Illinois Bona Fide Purchaser, Possession, Duty Of Inquiry

The following compilation of cases is an extended version of the list of Illinois cases contained in the February 1, 2009 post, Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire, that address the issue of the effect of possession by an occupant of real property by one other than the seller/vendor on a prospective purchaser's status as a bona fide purchaser.

As stated in my February 1 post, these cases are presented here to remind the reader of the importance of giving this issue the serious consideration it deserves when attempting to undo/unwind/void an abusive real estate transaction (ie. foreclosure rescue sale leasebacks, fraudulent inducement in the execution of a deed, forgeries, other real estate swindles) where, after scamming or otherwise abusively relieving an unwitting homeowner of his/her title, the scammer either sells the property to an unwitting third party, or encumbers the property with a loan from an unwitting mortgage lender, neither of whom participated in the abusive transaction with the homeowner, nor having any actual knowledge thereof. Voiding the deeds and mortgages in these cases (in situations where the instruments are voidable, as opposed to being absolutely void - "void ab initio") will turn on whether the subsequent third party purchaser or encumbrancer, despite lacking in actual knowledge of the fraud or other abusive transaction, can otherwise be charged with notice of the fraud, thereby making bona fide purchaser/encumbrancer status unavailable to them and, consequently, subjecting the deeds or mortgages to being voided/rescinded/set aside.

(In a related post that addresses the distinction between deeds that are absolutely void (void ab initio), and deeds that are merely voidable, see Unwinding An Abusive Or Fraudulent Real Estate Transaction? Determining If The Deed Is Void, Or Merely Voidable?)

While certainly not purporting to be an exhaustive list of cases dealing with the issue of possession and the duty to inquire when attempting to establish (or attack) one's status as a bona fide purchaser, the following compilation of case law citations specifically address this issue.

One caveat: Any serious consideration of the bona fide purchaser doctrine should, first and foremost, begin with a reading of the state recording statutes, as they are currently constituted. Since there are over 50 jurisdictions in the U.S., each with their own recording statute, I certainly can't address them here (for the Illinois recording statute, see 765 ILCS 5/30 of the Illinois Conveyances Act). But after reading your state's recording statutes, you may want to consider how these cases, if at all, fit into making the legal analysis necessary when attempting to undo/unwind/void an abusive real estate transaction by attacking the bona fide purchaser status of a subsequent purchaser or encumbrancer/mortgage lender. Keep in mind that, even in the event that the Illinois state legislature has passed laws subsequent to these court rulings that either modifies or renders them obsolete in Illinois, the persuasiveness of the logic that underlies them may still be of value to those involved in litigation outside of Illinois (don't lose sight of the fact that the doctrine of bona fide purchase is not a creature of state statute, but one of English common law, which is the starting point for this doctrine, not only as generally applied in Illinois, but as generally applied in Illinois' sister states as well).

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Illinois Supreme Court Cases

Ambrosius v. Katz, 2 Ill. 2d 173; 117 N.E.2d 69; 1954 Ill. LEXIS 321 (Ill. 1954):

(Editor's Note: This case could be extremely helpful towards undoing a sale leaseback, foreclosure rescue scam or other real estate swindle where title or home equity is ripped off.

This case provides direct support for the proposition that a grantor who remains in possession [ie. a "grantor-in-possession"] of the property [ie. typically, the screwed-over homeowner], even after delivery and recording of the deed, is notice against subsequent purchasers [ie. typically, the foreclosure rescue operator or a straw buyer acting as the operator's alter ego] and mortgagees [ie. typically, the mortgage lender/financial institution that, albeit unwittingly, finances the scam and provides the funds that constitutes the equity strpping proceeds ending up in the scammer's pocket] of the grantor's possible interest in the property.)

• A purchaser is bound to inquire of the person in possession by what tenure he holds and what interest he claims in the premises. It is well settled that whatever is sufficient to put a party on inquiry is notice of all facts which pursuit of such inquiry would disclose, and without such inquiry no one can claim to be an innocent purchaser as against him whose possession raises the inquiry. (Bryant v. Lakeside Galleries, Inc. 402 Ill. 466; Miller v. Bullington, 381 Ill. 238.)

• This rule protects a grantor whose grant was induced by fraud, but who, remaining in possession, can show such possession as notice of his equity against a subsequent grantee. (White v. White, 89 Ill. 460; Ronan v. Bluhm, 173 Ill. 277.) The purchaser cannot excuse himself by merely obtaining information as to how possession was obtained or inquiring of the grantor or of other persons as to the rights of the person in possession, but he is bound to inquire of the person in possession by what tenure he holds and what interest he claims. Open possession is sufficient to charge such purchaser with notice of all legal and equitable claims of the occupant. German-American Nat. Bank v. Martin, 277 Ill. 629.

Bryant v. Lakeside Galleries, Inc., 402 Ill. 466; 84 N.E.2d 412 (Ill. 1949):

• A purchaser is bound to inquire of the person in possession by what tenure he holds and what interest he claims in the premises. (German-American Bank v. Martin, 277 Ill. 629.) While appellant urges that she was entirely ignorant of appellee's possession, we have held that actual notice of possession is immaterial, if the facts were sufficient to put appellant on inquiry. (Mallett v. Kaehler, 141 Ill. 70.) The facts here were, in our opinion, sufficient to put appellant on inquiry. It is well settled that whatever is sufficient to put a party upon inquiry is notice of all facts which pursuit of such inquiry would lead to, and without such inquiry no one can claim to be an innocent purchaser as against him whose possession raises the inquiry. (Carnes v. Whitfield, 352 Ill. 384; Whitaker v. Miller, 83 Ill. 381.)

Bullard v. Turner, 357 Ill. 279, 192 N.E. 223 (Ill. 1934):

• The public records of conveyances and instruments affecting the title to real estate are established by statute to furnish evidence of such title, and a purchaser may rely upon such records in security unless he has notice, or is chargeable in some way with notice, of a claim, estate or interest inconsistent therewith. (Vombrack v. Wavra, 331 Ill. 508).

• Under the system of recording the evidences of title to real estate in force in this State, the actual occupancy of land is equivalent to the record of the instrument under which the occupant claims so far as notice to subsequent purchasers and incumbrancers is concerned. McDonnell v. Holden, 352 Ill. 362; Garlick v. Imgruet, 340 id. 136; Moore v. Machinery Sales Co. 297 id. 564; Merchants and Farmers State Bank v. Dawdy, 230 id. 199; Coari v. Olsen, 91 id. 273. A purchaser or incumbrancer is bound to inquire of a person in possession of real estate by what right he holds possession and what interest he claims; and in case the purchaser or incumbrancer fails to make such inquiry, the law charges him with constructive notice of all those facts which he would have ascertained respecting the claim or title of the person in possession had inquiry been made of him. (Nelson v. Joshel, 305 Ill. 420; Williams v. Brown, 14 id. 200; White v. White, 89 id. 460; Coari v. Olsen, 91 id. 273; Ford v. Marcall, 107 id. 136; Tillotson v. Mitchell, 111 id. 518; Rock Island and Peoria Railway Co. v. Dimick, 144 id. 628; German-American Nat. Bank v. Martin, 277 id. 629; Moore v. Machinery Sales Co. 297 id. 564).

McDonnell v. Holden, 352 Ill. 362, 185 N.E. 572 (Ill. 1933):

(See Editor's Note for Ambrosius v. Katz, above for situations involving a grantor-in-possession. Note further that this case deciding that a subsequent purchaser acquired its interest with notice of the rights of the grantor in possession occurred in the context of the grantor in possession's claim of equitable mortgage):

The following text is the court's statement of the relevant Illinois law and its application to the specific facts in the case (bold text is my emphasis, not in the original):

• While, generally, mere inadequacy of price will not be considered as sufficient to set aside a deed or to have a deed declared a mortgage or the basis of a trust, yet gross inadequacy of price is always considered as an evidentiary fact. Totten v. Totten, 294 Ill. 70.

***

• Under the system of recording the evidences of title to real estate in force in this State, the actual occupancy of land is equivalent to the record of the instrument under which the occupant claims, so far as notice to subsequent purchasers is concerned, (Garlick v. Imgruet, 340 Ill. 136,) and a purchaser is bound to inquire by what right or title the occupant holds, and the premises are taken by the purchaser subject to that title or interest, whatever it may be. (Moore v. Machinery Sales Co. 297 Ill. 564; Coari v. Olsen, 91 id. 273; Carr v. Brennan, 166 id. 108.) The rule is, that where one purchases land of another which is at the time of the purchase in the actual, open, exclusive and visible possession of a third person, such possession is constructive notice to the purchaser of all the rights whatever [***9] of the possessor of the land at the time of the purchase. (Union Bank of Chicago v. Gallup, 317 Ill. 184; Mauvaisterre Drainage District v. Frank, 313 id. 431.)

• Where a grantor does not deliver possession to the grantee but remains in the open, exclusive possession of the premises, a party taking a deed from the grantee during such occupancy is charged with notice of all the rights and equities of the first grantor. (Ronan v. Bluhm, 173 Ill. 277; Bruner v. Manlove, 3 Scam. 339.)

• In Dyer v. Martin, 4 Scam. 146, it is said: "Martin's possession was notice to all the world that he had some interest in the land, and whoever bought the land while that possession continued, took it subject to that interest, whatever it might be. -- 1 Story's Eq. 388-9; 2 Vesey, 437; 13 Vesey, 118; 2 Paige, 300; 3 Paige, 421; 16 Vesey, 249; 5 Jones' Ch. r. 29." The main questions, therefore, to be decided are whether or not, at the time of the making of the deeds, appellant had an interest in the premises, and if so, the extent of such interest.

• Appellee claims that Haley's deed from the master in chancery could not be considered as a mortgage as in making such purchase he used his own money, and that at the time of the making of the deed the relation of debtor and creditor did not exist between Haley and appellant. Where title is acquired by a purchaser through a master's deed, such deed will not be considered as a mortgage where at the time of such purchase the party claiming to be the mortgagor had permitted the period of redemption to expire and no indebtedness existed between him and the purchaser. (Eames v. Hardin, 111 Ill. 634.) Title acquired by the purchase of a certificate of sale at the request of the mortgagor, and a master's deed thereon, will not be considered as a mortgage where at the time of such purchase the mortgagor's period of redemption had expired and no indebtedness existed between him and the purchaser. (Burgett v. Osborne, 172 Ill. 227.)

• This rule does not apply in this case, as at the time of the making of the arrangement between appellant and Haley with reference to the property the time of redemption had not expired, and if in pursuance of that arrangement Haley advanced his money to procure the title for appellant's benefit, then the relation of debtor and creditor existed between them and there was an indebtedness which could be secured by a mortgage. A certificate of sale for certain land, and the sheriff's deed based thereon, are not conclusive of their true character, and it is competent to show by parol that they were, by agreement between the owner and the purchaser, intended as a mortgage. (Trogdon v. Trogdon, 164 Ill. 144; Whittemore v. Fisher, 132 id. 243.)

• Where the owner of land which has been sold under an execution made an arrangement with his tenant to redeem the same, and the tenant took an assignment of the certificate of purchase in his own name while acting as the agent of the owner, the landlord, and afterwards procured the sheriff to make a deed to himself instead of to the principal, it seems this inequity will constitute such agent the trustee of the principal. Moore v. Pickett, 62 Ill. 158.

• A fiduciary relation existed between appellant and Haley at the time of Haley's acquisition of the deed from the master in chancery. From the authorities cited it would appear that if at that time Haley was acting as appellee's agent to redeem the premises and instead of redeeming took the title in his own name, the law would raise a trust ex maleficio, and he would hold such title as a mortgagee and not as the owner of the fee. If, on the other hand, while appellant still had title to and an interest in the premises, an arrangement was made between the parties whereby Haley was to loan to appellant the money necessary to acquire the master's deed, and such loan was made, then the proceeds of such loan belonged to appellant, and if Haley acquired the master's deed by using the proceeds of such loan then a resulting trust would arise in favor of appellant. (Kochorimbus v. Maggos, 323 Ill. 510.)

• In that case it was said: "Constructive trusts are divided into two general classes: one consisting of those cases in which actual fraud is considered as equitable ground for raising the trust, and the other of those cases in which the existence of a confidential relation, and subsequent abuse of the confidence reposed, are sufficient to take the case out of the Statute of Frauds. (Miller v. Miller, 266 Ill. 522.) A party may voluntarily assume a confidential relation towards another, and if he does so he cannot thereafter do any act for his own gain at the expense of that relation. (Reed v. Peterson, 91 Ill. 288.)

• A fiduciary relation is not limited to cases of trustee and cestui que trust, guardian and ward, attorney and client, or other recognized legal relation, but it exists in all cases in which influence has been acquired and abused, in which confidence has been reposed and betrayed. The origin of the confidence is immaterial. It may be moral, social, domestic or merely personal. If the confidence, in fact, exists, is reposed by the one party and accepted by the other, the relation is fiduciary, and equity will regard dealings between the parties according to the rules which apply to such relation. (Higgins v. Chicago Title and Trust Co. 312 Ill. 11.) While neither an express trust nor a resulting trust can be created by parol agreement, yet where the transaction is such that at the moment the title passes either a resulting or constructive trust would arise in the absence of a parol agreement, such an agreement will not prevent a trust arising. -- Smith v. Smith, 85 Ill. 189; Wallace v. Carpenter, id. 590; Williams v. Brown, 14 id. 200." This is true, regardless of the existence of actual fraud, undue influence or coercion, and often directly contrary to the intention of the one holding the legal title. Housewright v. Steinke, 326 Ill. 398.

• It is claimed by appellee that if appellant's contentions are correct he is barred from maintaining his suit by reason of laches. Laches cannot be maintained as a defense to this action. During the entire time that Haley held title to the land, and up until the time of the trial, Haley had always recognized appellant's claim to be the owner of the land and that he was holding the title in trust for him. When appellee took a quit-claim deed to the premises from Haley with notice of appellant's possession and claim of title, she acquired by her quit-claim deed no greater interest in the premises than Haley had therein. She acquiesced in appellant's possession of the premises and retention of the proceeds of the rent therefrom, and at no time did she do or say anything to disturb appellant in the enjoyment of his rights until just shortly before the bringing of the suit.

• The decree will be reversed and the cause remanded, with instructions to enter a decree in accordance with the prayer of the bill and the views herein expressed.

Carnes v. Whitfield, 352 Ill. 384; 185 N.E. 819 (Ill. 1933):

• Actual residence is not essential to continuous possession. If the owner is in actual possession and there are continuous acts of ownership there is sufficient notice to the world of his claim of title. (Thomas v. Burnett, 128 Ill. 37; Mallett v. Kaehler, 141 id. 70.) A purchaser is bound to inquire of the person in possession by what tenure he holds and what interest he claims in the premises. (German-American Bank v. Martin, 277 Ill. 629; Williams v. Brown, 14 id. 200.) It is well settled that whatever is sufficient to put a party upon inquiry is notice of all facts which pursuit of such inquiry would lead to, and without such inquiry no one can claim to be an innocent purchaser as against him. (Mallett v. Kaehler, supra; Whitaker v. Miller, 83 Ill. 381.) In the application of this rule this court has repeatedly held that where the first purchaser is in possession it constitutes sufficient notice and protects his rights as effectually as by recording his deed. (Morrison v. Kelly, 22 Ill. 609.) Possession of a tenant is constructive notice of the legal or equitable rights of the landlord under whom he holds and to whom he pays rent, even though the legal title stands in another's name. Gallagher v. Northrup, 215 Ill. 563; Smith v. Heirs of Jackson, 76 id. 254.

German-American Nat'l Bank v. Martin, 277 Ill. 629, 115 N.E. 721 (Ill. 1917):

The following excerpt is the court's statement of the relevant Illinois law that it applied to the specific facts of this case [bold text is my emhasis, not in the original]:

• Whether these deeds were void as to subsequent creditors depends wholly upon whether such subsequent creditors had actual or constructive notice of their execution or delivery. Section 30 of the Conveyance act provides that all deeds, mortgages and other instruments of writing which are authorized to be recorded shall take effect and be in force from and after the time of filing the same for record, and not before, as to all creditors and subsequent purchasers without notice, and that all such deeds shall be adjudged void as to all such creditors and subsequent purchasers without notice until the same shall be filed for record.

• This statute places creditors on the same footing as subsequent purchasers, and the question then is, would a subsequent purchaser have been held, under the facts in this case, to have received notice of the execution and delivery of these deeds? ( Hatch v. Bigelow, 39 Ill. 546.)

• Each case is governed by its own particular facts. While it is sometimes difficult to determine what acts are sufficient to put a party on inquiry, there has never been any departure from the rule controlling the question at it was first stated in this State in Doyle v. Teas, 4 Scam. 202.

• The rule as there announced is as follows: "Where the court is satisfied that the subsequent purchaser acted in bad faith, and that he either had actual notice or might have had that notice had he not willfully or negligently shut his eyes against those lights which with proper observation would have led him to knowledge, he must suffer the consequences of his ignorance and be held to have had notice so as to taint this purchase with fraud in law. It is sufficient if the channels which would have led him to the truth were open before him, and his attention so directed that they would have been seen by a man of ordinary prudence and caution if he was liable to suffer the consequence of his ignorance. The law will not allow him to shut his eyes when his ignorance is to benefit himself at the expense of another, when he would have had them open and inquiring had the consequences of his ignorance been detrimental to himself and advantageous to the other."

• This rule has been consistently followed, repeatedly re-affirmed and never departed from. Among the cases in which it has been followed and applied are Rupert v. Mark, 15 Ill. 540; Merrick v. Wallace, 19 id. 486; Morrison v. Kelly, 22 id. 609; Hatch v. Bigelow, supra; Harper v. Ely, 56 Ill. 179; Babcock v. Lisk, 57 id. 327; Chicago, Rock Island and Pacific Railroad Co. v. Kennedy, 70 id. 350; Bent v. Coleman, 89 id. 364; Morrison v. Miles, 270 id. 41.

• As a part of this rule this court has uniformly held that the actual occupation of land is equal to the record of the deed or other instrument under which the occupant claims; that the purchaser is bound to inquire by what right or title he holds, and that the open, visible possession of premises is sufficient to charge a purchaser with notice of all legal and equitable claims of the occupant. ( Coari v. Olsen, 91 Ill. 273; Dyer v. Martin, 4 Scam. 146; Brown v. Gaffney, 28 Ill. 149; Lumbard v. Abbey, 73 id. 177; Whitaker v. Miller, 83 id. 381; Haworth v. Taylor, 108 id. 275; Mallett v. Kaehler, 141 id. 70; Merchants' Bank v. Dawdy, 230 id. 199.)

• Whatever is notice enough to excite attention and put the party on his guard and call for inquiry is notice of everything to which such inquiry might have led, and every unusual circumstance is a ground of suspicion and prescribes inquiry. Whatever is sufficient to put a party upon inquiry which would lead to the truth is in all respects equal to and must be regarded as notice. One having notice of such facts as would put a prudent man on inquiry is chargeable with the knowledge of other facts which he might have discovered on diligent inquiry. ( Blake v. Blake, 260 Ill. 70.) A purchaser may not excuse himself by merely obtaining information of the character in which the possession was originally obtained, but is bound to inquire of the person in possession by what tenure he holds possession and what interest he claims in the premises. Williams v. Brown, 14 Ill. 200.

Gray v. Lamb, 207 Ill. 258; 69 N.E. 794; 1904 Ill. LEXIS 3204 (Ill. 1904): The Illinois Supreme Court quotes from one of its earlier rulings:

• "Possession, before it can be held to operate as notice of an unrecorded deed, must be 'open, visible, exclusive and unambiguous, such as is not liable to be misunderstood or misconstrued.' * * * Such a possession must be of an open and visible character, which will be calculated to apprise the world that the property has been appropriated and is occupied, and the occupancy must be exclusive. 'If only used and enjoyed in common with others, or with the public in general, it could not be regarded as hostile to others claiming title.'" (Robertson v. Wheeler, 162 Ill. 566.)

Williams v. Spitzer, 203 Ill. 505, 68 N.E. 49 (Ill. 1903):

• The open and visible possession of land by the equitable owner is sufficient to charge a mortgagee with notice of the rights of such owner, and the mortgagee will take the lien subject to the rights of the person in such possession, whatever they may be. (Harris v. McIntyre, 118 Ill. 275; Joiner v. Duncan, 174 id. 252.)

Rock Island & P. R. Co. v. Dimick, 144 Ill. 628; 32 N.E. 291; 1892 Ill. LEXIS 1188 (Ill. 1892):

• The law is well settled in this State, as generally elsewhere, when not changed by the recording acts, that open and exclusive possession of lands, under an apparent claim of ownership, is notice to those subsequently dealing with the title of whatever interest the possessor has in the premises, whether the interest be legal or equitable in its nature. Wade on Notice, sec. 273; Davis v. Hopkins, 15 Ill. 519; Truesdale v. Ford, 37 id. 210; Smith v. Jackson's Heirs, 76 id. 254; Partridge v. Chapman, 81 id. 137.

• It has been held also in this State, that if the grantor remains in possession after conveyance, purchasers from the grantee are affected with notice of the grantor's rights in the land. White v. White, 89 Ill. 460; Ford v. Marcall, 107 id. 136.

• Nor does the doctrine, that the tenant in possession will not be permitted to assert a claim inconsistent with his recorded deed, (Wade on Notice, secs. 298-9; Smith v. Jackson's Heirs, supra), where otherwise applicable, apply to the reservation of an easement or right of way or passage in the land conveyed, where the grantor retains title to adjacent lands, and the easement or right of way is appurtenant to, and essential to the full enjoyment of the adjacent premises, the title to which remains in the grantor. Wade on Notice, sec. 300, and cases cited. Ordinarily, where an easement or right of way only is claimed, in the very nature of the right, the use or occupation of the land will be intermittent and, strictly speaking, not capable of that continuous possession of which lands are ordinarily susceptible. In such cases, notice is necessarily afforded, if at all, by the continued and uninterrupted user, which is analogous to, and in a sense, possession. And the same rule applies, the user must be open, visible and so far exclusive, as to put persons seeing the premises, upon notice thereof.

Ford v. Marcall, 107 Ill. 136, 1883 Ill. LEXIS 237 (Ill. 1883):

(See Editor's Note for Ambrosius v. Katz, above for situations involving a grantor-in-possession):

• The law is, as this court has declared in White v. White, 89 Ill. 460, that when the grantor of real estate remains in possession, all persons acquiring title from the grantee are chargeable with notice of all the claims of the grantor. In this case it appears, from the evidence preserved in the decree, that Elizabeth Bonham and complainant have been in the full, complete, open and notorious possession of the premises, by themselves and tenants, cultivating and occupying the same since before the making of the deed to Susan A. Bonham. That was notice to defendant, before he purchased the land at execution sale, of the equitable rights of the parties in possession. Besides that, he was notified, long before the sheriff's sale, that Robinson had not then, and never had, any interest in the land, and that he only held the legal title for the benefit of Elizabeth Bonham, the real owner. Defendant is in no sense an innocent purchaser,--certainly not in that sense that he can claim the protection of the law. The doctrine of express trust insisted upon has no application to the facts of this case, and need not be discussed.

White v. White, 89 Ill. 460, 1878 Ill. LEXIS 448 (Ill. 1878):

(See Editor's Note for Ambrosius v. Katz, above for situations involving a grantor-in-possession):

• The bill in this case charges that appellant Williams obtained a conveyance of a valuable farm in Kane county, also, a house and lot in Kaneville, in this State, from appellees [ie. Harry White & wife], through fraudulent representations; that the deed was not delivered by them to Williams; that he paid no consideration therefor; that the other appellants [ie. Harry White's children], knowing that the conveyance was obtained by Fraudulent means, and knowing all of the facts, and aiding Williams in procuring the deed, took from him a conveyance of the premises. On a hearing, the court below rendered a decree setting aside the deed from appellees to Williams, and the deed from him to appellant Harry S. White [ie. child of Harry White], and defendants appeal to this court, and ask a reversal.

***

• That Williams was guilty of such fraud as should set aside the conveyance to him, seems to us to admit of none, the slightest doubt. He seems to have played on the fears of appellees, and the more successfully as we infer there had been some talk of procuring the appointment of a conservator. He made false representations as to the purpose of his children, but whether at their instance and for their benefit, or for his own profit, does not appear.

• Here was property worth over $ 20,000, to which he obtained the title, and the only consideration was the future support of a man over seventy years of age. He paid nothing--was able to pay nothing. The relations of the parties were not such as to induce appellee to donate such a sum of money to him, and it appears that such was not the design, as he said he was willing to trust his wife to do what was right by his children, and there was fraud in failing and refusing to convey, as was agreed, to Mrs. White.

• White would never have willingly conveyed the property in this manner to Williams. He only accomplished his purpose by obtaining the deed to him without the consent of the grantors, and then refusing to convey to Mrs. White. The deed was obtained without any consideration paid, and by deceit, fraudulent pretenses, and the most shameful practices in appealing to the fears of the grantors, and the transaction can find no sanction in a court of justice; nor do appellants pretend to justify or maintain its honesty, or claim that the means employed by Williams were fair or honest.

• Then, were appellants [ie. Harry S. White and other siblings] protected as innocent purchasers for value? Most clearly they were not. The grantors were in possession, and all persons purchasing the property must be held charged with all of their claims, legal and equitable. If appellants did not employ Williams to thus procure the title, or if they had no actual notice of his fraud in obtaining the conveyance, they took it charged with notice as though they had seen their father, and he had informed them of all the particulars of the fraud perpetrated by Williams; and it is for the reason that a party purchasing real estate in the possession of another should see him, and learn what claim he has.

• When a person is in the actual possession of lands, the presumption is that he owns or has some legal claim to it, and the person buying it does so subject to his claims.

• It then follows, that as appellees could have set up the fraud against Williams, appellants taking charged with notice, they can urge the fraud with the same effect against them.

Whitaker v. Miller, 83 Ill. 381; 1876 Ill. LEXIS 477 (Ill. 1876):

• But there is another, and perhaps more important, reason, why the alleged purchasers from Miller can not claim the protection accorded to innocent purchasers of real property. When they obtained their interests in these lands, whatever that may have been, complainant was in possession by her tenants, and it was their plain duty to inquire of her what interest she claimed. This they omitted to do. Her possession was notice to all the world of her rights in the premises, and inquiry of her would have disclosed a knowledge of the truth.

• Without inquiry, no one can claim to be an innocent purchaser of lands in the actual possession of another, as against such party. The law charges him with notice of all the rights of the party in possession. The means of information were open to these parties, of which they did not avail, and it is, therefore, idle to insist defendants are innocent purchasers of these lands in any just sense.

Smith v. Heirs of Jackson, 76 Ill. 254; 1875 Ill. LEXIS 615 (1875):

(See Editor's Note for Ambrosius v. Katz, above for situations involving a grantor-in-possession. Note further that this case deciding that a subsequent purchaser acquired its interest with notice of the rights of the grantor in possession occurred in the context of the grantor in possession's claim of equitable mortgage):

• There is nothing unreasonable in a rule which requires a purchaser of land in the open, visible and exclusive possession of a person other than his vendor, to make inquiry as to that person's rights, and to take subject to those rights if he neglects to do so. It has been the rule of all the courts, so far as we are aware, that, in case of a tenancy, the possession of the tenant would amount to constructive notice to a purchaser of such tenant's title.

***

• It is true, this fact was not known to Smith, but he, according to his own testimony, purchased without even going or employing an agent to see the land, or make inquiry of the persons in occupation. Had inquiry been made, the fact would readily have been ascertained that they were paying rents to Jackson. The counsel who appear for him in this court were his legal advisers, he says, and to whom he presented the abstract for examination. It is not likely that counsel of such eminence would have failed to advise him of the necessity of inquiry whether there was any tenancy by others; for the law had been laid down by this court, as early as the case of Pittman v. Gaty, 5 Gilm. 186, that possession by the tenant was the possession of the landlord, and constructive notice of the landlord's title. That is the settled law in Pennsylvania, also in Iowa. See Dickey v. Lyon, 19 Iowa 544, where the principal cases upon both views of the question are collected and ably commented upon.

Flint v. Lewis, 61 Ill. 299; 1871 Ill. LEXIS 63 (Ill. 1871):

• That possession was notice to all the world that he had some interest in the land; and whoever bought it, while that possession continued, took it subject to that interest, whatever it might be. Dyer v. Martin et al. 4 Scam. 146; Brown v. Gaffney, 28 Ill. 149; Riley v. Quigley, 50 Ill. 304. The facts of which Flint was chargeable with notice, and the fact of Lewis' possession, were sufficient to put the former upon inquiry, and his failure to make inquiry is equivalent to notice. If he had gone to Lewis, the party in possession, and inquired of him in respect to his interest in the lands, he would have doubtless learned that it was that of one who held the equity of redemption, which had not been cut off by the pretended and fraudulent sale under the trust deed.

Hatch v. Bigelow, 39 Ill. 546; 1864 Ill. LEXIS 3 (Ill. 1864):

• A purchaser is held affected with notice of all that is patent on an examination of the premises he is about to buy.

Keys v. Test, 33 Ill. 317; 1864 Ill. LEXIS 68 (Ill. 1864):

• The open and notorious possession by the complainant of this land was sufficient to put subsequent purchasers on inquiry, and operates as notice to them of a claim to the land. The case of Doyle v. Teas, 4 Scam. 202, is full on this point.

Metropolitan Bank v. Godfrey, 23 Ill. 531; 1860 Ill. LEXIS 276 (Ill. 1860):

(See Editor's Note for Ambrosius v. Katz, above for situations involving a grantor-in-possession. This case could be extremely helpful towards undoing a sale leaseback, foreclosure rescue scam or other real estate swindle where title or home equity is ripped off. This case provides support for the proposition that the retained possession of a grantor of a deed, absolute on its face, but intended as a mortgage, was notice, to a purchaser (including a mortgage lender) of the grantee, of the equities of the grantor.)

• In Williams v. Brown, 14: Ill. 205, we say: A person who buys land in possession of another, is bound to inquire of the person in possession, by what tenure he holds possession, and what interest he claims in the premises. See also Prettyman et al. v. Wilkey et al., 19 Ill. 235, 238.

• So it is held that possession of lands by the grantor in a deed, absolute on its face, but intended as a mortgage, was notice, to a purchaser from the grantee, of the equities of the grantor. Wright v. Bates and Niles, 13 Vt. 341; Roberts v. Anderson, 3 Johns. Ch. 380-1; Grimstone v. Carter, 3 Paige's Ch. 437.

Morrison v. Kelly, 22 Ill. 609; 1859 Ill. LEXIS 142 (Ill. 1859):

• The doctrine is well recognized and established that a man may have the actual possession of real estate without a residence upon it. And it may be actual or constructive; actual, when there is an occupancy, such as the property is capable of, according to its adaptation to use; constructive, as when a person has the paramount title, which in contemplation of law draws to, and connects with it the possession. But to be adverse, it must be a pedis possessio, or an actual possession. And to constitute such a possession, there must be such an appropriation of the land to the individual, as will apprise the community in its vicinity that the land is in the exclusive use and enjoyment of such person. Trifling acts, doubtful and equivocal in their character, and which do not clearly indicate the intention with which they are performed, cannot be regarded as amounting to possession. But it has been held that neither actual occupancy, cultivation, or residence, are necessary to constitute actual possession. Ewing v. Burnett, 11 Peters 53.

• And where the property is so situated as not to admit of any permanent, useful improvements, and the continued claim of the party has been evidenced by public acts of ownership, such as he would exercise over property which he claimed in his own right, and would not exercise over property which he did not claim, has been held to be such possession as will create a bar under the statute of limitations. Ewing v. Burnett, 11 Peters 53. What acts may or may not constitute a possession, are necessarily varied, and depend to some extent upon the nature, locality and use to which the property may be applied, the situation of the parties, and a variety of circumstances necessarily have to be taken into consideration, in determining the question. They must necessarily be left to the jury, whose peculiar province it is, to pass upon the question of possession. Ewing v. Burnett, 11 Peters 53.

• It is the settled doctrine of this court, and it is believed to be in Great Britain, and the various courts of the Union, that under the registry laws, a notice of the prior conveyance is as effectual as the registry of the deed.

• The object of recording the deed being to give notice to the world of the purchaser's claim of title, when that end is attained, whether by recording, actual notice, or such circumstances brought to the knowledge of the subsequent purchaser or creditor, as would induce a prudent man to make inquiry before he acted, answers the object of the statute. Doyle v. Teas, 4 Scam. 202. When the deed is filed and recorded in the proper office, it is frequently only constructive notice, and defeats the title of the second purchaser, not because he has seen the deed and has actual notice of its existence, but because he has the means afforded him of informing himself of the existence of the prior conveyance. It has always been held sufficient, if actual notice has come to the knowledge of the second grantee before his purchase.

• While there is a conflict of authorities as to what circumstances brought to his knowledge are sufficient notice to protect the holder under an unrecorded deed, against a subsequent purchaser, it has been held by this court that, "Where the court is satisfied that the subsequent purchaser acted in bad faith, and that he either had actual notice, or might have had that notice, had he not willfully or negligently shut his eyes against those lights, which with proper observation, would have led him to knowledge, he must suffer the consequences of his ignorance, and be held to have had notice so as to taint his purchase with fraud in law. It is sufficient if the channels which would have led him to the truth, were open before him, and his attention so directed that they would have been seen by a man of ordinary prudence and caution, if he was liable to suffer the consequences of his ignorance. The law will not permit him to shut his eyes when his ignorance is to benefit himself at the expense of another, when he would have had them open and inquiring, had the consequences of his ignorance been detrimental to himself and advantageous to the other." Doyle v. Teas, 4 Scam. 250. The doctrine of this case was again recognized by this court in the cases of Rupert v. Mark, 15 Ill. 540; McConnell v. Read, 4 Scam. 123, and in Merrick v. Wallace, 19 Ill. 486. And it should now be regarded as the settled doctrine of this court.

Rupert v. Mark, 15 Ill. 540; 1854 Ill. LEXIS 57 (Ill. 1854):

• The law on the subject of notice to a subsequent purchaser seems to be well established. If he has knowledge of the unrecorded conveyance when he makes his purchase, he can not protect himself against that conveyance. He is as effectually bound by knowledge of the existence of the prior deed as he is by its registration. It is deemed an act of fraud in him to take a second deed under such circumstances. And whatever is sufficient to put him on inquiry as to the rights of others is considered legal notice to him of those rights. He is chargeable with knowledge of such facts as might be ascertained by the exercise of ordinary diligence and understanding.

• The actual possession of land is notice that the possessor has some interest therein. A party who purchases the same while that possession continues, takes the premises subject to that interest, whatever it may be. The possession is sufficient to put him on inquiry as to the title of the possessor; and it is his own fault if he does not ascertain the extent and character of that title.

• Where the purchaser under an unregistered conveyance is in the open and visible possession of the premises, it is deemed sufficient notice to protect him against a subsequent purchaser, and to charge the latter with knowledge of his title. Tuttle v. Jackson, 6 Wend. 213; Colby v. Kenniston, 4 N.H. 262; Matthews v. Demerritt, 22 Me. 312; Norcross v. Widgery, 2 Mass. 506; Landes v. Brant, 10 Howard 348; Dyer v. Martin, 4 Scam. 146; Dixon v. Doe, 1 S. & M. 70; Boling v. Ewing, 9 Dana 76; McCaskle v. Amarine, 12 Ala. 17.

For more Illinois cases from the state appeals courts, and a couple of cases from the Illinois Federal courts, see Illinois Bona Fide Purchaser, Possession, Duty Of Inquiry - State Appellate Cases, Federal Cases.