to support this argument. We affirm the Trial Court on this issue." Id.


"Plaintiff's... affidavit stated that the procedures he followed, met or exceeded what any lender in the community would do under the same or similar circumstances, and he was unaware of any other investigation he could have done to uncover the unrecorded and lost deed of trust. He stated that according to standard lending
practices, industry lenders do not generally share financial information as to indebtedness upon inquiry... We conclude plaintiff raised a genuine issue of material fact as to whether the factors US Bank enumerates that should have put plaintiff on notice were enough to put a 'reasonably cautious and prudent' lender on notice to further investigate and ascertain the ultimate facts. The record establishes a dispute as to what a reasonable, cautious and prudent lender would have done
under these circumstances." Id.