Sabo v. Horvath

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Citation. 2003 U.S. App.

Brief Fact Summary.

This case involves two recorded interests, in which the second purchaser did not have notice of the prior recordation.

Synopsis of Rule of Law.

If a grantor transfers prior to obtaining title, and the grantee records prior to title passing, a second grantee would not discover this conveyance, and so the second grantee is an innocent purchaser and his interest will prevail in a dispute over title.

Facts.

Grover C. Lowery (Lowery) occupied land for the purpose of obtaining a patent. He issued a document entitled Quitclaim Deed to the Horvaths (Defendants). At that time, Defendants knew that the patent and title were still in the United States Government’s possession, however, they did not re-record their interest after the patent had passed to Lowery. Lowery was issued the patent after the deed was conveyed. After the patent was issued, he executed another quitclaim deed to the Sabos (Plaintiffs), who recorded the document.

Issue.

Between two recorded interests, will the second purchaser who does not have notice of the previous recordation, which was outside the chain of title have the prevailing interest in the property?

Held.

Yes.
Defendants received a valid interest from Lowery because Lowery had complied with the statute to a sufficient extent so as to have an interest in the land, which was capable of conveyance.
A grantee who receives a quitclaim deed can be protected by the recording system, assuming the grantee purchased for valuable consideration and did not otherwise have actual or constructive knowledge as defined by the recording law. This grantee can be considered an innocent purchaser.
Plaintiffs claim Defendants recording is a wild deed because it was outside the chain of title.
A purchaser has notice only of recorded instruments that are within his chain of title. If a grantor transfers prior to obtaining title, and the grantee records prior to title passing, a second grantee who examines all conveyances under the grantor’s name from the date that the grantor secured title would not discover the prior conveyance. A wild deed does give constructive notice to a subsequent purchaser who duly records.
Plaintiff cannot be charged with discovery of the pre-patent transfer to Defendants when searching the chain of title.
Requiring a title check beyond the chain of title would add a large burden to real estate purchases. Theoretically, the records for each grantor would have to be checked back to the later of the grantor’s date of birth or the date when records were first retained. This would defeat the purpose of a recording system.
Rerecording an interest once title passes is less of a burden than requiring property purchasers to check indefinitely beyond the chain of title.
In order to promote simplicity and certainty in title transactions, a deed recorded outside the chain of title does not give constructive notice to subsequent grantees and thus is not duly recorded. The first duly recorded interest without actual or constructive knowledge of the deed will prevail.

Discussion.

Under this rule, a party searching title does not have to check the records under a grantor’s name until the grantor actually receives title to the property. The title searcher is relieved of a large burden because it is easier for a party to rerecord an interest than to conduct an indefinite search.