The following compilation of cases from the Court of Appeals of the state of New York (the state's highest court) address, either directly or tangentially, the issue of the effect of possession by an occupant of real property by one other than the seller/vendor on a prospective purchaser's status as a bona fide purchaser.
These cases are presented here to remind the reader of the importance of giving this issue the serious consideration it deserves when attempting to undo/unwind/void an abusive real estate transaction (ie. foreclosure rescue sale leasebacks, fraudulent inducement in the execution of a deed, forgeries, other real estate swindles) where, after scamming or otherwise abusively relieving an unwitting homeowner of his/her title, the scammer either sells the property to an unwitting third party, or encumbers the property with a loan from an unwitting mortgage lender, neither of whom participated in the abusive transaction with the homeowner, nor having any actual knowledge thereof.
Voiding or setting aside the deeds and mortgages in these cases (in situations where the instruments are voidable, as opposed to being absolutely void - "void ab initio") will turn on whether the subsequent third party purchaser or encumbrancer, despite lacking in actual knowledge of the fraud or other abusive transaction, can otherwise be charged with notice of the fraud, thereby disqualifying the subsequent purchaser or encumbrancer from bona fide purchaser/encumbrancer status and, consequently, subjecting the deeds or mortgages to possibly being voided/rescinded/set aside.
This case law compilation represents raw research only, and certainly does not purport 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.
I post it, however, with the view that some readers may find a part of the contents a helpful starting point for additional legal research in an effort to void certain abusive real estate transactions involving unwitting, financially strapped homeowners who have been screwed out of the equity in their homes by unscrupulous real estate operators.
See Effect Of Persons In Possession Of Real Estate Other Than The Owner/Vendor On A Buyer's Status As A Bona Fide Purchaser - NY State Court Cases for a compilation of the full court rulings for these and other New York cases on this issue.
For other states, generally, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.
See the National Consumer Law Center's Dreams Foreclosed: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams for an extensive review of one type of home equity ripoff to which the bona fide purchaser doctrine may apply.
See Foreclosure Rescue Scams (a chapter in a longer publication from the National Consumer Law Center) for a lawyer's guide to making a case on behalf of a victimized homeowner in attempting to void or set aside an abusive transaction.
Sweet v Henry, 175 N.Y. 268, 67 N.E. 574 (N.Y. 1903) (beginning at pg.20 of this case compilation):
- The rule of law is well settled that a recital in a deed forming a link in the chain of title of any facts which should put a subsequent grantee or mortgagee upon inquiry and to cause him to examine other matters by which a defect in the title would be disclosed, is constructive notice of such defect.
Where a purchaser of land has knowledge of any facts sufficient to put him on inquiry as to the existence of some right or some title in conflict with that which he is about to acquire, he is presumed either to have made the inquiry and ascertained the extent of such prior right, or to have been guilty of a degree of negligence equally fatal to his claim to be considered as a bona fide purchaser. ( Acer v. Westcott, 46 N. Y. 384; Williamson v. Brown, 15 N. Y. 354; McPherson v. Rollins, 107 N. Y. 316; Anderson v. Blood, 152 N. Y. 285.)
Phelan v Brady, 119 N.Y. 587 (N.Y. 1890):
- At the time of the execution and delivery of the mortgage to the plaintiff, the defendant Mrs. Brady was in the actual possession of the premises under a perfectly valid but unrecorded deed. Her title must, therefore, prevail as against the plaintiff.
It matters not, so far as Mrs. Brady is concerned, that the plaintiff in good faith advanced his money upon an apparently perfect record title of the defendant John E. Murphy. Nor is it of any consequence, so far as this question is concerned, whether the plaintiff was in fact ignorant of any right or claim of Mrs. Brady to the premises. It is enough that she was in possession under her deed and the contract of purchase, as that fact operated in law as notice to the plaintiff of all her rights.
It may be true, as has been argued by the plaintiff's counsel, that when a party takes a conveyance of property situated as this was, occupied by numerous tenants, it would be inconvenient and difficult for him to ascertain the rights or interests that are claimed by all or any of them. But this circumstance cannot change the rule.
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. ( Governeur v. Lynch, 2 Paige, 300; Bank of Orleans v. Flagg, 3 Barb. 318; Moyer v. Hinman, 14 N. Y. 184; Tuttle v. Jackson, 6 Wend. 213; Trustees of Union College v. Wheeler, 61 N. Y. 88, 98; Cavalli v. Allen, 57 id. 517.)
Ellis v. Horrman, 90 NY 466 (N.Y. 1882) (begins at page 69 of this case compilation):
- Notice sufficient to make it the duty of a purchaser to inquire, and failure so to do when information is easily accessible, is equivalent to actual notice within the rule of the authorities. In Williamson v. Brown (15 N.Y. 354) the rule is stated by Selden, J., at page 362, as follows: "The true doctrine on this subject is that where a purchaser has knowledge of any fact sufficient to put him on inquiry as to the existence of some right or title in conflict with that he is about to purchase, he is presumed either to have made the inquiry and ascertained the extent of such prior right, or to have been guilty of a degree of negligence equally fatal to his claim to be considered as a bona fide purchaser."
And Paige, J., in the same case states the rule as follows: "A party in possession of certain information will be chargeable with a knowledge of all facts which an inquiry suggested by such information, prosecuted with due diligence, would have disclosed to him." (Citing as authority Howard Ins. Co. v. Halsey, 4 Sandf. 565; Kennedy v. Green, 3 Mylne & K. 699.)
In 4 Sandf., supra, Duer, J., states the rule as follows: "The rule of law that must govern our decision is as inflexible as it is just, that he who is bound to inquire before the performance of an act, by which he has reason to believe that the rights of others may be affected, is chargeable with a knowledge of all the facts that an inquiry properly made would have disclosed to him."
In Flagg v. Mann et al, (2 Sumn. 486), Story, J., states the rule as follows: "If he does not inquire he is bound in the same manner as if he had inquired and had positive notice of the title of the party in possession."
In White-bread v. Jordan (1 You. & Coll. Exch. 303) the plaintiff was a London brewer, and supplied Jordan, who was a publican, with beer. It was the common practice with brewers in London to loan money to publicans whom they supplied with beer, upon a deposit of their title deeds. Jordan had deposited certain deeds with the plaintiff, pursuant to this custom. He afterward gave to one Boulnois, a wine merchant, a mortgage upon the property covered by the deeds deposited, which was duly recorded. Boulnois had notice of Jordan's debt to the plaintiff and of the existing custom between brewers and publicans, yet he made no inquiry of the brewer. Suit was brought to enforce the equitable mortgage arising from the deposit. Baron Alderson held that the notice to Boulnois was sufficient to make it his duty to inquire as to the existence of the deposit; that his not doing so was evidence of bad faith, and the plaintiff's right under his equitable mortgage was sustained.
In Kellogg v. Smith (26 N.Y. 18 at 18-21), Allen, J., in a dissenting opinion, admits the correctness of the rule stated by Judge Selden in Williamson v. Brown.
In Tuttle v. Jackson (6 Wend. 213-226), cited by the counsel for the appellant, the rule is stated by the chancellor as follows: "Whatever is sufficient to make it his duty to inquire as to the rights of others is considered legal notice to him of those rights." ( Grimstone v. Carter, 3 Paige Ch. 421; Jackson v. Post, 15 Wend. 588.)
The case of Reed et al. v. Gannon (50 N.Y. 345) would seem to be directly in point as a controlling authority in this case. The parties dealt upon the assumption that there were liens or incumbrances upon the property, but the number or extent, or character of the liens was not stated or referred to.
Rapallo, J., says "the insertion of these clauses in the instrument was sufficient to put the plaintiff on inquiry as to the extent and description of the existing incumbrances referred to. It was such notice as, in the language of the authorities, would lead any honest man using ordinary caution to make further inquiries. (1 Younge & Coll. Exch. 328.)
To deprive a party of the character of a bona fide purchaser it is not necessary in such a case to show express notice of the particular instrument. (Taylor v. Baker, 5 Price 306.) Notice of any fact calculated to put the party on inquiry is, in the absence of explanation by him, sufficient to charge him with notice of all instruments which an inquiry would have disclosed.
As we have seen, the defendant Horrman had information, which amounted to notice that the vendor had a lien upon the property for unpaid purchase-money. Having notice of the lien he was bound to inquire as to its extent and the manner by which payment of it was secured.
The most obvious and natural inquiry to be made in this case would have been of Mrs. Kleepfel, and it would have been her plain duty to have answered any inquiry which Horrman might make as to the particulars and extent of the lien referred to.
Had he inquired, there is no doubt that he would have been truly informed as to the plaintiff's mortgage, for Mrs. Kleepfel testifies that she supposed that the plaintiff's mortgage was at the time on record, and intended the defendant's lien upon the property to be subsequent to that of the plaintiff's. In failing to make such inquiry, we think the defendant must be held to have had notice of the facts which it would have disclosed had it been made. It cannot, therefore, be said of the defendant that he took his mortgage in ignorance of the plaintiff's lien upon the property in question.
We have carefully examined the numerous authorities cited by the learned counsel for the appellant, and while there are expressions by judges to be found in many cases which would seem to hold that actual notice of the particular lien was necessary in order to defeat a subsequent deed first recorded, we do not think there is any case which, in decision, is in conflict with the rule as stated by Selden, J., in Williamson v. Brown (supra). But, however that may be, there can be no doubt that the great current of authority is in harmony with the rule as there stated, and it has been too frequently approved by this court to be overruled or disregarded now.
Brown v Volkening, 64 NY 76 (N.Y. 1876) (begins at page 90 of this case compilation):
(Editor's Note: This case is an example where possession did not confer notice on a subsequent purchaser where said possession was found to be merely constructive possession, and not actual possession. It reinforces the principle that the possession which will be equivalent to notice to a subsequent purchaser must be an actual, open and visible occupation, inconsistent with the title of the apparent owner by the record; not equivocal, occasional, or for a special or temporary purpose. Constructive possession will not suffice, and consequently, did not apply in this case which involved an uninhabited and unfinished dwelling-house.) The facts follow:
1) An action was brought for the foreclosure of a mortgage given by Decker (a home builder) to lender upon a house and lot in the city of New York.
2) The answer of defendant Volkening (a mirror and tile subcontractor of Decker the home builder), who alone defended, alleged, among other things, that at the time foreclosing lender's mortgage was executed he was the equitable owner of the premises, and that before the commencement of this action the same were conveyed to him by Decker.
3) Volkening (the subcontractor) further alleged and proved that, prior to the execution of the mortgage in January, 1872, Decker, who was then building, upon the premises in question and upon adjoining lots owned by him, nineteen dwelling-houses, agreed with Volkening to sell him one of the nineteen houses, the consideration to be paid in mantels, mirrors and hall tiling to be furnished by Volkening for the nineteen houses, Decker agreeing to complete the house and deed it to Volkening on the first day of May, then next; that Volkening fully performed the agreement on his part.
4) Volkening also alleged that prior to the execution of the mortgage he had taken possession of the premises under said agreement, and that, at the time of taking his mortgage, plaintiff had full notice of all the facts and of defendant's rights and equities.
5) Upon the subject of possession the trial court found that prior to the execution of the mortgage in said complaint mentioned, said Decker had surrendered the keys of the house to said Volkening and said Volkening had entered into and had the actual and exclusive possession of the premises, and that such possession of said Volkening so continued, and at the time of the execution of said mortgage was actual and exclusive and could have been easily ascertained by the plaintiff by inquiry on said premises.
6) The trial court ruled in favor of Volkening; however the New York Court of Appeals reversed.
As its grounds for reversal. the state high court found that Volkening did not have actual possession, but merely had constructive possession, describing said possession below:
- The findings of fact by the learned judge by whom the action was tried are equivocal. Read as a whole, they only imply of necessity a constructive possession of the premises, a mere power over them by the respondent. They come far short of showing an actual use and occupation by him.
The delivery of the possession to him by Decker was symbolical, by a surrender of the keys of the house, and the actual and exclusive possession, and the expenditure of moneys in making alterations and improvements in the house as stated in the findings, must be regarded in the connection in which the statements are found, as but the continuance of that constructive possession commenced and evidenced by the delivery of the keys.
The cautious finding or statement of the judge that such possession, so continued, could have been easily ascertained by the appellant by inquiry on said premises, without indicating that there was an actual occupant of whom such inquiry could have been made, tends strongly to show that the learned judge used the word possession, as distinct from that of actual occupation, and in its strictly technical sense.
Possession means simply the owning or having a thing in one's own power; it may be actual, or it may be constructive. Actual possession exists where the thing is in the immediate occupancy of the party; constructive is that which exists in contemplation of law, without actual personal occupation.
- The testimony, viewed in its most favorable light for the respondent, shows that he did not at any time accept the house from Decker, his grantor, as finished and completed until long after the mortgage to the plaintiff; that until late in the fall he was urging Decker to complete the house as he had agreed, and complaining that it was not done, and did not accept the deed thereof until November.
The work which he did upon the house after the delivery of the keys in June, was performed by mechanics and laborers, and substantially in the execution of his agreement with Decker, for work upon the nineteen houses which Decker was building, including the one upon the mortgaged premises.
The fact that the work put upon the house in question by the respondent, was of a better character and more expensive than was put upon the other houses, or than he was bound to put upon this, did not vary the character of the act, or give any particular significance to it as affecting the plaintiff, or third persons. Whether Decker had or had not men at work upon the house during the same time may be doubtful upon the evidence, and the fact is not found.
The only possession of the respondent was by having laborers and mechanics at work upon an unfinished house, one of a block of nineteen houses, the record title to which was in Decker, and to which the respondent had no paper title, with nothing to indicate any difference in the proprietorship or the direction of the work between this house and any of the other eighteen houses.
There was no one remaining or staying permanently in the house until long after the giving of the mortgage to the plaintiff. It was an unfinished and unoccupied house.
In view of the undisputed evidence, and of the peculiar language of the findings of fact, we are constrained to hold that an actual, visible occupation of the premises by the respondent, was neither proved or found, and had the fact been so found by the judge it would have been error for which the judgment would have been reversed.
The protection which the registry law gives to those taking titles or security upon land upon the faith of the records, should not be destroyed or lost, except upon clear evidence showing a want of good faith in the party claiming their protection, and a clear equity in him who seeks to establish a right in hostility to him.
Slight circumstances, or mere conjecture, should not suffice to overthrow the title of one whose deed is first on record. The statute makes void a conveyance not recorded only as against a subsequent purchaser in good faith and for a valuable consideration. (1 R. S., 756, § 1.)
Actual notice of a prior unrecorded conveyance, or of any title, legal or equitable, to the premises, or knowledge and notice of any facts which should put a prudent man upon inquiry, impeaches the good faith of the subsequent purchaser.
There should be proof of actual notice of prior title, or prior equities, or circumstances tending to prove such prior rights, which affect the conscience of the subsequent purchaser. Actual notice, of itself, impeaches the subsequent conveyance.
Proof of circumstances, short of actual notice, which should put a prudent man upon inquiry, authorizes the court or jury to infer and find actual notice.
The character of the possession which is sufficient to put a person upon inquiry, and which will be equivalent to actual notice of rights or equities in persons other than those who have a title upon record, is very well established by an unbroken current of authority. The possession and occupation must be actual, open and visible; it must not be equivocal, occasional, or for a special or temporary purpose; neither must it be consistent with the title of the apparent owner by the record.
In Moyer v. Hinman (3 Kern., 180) the plaintiff was in actual possession of farming lands, under a contract of purchase, and that circumstance was held notice to all persons who had subsequently become interested in the premises, of all the plaintiff's rights under his contract.
De Ruyter v. The Trustees of St. Peter's Church (2 Barb. Ch., 555) was a case of actual possession and use of the premises, and such possession was held constructive notice of the rights of the occupant. Gouverneur v. Lynch (2 Paige, 300) was like Moyer v. Hinman (supra).
Chief Justice Parsons, in Norcross v. Widgery (2 Mass. 506), says: "This notice may be express, or it may be implied from the first purchaser being in the open and exclusive possession of the estate under his deed." The same doctrine is held in Colby v. Kenniston (4 N.H. 262), and both cases are cited with approval by the chancellor in Tuttle v. Jackson (6 Wend., 213).
In The Bank of Orleans v. Flagg (3 Barb. Ch., 316) it was held that the actual possession of the premises by the tenant of a purchaser was constructive notice to subsequent mortgagees of the equitable rights of such purchaser.
I have met with no case in which any thing short of actual, visible, and as is said in some cases, notorious possession of premises, has been held constructive notice of title in a claimant. (See Chesterman v. Gardner, 5 J. Ch., 29; Grinstone v. Carter, 3 Paige, 421; Cook v. Travis, 20 N.Y. 400; Webster v. Van Steenbergh, 46 Barb., 212.)
All the cases agree that notice will not be imputed to a purchaser except where it is a reasonable and just inference from the visible facts.
Neither will the principles of constructive notice apply to unimproved lands, nor to cases where the possession is ambiguous or liable to be misunderstood. ( Patten v. Moore, 32 N.H. 382.)
It should not apply within the same principle to an uninhabited and unfinished dwelling-house; there must be a possession actual and distinct, and manifested by such acts of ownership as would naturally be observed and known by others. The using of lands for pasturage or for cutting of timber is not such an occupancy as will charge a purchaser or incumbrancer with notice. ( Coleman v. Barklew, 3 Dutch., 357; McMechan v. Griffing, 3 Pick., 149; Holmes v. Stout, 10 N.J. Eq. 419; see also, Fassett v. Smith, 23 N.Y. 252.)
It cannot be said, either upon the cautious findings of the learned judge or upon the evidence, that the respondent was the open, actual occupant of the houses, either by himself or by tenants, or that there were any open, visible acts of ownership, by the respondent, of the mortgaged premises, which the public or third persons would be likely to notice, or which would suggest an inquiry into his claim, or which would evince bad faith or gross neglect should a party dealing in respect to the premises neglect to make inquiry.
Lamont v Cheshire, 65 NY 30 (N.Y. 1875) (begins at page 96 of this case compilation) (involves the effect of the filing of a lis pendens on the holder of an unrecorded interest in real estate where the party filing the lis pendens had notice of said holder's rights by reason of the latter's possession of the premises.
Observation: Two categories of foreclosure victims to whom this may affect are:
a) homeowners who have been screwed over in equity stripping/sale-leaseback foreclosure rescue scams where the victimized homeowners remained in open and exclusive possession of the premises (thereby arguably retaining unrecorded equitable rights in the premises despite no longer holding legal title to the premises) while the mortgage loan financing the scam subsequently ends up in foreclosure; and
b) tenants under unrecorded leases in homes in foreclosure where said tenants took possession prior to the filing of the lis pendens and the foreclosing mortgagee fails to name
The facts in this case are pretty detailed, but in its essence, this case has been interpreted and applied to support the proposition that while the holder of an interest in real estate acquired prior to the filing of the notice of pendency but not recorded until after the notice was filed is bound by the foreclosure judgment and sale, the title of the purchaser of the previously acquired interest is not defeated if the plaintiff knew of conveyance prior to the filing of the lis pendens.
Stated another way, the provision of the statute providing for the filing of lis pendens, making it constructive notice to a purchaser, and declaring that a purchaser whose conveyance is subsequently executed or recorded shall be a subsequent purchaser and shall be bound by the proceedings, simply affects such purchaser to the same extent as if he were made a party to the action; and the title of a purchaser so holding under a prior unrecorded conveyance, if made a party, could not, under such circumstances, be affected when plaintiff, at the time of filing notice, had actual or constructive notice of his rights.
An excerpt from the case:
- It has been seen, in the course of this discussion, that the theory of a lis pendens is that there must be no innovation
in the proceedings so as to prejudice the rights of the plaintiff. It is simply a rule to give effect to the rights ultimately
established by the decree.
Applying this doctrine to the present case, it would be impossible to claim that a lis pendens could give a creditor under an attachment a lien superior to the title of a purchaser under an unrecorded conveyance. The statute distinctly provides that a person whose conveyance is executed or recorded subsequent to the filing of a notice shall be deemed a subsequent purchaser, and bound by the proceedings to the same extent as if he were a party to the action.
It is necessary to ascertain, therefore, what would have been the effect if the defendants had been made parties to the action.
Had the plaintiff made the defendants parties to the action, his attachment proceedings would, of course, have been nugatory. As soon as the whole case had been disclosed it would have appeared that he was making a claim against a person who was in no respect liable to him, and his complaint would have been dismissed. How can he, under the statute, have any greater claims by omitting him? The words "to the same extent as if he were a party to the action" cannot be omitted in construction.
The scope of the clause is quite apparent. The case of conveyances executed after the filing of the notice comes within the ordinary rules of equity. What is new in the one hundred and thirty-second section of the Code is the provision in respect to a conveyance executed prior to and recorded subsequent to the filing of the notice.
The clause as to this matter was introduced mainly to provide for a class of controversies where a title inferior in right and subordinate to that of the plaintiff had not been put on record, but had accrued prior to the commencement of the action or of the filing of the notice. Under the former rules, it would be necessary to make the owner of such a title a party, as his right did not come to him during the pendency of the action. It might frequently be difficult for the plaintiff to ascertain the fact that such a sale had taken place. The section of the Code, as modified, makes all such inquiry unnecessary.
While it also applies to cases of rights superior to those of the plaintiff, it only affects them in such a way as they would be influenced if the owners were parties to the action. Thus, if a second mortgagee should desire to foreclose, his omission to make the holder of a prior unrecorded mortgage a party, would not enable him, with full knowledge of the facts, to gain a superior title.
On the other hand, if there should be a purchaser in good faith, he would, in all probability, acquire a perfect title, and the holder of the prior unrecorded mortgage would be remitted to an equitable claim upon the purchase-money as against any person holding a position subordinate to his own. Each case would thus be governed by its own peculiar circumstances. There is but a single underlying principle. This is, that the holder of the unrecorded instrument is affected to the same extent "as if he were a party to the action," and had not appeared or made any defence.
A single instance, showing the correctness of this rule, will suffice. Suppose that a second mortgage is unrecorded, and the holder of the first and recorded mortgage commences to foreclose, after the execution of such second mortgage, at the same time filing a regular notice of the pendency of the action. The second mortgagee is accidentally or purposely omitted as a party. Has he no rights, whatever, or may he appear before a referee appointed to ascertain the rights of parties to surplus moneys and make his claim? It would be absurd to say that he cannot. If he can, he is precisely in the position that he would have been in, had he been made a party to the action and had not answered or taken other steps in the cause.
- As the defendant Cheshire entered upon the premises in litigation under his unrecorded conveyance, his
possession, and that of his tenant, Martin, was sufficient notice to the plaintiff of his equitable rights.
If the plaintiff acquired the legal title, he was, by reason of the constructive notice derived from possession, converted into a trustee for the equitable owner. (Whitbread v. Boulnois, supra; Tuttle v. Jackson, 6 Wend., 213; De Ruyter v. Trustees of St. Peters, 2 Barb. Ch., 556; Grimstone v. Carter, 3 Paige, 421; Williamson v. Brown, 15 N.Y. 354; Landes v. Brant, 51 U.S. 348, 10 HOW 348, 13 L. Ed. 449; 2 Lead. Cas. in Eq., 194, 195, and cases cited [3d Am. ed.]; Flagg v. Mann, 2 Summer, 554.)
These cases show that the possession of the defendants was sufficient to put the plaintiff upon inquiry as to the nature and extent of their rights. He is accordingly presumed to have made the inquiry and to have ascertained the defendant's rights, or to have been guilty of a degree of negligence equally fatal to his claim to be considered a bona fide purchaser. He is accordingly chargeable with knowledge of all that he could have learned by an exact and diligent inquiry.
New Falls Corp. v. Board of Managers of the Parkchester North Condo., Inc., 10 AD3d 574, 782 NYS2d 425 (NY App. Div. 1st Dep't., 2004):
- While the purchaser of an interest acquired prior to the filing of the notice of pendency but not recorded until after the notice was filed is bound by the foreclosure judgment and sale (Polish Natl. Alliance of Brooklyn v White Eagle Hall Co., 98 AD2d 400, 403 ; CPLR 6501), the title of the purchaser of the previously acquired interest is not defeated if the plaintiff knew of conveyance prior to the filing of the notice of pendency (see Lamont v Cheshire, 65 NY 30 ).
- Although a lease for a term exceeding three years is a conveyance which may be recorded (see Real Property Law § 290 ), 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 ; see Ward v Ward, 52 AD3d 919, 921 ; Nethaway v Bosch, 199 AD2d 654 ).
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. We also reject the plaintiff's contention that the lease was extinguished by operation of CPLR 6501, which provides that a person whose conveyance is recorded after the filing of a notice of pendency "is bound by all proceedings taken in the action after such filing to the same extent as a party."
In support of its motion for summary judgment, the plaintiff failed to offer sufficient evidence to establish that a notice of pendency was indeed filed in connection with the foreclosure action.
Moreover, while "[i]nterests acquired prior to the filing of the notice of pendency but not recorded until after the notice was filed" are generally bound by the foreclosure judgment and sale (Polish Natl. Alliance of Brooklyn v White Eagle Hall Co., (98 AD2d at 404), an unrecorded interest in a conveyance is not defeated if the plaintiff in the foreclosure action knew of it prior to the filing of the notice of pendency (see Lamont v Cheshire, 65 NY 30 ; New Falls Corp. v Board of Mgrs. of Parkchester N. Condominium, Inc., 10 AD3d 574 ).
- The English judges found some difficulty at first in allowing any equity, however strong, to control the explicit terms of the statute. It was soon seen, however, that adhering to the strict letter of the act would open the door to the grossest frauds.
- Possession by a third person, under some previous title, has frequently but inaccurately been said to amount to constructive notice to a purchaser, of the nature and extent of such prior right. Such a possession puts the purchaser upon inquiry, and makes it his duty to pursue his inquiries with diligence, but is not absolutely conclusive upon him.
- If these authorities are to be relied upon, and I see no reason to doubt their correctness, the true doctrine on this subject is, that where a purchaser has knowledge of any fact, sufficient to put him on inquiry as to the existence of some right or title in conflict with that he is about to purchase, he is presumed either to have made the inquiry, and ascertained the extent of such prior right, or to have been guilty of a degree of negligence equally fatal to his claim, to be considered as a bona fide purchaser. This presumption, however, is a mere inference of fact, and may be repelled by proof that the purchaser failed to discover the prior right, notwithstanding the exercise of proper diligence on his part.(1)
Tuttle v. Jackson, 6 Wend. 213, 1830 N.Y. LEXIS 310 (N.Y. 1830) (begins at page 153 of this case compilation):
- If the subsequent purchaser knows of the unregistered conveyance at the time of his purchase, he cannot protect
himself against that conveyance, and whatever is sufficient to make it his duty to inquire as to the rights of
others. is considered legal notice to him of those rights.
Here Tuttle, the person to whom the unregistered deed was given, was in the actual possession of the premises at the time of the sheriff's sale, and this was good constructive notice to the subsequent purchaser to make it his duty to inquire as to the rights of the person in possession.
In Colby v. Kenniston, 4 N.H. 262, where the purchaser under an unregistered deed was in the open and visible possession of the premises, it was held sufficient notice to protect him against a subsequent purchaser, and to charge the latter with a knowledge of his rights.
So in Norcross v. Widgery, 2 Mass. 506, Ch. J. Parsons says: "This notice may be express, or it may be implied from the first purchaser being in the open and exclusive possession of the estate under his deed." See, also, Eyre v. Dolphin, 2 Ball & B., 301; Forbes v. Denniston, 2 Bro. P. C., 425; M'Mecham v. Griffing, 3 Pick., 149; Malpas v. Ackland, 3 Russ. Ch., 273; Lessee of Billington v. Welsh, 5 Binn. 129; Davis v. Blunt, 6 Mass. 487; Daniels v. Davison, 16 Ves., 254; S. C., 17 Id., 433; Allen v. Anthony, 1 Merriv. 282; Taylor v. Baker, Dan. 80, note a.
In Sheldon v. Cox, 2 Eden 228, Ld. Northington, in reference to notices under the Registry Acts, says there is no difference between personal and constructive notice in its consequences, except as to guilt.
And in Newman v. Chapman, 2 Rand. 93, 100, in the Va. Court of Appeals, Green, J., holds the same language. Under the Middlesex Registry Act, 7 Anne, ch. 20, the first deed is absolutely void at law, as against the second purchaser even with actual notice thereof, and the party there is bound to seek his relief in chancery.
Such was the decision of the K. B. in Doe v. Alsop, 5 Barn. & Ald., 142. But that decision is placed upon the ground that the statute is imperative that the first conveyance shall be void against any subsequent purchaser, and that the words "bona fide purchaser" are not used in the Act.
Such was also the decision under the first Va. Statute similarly worded; but after the words "for valuable consideration and without notice" were added in a subsequent revision, it then became a rule of law. 4 Rand. 208, 212; see, also, 2 Bibb 420.
By our recording Acts the unregistered deed or mortgage is only void as against a subsequent bona fide purchaser. The rule of equity here is, therefore, the rule of law, and whatever would in equity charge the party with notice of the equitable rights of a prior purchaser or incumbrancer so as to deprive him of the privilege of pleading that he is a bona fide purchaser without notice, must in a court of law be sufficient to protect the legal rights acquired under the unregistered deed, against the subsequently recorded conveyance.
Jackson v. Sharp, 9 Johns. 163, 1812 N.Y. LEXIS 70 (1812) (begins at page 208 of this compilation):
- There is no doubt that if a subsequent purchaser has notice, at the time of his purchase, of a prior
unregistered deed, it is the same to him as if it had been registered.
It is not a secret conveyance by which he can be prejudiced or defrauded; and if he purchases with knowledge of such prior deed, and with the expectation of getting his deed first registered, he does an act against good conscience, and in abuse of the statute, which was made to prevent and not to protect fraud.
It is, therefore, a well-settled principle, that such notice supplies the place of a prior registry, and the only question here is whether the defendant is chargeable with such notice.