Race-Notice, Inquiry Notice, and a Donee in the Chain
The jurisdiction's statute reads: 'No conveyance is valid against a subsequent purchaser for value and without notice whose conveyance is first recorded.' Owen deeds Blackacre to Alice by warranty deed; Alice does not record. Alice leases Blackacre to Carl for five years at market rent; Carl moves in and builds a large barn visible from the road. Owen, short of cash, deeds Blackacre to Betty for $5,000; Betty never visits the property and records immediately. Betty then deeds Blackacre to her son David 'as a gift'; David records. Three weeks later, Alice records. David sues Carl to evict him, arguing that Carl's lease is invalid because Alice never recorded before Betty did.
1. Who prevails between Alice and Betty, and why?
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This is a race-notice statute, so a later purchaser wins only if it takes (i) for value, (ii) without notice, and (iii) records first. Betty paid value and recorded first, but she fails on notice.
Notice comes in three forms: actual, record, and inquiry. Alice's deed was unrecorded, so the record gave Betty nothing, and Betty had no actual knowledge. Inquiry notice decides the case: possession of land by someone other than the grantor puts a purchaser on notice of whatever interest the possessor holds, and a purchaser who fails to inquire takes subject to it. Carl was living on Blackacre and had built a barn visible from the road. Betty could not have missed it and never even visited. Had she asked Carl, he would have produced his lease from Alice, which would have led directly to Alice's deed.
Betty is therefore charged with notice of Alice's interest and is not a bona fide purchaser. She takes subject to Alice's prior conveyance. Under a race-notice statute, Alice does not even need to have recorded first to defeat a later purchaser who took with notice.
2. Does David fare any better than Betty, given that he recorded before Alice and paid nothing? Would the answer change if David had paid $10,000?
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David takes nothing better than Betty had. Two doctrines apply and point the same way.
First, donees are not protected by the recording act. Recording statutes protect 'purchasers for value'; a gift grantee gives no value and cannot qualify in his own right.
Second, the shelter rule lets a transferee step into the shoes of a prior bona fide purchaser - even a donee, even one with notice - but only if the transferor actually was a BFP. Betty was not, because Carl's open possession gave her inquiry notice. A defective chain is not laundered by passing title to a donee.
Paying $10,000 would change nothing: David would still hold only Betty's title, which is void as against Alice, and adequacy of consideration does not create BFP status where notice is present. David's earlier recording is immaterial, because recording protects only those whom the statute protects.
If Betty had been a BFP, the result would flip: David would shelter under her protection and would defeat Alice even as a donee.
3. Can David evict Carl? What is Carl's position after Alice records?
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Carl remains in possession for three reasons.
Alice's title is good as against Betty and David. Carl's landlord is still Alice, and his lease is intact.
Leases bind successors with notice. Even a grantee who takes by a valid deed takes subject to outstanding leases of which he has notice, and a lease is a conveyance for recording-act purposes. David had inquiry notice of Carl's occupancy - exactly as Betty did - and a grantee from a non-BFP takes with the notice his grantor had. Recording the deed does not purge that notice.
Recording statutes allocate title between competing grantees. They do not authorize ejectment of a tenant whose lease predates the rival deed and whose possession was open and visible.
David's ejectment action fails. Carl stays for the balance of the five-year term, and his rent obligation runs to Alice. Alice may also quiet title against David, whose deed is void as against her interest.