Real Estate set 9

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? response - incorrect A The friend, regardless of the type of recording statute. B The friend, because she recorded prior to the investor's recording. C The investor, regardless of the type of recording statute. D The investor, because it took by warranty deed rather than quitclaim deed.

A The friend, regardless of the type of recording 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, therefore, had record notice and cannot claim the protection that these types of statutes provide for subsequent purchasers for value who take without notice. Thus, (A) is correct and (C) is incorrect. The fact that the friend is merely a donee rather than a BFP does not mean that her recording has no effect. It is only the subsequent taker who has to be a BFP rather than a donee to utilize the recording statute. The prior grantee, regardless of her status, protects her interest by recording because it prevents anyone from becoming a subsequent BFP. (B) is incorrect because, as noted above, the friend will prevail under any type of recording act, but not necessarily because she recorded prior to the investor's recording. If the jurisdiction has a notice statute, whether the friend recorded prior to the investor's recording is irrelevant. Rather, it is the fact that the friend recorded prior to the investor's purchase that gives the friend superior title in a notice jurisdiction, because the investor would have record notice of the conveyance and thus would not qualify as a BFP. (D) is incorrect because the quitclaim/warranty deed distinction does not affect who has title to the land; that status merely affects the parties' respective causes of action and ability to recover against the landowner.

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? response - incorrect A Yes, in a race-notice jurisdiction. B Yes, regardless of the type of recording statute. C No, in a race-notice jurisdiction. D No, because the buyer was a bona fide purchaser for value who bought the land before the bank recorded its mortgage.

A Yes, in a race-notice jurisdiction. 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. (C) is wrong because the buyer did not win the race to record, which is one of the two requirements for a subsequent purchaser to prevail in a race-notice jurisdiction. (B) is wrong because the buyer would not take the land subject to the bank's mortgage in a pure notice jurisdiction. Under a notice recording act, a subsequent bona fide purchaser with no actual or constructive notice prevails over a prior grantee or mortgagee who has not recorded at the time of the conveyance to the subsequent purchaser. (D) is not the best answer because it would only be true in a notice jurisdiction. The buyer would take subject to the mortgage in a pure race or race-notice jurisdiction because the mortgage was recorded before the buyer's deed (even though the buyer did not have notice of the mortgage when he bought the land).

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? response - correct 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.

B The creditor prevails, because the investor was not a purchaser for value without notice of the creditor's interest. 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 bona fide purchaser 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 bona fide purchaser. If the grantor transfers his after-acquired title to an innocent purchaser for value, the bona fide purchaser 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 bona fide purchaser, 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 bona fide purchaser. 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 bona fide purchaser, and (C) is an incorrect choice. (A) is incorrect because, although the son is estopped to deny that he acquired title for the benefit of the creditor, he could have conveyed valid title to a subsequent purchaser for value who had no notice of the creditor's interest. Therefore, it is not exactly correct to say that the son had no title to convey. (D) is incorrect because the investor will not prevail. It is true that under the recording acts the creditor's deed was not in the chain of title, but the investor still does not qualify as a bona fide purchaser. The investor is on inquiry notice arising from the creditor's possession of the property.

A homeowner leased his home to a tenant for three 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. Three months after the conveyance to the buyer, the homeowner conveyed the property to his cardiologist, who knew nothing of the prior conveyance to the buyer. The homeowner took the cardiologist's money and skipped town. 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? response - correct A Yes, because the tenant is estopped from denying a landlord-tenant relationship with the cardiologist, since she had paid rent for many months. B Yes, because the cardiologist was a bona fide purchaser when he bought the property from the homeowner. C No, because the cardiologist failed to record his deed to the property. D No, because the cardiologist does not have good title to the property and cannot demand rent from tenants in possession.

B Yes, because the cardiologist was a bona fide purchaser when he bought the property from the homeowner. The cardiologist will likely win. When the cardiologist bought the property from the homeowner, he was a bona fide purchaser who gave value and who had no notice of the earlier sale to the buyer. 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. (A) is incorrect. Simply because a tenant pays rent to someone who the tenant thinks owns the property does not create an estoppel requiring the tenant to continue paying rent to that person. The cardiologist will win, but not for this reason. (C) is incorrect because it is not necessary for a grantee to record a deed to give the grantee legal title to the property. Recordation is necessary only to protect against subsequent purchasers from the same grantor. Unrecorded deeds are perfectly valid as long as the recording act does not dictate otherwise. (D) is incorrect. The cardiologist did in fact have good title to the property because, as a bona fide purchaser, he was protected by the notice recording act.

Which of the following parties cannot be protected as a bona fide purchaser of land? response - incorrect A A donee from a bona fide purchaser of the land. B A purchaser from an heir to the land. C A devisee of the land. D A mortgagee of the land.

C A devisee of the land. A devisee of the land cannot be protected as a bona fide purchaser ("BFP") of land. Notice and race-notice recording acts protect BFPs from prior unrecorded conveyances of the same property. A BFP is a purchaser who takes land without notice of a prior instrument and pays valuable consideration. Donees, heirs, and devisees are not BFPs because they do not give value for their interests; i.e., they are not purchasers. A mortgagee of the land can be protected as a BFP of land. Mortgagees for value (but not those who receive a mortgage only as security for a preexisting debt) are treated as purchasers, either expressly by recording acts or by judicial classification. Thus, mortgagees for value who take without notice can be protected as BFPs. A purchaser from an heir to the land can be protected as a BFP of land. Donees, heirs, and devisees themselves are not purchasers and thus cannot be BFPs. However, one who buys land from such a party will be protected against a prior unrecorded conveyance from the record owner. A donee from a bona fide purchaser of the land can be protected as a BFP of land. Under the shelter rule, anyone who takes from a BFP will be treated like a BFP (i.e., will prevail against any interest her transferor would have prevailed against). This rule exists to protect the BFP by preserving his ability to convey property. It applies even when his transferee had actual knowledge of a prior unrecorded interest or did not take for substantial pecuniary value (i.e., was a donee). However, a non-BFP who previously had title cannot acquire BFP status by selling the land to a BFP and then repurchasing it.

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, who owns Blackacre? response - correct A A, under every recording act B B, under every recording act C B, under a notice statute D B, under a race or race-notice statute

C B, under a notice statute If both parties paid valuable consideration for the land, and neither knew of the other's deed, B owns 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. B would not own Blackacre under a race or race-notice statute (and thus not under every recording act). Under a race statute, the first party to record wins, regardless of whether she has notice of a prior conveyance. Under a race-notice statute, a subsequent BFP prevails over a prior grantee only if she records before the prior grantee. Here, A prevails over B under these acts because B did not record first. Because B prevails over A under a notice statute, A does not own Blackacre under every recording act.

Which of the following does not charge a purchaser of realty with inquiry notice? response - incorrect A The absence of his grantor's deed from the chain of title. B His deed's reference to an unrecorded instrument. C His grantor's use of a quitclaim deed. D The presence of a third party on the property.

C His grantor's use of a quitclaim deed. His grantor's use of a quitclaim deed does not charge a purchaser of realty with 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. The presence of a third party on the property charges a purchaser of realty with inquiry notice. A title search is not complete without an examination of the property. A purchaser is charged with knowledge of whatever an inspection of the property would have disclosed and with anything that would have been disclosed through an inquiry of the possessor. His deed's reference to an unrecorded instrument charges a purchaser of realty with inquiry notice. If a recorded instrument makes reference to an unrecorded transaction, the grantee is bound to inquire of the nature and character of the unrecorded transaction. The absence of his grantor's deed from the chain of title charges a purchaser of realty with inquiry notice. When a grantor's title documents are unrecorded, the grantee is required, at his peril, to insist on seeing the deed and requiring it to be recorded.

A recording act that provides: "Any 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," is a __________. response - correct A statute of frauds B race statute C notice statute D race-notice statute

C notice statute A recording act that provides: "Any 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," is a notice statute. Under a notice statute, a later purchaser of land will prevail over an earlier grantee if she takes without actual or constructive (e.g., record) notice of the earlier grant. The above language is not a race-notice statute. An example of a race-notice statute is: "Any 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, whose conveyance is first recorded." Under a race-notice statute, a later purchaser will prevail over an earlier grantee only if she takes without actual or constructive (e.g., record) notice of the earlier grant and records before he does. The above language is not a pure race statute. An example of a pure race statute is: "Any conveyance of an interest in land, other than a lease for less than one year, shall not be valid against any subsequent purchaser whose conveyance is first recorded." Under a race statute, notice is irrelevant. The first party to record, regardless of the date of her conveyance, wins. The Statute of Frauds is not a recording act. Every conveyance of an interest in land with a duration long enough to bring into play a particular state's Statute of Frauds (typically one year) must be evidenced by a writing, signed by the party to be charged.