MBE: Property + Essays > Recording > Flashcards
Recording Flashcards
O conveys to A on Monday. O conveys to B on Tuesday. A records on Wednesday. B records on Thursday.
If both parties paid valuable consideration for the land, and neither knew of the other’s deed, who wins?
If both parties paid valuable consideration for the land, and neither knew of the other’s deed, B wins under a notice statute.
A notice statute is a recording act that protects a subsequent bona fide purchaser. A notice statute requires only that the subsequent purchaser have no actual or constructive (i.e., record or inquiry) notice at the time of the conveyance. While a prior grantee can prevent the existence of a subsequent BFP by recording, a BFP will be protected under a notice statute even if she does not record. Here, B prevails over A under a notice statute because B had no notice of the O-A conveyance at the time of her conveyance from O.
B would lose under a race or race-notice statute.
O conveys to A on Monday. O conveys to B on Tuesday. A records on Wednesday. B records on Thursday.
If both parties paid valuable consideration for the land, and neither knew of the other’s deed, how can A win?
A wins under a race or race-notice statute.
A race statute is a recording act that alters the common law rule of “first in time, first in right” to protect the first party to record. Notice is irrelevant. Thus, a later transferee who records first takes title even if she knew of the prior conveyance. Here, A prevails over B under race statute because A recorded first.
Under a race-notice statute, a subsequent BFP prevails over a prior grantee only if she records before the prior grantee. Here, A prevails—and NOT B—under a race-notice statute because B did not record first.
B sold a farm to L, who did not record. J, a judgment creditor of B, later filed a lien against B’s real property. J did not know that B had sold the farm to L.
Does the recording act protect J because she knew nothing of L’s unrecorded deed?
The recording act does not protect J, the judgment creditor because she is a judgment creditor. Recording acts do not protect judgment creditors.
What are the three types of recording acts?
Notice acts, race-notice acts, and pure-race acts
What is a notice act?
Notice act protects BFP.
What is a race-notice act?
Subsequent BFP is protected if she takes without notice and records before prior grantee.
T sold a house to W on January 1; W did not record.
Then T sold the same house to P. P didn’t know about the earlier sale to W and P did not record.
Then W recorded and the next day P recorded.
Who wins in a notice statute jurisdiction?
In a notice statute jurisdiction, the BFP wins. Here, P is the BFP so he would win because he took title without notice (no recorded deed).
T sold a house to W on January 1; W did not record.
Then T sold the same house to P. P didn’t know about the earlier sale to W and P did not record.
Then W recorded and the next day P recorded.
Who wins in a race-notice statute jurisdiction?
In a race-notice jurisdiction, W would win because he was first to record the deed and took without notice.
What is a pure-race act?
A pure-race act protects the first to record and notice is irrelevant.
What type of act(s) are/is associated with:
“without notice” or “in good faith”
notice or race-notice
What type of act(s) are/is associated with:
“first recorded” + “without notice” or “in good faith”
race-notice
What type of act(s) are/is associated with:
no mention of notice or good faith
pure-race
What happens if a subsequent purchaser pays an absurdly low price?
That subsequent purchaser got lucky. In absence of an explicit claim of fraud, any amount other than a nominal amount is considered to be for fair value.
Who are BFPs?
BFPs are bona fide purchasers who bought without notice.
Who are not BFPs?
An heir, devisee, or donee cannot be a BFP and can never defeat the claim of someone who has prior conveyance from O. Also includes judgment lienors.
*or anyone who had notice
What is the Shelter Rule exception?
Anyone, literally anyone, can shelter under the rights of a BFP. This includes people who KNEW of an earlier sale.
e.g.
T sold his property to R, and R did not record. Later, T sold the same property to S, a BFP. S recorded. Then S gave the deed to his friend D as a gift. There is a race-notice statute.
S shelters D. Ordinarily, people who get gifts cannot be BFPs but D is protected by one so D would win over R.
What are three types “without notice”?
These three types can defeat a subsequent purchaser:
- actual notice - subsequent purchaser knew about prior conveyance = they lose
- record notice - constructive notice from the record; recorded in chain of title
- inquiry notice - from reasonable diligence
T sold to R, no recording.
T then sold to S, a BFP. S recorded.
Later S sold to D, who knew about the earlier sale to R but didn’t care and wanted to take a chance on title.
Can a recording act protect D?
S was a BFP who sold to D. D is protected by the Shelter Rule exception. D wins over R.
T conveyed land to R in a jurisdiction that has a notice recording statute.
Later T conveyed land to S who knew about the earlier sale to R.
S bequeathed the land to D.
D sold the land to U, a BFP.
U conveyed the northern half to L, who knew about the earlier sale to R. U conveyed the southern half to B as a gift.
Who wins over R?
S has notice and is not a BFP. D received the land without value because it was a testamentary gift.
U is the only BFP and he shelters L, even though he knew of the earlier sale, and to B.
What are the steps for title searching?
Title searching requires:
- Chain of title - go to grantee’s index and then look for grantor
- See if chain is strong enough by searching the grantor index
Look for: if grantor placed any encumbrances on the property during that time + if grantor conveyed the property to anyone else before passing to the next link in the chain
What are wild deeds?
Wild deeds are deeds recorded outside the chain of title and they do not give notice.
E sold to M, no recording. Then E sold to D and D recorded. Then M recorded.
Finally, D sold to C and C had no notice of first sale to D.
Since M recorded before C bought, is C charged with constructive notice of the prior sale to M?
No. M recorded too late.
What type of jurisdiction?:
“A conveyance of an estate in land shall not be valid against a subsequent purchaser for value unless the conveyance is first recorded.”
race statute
What type of jurisdiction?:
“A conveyance of an estate in land shall not be valid against any subsequent purchaser for any value without notice thereof unless the conveyance is recorded.”
notice statute
What type of jurisdiction?:
“Any conveyance of an estate in land, other than a lease for less than one year shall not be valid against any subsequent purchaser in good faith for value whose conveyance is first recorded.”
race-notice statute
What is inquiry notice?
Inquiry notice means that a subsequent grantee is held to have knowledge of any facts that a reasonable inquiry would have revealed, even if he made no inquiry. A quitclaim deed releases whatever interest a grantor might have in the property and contains no covenants for title. Nonetheless, in the majority of states, grantees are not charged with inquiry notice from the mere fact that a quitclaim deed was used.
O conveys Blackacre to A on Monday. O conveys Blackacre to B on Tuesday. A records on Wednesday. B records on Thursday.
If both parties paid valuable consideration for the land, and neither knew of the other’s deed, how would B own Blackacre?
B would own Blackacre under a notice statute.
A notice statute is a recording act that alters the common law rule of “first in time, first in right” to protect a subsequent bona fide purchaser (“BFP”)- i.e., one who pays valuable consideration and lacks notice of the prior conveyance. A notice statute requires only that the subsequent purchaser have no actual or constructive (i.e., record or inquiry) notice at the time of the conveyance. While a prior grantee can prevent the existence of a subsequent BFP by recording, a BFP will be protected under a notice statute even if she does not record. Here, B prevails over A under a notice statute because B had no notice of the O-A conveyance at the time of her conveyance from O.
A landowner gratuitously conveyed his interest in land to a friend by quitclaim deed. The friend promptly and properly recorded her deed. Six months later, the landowner conveyed his interest in the same land to an investor for $50,000 by warranty deed, which was promptly and properly recorded.
As between the friend and the investor, who has the superior right to title to the land?
The friend, regardless of the statute.
Because the friend recorded prior to the subsequent conveyance, she has the superior right to title regardless of the type of recording statute. A conveyance that is recorded can never be divested by a subsequent conveyance through operation of the recording statutes. By recording, the grantee gives constructive (or “record”) notice to everyone. Hence, proper recording prevents anyone from becoming a subsequent bona fide purchaser (“BFP”). Because the landowner’s conveyance to the friend was recorded at the time of the landowner’s conveyance to the investor, the investor cannot prevail. The investor will clearly lose under a pure race statute because the friend recorded first. The investor will also lose under notice and race-notice statutes because the conveyance to the friend was recorded at the time of the conveyance to the investor. The investor had record notice and cannot claim the protection that these types of statutes provide for subsequent purchasers for value who take without notice.
A homeowner leased his home to a tenant for 3 years. The following year, the homeowner conveyed the house to a buyer, who never recorded her deed nor did anything with regard to the house. The tenant continued paying rent to the homeowner. 3 months after the conveyance to the buyer, the homeowner conveyed the property to his cardiologist, who knew nothing of the prior conveyance. The cardiologist told the tenant that he now owned the house and that all rents should be paid to him. The tenant complied.
Six months later, the cardiologist went to his local bank for a loan. He offered to put up the property as security. The bank discovered that the cardiologist had never recorded his deed and that, just two weeks prior to his loan application, the buyer had recorded a deed to the house that bore an earlier date than the deed the cardiologist had shown the bank. Because of this cloud on the title, the bank refused the loan request. When the tenant discovered this, she quit paying rent to the cardiologist. The state has a recording statute that provides, “a conveyance of an interest in land, other than a lease for less than one year, shall not be valid against any subsequent purchaser for value, without notice thereof, unless the conveyance is recorded.”
If the cardiologist sues the tenant to compel the payment of rent, is the cardiologist likely to win?
The cardiologist will likely win.
When the cardiologist bought the property from the homeowner, he was a BFP. Not only did the cardiologist not have actual notice of the earlier sale, he did not have constructive notice either because the buyer did not record before the cardiologist bought. The recording statute in the jurisdiction is a notice statute. In a jurisdiction with a notice recording statute, a subsequent purchaser who gives value and takes without notice wins over the earlier grantee.
If the facts had shown a jurisdiction with a race-notice recording act, the cardiologist would have been in trouble. With race-notice, the cardiologist would not only have to take without notice, he would have to be the first to record. Because the facts do not show that the cardiologist recorded at all, he would lose. But because this is a notice act jurisdiction, the fact that the buyer finally recorded before the cardiologist is irrelevant.
What is the doctrine of estoppel by deed?
When a grantor conveys property that he does not own, his subsequent acquisition of title to that property vests in the grantee under the doctrine of estoppel by deed.
Most courts hold that this is personal estoppel, which means that title inures to the grantee’s benefit only as against the grantor, not a subsequent bona fide purchaser. If the grantor transfers his after-acquired title to an innocent purchaser for value, the BFP gets good title. The majority view is that it is not in his chain of title. Thus, it is not the fact that the creditor recorded that prevents the investor from being a BFP - instead its because there is constructive notice of another interest. A title search is not complete without an examination of possession. If the possession is unexplained by the record, the subsequent purchaser is charged with knowledge of whatever an inspection of the property would have disclosed and anything that would have been disclosed by inquiring of the possessor.
On February 10, an owner took out a $10,000 mortgage on her land with a bank. On February 15, the owner conveyed the land for $50,000 to a buyer who was not aware of the mortgage. On February 17, the bank recorded its mortgage interest in the land. On February 21, the buyer recorded his deed to the land.
Does the buyer hold the land subject to the bank’s mortgage?
The buyer takes subject to the bank’s mortgage in a race-notice jurisdiction because it was recorded first. All recording acts apply to mortgages as well as deeds. Thus, a subsequent purchaser of the property will take subject to a prior mortgage unless the recording act changes the result. A race-notice recording act would change this result only where a subsequent purchaser did not have notice of the mortgage at the time of purchase and recorded his deed before the mortgage was recorded. Here, the buyer did not have notice of the mortgage but he recorded after the bank; thus, he takes subject to the bank’s interest.
Which of the following parties would be entitled to prevail against a prior transferee under “notice” and “race-notice” statutes?
A - A donee of the land
B - One who took the land by specific bequest
C - A mortgagee for value
D - A judgment creditor
(C) A mortgagee for value would be entitled to prevail against a prior transferee under “notice” and “race-notice” statutes. Notice and race-notice recording acts protect BFPs from prior unrecorded conveyances of the same property and a mortgagee for value is the only BFP of the answer choices. Donees, heirs, and devisees are not BFPs because they do not give value for their interests.
A judgment creditor would not be entitled to prevail against a prior transferee under “notice” and “race-notice” statutes. In nearly all states, a plaintiff who obtains a money judgment can obtain, by statute, a judgment lien on the defendant’s real estate. The majority of cases hold that the judgment lienor is not protected either because (i) he is not a BFP because he did not pay value for the judgment, or (ii) the judgment attaches only to property “owned” by the defendant, and not to property the defendant has previously conveyed away, even if that conveyance was not recorded.
T/F: If a grantor executes a deed but fails to deliver it during her lifetime, title does not pass.
True. A deed is not effective to transfer an interest in realty unless it has been delivered by the grantor and accepted by the grantee. The delivery requirement is satisfied through words or conduct evidencing the grantor’s intent that that title pass immediately and irrevocably. Without adequate delivery, there is no conveyance of title to the intended grantee. Thus, title does NOT pass on the grantor’s death, and title is NOT held in trust by the grantor’s estate for the intended grantee. Moreover, while a deed must be properly executed to be valid, title does not pass when the deed is executed, but rather upon delivery.
O conveyed property to B, who put the deed in his suitcase and left the country. O conveyed property to I, who was unaware of the previous transaction. B returned and recorded his deed. Later I conveyed the property to D, who knew of B’s deed.
D filed a suit against B to determine ownership of the property. The property is located in a jurisdiction with the following statute: “any conveyance of an interest in land shall not be valid against any subsequent purchaser for value, without notice, unless the conveyance is recorded.”
How should the court rule?
This is a notice statute jurisdiction because the statute at issue does not mention first to record or good faith. This means that the BFP should prevail even if BFP has not recorded.
Here, I was the BFP because I did not know of the previous transaction to B and gave value. Because of the shelter rule, D is protected by I’s BFP status and can win over the properly recorded B. D wins over B, but would not have superior rights over the true BFP I.
O owns Blackacre. X acquires title to Blackacre through adverse possession. O sells Blackacre to A.
Who owns Blackacre?
Even if A is a BFP, X prevails because X acquired title by operation of law, so A is not protected by a recording statute.
T/F: In a jurisdiction with a grantor-grantee indexing system, transferees only have constructive notice of deeds recorded within the chain of title.
True. Transferees only have constructive notice of deeds recorded within the chain of title. If someone who did not record granted it to someone who did, a subsequent purchaser would not know of the second person’s recorded deed.
In essays, add: Under common law, priority is given to the conveyance that is first in time. Then discuss relevant recording statutes and three types of notice - actual, constructive, and inquiry.
Yup. Make sure to mention who would win under common law.
A woman purported to convey a vacant parcel of land she did not own to a buyer by a general warranty deed. The buyer immediately recorded the deed, built a house on the land, and has resided there ever since. Six months later, the woman acquired title to the parcel of land from the true owner. The woman immediately sold the land to an investor by a general warranty deed, which the investor promptly recorded. The investor paid the woman a reasonable value for the parcel of land. Because the investor purchased the parcel of land solely as an investment and never visited it, she never knew that the buyer was living there.
Who has title to the parcel of land?
A - buyer, and the investor has no enforceable claim to the parcel of land.
C - investor, and the buyer has no enforceable claim to the parcel of land
The buyer has title to the parcel of land. Under the estoppel by deed theory, if a grantor purports to convey an estate in property that she does not then own, her subsequent acquisition of title to the property will automatically inure to the benefit of the grantee, but only as against the grantor. If the grantor transfers her after-acquired title to a BFP, the BFP gets good title.
Here, when the woman acquired title to the parcel of land from the true owner, that title passed automatically to the buyer by operation of law. Although the investor paid a reasonable value for the parcel of land, she is not a BFP because she had at least inquiry notice of the buyer’s interest in the land. Under the majority view, a recorded deed obtained from a grantor who had no title at that time but who afterwards obtains title is not in the chain of title and so does not give constructive (or record) notice to a subsequent purchaser. However, a subsequent purchaser is charged with knowledge of whatever an inspection of the property would have disclosed and anything that would have been disclosed by inquiring of the possessor. Here, an examination of possession would have revealed the buyer’s interest in the parcel of land. Thus, the investor has no enforceable claim to the land and (C) is wrong.
A father drew up a deed conveying his land to his son. The father never recorded the deed and left it in the top drawer of his desk in his study. Two years later, the father died. He left a will, which declared that all of his property be divided equally between the son and the father’s daughter.
While going through his father’s personal effects, the son discovered the deed to the land. He showed the deed to his sister and the two of them agreed not to record the deed. The son put the deed in a desk drawer in his home. A year later, the son died. As the executor perused the son’s personal papers, he came across the deed and promptly recorded it. He then entered into a contract to sell the land to a buyer. The daughter discovered this and promptly filed suit, claiming an interest in the land. A statute of the jurisdiction provides: “No conveyance is good against a subsequent purchaser for value, without notice, who first records.”
How will the court rule?
A - In favor of the daughter, because there was no proper delivery of the deed to the land.
B - In favor of the daughter, because the executor violated his fiduciary duty when he recorded.
C - Against the daughter, because the executor and the buyer are protected by the recording act.
D - Against the daughter, because she is not a bona fide purchaser.
(A) The daughter will prevail because the deed executed by the father to the son was never properly delivered. A deed is not effective unless it is delivered. The father did not do anything to indicate an intent to pass immediate title to the son. The presumption of nondelivery is not rebutted and the father retained title. Therefore, the land was part of the father’s estate and the daughter and the son inherited it as tenants in common. The daughter has an undivided one-half interest in the land.
(B) is wrong because the executor’s recording of the void deed did not damage the daughter because it did not affect her rights.
(C) is wrong for two reasons: (i) The buyer cannot be protected by the recording act because he has not yet recorded and this is a race-notice jurisdiction. To prevail in a race-notice jurisdiction, a party must be a subsequent purchaser for value, without notice of an adverse claim, and must record first. The buyer has not yet recorded. It is not clear from the facts whether he has even received the deed. If he has not, he cannot qualify as a BFP because he now has notice of the daughter’s claim. (ii) The executor cannot claim the protection of the recording act because he is acting as the son’s agent. The son was a donee with notice and as such was outside the protective provisions of the recording act.
(D) is wrong because the daughter need not be a BFP (i.e., need not turn to the recording act) to prevail. She inherited an undivided one-half interest in the land, which has not been cut off by the subsequent acquisition and recording by a BFP.
A corporation was in the business of purchasing real property at below-market prices and reselling the properties to investors. The bylaws of the corporation authorized the chief executive officer (“CEO”) and the director of the marketing division to enter into contracts on behalf of the corporation for the purchase or sale of properties. The corporation had recently purchased a large parcel of beachfront property for resale. The CEO secretly opened negotiations with an amusement park to sell the property. However, unknown to the CEO or anyone else in the corporation, the marketing director had already reached an agreement with a hotel for the sale of the property.
On April 23, the marketing director and the hotel signed a written contract providing for sale of the property by the corporation to the hotel for $35 million. On April 25, the board of directors amended its bylaws, effectively depriving the marketing director of authorization to bind the corporation in purchase or sale transactions. This action was immediately publicized and became known to both the marketing director and the hotel. On April 26, the hotel duly recorded its contract. On May 1, the CEO, still unaware of the marketing director-hotel agreement, approved sale of the property to the amusement park for $39 million. The necessary documents of title were prepared and properly recorded by the amusement park on May 5. Two days later, the amusement park learned of the marketing director-hotel agreement. On May 10, the date scheduled for closing of the hotel’s sale agreement, the CEO refused to accept the hotel’s tender of $35 million and refused its demand for a deed to the property.
The hotel subsequently brings action against the corporation and the amusement park for specific performance and to quiet title to the property. For whom will the court likely rule?
A - Ds, because the board of directors had deprived the marketing director of authority to bind the corporation in the sale of real property.
B - Ds, because the amusement park is the only purchaser who properly recorded a deed to the property.
C - Hotel, because the amusement park had constructive notice of the hotel’s interests in the property when the agreement with the CEO was made.
D - Hotel, because the attempt to divest the marketing director of authority to approve sales of the corporation’s property was invalid.
Judgment should be for the hotel regardless of whether the jurisdiction has a notice statute or a race-notice statute. Under either type of recording statute, the only persons protected by the statute are BFP. To attain this status, the person must take without notice. Because the marketing director-hotel contract was properly recorded, the amusement park had constructive notice of the hotel’s interest in the property. Thus, the park could not become a BFP when it entered into its contract.
(B) is wrong because the hotel recorded its contract of sale. Any instrument creating or affecting an interest in land (e.g., deed, mortgage, contract to convey) can be recorded, providing constructive notice to subsequent purchasers. Thus, the hotel’s failure to record a deed does not deprive it of protection of the recording statute.
As a result of a personal injury lawsuit, a victim obtained a judgment against a tortfeasor for $100,000. The tortfeasor, who had few assets, did not pay the judgment. On April 1 of the following year, the tortfeasor inherited a parcel of land from her uncle. On May 1, the tortfeasor entered into a contract with a buyer to sell the land for $120,000. The contract was not recorded. The buyer immediately applied to a bank for a loan of $100,000. The bank approved the buyer’s loan, and on May 15, a closing was held. The tortfeasor deeded the land to the buyer, and the buyer executed a mortgage for $100,000 to the bank. Due to an error by the title company, the deed from the tortfeasor to the buyer was not recorded, although the mortgage to the bank was recorded. Neither the buyer nor the bank had any knowledge of the victim’s judgment. On May 20, the victim recorded his judgment in the county recorder’s office where the land was located. At that time, he had no knowledge of the buyer’s or the bank’s rights. When he learned about them, he immediately brought a proceeding to foreclose his judgment lien, naming the tortfeasor, the buyer, and the bank as parties.
The jurisdiction has a typical grantor/grantee recording index, and has enacted the following statute:
“Any judgment properly filed in the county recorder’s office shall, for 10 years from filing, be a lien on the real property then owned or subsequently acquired by any person against whom the judgment is rendered. No conveyance or mortgage of real property shall be good against subsequent bona fide purchasers for value and without notice unless the same be recorded according to law.”
As between the victim and the bank, which party’s interest in the land will be given priority?
A - bank, because the bank recorded its mortgage before the victim recorded his judgment lien.
B - bank, because the victim is not protected by the recording statute.
The victim will not likely prevail against the bank because a majority of courts hold that the judgment lienor is not protected by the recording statute. If the statute here, which is a notice statute, were applicable to protect the victim, he would have priority over the bank because his judgment lien was recorded before the buyer’s deed was recorded. Under this view, the bank’s mortgage would have been considered “wild” and would be deemed unrecorded because the preceding conveyance, the buyer’s deed, was actually unrecorded. A searcher in the public records would therefore have been unable to find the mortgage. Hence, if the statute were applicable to protect the victim, he would have priority over the bank.
But most courts reason that either (i) a judgment creditor is not a BFP because he did not pay contemporaneous value for the judgment, or (ii) the judgment attaches only to property “owned” by the debtor, and not to property previously conveyed away, even if that conveyance was not recorded. Under the statute in the present question, a judgment does not attach until it is recorded. Here, the victim’s judgment did not attach to the land until after the bank obtained a mortgage on it, and the recording statute does not change that result. The failure of the buyer to record, and the resultant treatment of the bank as unrecorded, is irrelevant. Thus, the bank’s mortgage is superior to the victim’s lien.
(A) is wrong because it does not matter whether the bank’s mortgage was recorded, as against a subsequent judgment lien creditor. The judgment lien creditor is not protected by the recording statute, so the bank prevails even though its mortgage would be deemed unrecorded, as discussed above.
A vintner divided his vineyard into two parcels, drawing the boundaries so that the single well that had irrigated the entire vineyard fell on the border of the two properties. The vintner then conveyed the eastern parcel to his friend by a deed that contained the following covenant:
“If the well located on the boundary of the eastern and western parcels continues to be used for irrigation purposes and becomes in need of repair or replacement, the grantee, his heirs, and assigns and the grantor, his heirs, and assigns each promise to pay one-half of the cost of such repair or replacement. This covenant shall run with the land.”
The deed from the vintner to the friend was not recorded, and the vintner did not record a copy of the deed with the records for the western parcel.
The friend later sold the eastern parcel to a farmer. The farmer’s deed did not contain the covenant about the well. After 15 years of use by the owners of both the eastern and western parcels, the well began to fail. The farmer took it upon himself to have the well repaired at a cost of $30,000. About two weeks later, the farmer discovered the deed from the vintner to the friend in some old files. By this time, the western parcel had passed to the vintner’s son by inheritance and again to the son’s daughter by inheritance from the now-deceased son. The daughter knew nothing of the covenant concerning the well. The farmer presented the daughter with the bill for the well repair with a copy of the vintner/friend deed and a note that said he expected to be reimbursed for $15,000. The daughter refuses to pay, and the farmer sues.
The jurisdiction has a 10-year statute of limitations for acquiring property by adverse possession, and the following recording statute: “Any conveyance of an interest in land shall not be valid against any subsequent purchaser for value, without notice thereof, unless the conveyance is recorded.”
For whom is the court most likely to rule?
The farmer will most likely prevail in his suit for one-half the cost of the well repairs because the covenant runs with the land. When a covenant runs with the land, subsequent owners of the land may enforce or be burdened by the covenant. If all of the requirements for the burden to run are met, the successor in interest to the burdened estate will be bound by the arrangement as effectively as if he had himself expressly agreed to be bound. To be bound: (i) the parties must have intended that the covenant run with the land; (ii) the original parties must have been in horizontal privity; (iii) the succeeding party must be in vertical privity with the original promisor; (iv) the covenant must touch and concern the land; and (v) generally, the burdened party must have actual or constructive notice of the covenant. Here, the intent is shown by the express language of the covenant, which says that it is intended to run with the land. Even without that language, the use of the words “heirs” and “assigns” would show the intent for the covenant to run. The original parties were in horizontal privity because at the time the vintner entered into the covenant, he and the friend shared an interest in the land independent of the covenant—as grantor and grantee. The daughter is in vertical privity with the vintner because she holds the entire interest in the western parcel held by the vintner. The covenant touches and concerns the land because promises to pay money to be used in a way connected with the land are held to touch and concern the property. Because the daughter was unaware of the covenant, the required notice seems to be missing. While it is generally true that the owner of the burdened land must have notice, it should be remembered that the requirement is a function of the recording statute. (At common law, the covenant was enforceable in an action for damages regardless of notice; this was changed by the recording statutes.) However, because the daughter is a donee (an heir) and not a bona fide purchaser, she is not protected by the recording statute and thus is subject to the covenant even without notice.
To satisfy a debt owed to a creditor, a son executed and delivered to the creditor a warranty deed to a large tract of undeveloped land. The creditor promptly recorded the deed. Shortly thereafter, she built a house on the property and has lived there ever since. The son never actually owned the land. It belonged to his father, but the father had promised to leave the property to the son.
Later, the father died and his will devised the property to the son. Pressed for money, the son then sold the land to an investor by warranty deed, which the investor promptly recorded. Although the investor paid full value for the property, he purchased it strictly for investment and never visited the site. He therefore did not realize that the creditor was living there, and knew nothing of the son’s earlier deed to the creditor.
The jurisdiction in which the land is located has the following statute: “A conveyance of an estate in land (other than a lease for less than one year) shall not be valid against any subsequent purchaser for value without notice thereof unless the conveyance is recorded.”
Which of the following is the most likely outcome of a quiet title action brought by the creditor against the investor?
A - The creditor prevails, because the son had no title to convey to the investor.
B - The creditor prevails, because the investor was not a purchaser for value without notice of the creditor’s interest.
C - The investor prevails, because under the doctrine of estoppel by deed, title inures to the benefit of the original grantee only as against the grantor.
D - The investor prevails, because under the recording acts, the deed from the son to the creditor was not in the chain of title and hence did not constitute notice to the investor.
The creditor will prevail in a suit to quiet title because the investor had notice of the creditor’s interest in the property and, thus, is not a BFP for value. When a grantor purports to convey property that he does not own, his subsequent acquisition of title to that property vests in the grantee under the doctrine of estoppel by deed. Most courts, however, hold that this is personal estoppel, which means that title inures to the grantee’s benefit only as against the grantor, not a subsequent BFP. If the grantor transfers his after-acquired title to an innocent purchaser for value, the BFP gets good title. There is a split of authority as to whether the original grantee’s recordation of the deed imparts sufficient notice to prevent a subsequent purchaser from being a BFP, but the majority view is that it does not because it is not in his chain of title. Thus, it is not the fact that the creditor recorded that prevents the investor from being a BFP. The fact that the creditor built a home and was living on the property gave the investor constructive notice of her interest. A title search is not complete without an examination of possession. If the possession is unexplained by the record, the subsequent purchaser is charged with knowledge of whatever an inspection of the property would have disclosed and anything that would have been disclosed by inquiring of the possessor. Therefore, the investor is charged with knowledge of the creditor’s possession and with what the creditor would have told him about her possession; i.e., that the property was conveyed to her by the son prior to his conveyance to the investor. Consequently, the investor does not qualify as a BFP.
