## Facts

- John E. Jennings and Helen M. Jennings owned real property at 250 Bell Road, Lower Merion Township, Montgomery County, Pennsylvania.
- Boenning and Scattergood, Inc. (Boenning) obtained a money judgment against the Jennings in 1966.
- Boenning attempted to execute on the property but failed to have its writ(s) of execution properly entered and indexed in the Montgomery County judgment index.
- Execution efforts were delayed by litigation, including state-court proceedings and a later federal injunction that was ultimately lifted, after which the property was again listed for sale.
- Equitable Life Assurance Society foreclosed on a first mortgage, and the property was sold at a sheriff’s sale on February 20, 1974.
- After payment of the foreclosing mortgage and costs, $66,679.50 remained for distribution to other creditors.
- The sheriff posted a proposed schedule of distribution that omitted Boenning’s judgment claim because Boenning’s execution was not properly indexed and therefore did not appear of record as a lien.
- After Boenning obtained its judgment (and during the period when Boenning’s execution was not properly indexed), John McCoy loaned money to the Jennings and took a mortgage on the property.
- McCoy had actual knowledge of Boenning’s judgment when he took his mortgage, and McCoy recorded his mortgage.
- Later, Margolies and Jay Vending Company (Jay) also loaned money and took mortgages on the property.
- Margolies and Jay recorded their mortgages and, on the record presented, did not have actual knowledge of Boenning’s judgment.
- Boenning filed exceptions/claims seeking an order recognizing its judgment as entitled to priority in distribution of the sheriff’s sale proceeds.
- The Court of Common Pleas ruled in Boenning’s favor, ranking Boenning ahead of the later mortgages, and McCoy, Margolies, and Jay appealed.

## Issues

1. Does an earlier judgment creditor who failed to properly index its execution obtain priority over later recorded mortgagees in distributing surplus sheriff’s sale proceeds, and does actual notice change the result?

## Decision

- The Superior Court held that a later mortgagee with actual notice of Boenning’s prior judgment (McCoy) could not use Boenning’s indexing defect to gain priority over Boenning.
- The court held that later recorded mortgagees without actual notice (Margolies and Jay) were protected as bona fide encumbrancers and could not be subordinated to Boenning based on an unindexed execution.
- The Superior Court therefore affirmed the distribution order as to McCoy’s subordination to Boenning, but reversed/modified it to give Margolies and Jay priority over Boenning.

## Legal Principles

- A judgment creditor’s ability to assert lien priority against subsequent purchasers or mortgagees depends on proper entry/indexing in the public records; failure to index defeats priority against later bona fide encumbrancers who rely on the record.
- Recording statutes protect subsequent mortgagees who take and record their mortgages without actual notice of an earlier, unrecorded or unindexed judgment/execution lien.
- Actual notice can defeat the protection otherwise available to a later mortgagee; a mortgagee who knowingly takes a mortgage subject to a prior judgment may be subordinated to that prior claim despite recording.
- In distributing surplus proceeds from a sheriff’s sale, the court may correct a sheriff’s proposed schedule to reflect the legally required ranking of claims based on recording status and notice.

## Conclusion

After the sheriff’s sale of the Jennings’ property produced surplus funds, the sheriff’s schedule omitted Boenning’s earlier judgment because Boenning had not properly indexed its execution. On appeal, the Superior Court separated the later mortgagees based on notice: it subordinated McCoy, who had actual knowledge of Boenning’s judgment, to Boenning, but protected Margolies and Jay as recorded mortgagees without actual notice, giving them priority over Boenning in the distribution of the proceeds.


In re Distribution of Proceeds from Sheriff's Sale of Premises 250 Bell Road, Lower Merion Township, Montgomery County, 345 A.2d 921 (1975)