Race-Notice Recording and Inquiry Notice from Possession
On January 5, Owen conveyed Blackacre to Alice by warranty deed. Alice paid $250,000, moved into the house, and openly occupied it, but she did not record. On February 1, Owen conveyed the same parcel to Ben by warranty deed for $260,000. Ben did not inspect the property, had no actual knowledge of Alice, and recorded on February 2. On March 1, Alice conveyed Blackacre to Carla by warranty deed for $270,000. Carla knew Alice was in possession but had no actual knowledge of Ben. Carla recorded on March 2. The jurisdiction is a race-notice state: a subsequent purchaser prevails only if it takes without notice and records first. The recording index is grantor-grantee. Ben’s title search covered Owen’s name from the date Owen acquired title through February 1, but Ben never visited the property. Carla’s lawyer searched the index and saw no deed from Owen to Alice.
1. Who has priority between Alice and Ben? Discuss record notice and inquiry notice.
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Alice probably prevails over Ben. Ben recorded first and had no actual or record notice of Alice, because Alice’s deed was unrecorded. But Alice was in open possession. Possession of land is inquiry notice: a purchaser who fails to inspect may be charged with knowledge of the possessor’s claimed interest. Ben did not visit the property, so he is charged with what a reasonable inspection would have revealed. That prevents Ben from being a bona fide purchaser without notice as to Alice. In a race-notice state, Ben’s recording does not protect him against an interest of which he had inquiry notice. Alice’s prior unrecorded deed therefore beats Ben’s later recorded deed.
2. What is Carla’s status? Does she take free of Ben’s deed, or does Ben’s recorded deed give her constructive notice?
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Carla takes Alice’s interest. Carla had actual knowledge of Alice’s possession, but that knowledge is consistent with Alice’s ownership; it does not give Carla notice of Ben. Carla’s lawyer searched the index and found no deed from Owen to Alice, so Carla had no record notice of Alice’s deed, and Ben’s deed was recorded before Carla bought. That record gives Carla constructive notice of Ben’s deed, however, because Ben’s deed was in the chain from Owen and was recorded before Carla’s purchase. The key is priority: if Ben is defeated by Alice because of inquiry notice, Ben has no superior interest to pass to Carla. Carla steps into Alice’s priority and owns the parcel, subject to any claim Ben may assert against Owen for breach.
3. Would the result change if Alice had moved out before Ben’s purchase and the house had been vacant?
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Yes. If Alice had vacated and the property was vacant when Ben bought, Ben would have no inquiry notice from possession. Ben had no actual notice, and Alice’s deed was unrecorded, so Ben would be a bona fide purchaser who recorded first. Under the race-notice statute, Ben would prevail over Alice. Carla would then take from Alice, whose interest had already been defeated by Ben. Carla could not improve Alice’s position, even if Carla herself lacked notice of Ben, because Alice had nothing left to convey. Ben’s recording before Carla’s purchase would also give Carla constructive notice of Ben’s deed. The presence or absence of open possession is therefore decisive.