Title Assurance Flashcards
Why have recording system?
Information, Preservation, Protection
Expectations created by recording system
Affirmative duty to investigate property they are interest in
Rules related to unrecorded deeds
- Deed is valid and good against grantor without recordation
- Subsequent bonafide purchaser > prior unrecorded interests
Bonafide purchaser: someone who purchases property in good faith and who exercised reasonable diligence in researching the title of the desired property prior to sale
- Between Non Bonafide purchasers. The first purchaser in time has superior interest.
Luthi v. Evans (mother hubbard and recording)
Rule of Law
A Mother Hubbard clause does not provide constructive notice to subsequent purchasers that the unspecified interest was conveyed. How to protect from future purchasers : by recording property interest. Recording though is not just good enough (you are not protected). Must record in a certain way: with sufficient specificity
Facts
Grace Owens and others possessed interests in oil-and-gas leases. On behalf of herself and her co-owners, Owens executed and recorded a document assigning the groups’ interests in the leases to International Tours (Tours) (defendant). The assignment described seven specific leases located in Coffey County, Kansas. The assignment document also contained a Mother Hubbard clause—a clause that conveys all of a grantor’s property in a specific county. That clause conveyed all the assignors’ other lease interests that were located in the county “whether or not the same are specifically enumerated above.” At that time, Owens separately owned an interest in an oil-and-gas lease known as the Kufahl lease that was also located in Coffey County. The Kufahl lease was not one of the seven specifically listed leases. Four years later, Owens assigned her interest in the Kufahl lease to J.R. Burris (defendant). Burris conducted a title search in the county’s deed office and obtained an abstract of title but did not find anything showing that Tours had an interest in the Kufahl lease. Later, both Tours and Burris claimed competing interests in the Kufahl lease. Also, John Evans (defendant) held a royalty interest in the lease. The owners of the Kufahl property, Dale and Marcia Luthi (plaintiffs), filed a lawsuit to cancel the Kufahl lease, which required resolving who held what lease interests. The trial court found that the Mother Hubbard clause had not put Burris on constructive notice that Owens had conveyed the Kufahl lease to Tours. Accordingly, Burris was an innocent purchaser for value, and the lease belonged to him, subject to Evans’s royalty interest. The Kansas Court of Appeals found that Tours owned the lease. Burris appealed to the Kansas Supreme Court.
Issue
Does a Mother Hubbard clause provide constructive notice to subsequent purchasers that the unspecified interest was conveyed?
Holding and Reasoning (Prager, J.)
No. A Mother Hubbard clause does not provide constructive notice to subsequent purchasers that the unspecified interest was conveyed. In conveying all of a grantor’s property in a specific county, a Mother Hubbard clause creates an enforceable transfer between the parties to the conveyance, even for property interests not specifically identified in the conveyance document. In addition, if a subsequent purchaser has actual notice that a Mother Hubbard clause conveys property that is not specifically identified in the conveyance document, that conveyance is enforceable against that subsequent purchaser. However, by itself, a Mother Hubbard clause does not necessarily provide constructive notice of a transfer. Rather, even if a conveyance contains a Mother Hubbard clause, a subsequent purchaser is on constructive notice of a property-interest transfer only if some part of the conveyance document identifies the transferred property interest with enough specificity to identify the interest during a title search. Here, even though the Kufahl lease was not specifically listed in the document assigning lease interests to Tours, the Mother Hubbard clause meant that Owens assigned her interest in the Kufahl lease to Tours. This assignment was effective and enforceable (1) between Owens and Tours and (2) against anyone else who had actual notice that the assignment to Tours included the Kufahl lease. However, Burris did not have actual notice, and the Mother Hubbard clause did not give him constructive notice of the assignment. Therefore, Burris was an innocent purchaser for value, and the Kufahl lease belonged to him. The appellate ruling is reversed. The trial court’s judgment is affirmed. Burris wins
How to protect from future purchasers:
by recording property interest. Recording though is not just good enough (you are not protected). Must record in a certain way: with sufficient specificity
Notice Standards (actual and constructive)
Actual Notice: Personal Information or knowledge about the issue
Constructive Notice: arises by presumption of law from the existence of certain facts, even if notice was not actually received
What does it mean to describe a real estate conveyance with “sufficient specificity”?
- The property conveyed is described in a way that an ordinary person could identify what is being bought and sold
- The property conveyance can be discovered by reasonable diligence
-Once sufficiently specified, law should presume others should have seen it even if in their due diligence they did not actually see it
-Conveyance will give others constructive notice, thereby protecting first purchasers from subsequent claims
-If no constructive notice because you did not give specificity, it will be vulnerable to subsequent property claims
Why does recording a deed that gives others constructive notice of your purchase protect you from subsequent sales?
Because you cannot be a bonafide purchaser if you have actual or constructive notice of a defect in the seller’s title (just because you have actual or constructive notice and the fact pattern says he is a NBFP he is still NBFP)*******
How can recipients of general deeds protect themselves?
Take possession of the property
File an affidavit with a specific description of the transaction in the county records
Types of notice jurisdiction rules
notice statute, race statute, notice-race statute (None of these rules apply to donees (only purchasers for consideration)
Notice Statute rules
- Subsequent Purchasers are not protected if they have:
-Actual or
-Constructive notice of the prior sale after exercising reasonable diligence
-What Texas uses
-Prioritize property rights to those who have done their due diligence
-If two people fight over a property, the person who participated in investigation and could not find any prior defects, did due diligence beats second person
Race Statute Jurisdiction Rules
- First to record wins
- If no party records, first to purchase wins
Favors administrability (easiest to settle)
Spectrum: fairness to admin
Notice Race Statute Jurisdiction rules
Subsequent purchasers are not protected unless:
They recorded first AND
They had no notice of prior purchases after exercising reasonable diligence
Allen v. Allen
Sale 1: Ethel transferred to Allen her son and her as joint tenants (joint tenancy with right of survivorship means the other person will take all when the other dies, will not go to heirs)
Transaction was recorded
Sale 2: 4 months later Ethel transferred to trust
Jurisdiction was Notice
Since notice jurisdiction, Harold does not need to record to have superior interest, just cannot have notice (he looked around nothing was there he did it the right way)
Trust argument was way deed was recorded was ineffective (did not follow each of the rules as required)
Trust wins at trial court, affirmed at appeals
Rule of Law
If a deed conveying land is not properly acknowledged, the deed is neither entitled to be recorded nor sufficient to give constructive notice.
