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43. For whom is the court likely to decide?
Recently, the cousin learned about the friend's deed and possession, immediately recorded her deed, and sued the friend for possession and to quiet title. The friend then recorded his deed and raised all available defenses.
The recording act of the jurisdiction provides as follows: «No unrecorded conveyance or mortgage of real property shall be good against subsequent purchasers for value without notice, who shall first record.»
A man conveyed land by quitclaim deed as a gift to his cousin, who did not then record the deed or take possession of the land. Six months later, when the man was still in possession, he conveyed the land by quitclaim deed as a gift to a friend, who knew nothing of the deed to the cousin. The friend did not record his deed. The man then vacated the land, and the friend took possession.
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There are three types of recording acts: notice, race-notice, and race statutes. Under a NOTICE statute, a subsequent BFP prevails over a prior grantee who failed to record. The most important fact under a notice statute is that the subsequent BFP had no actual OR constructive notice at the time they purchased the property.
Under a RACE-NOTICE statute, a subsequent BFP is protected only if they record before the prior grantee, without notice of the prior instrument. This gives an inducement to record quickly to reduce questions of title.
Under a RACE statute, whoever records first wins, and actual notice of a prior grantee is irrelevant.
A is correct. The statute in the question is a recording statute, more specifically a race-notice statute. In this case, both conveyances to the cousin and the friend were conveyed by quitclaim deed as a gift. The friend did not pay value for the land, and therefore, the friend is not a subsequent bona fide purchaser for value. This means the common law rule of «first in time, first in right» applies. The cousin will win because she was granted the property first, and the friend is not protected under the recording statute, as he was not a purchaser for value.
B is incorrect. It is not enough that the friend did not record first. The friend was not a subsequent bona fide purchaser and is, therefore, not protected by the recording act. The party who was granted the property first will prevail because the common law rule will apply. Therefore, answer choice A is a stronger answer.
C is incorrect. If a person does not meet the requirements to be a subsequent bona fide purchaser, the person is not protected by the recording statute. Then, the common law rule of first in time applies. In this question, the friend does not qualify as a subsequent bona fide purchaser for value and is, therefore, not covered by the recording statute. Under the common law rule, priority will be given to the grantee who was first in time.
D is incorrect. In order for a subsequent bona fide purchaser to prevail, the person must not have had notice of the prior instrument. The purchaser must be without knowledge at the time of conveyance, however, it is immaterial to the analysis if the purchaser obtains knowledge after the conveyance but before he or she records. If a person is in possession of the property, it may be enough to give the subsequent purchaser notice of a prior conveyance. Such knowledge could possibly defeat a claim brought by a subsequent purchaser. However, in this case, neither party is a subsequent bona fide purchaser. The grantee who was first in time will win.