The following compilation of cases is an extended version of the list of Florida 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purchaser/encumbrancer status unavailable to them and, consequently, subjecting the deeds or mortgages to being voided/rescinded/set aside.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 Florida recording statute, see 695.01 Conveyances to be recorded). 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 Florida state legislature has passed laws subsequent to these court rulings that either modifies or renders them obsolete in Florida, the persuasiveness of the logic that underlies them may still be of value to those involved in litigation outside of Florida (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 Florida, but as generally applied in Florida's sister states as well).
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Florida Supreme Court Cases
Blackburn v. Venice Inlet Co., 38 So. 2d 43 (Fla. 1948):
It is settled law in Florida that actual possession is constructive notice to all the world, or any one having knowledge of said possession of whatever right the occupants have in the land. Such possession, when open, visible and exclusive, will put upon inquiry those acquiring any title to or a lien upon the land so occupied to ascertain the nature of the rights the occupants really have in premises. Marion Mortgage Co. v. Grennan, 106 Fla. 913, 143 So. 761, 87 A.L.R. 1492.
Williams v. Markey-Harmon Co., 145 Fla. 201; 198 So. 825; 1940 Fla. LEXIS 928 (Fla. 1940): Cites the requirements of the rule enunciated in Marion Mortgage Co. v. Grennan, 106 Fla. 913, 143 So. 761, where it was said:
"Actual possession is constructive notice to all the world or anyone having knowledge of said possession, of whatever rights the occupants have in the land. Such possession when open, visible and exclusive, will put upon inquiry those acquriring any title to or a lien upon the land so occupied to ascertain the nature of the rights the occupants really have in the premises. Carolina Portland Cement Company v. Roper, 68 Fla. 299, 67 So. 115; Tate v. Pensacola G.L. & Dev. Company, 37 Fla. 439, 20 So. 543; McAdams v. Wachab, 45 Fla. 482, 33 So. 702. This Court also specifically held in the case of Crozier, et al., v. Ange, 85 Fla. 120, 95 So. 426, that 'Where at the time property is mortgaged it is actually occupied by others than the mortgagor, the mortgagee is thereby put upon notice to inquire as to the rights of the occupants.' 19 R.C.L. 421, Sections 201 and 202."
Florida Land Holding Corp. v. McMillen, 135 Fla. 431; 186 So. 188; 1938 Fla. LEXIS 1573 (Fla 1938): This Court cited from its earlier decision in Marion Mortgage Co. v. Grennan, 106 Fla. 913, 143 So. 761, when it said:
"Actual possession is constructive notice to all the world or anyone having knowledge of said possession, of whatever rights the occupants have in the land. Such possession when open, visible and exclusive, will put upon inquiry those acquiring any title to or a lien upon the land so occupied to ascertain the nature of the rights the occupants really have in the premises. Carolina Portland Cement Company v. Roper, 68 Fla. 299, 67 So. 115; Tate v. Pensacola G.L. & Dev. Company, 37 Fla. 439, 20 So. 543; McAdams v. Wachab, 45, Fla. 482, 33 So. 702. This court also specifically held in the case of Crozier, et al., v. Ange, 85 Fla. 120, 95 So. 426, that 'where at the time property is mortgaged it is actually occupied by others than the mortgagor, the mortgagee is thereby put upon notice to inquire as to the rights of the occupants.' 19 R.C.L. 421, Sections 201 and 202.
"While a mortgagee is a 'purchaser' to the extent of his interest in the mortgaged property and where it appears that he is a bona fide purchaser for value and 'without notice of any secret unrecorded claim or interest' in such property, he will be protected. Warner v. Watson, 35 Fla. 402, 17 So. 654. There being, however, no charge of secrecy in the instant case the above rule does not apply especially where it is shown that the property at the time of the mortgage was occupied by others than the mortgagor under a contract for deed.
Marion Mortg. Co. v. Grennan, 106 Fla. 913; 143 So. 761; 1932 Fla. LEXIS 1145 (Fla. 1932):
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In fact, the rights of a purchaser in possession of land under an unrecorded claim of title are protected against bona fide purchaser for value. Russell v. Scarborough, 155 Miss. 508, 124 So. 648; Crozier et al. v. Ange, 85 Fla. 120, 95 So. 426; 19 R.C.L. 421.
Ellis v. Everett, 79 Fla. 493; 84 So. 617 (Fla. 1920):
Complainant cites the case of Tyler v. Johnson, 61 Fla. 730, 55 South. Rep. 870. This is in line with the other decisions of this court holding that "Actual possession of the land affords notice that such possession is presumably pursuant to some right, and, if the right is not shown by the duly recorded title, the possession may be regarded as notice of any right claimed by one in possession. Such possession puts the purchaser upon inquiry."
In the case of Tate v. Pensacola, Gulf, Land & Development Co., 37 Fla. 439, 20 South. Rep. 542, this court said: "Actual possession of land is notice to all the world of whatever rights the occupant really has in the premises, and a vendor cannot convey to any other person whithout such person being affected with such notice. Actual knowledge of such possession on the part of those sought to be charged with such notice is not necessary. Notice in such a case is a legal deduction from the fact of possession."
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The burden of proof is upon the party who claims by virtue of priority of record, against a prior but unrecorded deed, to show affirmatively the payment of a valuable consideration and such proof must be made by some other evidence than a mere recitation of it in a deed. Lake v. Hancock, 38 Fla. 53, 20 South. Rep. 811.
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One setting up the claim of a good faith purchaser as against an unrecorded deed has the burden of showing that he purchased without notice of such deed. McFarland v. Peters, 87 Neb. 829, 128 N.W. 523, cited in Balard's Real Property, 787, and cases cited; Lake V. Hancock, supra, and the cases there cited.
Carolina Portland Cement Company v. Roper, 68 Fla. 299, 67 So. 115 (Fla. 1914):
Every judgment entered by the Circuit Court shall create a lien and be binding upon the real estate of the defendant in the county where rendered. Sec. 1600, Gen. Stats, 1906. No conveyance, transfer or mortgage of real property shall be good and effectual in law or equity against creditors or subsequent purchasers for a valuable consideration and without notice, unless the same be recorded according to law. Sec. 248, Gen. Stats. 1906. The creditors referred to in the above statute are creditors who "had obtained liens on the recovery of judgments." Rogers v. Munnerlyn, 36 Fla. 591, 18 South. Rep. 669.
The law is well settled that under our recording laws subsequent purchasers and creditors acquiring subsequent liens by judgment or otherwise without notice of a prior unrecorded deed will be protected against such unrecorded conveyance, unless the party claiming thereunder can show that such subsequent purchaser or lien creditor acquired his title or lien with notice of such unrecorded conveyance; and the burden of showing such notice is upon the party claiming under such unrecorded conveyance. All of the presumptions in such a case are in favor of the bona fides of such subsequent purchaser or lien creditor, and that they acquired their subsequent title or lien in good faith and without notice of the unrecorded prior conveyance.
An execution creditor, equally with a subsequent purchaser, is protected under the statute against unrecorded deeds, and in order to deprive such judgment creditor of the protection of the recording statute it must be shown that he had notice in some recognized way of the rights of the party claiming under the unrecorded deed at the time of the rendition of his judgment. Feinberg v. Stearns, 56 Fla. 279, 47 South. Rep. 797.
Actual possession of land is such notice to all the world or to any one having knowledge of such possession as will put upon inquiry those acquiring title to or a lien on the land, to ascertain the nature of the rights the occupant really has in the premises. One who acquires title to or a judgment lien on land with constructive notice of the actual possession and occupancy of the land by one other than the vendor or judgment debtor, takes subject to such rights as the proper inquiry will disclose the occupant of the land actually has therein.
Possession, in order to be constructive notice of a claim of title to the land occupied, must be open, visible and exclusive; and such occupancy may be shown by any use of the land that indicates an intention to appropriate it for the benefit of the possessor. Such use may be any to which the land is adapted, and is calculated to apprise the world that the property is occupied under a claim of right therein. See Tate v. Pensacola, Gulf, Land & Development Co., 37 Fla 439, 20 South. Rep. 543; Massey v. Hubbard, 18 Fla. 688; McAdow v. Wachob, 45 Fla. 482, 33 South. Rep. 702.
Tate v. Pensacola, Gulf, Land & Dev. Co., 37 Fla. 439; 20 So. 542; 1896 Fla. LEXIS 150 (Fla. 1896):
The broad general rule has often been proclaimed by the courts that "the actual possession of land is notice to all the world of whatever rights the occupant really has in the premises, and a vendor can not convey to any other person without such person being effected with such notice." Finch vs. Beal, 68 Ga. 594; Sewell vs. Holland, 61 Ga. 608.
In such cases open, visible, actual possession is of itself notice of the rights of those in possession. Actual knowledge of such possession on the part of those sought to be charged with such notice is not necessary. Notice in such cases is a legal deduction from the fact of possession. Allen vs. Cadwell, 55 Mich. 8, 20 N. W. Rep. 692; Woodward vs. Clark, 15 Mich. 104; Hamilton vs. Fowlkes, 16 Ark. 340, and many authorities cited in text; Buck vs. Holloway, 2 J. J. Marsh, 163; School District vs. Taylor, 19 Kansas, 287; Lipp vs. Hunt, 25 Neb. 91, 41 N.W. Rep. 143; Moss vs. Atkinson, 44 Cal. 3; McConnel vs. Reed, 4 Seam, 117, S. C. 38 Am. Dec. 124; Killey vs. Wilson, 33 Cal. 690; Lipp vs. South Omaha Land Syndicate, 24 Neb. 692, 40 N.W. Rep. 129; Bank of Orleans vs. Flagg, 3 Barb. Chy. 316; Dixon & Starkey vs. Doe ex dem. Lacoste, 9 Miss. (1 S. & M.) 70; Strickland vs. Kirk, 51 Miss. 795; Perkins, Livingston & Post vs. Swank, 43 Miss. 349; Doolittle vs. Cook, 75 Ill. 354; Metropolitan Bank vs. Godfrey, 23 Ill. 579; Noyes vs. Hall, 97 U. S. 34.
Some objection of appellee is made that the possession of those through whom complainant derived his equitable title, was not such open, visible possession, such as is necessary to give constructive notice of the title of the tenant.
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Possession, in order to be constructive notice of a claim of title, must be open, visible and exclusive, and is shown by any use of the land that indicates an intention to appropriate it for the benefit of the possessor. Such use may be any to which the land is adapted, and is calculated to apprise the world that the property is occupied. Truesdale vs. Ford, 37 Ill. 210; Wickes vs. Lake, 25 Wis. 71.
Florida District Court of Appeal Cases
Kroitzsch v. Steele, 768 So. 2d 514; 2000 Fla. App. LEXIS 11322 (Fla. App. Ct., 2nd DCA, 2000):
It is a basic tenet of property law that successors to legal title take title subject to those equitable interests of which they have notice. See Hoyt v. Evans, 91 Fla. 1053, 1055; 109 So. 311, 311 (1926). Actual possession is constructive notice to all the world or anyone having knowledge of said possession of whatever rights the occupants have in the land. Such possession when open, visible, and exclusive, will put upon inquiry those acquiring any title to or a lien upon the land so occupied to ascertain the nature of the rights the occupants really have in the premises. Lee County Bank v. Metropolitan Life Ins. Co., 126 So. 2d 589, 592 (Fla. 2d DCA 1961) (quoting Carolina Portland Cement Co. v. Roper, 68 Fla. 299, 303; 67 So. 115, 116 (1914)).
Volume 77 of American Jurisprudence Second, Vendor and Purchaser, § 473 provides: Generally, possession of real estate is not notice of a claim not asserted, and if proper inquiry is made, and information concerning the rights of the possessor is withheld or concealed, possession will be notice only of the fact of possession and not of the rights of the possessor so concealed. The investigation should, however, be a reasonable one. The inquiry should be made directly of the person in possession, since such person is the one interested and from whom the proper information will be acquired; it is insufficient to make the inquiry as to the possessor's right from the vendor whose interest it is to conceal the true state of facts, and it is likewise insufficient to inquire merely of persons living in the neighborhood. (Emphasis added). See also Bright v. Buckman, 39 F. 243, 244 (N.D. Fla. 1889); Humble Oil & Ref. Co. v. Laws, 272 So. 2d 841 (Fla. 1st DCA 1973).
In Humble Oil, a prospective purchaser contracted to purchase an oil, gas, and mineral lease with the record owners of a property inhabited by tenants who had executed an unrecorded contract for sale of the property and rights with the record owners. See 272 So. 2d at 842. During negotiations with the prospective purchaser, the record owner remarked that she did not think she owned any mineral rights. The prospective purchaser observed that the property in question was inhabited and being cultivated, but ended his inquiry into the tenants' rights with a record search. The First District affirmed the trial court's determination that the tenants' possession put the prospective purchaser on notice of their interest in the land. Id. at 842-43. The court explained: [The] prospective purchaser, having knowledge of the possession of the realty by the . . . lessees, was required to inquire as to the full terms and conditions of their lease, including their right to purchase. . . . [The prospective purchaser] did not visit the property or make any inquiry other than as reflected by the courthouse records. Id.
In this case, it is undisputed that the Buyers checked the official property records at the courthouse, obtained a copy of the purported lease between Varner and the Tenants, obtained title insurance, and drove by the property to ascertain that the residence was occupied. The question for this court to resolve is whether those actions constituted reasonable inquiry. We conclude that there were sufficient red flags raised in this residential purchase to require further inquiry by the Buyers. The one-year lease agreement Varner showed to the Buyers was dated July 1992, signed by Mr. Kroitzsch only, and had not been witnessed. Although Varner represented that the Tenants were past due on the rent, the Buyers did not obtain an estoppel letter from the Tenants prior to the closing. Additionally, the Buyers never inquired about the amount of rent claimed to be unpaid, and the closing statement for the purchase of the property contained no proration of rent.
The Buyers drove by the property to ascertain that the residence was occupied, but made no effort to contact the Tenants to ascertain their interests in the property. In fact, the Buyers made no contact with the Tenants at all until months after their purchase of the residence from Varner. The Buyers did not rely upon an affidavit of Varner as to the Tenants' possessory interest at closing, as the affidavit was executed by Varner sixteen days after the closing. Finally, it is true that the Buyers bought an owner's title insurance policy, but that policy did not protect against the rights of parties in possession.
The Buyers relied solely upon the public records, a questionable residential lease agreement, and the representations of the seller in ascertaining the Tenants' rights to the property. Like the prospective purchaser in Humble Oil, the Buyers failed to make any inquiry with the Tenants as to their rights in the property. We agree with the First District that such actions are necessary in cases where red flags are raised in determining the property rights of record owners who have tenants, as here. Because we conclude that the Buyers did not conduct a reasonable inquiry into the status of the Tenants' possible interest in this property, we reverse the order requiring the Tenants to vacate the property and remand for further proceedings in the trial court.
Citgo Petroleum Corp. v. Fla. E. Coast Ry., 706 So. 2d 383 (Fla. Ct. App. 4th DCA, 1998):
We also reject FEC's argument that Citgo's failure to record its easement renders it ineffectual against FEC. Under Florida's recording act, FEC is subject to Citgo's pre-existing, unrecorded easement unless FEC was "without notice" of it. See § 695.01(2), Fla. Stat. (1995); Ruotal Corp. v. Ottati, 391 So. 2d 308, 309 (Fla. 1980); Florida Power & Light Co. v. Rader. [footnote omitted] If the circumstances known to FEC when it acquired the subject property were "such as should reasonably suggest inquiry" into Citgo's property rights, then FEC is deemed to be on "inquiry notice" of -- and bound by -- those encumbrances which would have been discovered upon a reasonable inquiry. See Chatlos v. McPherson, 95 So. 2d 506, 509 (Fla. 1957).
Applying this principle, in Florida Power & Light Co. v. Rader, where the transferee took possession of land upon which FP&L had constructed power lines and poles pursuant to an unrecorded easement, this court reversed the trial court's finding that FP&L's failure to record its easement rendered the easement ineffectual against the transferee. The court explained: Actual, open and obvious possession is constructive notice to all the world of whatever right the occupant has in the land, and puts upon inquiry those acquiring any title to or lien upon the land so occupied to ascertain the nature of the rights the occupant has in the premises. 306 So. 2d at 567.
Pursuant to Rader, we conclude, as a matter of law, that Citgo's actual, open, and obvious possession by construction of a conspicuous pipeline placed FEC on inquiry notice of Citgo's easement. As FEC conceded below, it had actual knowledge that Citgo was constructing a pipeline across FEC's proposed right-of-way; in fact, FEC and Citgo corresponded concerning the specifications for building the pipeline beneath FEC's tracks, and FEC later built its new track between vents which conspicuously protruded from the relocated pipeline. See Kirma v. Norton, 102 So. 2d 653 (Fla. 2d DCA 1958)(holding that a grantee was bound by a sewer pipe easement which crossed his land and emptied into a river, even though the pipes were underground, as the emergence of the pipes from the river bank should have put a prudent buyer on notice to inquire, and he was, therefore, bound by what he would have learned).
A review of Citgo's 1983 Agreement with the DOT would have revealed to FEC that Citgo "will at all times, both during and after construction, have free and complete access to the existing and new jet fuel line ...." In light of its prior licensor-licensee relationship with Citgo, FEC argues that its actual knowledge of the pipeline is not tantamount to inquiry notice of an easement. However, the presence of the pipeline put FEC on inquiry notice of "whatever right" Citgo had in the land. See Rader, 306 So. 2d at 567; accord Randolph v. Martin, 100 So. 2d 198, 199 (Fla. 3d DCA 1958)(holding the transferee to be on inquiry notice of an easement where she was aware of the easement-holder's use of the property even though she did not know the "extent" of the easement-holder's claim).
Florida Power & Light Co. v. Rader, 306 So. 2d 565 (Fla. App. Ct. 4th DCA 1975):
The trial court concluded, apparently on the basis of Section 695.01(1), F.S., that appellant's failure to record the easement deprived appellee, who purchased the property in 1959, of either actual or constructive notice of the easement, and therefore the easement was ineffectual as against appellee. Such conclusion is contrary to appellee's testimony to the effect that prior to purchasing the property he had made a visual inspection of it and had seen the power lines and poles in question.
Actual, open and obvious possession is constructive notice to all the world of whatever right the occupant has in the land, and puts upon inquiry those acquiring any title to or lien upon the land so occupied to ascertain the nature of the rights the occupant has in the premises. Blackburn v. Venice Inlet Co., Fla.1948, 38 So.2d 43; Marion Mortgage Co. v. Grennan, 1932, 106 Fla. 913, 143 So. 761, 87 A.L.R. 1492; Tate v. Pensacola Gulf, Land & Development Co., 1896, 37 Fla. 439, 20 So. 542.
It is true that at the time appellee inspected the premises and observed the presence of the electric power transmission lines he was uncertain as to the boundary line of the property and, therefore, did not then know that the transmission lines were on the property. It is also true that the survey which was prepared at his request (and examined by him before closing the sale) did not reflect the location of the transmission lines. The fact remains, however, that the electric power transmission lines were on the property and were open, obvious and visible. Appellee was charged with notice of that which was there to be seen, irrespective of whether he actually knew of such possession. Humble Oil & Refining Co. v. Laws, Fla.App.1973, 272 So.2d 841; Moore v. Choctawhatchee Electric Co-operative, Inc., Fla.App.1967, 196 So.2d 788; Vincent v. Hines, 1920, 79 Fla. 564, 84 So. 614; Tate v. Pensacola Gulf, Land and Development Company, supra.
Humble Oil & Refining Co. v. Laws, 272 So. 2d 841; 1973 Fla. App. LEXIS 7438 (Fla. App. Ct. 1st DCA 1973):
At the time of the execution of the above instrument, the Laws gave the Fillingims a check for $1,000 marked "land rent and option to buy." When Mr. Fillingim accepted the check, he shook hands with Mr. Law and stated: "As far as we're concerned, the property's yours. You can do whatever you want with it".
The Laws went into immediate possession of the land, limed and fertilized a part of it, planted 75 acres in soybeans and had 6 acres in permanent pasture. Oats and wheat were planted in the fall. An old shack on the property was rewired for electricity and was occupied by Mr. Laws from 30 to 45 days while he worked the land. They also cleared an area under a big magnolia tree for a future home site, seeded it with grass, and planted roses and azaleas. Extensive farm equipment owned by them was continuously on the property.
Some time prior to July 9, 1970, an agent for Humble left his calling card at the Fillingim's residence. Mrs. Fillingim called the agent who discussed with her his company's desire to lease the oil, gas and mineral rights on the subject land. Mrs. Fillingim advised that she didn't think they owned any mineral rights. Subsequently, the agent examined an abstract of the land and agreed to pay the Fillingims $3,350 (and other consideration dependent on certain contingencies) for an oil, gas and mineral lease. Mrs. Fillingim told the agent the property was "rented". An oil, gas and mineral lease between the Fillingims and Humble was executed and recorded.
Humble vigorously contends that its only possible notice of the Laws' interest in the subject land was their cultivation of same and the owner-seller's statement to its agent that the land was rented for one year. Further argument by Humble is that cultivation of the land without a continuous residence thereupon is not sufficient to put a lessee on notice of an unrecorded option or contract for sale, citing as its authority a Texas case. 2[Jackson v. De Guerin, 124 Tex. 424, 77 S.W.2d 1041 (1935)] It might well be that Texas law recognizes Humble's position, but it does not "hold water" in Florida. Actual possession is constructive notice to all the world of whatever rights the occupants have in the land. Such possession when open, visible, and exclusive, will put upon inquiry those acquiring any title to or a lien upon the land so occupied to ascertain the nature of the rights the occupants really have in the premises. 3[Marion Mortgage Co. v. Grennan, 106 Fla. 913, 143 So. 761, 87 A.L.R. 1492 (1932); Florida Land Holding Corporation v. McMillen, 135 Fla. 431, 186 So. 188 (1938); Blackburn v. Venice Inlet Co., 38 So.2d 43 (Fla.1949)]
Humble, a prospective purchaser, having knowledge of the possession of the realty by the Laws, as lessees, was required to inquire as to the full terms and conditions of their lease, including their right to purchase. 4[Denco, Inc. v. Belk, 97 So.2d 261, 265 (Fla.1957)] As related in the above facts, the exclusive possession by the Laws was more than adequate to put any person upon inquiry as to their interest in the lands occupied by them. This Humble did not do. Its agent did not visit the property or make any inquiry other than as reflected by the courthouse records. The judgment appealed is affirmed.
United Contractors, Inc. v. United Construction Corp., 187 So. 2d 695 (Fla. App. Ct. 2nd DCA 1966):
The "constructive notice" doctrine has been fully adopted in Florida, especially as it most commonly is applied under our recording statute. See F.S. § 695.01 F.S.A.; Sapp v. Warner, 1932, 105 Fla. 245, 141 So. 124, reaffirmed on rehearing, 105 Fla. 263, 143 So. 648; Tri-County Produce Distributors, Inc. v. Northeast Production Credit Association, Fla.App.1963, 160 So.2d 46; Tolar v. Myer, Fla.App.1957, 96 So.2d 554; Daniel v. May, Fla.App.1962, 143 So.2d 536; Davis v. Brewer, 1939, 135 Fla. 752, 186 So. 207; Maule Industries, Inc. v. Sheffield Steel Products, Inc., Fla.App.1958, 105 So.2d 798; Hagan v. Sabal Palms, Inc., 186 So.2d 302, opinion filed March 23, 1966, 2d D.C.A.
"Implied actual notice" is an inference of fact, and includes notice inferred from the fact that a person has means of knowledge which it was his duty to use, Rinehart v. Phelps, 1942, 150 Fla. 382, 7 So.2d 783, but such possession to be notice of claim of title, must be open, visible and exclusive, Carolina Portland Cement Co. v. Roper, 1914, 68 Fla. 299, 67 So. 115.
Actual possession is notice to all the world of whatever right the holder has in the property and such possession, when open, visible and exclusive, will put upon inquiry those having or acquiring any title to or lien upon the property to ascertain the nature of the right the holder really has in the property. Blackburn v. Venice Inlet Co., Fla.1949, 38 So.2d 43.
"The principle applied in cases of alleged implied actual notice is that a person has no right to shut his eyes or ears to avoid information, and then say that he has no notice; that it will not suffice the law to remain wilfully ignorant of a thing readily ascertainable * * * when the means of knowledge is at hand." Sapp v. Warner, supra.
A similar issue as to priority of rights between a subsequent mortgagee and a vendee in possession under an unrecorded contract for deed was presented and discussed in Marion Mortgage Co. v. Grennan, 106 Fla. 913, 143 So. 761, 763, 87 A.L.R. 1492.
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"It is not necessary to determine here whether the contract for deed to the Reeds was acknowledged or recorded, as the contract would be good not only as between the original owner and his vendees and between the original owner and the grantee of the title in which latter instrument the said contract for deed was also transferred. The said contract for deed was in fact effective, though not recorded as against the subsequent mortgage which was executed after the property had been sold to said vendees, as it is clearly shown that said vendees had from date of purchase been in actual adverse possession of the premises and at the time of the execution and delivery of the mortgage and each subsequent assignment.
"Actual possession is constructive notice to all the world or any one having knowledge of said possession, of whatever rights the occupants have in the land. Such possession when open, visible, and exclusive, will put upon inquiry those acquiring any title to or a lien upon the land so occupied to ascertain the nature of the rights the occupants really have in the premises. Carolina Portland Cement Company v. Roper, 68 Fla. 299, 67 So. 115; Tate v. Pensacola, G., L. & Dev. Co., 37 Fla. 439, 20 So. 542, 543, 53 Am.St. Rep. 251; McAdow v. Wachob, 45 Fla. 482, 33 So. 702. This court also specifically held in the case of Crozier et al. v. Ange, 85 Fla. 120, 95 So. 426, that, 'Where at the time property is mortgaged it is actually occupied by others than the mortgagor, the mortgagee is thereby put upon notice to inquire as to the rights of the occupants.' 19 R.C.L. 421, §§ 201 and 202.
"While a mortgagee is a 'purchaser' to the extent of his interest in the mortgaged property and where it appears that he is bona fide purchaser for value and 'without notice of any secret unrecorded claim or interest' in such property, he will be protected. Warner v. Watson, 35 Fla. 402, 17 So. 654. There being, however, no charge of secrecy in the instant case, the above rule does not apply, especially where it is shown that the property at the time of the mortgage was occupied by others than the mortgagor under a contract for deed. If the mortgagee, though he does it passively, suffers another to purchase and expend money on land under an erroneous opinion of the title without making known his claims, he shall not afterwards be permitted to exercise his legal rights against such purchaser. Hagan v. Ellis, 39 Fla. 463, 22 So. 727, 63 Am.St.Rep. 167; Price v. Stratton, 45 Fla. 535, 33 So. 644; Coram v. Palmer, 63 Fla. 116, 58 So. 721.
The above decision was followed in the disposition of a similar question in Scott et al. v. Simmons et al.,
151 Fla. 628, 10 So.2d 122, wherein the purchaser, pursuant to an oral contract of purchase, paid the vendor, Simmons, $100 down payment, immediately took possession and began fencing the land on July 5, 1939. The purchaser had an abstract brought up to date on July 8, 1939, which disclosed an apparent satisfactory state of the title.
***
Meanwhile, on July 14, 1939, a mortgage was recorded which had been executed on June 27, 1925, by a prior grantor to secure a portion of the purchase price. The deed conveying the land to the vendor, Simmons, had contained no reference to the encumbrance. The mortgage holders, Mary C. Scott and her husband, brought a foreclosure action against Simmons and his wife, and against the purchaser from Simmons who had taken possession. The suit was dismissed and the mortgagees appealed.
In affirming the dismissal the Court held: "The problem with which we are confronted is the relative rights of the vendee, who took possession under the verbal contract without knowledge of the mortgage and before it was recorded, and the mortgagee, who placed her mortgage on record before delivery and recordation of the former's deed. The genuineness of the possession by the appellee Simmons is not challenged and it is not even suggested that it was casual, occasional, temporary, equivocal or of such character as not to provoke inquiry. 8 Thompson on Real Property (Permanent Edition), Page 421, et seq. Being of this quality the possession was certainly notice to the mortgagee that the possessor had a real interest in the property and his rights, therefore, were not affected by the lien. The mortgagee was relegated for relief to the interest of the vendor which she could reach provided she gave actual notice to the vendee. Recording the instrument, after the commencement of the possession, did not relieve her of the necessity of informing him of its existence and of the default of the mortgagor if she intended her claim to attach to the amount owed by him to the vendor. See Thompson on Real Property, supra, page 424. "Authority for this conclusion may be found in a decision of this court, Marion Mortgage Co. v. Grennan, 106 Fla. 913, 143 So. 761, 87 A.L.R. 1492, where the same principle was involved and where the facts in all essential respects correspond with those in the instant case. * * *"
As illustrated by the foregoing decisions, actual possession of real property, when open, visible, and exclusive, will put upon inquiry those acquiring any title to or a lien upon the land so occupied to ascertain the nature of the rights the occupants really have in the premises.
Pursuant to this rule it has been held that a mortgagee of real estate takes his security charged with notice of the equities of a third person in possession of the property at the time of the execution of the mortgage. First Federal Sav. & Loan Ass'n. of Miami v. Fisher, Fla.1952, 60 So.2d 496. And therefore, where at the time property is mortgage it is actually occupied by others than the mortgagor, the mortgagee is thereby put on notice to inquire as to the rights of the occupants. Marion Mortgage Co. v. Grennan, supra.
A factually similar situation was presented to the court in Fraser v. Fleming, 190 Mich. 238, 157 N.W. 269, 270, wherein the purchaser, under an unrecorded contract entered into on June 30, 1913, which required the vendor to construct a house, had moved part of his furniture in on October 1st or 2nd. The workmen completed the house, with the exception of painting on October 4th. The purchaser contended that he moved in on October 4th, but it was conceded by opposing parties that the purchaser was in possession of the premises by October 7th. In the meantime, the vendor was negotiating for a loan with the mortgagee and the terms of the loan were agreed to on October 4th and the mortgage was drafted that day. The mortgage was not acknowledged until October 7th and none of the money was paid over until October 8th.
The Supreme Court of Michigan, in holding that the vendee in possession under these circumstances should prevail over the mortgagee, stated: "* * * The question therefore is whether their possession of the lot was of such a character as to amount to constructive notice when defendant parted with the money loaned on the mortgage. 'The rule uniformly settled in this state is that payment must be made before notice in order to secure the title to the land purchased.' Palmer v. Williams, 24 Mich. 328; 39 Cyc. § 1763. And 'possession of land by a contract purchaser is constructive notice of his rights.' Corey v. Smalley, 106 Mich. 257, 64 N.W. 13, 58 Am.St.Rep. 474. "Defendant testified that the money loaned was paid to Trimble's creditors on the morning of the 8th, after the deed from Dodge had been recorded, and the deed was recorded at 10:45 a.m., as shown by the register's certificate. It is practically undisputed that the Carpenters had supper in the house on the evening of the 6th, and that their goods were in the house by the evening of the 7th, when they began living there regularly and continually. We cannot agree with the circuit judge that this possession was insufficient to operate as constructive notice. What more notorious and open possession could they have taken? Their goods were in the house, they were eating and sleeping there, and any one calling at the house would have found them there on the day the money was paid, and on the night before. * * * The possession by the Carpenters was in the best of faith, and not for the purpose of defrauding defendant; and, although it had not existed for any great length of time before the payment of the money, it had existed for a sufficient period to operate as constructive notice. Allen v. Cadwell, 55 Mich. 8, 20 N.W. 692; Miner v. Wilson, 107 Mich. 57, 64 N.W. 874;, Oconto Co. v. Lundquist, 119 Mich. 264, 77 N.W. 950; Boyer v. Chandler, 160 Ill. 394, 43 N.E. 803, 32 L.R.A. 113; Phelan v. Brady, 119 N.Y. 587, 23 N.E. 1109, 8 L.R.A. 211. Constructive notice by possession is equal to constructive notice by record. 39 Cyc. § 1745. The mortgage was therefore void in equity as against the rights of the Carpenters, and is equally void as against complainant, who has succeeded to those rights."
The Howes, in the instant case, had moved their furniture into the house, slept there, took their meals there, parked two cars there, and had no other place to live at the time the mortgage was executed. The bank had been furnished a title opinion which specifically stated that the opinion was subject to the rights of any parties in possession. It is also undisputed that at no time prior to the real estate closing did the defendants Howe or Metropolitan Life Insurance Company, Inc., have actual knowledge of the existence of the mortgage to plaintiff, the Lee County Bank.
