Real Property Recording System

• Title assurance provides protection for the title.
• Title insurance assures the title.
• The recording system ensures no surprises in a title examination.

The Recording System

• Deals with property and the problem of notice.
• Uses mechanics such as the tract index for recording.
• One must look up a parcel to see all associated rights using the grantor-grantee index.
• Essential to look for the person and to find the chain of title.
• Involves acquiring property from a seller.
• A deed can be a cloud on the title.
• Law incentivizes recording of real estate rights, with potential loss of rights if not recorded.
• The presumption in America is that property is owned as an investment.
• Every state has a recording act that changes common law.

Functions of the Recording System

• Pertain to buyers both before and after a sale.
• Affects bonafide purchasers

Bonafide Purchasers

• Someone who conveys to A but does not record.
• Someone who conveys to B, a BFP (Bonafide Purchaser).
• Common law dictates "first in time, first in right" however recording statutes may allow B to prevail against A, depending on the statute.
• A bonafide purchaser has no notice of prior adverse interest.
• A purchaser has paid valuable consideration for their property rights.
• Prior in time is superior in right unless a later party meets recording statute requirements.

Luthi v. Evans (Kan. 1978)

• Key parties include Owens, Tours, and Burress.
• The claim is between Tours and Burress.
• Profit aprendre refers to profits from a lease that eventually terminate when there is no more oil.

Oil and Gas Leases

• (RECORDED) O → T = 7 Express oil and gas leases AND a mother hubbard clause(BARE, There are no true property rights here).
• O to B refers to the Kufal lease.
• Due diligence is preferred within reason.
• A mother hubbard clause does not put the world on notice if there was a gap in time because he did not know if Owens owned the kafal lease during the time she conveyed it to Tours.
• Risk is put on Tours due to the benefit they receive from the mother hubbard clause.
• One must find out other property rights and put the world on notice.
• Subsequent purchasers are not expected to go beyond record, so the person recording must keep records comprehensive for Tours.
• Inquiry notice requires a reasonable purchaser to ask about relationships.
• If there was a GWD between O → T then T can get damages from O
• Mother hubbard clause is only valid and enforceable with the parties in which the written instrument binds.
• Deals with parties vs the world and the government survey system pg. 689-92
• Includes a baseline and Principal Meridian.
• Square mile sections are numbered consecutively, starting upper right to left, dropping to the square directly below.
• Information starts specific, then broad.
• Protection extends to bona fide purchasers and kinds of notice.
• Any kind of notice bars bonafide status.

Kinds of Notice

• Actual notice is derived from the facts.
• Constructive notice comes from record in the records office.
• Inquiry notice is another form.

Orr v. Byers (Cal. App. Ct. 1988)

• This case involves a dispute over real estate, involving a 3rd party Elliot.
• O v. E results in O winning, having a judgement against E and a judgement lien on all of E's property from the start of the case.
• The prevailing party writes the order with the order reviewed by the judge's clerk.
• Misspelling E's name in the order matters.
• ELLIOT → ORR (RECORDED)
• ELIOT → ORR (RECORDED)
• Purpose is to ensure the world is on notice.
• Byers is a BFP (Bonafide Purchaser).
• Majority Rule uses Doctrine of Idem Sonans i.e correct, similar sounds between the correct pronunciation and the pronunciation of what the records says.
• Minority Rule sees actual spelling enough to not give constructive notice.
• American law of property (Modern trend) – Only constructive notice if misspelling is with SAME first letter.

Problem 2 PAGE 696

• Rebecca Welton owns Richmondacre, and the record title is in her name.
• Rebecca marries Rupert Mannion and gives a mortgage on Richmondacre to Ted, signing the mortgage “Rebecca Welton Mannion."
• The mortgage is indexed under the name of “Mannion."
• Subsequently Rebecca divorces Rupert, resumes using her maiden name, and sells Richmondacre to Roy, signing the deed, "Rebecca Welton.
• Roy has no actual notice of Ted's mortgage.
• The question becomes in a jurisdiction where indexing is a part of the record, does Roy prevail over Ted?
• Mannion → Ted (RECORD)
• Welton → Roy (RECORD)
• T v. R = R wins if Rebecca signed the mortgage “Rebecca Welton-Mannion," and that the mortgage had been indexed under the name of “Welton-Mannion.” . Constructive notice to Roy? indexing under hyphenated name insufficient to provide constructive notice of claims against either of the unhyphenated versions of the debtor's name).
• Welton-Mannion → T (RECORDED)
• A HYPHEN MAKES TWO SEPARATE WORDS AND MAKES IT A SINGLE WORD AND IT DOES NOT SOUND THE SAME
• Welton → Roy (RECORDED)
• No Constructive Notice
• Now suppose that after the divorce and before the conveyance to Roy, Jamie obtained a judgment against Becky Welton. The judgment created a lien on all Becky's property, and the judgment was filed and indexed under the name of “Becky Welton." ; The title examiner hired by Roy does not search under the name “Becky Welton."
• Does Jamie prevail over Roy?
• Is the title examiner liable?
• B, Welton → Jamie (Recorded)
• R, Welton → Roy (Recorded)
• Common diminutives = Notice, NOT the same as nicknames and does not provide notice.

Types of Recording Acts

• Race: Uses only the Race system and is followed only in 2 states

Race System

• First to record prevails.
• O to A (Does not record)
• O to B (Does not record)
• B records
• A records
• A v. B = B wins

Notice System

• In 24 states, a subsequent bonafide purchaser w/o notice prevails, regardless of whether she records.
• O to A (DNR)
• O to B (DNR) (NO ACTUAL NOTICE)
• A records
• A v. B = B wins because they are the SUBSEQUENT Bonafide purchaser.
• Race-Notice in 24 states, where a subsequent purchaser prevails only if she is a Bonafide purchaser and she records BEFORE the prior instrument is recorded
• O to A (DNR)
• O to B (DNR) (No notice)
• B records
• A records

Chain of Title Rule

• Specifies requirements for valid recording.
• Aka Zimmer rule
• An interest in land is not validly recorded unless all the deeds in the chain of title are also validly recorded.

Shelter Rule (Applies to notice & race-notice)

• Provides that someone even if they are not bonafide will be treated as Bonafide IF they receive the property from someone that is Bonafide.
• O to A (DNR)
• O to B (DNR)
• A records
• B→ C (Has constructive record notice when he looks up the title)
• A v. C = C wins

Recap Question

• Race: Raven
• Notice = Tyra
• Race-Notice = Tyra

Page 713 - Scenario 5(a) &(b)

• (a) O conveys to B, who does not record.
• O conveys to A, who does not record.
• B conveys to C, who records.
• A conveys to D, who records and D is shown the deed from O to A.
• D is still a Bonafide purchaser because it is NOT a prior ADVERSE interest, with no reason to believe A didn't have the right to convey.
• O conveys to E, who records.

Relevant Notice

• Claimants: C, D, E
• E is the most subsequent person and is also Bonafide.
• If he looks up O, he won't find any record that O gave away his rights.
• He wouldn't be expected to look further.

Relevant Race - Notice

• C is not validly recorded because all chain of title deeds should have been validly recorded, it is not a valid record for him to win.
• D is not validly recorded because all chain of title deeds should have been validly recorded.
• E wins

Scenario (b)

• O conveys to A, who does not record.
• O conveys to B, who knows of the deed from O to A and does not record; B is NOT a BFP.
• O conveys to C, who does not record.
• B conveys to D, who does not record (D is shown the deed from O to B).
• The key is that it is not a prior ADVERSE interest because he should have expected that making D a BFP.
• He was expected to lookup O's name.
• A records.
• B records.
• D records.
• Claimants: A, D, C

Notice

• D would prevail because A recorded AFTER D received his property

Race-Notice

• A would prevail because D is not in the record after a certain point in time.
• On what covenants of title could each of them bring damages?
• If, after D records, A conveys to E, who promptly records, who prevails in a notice jurisdiction? In a race-notice jurisdiction?
• Persons protected by the recording system: equitable conversion, waiver, indexing and recordation.

The Indexing and Recordation

• Aspects of the indexing and recordation: Majority Rule and Minority Rule

Balance in the Notice Requirement

• Structure of financing

Inquiry Notice

• Record
• Possession
• Use

Harper v. paradise

• Maude Harper (fee simple) this is a replacement deed.
• This is a replacement deed
• They would have none of the prior adverse interest because it is Maude Harpers childrens remainder
• Standard = would the reasonable purchaser have inquired further?
• The due diligence we expect would have required them to ASK the question NOT to get the right answer.
• Not Bonafide because of inquiry notice and Maudes children will win
• Trying to protect what the original intent was
• Are there any unanswered questions that you would have expected to have followed up
• Record does not equal notice

Record and inquiry

• Questions
• Due diligence

Page 719

• One of the units was owned
• Not Bonafide because assigned notice to the bank because they should have inspected the premises and ASK questions.
• Assigned inquiry notice to the bank
• Prior Purchasers v. Subsequent Purchasers
• You own the entire building and there are four units that
• If the possession is consistent with what is on record then you do not have to ask each individual tenant what their expectations are. (HALF STATES)
• Even if there is nothing inconsistent you have to ask the jurisdictions.
• Marketable Title Acts Example
• Whichever did is operative is however far back you have to go
• 2000-40 = 1960.

Problem 1 Pg. 722