Property - The RECORDING SYSTEM Flashcards
Our Model for the RECORDING SYSTEM is the Case of the Double Dealer
O conveys Blackacre to A. Later, O conveys Blackacre, the same parcel, to B. O, our double dealer, has skipped town. In the battle of A v. B who wins??
Two Bright Line Rules
(1) if B is a Bona Fide Purchaser (BFP), and we are in a NOTICE jurisdiction, B wins, regardless of whether or not she records before A does
(note: “BFP” implies that B doesn’t have notice, meaning A has not yet properly recorded at time of conveyance to B)
(2) If B is a BFP and we are in a RACE-NOTICE jurisdiction, B wins if she records properly before A does
***NY is a RACE-NOTICE JURISDICTION
recording acts exist to protect only ______ and _____
Bona Fide Purchasers and Mortgagees (creditors)
What is a “Bona Fide Purchaser?”
A bona fide purchaser is one who is
(1) a “purchaser” (which may include a mortgagee or creditor as well as a buyer of land)
(1) buys land FOR VALUE, and
(2) WITHOUT NOTICE that someone else got there first
typical hypos
-the “bargain basement sale” - e.g. B paid $50,000 for blackacre when its fair market value is $100k. B IS still a purchaser FOR VALUE
case of the “doomed donee”
B is O’s heir, or devisee or done. In a recording statute question, B loses unless the SHELTER RULE APPLIES - because he is not a BFP bc don’t give VALUE
three forms of notice (review)
AIR
ACTUAL- prior to B’s closing, B learns of A
INQUIRY - B is on inquiry notice of whatever an examination of Blackacre would show. Buyer of real estate has a duty to inspect before transfer of title to see for example, where anyone else is in possession. If another is in possession, B has inquiry notice, regardless of whether buyer actually bothered to inspect or not
–further, if a recorded instrument makes reference to an unrecorded transaction, grantee is on inquiry notice of whatever a follow-up would show
RECORD - B is on record notice of A’s deed if at the time B takes, A’s deed was recorded properly within the CHAIN OF TITLE
Recording Statutes - NOTICE v. RACE-NOTICE
NOTICE STATUTE - “A conveyance of an interest in land shall not be valid against any subsequent purchaser for value, without notice thereof, UNLESS THE CONVEYANCE IS RECORDED
RACE-NOTICE STATUTE - “A conveyance of an interest in land shall not be valid against any subsequent purchaser for value, without notice thereof, WHOSE CONVEYANCE IS FIRST RECORDED
*** Just look for the words “FIRST RECORDED” and you know you are in a race notice - think gotta get there FIRST
Requirement to Give PROPER RECORD NOTICE
To give record notice to subsequent takers, the deed must be recorded PROPERLY, within the CHAIN OF TITLE, which refers to that sequence of recorded documents capable of giving record notice to later takers
In most states, the CHAIN OF TITLE is established through a title search of the Grantor-Grantee index
Three CHAIN OF TITLE PROBLEMS
(1) The Shelter Rule
(2) The “Wild Deed”
(3) Estoppel by Deed
The SHELTER RULE
Three CHAIN OF TITLE PROBLEMS
One who takes from a BFP, even if not himself a BFP, will prevail against any entity that the transferor or BFP would have prevailed against.
—In other words, the transferee “takes shelter” in the status of her transferor, and thereby “steps into the shoes” of the BFP even though she otherwise fails to meet the requirements of BFP status
e.g. O conveys to A, who does not record. Later, O conveys the same parcel to B, a BFP, who records. B then conveys to C, who is a MERE DONEE or who has actual knowledge of the O to A transfer. In a contest of A vs. C – C PREVAILS because we treat C as having the status of B, who was a BFP who properly recorded
POLICY: the shelter rule aims to protect B, the BFP, by making it easier for B to transfer successfully
The problem of THE WILD DEED
Three CHAIN OF TITLE PROBLEMS
RULE of the WILD DEED: if a deed, entered on the records, has a grantor unconnected to the chain of title, the deed is a wild deed. IT IS INCAPABLE OF GIVING RECORD NOTICE OF ITS EXISTENCE - this recording is a nullity and does not count
—problem is a link is missing so a subsequent BFP could not feasibly find it
O sells Blackacre to A, who does not record. Then, A sells to B. B records the A-to-B deed. A-to-B deed is a “wild deed” because there is a missing step. O (double dealer) then conveys to C, a BFP, who records
–C would beat B in a race-notice and a notice jurisdiction bc she is a BFP, and the “wild deed” doesn’t count as recording so C won the race to record.
ESTOPELL BY DEED
Three CHAIN OF TITLE PROBLEMS
Estoppel by Deed - one who conveys realty in which he has no interest (here, X) is estopped from denying the validity of the conveyance if he later acquires the previously transferred interest
In 1950, O owns blackacre and is thinking of selling it to X, but doesn’t. X, even though he doesn’t own it yet, conveys it to A, who records it (note, this will be a wild deed because X didn’t have title). in 1960, O conveys blackacre to X and X records. (at this point A owns blackacre bc X is ESTOPPED BY DEED). in 1970, X double deals and sells blackacre to B, a BFP, who records. In 1970 B owns blackacre, because he is a BFP who VALIDLY records first (A’s recording doesn’t count bc outside chain of title). In a notice jurisdiction, B would just be last BFP to enter (had no notice bc A’s recording didn’t count)
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