The following compilation of cases is an extended version of the list of Pennsylvania 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, 2009 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purchaser/encumbrancer status unavailable to them and, consequently, subjecting the deeds or mortgages to being voided/rescinded/set aside.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 Pennsylvania statute, see 21 Pa. Stat. Ann. §§ 351 and 444.
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 Pennsylvania state legislature has passed laws subsequent to these court rulings that either modifies or renders them obsolete in Pennsylvania, the persuasiveness of the logic that underlies them may still be of value to those involved in litigation outside of Pennsylvania (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 Pennsylvania, but as generally applied in Pennsylvania sister states as well).
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Pennsylvania Supreme Court
Woods v. Farmere, 7 Watts 382, 1838 Pa. LEXIS 94 (1838):
- The duty of inquiring into the foundation of a notorious possession is not a grievous one, and it is soon performed. Why, then, should a purchaser be suffered to act on probabilities as facts at the risk of any one but himself, when a moderate share of attention would prevent misconception or loss? The doctrine of constructive notice is undoubtedly a sharp one; but it is not more so in regard to a notorious possession than it is in regard to a registry. Nor is it less reasonable; for it certainly evinces as much carelessness to purchase without having viewed the premises, as it does to purchase without having searched the register.
Hole v. Rittenhouse, 19 Pa. 305 (1852):
- Actual possession of land is notice to all the world, not merely of the fact itself, but of the title under which the possessor holds it, and notice of so high an order that it excuses him for non-compliance with the recording law, and for almost every other manner of laches.
Jamison v. Dimock, 95 Pa. 52 (1880):
- The admitted possession of the defendants from October 1875 was notice of Mrs. Dimock's equitable title not only to Herdic's vendee, but to the assignees of the mortgage as well as the purchaser at sheriff's sale.
- It does not appear that inquiry was made by either of them for the purpose of ascertaining by what right defendants were in possession. It was unquestionably their duty to make such inquiry, and having neglected to do so, they were affected with constructive notice of such facts as would have come to their knowledge in the proper discharge of that duty. This principle is applicable to the plaintiff as well as to Mr. Herdic's vendee: Woods v. Farmere, 7 Watts 382.
Hottenstein v. Lerch, 104 Pa. 454 (1882):
- In order to consider the merits of the contention intelligently, it is necessary to determine with some care what the terms of the rule are. The language in which it is expressed has not varied from the earliest to the latest of the cases in which it has been announced. Thus in Jaques v. Weeks, 7 Watts 261, and in Maul v. Rider, 59 Pa. 167, it is stated in identical words: "Whatever puts a party upon inquiry amounts in judgment of law to notice, provided the inquiry becomes a duty, as in case of purchasers and creditors, and would lead to the knowledge of the requisite fact by the exercise of ordinary diligence and understanding."
- The rule is a broad and general one, and includes other subjects than the unrecorded title to land. Even when that one subject is the occasion of a judicial controversy the rule has two well-defined and distinct branches.
- One of them relates to notice of an unrecorded title by information of its existence, communicated verbally. In this class of cases it is well settled that a party is not affected by a mere general rumor, and notice of such a rumor is neither actual nor implied notice of the existence of such a title. It is also held that the information must come from some person interested in the property and must be directly communicated to the party sought to be affected. All the cases assert this distinction.
- The other branch of the rule referred to, relates to the effect, as notice, of actual possession of the land in question by another than the grantor of the party to be affected.
- Such possession is the equivalent of notice, and therefore is notice, because it is inconsistent with the title conveyed to the purchaser, and because it is the duty of a purchaser to regard such a possession and inquire into its character. If the inquiry would result in knowledge of the requisite fact, the purchaser is bound by the actual state of the title, whether he made the inquiry or not.
- Thus in Jaques v. Weeks, 7 Watts 261 at 276, Kennedy, J., in stating the rule, says: "Every purchaser of land, I take it as a general rule, must be presumed in equity to know whether the possession be vacant or not; and if a third person be in the actual and visible occupation of the land at the time of his purchase, it is sufficient to put him on inquiry, in order that he may know by what tenure or right such person holds the possession; and whatever is sufficient to put the party on inquiry is equivalent to notice in equity" (citing several cases).
- Accordingly it was held in Daniels v. Davison, 16 Ves. 249; 17 Ves. 433, that the possession of a tenant who had taken it under a lease for a term of years, and during the pendency of the lease made a contract with his lessor for the purchase of the reversion, was notice to a subsequent purchaser, the lease being still unexpired, not only of the tenant's interest under it, but likewise of his equitable title to the estate, under his contract for the purchase of it. . . . Sir Thomas Plumer, Master of the Rolls, likewise in Meux v. Maltby, 1 Swanst. 277, said that it had been repeatedly decided that the purchaser of an estate in possession of a tenant was bound to inquire by what right and under what agreement the tenant held it.
- The doctrine of Daniels v. Davison, was recognized and enforced by this court in the case of Kerr v. Day, 14 Pa. 112. On p. 117, Bell, J., says, "Carnahan's possession as the tenant of Cuddy, is attended with the same effect in imposing the duty of inquiry upon Day, the second purchaser, as though Cuddy himself had been in possession."
- In Hood v. Fahnestock, 1 Pa. 470, on p. 474, Rogers, J., said, "Hood, the purchaser from Magill, knew, or, which in law is the same thing, ought to have known, that there was a tenant in possession of the estate he was about to purchase. He was bound to inform himself, as we have seen, of the conditions of the lease; and in doing so, he must have discovered, if he was before ignorant of the fact, that the person in possession held it as the tenant of Jacob Herrington, the man who, in conjunction with his brother, concocted the fraud. The purchaser was bound to make inquiry; and if this duty which the law throws upon him had been exercised with due diligence and proper discretion, can a doubt remain, it would have led to a knowledge of the important fact that Jacob Herrington was the landlord of the tenant in possession?"
- It is clear, therefore, that the possession of a tenant is notice of his own title as tenant, and also of the title of the landlord under whom he holds, and that a purchaser is bound by the fact of such possession to make inquiry as to the state of the title, and is chargeable with notice of the actual condition of the title which such inquiry would have developed.
- In Sailor v. Hertzog, 4 Whart. 259, it was held that the law presumes that a purchaser of real estate will not trust merely to the title papers and records, but will inquire of the person in possession whether he claims title to the land. If the possession is distinct and unequivocal, it is sufficient to put the purchaser on inquiry, and amounts to constructive notice.
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- In the case of Green v. Drinker, 7 Watts & Serg. 440, it was held that the possession of land such as will dispense with the necessity of recording the deed for it, must be such an occupancy as will afford a stranger to the title an opportunity of making the necessary inquiry for it. In Meehan v. Williams, 48 Pa. 238 on p. 241, we said: "What makes inquiry a duty, is such a visible state of things as is inconsistent with a perfect right in him who proposes to sell."
Rowe v. Ream, 105 Pa. 543 (1884):
- Equitable titles, resting in parol, are always more or less insecure, even when the beneficial owner is in actual and exclusive possession; and, the general principle undoubtedly is that such possession, when distinct and unequivocal, puts purchasers and mortgagees on inquiry, and thus visits them with notice of the occupant's title.
- Since Le Neve v. Le Neve, 2 Lead. Cas. Eq. 35, this principle has been recognized in many cases among which are the following: Billington's Lessee v. Welsh, 5 Binn. 129, 132; Sailor v. Hertzog, 4 Whart. 259; Woods v. Farmere, 7 Watts 382, 384; M'Culloch v. Cowher, 5 Watts & Serg. 427 at 427-9; Patton v. Hollidaysburg, 40 Pa. 206; Meehan v. Williams, 48 Pa. 238; Jamison v. Dimock et ux., 95 Pa. 52 at 52-6; Hottenstein v. Lerch, 104 Pa. 454.
- While the principle is differently stated in some of these cases it is substantially the same in all. In Woods v. Farmere, supra, Chief Justice Gibson, speaking of the unlimited effect given by the English Courts to possession as an index to title, says "the duty of inquiring into the foundation of a notorious possession is not a grievous one, and it is soon performed. Why then, should a purchaser be suffered to act on probabilities, as facts, at the risk of any one but himself when a moment's share of attention would prevent misconception or loss? The doctrine of constructive notice is undoubtedly a sharp one; but, it is not more so in regard to a notorious possession than it is in regard to a registry. Nor is it less reasonable; for it certainly evinces as much carelessness to purchase without having viewed the premises as it does to purchase without having searched the register."
- In the language of Woodward P. J., adopted by this court in McCulloch v. Cowher, supra, "The possession of land is notice to the world of every title under which the occupant claims it, unless he has put a title on record inconsistent with his possession. When, as in this case, an individual is in possession under no recorded title, his possession is notice of every title which he can set up to protect himself, sufficient at least to put a purchaser on inquiry." A full discussion of the subject, by our brother Green, may also be found in Hottenstein v. Lerch, supra.
- The constructive notice, spoken of in these cases, is in the nature of evidence of notice, the presumptions of which are so violent that they cannot be controverted. It is that notice which the law imputes to a person without regard to whether he has actual knowledge or not. In other words, when inquiry becomes a duty, the means of knowledge which it affords is regarded as the legal equivalent of actual notice.
Anderson v. Brinser, 129 Pa. 376; 18 A. 520 (1889):
- The only remaining question for our consideration is whether or not Jonas Brinser is to be regarded as an innocent purchaser, and entitled to protection as such. Anderson died in 1883, and the conveyance by Hershey to Brinser was in 1884. Anderson's heirs were in the actual possession of the premises in dispute at the time of the conveyance, and it is contended that their possession put Brinser upon inquiry as to the title, in virtue of which that possession was maintained, and that, having failed in this respect, he is affected with notice of that which a proper inquiry would have developed. The rule of law which is thus invoked is settled in a long line of cases, including Jaques v. Weeks, 7 W. 261; Maul v. Rider, 59 Pa. 167; Hottenstein v. Lerch, 104 Pa. 454; Rowe v. Ream, 105 Pa. 543.
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- Knowledge of the existence of a lease will, of course, give constructive notice of all its provisions; but, the possession, apart from the lease, we think should be treated as notice of the possessor's claim of title, whatever that claim may be, for the lease may be but the first of two or more successive rights acquired by the tenant.
- Whilst in the occupancy, under a lease for years, the tenant may have purchased under articles and entitled himself to an equity; or, indeed, he may have purchased the legal estate in fee and failed to record his deed. Would it be supposed that a knowledge of the precedent lease would dispense with the duty of inquiry, and entitle a subsequent grantee to the protection of an innocent purchaser? Or, the lease may have been the instrument of a base fraud; it may have been executed under the false and fraudulent pretence, to an illiterate person, that it was in fact a conveyance or a contract of sale. Would possession afford no protection in such a case? We think it would. In such cases the possession is the possessor's only reliance, for he may be powerless to put his claim of title upon the record.
White v. Patterson, 139 Pa. 429 (1891):
- The appellee's possession of the land described in the bill, was notice to the appellant and the parties under whom she claims, that he was the equitable owner of it, and that his vendor held the legal title to it in trust for him: Hottenstein v. Lerch, 104 Pa. 455; Rowe v. Ream, 105 Pa. 543.
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- The objection that the equitable owner is precluded by laches from obtaining the relief he seeks is not well taken. "Laches will not be imputed to one in peaceable possession of land, for delay in resorting to a court of equity to establish his right to the legal title. The possession is notice to all, of the possessor's equitable rights, and he need only assert them when he may find occasion to do so:" 12 Am. & E. Encyc, of Law, 606, and cases cited; Du Bois v. Baum, 46 Pa. 537; Richards v. Elwell, 48 Pa. 361; Harris v. Harris, 70 Pa. 170.
Ohio R. Junc. R.R. Co. v. Pa. Co., 222 Pa. 573; 72 A. 271 (1909):
- "Whatever puts a party upon inquiry amounts in law to notice, provided the inquiry becomes a duty, as in case of purchasers and creditors, and would lead to the knowledge of the requisite fact by the exercise of ordinary diligence and understanding:" Jaques v. Weeks, 7 Watts, 261.
- It is always the duty of a purchaser of real estate to investigate the title of his vendor. He cannot be said to exercise due diligence in this regard if he accepts the statement of his vendor as to binding effect of an outstanding agreement of sale with another, and makes no attempt to ascertain for himself what the agreement contains. Had the defendant or its agent inquired through the agreement itself, of the existence of which it admittedly had notice, or of the party holding it, the fact that there was an outstanding equitable title in the plaintiff must have appeared. Failing to do this the defendant was chargeable, as matter of law, with notice of the facts which the inquiry would have disclosed.
Lazarus v. Lehigh & W.-B. Coal Co., 246 Pa. 178 (1914):
- Three quarters of a century ago, in Woods v. Farmers, 7 Watts 383, we said, adopting the English doctrine, that the possession of a tenant is notice of his actual interest, whether as lessee or purchaser. In the more recent case of Jamison v. Dimock, 95 Pa. 52, we reiterated the rule, holding that it is the duty of purchasers of real estate to make inquiry respecting the rights of parties in possession, and failing to do so, they are affected with constructive notice of such facts as would have come to their knowledge in the proper discharge of that duty.
Stonecipher v. Keane, 268 Pa. 540 (1920):
- The actual visible possession of a tenant is constructive notice both of his interest and that of his landlord (see Sheaffer v. Eakman, 56 Pa. 144); therefore, if Lawler had such possession, as Keane's tenant, at the time of McGrew's purchase, in 1907, and so continued until after the latter's conveyance to Miss Kelly in 1913, it was a potent fact in favor of defendant.
- A prospective purchaser of land is required to make inquiry of those in possession thereof and, failing to do so, is affected with constructive notice of all that such inquiry would have disclosed: Lazarus v. Lehigh & W.B. Coal Co., 246 Pa. 178; Ohio R. Junc. R.R. Co. v. Penna. Co., 222 Pa. 573; Jamison v. Dimock et ux., 95 Pa. 52.
- In other words, actual possession is constructive notice of the interest of the possessor in the premises (Rowe v. Ream, 105 Pa. 543) and of his relation thereto. Such possession is evidence of title and in a certain sense a substitute for recording (White v. Patterson, 139 Pa. 429), and is sufficient to put an intending purchaser upon inquiry: Hottenstein v. Lerch, 104 Pa. 454; Lord's App., 105 Pa. 451; Jacques v. Weeks, 7 Watts 261.
Salvation Army Incorporated Trustees v. Lawson, 293 Pa. 459, 143 A. 113 (1928):
- Plaintiffs' title could be affected only with what they actually or constructively knew at the time of the purchase, necessarily, as to the latter, by what they could have learned by inquiry of the person in possession and of others who, they had reason to believe, knew of facts which might affect the title, and also by what appeared in the appropriate indexes in the office of the recorder of deeds, and in the various courts of record whose territorial jurisdiction embraced the land in dispute (Jaques v. Weeks, 7 Watts 261; Hill v. Epley, 31 Pa. 331, 336; Maul v. Rider, 59 Pa. 167, 171); but not of that which they could not have learned by inquiry of those only who, they had reason to believe, knew of the facts: Lower's App., 1 Walker 404.
- The burden of proof upon these points was upon defendant, and, to be of any effect, the evidence was required to be clear and unequivocal: Meehan v. Williams, 48 Pa. 238, 241, 242; Townsend v. Little, 109 U.S. 504, 511. It is not claimed that plaintiffs had actual knowledge of the alleged wrong, or that they knew of others who were acquainted with facts which might affect the title to the property.
- Their grantor was in possession, her grant was an affirmance that she had a good title, and hence, as we have held, plaintiffs were not required to make any inquiry of her: Stiffler v. Retzlaff, 20 W.N.C. 303. "Indeed there can be no doubt whatever of the proposition that where the land is occupied by two persons, as, for instance, by husband and wife, and there is a recorded title in one of them, such joint occupation is not notice of an unrecorded title in the other . . . . The rule is universal that if the possession be consistent with the recorded title, it is no notice of an unrecorded title": Kirby v. Tallmadge, 160 U.S. 379, 388.
Kinch v. Fluke, 311 Pa. 405, 166 A. 905 (1933):
- A vendee who purchases land, by entering into open, notorious and continued possession of it, gives notice not only of his interest in the land, but that of his vendor.
- This is true notwithstanding the fact that the agreement of purchase was not entered of record. Such possession is evidence of title, and, in a certain sense, is a substitute for recording the agreement of purchase, and is sufficient to put a subsequent purchaser or mortgagee on inquiry: Hottenstein v. Lerch, 104 Pa. 454; Lord's App., 105 Pa. 451; Rowe v. Ream, 105 Pa. 543; White v. Patterson, 139 Pa. 429.
- A prospective purchaser is required to make inquiry of those in possession, and failing to do so, is affected with constructive notice of all that such inquiry would have disclosed: Stonecipher v. Keane, 268 Pa. 540; Lazarus v. Lehigh & W.-B. Coal Co., 246 Pa. 178; Ohio R. Junc. R.R. Co. v. Pa. Co., 222 Pa. 573; Jamison v. Dimock, 95 Pa. 52.
- The notice of possession which the law imposes on a subsequent vendee or mortgagee without regard to whether he has actual knowledge or not, is of such character that it cannot be controverted. The means of knowledge which possession affords is regarded as the legal equivalent of actual notice: Rowe v. Ream, supra, at 546.
- It is conceded that neither of the mortgagees, the Seaboard or Finance Company, made any inquiry of appellants, who were in possession, as to the nature of their title. The mortgagees, therefore, took subject to the interests under the agreement of sale.
- What then was the effect of the recording of mortgages on future payments by the vendees, appellants in this case? It has been stated that where a vendor sells lands by articles of agreement, a subsequent judgment against the vendor binds the legal estate in the vendor but only to the value of the unpaid purchase money: Brooke v. Bordner, 125 Pa. 470; Catlin v. Robinson, 2 Watts 373; Fasholt v. Reed, 16 S. & R. 265.
- As it has been otherwise stated: a judgment against the vendor of land retaining legal title is not so much a lien on the legal title as it is on the unpaid purchase money. These statements of the law are broader than the cases there mentioned will sustain for they omit any mention of notice to the vendee. The question here involved is whether the recording of a mortgage against the vendor's interest is constructive notice of the lien of that mortgage to vendees in possession under an agreement of sale.
- The purpose of recording mortgages or of entering judgment is to give notice of its existence to those who subsequently acquire an interest in or lien upon the property. It is sometimes said "that the record of a deed [or mortgage] is constructive notice to all the world." That, it is evident, is too broad and unqualified an enunciation of the doctrine. Recording is constructive notice only to those who are bound to search for it: subsequent purchasers and mortgagees, and, perhaps, all others who deal with or on the credit of the title, in the line of which the recorded deed [or mortgage] belongs: Maul v. Rider, 59 Pa. 167, 171; Bank v. Carr, 15 Pa. Superior Ct. 346, 349.
- The assignment of a mortgage by an instrument duly executed, or the assignment of such mortgage on the margin of the mortgage record is not such legal notice to the mortgagor as will preclude him from setting up payments made by him to the mortgagee before he has actual notice of the assignment: Foster v. Carson, 159 Pa. 477; O'Maley v. Pugliese, 272 Pa. 356, 359; Brindle v. McIlvaine, 9 S. & R. 74, 75; Bury v. Hartman, 4 S. & R. 175; Lee v. Sallada, 7 Pa. Superior Ct. 98. In order to complete the assignee's right with respect to such an assignment, the law requires actual notice be given to the mortgagor of the assignment. The recording act imposes no duty on the mortgagor to search the record for the purpose of ascertaining whether the mortgagee has assigned the mortgage. To do so would impose too great a burden on the mortgagor. Actual notice must be given to the mortgagor of the assignment.
- It has also been held that the docketing of a judgment is not notice of the lien to a purchaser in possession, since, after he has made his contract for the purchase and entered into possession, he is not bound to keep the run of the dockets, and payments subsequently made by him to the vendor pursuant to the contract without actual notice of the judgment, are valid as against such liens. See Black on Judgments, section 438, and Freeman on Judgments, 4th edition, section 364, and the numerous authorities from other states there cited.
- We held in Riddle v. Berg Co., 3 Sad. 566, 7 Atl. 232, where land was held pursuant to an article of agreement, and before the date of final payment a promissory note was given for the final payment, that it was not the duty of the purchaser, who has given such note in payment of the balance due on the purchase price, to watch the record and, when a judgment is entered, inform the judgment plaintiff of the existence of the note and the possibility of its being negotiated.
- If the recording of an assignment of a mortgage, or the docketing of a judgment, is not effective as constructive notice to the vendee of land when payments are to be made by the vendee to the mortgagor or judgment debtor, but actual notice is essential, how then can the rule of law be that the mere recording of a mortgage is effective as constructive notice to the vendee who purchased and was in actual possession of the land before the existence of such mortgage.
- The mortgagee has ample opportunity to ascertain the state of the possessor's title, the amount of purchase money due the mortgagor; and is given ample opportunity to effectuate his lien by notifying the vendee under articles of his mortgage or judgment. We can readily see where land is sold by articles of agreement and the purchaser does not go into possession, that his subsequent payment of purchase money to the vendor must be at his peril if judgments or mortgages have been entered in the interim. Such lien holders have no means of information (apart from actual notice) that the mortgagor or judgment debtor has parted with his title.
- The rule must be otherwise as to the sale of land under articles of agreement where possession is taken thereunder and held openly, continuously and notoriously. The opportunity is then afforded to the mortgagee of completing his lien by actual notice to the vendee in possession. We, therefore, conclude that the recording of a mortgage or docketing of a judgment is not constructive notice of a lien on land to a vendee then in possession under an agreement of sale. The mortgage operates as an assignment of the balance of the purchase money due but actual notice is required to make it effective. In other words, the lien of a mortgage or judgment, whether or not recorded or docketed, on the unpaid purchase money due from a vendee of land in possession under an agreement of sale, is not effective so as to require payment of the unpaid purchase money to the mortgagee or holder of the judgment unless actual notice of such mortgage or judgment has been given to the vendee in possession.
- If the rule were otherwise in the instant case, before each monthly payment was made it would be necessary for the purchasers to inquire from the mortgage record whether the vendor had assigned the balance of the purchase money due. This is an unwarranted burden.
Miners Savings Bk. of Pittston v. Tracy et ux., 326 Pa. 367, 192 A. 246 (1937):
- We said in Salvation Army, Inc., Trustees, v. Lawson, 293 Pa. 459, 463:
'There can be no doubt whatever of the proposition that where the land is occupied by two persons, as, for instance, by husband and wife, and there is a recorded title in one of them, such joint occupation is not notice of an unrecorded title in the other. . . . The rule is universal that if the possession be consistent with the recorded title, it is no notice of an unrecorded title.'
- Many cases so held, but it is sufficient to refer to Stewart v. Freeman, 22 Pa. 120, 123; Townsend v. Little, 109 U.S. 504; Kirby v. Tallmadge, 160 U.S. 379, 388; Rankin v. Coar, 46 N.J. Eq. 566, 22 A. 177. Indeed, this conclusion is but an application of the general principle that, in the absence of proof to the contrary, actual possession is presumed to be in him who has the record title. It would be intolerable to require an intending purchaser or encumbrancer to ask every person living in a property, be they many or few, whether or not he has a better title than the record owner, who is also in possession.
- This would be to shift the burden of clear proof of notice from him whose neglect to record his deed has caused the trouble, to him who has been guilty of no neglect; and would reverse the rule that the possesion of one holding under an unrecorded deed, in order to be effective as against a subsequent purchaser, must be open, notorious, distinct and unequivocal: Rankin v. Coar, supra." See also Buck's Appeal, 100 Pa. 109; Harris v. McIntyre, 118 Ill. 275, 8 N.E. 182; Atwood v. Bearss, 47 Mich. 72, 10 N.W. 112.
- The presumption is of course rebuttable but in this case there is nothing to rebut it; appellant's evidence supports the facts bringing the case directly within the statute.
Sidle v. Kaufman, 345 Pa. 549, 29 A.2d 77 (1942):
- It is well settled that purchasers and mortgagees of real estate are affected not only by matters of which they had actual knowledge and by what appeared in the office of the recorder of deeds and in the various courts of record whose territorial jurisdiction embraced the land in dispute, but as well "by what they could have learned by inquiry of the person in possession and of others who, they had reason to believe, knew of facts which might affect the title": Salvation Army Inc. Tr. v. Lawson, 295 Pa. 459, 463. See also Kinch v. Fluke, 311 Pa. 405, 408; Driebe v. Fort Penn Realty Co., supra, 318; Koubek v. Tenos, 343 Pa. 409, 412.
- Here it is admitted Sidle entered into open, exclusive and notorious possession of the premises in 1938, residing there with his family down to the date of the fire. After the fire the Sidles were compelled to take up temporary quarters elsewhere, owing to the damaged condition of the dwelling, but furniture and other personal property of Sidle remained (and so far as appears still remains) on the premises, and he thus did in fact continue to assert and retain possession under the lease and option agreement. At the hearing Shure admitted he had not read the answer sworn to by him and filed in his behalf, denying notice; admitted he had heard about the option from "a lot of people" and that Sidle had told him he "had some kind of understanding with Mr. Kaufman"; and he testified he made no inquiry of Sidle, because he "relied upon and trusted Mr. Kaufman implicitly."
- Shure thus deliberately omitted to make inquiry of Sidle, the party in possession, or others known to him to have knowledge of facts affecting the title, and failing to do so, is chargeable, as a matter of law, with constructive notice of all that such inquiry would have disclosed.
- As appellant states: "The testimony regarding Reuben Shure indicates clearly that he willingly bought his way into litigation regardless of the consequences and relying solely upon the ability of Nathan Kaufman to make him safe."
Atlantic Refining Co. v. Wyoming Nat. Bank, 356 Pa. 226, 51 A. 2d 719 (1947):
- Not only had the auction sale to Jacobs been expressly made "subject to the rights of the tenants in possession" but, as a matter of law, he was bound with knowledge of the possessing tenant's (Atlantic's) right under its lease to the first refusal to purchase "the demised premises": see Kerr v. Day, supra [14 Pa. 112], at pp. 116-117, where the rule as stated by Lord Eldon in Taylor v. Stibbert, 2 Ves. 437, is approvingly quoted, in part, as follows: "'Where there is a tenant in possession under a lease, or an agreement, a person purchasing part of the estate must be bound to inquire on what terms that person is in possession.... [A] tenant being in possession under a lease, with an agreement in his pocket to become the purchaser, those circumstances altogether give him an equity, repelling the claim of a subsequent purchaser, who made no inquiry as to the nature of his possession'".
- Knowledge of an option to purchase is within the range of what such an inquiry bindingly reveals. In the annotation appearing in 74 A.L.R. p. 355 et seq., Kerr v. Day, supra, is cited (p. 356) as holding "that the possession of a lessee charges a purchaser with knowledge of a provision of the lease granting an option to purchase". (Emphasis supplied).
Schell v. Kneedler, 359 Pa. 424, 59 A. 2d 91 (1948):
- The deed to the Bradys was recorded and they were in possession; that fact makes it immaterial for present purposes that plaintiff and her husband also lived in the same house with the Bradys. Neither Kneedler nor Grammes, when they bought from the Bradys, had any knowledge, actual or constructive, of the secret trust; they wre bound by the recorded title and could rely on possession by the Bradys.
- Finding title and possession in one person relieved them from further inquiry on the premises.
- In Miners Savings Bank etc. v. Tracy , 326 Pa. 367, 192 A. 246, at p. 373 we referred to the rule as follows:
"'We said in Salvation Army, Inc., Trustees, v. Lawson , 293 Pa. 459, 463; "There can be no doubt whatever of the proposition that where the land is occupied by two persons, as, for instance, by husband and wife, and there is a recorded title in one of them, such joint occupation is not notice of an unrecorded title in the other.... The rule is universal that if the possession be consistent with the recorded title, it is no notice of an unrecorded title." Many cases so held, but it is sufficient to refer to Stewart v. Freeman , 22 Pa. 120, 123; Townsend v. Little , 109 U.S. 504; Kirby v. Tallmadge , 160 U.S. 379, 388; Rankin v. Coar , 46 N.J. Eq. 566, 22 A. 177. Indeed, this conclusion is but an application of the general principle that, in the absence of proof to the contrary, actual possession is presumed to be in him who has the record title. It would be intolerable to require an intending purchaser or encumbrancer to ask every person living in a property, by they many or few, whether or not he has a better title than the record owner, who is also in possession. This would be to shift the burden of clear proof of notice from him whose neglect to record his deed has caused the trouble, to him who has been guilty of no neglect; and would reverse the rule that the possession of one holding under an unrecorded deed, in order to be effective as against a subsequent purchaser, must be open, notorious, distinct and unequivocal: Rankin v. Coar , supra.' See also Buck's Appeal , 100 Pa. 109; Harris v. McIntyre , 118 Ill. 275, 8 N.E. 182; Atwood v. Bearss , 47 Mich. 72, 10 N.W. 112."
- Kinch et ux. v. Fluke et al ., 311 Pa. 405, 166 A. 905, was referred to during the oral argument. But in that case a different principle applied. Fluke who held the record title was not in possession when he made the mortgages; his mortgagees therefore were bound to inquire of Kinch, who was in possession by articles, or risk the lien of their mortgages. The cases cited by Justice KEPHART on page 408 of the opinion in that case in referring to the duty of inquiry on a purchaser or mortgagee were cases in which possession and record title were not in same person.
Malamed v. Sedelsky, 80 A.2d 853, 367 Pa. 353 (Pa. 1951):
- There is nothing to show that plaintiff had actual notice, but there is an averment in the New Matter part of the Answer that the defendants were in exclusive possession of the premises from February 24, 1947, when Pastner took title to the present time.
- Such possession by the Sedelskys was sufficient constructive notice, for it has long been settled that it is the duty of a purchaser of real property to make inquiry respecting the rights of the party in possession and failing to do so they are affected with constructive notice of such facts as would have come to his knowledge in the proper discharge of that duty: Lazarus v. Lehigh and Wilkes-Barre Coal Co., 246 Pa. 178, 184, 92 A. 121 (1914); Atlantic Refining Co. v. Wyoming Nat. Bank, 356 Pa. 226, 236, 51 A. 2d 719 (1947); Sidle v. Kaufman, 345 Pa. 549 557, 29 A. 2d 77 (1942); Kinch v. Fluke, 311 Pa. 405, 166 A. 905 (1933) 2.
- This has been the law as far back at least as Woods v. Farmere, 7 Watts 382, 387 (1838), where it was said by Chief Justice GIBSON, at p. 387, "... it certainly evinces as much carelessness to purchase without having viewed the premises, as it does to purchase without having searched the register." In that case the rule was invoked against a purchaser at a sheriff's sale which under the pleadings is the real status of the plaintiff here. But even if the plaintiff were viewed as a judgment creditor he would nevertheless in that capacity be still subject to the same duties as subsequent purchasers and mortgagees. The Act of 1931, supra, puts him in the same class with them and accords him no greater rights. If then plaintiff had inquired of the defendants who were in exclusive possession by what authority they occupied the premises, he would have learned of their claim of ownership and that his judgment debtor had no title. Being bound by constructive notice therefore of the prior conveyance, his action must fail and the judgment must be reversed.
Lund v. Heinrich, 410 Pa. 341; 189 A.2d 581 (1963):
An innocent purchaser for value, having neither actual nor constructive knowledge of claims of a third party, holds the title acquired free of any such secret equities. Where one of two innocent persons must suffer, he whose neglect makes the injury possible must bear the responsibility. See, Haggerty v. Moyerman, 321 Pa. 555, 184 A. 654 (1936); Puharic v. Novy, 317 Pa. 199, 176 A. 233 (1934); and Kepler v. Kepler, 330 Pa. 441, 199 A. 198 (1938). The purpose of the foregoing rule is to discourage secret liens or equities against property, particularly real property, where the owner of the lien, encumbrance or equity may record it or institute proceedings immediately, and make it a matter of permanent record from which those who deal with the property thereafter may learn that the owner does not have a perfect title to the land involved: Puharic v. Movy, supra.
As stated in Salvation Army Inc., Tr., v. Lawson, 293 Pa. 459, 143 A. 113 (1928), at page 463:
"Plaintiffs' title could be affected only with what they actually or constructively knew at the time of the purchase, necessarily, as to the latter, by what they could have learned by inquiry of the person in possession and of others who, they had reason to believe, knew of facts which might affect the title, and also by what appeared in the appropriate indexes in the office of the recorder of deeds, and in the various courts of record whose territorial jurisdiction embraced the land in dispute ( Jaques v. Weeks, 7 Watts 261; Hill v. Epley, 31 Pa. 331, 336; Maul v. Rider, 59 Pa. 167, 171); but not of that which they could not have learned by inquiry of those only who, they had reason to believe, knew of the facts; Lower's App., I Walker 404. The burden of proof upon these points was upon defendant, and, to be of any effect, the evidence was required to be clear and unequivocal: Meehan v. Williams, 48 Pa. 238, 241, 242; Townsend v. Little, 109 U.S. 504, 511. It is not claimed that plaintiffs had actual knowledge of the alleged wrong, or that they knew of others who were acquainted with facts which might affect the title to the property. Their grantor was in possession, her grant was an affirmance that she had a good title, and hence, as we have held, plaintiffs were not required to make any inquiry of her: 3 Stiffler v. Retzlaff, 20 W.N.C. 303 ... "The rule is universal that if the possession be consistent with the recorded title, it is no notice of an unrecorded title'" Kirby v. Tallmadge, 160 U.S. 379, 388."
Further, as stated in the above case, the burden of proving that a purchaser for value had constructive notice of facts not appearing in the record is upon him who asserts it. This burden was not met and the lower court correctly so concluded.
Mid-State Bank & Trust Co. v. Globalnet Int'l, Inc., 557 Pa. 555; 735 A.2d 79 (1999):
A party is on constructive notice of another's interest in real property where the party "could have learned by inquiry of the person in possession and of others who, they had reason to believe, knew of facts which might affect title, and also by what appeared in the appropriate indexes in the office of the recorder of deeds." Lund v. Heinrich, 410 Pa. 341, 346, 189 A.2d 581, 584 (1963).
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Superior Court of Pennsylvania
Roberts v. Estate of Pursley, 718 A.2d 837 (Pa. Super. 1998):
- The facts of this case involve Appellees predecessors in title, who purchased parcel of land for value and without notice of Appellants' adverse interest in such parcel. Because sections 351 and 444 are both intended to provide the same protections to bona fide purchasers, and in light of the fact that the sections must be read together, we hold that the trial court was correct in applying the Pennsylvania recording statute to the facts of this case. Miners National Bank of Wilkes-Barre, supra; Mancine, supra.
- Next, Appellants contend, citing Kaiser Energy Inc. v. Commonwealth of Pennsylvania, Department of Environmental Resources, 113 Pa. Commw. 6, 535 A.2d 1255 (Pa. Commw. 1998), that the bona fide purchaser concept does not apply to the facts of the present case because Appellees' grantor did not possess legal title. In Kaiser, supra, the Commonwealth Court held that "the bona fide purchaser concept applies only to purchasers of legal title." 535 A.2d at 1258 (citing 32 P.L.E. Sales of Realty § 156 (1960)). The Commonwealth Court's decision in Kaiser, supra, is not binding on this court. Moreover, we do not find the Commonwealth Court's decision instructive; in fact, we find the Commonwealth Court's argument inconsistent with the bona fide purchaser concept contained within the recording statute of this Commonwealth.
- The recording statute was intended to protect bona fide purchasers who give value for land. Long John Silver's Inc. v. Fiore, 255 Pa. Super. 183, 190, 386 A.2d 569, 573 (1978) (citing Lund v. Heinrich, 410 Pa. 341, 189 A.2d 581 (1963)). In order to qualify as a bona fide purchaser, the subsequent buyer must be without notice of a prior equitable interest. Id.
- If "legal title," within the Appellant's definition, were required for a subsequent purchaser to qualify as a bona fide purchaser, the recording statute would not further its intended goals. For instance, in the typical recording statute situation, a grantor sells land to a grantee who does not record the deed; then, a subsequent buyer purchases the same land from the same grantor as the original grantee and this subsequent grantee records his deed before the first grantee. The subsequent grantee does not have "legal title" within the Appellant's definition because at the time the land was sold to him, the grantor did not have legal title to give such right. Yet, notwithstanding the fact that he does not have "legal title," he is a bona fide purchaser if at the time of the sale he was without notice of an adverse interest and value was given for the purchase of the land. See Long John Silver's, supra. As evidenced here, imposing a requirement of "legal title" to the definition of a bona fide purchaser would nearly render the recording statute useless. We, therefore, find no merit in Appellants' argument.
- Appellants' next contention is that Appellees cannot be protected under the recording statute because they inherited the disputed land parcel from their predecessors-in-interest. In support of this contention, Appellants cite U.S. v. 137.02 Acres of Land, 334 F. Supp. 1021 (M.D. Pa. 1971). There, the United States District Court for the Middle District of Pennsylvania held that "heirs, who have given nothing of value in return for title, are not in the position of bona fide purchasers, mortgagees, and judgment creditors." Id. at 1024. Even though this is a correct rule of law, the trial court did not err by failing to apply it in the present case.
- In Thompson v. Christie, 138 Pa. 230, 20 A. 934 (1890), our supreme court pointed out that "it is well settled that a bona fide purchaser, without notice of a secret agreement or trust, takes title discharged from such agreement or trust, and that he can convey good title even though his vendee has had actual notice." Thompson, 138 Pa. at 249, 20 A. at 934 (citations omitted); see also 77 Am.Jur. 2D Vendor and Purchaser § 509 (stating that "generally, a remote purchaser of real estate whose purchase does not fulfill all the requisites for protection due a bona fide purchaser may nevertheless be accorded protection because of a purchaser who is entitled thereto") (citations omitted). Essentially, our supreme court's holding in Thompson, supra, extended bona fide purchaser protection to vendees who purchase land from a bona fide purchaser vendor, even where the vendee has notice of adverse interests in the property. The purpose of this rule is to "prevent a stagnation of property and to protect the first purchaser, who, being entitled to hold and enjoy, must be equally entitled to sell." 77 Am.Jur. 2D Vendor and Purchaser § 509 (citations omitted).
- Under the aforesaid rationale, we extend protection to devisees and heirs who take from a bona fide purchaser. The purpose here is not to protect the heir or devisee, but to permit the bona fide purchaser to convey his land. Moreover, the application of this principle to heirs and devisees will further the policy of preventing the stagnation of property as well as the policies surrounding the bona fide purchaser concept. Long John Silver's, supra. We are not, however, extending protection to heirs and devisees who take from one who has not acquired status as a bona fide purchaser. Extending such protection would not further the underlying purpose of the recording statute and the bona fide purchaser doctrine. See Mancine, supra; Long John Silver's, supra.
***
- The Pennsylvania Supreme Court has held:
it is well settled that purchasers . . . of real estate are affected not only by matters of which they had actual knowledge and by what appeared in the office of the recorder of deeds and in the various courts of record whose territorial jurisdiction embraced the land in dispute, but as well 'by what they could have learned by inquiry of the person in possession and of others, who they had reason to believe, knew of facts which might affect title.'
Sidle v. Kaufman, 345 Pa. 549, 557, 29 A.2d 77, 81 (1942) (quoting Salvation Army Inc. Trustees v. Lawson, 293 Pa. 459, 463, 143 A. 113, 114 (1928)). However, a purchaser will not be prejudiced by facts, which he could not have learned by inquiry. Salvation Army Inc. Trustees, 293 Pa. at 462, 143 A. at 114 (citing Lower's Appeal, 1 Walk 404, 5 Leg.Daz. 45 (1873)).
Volunteer Fire Co. v. Hilltop Oil Co., 412 Pa. Super. 140; 602 A.2d 1348 (Pa. Super. 1992):
- In order to qualify as a bona fide purchaser for value, an innocent purchaser must take with "neither actual nor constructive knowledge of claims of a third party . . . ." Lund v. Heinrich, 410 Pa. 341, 346, 189 A.2d 581, 584 (1963). Constructive knowledge means "what they could have learned by inquiry of the person in possession and of others who, they had reason to believe, knew of facts which might affect the title, and also by what appeared in the appropriate indexes in the office of the recorder of deeds . . . ." Id., 410 Pa. at 348, 189 A.2d at 585.
Long John Silver's, Inc. v. Fiore, 255 Pa. Super. 183; 386 A.2d 569 (Pa. Super. 1978):
- Under Pennsylvania law, at the time of signing an unconditional agreement for the sale of land, the buyer acquires an equitable interest in the land. Byrne v. Kanig, 231 Pa.Super. 531, 332 A.2d 472 (1975). This rule is consistent with the common law rule regarding unrecorded deeds and agreements of sale whereby a buyer acquires an equitable interest in the land. At common law, the first buyer's deed was superior to subsequent deeds to the property conveyed by the same grantor, regardless of whether the first deed was without consideration and the subsequent deed was to a bona fide purchaser without notice.
- The Pennsylvania recording statute, 5 however, protects subsequent purchasers by giving a subsequent bona fide purchaser for value without notice of a prior transaction priority over the equitable estate of the first owner. Lund v. Heinrich, 410 Pa. 341, 189 A.2d 581 (1963). However, in order to qualify as a bona fide purchaser, the subsequent buyer must be without notice of the prior equitable interests of others. Overly v. Hixson, 169 Pa.Super. 187, 82 A.2d 573 (1951).
- If the subsequent purchaser has notice of the first agreement of sale or deed, he has no protection as a bona fide purchaser and his title is subject to the interest vested in the first purchaser.
- Either actual or constructive notice is sufficient to prevent the subsequent purchaser from acquiring the status of a bona fide purchaser. Overly v. Hixson, supra. Because constructive notice is not limited to instruments of record, a subsequent purchaser may be bound by constructive notice of a prior unrecorded agreement. Overly v. Hixson, supra; Smith v. Miller, 296 Pa. 340, 145 A. 901 (1929). This is true because the subsequent purchaser could have learned of facts that may affect his title by inquiry of persons in possession or others who the purchaser reasonably believes know such facts. Lund v. Heinrich, supra; Sidle v. Kaufman, 345 Pa. 549, 29 A.2d 77 (1943).
Overly v. Hixson, 169 Pa. Super. 187, 82 A.2d 573 (1951):
- The applicable recording Act (Act of 1775, March 18, 1 Sm. L. 422, § 1; Act of 1893, May 19, P. L. 108, § 1, 21 PS § 444) required deeds to be recorded within ninety days of their execution dates and provided that if not so recorded they would be adjudged fraudulent and void against subsequent purchasers for a valid consideration.
- But it was also the law under this statute, as it has been under all our recording Acts, that subsequent purchasers who had actual or constructive notice of unrecorded deeds were not protected. Smith v. Miller, 296 Pa. 340, 145 A. 901; Detwiler v. Coldren, 101 Pa. Superior Ct. 189.
- Actual and exclusive possession by a grantee who neglects to record his deed has been consistently held to constitute constructive notice of his title.
- That situation, however, must be distinguished from cases like the one before us, where the owner of the unrecorded interest was not in exclusive possession of the property, but was, rather, in joint possession with one having record title, and where it appeared that between the joint possessors there existed a family relationship.
- Smith v. Miller, supra, a case involving similar facts, properly states the law as follows (pp. 344, 345):
"We said in Salvation Army Inc. Trustees v. Lawson, 293 Pa. 459, 463, 143 A. 113: [HN3] 'There can be no doubt whatever of the proposition that where the land is occupied by two persons, as, for instance, by husband and wife, and there is a recorded title in one of them, such joint occupation is not notice of an unrecorded title in the other . . . . The rule is universal that if the possession be consistent with the recorded title, it is no notice of an unrecorded title.' Many cases so hold, but it is sufficient to refer to Stewart v. Freeman, 22 Pa. 120, 123; Townsend v. Little, 109 U.S. 504, 27 L. Ed. 1012, 3 S. Ct. 357; Kirby v. Tallmadge, 160 U.S. 379, 388, 40 L. Ed. 463, 16 S. Ct. 349; Rankin v. Coar, 46 N. J. Eq. 566, 22 A. 177. Indeed, this conclusion is but an application of the general principle that, in the absence of proof to the contrary, actual possession is presumed to be in him who has the record title. It would be intolerable to require an intending purchaser or encumbrancer to ask every person living in a property, be they many or few, whether or not he has a better title than the record owner, who is also in possession. This would be to shift the burden of clear proof of notice from him whose neglect to record his deed has caused the trouble, to him who has been guilty of no neglect; and would reverse the rule that the possession of one holding under an unrecorded deed, in order to be effective as against a subsequent purchaser, must be open, notorious, distinct and unequivocal: Rankin v. Coar, supra."
- See Miners Savings Bank of Pittston v. Tracy, 326 Pa. 367, 192 A. 246; Schell v. Kneedler, 359 Pa. 424, 59 A. 2d 91; 2 A. L. R. 2d 857 et seq. The rule may also be put as follows: "When the occupation by one is not exclusive but in connection with another, who has the record title and with whom there exists a relationship sufficient to account for the situation, and the circumstances do not suggest an inconsistent claim, such possession will not give notice of a right not appearing of record." 66 C. J., Vendor and Purchaser, § 1028.
Pennsylvania Lower State Courts
United States Bank Nat'l Ass'n v. Flemming, NO. 3487, Control No. 042044, Common Pleas Court of Philadelphia County, Pennsylvania Civil Trial Division, 2009 Phila. Ct. Com. Pl. LEXIS 212, May 29, 2009:
In order for an innocent purchaser for value to hold a title free of all "secret equities" the innocent purchaser must have neither actual nor constructive knowledge of the claims of a third party. Lund v. Heinrich, 410 Pa. 341, 189 A.2d 581, 584 (Pa. 1963). Purchasers and mortgagees are considered to have knowledge of all recorded matters and all matters about which "they could have learned by inquiry of the person in possession and of others who, they had reason to believe, knew of facts which might affect the title." Sidle v. Kaufman, 345 Pa. 549, 29 A.2d 77, 82 (Pa. 1942).
***
The party averring that the purchaser had constructive knowledge of a defect in the title has the burden of proof by "clear and unequivocal" facts. Puharic v. Novy, 317 Pa. 199, 176 A. 233, 234 (Pa. 1934).
Muller v. McNamee, No. 751, Common Pleas Court of Philadelphia County, Pennsylvania, 20 Phila. 644; 1990 Phila. Cty. Rptr. LEXIS 36, May 9, 1990 , Affirmed without opinion by Muller v. McNamee, 408 Pa. Super. 639, 585 A.2d 542 (Pa. Super. 1990):
- The Pennsylvania Recording Statute 21 P.S. Section 351 provides:
All deeds, conveyances, contracts and other instruments of writing wherein it shall be the intention of the parties executing the same to grant, bargain, sell, and convey any lands, tenements, or hereditaments situate in this Commonwealth, upon being acknowledged by the parties executing the same or proved in the manner provided by the laws of this Commonwealth, shall be recorded in the office for the recording of deed in the county situate. Every such deed, conveyance, contract, or other instrument of writing which shall not be acknowledged or proved and recorded, as aforesaid, shall be adjudged fraudulent and void as to any subsequent bond [sic] fide purchaser or mortgagee or holder of any judgment, duly entered in the prothonotary's office of the county in which the land, tenements or hereditaments are situate, without actual or constructive notice unless such deed, conveyance, contract, or instrument of writing shall be recorded, as aforesaid, before the recording of the deed or conveyance or the entry of the judgment under which such subsequent purchaser, mortgagee, or judgment creditor shall claim. Nothing contained in this act shall be construed to repeal or modify any law providing for the lien of purchase money mortgages.
- The effect of this statute is to protect subsequent purchasers by giving a subsequent bona fide purchaser for value without notice of a prior transaction priority over the equitable estate of the first owner. Land v. Commonwealth of Pennsylvania, Pennsylvania Housing Finance Agency, 101 Pa. Commw. 179, 515 A.2d 1024, (1986); Long John Silver's Inc. v. Fiore, 255 Pa.Super. 183, 386 A.2d 569 (1978).
- However, in order to qualify as a bona fide purchaser, the buyer must be without notice of the prior equitable interests of others. Long John Silver's, Inc. v. Fiore, supra. If the subsequent purchaser has notice of the first agreement of sale or deed, he has no protection as a bona fide purchaser and his title is subject to the interest vested in the first purchaser. Long John Silver's Inc. v. Fiore, supra. "[T]itle could be affected only with what they actually or constructively knew at the time of the purchase, necessarily, as to the latter, by what they could have learned by inquiry of the person in possession and of others who, they had reason to believe, knew of facts which might affect the title, and also by what appeared in the appropriate indexes in the office of the recorder of deeds, and in the various courts of record whose territorial jurisdiction embraced the land in dispute, . . ." Lund v. Heinrich, 410 Pa. 341, 348, 189 A.2d 581 (1963); Salvation Army Inc., Trustees v. Lawson, 293 Pa. 459, 143 A. 113 (1928).
Pa. Dep't of Transp. v. Mendelsohn, No. 3658, Common Pleas Court of Philadelphia County, Pennsylvania, 11 Phila. 390, 1984 Pa. Dist. & Cnty. Dec. LEXIS 192 (1984):
- It is the duty of a prospective purchaser of land to make a proper inquiry as to the status of the title of his vendor and one who neglects to make an inquiry where it is a duty, is not a bona fide purchaser. Lund v. Heinrich, 410 Pa. 341, 189 A.2d 581 (1963). However, a purchaser of land is not deemed to have notice of matters which lie beyond the range of an inquiry and which reasonableness might not disclose. Where a purchaser could not have learned the facts by an inquiry, he is not prejudiced because he did not inquire. Hetherington v. Clark, 30 Pa. 393 (1858); Appeal of Lower, 1 Walk. 404, 5 Leg. GAZ 45 (1873).
Am. Bank & Trust Co. ex rel. Commercial Banking Corp. v. McKibbins, No. 889, Common Pleas Court of Philadelphia County, Pennsylvania, 2 Phila. 8, 1978 Phila. Cty. Rptr. LEXIS 2 (1978):
- We turn now to the plight of the Butlers, the purchasers at the sheriff sale. They claim to be bona fide purchasers for value without notice of any irregularity or adverse claim of others and thus entitled to their title. Indeed, a bona fide purchaser of real estate is protected against all adverse claim to title. Gilberton Contracting Co. v. Hook, 255 F. Supp. 687 (E.D. Pa. 1966); Lund v. Heinrich, 410 Pa. 341, 189 A.2d 581 (1963).
- However, this case does not present the ordinary situation where the seller has recorded title and all indicias of ownership upon which the law allows a prospective purchaser to rely with impunity. The property in this case was and is in custodia legis, subject to be sold only by leave of Court. The argument of the purchasers that because the conservator did not index his appointment in the judgment index or in the office for recordings of interest in real estate, they had to rely on owner's index that showed the judgment debtor to be the owners of the subject real estate, has no basis in fact or law.
- In fact, the purchasers made no inquiry at all, but proceeded to the sale with the abandon of a gambler to expect munificence from a little investment. Professing that they purchased the property to make it their home, they did not inspect it or see it before the sheriff sale. They were unaware of the physical condition or the layout. They have never seen the inside, and only after the sheriff sale did Mr. Butler see the outside. Learning from that visit that it was apparently occupied, they made no inquiry as to the nature and extent of the occupancy. Without knowledge of when it would become available for possession, they sold their own home in anticipation of moving to it.
- A purchaser of realty who neglects to make a proper inquiry is not a bona fide purchaser for value. It is the duty of the purchaser to make reasonable inquiry as to the status of his seller. Malamed v. Sedelsky, 367 Pa. 353, 80 A.2d 853 (1951); Kinch v. Fluke, 311 Pa. 405, 166 A. 861 (1933); Woods v. Farmere, 7 Watts 382 (1838).
