NY Bankruptcy Court: REMIC Investor Lacks Standing In Chapter 11 Case Where Debtor's Property Secures Loan Included In Pool Held By Trust

Lexology reports:

• In a recent decision, the Bankruptcy Court for the Southern District of New York concluded that an investor in a Real Estate Mortgage Investment Conduit ("REMIC") lacked standing to object to the sale of a chapter 11 debtor's real property, despite that the property served as collateral for loans held in trust by the REMIC for the benefit of its investors.

For more, see REMIC investor lacks standing to object to sale of collateral in borrower's bankruptcy reorganization (requires subscription; if no subscription, GO HERE; or TRY HERE - then click the appropriate link for the story).

For the ruling, see In re: Innkeepers USA Trust, Case No. 10-13800 (Bankr. S.D. N.Y. April 1, 2011).

Thanks to Deontos for the heads-up on the story.

'Lien Priority' Battles Between Recorded, Unrecorded Interests In Real Estate Continue; Homebuyer Downpayment Lien Trumps Builder's Construction Loan

Bona fide purchaser fans (including title insurance lawyers & agents, as well as home buyers making downpayment deposits on yet-to-be-built homes & condos, and construction lenders) may find the following butchered summary of some of the facts from a recent ruling of the South Carolina Court of Appeals of some interest:

1. Covington, an experienced real estate broker, enters into a contract with Wingard, a real estate developer, for the purchase of a yet-to-be built home.



2. Covington gives Wingard two downpayment checks, one for $10,000, which was deposited shortly thereafter, and one for $276,700, which was given with the instruction that it was not to be deposited until after Wingard obtained a mortgage loan to commence construction of the premises.



3. The $276,700 check given by Covington was a 'hot check' (ie. he did not have sufficient funds in his bank account to cover this amount).



4. As a precondition for the yet-to-be obtained construction loan, lender required Wingard to sell the unit for each lot in the development.



5. Wingard apparently met the condition, as lender subsequently provided a $7,000,000 construction loan.



6. Shortly after the mortgage securing the construction loan was recorded, Wingard deposited Covington's $276,700 check which, because Covington had since deposited sufficient funds in his account to cover it subsequent to its issuance, was no longer 'hot', and cleared without incident.



7. Wingard ultimately defaulted on the construction mortgage, and the lender initiated foreclosure.



8. At some point thereafter, a question arose regarding the lien priority involving the competing interests of the lender's recorded construction mortgage, and Covington's equitable lien(1) (which, by its very nature, is an unrecorded lien) for the amount of his down payment deposit.

Question:

As between the competing interests of Covington's unrecorded equitable lien and the lender's recorded mortgage, which lien has priority on the premises?

If you guessed that the lender's recorded mortgage had priority over Covington's unrecorded equitable lien for the amount of his downpayment money, GUESS AGAIN.

Given the specific facts of this case, and as set forth in the court's ruling, Covington's equitable lien for his downpayment cash trumps the lender's construction loan, so that any foreclosure of the mortgage will leave Covington's lien for his downpayment unaffected (ie. the bank's construction loan is, in effect, treated as a 2nd mortgage subordinate to Covington's lien; if he does not recover his downpayment money, Covington (along with other would-be buyers who coughed up deposits on the struggling project) will then be able to foreclose on the bank to reclaim his cash).

Further, the court found this to be the case, notwithstanding the fact that Covington's $276,700 check:

• was held uncashed by Wingard until after the construction loan was made, and
  


• was written at a time when there were insufficient funds in the bank to cover the payment (although funds were ultimately made available when the check was eventually deposited).

For full facts, the ruling, and the court's application of the relevant law, see Regions Bank v. Wingard Properties, Inc., Opinion No. 4846 (S.C. Ct. App. June 22, 2011).

(1) I mention in passing that when a buyer pays a downpayment for any purchase of real estate, the buyer is generally entitled to an equitable lien on the premises for the amount of his deposit. The entitlement to such an equitable lien is usually not any big deal - except, of course, in those cases where the transaction ultimately fails to close and the seller and/or escrow agent refuses to refund the deposit back to the buyer.bona fide purchaser

Judge To Bill Collectors: Courtroom Is Not A "Land Of Oz!"

From a May, 2010 story in The New York Times:

• As New Yorkers have tumbled into credit card debt in large numbers during the great recession, bill collectors have inundated the courts to get what they say is due. In turn, the courts have issued hundreds of thousands of orders against residents. Some consumer groups argue that by doing so, the courts have become little more than an arm of the debt collection industry.



• Now, a few judges in New York State are suggesting that they agree, at least in part, with the consumer groups. They have fumed at debt collectors and their lawyers, scolding them for interest as high as 30 percent a year and berating them for false statements and abusive practices.



• Some of the rulings have even been sarcastic or incredulous. In December, a Staten Island judge said debt collectors seemed to think their lawsuits were taking place in a legal Land of Oz, where everyone was supposed to follow anticonsumer rules invented by some unseen debt-collection wizard.

***

• In the Staten Island case, the judge, Philip S. Straniere, said a credit card company was claiming interest of 28 percent on the balance due, which would be illegal as usury under New York law. The company argued that the credit card issued to a New Yorker that seemed to be from a national company had actually been issued by a one-branch bank in Utah, which had no usury law.



• “Like the Land of Oz, run by a Wizard who no one has ever seen,” Judge Straniere wrote, “the Land of Credit Cards permits consumers to be bound by agreements they never sign, agreements they may never have received, subject to change without notice and the laws of a state other than those existing where they reside.”(1)



• The judge ruled that the supposed agreement allowing unlimited interest charges was not enforceable in New York.(2)

For the story, see In New York, Some Judges Are Now Skeptical About Debt Collectors’ Claims.

For Judge Straniere's ruling, see American Express Travel Related Services Company, Inc. v. Assih, 2009 NY Slip Op 29527 (NYC Civ. Ct., Richmond Cty., 2009).

(1) Commenting on the rules governing the consumer credit and debt collection industries, Judge Straniere makes this observation:

• Having dealt with thousands of consumer credit cases over the years the court is sometimes caused to wonder if the regulations governing this industry originated in the "Wonderful Land of Oz" and not in the legislature of the various states and national government.

(2) Judge Straniere gave the lender the kiblosh on the usury issue with this remark:

• The Wizard in the "Wizard of Oz" warned Dorothy and friends, "Do not arouse the wrath of the great and powerful Oz," I am sure the court will likewise be arousing the wrath of the plaintiff by finding that the credit card agreement entered into by the defendant with any of the plaintiff's entities is void as in violation of New York's usury statute.

Defective Foreclosure At Center Of REO Homebuyers' Dilemma; Discover They Acquired Crappy Title When Subsequent Refinance Attempt Failed

In Cape Coral, Florida, The News Press reports:

• Brian and Holly Barnhart thought they were home free when they bought their Cape Coral dream house from Wells Fargo Bank - but the bank didn't even own the house.



• Now the Barnharts, who emptied their life savings to buy the house for $153,000 cash and renovate it for another $80,000, are stuck in limbo along with their two small children and a baby due in July.

***

• At the heart of the problem is a mortgage foreclosure lawsuit filed by Wells Fargo in 2007 against Richard Riccobono for a mortgage he had on the house. The bank won the suit and then took back possession of the house, but moved July 30, 2009, to set aside its ownership.



• That caused ownership of the house to revert to Riccobono. But on Nov. 3, 2010, Wells Fargo sold the house to the Barnharts - who discovered two months later they didn't really own it when they applied for a mortgage.



• Their plight is the latest in a string of cases in which people are suffering the aftershocks of the wave of foreclosures that swept through the county after the real estate bubble burst at the end of 2005.(1)

For more, see Exclusive: Cape Coral family pays Wells Fargo for home bank didn't own.

(1) Unless they updated their owner's title insurance policy (assuming, of course, they obtained one when they bought the home in the first place) to reflect the additional $80,000 investment for renovations (or unless they have something in their existing policy that addresses market value increases - for which they would have paid an additional insurance premium), the Barnhart's may find that their title insurance coverage is limited to the $153,000 they paid for their home. (It may be possible, however, that the Barnhart's can go to court and request that a judge impose an equitable lien on the property for the $80K expended to fix the place up.)

Virginia Homeowner's F'closure Challenge Leaves Public Auction Buyer Out $310K With Ongoing Tax Bills, In 2-Year Tug-Of-War For Possession Of Premises

In Richmond, Virginia, the Richmond Times Dispatch reports:

• The foreclosure mess rocking the nation is playing out in Richmond.



• On one side is a father-and-son team who bought a house in Windsor Farms as an investment at a foreclosure auction nearly two years ago but can't take possession of the house.



• On the other is the couple who owned the house — and claim they still do, alleging that the foreclosure process was improper and should be voided.



• Now, the case is tied up in the courts. [...] Judge Walter W. Stout of Richmond Circuit Court said Monday that the case has become a quagmire because of questions relating to title and possession.

***

• Similar cases are likely to pop up, as foreclosures continue to mount nationwide and lenders and attorneys general in all 50 states review foreclosure procedures for possible improprieties.

***

• The Watsons paid $310,200 for the house at a foreclosure auction on the steps of the John Marshall Courts Building in July 2009. Their name was recorded a couple of weeks later on the deed of trust. They have paid property taxes of nearly $15,000 since then, said their attorney, William K. Grogan.



• But it's not clear who owns the house. The Nicholsons have not paid any mortgage or rent for at least 30 months, Grogan said in court filings. But the Nicholsons allege that the foreclosure process on their home was bogus, according to court records. [...] The couple has posted more than $19,000 in bonds, the Nicholsons' attorney said. "He is not a freeloader," Henry W. McLaughlin, one of two attorneys representing the Nicholsons, said at a recent court hearing.

For more, see Windsor Farms foreclosure case a quagmire.

Another Florida Homeowner Suffers Pre-Foreclosure House-Trashing; Cops To Victim: Don't Bother Us, It's A 'Civil Matter!'

In Brooksville, Florida, WTSP-TV Channel 10 reports:

• Imagine coming back to your home after being away a few weeks and finding the locks changed and the home trashed. That's what happened to Chris Boudreau of Brooksville. Boudreau showed us the home, which was stripped bare.



• Walking through the living room, he tells us "I used to have a couch, a sofa, a couple of end tables, a TV, DVD player, tapes and cabinet... but they are now gone."



• It happened after 21 Mortgage Corporation in Knoxville, which is Boudreau's lender, hired a local company to do the job. The mortgage company spokesperson refused to talk to us, but we talked to Boudreau's attorney, Tom Altman.



• According to Altman, the woman from the mortgage company told him Florida is a "self help state," and that's why they are allowed to do this. However, Altman explained he was holding the mortgage and Florida is not a self help state. He says he told the woman Florida has strict mortgage foreclosure laws and they were being violated by the company.



• But the Hernando Sheriff's Office apparently has no interest in enforcing those laws... or burglary, breaking and entering and trespassing, either. They say it is a civil matter, even though everything from the house was taken or thrown in the dumpster. The wedding dress belonging to Boudreau's wife was even cut to shreds.



• "When she saw what happened, she actually went into in the dumpster trying to go through the stuff," Boudreau says. "She was crying her eyes out."



• Boudreau's attorney says the Hernando Sheriff's Office is flat wrong. "Although Boudreau had fallen behind a bit in his mortgage, there were no foreclosure proceedings in effect," Altman says. "That means the people who trashed bordures home and took his possessions should be arrested and prosecuted like common criminals."



• Boudreau says he just wants to get his stuff back. However, that seems unlikely and it appears Boudreau will have to sue to be compensated for his losses.

Source: Man falls behind on payments, mortgage company has home trashed.

(1) For examples of filed lawsuits involving illegal bank break-in, "trash-out" & lockout cases, see:

• Bank admits mistake on Willcox home foreclosure (involving an Arizona homeowner) (for a copy of the resulting federal lawsuit, see Newman v. Bank of America, N.A. and go here for the attached Exhibits),


• Couple: Bank Foreclosed On Wrong House (New Bedford Couple Suing Bank Of America) (involving a Massachusetts resident with a home in Florida) (for a copy of the resulting federal lawsuit, see Cardoso v. Bank of America, et al.),


• Family's recently purchased home, gutted by property removal service (involving a Michigan homeowner) (for a copy of the resulting federal lawsuit and accompanying Exhibits , see Rought v Deutsche National Trust Company, Trustee, et al.),


• In a Sign of Foreclosure Flaws, Suits Claim Break-Ins by Banks (involving a California homeowner) (for a copy of the resulting federal lawsuit, see Ash v. Bank of America).

For those homeowners who've been screwed over by wrongful lockouts by foreclosing lenders (and their confederates) and seek some possible guidance on how much their cases might be worth if they seek to sue, see:

• Nevada High Court OKs $1M+ Damage Award To Homeowner Due To Mortgage Company Misidentification Of Home In Foreclosure (for the court ruling, see Countrywide Home Loans v. Thitchener, 192 P.3d 243; 2008 Nev. LEXIS 79; 124 Nev. Adv. Rep. 64 (Nev. 2008)),



• Long Island Judge Hammers Wells w/ $155K Tab For Oppressive, Heavy Handed, Egregious Conduct For Pre-Sale Lockout Of Homeowner In Foreclosure (for the court ruling, see Wells Fargo v. Tyson, 2010 NY Slip Op 20079 (Sup. Ct., Suffolk County, March 5, 2010)).

(2) This isn't the first time that cops have washed their hands when investigating these real estate-related crimes. See:

• Fed. Court Affirms 29+ Year Sentence For F'closure Rescue Operator In Rackets That Local Cops, DAs, Texas AGs Cluelessly Minimized As 'Civil Matters';


• Would-Be Buyers Screwed Over In Rent-To-Own Racket Involving Homes In F'closure Complain To Local Prosecutor; Ripoff Is Treated As A Civil Matter;


• Cops Accept "The Bank Sent Me!" Defense In Home Break-In Probe Targeting "Trash-Out" Agent; Say No Crime Was 'Intended' - "It's A Civil Matter!";


• Another F'closed Homeowner Illegally Driven From Home; Cops Decline To Pursue Criminal Charges; Call Premature, Unauthorized "Eviction" A Civil Matter;


• Suspected Home Hijacking Case Once Considered "Civil Matter" Will Now Be Treated As Criminal Trespass, Say Cops;


• Another Foreclosure Misidentification Screw-Up Results In Pair "Cleaning Out" Wrong Home; DA Declines Prosecution - Says It's A Civil Matter.

BofA At Center Of Another Servicer Screw-Up; Buyer Who Paid Cash Barely Dodges Foreclosure On Recently-Bought Home Once Owned By Delinquent Borrower

In Sacramento, California, The Sacramento Bee reports:

• Kamal Sharma almost lost his house in a foreclosure auction the other day. The funny thing is: He doesn't even owe any money on it. Sharma's story – an extreme case even in Sacramento's chaotic real estate market – shows that lenders continue to make foreclosure mistakes despite extensive publicity and promises to fix problems, which include sloppy paperwork and communication breakdowns.

***

• Sharma's troubles started last month when he arrived at his West Sacramento house one day to find a foreclosure notice from the servicing arm of Bank of America taped to the front door. Sharma, 34, had paid $85,000 in cash for the three-bedroom home in March, using money from a settlement he received from a workplace accident in which he lost half of his left foot. He planned to rent the house out for income.



• After the foreclosure notice arrived, other curious things happened. A potential buyer came snooping around the neighborhood, and then a property management firm refused to list the house as a rental due to the foreclosure notice.



• Unable to reach BofA for answers, Sharma headed to West Sacramento City Hall on June 22, the day his house was scheduled for auction. That's when the bank abruptly called off the sale just as buyers were lining up. Sharma still hasn't heard anything directly from BofA. But in response to a Bee inquiry, the bank apologized and attributed the problem to a "data entry error" that restarted an old foreclosure action against the home's previous owner.

For more, see Wrongful home foreclosures rare – but devastating.

Foreclosure Rescue Operator Gets 12 Months, Ordered To Pay $48K For Ripping Off 15 Victims In Upront Fee Loan Modification Scam

In Ventura County, California, the Ventura County Star reports:

• A judge on Tuesday sentenced a 55-year-old Ventura woman to a year in jail after she pleaded guilty to running an illegal real estate foreclosure rescue scam that lured 15 victims who paid her thousands of dollars. Ventura County Superior Court Judge Edward Brodie ordered Maria Victoria Santos to pay $48,000 as restitution and put her on five years probation, according to Deputy District Attorney Dominic Kardum.



• Santos pleaded guilty in February to three felony counts of unlawful acts by a foreclosure consultant and four counts of grand theft, Kardum said in a press release.



• Santos victimized predominately Spanish-speaking Ventura County residents and advertised her foreclosure scam on local Spanish-speaking radio stations. Santos promised to save people's homes from foreclosure provided they pay her thousands of dollars in up-front fees, Kardum said.

Source: Ventura woman sentenced to year in jail in real estate scam.

Adult Daughter's Homestead Claim Against Deceased Mom's Estate Trumps Foreclosure Rescue Operator

The following facts are taken from a recent ruling of the Minnesota Court of Appeals ('Yennie' = foreclosure rescue operator; 'Wolf' = now-deceased homeowner):

• Yennie's claim against the estate is based on a written agreement that he and Wolf executed in August 2004. The agreement, which is entitled "Investment Agreement Conveying Partial Interest in Real Property," relates to Wolf's home in the city of Plainview.
  
  The agreement provides that Yennie will assist Wolf in redeeming the property from foreclosure, make payments to bring the mortgage up to date, and perform repairs to the house in anticipation of its sale.
  
  The agreement further provides that, upon the sale of the property, Wolf would receive the first $47,500 in proceeds; Yennie then would receive reimbursement for the expenditures he made; and Wolf and Yennie then would evenly split the remaining proceeds.
  
  Wolf died intestate on January 22, 2010. Yennie filed a claim against the estate in the amount of approximately $28,000, which reflects expenditures he made pursuant to the 2004 written agreement.
  
  The personal representative disallowed the claim. Meanwhile, Wolf's daughter, his only surviving heir, filed a [statutory homestead] claim against the estate in the amount of $10,000.

In applying Minnesota law, the state appeals court held that, by reason of the homestead provisions in the state statute, Wolf's daughter was entitled to priority over the claim made by Yennie for the $28,000 he shelled out to fix up Wolf's home and pay the bills.

Inasmuch as there was insufficient money in this case to pay off all the claims made against the estate, and Wolf's daughter cashed out on her $10,000 homestead claim in full, Yennie was consequently left partially holding the bag on his claim, entitled to split whatever was left in the estate with one other claimant, and pocketing only a fraction of what he ponied up to fix up the home of the now-deceased homeowner.

For the ruling, see In re Estate of Wolf, No. A10-2029 (Minn. App. June 20, 2011) (unpublished).

Use Of Quiet Title & Slander Of Title In Undoing Real Estate Equity Ripoff, Voiding Deeds & Mortgages

The successful use of a quiet title and slander of title lawsuit in an effort to undo a real estate equity scam perpetrated on an elderly property owner by his nephew and a gang of others was the focus of a December, 2009 ruling of an Illinois appeals court.

The fact pattern involved, among other things, a purported sale leaseback, coupled with a repurchase option, of property and the recording of forged land documents.

For those in Illinois (and possibly elsewhere) in the business of undoing and unwinding these ripoffs on behalf of the victims, there may be some points of interest, including the following:

• action to quiet title,


• requirements for adequately proving slander of title,


• essential elements of a forgery,


• cloud on title ("is the semblance of title" which is "unfounded" or "which it would be inequitable to enforce"),


• authority of an agent (may be actual or apparent and, if actual, may be express or implied),


• ratification of agent's unauthorized acts,


• failed attempt by the bank that financed the ripoff to reinstate its mortgage lien that had been voided by the trial court (unsuccessfully argued judicial estoppel and unclean hands),


• imposition of punitive damages in a slander of title case,


• availability of an attorney fee award for the victim in a slander of title case,(1)


• factors in determining an appropriate award for attorneys fees for the victimized property owner (liability for which is imposed on the scammers),


• applicability of a contingency fee risk multiplier in calculating the award for attorneys fees(2) (court approved use of a multiplier of 3 to determine the total fee award of $595,574 for the contingent portion of the fee).

For the ruling, see Gambino v. Boulevard Mortg. Corp., 398 Ill. App. 3d 21, 922 NE 2d 380 (Ill. App. 1st Dist., 6th Div. 2009) (Appeal denied by Gambino v. Blvd. Mortg. Corp. (W.W. Funding, L.L.C.), 2010 Ill. LEXIS 909 (Ill., May 26, 2010)).

(1) With respect to the appropriateness of awarding attorneys fees in a slander of title action, the Illinois appeals court made this observation:

• Contrary to the Wolf defendants' argument, there is authority in Illinois providing that recovery for slander of title actions permit recovery of those costs and attorney fees which directly flow from the wrongful disparagement. Home Investments Fund v. Robertson, 10 Ill. App.3d 840, 844, 295 N.E.2d 85 (1973).
  
  Further, plaintiffs were entitled to recover those costs and attorney fees directly related to the quieting of title and to those damages directly related to a slander of title, i.e., loss of vendibility, etc. Robertson, 10 Ill.App.3d at 844, 295 N.E.2d 85.

(2) For more on the use of risk multipliers in calculating prevailing party attorney fees in pro bono and contingency fee cases, see:

• The Yale Law Jounal: The Contingency Factor In Attorney Fee Awards.


• Defending A Foreclosure Defense Case Pro Bono? Don't Forget The Contingency Risk Factor When Sticking Losing Lender With Tab.

More On Void vs. Voidable

Whether one is looking to undo or unwind an abusive real estate deal, set aside a deed, mortgage or other conveyance, or vacate/void a foreclosure judgment, the distinction between its status as void and voidable may, in many cases, be the most important issue to address.

In this regard, the following reminder as to the fundamental difference between void and voidable (in the context of a court judgment under attack) appeared in a recent ruling from an Ohio appeals court, a reminder that can't be repeated enough:

• {¶11} " 'The distinction between "void" and "voidable" is crucial. If a judgment is deemed void, it is considered a legal nullity which can be attacked collaterally.
  
  Conversely, if a judgment is deemed voidable, it will have the effect of a proper legal order unless its propriety is successfully challenged through a direct attack on the merits. * * * ' " GMAC, LLC v. Greene, 10th Dist. No. 08AP-295, 2008-Ohio-4461, ¶27, quoting State v. Montgomery, 6th Dist. No. H-02-039, 2003-Ohio-4095, ¶10, quoting Clark v. Wilson (July 28, 2000), 11th Dist. No. 2000-T-0063.
  
  A judgment is void where service of process has not been accomplished or where the court lacks subject-matter jurisdiction. Deckerd v. Deckerd (June 24, 1999), 7th Dist. No. 98-CO-59.
  
  In contrast, "[a] voidable judgment is one rendered by a court having jurisdiction and although seemingly valid, is irregular and erroneous." GMAC at ¶26, quoting Montgomery at ¶9, citing Black's Law Dictionary (7 Ed.1999) 848.(1)

The significance of the distinction(2) lies in:

1. the timing and (in the context of court judgments) method of attack relating to any challenge made by the injured party:
   
   (void - can be challenged at any time and (in the context of court judgments) can be collaterally attacked; voidable - subject to time constraints and (in the case of court judgments) rules set forth in the state rules of civil procedure);
2. the effect on the rights of those who subsequently acquire an interest in any property, the title to which may be implicated by the judgment, conveyance, contract, etc.:
   
   (void - all subsequent acquirers are out of luck and acquire nothing, even those who may otherwise qualify as bona fide purchasers; voidable - will not trump the rights of subsequent purchasers and encumbrancers if, and only if, they qualify for protection as bona fide purchasers).

For the ruling, see Wagenbrenner v. Wagenbrenner, 2011-Ohio-2811 (Ohio App. 10th Dist., Franklin County, June 9, 2011).

(1) For Ohio civil procedure junkies, the court then added this point:

• {¶12} It is well-settled that a court has the inherent authority to vacate a void judgment and that a void judgment may be challenged at any time. The Milton Banking Co. v. Dulaney, 4th Dist. No. 09CA10, 2010-Ohio-1907, ¶26.
  
  However, "[a] voidable judgment is subject to direct appeal and to the provisions of Civ.R. 60(B). A Civ.R. 60(B) application for relief must be made to the trial court that rendered the judgment from which relief is sought." Montgomery at ¶9 (internal citations omitted). See also GMAC; Deckerd (exclusive means to challenge a voidable judgment is Civ.R. 60(B)); Brown v. Brown (Feb. 5, 1991), 2d Dist. No. 90-CA-41 (because the judgments were voidable and not void the appellant should have sought relief through Civ.R. 60(B)); McIntyre v. Braydich, 11th Dist. No. 96-T-5602 (a court has no inherent authority to vacate voidable judgments); Evans v. Supreme Court of Ohio, 10th Dist. No. 02AP-736, 2003-Ohio-959, ¶17 (voidable judgments may only be challenged on direct appeal); Mayfield Hts. v. N.K., 8th Dist. No. 93166, 2010-Ohio-909 (because the judgment was voidable the trial court did not have the authority to vacate it).

(2) See Beyond a Definition: Understanding the Nature of Void and Voidable Contracts for an analysis (in the context of contracts) of the problems encountered when making the distinction between what is truly void, and what is merely voidable (footnotes conained in the original text omitted):

• Contract law has a problem. With predictable recurrence, court opinions, statutes, scholarly literature, and contract draftsmen use the words “void,” “voidable,” and “unenforceable” – as well as dozens of other terms of the same ilk – to describe flawed contracts.
  
  Yet the meaning of these declarations is persistently and maddeningly slippery. In the rare case where the precise meanings of these words are pressed into service in the courtroom, litigants are often surprised to find the court announce that a transaction formerly (and unequivocally) declared to be void is, in fact, merely voidable or unenforceable.
  
  The scope of the problem is as widespread as it is trifled; though the distinction between void and voidable is sometimes the most important issue in contract disputes, very little serious, scholarly attention has been paid to the nature of the distinction. DeedVoidVoidable

Feds Score Eight More Guilty Pleas In Northern California Foreclosure Auction Bid-Rigging Sweep; Sherman Act Violations Leave Investors In Hot Water

From the U.S. Department of Justice:

• Eight California real estate investors have agreed to plead guilty for their roles in two separate conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced.(1)

***

• According to the felony charges, the real estate investors participated in a conspiracy to rig bids by agreeing to refrain from bidding against one another at public real estate foreclosure auctions in Contra Costa County and Alameda County, Calif.

***

• The department said that the primary purpose of the conspiracies was to suppress and restrain competition to obtain selected real estate offered at Alameda and Contra Costa County public foreclosure auctions at noncompetitive prices. When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner.(2)

***

• Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. [...] The Antitrust Division and the FBI have identified a pattern of collusive schemes among real estate investors aimed at eliminating competition at real estate foreclosure auctions, and [the] charges are part of the department’s ongoing effort to combat this conduct and restore competition to public auctions.(3)

For the Department of Justice press release, see California Real Estate Investors Agree to Plead Guilty to Bid Rigging at Public Foreclosure Auctions (Investigation Yields Eight Plea Agreements).

(1) According to the press release, charges were filed in U.S. District Court for the Northern District of California in Oakland, Calif., against Thomas Franciose of San Francisco; William Freeborn of Alamo, Calif.; Robert Kramer of Oakland, Calif.; Thomas Legault of Clayton, Calif.; David Margen of Berkeley, Calif.; Brian McKinzie of Hayward, Calif.; Jaime Wong of Dublin, Calif.; and Jorge Wong of San Leandro, Calif.

(2) According to the Justice Department and/or court documents:

• after the conspirators’ designated bidder bought a property, the conspirators would hold a secret, private auction at which each participant would bid the amount above the public auction price he was willing to pay;


• secret, private auctions took place at or near the courthouse steps where the public auctions were held where the highest bidder at the private auction won the property;


• the difference between the public auction price and that at the second auction was the group’s illicit profit, and it was divided among the conspirators, often in cash.

(3) The investigation into fraud and bid rigging at certain real estate foreclosure auctions in Northern California is being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco office. The Justice Department urges anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at 415-436-6660, visit www.justice.gov/atr/contact/newcase.htm or call the FBI tip line at 415-553-7400.

Faulty Affidavit Failing To Establish That Prior Notice Of Default & Acceleration Was Given To Homeowner Derails Another Foreclosure Action

William A. Roper, Jr. writes in the Mortgage Servicing Fraud Forum:

• The Ohio Court of Appeals for the Ninth District [] reversed another Summary Jugment granted by a Summit County Trial Court in the case Central Mortgage Company v. Elia.



• The Court found that the conclusory averment within the plaintiff's affidavit that all conditions precedent had been satisfied was insufficient to prove compliance with Section 22 of the mortgage.(1) Does that sound familiar?

He goes on to state:

• After looking through a few Ohio cases I do think it is important to point out that the Plaintiff does seem to be getting an assignment done prior to commencement (about 30 days) but they constantly fail to plead an endorsed copy of the note, even in contested cases, they have failed to attach an endorsed copy of the note to a motion for [summary judgment].



• There are also many deficiencies in the affidavits submitted by the Plaintiffs, it's important to know the cases and rules on what makes an admissible affidavit. Failure to raise the deficiencies in these affidavits will result in a waiver of the argument.

For Bill Roper's entire post thread, see Ohio Appellate Court Reverses Another Summary Judgment on Failure To Prove Conditions Precedent: Central Mortgage Company v. Elia.

For the ruling, see Central Mortgage Company v. Elia, No. 25505, 2011 Ohio 3188 (Oh. App. 9th Dist. June 29, 2011).

(1) Section 22 refers to the written requirement contained in the mortgage that the borrowers be given written notice by the foreclosing lender prior to the start of the foreclosure process specifying the default, the action needed to cure the default, and the time period within which to do so.

O'Brien After Land Doc Registry Audit: "My Registry Is A Crime Scene...This Is Disgusting & This Is Criminal!" Calls For Halt To AG Settlement Talks

From the Office of the Southern Essex District Registry of Deeds (Massachusetts):

• Yesterday at the Annual Conference of The International Association of Clerks, Recorders, Election Officials and Treasurers (IACREOT), Register John O’Brien revealed the results of an independent audit of his registry.



• The audit, which is released as a legal affidavit was performed by McDonnell Property Analytics, examined assignments of mortgage recorded in the Essex Southern District Registry of Deeds issued to and from JPMorgan Chase Bank, Wells Fargo Bank, and Bank of America during 2010. In total, 565 assignments related to 473 unique mortgages were analyzed.

McDonnell’s Report includes the following key findings:

• Only 16% of assignments of mortgage are valid,


• 75% of assignments of mortgage are invalid,


• 9% of assignments of mortgage are questionable,


• 27% of the invalid assignments are fraudulent, 35% are “robo-signed” and 10% violate the Massachusetts Mortgage Fraud Statute,


• The identity of financial institutions that are current owners of the mortgages could only be determined for 287 out of 473 (60%),


• There are 683 missing assignments for the 287 traced mortgages, representing approximately $180,000 in lost recording fees per 1,000 mortgages whose current ownership can be traced.

***

• "My registry is a crime scene as evidenced by this forensic examination," stated John O’Brien. "This crime that has affected thousands of homeowners in Essex County who, through no fault of their own, have had their property rights trampled on and their chain of title compromised. This evidence has made it clear to me that the only way we can ever determine the total economic loss and the amount damage done to the taxpayers is by conducting a full forensic audit of all registry of deeds in Massachusetts. I suspect that at the end of the day we are going to find that the taxpayers have been bilked in this state alone of over 400 million dollars not including the accrued interest plus costs and penalties. The Audit makes the finding that this was not only a MERS problem, but a scheme also perpetuated by MERS shareholder banks such Bank of America, Wells Fargo, JP Morgan and others. I am stunned and appalled by the fact that America’s biggest banks have played fast and loose with people’s biggest asset – their homes. This is disgusting, and his is criminal," said O’Brien.



• O’Brien continued "Once again I am asking Attorney General Martha Coakley and the other state Attorney’s General to follow the lead of New York Attorney General Eric Schneiderman and stop any settlement talks with the banks. The results of this report are only for my registry, but I can assure you that this type of criminal fraud is rampant across the nation. This leaves me to question why anyone would consider settling with these banks until we know the full extent of the damage that they have caused to the homeowners chain of title across this country and the amount of money they have bilked he taxpayers for their failure to pay recording fees."(1)

For more, see Southern Essex Registry of Deeds Audit Reveals That 75% of Assignments of Mortgage Are Invalid; O'Brien Says Banks Responsible for an Epidemic of Fraud (Once again urges Attorney’s General to stop Bank settlement talks).

(1) At the risk of emphasizing what may be obvious to many, this 'crappy title' problem can affect both those properties that have gone through foreclosure, as well as those that haven't.

For more on the crappy title problem in connection with the filing of bogus land documents and improperly foreclosing on homes, see:

• Daily Finance: Why the Foreclosure Mess Settlement Proposal Can't Fix the Damage,


• Naked Capitalism: On the Clouded Title Mess and the Difficulties of Cleaning It Up.

Cops: Pair Pinched In Alleged Upfront Fee Loan Mod, Credit Repair Racket Used India Call Center, Local Mail Drop To Bag Victims From Around Country

In Fresno, California, KFSN-TV Channel 30 reports:

• Police have broken up what they believe is an international mortgage fraud operation with a hub in Fresno. The operation is accused of taking advantage of people in the most desperate financial situations and making their problems even worse.



• Officers arrested Baljit Singh and Sharanjit Kaur at a Northwest Fresno home, and put them in jail on charges of grand theft. Police served four search warrants Wednesday, and they've uncovered more than 20 victims -- people in dire straits who were taken advantage of when they were looking for a quick way out.



• A simple arrest in Northwest Fresno brought a complicated web of scams to an end, according to Fresno Police. Singh and Kaur lived in the home and operated a credit repair business and a mortgage modification business. Police say the companies were nothing more than fronts for financial crime.



• Consumer Credit Repair and Consumer Financial Services targeted people with bad credit or homes in the foreclosure process and promised an easy fix. "We've found victims throughout the country," said Detective Ken Dodd of the financial crimes unit. "One victim in Oregon had also sent money in to Consumer Financial Services only to find out their home loan had not been modified and they received a default notice."



• Investigators say callers from India contacted victims and convinced them to send money to an office in Fresno. This is the office -- nothing more than a mail drop box where police say the suspects picked up the cash and left their victims sinking even further into debt.

For the story, see International mortgage fraud operation bust in Fresno.

Two Get Prison In Contract For Deed Payment-Skimming Racket; Pocketed Deposits & Monthly Payments From Duped Buyers, Stiffed Existing Mortgage Lenders

From the Office of the U.S. Attorney (Midland, Texas):

• United States Attorney John E. Murphy announced that 35-year-old Jason Heath Morrison, of Midland, Texas, was sentenced to 84 months in federal prison followed by ten years of supervised release for his role in a real estate fraud scheme, as well as for his failure to register as a sex offender. Morrison’s co-defendant, 35-year-old Marcus Jacob Rosenberger, of Odessa, Texas, was sentenced to 33 months in federal prison followed by three years of supervised release for his roles in the real estate fraud scheme involving Morrison as well as a separate real estate fraud scheme.(1)

***

• In February 2010, the Midland Police Department began investigating Morrison and Rosenberger for real estate fraud. Morrison and Rosenberger’s scheme involved convincing distressed homeowners, whose homes were in foreclosure, to sign over their properties to Morrison and Rosenberger with only the promise that Morrison and Rosenberger would keep the house out of foreclosure, resell it, and retain any profit.



• Morrison and Rosenberger then placed ads in local newspapers advertising the homes for sale by owner. Buyers gave Morrison and Rosenberger thousands of dollars in down payments, and then proceeded to pay monthly payments on their new homes.



• But Morrison and Rosenberger did not apply the buyers’ monies towards the underlying mortgage, which resulted in several of the homes actually be foreclosed and sold at auction, unbeknownst to the original homeowner or the new buyer. Several of the new buyers were evicted and they all lost all the money they paid to Morrison and Rosenberger.

For the U.S. Attorney press release, see Permian Basin Residents Sentenced To Federal Prison For Real Estate Fraud.

(1) According to the press release, Judge Junell also ordered Morrison and Rosenberger to pay $173,495.79 in restitution to their victims; and he ordered Rosenberger to pay an additional $170,108.80 to the victims of a second real estate ripoff.

Who Are Bank Of America's Newest Robo-Signers?

From Fraud Digest:

• Who are Bank of America's newest robo-signers? For several years, BOA turned to its subsidiary, BAC Home Loans Servicing, in Collin County, Texas, whenever mortgage assignments were needed in foreclosures. This office, formerly Countrywide Home Loans Servicing, produced hundreds of thousands of assignments, including most all of the assignments to Countrywide CWABS and CWALT trusts.



• In recent months, however, BOA has turned to its office in Ventura County, California, as the Collin County, TX, signers have become too well known. These assignments are made primarily for CWALT and CWABS trusts that closed in 2005, 2006 and 2007.



• These assignments claim to assign both the mortgages and the notes to the trusts. On each of these assignments, MERS is stated to be the HOLDER of the mortgage.

Source: Who are Bank of America's newest robo-signers?

(1) Who are the newest signers - who use MERS titles to assign mortgages TO BAC while actually working FOR BAC - signing as if they were MERS officers for dozens of different companies? According to Fraud Digest, The names appearing most often include:

• Ricki Aguilar, Malik Basurto, Youda Crain, Diana DeAvila, Edward Gallegos, Christopher Herrara, Bud Kamyabi, Tina LeRaybaud, Jane Martorana, Martha Munoz, Srbui Muradyan, Debbie Nieblas, Yomari Quintanilla, Luis Roldan, Miguel Romero, Cynthia Santos, Swarupa Slee.

According to Fraud Digest, these individuals, in 2011, have signed as MERS officers for the following mortgage companies and banks, including many that no longer existed in 2011:

• Aegis Wholesale Corporation, American Brokers Conduit, America's Wholesale Lender, Amnet Mortgage, Ampro Mortgage, Countrywide Bank FSB, Decision One Mortgage Company, First Choice Funding Inc., First Interstate Financial Corp., First National Bank of Arizona, Market Street Mortgage Corp., M/I Financial Corp., Millenia Funding Corporation, MortgageIt, One Mortgage Company, LLC, Pinnacle Direct Funding Corp., Pulte Mortgage, Quicken Loans, Universal American Mortgage Company, Service Mortgage Underwriters, Inc., Wilmington Finance, Inc.

CoreLogic in Chapin, South Carolina, is the keeper of these documents, and Bank of New York Mellon is the trustee for most of the CWABS and CWALT trusts that use these BAC documents, according to Fraud Digest.

BofA Director On Countrywide: "Worst Decision We Ever Made!" As Bank Settles 'Crappy Mortgage' Suit For $8.5B; Will Swallow Add'l $5.5B In Buybacks

The Wall Street Journal reports:

• Just before Bank of America Corp. swooped in to buy Countrywide Financial Corp. in 2008, the bank's then-chief executive, Kenneth D. Lewis, told analysts why he had dropped his resistance to owning a mortgage lender.



• "Arithmetic overcomes all your issues," he told analysts. "If I ever did anything in the mortgage business, I would have to eat about seven years of my words, so it would have to be pretty compelling."



• The nation's largest bank by assets has been haunted by Countrywide's numbers ever since the $2.5 billion deal was completed.



• On Wednesday, Bank of America announced, as expected, an $8.5 billion settlement with investors who took a beating on mortgage bonds issued by Countrywide before the housing market collapsed.



• The Charlotte, N.C., bank also will swallow an additional $5.5 billion to buy back other defective mortgages in the future. And it took a $6.6 billion hit for lawsuits, foreclosure snarls, a write-off in the value of its mortgage business and loan-servicing adjustments.

***

• Of all the deals Bank of America made during its climb to the top of the U.S. banking heap since the 1980s, Countrywide has spawned more regret than probably any other acquisition by Mr. Lewis or his predecessor, Hugh L. McColl Jr.



• "It turned out to be the worst decision we ever made," said one Bank of America director who voted for the Countrywide deal in January 2008. Mr. Lewis declined to comment through his attorney.



• Since the purchase, the bank's real-estate division has saddled it with more than $17 billion in losses, most of it coming from the assets inherited from Countrywide. Even Mr. Moynihan has hinted publicly that the deal was a mistake, telling shareholders in May that the bank agreed to take on Countrywide, based in Calabasas, Calif., "just when you shouldn't have done it."

***

• Since then, Bank of America's mortgage division has racked up $17.7 billion in net losses amid rising numbers of homeowner defaults. The company has lost $22 billion since the start of 2010 to investors who demanded the bank buy back Countrywide mortgage bonds.



• Other legal payouts include $8.4 billion for home-loan modifications, $108 million to the Federal Trade Commission to settle claims of excessive fees by Countrywide, and more than half of the $67 million fraud-suit settlement involving former Countrywide founder Angelo Mozilo. Mr. Mozilo declined to comment through his lawyer.



• Bank of America still faces the prospect of billions of dollars in fines from U.S. and state regulators investigating foreclosure procedures. That mess could cost the company about $7.4 billion on a pretax basis, said Glenn Schorr, an analyst at Nomura Securities.

For more, see BofA Haunted by Countrywide Deal (requires subscription; if no subscription, GO HERE - then click appropriate link for the story).

NY AG: 'Quick, Cheap $20-25B Multi-State Foreclosure Fraud Settlement Not Enough!'; Scneiderman "Stunned" To Find Probe Lacking In Docs, Depositions

The Rochester (New York) Democrat and Chronicle reports:

• New York Attorney General Eric Schneiderman expects to lead opposition to what he called a "quick, cheap settlement" of a 50-state investigation into foreclosure practices.



• Schneiderman put the monetary settlement being discussed with the largest U.S. mortgage servicers at $20 billion to $25 billion and said he will take "the hardest line" against it.



• The probe began in October. New York launched its own investigation two months ago and, Schneiderman said, has found the problem is much deeper. He said he was "stunned" to find the multi-state probe so lacking that no documents or witness depositions had been obtained.

For more, see AG Eric Schneiderman opposes foreclosure deal.

Oregon Judge Slams Brakes On F'closure Eviction; Failure To Record Mortgage Assignment Violates State Law, Allows Homeowner To Unpack Bags & Stay Put

In Columbia County, Oregon, The Oregonian reports:

• A Columbia County judge has blocked U.S. Bank from evicting a Vernonia woman whose home it purchased in foreclosure, concluding in a case with far-reaching implications that her lenders had not properly recorded mortgage documents.



• Last week's action appears to be the first in which an Oregon judge has halted an eviction and declared a foreclosure sale void after the fact. The ruling, if it stands, raises questions about the validity of other recent foreclosures in the state and could create serious problems for lenders and title companies, as well as for buyers of such properties.

***

• Nearly all foreclosures in the state occur without a judge's involvement under so-called nonjudicial proceedings. But this ruling, legal observers say, could potentially divert more foreclosure actions into courtrooms, a more time-consuming and costly proposition that could exacerbate the state's housing slump. "This will certainly be problematic for lenders," said David Ambrose, a Portland real-estate attorney.



• It also casts doubt on the validity of already completed foreclosure sales in which lenders resold mortgages without recording the sales in county recorder offices. Many of those questionable transactions, [...] involve the Mortgage Electronic Recording System. MERS was created by the mortgage industry to rapidly securitize loans without recording them.



• Federal judges in Oregon have ruled that MERS-involved foreclosure actions violated state recording law. MERS also has been tied to so-called robo-signing scandals that prompted a 50-state investigation of the nation's largest loan servicers and banks.

For more, see Oregon judge voids foreclosure sale, casting doubt on others.

For the ruling, see U.S. Bank v. Flynn, Case No. 11-8011 (Columbia Cty. Cir. Ct. June 23, 2011).

Appeals Court Says 'No Way' To BofA's F'closure Eviction Attempt; Crappy Affidavit Sinks Effort To Boot Homeowner; Another Lower Court Ruling Reversed

A defective affidavit filed by an officer ("Hiatt" - maybe a robosigner?) of loan servicer Bank of America in an action for ejectment targeting a recently-foreclosed borrower was the focus of another appeals court reversal of a lower court ruling adverse to homeowners.

After considered analysis of the facts of the case, and the state law applicable thereto, the Alabama Court of Civil Appeals ruled as follows:(1)

• In the case now before us, Hiatt's affidavit did not show that Bank of America was a participant in the servicing of the mortgage or in the foreclosure.
  
  It did not explain how Hiatt, in his capacity as an officer of, and attorney-in-fact for, Bank of America, would have acquired personal knowledge of the information he testified to in his affidavit.
  
  Moreover, none of the documents that accompanied his affidavit were sworn, certified, or otherwise authenticated.
  
  Consequently, based on the holding of the supreme court in Crawford, we hold that the testimony contained in Hiatt's affidavit and the documents that accompanied his affidavit were inadmissible and, therefore, that the trial court erred in entering a summary judgment in favor of the Secretary.
  
  Therefore, we reverse the summary judgment and remand the cause for further proceedings consistent with this opinion.

For the ruling, see Smith v. Secretary of Veterans Affairs, No. 2100194 (Ala. Civ. App. June 24, 2011).

(1) Before addressing the admissibility of the affidavit, the court addressed BofA's defense that, because the homeowner failed to file a motion to strike the affidavit in the trial court, he effectively waived his right to challenge it:

• In the case now before us, although Frank did not move to strike Hiatt's affidavit and the unsworn, uncertified, and unauthenticated documents that accompanied it, Frank's response to the summary-judgment motion called the trial court's attention to the inadmissibility of the affidavit and those documents by objecting to them and stating the grounds of the objection.
  
  Therefore, we find no merit in the Secretary's argument that Frank waived his objection to the Hiatt affidavit and the documents that accompanied it because he failed to move to strike them. See Ex parte Elba Gen. Hosp. & Nursing Home, Inc.

Lack Of Competent Evidence Supporting Confirmation Of Non-Judicial Foreclosure Process Sinks Sale; Lower Court Foreclosure Ruling Reversals Continue

A ruling by the Georgia Court of Appeals reinforces the fact that a lower court hearing to confirm the results of a Georgia non-judicial foreclosure sale under a power of sale is not to be treated as an exercise in rubber-stamping, a lesson that a reversed state trial judge recently received.

From the ruling (bold text is my emphasis; footnotes from the original text omitted):

• Franklin argues that the trial court erred by finding that the properties sold for their true market value because no evidence was introduced as to the regularity of the sales, no evidence was introduced showing foreclosure sales ever took place, and no evidence was introduced regarding the actual prices received for the properties at the alleged sales.
  
  Franklin contends that First Georgia produced only the notices of sale under power for the properties and the testimony of two appraisers, who provided evidence of the market value of the properties, but First Georgia failed to produce competent evidence as to the occurrence or outcome of the sales. We agree and reverse.

***

• The confirmation statute requires the trial court to determine whether the sale under power was properly executed. Here, the trial court's determination as to the regularity of the sales is not supported by any competent evidence in the record.
  
  Although the report to the judge contained allegations of fact concerning the sales, the report was not verified and not supported by testimony or other evidence at the hearing. Although First Georgia's attorney stated that the properties sold for $170,000; $48,000; and $300,000; this statement was not competent evidence.

For the ruling, and the analysis of the applicable Georgia law, see Franklin v. First Georgia Banking Co., A11A0216 (Ga. Ct. App. June 23, 2011).

Trusts Appearing Upstream In Chain Of Title & Property Ownership Rights Of Subsequent Purchasers

A recent ruling by the Georgia Court of Appeals may be of some interest to title examiners and attorneys in the title insurance industry when insuring property containing a trust as a title holder somewhere upstream in the chain of title.

While I'm sure that this post will be of interest to absolutely no one other than possibly title insurance professionals and bona fide purchaser aficionados, I know I'll be referring back to this case in the future. Accordingly, it makes the cut and gets posted(1) (bold text is my emphasis):

• 1. Kitchings first argues that the trial court erred in holding that Patch Nursery and Ameris Bank were bona fide purchasers for value. Kitchings contends that the co-trustees' distribution of all the property in a single transfer to Christine Cannon was sufficient to put a reasonably prudent title examiner on notice that the transfer was a mismanagement of the assets of the trusts, a breach of the trust agreement and a breach of the co-trustees' fiduciary duty to the remainder beneficiaries.
  
  "As a general rule, a bona fide purchaser for value is protected against outstanding interests in land of which the purchaser has no notice. Farris v. Nationsbanc Mtg. Corp., 268 Ga. 769, 770 (2) (493 SE2d 143) (1997); OCGA §§ 23-1-19, 23-1-20. We have long held that a grantee in a security deed who acts in good faith stands in the attitude of a bona fide purchaser, and is entitled to the same protection." Brock v. Yale Mtg. Corp., 287 Ga. 849, 852 (700 SE2d 583) (2010).
  
  To qualify as a bona fide purchaser for value without notice, a party must have neither actual nor constructive notice of the matter at issue. Notice sufficient to excite attention and put a party on inquiry shall be notice of everything to which it is afterwards found that such inquiry might have led. Whiten v. Murray, 267 Ga. App. 417, 421 (2) (599 SE2d 346) (2004). A purchaser of land is charged with constructive notice of the contents of a recorded instrument within its chain of title. VATACS Group v. HomeSide Lending, 276 Ga. App. 386, 391 (2) (623 SE2d 534) (2005). Furthermore, the grantee of a security interest in land and subsequent purchasers are entitled to rely upon a warranty deed that is regular on its face and duly recorded in ascertaining the chain of title.
  
  Deutsche Bank Nat. Trust Co. v. JP Morgan Chase Bank, 307 Ga. App. 307, 309 (704 SE2d 823) (2010).
  
  Here, Thomas Cannon, Sr.'s will granted to the trustees the power "[t]o sell, exchange, partition or otherwise dispose of any property at any time held or acquired under this will . . . for such purposes as my personal representatives may deem best. . . ." The will further provided: "[m]y primary desire is that my spouse be supported in a reasonably comfortable manner throughout life rather than the preservation of principal until the termination of this trust, and I wish my Co-Trustees to be guided by this consideration in determining the amount to be used for the support of my spouse. . . ." (emphasis supplied).
  
  The title search shows that the property was transferred to Christine Cannon through a Trustees Deed of Distribution, from the remainder trust to the primary beneficiary of the trust. The wording of the trusts at issue, as set out previously, allows the trustees to sell or dispose of any property, at any time, for reasons they may deem best, for the benefit of Christine Cannon.
  
  "A purchaser of land is charged with constructive notice of the contents of a recorded instrument within its chain of title. Conversely, a purchaser is not charged with constructive notice of interests or encumbrances which have been recorded outside the chain of title." Gallagher, supra at 625. Here, there is nothing in the chain of title or the trust instruments that would put either the bank or Patch Nursery on notice that there were any issues affecting title to the properties.
  
  The provisions of Cannon, Sr's will gave broad discretion to the trustees. Thus, there was nothing in the documents themselves sufficient "to excite attention and put a party on inquiry." See Whiten, supra at 421. See also Beecher v. Carter, 189 Ga. 234 (5 SE2d 648) (1939) ("Where a purchaser of land from one in possession, who holds a deed thereto [that] is absolute on its face, has paid the purchase-price and taken possession, parties claiming an equity therein of which the purchaser had no notice are not entitled to have purchaser's deed canceled.").
  
  Accordingly, there was no error in the trial court's grant of summary judgment to Ameris Bank and Patch Nursery on the grounds that they were entitled to the protection of bona fide purchaser for value on Kitchings's claim to cancel their deeds.

For the ruling, see Kitchings v. Ameris Bank, A11A0323 (Ga. Ct. App. June 8, 2011).

(1) Apologies to the handful of you who are here reading this blog on July 4th weekend instead of being away on vacation, and thanx for your forebearance and patronage!

Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire

This post is a somewhat updated reprint of a post first appearing on February 1, 2009, with most of the links contained herein being updated.

A number of posts(1) have made reference to the legal doctrine of bona fide purchaser in the context of a purchase and sale of real property. More specifically, the posts dealt with the application of this doctrine in situations where the occupancy and possession of the real property by someone other than the owner/seller triggered a duty to inquire on the part of the purchaser as to possible unrecorded property rights of persons in possession of the real estate.

As described in these posts, the courts ruled that the purchaser had a duty to inquire of said persons in possession to ascertain what rights, if any, they had in the property. Failure to make reasonable inquiries would result in the purchaser acquiring its interest subject to any of the occupant's rights the purchaser would have discovered had such an inquiry be made. By failing to make inquiry, the purchaser would not be afforded treatment as a bona fide purchaser and, consequently, would lose the protection of the recording statutes and leave their interest in the real estate in an inferior position to any unrecorded rights of those in possession.

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.

Inasmuch as the mission of this blog is to obtain information that may be of some interest to some in real estate related professions, and "push it out the door" as soon as possible, I confess that I have not fully researched this issue as it is currently applied in any of the following states. The purpose of this post is to merely:

• make the reader aware of the existence of the case law that follows, and
• 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).

One final point: Any serious consideration of this issue should 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. But after reading your 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.

*************************

Arizona: Roy & Titcomb, Inc. v. Villa, 37 Ariz. 574; 296 P. 260 (1931):

• If the circumstances were such that notice could be imputed, it is sufficient, and the particular fact relied on as having this effect is that appellee was at the time in actual, open, notorious and undisputed possession of the premises and had been since 1911.
  .Practically all the authorities give assent to the proposition that the purchaser or mortgagee of land in possession of an occupant other than the holder of the record title is compelled to inquire of the occupant by what title he holds possession, or he will be held to have taken subject to whatever rights a proper inquiry would disclose the occupant had therein."
  .Actual possession of land," says 46 C.J. 547, "is such notice to all the world or to anyone having knowledge of such possession as will put upon inquiry those acquiring title or a lien on the land to ascertain the nature of the right that the occupant has in the premises." In Rowe v. Ream, 105 Pa. 543, the court quotes with approval this language:
  .
  "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."
  .In Oliver v. McWhirter, 112 S.C. 555, 100 S.E. 533, 536, is found this language:
  .
  "One in possession under an equitable title has nothing that he can record; and possession, open and unconcealed, is the only mode by which he can give notice to the world of his rights; and when this notice is given, in the only way in which it could be given, he should be protected."
  .In Carolina Portland Cement Co. v. Roper, 68 Fla. 299, 67 South. 115, 116, the court says:
  .
  "Actual possession of land is such notice to all the world or to anyone 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 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."
  .The following are to the same effect: Petrain v. Kiernan, 23 Or. 455, 32 Pac. 158; Follette v. Pacific Light & Power Corp., 189 Cal. 193, 23 A.L.R. 965, 208 Pac. 295; McVey v. McQuality, 97 Ill. 93; Moore v. Oates, 143 Ark. 328, 220 S.W. 657; Niles v. Cooper, 98 Minn. 39, 13 L.R.A. (N.S.) 49, 107 N.W. 744; Garbutt v. Mayo, 128 Ga. 269, 13 L.R.A. (N.S.) 58, 57 S.E. 495; Ross v. Hendrix, 110 N.C. 403, 15 S.E. 4; Wood v. Price, 79 N.J. Eq. 620, Ann. Cas. 1913A 1210, 38 L.R.A. (N.S.) 772, 81 Atl. 893.
  .Appellee contends that it conclusively appears from the statement of Lorenzo Villa to appellant, when the note and mortgage were executed, that it had both actual and constructive notice of appellee's possession and occupancy of the premises. Whether this be true or not is immaterial because it was the duty of appellant to ascertain who was in possession of the property before purchasing an interest therein. As said by the court in Sheerer v. Cuddy, 85 Cal. 270, 24 Pac. 713, 714:
  .
  "Whether the respondent knew of the appellant's possession or not is immaterial. It was his duty to know who was in possession of the property before making the purchase, and his purchase without ascertaining the fact must be regarded as the strongest evidence of bad faith on his part. The burden of making the proper inquiry was cast upon him by the mere fact of actual possession on the part of the appellant. If it were allowed that, by failing to acquaint himself with the fact of possession on the part of another than the vendor, the vendee could avoid the effect of the rule above stated, he could purposely avoid any inquiry on the subject, and thereby evade the rule and its consequences entirely."
  .

Arizona: See Arizona Bona Fide Purchaser, Possession, Duty Of Inquiry for a longer list of Arizona cases.
.Arkansas: Owners Ass'n of Foxcroft Woods, Inc. v. Foxglen Assocs., 346 Ark. 354; 57 S.W.3d 187; 2001 Ark. LEXIS 589 (2001):

• This court has held that when ordinary inspection of the premises by a purchaser, followed by reasonable inquiry, would reveal the existence of a servitude, then that purchaser is charged with notice. Armstrong v. McCrary, 249 Ark. 816, 462 S.W.2d 445 (1971) (citing Hannah v. Daniel, 221 Ark. 105, 252 S.W.2d 548 (1952)). When a person has knowledge sufficient to lead him or her to a fact, that person will be deemed to know it. Hannah v. Daniel, supra; Waller v. Dansby, 145 Ark. 306, 224 S.W. 615 (1920).

California: Pell v. McElroy, 36 Cal. 268, 1868 Cal. LEXIS 186 (1868):

• The simple, independent fact of possession is sufficient to raise a presumption of interest in the premises on behalf of the occupant. And we can discover no just or rational ground for giving to this fact less significance as notice to a party purchasing the legal title from one not in possession, in consequence of the fact that such occupant had by deed divested himself of the legal title.

***

• An absolute deed divests the grantor not only of his legal title, but right of possession; and when such grantor is found in the exclusive possession of the granted premises long after the delivery of his deed, here is a fact antagonistic to the fact and legal effect of the deed; and we cannot appreciate the justice, sound reason, or policy of a rule which would authorize a subsequent purchaser, while such fact of possession continues, to give controlling prominence to the fact and legal effect of the deed, in utter disregard of the other notorious prominent antagonistic fact of exclusive possession in the original grantor. He cannot be regarded a purchaser in good faith who negligently or willfully closes his eyes to visible pertinent facts, indicating adverse interest in or incumbrances upon the estate he seeks to acquire, and indulges in possibilities or probabilities, and acts upon doubtful presumptions, when by the exercise of prudent, reasonable diligence he could fully inform himself of the real facts of the case.

***

• The continued exclusive possession of a vendor after his formal conveyance of the legal title is a fact in conflict with the legal effect of his deed, and is presumptive evidence that he still retains an interest in the premises, and is sufficient to put a purchaser upon inquiry, and subject him to the general rule heretofore announced in case of the party in possession being a stranger to the title as of record.

California: Scheerer v. Cuddy, 85 Cal. 270, 24 P. 713 (Cal. 1890):

• The actual possession of the premises by the appellant was sufficient to put the respondent upon inquiry as to the nature and extent of its claim. (Pell v. McElroy, 36 Cal. 268; O'Rourke v. O'Connor, 39 Cal. 446; Moss v. Atkinson, 44 Cal. 9, 17; Hunter v. Watson, 12 Cal. 363; 73 Am. Dec. 543; Lestrade v. Barth, 19 Cal. 660, 675; Dutton v. Warschauer, 21 Cal. 610; 82 Am. Dec. 765.)
  .The effect of such possession, and the diligence required of the vendee to ascertain the extent of the claim of the party in possession, is thus clearly stated in Pell v. McElroy, 36 Cal. 268.
  .The fact of open, notorious, and exclusive possession and occupation of lands by a stranger to a vendor's title, as of record at the time of a purchase from and conveyance by such a vendor out of possession, is sufficient to put such purchaser upon inquiry as to the legal and equitable rights of the party so in possession, and such vendee is presumed to have purchased and taken a conveyance from the vendor with full notice of all the legal and equitable rights in the premises of such party in possession and in subordination to these rights, and this presumption is only to be overcome or rebutted by clear and explicit proof on the part of such purchaser, or those claiming under him, of diligent, unavailing effort by the vendee to discover or obtain actual notice of any legal or equitable rights in behalf of the party in possession.
  .And when the location of the land is such as to render personal application to and inquiry of the occupant practicable, a purchaser failing to make such application and inquiry is no more entitled to be regarded a purchaser in good faith than if he had so inquired and ascertained the real facts of the case.
  .Whether the respondent knew of the appellant's possession, or not, is immaterial. It was his duty to know who was in possession of the property before making the purchase, and his purchase without ascertaining the fact must be regarded as the strongest evidence of bad faith on his part. The burden of making the proper inquiry was cast upon him by the mere fact of actual possession on the part of the appellant.
  .If it were allowed that by failing to acquaint himself with the fact of possession on the part of another than the vendor the vendee could avoid the effect of the rule above stated, he could purposely avoid any inquiry on the subject, and thereby evade the rule and its consequences entirely.

California: Hyde v. Mangan, 88 Cal. 319, 26 P. 180 (1891) (applied bona fide purchaser doctrine in the context of an equitable mortgage):

• The plaintiff came into court in this action with full notice of all the rights and equities existing between the railroad company and the defendants, and between Brownstone and his assignees and the defendants; for the defendants were in the open, notorious, and exclusive possession of this land at all these times, and plaintiff made no inquiry to ascertain the rights or claims of defendants, and he is in no better position, and no more entitled to be regarded as a purchaser in good faith than if he had so inquired and ascertained the real facts of the case. (Pell v. McElroy, 36 Cal. 268; Bank of Mendocino v. Baker, 82 Cal. 114; Scheerer v. Cuddy, 85 Cal. 273.) Neither could the plaintiff be recognized as a bona fide purchaser from his assignor, Erlanger, upon the additional ground that in the sale of equitable interests the principle of bona fide purchasers has no standing. (Taylor v. Weston, 77 Cal. 534.)

California: J. R. Garrett Co. v. States, 3 Cal.2d 379 [44 P.2d 538] (1935):

• As a general rule, possession of real property is constructive notice to any intending purchaser or encumbrancer of said property. This rule is so well established that citation of authority is hardly necessary. We mention, however, the case of Follette v. Pacific L. & P. Co., 189 Cal. 193, 205 [208 P. 295, 23 A.L.R. 965], where a long list of authorities is cited.
  .This rule applied even in the case of a grantor remaining in possession after execution and delivery of a deed to his vendee. (Pell v. McElroy, 36 Cal. 268, 272, 274; O'Rourke v. O'Connor, 39 Cal. 442; Taber v. Beske, 182 Cal. 214, 216 [187 P. 746]; Hopkins v. Garrard, 7 B. Mon. (Ky.) 312.)
  .In Pell v. McElroy, supra, the question presented in the instant case was before the court, as appears from the following quotation from the opinion in that case: "In the present case the question arises, whether the fact of open, notorious, and exclusive possession of lands by a vendor thereof, after transfer of his legal title thereto by deed, is sufficient to put a subsequent vendee of the same premises, while so in possession of the original vendor, upon inquiry as to the equitable rights of such original vendor, and subject such subsequent purchaser to the same rules as when a stranger to the title of his vendor, as of record, is in possession."
  .Continuing, the court, on page 274 [36 Cal.], says: "An absolute deed divests the grantor not only of his legal title, but right of possession; and when such grantor is found in the exclusive possession of the granted premises long after the delivery of his deed, here is a fact antagonistic to the fact and legal effect of the deed; and we cannot appreciate the justice, sound reason, or policy of a rule which would authorize a subsequent purchaser, while such fact of possession continues, to give controlling prominence to the fact and legal effect of the deed, in utter disregard of the other notorious prominent antagonistic fact of exclusive possession in the original grantor. He cannot be regarded a purchaser in good faith who negligently or willfully closes his eyes to visible pertinent facts, indicating adverse interest in or incumbrances upon the estate he seeks to acquire, and indulges in possibilities or probabilities, and acts upon doubtful presumptions, when by the exercise of prudent, reasonable diligence he could fully inform himself of the real facts of the case."
  .In the concluding paragraph of the opinion the court reiterates the rule as follows: "The continued exclusive possession of a vendor after his formal conveyance of the legal title is a fact in conflict with the legal effect of his deed, and is presumptive evidence that he still retains an interest in the premises, and is sufficient to put a purchaser upon inquiry, and subject him to the general rule heretofore announced in case of the party in possession being a stranger to the title as of record." The case of Pell v. McElroy, supra, is cited with approval in many cases decided by this court.
  .The same principle is expressly approved in Taber v. Beske, supra. In that case Mrs. Beske, an ignorant woman, desired to borrow the sum of $500 upon a lot owned by her. She so informed one Horsford, who fraudulently prepared a power of attorney in his favor, and represented to her it was a mortgage on her lot to secure the payment of $500. She, relying upon his statement and without reading the power of attorney, signed it, and Horsford gave her the sum of $500. After a short visit to her old home in Europe she returned to her home here, and ever since that time had been in possession and occupancy of said lot, either in person or through her tenants. Horsford, acting under his power of attorney, conveyed the lot to one Dennison, who paid no consideration and who knew that the conveyance was unauthorized. Thereafter, and while defendant Beske was in the possession of said lot, Horsford and Dennison conveyed the lot to plaintiff for a valuable consideration. The trial court found that plaintiff acquired title to said real property with notice of the defendant's rights therein and rendered judgment in favor of the defendant.
  .In affirming the judgment this court said (p. 217 [182 Cal.]): "Appellant contends that there is no evidence to support the finding that Taber, at the time he purchased and received the deed, was informed of the power of attorney and the circumstances of its execution. The finding that Mary Beske was in actual open, exclusive, and adverse possession of the lot, by herself and her tenants, at the time Taber bought and paid for the lot, put him on inquiry as to her rights and claims upon the property and charged him with knowledge of all that such inquiry, if pursued, might have developed."
  .In Hopkins v. Garrard, supra, the opinion delivered by Chief Justice Marshall states the law upon this question as follows: "But the fact that, notwithstanding his deed to Hopkins, which acknowledged full payment, Garrard, the grantor, remained in possession of the land, was an indication that he had or claimed some interest in the land, and should have put the subsequent vendees on an inquiry, by which they would have easily learned that the purchase money was, in fact, unpaid, and probably that Garrard was holding the possession as security for it. On the ground of notice, therefore, implied from the possession, the lien of Garrard for his purchase money is considered effectual against the subsequent purchase, even beyond the effect of the lis pendens."

California: Pacific Gas & Elec. Co. v. Minnette (1953) 115 Cal.App.2d 698 [252 P.2d 642]:

• ‘Possession of land is notice to the world of every right that the possessor has therein, legal or equitable; it is a fact putting all persons on inquiry as to the nature of the occupant's claims.’ [Citation.] ‘Except in so far as the rule has been varied by statute, actual possession of land is such notice to all the world, or to anyone having knowledge of such possession, as will put on inquiry those acquiring title or a lien on the land to ascertain the nature of the right that the occupant has in the premises. The presumption is that inquiry of the possessor will disclose how and under what right he holds possession, and, in the absence of such inquiry, the presumption is that, had such inquiry been made, the right, title, or interest under which the possessor held would have been discovered. The notice which the law presumes has been held to be actual, and not merely constructive, notice. Possession is notice not only of whatever title the occupant has but also of whatever right he may have in the property, and the knowledge chargeable to a person after he is put on inquiry by possession of land is not limited to such knowledge as would be gained by examination of the public records.’ [Citations.]

California: Asisten v. Underwood (1960) 183 Cal.App.2d 304 [7 Cal.Rptr. 84]:

• It is a general rule that possession of real property is constructive notice to any intending purchaser or encumbrancer of the property of all the rights and claims of the person in possession which would be disclosed by inquiry. (Pell v. McElroy, 36 Cal. 268, 272.)
  .This rule is extended to the case of a grantor remaining in possession after execution and delivery of a deed to his vendee and a subsequent purchaser of the same property must inquire into the equitable rights of the original vendor. (Pell v. McElroy, supra; J. R. Garrett Co. v. States, 3 Cal.2d 379 [44 P.2d 538].)
  .The same rule was applied in Taber v. Beske, 182 Cal. 214, 217 [187 P. 746], where the court said: "Appellant contends that there is no evidence to support the finding that Taber, at the time he purchased and received the deed, was informed of the power of attorney and the circumstances of its execution. The finding that Mary Beske was in actual, open, exclusive, and adverse possession of the lot, by herself and her tenants, at the time Taber bought and paid for the lot, put him on inquiry as to her rights and claims upon the property and charged him with knowledge of all that such inquiry, if pursued, might have developed. (Citations.) His actual knowledge is, therefore, not necessary to support the judgment."

California: Evans v. Faught, 231 Cal. App. 2d 698; 42 Cal. Rptr. 133 (Cal. App. 1st Dist. Div 1, 1965):

• Such finding and conclusion were, moreover, in accordance with the cases which, in construing section 1214, fn. 8 have held that an unrecorded lease is not void as against a purchaser who has notice of the lease or such notice as should put him on such inquiry as would disclose its existence. (Scheerer v. Cuddy, 85 Cal. 270, 272 [24 P. 713]; Commercial Bank v. Pritchard, 126 Cal. 600 [59 P. 130].)
  .The rationale of this rule is that a purchaser of premises occupied in part by a third person under an unrecorded lease cannot be said to be an innocent purchaser since possession by such third party may constitute notice to the purchaser, provided it is open, notorious, exclusive and visible, and not consistent with the record title. (Scheerer v. Cuddy, supra, pp. 272-273; Manig v. Bachman, 127 Cal.App.2d 216, 221-222 [273 P.2d 596]; High Fidelity Enterprises, Inc. v. Hull, 210 Cal.App.2d 279, 281 [26 Cal.Rptr. 654].

California: Saxon v. Du Bois, 209 Cal. App. 2d 713; 26 Cal. Rptr. 196 (Cal. App. 1st Dist. Div.3, 1962):

• Whether defendant knew of the possession by Daut of the pipe and catch basin is immaterial. It was her duty to know before making the purchase, else the purchaser could purposely avoid any inquiry on the subject and thereby defeat the rule of notice by possession. (Follette v. Pacific Light & Power Corp., 189 Cal. 193, 213 [208 P. 295, 23 A.L.R. 965]; Scheerer v. Cuddy, 85 Cal. 270, 273 [24 P. 713]; Wineberg v. Moore, 194 F.Supp. 12, 16, 17; Beverly Hills Nat. Bank v. Seres, 76 Cal.App.2d 255, 263 [172 P.2d 894].)

California: Hansen v. G & G Trucking Co., 236 Cal. App. 2d 481; 46 Cal. Rptr. 186 (Cal. App. 1st Dist, Div.1, 1965):

• Insofar as the possession of the property by respondent's mother is concerned, it is well settled that "the possession of the tenant is notice of his landlord's title; that is to say, such possession is sufficient to put a person dealing with the property upon inquiry; and the law will charge him with notice of all those facts which he might have ascertained, had he pursued the inquiry with proper diligence." (O'Rourke v. O'Connor, 39 Cal. 442, 446-447; White v. Rosenstein, [236 Cal.App.2d 499] 8 Cal.App.2d 217, 223 [47 P.2d 358]; Manig v. Bachman, supra, pp. 221- 222.)
  .Accordingly, "It is equally well settled that where a person who is a stranger to the record title of the vendor is in possession, the purchaser is under a duty to make inquiry of such stranger's rights, and failure to do so deprives him of the status of bona fide purchaser." (Manig v. Bachman, supra, p. 222; Hunter v. Watson, 12 Cal. 363 [73 Am.Dec. 543]; Pell v. McElroy, 36 Cal. 268.)

California: Claremont Terrace Homeowners' Ass'n v. United States, 146 Cal. App. 3d 398; 194 Cal. Rptr. 216 (Cal. App. 1st Dist. Div.1, 1983):

• As explained in Asisten v. Underwood (1960) 183 Cal.App.2d 304, 309 [7 Cal.Rptr. 84]: "It is a general rule that possession of real property is constructive notice to any intending purchaser or encumbrancer of the property of all the rights and claims of the person in possession which would be disclosed by inquiry."
  ."The possession required to impart notice to a subsequent purchaser must be open, notorious, exclusive and visible, and not consistent with the record title." (High Fidelity Enterprises, Inc. v. Hull, supra, 210 Cal.App.2d 279, 281.) If either a tenant or a stranger is in possession of leased premises, the purchaser is charged with all those facts which might have been ascertained had a reasonably diligent inquiry been made. (Manig v. Bachman, supra, 127 Cal.App.2d 216, 221-222; Natural Resources, Inc. v. Wineberg, supra, 349 F.2d 685, 690.)
  .And as noted in Pacific Gas & Elec. Co. v. Minnette (1953) 115 Cal.App.2d 698, 705 [252 P.2d 642]: "'Possession is notice not only of whatever title the occupant has but also of whatever right he may have in the property, and the knowledge chargeable to a person after he is put on inquiry by possession of land is not limited to such knowledge as would be gained by examination of the public records." (Italics omitted.) fn. 6 The subsequent purchaser or encumberer has the burden of showing lack of notice. (Chalmers v. Raras (1962) 200 Cal.App.2d 682, 686 [19 Cal.Rptr. 531]; Manig v. Bachman, supra, 127 Cal.App.2d at p. 223.)

California: Mullin v. Bank of America, 199 Cal. App. 3d 448; 245 Cal. Rptr. 66 (Cal. App. 1st Dist. Div 3,) unpub. 1988):

• We also note that '[e]very person who has actual notice of circumstances sufficient to put a prudent [person] upon inquiry as to a particular fact, has constructive notice of the fact itself in all cases in which, by prosecuting such inquiry, he [or she] might have learned such fact.' (Civ. Code, § 19.) The general rule is that possession of real property by one other than the seller is notice sufficient to put an intending purchaser or encumbrancer of property on inquiry as to the rights of the occupant unless under the peculiar circumstances of the case there is no duty to make inquiry. (Three Sixty Five Club v. Shostak (1951) 104 Cal.App.2d 735, 738 [232 P.2d 546]; Asisten v. Underwood (1960) 183 Cal.App.2d 304, 309 [7 Cal.Rptr. 84].)

California: In re Marriage of Cloney, 91 Cal. App. 4th 429; 110 Cal. Rptr. 2d 615; (2001):

• By statute, notice may be actual or constructive. Actual notice is defined as "express information of a fact," while constructive notice is that "which is imputed by law." ( Civ. Code, § 18.) (2) "A person generally has 'notice' of a particular fact if that person has knowledge of circumstances which, upon reasonable inquiry, would lead to that particular fact." ( First Fidelity Thrift & Loan Assn. v. Alliance Bank (1998) 60 Cal. App. 4th 1433, 1443 [71 Cal. Rptr. 2d 295]; Civ. Code, § 19; 5 Miller & Starr, Cal. Real Estate (3d ed. 2000) Recording and Priorities, §§ 11:49 to 11:51, 11:58 to 11:59, pp. 129-138, 147-151.)

California: See California Bona Fide Purchaser, Possession, Duty Of Inquiry for a longer list of California cases.

Colorado: Martinez v. Affordable Hous. Network, Inc., 123 P.3d 1201; 2005 Colo. LEXIS 1075 (Colo. 2005):

• We have traditionally recognized three forms of notice: actual notice, constructive notice, and inquiry notice. Franklin Bank, N.A. v. Bowling, 74 P.3d 308, 313 (Colo. 2003). Actual notice occurs when a party has actual knowledge of a title defect. Id. While both "constructive and inquiry notice operate to impute knowledge to a party under certain specific conditions," we recognize them as separate inquiries. Id. at 313 n.11. Constructive notice arises where a search of the title records would have revealed a defect. See id. at 313. "Inquiry notice arises when a party becomes aware or should have become aware of certain facts which, if investigated, would reveal the claim of another." Id. However, notice will not be "imputed to a purchaser if a reasonable search would prove, or would have proven, futile." Littlefield v. Bamberger, 32 P.3d 615, 619 (Colo. App. 2001).
  .Inquiry notice imputes knowledge where the circumstances are such that they would have aroused the suspicions of an ordinary purchaser. See Littlefield, 32 P.3d at 618-19. And, once there is a duty to inquire, the purchaser "will be charged with all knowledge that a reasonable investigation would have revealed." Franklin Bank, N.A., 74 P.3d at 313; see also Burman v. Richmond Homes Ltd., 821 P.2d 913, 919 (Colo. App. 1991).
  .It is well settled in Colorado that, with certain exceptions inapplicable here, possession of real estate is sufficient to put an interested person on inquiry notice of any legal or equitable claim the person or persons in open, notorious, and exclusive possession of the property may have. See Hitchens v. Milner Land, Coal & Townsite Co., 65 Colo. 597, 601, 178 P. 575, 576 (1919); Colburn v. Gilcrest, 60 Colo. 92, 94, 151 P. 909, 910 (1915); Yates v. Hurd, 8 Colo. 343, 344, 8 P. 575, 576 (1885); Tiger v. Anderson, 976 P.2d 308, 310 (Colo. App. 1998).

Florida: Florida Land Holding Corp. v. McMillen, 135 Fla. 431, 186 So. 188 (Fla. 1938) (citing Marion Mortgage Co. v. Grennan, 106 Fla. 913, 143 So. 761):

• 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.

Florida: Waldorff Ins. v. Eglin Nat. Bank, 453 So.2d 1383 (Fla.App. 1 Dist. 1984) (citing the Florida Supreme Court in Blackburn v. Venice Inlet Co., 38 So.2d 43, 46 (Fla. 1948)):

• It is settled law in Florida that actual possession is constructive notice to all the world, or anyone 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 the premises.

Florida: Morris v. Osteen, 948 So. 2d 821; 2007 Fla. App. LEXIS 500; 32 Fla. L. Weekly D 247 (5th DCA 2007):

• Thus, "successors to legal title take title subject to those equitable interests of which they have notice." Kroitzsch v. Steele, 768 So. 2d 514, 517 (Fla. 2d DCA 2000). Forms of notice include possession, actual notice, and constructive notice of publicly recorded matters. [Cain & Bultman, Inc. v. Miss Sam, Inc., 409 So. 2d 114, 117 (Fla. 5th DCA 1982)].
  .In particular, with regard to possession, the Second District court has said that "[a]ctual 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." Kroitzsch, 768 So. 2d at 517.

Florida: See Florida Bona Fide Purchaser, Possession, Duty Of Inquiry for a longer list of Florida cases.

Georgia: Whiten v. Murray, 267 Ga. App. 417; 599 S.E.2d 346; 2004 Ga. App. LEXIS 671 (2004):

• A bona fide purchaser for value is protected against outstanding equitable interests in land of which the purchaser has no notice. Notice sufficient to excite attention and put a party on inquiry shall be notice of everything to which it is afterwards found that such inquiry might have led. Ignorance of a fact due to negligence shall be equivalent to knowledge in fixing the rights of parties. (Punctuation and footnote omitted.) R. W. Holdco, Inc. v. SCI/RW Holdco, Inc., 250 Ga. App. 414, 415 (1) (551 S.E.2d 825) (2001).

***

• Possession of land shall constitute notice of the rights or title of the occupant. In order for the possession to have the effect of notice, it must be actual, open, visible, exclusive, and unambiguous. He who takes with notice of an equity takes subject to that equity. Notice sufficient to excite attention and put a party on inquiry shall be notice of everything to which it is afterwards found that such inquiry might have led. Ignorance of a fact, due to negligence, shall be equivalent to knowledge in fixing the rights of the parties. (Citations and punctuation omitted.) Bacote v. Wyckoff, 251 Ga. 862, 866 (2) (310 S.E.2d 520) (1984).

Georgia: Bacote v. Wyckoff, 251 Ga. 862; 310 S.E.2d 520 (Ga. 1984):

• "Possession of land shall constitute notice of the rights or title of the occupant." OCGA § 44-5-169 (Code Ann. § 85-408).
  .
  In order for the possession to have the effect of notice, it must be actual, open, visible, exclusive, and unambiguous. McDonald v. Dabney, 161 Ga. 711 (132 SE 547) (1929).
  .
  "He who takes with notice of an equity takes subject to that equity." OCGA § 23-1-16 (Code Ann. § 37-115). "Notice sufficient to excite attention and put a party on inquiry shall be notice of everything to which it is afterwards found that such inquiry might have led. Ignorance of a fact, due to negligence, shall be equivalent to knowledge in fixing the rights of the parties." OCGA § 23-1-17 (Code Ann. § 37-116).
  .
  The foregoing equitable principles demonstrate that once appellant found appellees in actual, open, visible, exclusive, and unambiguous possession of the property, he had an affirmative duty to inquire of Mrs. Wyckoff concerning appellees' rights in the premises and as a consequence of his failure to do so, he may not now prevail. Yancey v. Harris, 234 Ga. 320 (216 SE2d 83) (1975).
  .
  Appellant's loss here is not traceable to appellees' actions, but to his own failure to perform his statutory duty to inform himself through inquiry as to the true state of the title.

Georgia: Yancey v. Harris, 234 Ga. 320; 216 SE2d 83 (Ga. 1975):

• This result is compatible with generally applied legal principles. "In all but a few jurisdictions, a purchaser of land has constructive notice of all facts affecting the title of which he would have learned by an inspection of the premises. It is, therefore, the general rule that, if land is in possession of any one other than the vendor, a purchaser takes title subject to all existing rights and equities of the person in possession." 2 Patton on Titles 603, § 674 (2d Ed. 1957).

***

• "To operate as notice, the possession must be open, visible, exclusive, and unambiguous, not liable to be misconstrued or misunderstood. It must not be mixed or ambiguous possession. So it has been held that possession of land by the grantee, holding under an unrecorded deed, together with the grantor, is not constructive notice of the unrecorded deed to a subsequent purchaser. Wells v. American Mortgage Co., 109 Ala. 430 (20 S 136). Where a widow contributed a part of the purchase-money of a farm, and her brother, who contributed the remainder, took title thereto in his own name without her knowledge, it was held that the fact that she lived on the farm with him did not give notice of her resulting trust to a purchaser from him. Harris v. McIntyre, 118 Ill. 275 (8 NE 182).
  .
  The correct rule is that when the occupation by one is not exclusive, but in connection with another, with respect to whom there exists a relationship sufficient to account for the situation, and the circumstances do not suggest an inconsistent claim, then such a possession will not give notice of a right by an unrecorded grant... If, of two occupants, one has the record title, a purchaser has the right to assume that the other has no title. [Cits.]" McDonald v. Dabney, 161 Ga. 711, 725 (132 SE 547). (Emphasis supplied.) Accord, Manning v. Manning, 135 Ga. 597 (3) (69 SE 1126); Goodwynne v. Bellerby, 116 Ga. 901 (5) (43 SE 275).
  .
  However, where, as here, there is no joint occupation of the land involved and defendants must rely solely on a claimed familial relation between the one in possession and the record title owner, the law does not support them. In Hall v. Turner, 198 Ga. 763 (32 SE2d 829), the possession of a father and mother was held sufficient to put a purchaser upon inquiry where the son, to whom the father and mother had deeded the property under an agreement that they might remain in possession for their lifetimes, attempted to sell without a reservation of their rights.
  .
  To the same effect is Waddell v. City of Atlanta, 121 Ga. App. 94 (172 SE2d 862), wherein the possession of a wife and children under an award of temporary alimony was sufficient to give notice to a prospective purchaser from the husband. Also, in Lewis v. Lewis, 210 Ga. 330 (80 SE2d 312), "[t]he actual possession of the home place by the wife and children was sufficient to put Graham [the husband's attorney who was paid with a deed to the premises] on inquiry as to the claim under which she held possession. Code § 85-408..." Id. at 334-335.

Georgia: Perimeter Dev. Corp. v. Haynes, 234 Ga. 437 (1975); 216 SE 2d 581 (Ga. 1975) (the issue of a grantor in possession was addressed in the context of a transaction involving an equitable mortgage):

• 1. The appellants contend that since the record showed that the Haynes were in possession of the property under an expired lease agreement, they were relieved from inquiring into the nature of their possession. There is no merit in this contention.
  .
  In Chandler v. Ga. Chemical Works, 182 Ga. 419, 424 (185 SE 787) this court said: "`Possession of land is notice of whatever right or title the occupant has.' Code of 1933, § 85-408. In reference to this section it was said in Hadaway v. Smedley, 119 Ga. 264, 268 (46 SE 96): `If it had been a new principle announced for the first time in that Code (of 1895), it might not have applied to some of the transactions in this case; but it is not a new principle and has always been the law in this State, as will be seen by reference to the opinion of Bleckley, C. J., in Broome v. Davis, 87 Ga. 587 (13 SE 749), from which this section of the Code was taken.'
  .
  The principle is also found in Peck v. Land, 2 Ga. 1 (2) (46 AD 368), the second headnote of which is: `The possession of property, real or personal, remaining with the vendor after an absolute deed of conveyance, is an evidence of fraud.' (Italics ours.)
  .
  In Fleming v. Townsend, 6 Ga. 103 (50 AD 318), it was held: `Possession retained by the vendor, after an absolute sale of real or personal property, is prima facie evidence of fraud, which may be explained, and after the possession is proven, the burthen of explaining it rests upon those who claim under the sale.' In that case Judge Nisbet approved the holding of the lower court that `The possession in the vendor was, under that Statute (27 Elizabeth), and also by the principles of the Common Law, independent of it, prima facie evidence of fraud.'
  .
  While this case does not involve the question of defrauding creditors, yet the fundamental principles of notice implied from possession is at the core. The badge of fraud is there prima facie, and required one claiming under the grantee to determine by inquiry whether the badge was real or apparent. `The burthen of explaining it rests upon those who claim under the sale.'
  .Or as was said in Fleming v. Townsend, supra: `The onus of explanation, after possession is proven, is upon the grantee.' So it can be seen that from very early times deeds and assignments of property, where the grantor remained in possession, were said to be affected with an infirmity that prevented them from being conclusive. The possession called for inquiry as to the right or title of the occupant in the present case, and opened the transaction to investigation.
  .
  In such circumstances the grantee assumed the risk of a court declaring his contract void, in the absence of a satisfactory showing that the transaction was bona fide. In Berry v. Williams, 141 Ga. 642 (81 SE 881), it was held: `1. A deed absolute in form may be shown to have been made to secure a debt, where the maker remains in possession of the land. Mercer v. Morgan, 136 Ga. 632 (71 SE 1075). 2. Actual possession is notice to the world of the right or title of the occupant. Mercer v. Morgan, supra; Bridger v. Exchange Bank, 126 Ga. 821 (56 SE 97, 8 LRA (NS) 463, 115 ASR 118); Austin v. Southern Home &. Asso., 122 Ga. 439 (50 SE 382). 3. Where the owner of land executes a deed of the character mentioned in the first note, and remains in possession of the land, and the grantee conveys the land to another who has no actual notice of the undisclosed agreement that the deed should operate as a security for debt, and who has made no inquiry of the occupant, the latter may pay or tender the amount of the debt to the first grantee and maintain an equitable action against the first grantee and the remote grantee for cancellation of both deeds as clouds upon his title, and to have the title decreed to be in him.'
  .
  It will be noted that in that case there was `actual possession' by the grantor. No other facts or circumstances are shown which would demand an inquiry, except the single fact of possession.
  .
  We have undertaken to show such facts in the present case as an additional reason for a reversal of the judgment. See, to the same effect as in the last mentioned case: Cogan v. Christie, 48 Ga. 585; Franklin v. Newsom, 53 Ga. 580; Broome v. Davis, 87 Ga. 584, 587, supra; Kent v. Simpson, 142 Ga. 49 (82 SE 440); Summerour v. Summerour, 148 Ga. 499 (97 SE 71); Waller v. Dunn, 151 Ga. 181 (106 SE 93); Sims v. Sims, 162 Ga. 523 (134 SE 308).
  .
  "It is contended by the defendant, however, that the present case is not controlled by the foregoing cases, but is controlled by a line of decisions beginning with Jay v. Whelchel, 78 Ga. 786 (3 SE 906), and including Malette v. Wright, 120 Ga. 735 (48 SE 229); Peabody v. Fletcher, 150 Ga. 468, 479 (104 SE 448); Johnson v. Hume, 163 Ga. 867 (137 SE 56); Rimes v. Floyd, 168 Ga. 426, 428 (148 SE 86).
  .
  We think it will be found that the case of Jay v. Whelchel, supra, and the cases following and based upon it, stand upon their special facts. If not, the older cases upon which section 85-408, supra, is founded must prevail. In Bridger v. Exchange Bank, 126 Ga. 821, 826 (56 SE 97, 8 LRA (NS) 463, 115 ASR 118), it was stated, as to the Malette case: `The decision never intended to abrogate the general rule, but merely held that the facts of that case did not fall within it.' The two lines of cases have led to some very close decisions. It is worth while to note that Chief Justice Bleckley wrote the decisions in both Jay v. Whelchel and Broome v. Davis, from which latter the Code provision was taken. There is no conflict between the two decisions."

Idaho: Kalange v. Rencher, 136 Idaho 192; 30 P.3d 970; 2001 Ida. Lexis 99 (2001):

• We have held that possession by other than the grantee of record is constructive notice to a subsequent purchaser of the claim of the person in possession. Fajen v. Powlus, 96 Idaho 625, 533 P.2d 746 (1975).

Illinois: Fidelity Trust & Savings Bank v. Williams (1936), 285 Ill. App. 131, 1 N.E.2d 739:

• The rule of law which seems to control in a like situation is that the retention of possession by the grantor of the property conveyed is notice of his or her interest in the property, and to those claiming under the grantee, and such rule is laid down in the case of Ford v. Marcall, 107 Ill. 136, wherein the court said: "The law is, as this court has declared in White v. White, 89 Ill. 460, that when the grantor of real estate remains in possession, all persons acquiring title from the grantee are chargeable with notice of all the claims of the grantor."
  .This rule was followed and approved in the case of Ronan v. Bluhm, 173 Ill. 277, where the court said: "It is proper we should remark, in answer to the discussion upon the point, that as it is conceded by all parties that the said Thomas Ronan did not deliver possession of the premises in question to the grantee, Carbine, but remained in the open and exclusive occupancy thereof, appellee, Bluhm, is deemed, as matter of law, to have taken the conveyance from Carbine with full notice of all the rights and equities of said Ronan in the premises. Illinois Central Railroad Co. v. McCullough, 59 Ill. 166; White v. White, 89 id. 460; Ford v. Marcall, 107 id. 136." It is to be noted from what the court said in this opinion that Bluhm was deemed as a matter of law to have taken the conveyance from Carbine, the grantee of Ronan, with full notice as to all the rights and equities of Ronan in the premises.
  .This rule has been passed upon by the courts of this State, and the law is again discussed and approved in the case of Rock Island & Peoria Ry. Co. v. Dimick, 144 Ill. 628. The court in this opinion said: "The law is well settled in this State, as generally elsewhere, when not changed by the recording acts, that open and exclusive possession of lands, under an apparent claim of ownership, is notice to those subsequently dealing with the title of whatever interest the possessor has in the premises, whether the interest be legal or equitable in its nature. Wade on Notice, sec. 273; Davis v. Hopkins, 15 Ill. 519; Truesdale v. Ford, 37 Ill. 210; Smith v. Jackson's Heirs, 76 Ill. 254; Partridge v. Chapman, 81 Ill. 137. It has been held also in this State, that if the grantor remains in possession after conveyance, purchasers from the grantee are affected with notice of the grantor's rights in the land. White v. White, 89 Ill. 460; Ford v. Marcall, 107 id. 136."
  .In the case of Porter v. Clark, 23 Ill. App. 567, this rule was also approved, and in discussing the subject matter of the litigation, the court there stated what we regard as pertinent in its application to the instant case. This statement is: "If Porter, knowing as he did that Clark was in possession, had gone to him and inquired as to his rights, he would undoubtedly have been told that the purchase money had not been paid, and that he, Clark, claimed a vendor's lien on the land."

Illinois: Life Savings & Loan Association v. Bryant, 125 Ill. App. 3d 1012, 81 Ill. Dec. 577, 467 N.E.2d 277 (1st Dist. 1984):

• The final question to be answered then is, exactly to what priority was the Bryants' interest restored upon negation of the subordination agreement in relation to the subsequently executed mortgage. The answer turns on whether Life, as Mortgagee, was a bona fide purchaser such that its interest was protected by the recording act. Metcalf v. Altenritter (1977), 53 Ill. App. 3d 904, 369 N.E.2d 498.
  .A bona fide purchaser is one who takes without notice of a prior claim or encumbrance. (Guard ex dem. Robinson v. Rowan (1840), 3 Ill. (2 Scam.) 499.) A mortgagee of realty is regarded as a purchaser, and, if the mortgage is supported by consideration and is taken in good faith, the mortgagee will be protected against adverse claims of which it has no notice. (59 C.J.S. Mortgages sec. 232 (1949).)
  .Where, however, the mortgagee, at the time of taking the mortgage, has knowledge or legal notice of a prior conveyance, it is not entitled to the protection of a bona fide purchaser. (Fidelity Trust & Savings Bank v. Williams (1936), 285 Ill. App. 131, 1 N.E.2d 739.) One who takes a mortgage upon property with knowledge, either actual or constructive, of an earlier although unrecorded conveyance of it, takes it subject thereto and will not be permitted by placing his mortgage first on the record to gain priority over the earlier lien. St. Boniface Building & Loan Association v. Demopoulos (1939), 302 Ill. App. 614, 24 N.E.2d 171.

***

• Illinois courts have uniformly held that the actual occupation of land is equivalent to the recording of the instrument under which the occupant claims interest in the property. (Bullard v. Turner (1934), 357 Ill. 279, 192 N.E. 223; Beals v. Cryer (1981), 99 Ill. App. 3d 842, 426 N.E.2d 253). The open and visible possession of land by the equitable owner is sufficient to charge a mortgagee with notice of the rights of such owner, and the mortgagee will take subject to the rights of the person in possession. Williams v. Spitzer (1903), 203 Ill. 505, 68 N.E. 49.

Illinois: Newman v. 1st 1440 Invest., Inc., 1993 U.S. Dist. LEXIS 354 (USDC N.D. Ill., 1993):

• A person who takes property for valuable consideration without notice of another's adverse claim is regarded as a bona fide purchaser whose rights are superior to competing claims. Life Savings & Loan Association v. Bryant, 125 Ill. App. 3d 1012, 81 Ill. Dec. 577, 582, 467 N.E.2d 277 (1st Dist. 1984)."
  .A mortgagee of realty is afforded the same protections as a bona fide purchaser if the mortgagee secures the mortgage without knowledge or notice of adverse claims to its mortgage. Id. Notice of a competing interest in the realty may be predicated upon actual or constructive knowledge, and may also be imputed if the circumstances impose a duty of inquiry upon the purchaser/mortgagee. Burnix oil Co. v. Floyd, 106 Ill. App. 2d 16, 23, 245 N.E.2d 539 (1st Dist. 1969).
  .A person is charged with the duty of inquiry only upon gaining knowledge of facts inconsistent with the mortgagor's claim or those "facts which would make a prudent person suspicious. In re Ryan, 851 F.2d 502, 511 (1st Cir. 1988). Inquiry notice imputes knowledge of all those facts which a diligent inquiry would have revealed.
  .A person who takes property for valuable consideration without notice of another's adverse claim is regarded as a bona fide purchaser whose rights are superior to competing claims. Life Savings & Loan Association v. Bryant, 125 Ill. App. 3d 1012, 81 Ill. Dec. 577, 582, 467 N.E.2d 277 (1st Dist. 1984).
  .A mortgagee of realty is afforded the same protections as a bona fide purchaser if the mortgagee secures the mortgage without knowledge or notice of adverse claims to its mortgage. Id. Notice of a competing interest in the realty may be predicated upon actual or constructive knowledge, and may also be imputed if the circumstances impose a duty of inquiry upon the purchaser/mortgagee. Burnix oil Co. v. Floyd, 106 Ill. App. 2d 16, 23, 245 N.E.2d 539 (1st Dist. 1969).
  .The most common example of inquiry notice charged to a mortgagee is when a person other than the vendor is in possession of the property. Life Sav. & Loan Ass'n v. Bryant, supra, 81 Ill. Dec. at 582, 467 N.E.2d 277.
  .However, inquiry notice is imputed whenever the cumulative facts or circumstances create a reasonable suspicion that the mortgagee's interests are subject to an adverse claim. See, e.g., In re Cutty's-Gurnee, Inc., supra, 133 Bankr. at 952-53.
  .Factors, besides possession, which can serve as red flags to place a party on inquiry notice include: the extensive involvement of the putative bona fide purchaser in the transaction; the precarious financial status of the plaintiff; the low purchase price of the property; and the ease at which minimal investigation would uncover the fraudulent nature of the transaction. Shacket v. Roger Smith Aircraft Sales, 651 F. Supp. 675, 691-92 (N.D. Ill. 1986).

Illinois: In re Cutty's-Gurnee, Inc., 133 B.R. 934 (USBC N.D. Ill. 1991) (applying doctrine in the context of an equitable mortgage):

• Inquiry notice is the knowledge the law imputes to a lien claimant or purchaser of real property when such claimant is under a duty of inquiry. Inquiry notice imputes knowledge of all facts that a diligent inquiry would have brought to light. Miller v. Bullington, 381 Ill. 238, 44 N.E.2d 850 (1942).
  .The lien claimant's duty of inquiry depends upon all the facts and circumstances. It is clear that where a physical inspection of the property would reveal an adverse interest or where there is a party in possession other than the record title owner, the subsequent lien claimant has a duty to inquire of the possessor as to his interest and is charged with knowledge of the facts discoverable from such an inquiry or inspection. Miller, 381 Ill. at 244, 44 N.E.2d at 853; Burnex Oil Co. v. Floyd, 106 Ill. App. 2d 16, 23, 245 N.E.2d 539, 544 (1st Dist. 1969); In re Ehrlich, 59 Bankr. 646, 650 (Bankr. N.D. Ill. 1986).

Illinois: In Re Polo Builders, Inc., 433 B.R. 700 (Bankr. N.D. Ill. E. Div. 2010):

• It has long been settled in Illinois,[8] as it is elsewhere, see 5 Herbert Thorndike Tiffany, The Law of Real Property § 1287 at 57 (3d ed.1939), that possession of property is notice of whatever rights to the property the party in possession claims, Ambrosius, 2 Ill.2d at 182, 117 N.E.2d at 74; Miller, 381 Ill. at 243, 44 N.E.2d at 852, and when the party claims title under a deed, possession is equivalent to the recording of the deed, Miller, 381 Ill. at 243, 44 N.E.2d at 852; Banco Popular, 335 Ill.App.3d at 210, 269 Ill.Dec. 389, 780 N.E.2d at 1125.
  .A purchaser therefore has an obligation to ask the party in possession by what right he claims possession and what his interest is. Bryant, 402 Ill. at 477, 84 N.E.2d at 418. The purchaser is charged with notice of all facts such an inquiry would reveal. Id. at 477-78, 84 N.E.2d at 418; see also Ehrlich, 59 B.R. at 650.
  .What constitutes "possession," however, is less clear. To serve as notice of an unrecorded interest, possession must be "open, visible, exclusive, and unambiguous." Robertson v. Wheeler, 162 Ill. 566, 575, 44 N.E. 870, 872 (1896) (internal quotation omitted); see also Beals v. Cryer, 99 Ill.App.3d 842, 845, 55 Ill.Dec. 278, 426 N.E.2d 253, 255 (1981); Burnex Oil Co. v. Floyd, 106 Ill.App.2d 16, 21-22, 245 N.E.2d 539, 543 (1969); Millikin Trust Co. v. Gregory, 292 Ill.App. 28, 35, 10 N.E.2d 853, 856 (1937).
  .At the same time, "neither actual occupancy, cultivation, [n]or residence" is necessary. Morrison v. Kelly, 22 Ill. 609, 624 (1859); see also Chicago Title & Trust Co. v. Darley, 363 Ill. 197, 202, 1 N.E.2d 846, 849 (1936); Beals, 99 Ill.App.3d at 844, 55 Ill.Dec. 278, 426 N.E.2d at 255. "Improvements or acts of dominion" showing the possessor has "exclusive 709*709 management and control" are enough. Beals, 99 Ill.App.3d at 844, 55 Ill.Dec. 278, 426 N.E.2d at 255; see also Banco Popular, 335 Ill.App.3d at 211, 269 Ill.Dec. 389, 780 N.E.2d at 1126; see, e.g., Bryant, 402 Ill. at 475, 84 N.E.2d at 417 (holding party was in possession who had "commenced to rehabilitate and improve" buildings). Whether a party has possession depends on the facts of each case. Morrison, 22 Ill. at 624-25; Beals, 99 Ill. App.3d at 844, 55 Ill.Dec. 278, 426 N.E.2d at 255.

(Editor's Note: In elaborating on the fact that "[i]t has long been settled in Illinois ... that possession of property is notice of whatever rights to the property the party in possession claims ...", the court added this observation in footnote 8 of its ruling:

• So long, in fact, that more than a century ago the Illinois Supreme Court described the rule as "too well settled to call for the citation of authorities." Mason v. Mullahey, 145 Ill. 383, 388, 34 N.E. 36, 36 (1893).)

Illinois: See Illinois Bona Fide Purchaser, Possession, Duty Of Inquiry for a longer list of Illinois cases.

Indiana: Thomas v. Thomas, (No. 45A05-0906-CV-357, Ind. Ct. of App., March 16, 2010):

• See Failure To Inspect Property & Inquire Into Rights Of Parties In Possession Prior To Making Loan Leaves Indiana Lender With Voided Mortgage for excerpts from this case.

Iowa: Scaglione v. Lamar Co., LLC, No. 7-687 / 06-1436, 2007 Iowa App. Lexis 1075 (Iowa Ct. App. 2007): In holding that the rights of a person in possession under an unrecorded lease had priority over the holder of a subsequently recorded deed, the court made this observation on Iowa law in this regard:

• "A land purchaser has the burden to establish the status of bona fide purchaser. To do so, the purchaser must show the purchase was made without either actual or constructive notice of existing rights in the property." Sun Valley Iowa Lake Ass'n v. Anderson, 551 N.W.2d 621, 638 (Iowa 1996). A person who purchases land with knowledge of facts that would put a prudent person upon inquiry that, pursued with ordinary diligence, would lead to actual notice of rights claimed adversely by another, is chargeable with actual notice. Nat'l Properties Corp. v. Polk County, 351 N.W.2d 509, 511 (Iowa 1984).
  .They "may not act in contravention to the dictates of reasonable prudence, or refuse to inquire when the propriety of the inquiry is naturally suggested by circumstances known to" them. Raub v. Gen. Income Sponsors, 176 N.W.2d 216, 220 (Iowa 1970).

Kansas: Nat'l City Mortg. Co. v. Ross, 34 Kan. App. 2d 282; 117 P.3d 880 (Ct. App. 2005):

• The general rule is that possession of land is notice to the world of whatever rights the possessor may have in the property. See Gray v. Zelmer, 66 Kan. [514, 72 Pac. 228 (1903)].

Michigan: Wash. Mut. Bank v. Cmty. Shores Bank, No. 274959, unpublished, 2007 Mich. App. LEXIS 2467 (Mich. App. Ct. 2007):

• "A good-faith purchaser is one who purchases without notice of a defect in the vendor's title." Michigan Nat'l Bank & Trust Co v Morren, 194 Mich. App. 407, 410; 487 N.W.2d 784 (1992). Notice can be actual or constructive. Kastle v Clemons, 330 Mich. 28, 31; 46 N.W.2d 450 (1951).

***

• Constructive notice exists "[w]hen a person has knowledge of such facts as would lead any honest man, using ordinary caution, to make further inquiries concerning the possible rights of another in real estate, and fails to make" such inquiries. Kastle, supra at 31. The relevant issues are whether the facts were sufficient to give rise to the need to make further inquiry and,if so, whether due diligence was exercised in making the inquiry. American Fed S&L Ass'n v Orenstein, 81 Mich. App. 249, 252; 265 N.W.2d 111 (1978).
  .The open, manifest, unequivocal possession of premises by a person constitutes constructive notice of that person's possible interests in the property. Kastle, supra at 31. Where the purchaser's agent has information concerning the possible interest of another, the purchaser is charged with constructive notice of the same information, id. at 32, unless the agent's interest is adverse to that of the purchaser. Bryce v Jones, 54 Mich. App. 709, 715-716; 221 N.W.2d 433 (1974), rev'd on other grounds 394 Mich. 425 (1975).

Michigan: Malloy v. Pearson, No. 222597, unpublished, 2001 Mich. App. LEXIS 294 (Mich. App. Ct. 2001):

• Notice is whatever is sufficient to direct attention of the purchaser of realty to prior rights or equities of a third party and to enable him to ascertain their nature by inquiry. Notice need only be of the possibility of the rights of another, not positive knowledge of those rights. Notice must be of such facts that would lead any honest man, using ordinary caution, to make further inquiries in the possible rights of another in the property. [Royce v Duthler, 209 Mich. App. 682, 690; 531 N.W.2d 817 (1995), quoting Schepke v Dep't of Natural Resources, 186 Mich. App. 532, 535; 464 N.W.2d 713 (1990)].

Minnesota: Stone v. Jetmar Props., LLC, 733 N.W.2d 480; 2007 Minn. App. LEXIS 80 (Minn. App. 2007):

• Public policy generally favors allowing a degree of reliance on the title shown in public records. See Nussbaumer v. Fetrow, 556 N.W.2d 595, 599 (Minn. App. 1996), review denied (Minn. Feb. 26, 1997) (stating policy of allowing judgment creditors to rely on record). But the reliance allowed is not absolute. A "party attempting to invoke the doctrine [of equitable estoppel] cannot be negligent and cannot have knowledge of the defect in the title." W. Concord Conservation Club, Inc. v. Chilson, 306 N.W.2d 893, 896 (Minn. 1981).
  .A prospective purchaser is obligated to discover anyone in possession of the land at issue and to "inquire into the nature and extent of the occupant's interest." Id. As a result of this obligation, the purchaser is held to have knowledge of all the "rights of the [possessor] and also of all facts connected therewith which reasonable inquiry would have developed." Claflin v. Commercial State Bank, 487 N.W.2d 242, 248 (Minn. App. 1992), review denied (Minn. Aug. 4, 1992). "In order to have status as a bona fide purchaser the mortgagee's inquiry must be directed to the person in possession; inquiry of the mortgagor, who may have reason to conceal the truth, is not sufficient." Id.

Minnesota: See Minnesota Bona Fide Purchaser, Possession, Duty Of Inquiry for a longer list of Minnesota cases.
Missouri: Obernay v. Chamberlin, 506 SW 2d 446 (Mo. 1974):

• The leading Missouri case on this subject is Drey v. Doyle, 99 Mo. 459, 12 S.W. 287, wherein the court stated: "Now from the line of former adjudications of this court it is plain to be seen that the notice which will postpone a recorded instrument, affecting real estate, to a prior unrecorded one, must be actual notice. Such notice may be shown by direct evidence, or it may be inferred from facts and circumstances. The question is one of fact, and is to be determined like any other fact. Circumstances coming to the knowledge of the subsequent purchaser, which would put a prudent person upon inquiry, should go to the jury as evidence of notice. In short any evidence tending to show knowledge of the prior unrecorded instrument should be received as evidence of notice. The inference to be drawn from the facts and circumstances is one of fact and not of law.Possession and knowledge thereof will, in ordinary cases, be good proof of notice of the title under which the party in possession claims. Such evidence, under other circumstances, will be of little value."The Missouri cases on this subject are treated at length in an article on possession as notice, appearing in 16 Mo.L.Rev. 142 (April, 1951).

Missouri: Hayward v. Arnold, 779 SW 2d 342 (Mo. App. W.D. 1989):

• Furthermore, the purchaser of the property takes subject to the rights of anyone in actual possession. Karsznia v. Kelsey, 262 S.W.2d 844, 846 (Mo.1953); Hallauer v. Lackey, 188 S.W.2d 30, 34 (Mo. 1945); Woodbury v. Connecticut Mutual Life Insurance Co., 166 S.W.2d 552, 554-55 (Mo.1942); Langford v. Welton, 48 S.W.2d 860, 863 (Mo.1932); Ballenger v. Windes, 99 S.W.2d 158, 159 (Mo.App.1936). A purchaser may not plead lack of notice of the claims of an occupant.

Missouri: Janss v. Pearman, 863 SW 2d 643 (Mo. App. S.D. 1993):

• A purchaser of real estate takes it subject to the rights of anyone in actual possession. Karsznia v. Kelsey, 262 S.W.2d 844, 846 (Mo.1953); Willett v. Centerre Bank of Branson, 792 S.W.2d 916, 919 (Mo.App.S.D.1990); Hayward v. Arnold, 779 S.W.2d 342, 345 (Mo.App.W.D.1989). A purchaser is charged with such knowledge as he could have obtained from the party in possession upon reasonable inquiry. Hallauer v. Lackey, 353 Mo. 1244, 188 S.W.2d 30, 34 (1945); Woodbury v. Connecticut Mutual Life Ins. Co., 350 Mo. 527, 166 S.W.2d 552, 555 (1942).

Missouri: Hart v. Parrish, 244 SW 2d 105 (Mo. 1951):

• Plaintiff Hart was familiar with property and knew defendant-respondent Lillian Parrish, widow of Charles H. Parrish, was in possession, "living on the property." In these circumstances, it should not be held Mittler had no notice of the fraud upon which defendant Lillian has relied for cancellation.

Missouri: Hatcher v. Hall, 292 SW 2d 619 (Mo. App. S.D. 1956):

• It is true that, as our courts have reiterated many times, notice is regarded in law as actual where the person sought to be charged therewith either knows of the existence of the particular fact in question or is conscious of having the means of knowing it, even though such means may not be employed by him;[12] and that, since notice does not mean positive information brought directly home to the person sought to be affected thereby, whatever fairly is sufficient to put an ordinarily prudent person on inquiry constitutes notice to him of such facts as would be disclosed by reasonable pursuit and proper inquiry.[13]
  .
  For, justice is not so indulgent as to encourage one to shut his eyes to circumstances which would excite the zetetic impulse in an ordinarily prudent individual [Drey v. Doyle, 99 Mo. 459, 469, 12 S.W. 287, 289] or to throw away the key to the door of exploration through which the facts reasonably might be ascertained [Barrett v. Davis, 104 Mo. 549, 561, 16 S.W. 377, 380; James v. Hutchinson, Mo.App., 211 S.W.2d 507, 511]; and, from early times, our courts "have always recognized that the still small voice of suggestion, emanating as it will from contiguous facts and surrounding circumstances, pregnant with inference and provocative of inquiry, is as potent to impart notice as a presidential proclamation, or an army with banners." Connecticut Mut. Life Ins. Co. v. Smith, 117 Mo. 261, 292-293, 22 S.W. 623, 629; Adams v. Gossom, 228 Mo. 566, 583, 129 S.W. 16, 21.
  .
  However, one is put on inquiry and charged with notice of the facts which would be disclosed thereby, only when "`the inquiry becomes a duty, and the failure to make it a negligent omission'" [Laughlin v. Findlay, 324 Mo. 1021, 1024, 25 S.W.2d 464, 465(1)];[14] or, as otherwise stated, "`(w)here there is a duty of finding out and knowing, negligent ignorance has the same effect in law as actual knowledge.'"[15]
  .
  Whether the circumstances are sufficient to give rise to a duty of further inquiry is ordinarily a question of fact[16] [at least where the evidence is conflicting or is such that more than one inference of fact might be drawn therefrom (Merrill on Notice, Vol. 1, Section 64, p. 61)], frequently fraught with appreciable difficulty and always determinable in the light of the circumstances of the particular case under consideration;[17] and whether, when one is put on inquiry, the exercise of common prudence and ordinary diligence [Edwards v. Carondelet Milling Co., 108 Mo. App. 275, 287, 83 S.W. 764, 768; Kitchen v. St. Louis, K. C. & N. Ry. Co., 69 Mo. 224, 265] in further investigation would have led to discovery of the information, knowledge of which is sought to be charged, likewise usually becomes a question of fact.[18]

Montana: Berlin v. Gaudin, Cause No. DV-04-512, Twent-First Judicial District Court Of Montana, Ravalli County, 2007 Mont. Dist. LEXIS 450 (2007):

• Bona fide purchasers receive protection under the recording statutes. However, recordation does not protect against interests, such as adverse possession, which arise by operation of law.
  ."A title depends not only upon the deeds and other writings appearing of record, but also upon a great number of facts nowhere appearing of record." (Citation omitted.) The recording acts offer no protection against forgery, prescription, adverse possession, etc. Neither do the recording acts protect against conditions and rights revealable by a personal inspection of the property, and, accordingly, an inspection is an essential part of title examination.
  .
  The inspection should ascertain (1) physical conditions and (2) unrecorded rights of parties in occupation. Milton R. Friedman, Friedman on Contracts, § 9:7, vol. II, (7th ed., Practising Law Institute, 2007). (Emphasis added.) "When there appears possession of land by persons other than the record holder, which possession is inconsistent with the record title, there is a duty of inquiry imposed upon a purchaser of that land." Rase v. Castle Mountain Ranch, Inc. (1981), 193 Mont. 209, 219, 631 P.2d 680, 685.

Nebraska: 3's Lounge Inc. v. Tierney, 16 Neb. App. 64; 741 N.W.2d 687 (Ct. App. 2007):

• Possession of the land is notice to the world of the possessor's rights therein and of all possessory interests of which inquiry of the possessor would elicit knowledge. Grand Island Hotel Corp. v. Second Island Development Co., 191 Neb. 98, 214 N.W.2d 253 (1974). Had Frank inquired into the status of 3's Lounge's interest, he would have easily discovered that 3's Lounge held an option to purchase the disputed property.

New Hampshire: Manchester Vickerry Realty Co. Trust v. 777 S. Willow St. Plaza L.P., 01-5043-C , 2004 Mass. Super. LEXIS 592, Superior Court of Massachusetts, At Middlesex (2004) - (a Massachusetts state court decision interpreting and applying New Hampshire law):

• According to the statute, a purchaser or lessee possesses the senior claim if he or she records without notice of a prior unrecorded interest. Amoskeag Bank, 133 N.H. [11, 14, 572 A.2d 1153 (1990)]. Knowledge of a prior unrecorded interest, however, can subjugate a subsequent purchaser or lessee's seniority in the chain of title. Id. Under New Hampshire law, a subsequent lessee cannot have the senior claim to real estate if he or she has actual notice of a prior interest at the time the subsequent claim is recorded, even if no recording of the prior interest is made. Id.; see also Rogers v. Jones, 8 N.H. 264 (1836) (unrecorded deed is good against purchasers with notice).
  .New Hampshire case law also recognizes that one may be charged with constructive knowledge of a prior interest in real estate where reason exists for a party to inquire. See Janvrin v. Janvrin, 60 N.H. 169, 172-73 (1880); see also Sawin v. Carr, 114 N.H. 462, 464, 323 A.2d 924 (1974) (obligation to investigate arose from the fact that the third party claiming interest occupied the premises). Failure to inquire can defeat one's claim to the real estate. Sawin, 114 N.H. at 466-67 (where plaintiffs had been in possession of property for nearly four years, had made substantial improvements thereon, and were in possession when subsequent purchaser bought the property, subsequent purchaser had a duty to inquire and was chargeable with notice of what he might have learned on examination).

New Jersey: I.E.'s, L.L.C. v. Simmons, 392 N.J. Super. 520; 921 A.2d 483; 2006 N.J. Super. Lexis 352 (Superior Court Of New Jersey, Law Division, Middlesex County, 2006):

• New Jersey law has long recognized that a bona fide purchaser for value of real estate who purchases the property knowing others are in possession of the property has a duty to make reasonable and diligent inquiry of the rights to the property by those in possession. Hinners v. Banville, 114 N.J. Eq. 348, 168 A. 618 (E. & A.1933). Hinners is a mortgage foreclosure case where owners were served by publication. The property was sold at a sheriff's sale and then purportedly sold to a bona fide purchaser for value. The sale to the bona fide purchaser for value was set aside since the family was in possession of the property, and the court held that the bona fide purchaser for value had a duty to make a reasonable investigation of the rights of the party in possession. Id. at 356-57, 168 A. 618. See also, Michalski v. U.S., 49 N.J. Super. 104, 108-09, 139 A.2d 324 (Ch.Div.1958).

New Jersey: See New Jersey Bona Fide Purchaser, Possession, Duty Of Inquiry for a longer list of New Jersey cases.
New York: Phelan v. Brady (try here for Google version), 119 N.Y. 587; 23 N.E. 1109; (NY 1890):

• Actual possession of real estate is sufficient notice to a person proposing to take a mortgage on the property, and to all the world of the existence of any right which the person in possession is able to establish. [citations omitted].

New York: Doyle v. Siddo, 31 A.D.3d 697, 818 N.Y.S.2d 474, 2006 N.Y. App. Div. LEXIS 9569 (N.Y. App. Div. 2d Dep't, 2006): In affirming a denial of a motion to dismiss, the New York appellate court stated that the complaint filed in this action against one Tibbert, a subsequent purchaser of real property:

• alleged that the plaintiff openly possessed and occupied the subject premises pursuant to a claim of equitable ownership prior to Tibert's purchase.
  .Accordingly, Tibert may have had a duty to inquire with regard to the plaintiff's possession, such that he would not be considered a bona fide purchaser for value who is entitled to the protections of Real Property Law § 291 (see Phelan v Brady, 119 NY 587, 591-592, 23 NE 1109 [1890]; Webster v Ragona, 7 AD3d 850, 854-855, 776 NYS2d 347 [2004]; Vitale v Pinto, 118 AD2d 774, 776, 500 NYS2d 283 [1986]).

New York: Ward v. Ward, 52 A.D.3d 919; 859 N.Y.S.2d 774; 2008 N.Y. App. Div. LEXIS 4816 (App. Div. 3d Dept. 2008):

• Whether a party has actual or inquiry notice of a competing interest is a relevant consideration in determining if that party is a bona fide purchaser entitled to the protection of the recording act (see Ithaca Assoc. Co. v Plataniotis, 274 AD2d 640, 642, 710 N.Y.S.2d 688 [2000]; Tompkins County Trust Co. v Talandis, 261 AD2d 808, 810, 690 N.Y.S.2d 330 [1999], lv dismissed 93 NY2d 1041, 719 N.E.2d 930, 697 N.Y.S.2d 569 [1999]; see also Real Property Law § 291).
  .A party will be deemed to have inquiry notice when it had "'knowledge of facts that would lead a reasonably prudent purchaser to make inquiry'" (Morrocoy Mar. v Altengarten, 120 AD2d 500, 500, 501 N.Y.S.2d 701 [1986], quoting 1 Warren's Weed, New York Real Property, Bona Fide Purchaser §1.05, at 357).
  .Notably, "'actual possession of real estate is notice to all the world of the existence of any right which the person in possession is able to establish'" if such possession is inconsistent with the title of the apparent owner of record (Wardell v Older, 70 AD2d 1008, 1009, 418 N.Y.S.2d 196 [1979], quoting Ehrlich v Hollingshead, 275 App Div 742, 743, 87 N.Y.S.2d 682 [1949]).

New York: 1426 46 St., LLC v. Klein, 60 A.D.3d 740; 876 N.Y.S.2d 425 (App. Div. 2nd Dept. 2009):

• Furthermore, the court should not have determined, as a matter of law, that the lease was void as against Horowitz, who purchased the premises at the foreclosure sale, because it was unrecorded. Although a lease for a term exceeding three years is a conveyance which may be recorded (see Real Property Law § 290[2]), an unrecorded conveyance is void only as against a subsequent good faith purchaser for value (see Real Property Law § 291).
  .Moreover, "[a]ctual possession of real estate is sufficient notice . . . to all the world, of the existence of any right which the person in possession is able to establish" (Phelan v Brady, 119 NY 587, 591-592, 23 N.E. 1109; see Ward v Ward, 52 AD3d 919, 921, 859 N.Y.S.2d 774; Nethaway v Bosch, 199 AD2d 654, 605 N.Y.S.2d 135). Here, in support of its motion for summary judgment, the plaintiff offered no evidentiary proof that its predecessor-in-title, Horowitz, was a good faith purchaser who took title without actual or constructive notice of the defendants' unrecorded lease interest.

North Carolina: Morehead v. Harris, 262 N.C. 330; 137 S.E.2d 174 (1964):

• "A person is an 'innocent purchaser' when he purchases without notice, actual or constructive, of any infirmity, and pays valuable consideration and acts in good faith." Lockridge v. Smith, 206 N.C. 174, 173 S.E. 36.

***

• The burden of proof of the "innocent purchaser" issue is upon those claiming the benefit of this principle -- in this case the defendants Price. Hughes v. Fields, 168 N.C. 520, 84 S.E. 804; Lumber Co. v. Trading Co., 163 N.C. 314, 79 S.E. 627; Cox v. Wall, 132 N.C. 730, 44 S.E. 635.

North Carolina: Perkins v. Langdon, 237 N.C. 159; 74 S.E.2d 634 (1953):

• Actual possession is treated as the equivalent of notice to the purchaser and as a substitute for registration. Webber v. Taylor, 55 N.C. 9; Edwards v. Thompson, 71 N.C. 177; Tankard v. Tankard, 79 N.C. 54; Heyer v. Beatty, 83 N.C. 285; Bost v. Setzer, 87 N.C. 187; Johnson v. Hauser, 88 N.C. 388; Staton v. Davenport, 95 N.C. 11; Mayo v. Leggett, 96 N.C. 237, 1 S.E. 622. See also Allen v. Bolen, 114 N.C. 560, 18 S.E. 964; 51 C.J.S., Landlord and Tenant, Sec. 258; Raisin v. Shoemaker, supra; Eckman v. Beihl, 116 N.J. 308, 184 A. 430; Huddleston v. Ward (Ohio), 68 N.E. 2d 580; 39 Am. Jur., Notice and Notices, Sec. 18; Annotation, 74 A.L.R. 355.

North Carolina: Smith v. Fuller, 152 N.C. 7; 67 S.E. 48 (1910), in which the court [alteration added]:

• Conced[es] the soundness of the principle established by the decided weight of authority, that possession by a person other than the vendor, when such possession is open, notorious and exclusive, puts a purchaser upon inquiry and is notice of every fact which he could have learned by proper inquiry (as held by this Court in Edwards v. Thompson, 71 N.C. 177; Staton v. Davenport, 95 N.C. 11; Tankard v. Tankard, 79 N.C. 54; ibid., 84 N.C. 286; Bost v. Setzer, 87 N.C. 187; Johnson v. Hauser, 88 N.C. 388; Mfg. Co. v. Hendricks, 106 N.C. 485, 11 S.E. 568; Patterson v. Mills, 121 N.C. 258, 28 S.E. 368), [...]

North Carolina: Tankard v. Tankard, 79 N.C. 54 (1878):

• Open, notorious, and exclusive possession puts a purchaser upon inquiry, and is notice of every fact which he could have learned by inquiry.

Ohio: Bishop v. Rice, 2006 Ohio 1131; 2006 Ohio App. LEXIS 1030 (Ohio App. Ct., 2nd Dist. 2006): In ruling against one, Rice, a person in possession of real estate under a oral land contract with the owner, one Speakman, and involving a subsequent purchaser, Bishop, the court stated:

• The proper inquiry is whether a vendee in possession under an oral land contract has any enforceable rights as against a subsequent purchaser who buys the property from the vendor with knowledge of the vendee's possession but without knowledge of the oral land contract. The answer to this question is found in R.C. § 5301.25(A), which provides that an unrecorded land contract is "fraudulent, so far as relates to a subsequent bona fide purchaser having, at the time of purchase, no knowledge of the existence of such * * * land contract[.]"
  .Because Rice's land contract with Speakman was oral, it necessarily was unrecorded. Moreover, the record contains no evidence that Bishop knew of the land contract before she purchased the Pinnacle Road property. She testified that she merely had seen Rice's trucks there. Although it might be argued that Bishop's observation of the trucks imposed on her some duty to inquire into the circumstances surrounding their presence, the language of R.C. § 5301.25(A) provides otherwise.
  .Under the statute, an unrecorded land contract is fraudulent as to a subsequent purchaser who has no knowledge of it. When an interest in land is unrecorded, the knowledge referred to in R.C. §5301.25(A) is actual knowledge at the time of purchase. Inquiry notice is insufficient. Montgomery County Treasurer v. Gray, Montgomery App. No. 20254, 2004 Ohio 2729, at P20-21; see also Emrick v. Multicon Builders, Inc. (1991), 57 Ohio St.3d 107, 109, 566 N.E.2d 1189, quoting Varwig v. Cleveland, Cincinnati, Chicago & St. Louis R.R. Co. (1896), 54 Ohio St. 455, 468, 44 N.E. 92 ("'Where it appears that the party was a purchaser for value it is not a defense in support of a claim based on an unrecorded deed to show that he took title under circumstances which ought to have excited apprehension and inquiry in the mind of a prudent and reasonable man. No other view will give effect to the statute. Its words make the absence of knowledge of the release at the time of the purchase the test; not absence of that which might induce inquiry.'").
  .Given that Rice's oral land contract must be treated as fraudulent under R.C. § 5301.25(A), we conclude that he has no enforceable rights or interest in the Pinnacle Road property as against Bishop, a bona fide purchaser who took without knowledge of the land contract.

Ohio: ABN AMRO Mortg. Group, Inc. v. Roush, 2005 Ohio 1763 (Ct. App, 10th Dist., 2005):

• Pursuant to R.C. 5301.25, "a bona fide purchaser for value is bound by an encumbrance upon land only if he has constructive or actual knowledge of the encumbrance." Emrick v. Multicon Builders, Inc. (1991), 57 Ohio St.3d 107, 109, 566 N.E.2d 1189 quoting Tiller v. Hinton (1985), 19 Ohio St.3d 66, 68, 19 OBR 63, 65, 482 N.E.2d 946, 949.
  .Actual notice is "such notice as is positively proved to have been given to a party directly and personally, or such as he is presumed to have received personally because the evidence within his knowledge was sufficient to put him upon inquiry." Black's Law Dictionary, (6 Ed.Rev. 1990) 1061. "Constructive notice may be afforded by a recorded instrument by lis pendens, and by knowledge of circumstances sufficient to awaken suspicion and put the purchaser on inquiry." 41 Ohio Jurisprudence 3d § 78. We have previously held that a "good faith mortgagee is charged with constructive notice only of the rights of the person in possession and the rights of persons claiming an interest under a duly recorded instrument." Mellon Natl. Mortgage Co. of Ohio v. Jones (1977), 54 Ohio App. 2d 45, 374 N.E.2d 666, This " 'notice is gained either from public records of the county or actual knowledge thereof.' " Id. at 49 citing Standard Oil Co. v. Moon (1930), 34 Ohio App. 123, 8 Ohio Law Abs. 230, 170 N.E. 368, 31 Ohio L. Rep. 239.
  .R.C. 5301.25, Ohio's recording statute, provides in relevant part: All deeds, land contracts referred to in division (A)(2)(b) of section 317.08 of the Revised Code, and instruments of writing properly executed for the conveyance or encumbrance of lands, tenements, or hereditaments, other than as provided in division (C) of this section and section 5301.23 of the Revised Code, shall be recorded in the office of the county recorder of the county in which the premises are situated. Until so recorded or filed for record, they are fraudulent insofar as they relate to a subsequent bona fide purchaser having, at the time of purchase, no knowledge of the existence of that former deed, land contract, or instrument.
  .Applying the foregoing, appellant asserts that appellee had constructive notice of her life estate interest as a result of her possession of the property. In support, appellant references her affidavit, in which she asserts she has resided at the property since she took possession in 1995. Further, appellant argues "the world was required to take notice of [her] possession of the real property and in turn engage in a diligent search as to Appellant Roush's interest." (Appellant's Brief at 19.)
  .Appellant further argues that appellee had constructive notice of her interest in the property as a result of the Roush lawsuit. She argues that appellee had a duty to apprise itself in detail as to the disposition of the Roush lawsuit. Without citing any supporting authority, appellant asserts "it is simply not reasonable diligence of a mortgagee or purchaser to simply witness that litigation against a potential borrower no longer remains pending." n4 (Appellant's Brief at 21.)

***

• Appellee asserts that the trial court correctly relied upon Bank of N.Y v. Stambaugh, Trumbull App. No. 2002-T-0184, 2003 Ohio 6416 at P16, in which the Eleventh Appellate District found a party receiving a property interest was required to comply with the recording requirements of R.C. 5301.23 and 5301.25. We agree.
  .In Spring Lakes Ltd. v. O.F.M. Co. (1984), 12 Ohio St.3d 333, 12 Ohio B. 431, 467 N.E.2d 537, the Supreme Court of Ohio held that "in order for a purchaser of real property to be charged with constructive notice of an encumbrance contained in a prior recorded instrument, the prior instrument must be recorded in the purchaser's chain of title." Id. at 336. Here, it is undisputed that appellant did not record her "reserved" life estate interest when the property was conveyed from Augustine to Roush, nor did she record a certificate of judgment after she won the Roush lawsuit, in accordance with the requirements of R.C. 5301.25. Thus, the trial court was correct in determining that appellee did not have constructive notice of appellant's interest in the property.

Ohio: Wayne Bldg. & L. Co. v. Yarborough, 11 Ohio St. 2d 195 (Oh.1967):

• In Ohio, knowledge of the payments made under a contract to purchase real estate has not been a prerequisite to notice of the vendee's rights under the contract, arising from such payments. The possession by the vendee of the lands subject to his contract has been held sufficient notice of the vendee's rights, whether or not the possession was actually known to a subsequent mortgagor. Jaeger v. Hardy, 48 Ohio St. 335, 27 N. E. 863; Ranney v. Hardy, 43 Ohio St. 157, 1 N. E. 523.
  .
  In the Jaeger case, the court declared, at page 340: "In this case, the possession of the defendant, Dixon * * * was sufficient notice of his rights under the contract * * *." In the Ranney case, the court said, at page 159, "as * * * [the mortgagee], when he loaned the money * * * knew that * * * [the vendee] was residing on the lot with his family, he was charged with knowledge of the terms and conditions upon which such possession was held."
  .
  Therefore, in the instant cases this court holds that notice to Wayne of an outstanding contract to purchase the subject premises was sufficient notice of the equities of the Lantzes under such contract.

Pennsylvania: Mid-State Bank & Trust Co. v. Globalnet Int’l, Inc., 735 A.2d 79, 85 (Pa. 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).

Pennsylvania: For a longer list of Pennsylvania cases, see:

• Pennsylvania Bona Fide Purchaser, Possession, Duty To Inquire,
• Pennsylvania Bona Fide Purchaser, Possession, Duty To Inquire - Federal Cases.

Texas: Madison v. Gordon, 39 S.W.3d 604; 2001 Tex. LEXIS 5; 44 Tex. Sup. J. 410, (Tex. 2001):

• Status as a bona fide purchaser is an affirmative defense to a title dispute. See Cooksey v. Sinder, 682 S.W.2d 252, 253 (Tex. 1984) (per curiam). A bona fide purchaser is not subject to certain claims or defenses. See Carter v. Converse, 550 S.W.2d 322, 329 (Tex. Civ. App.--Tyler 1977, writ ref'd n.r.e.). To receive this special protection, one must acquire property in good faith, for value, and without notice of any third-party claim or interest. Houston Oil Co. v. Hayden, 104 Tex. 175, 135 S.W. 1149, 1152 (Tex. 1911); Carter, 550 S.W.2d at 329.
  .Notice may be constructive or actual. Flack v. First Nat'l Bank, 148 Tex. 495, 226 S.W.2d 628, 631 (Tex. 1950); American Surety Co. v. Bache, 82 S.W.2d 181, 183 (Tex. Civ. App.--Fort Worth 1935, writ ref'd). Actual notice rests on personal information or knowledge. Flack, 226 S.W.2d at 631. Constructive notice is notice the law imputes to a person not having personal information or knowledge. Flack, 226 S.W.2d at 632.
  .One purchasing land may be charged with constructive notice of an occupant's claims. This implied-notice doctrine applies if a court determines that the purchaser has a duty to ascertain the rights of a third-party possessor. See Collum v. Sanger Bros., 98 Tex. 162, 82 S.W. 459, 460 (Tex. 1904); American Surety Co., 82 S.W.2d at 183. When this duty arises, the purchaser is charged with notice of all the occupant's claims the purchaser might have reasonably discovered on proper inquiry. Dixon v. Cargill, 104 S.W.2d 101, 102 (Tex. Civ. App.--Eastland 1937, writ ref'd); see also Flack, 226 S.W.2d at 632.
  .The duty arises, however, only if the possession is visible, open, exclusive, and unequivocal. See Strong v. Strong, 128 Tex. 470, 98 S.W.2d 346, 350 (Tex. 1936) (holding claimant residing as "a member of [the record title-owner's] family" was not open or exclusive); see also Shaver v. National Title & Abstract Co., 361 S.W.2d 867, 869 (Tex. 1962) (holding buried pipeline not "visible"); Paris Grocer Co. v. Burks, 101 Tex. 106, 105 S.W. 174, 176 (Tex. 1907) (holding severed portion of a tract of land, though fenced off, was "too uncertain and equivocal" to give purchaser notice); Boyd v. Orr, 170 S.W.2d 829, 834 (Tex. Civ. App.--Texarkana 1943, writ ref'd) (holding minor children's occupancy in mother's homestead was "not the character of possession as would constitute constructive notice"); De Guerin v. Jackson, 50 S.W.2d 443, 448 (Tex. Civ. App.--Texarkana 1932) (holding there was no "visible" circumstance pointing to claimant as possessor of field and noting that "all authorities agree" that the possession must be "open, visible, and unequivocal" to impute notice to a potential purchaser),aff'd, 124 Tex. 424, 77 S.W.2d 1041 (Tex. 1935).
  .In Strong, we described the kind of possession sufficient to give constructive notice as "consisting of open, visible, and unequivocal acts of occupancy in their nature referable to exclusive dominion over the property, sufficient upon observation to put an intending purchaser on inquiry as to the rights of such possessor." Strong, 98 S.W.2d at 350. Possession that meets these requirements--visible, open, exclusive, and unequivocal possession--affords notice of title equivalent to the constructive notice deed registration affords. Strong, 98 S.W.2d at 348. However, we also held that "ambiguous or equivocal possession which may appear subservient or attributable to the possession of the holder of the legal title is not sufficiently indicative of ownership to impute notice as a matter of law of the unrecorded rights of such possessor." Strong, 98 S.W.2d at 350.

Texas: Cohen v. Hawkins, NO. 14-07-00043-CV, 2008 Tex. App. LEXIS 2647 (Tex. App. Houston [14th Dist] 2008, pet. denied): The court, in footnote 6, described a purchaser's duty to inquire of those in possession of the subject real estate:

• A purchaser of land is charged with constructive notice of all claims of a party in possession of the property that the purchaser might have discovered had he made proper inquiry. Apex Fin. Corp. v. Garza, 155 S.W.3d 230, 234 (Tex. App.--Dallas 2004, pet. denied); see also Madison, 39 S.W.3d at 606. More specifically, possession by a third party requires that the purchaser make such inquiries as a reasonable person would, and the failure to make such inquiries charges the purchaser with knowledge of the claims and facts such inquiry would have revealed. See Collum v. Sanger Bros., 98 Tex. 162, 82 S.W. 459, 460 (1904); Aldridge v. N.E. I.S.D., 428 S.W.2d 447, 449 (Tex. Civ. App.--San Antonio 1968, writ ref'd n.r.e.); Astin v. Martin, 289 S.W. 442, 444 (Tex. Civ. App.--Austin), rev'd on other grounds, 295 S.W. 584 (1926).

Texas: Fletcher v. Minton, 217 S.W.3d 755; 2007 Tex. App. LEXIS 2225 (Tex. App. - Dallas 2007):

• The Texas Property Code provides for the recording of real property transfers and limits the validity of unrecorded instruments as follows:
  .(a) A conveyance of real property . . . is void as to a creditor or to a subsequent purchaser for a valuable consideration without notice unless the instrument has been acknowledged, sworn to, or proved and filed for the record as required by law.
  .(b) The unrecorded instrument is binding . . . on a subsequent purchaser who does not pay a valuable consideration or who has notice of the instrument. TEX. PROP. CODE ANN. § 13.001 (Vernon 2006). Thus, an unrecorded conveyance is binding on those who have knowledge of the conveyance. Burris v. McDougald, 832 S.W.2d 707, 709 (Tex. App.-Corpus Christi 1992, no writ). A person who acquires property in good faith, for value, and without notice of any third-party claim or interest is a bona fide purchaser. Status as a bona fide purchaser is an affirmative defense to a title dispute. Madison v. Gordon, 39 S.W.3d 604, 606, 44 Tex. Sup. Ct. J. 410 (Tex.2001).
  .Notice will defeat the protection otherwise afforded a bona fide purchaser. City of Richland Hills v. Bertelsen, 724 S.W.2d 428, 429 (Tex.App.-Fort Worth 1987, no writ). "Notice" is broadly defined as information concerning a fact actually communicated to a person, derived by him from a proper source, or presumed by law to have been acquired. Flack v. First Nat'l Bank, 148 Tex. 495, 226 S.W.2d 628, 631 (Tex.1950). Notice may be actual or constructive. Id. Actual notice results from personal information or knowledge, as well as those facts which reasonable inquiry would have disclosed. Constructive notice is notice the law imputes to a person not having personal information or knowledge. Madison, 39 S.W.3d at 606; Flack, 226 S.W.2d at 631-632.
  .A purchaser of land is charged with constructive notice of all claims of a party in possession of the property that the purchaser might have discovered had he made proper inquiry. Apex Fin. Corp. v. Garza, 155 S.W.3d 230, 234 (Tex.App.-Dallas 2004, pet. denied). This duty to ascertain the rights of a party in possession of the property arises when the possession is open, visible, exclusive, and unequivocal. Id. see also, Madison, 39 S.W.3d at 606.

Texas: Bank of Am., N.A. v. Schwartz (In re Hayes), 194 Fed. Appx. 217; 2006 U.S. App. LEXIS 21139 (5th Cir. 2006) (affirming In re Hayes, Case # SA-03-CA-1228, 2004 WL 2926006 (W.D. Tex. San Antonio Div. 2004)): A Federal appeals court ruling that concluded that a homebuyer's equitable title to a purchased home in an arrangement where no deed was recorded was found to have priority under Texas law over a mortgage loan subsequently placed on the property by the seller after the sale to the homebuyer (the lower court's 23-page ruling in In re Hayes gives an extensive analysis on the Texas law involving the effect of the bona fide purchaser doctrine to subsequent purchasers and mortgage lenders where one is in possession of land under an unrecorded instrument and how it was applied to the facts in this case).

Virginia: Brooks v. Lum, Case No. (Chancery) 00-13, 52 Va. Cir. 390; 2000 Va. Cir. LEXIS 301; Circuit Court of the City Of Winchester, Virginia (2000):

• When the purchaser has actual knowledge that there are persons in possession of the property being purchased who dispute the seller's title, he has a duty to inquire about the circumstances of that possession. Ely v. Johnson, 114 Va. 31, 75 S.E. 748 (1912) (purchaser on notice as to possession and use of land by another).
  .As stated in 58 Am. Jur. 2d, Notice, § 21: Possession of land is notice to the world of every legal or equitable right that the possessor has therein. It is a fact putting all persons on inquiry as to the nature of the occupant's claims, as well as the claims under whom he occupies.
  ."Under the [recording] statute, only purchasers without notice can take advantage of a failure to record." National Mutual Building & Loan Association v. Blair, 98 Va. 490, 498, 36 S.E. 513. "Such a failure cannot affect a purchaser who has actual notice." Chavis v. Gibbs, 198 Va. 379, 383, 94 S.E.2d 195 (1956). In Chavis v. Gibbs, 198 Va. 379, 385, 94 S.E.2d 195 (1956), the Supreme Court stated "whatever fairly puts a person on inquiry is sufficient notice where the means of knowledge are at hand; and if he omits to inquire, he is then chargeable with all the facts which, by a proper inquiry, he might have ascertained."

Wisconsin: Anderson v. Quinn, 2007 WI App 260; 306 Wis. 2d 686; 743 N.W.2d 492; 2007 Wisc. App. LEXIS 1020, (Wis. Ct. App. 2007):

• Notice here is governed by WIS. STAT. § 706.09(2): A purchaser has notice of a prior outstanding claim or interest, within the meaning of this section wherever, at the time such purchaser's interest arises in law or equity:….(a) … Such purchaser has affirmative notice apart from the record of the existence of such prior outstanding claim, including notice, actual or constructive, arising from use or occupancy of the real estate by any person at the time such purchaser's interest therein arises, whether or not such use or occupancy is exclusive; but no constructive notice shall be deemed to arise from use or occupancy unless due and diligent inquiry of persons using or occupying such real estate would, under the circumstances, reasonably have disclosed such prior outstanding interest; nor unless such use or occupancy is actual, visible, open and notorious….
  .Under this statute, actual or constructive notice of a claim can arise from use (1) "by any person" (2) "at the time … the purchaser's … interest arises," (3) "whether or not [the] use … is exclusive…." WIS. STAT. § 706.09(2). In addition, constructive notice of a claim can exist only if: (1) diligent inquiry of persons using the land would have revealed the claimed interest, and (2) the use is "actual, visible, open and notorious…." Id.

Wisconsin: Hoey Outdoor Adver. v. Ricci, 2002 WI App 231; 256 Wis. 2d 347; 653 N.W.2d 763; 2002 Wisc. App. LEXIS 421 (Ct. App. 2002):

• The applicable statute is Wis. Stat. § 706.09, which provides in part:
  .(1) [...], (2) Notice of prior claim. A purchaser has notice of a prior outstanding claim or interest, within the meaning of this section wherever, at the time such purchaser's interest arises in law or equity:
  .(a) Affirmative notice. Such purchaser has affirmative notice apart from the record of the existence of such prior outstanding claim, including notice, actual or constructive, arising from use or occupancy of the real estate by any person at the time such purchaser's interest therein arises, whether or not such use or occupancy is exclusive; but no constructive notice shall be deemed to arise from use or occupancy unless due and diligent inquiry of persons using or occupying such real estate would, under the circumstances, reasonably have disclosed such prior outstanding interest; nor unless such use or occupancy is actual, visible, open and notorious.

***********************

(1) See:

• 1-28-09: Lack Of Knowledge Or Partcipation In Fraud Not Enough To Sustain Bona Fide Purchaser Status In Equity Stripping, Foreclosure Rescue Deal;
• 1-26-09: Faulty Service Of Process In Tax Foreclosure, Failure To Investigate Rights Of Persons In Possession Leaves Unwitting Buyer Empty Handed.

See also: The Home Equity Theft Reporter, 1-29-09: NY AG Probe Targets Upstate Sale-Leaseback Foreclosure Rescue Operator, Says Firm's Lawyer; Company's Ch. 11 Bankruptcy Filing Dismissed. InquiryNoticePossessionBFP