Sabo v. Horvath

Brief Fact Summary.

In this case, Lowery conveyed the same five-acre parcel of land twice. Once to the Appellee, William Horvath (Appellee) and his wife Barbara Horvath (Ms. Horvath) and secondly to the Appellants, William Sabo and Barbara Sabo (Appellants) both by quitclaim deed. Lowery’s interest in the land comes from a United States Patent under the “Alaska Homesite Law” and Lowery’s conveyance to the Appellee and Ms. Horvath was made prior to the issuance of the patent, whereas the deed to the Appellants was made after the issuance of the patent. The Appellee and Ms. Horvath recorded first and was prior to patent and title, thus was “outside the chain of title.”

Synopsis of Rule of Law.

A purchaser only has notice of recorded interests, which are within his “chain of title.” The rule in most jurisdictions, which have adopted a grantor-grantee index system of recording, is that a “wild deed” does not serve as constructive notice to a subsequent purchaser who duly records.

Facts.

In this case Lowery conveyed the same five-acre parcel of land twice. Once to the Appellee and this wife Ms. Horvath and secondly to the Appellants both by quitclaim deed. Lowery’s interest in the land comes from a United States Patent under the “Alaska Homesite Law” and Lowery’s conveyance to the Appellee and Ms. Horvath was made prior to the issuance of the patent, whereas the deed to the Appellants was made after the issuance of the patent. The Appellee and Ms. Horvath recorded first and was prior to patent and title, thus was “outside the chain of title.” The Appellee and Ms. Horvath sued the Appellants to quiet title and the Appellants counter-claimed to quiet their title. The lower court ruled that Lowery had an equitable interest capable of transfer at the time of the Horvath deed and further, that the deed to the Appellee and Ms. Horvath contemplated more than mere quitclaim, but warranted that patent would be transferred. The lower court also ruled that the Horvaths h
ad the superior claim due to the prior recording, which was considered constructive notice to the Appellants under the Alaska Recording Statute. The Appellants appealed.

Issue.

The Court stated three issues:
Under the Alaska Homesite Law, when did Lowery obtain a present equitable interest in land, which he could convey?
Are the Appellants, grantees under a quitclaim deed, “subsequent innocent purchasers in good faith”?
Is the Horvaths first recorded interest, which is outside the chain of title, constructive notice to the Appellants?

Held.

Lowery did have an interest which he could convey at the time of the deed to the Appellee and Ms. Horvath. The Appellants could be good faith purchasers even though they took by quitclaim deed. The Appellants did not have constructive notice as to the prior out of chain of title deed to the Appellee and Ms. Horvath and such prior deed is a “wild deed.” Reversed.
The Court first holds that Lowery did have a transferable interest at the time of the deed to the Appellee and Ms. Horvath. The Court then must answer whether the Appellants could be subsequent innocent purchasers in good faith, even though they took under a quitclaim deed.
Since a quitclaim deed only transfers the interest of the grantor, the question is whether a quitclaim deed puts a purchaser on constructive notice. The Court noted a conflict among authorities, but decided to follow the majority rule, which holds that a quitclaim grantee 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.
A purchaser only has notice of recorded interests, which are within his “chain of title.” The rule in most jurisdictions, which have adopted a grantor-grantee index system of recording is that a “wild deed” does not serve as constructive notice to a subsequent purchaser who duly records.
The Court noted that it could announce a rule, which would require the subsequent recording party to search all the records beyond the chain of title, perhaps back to the grantor’s date of birth, but that it would be less of a burden to require the first recorder to re-record once the title is established by the patent.

Discussion.

The Court noted the difficulty of balancing the equities in this case as between the Appellee and Ms. Horvath and the Appellants. The Court relied on principles of the law of recording to decide the case and only noted in passing the relative equities. Consider the question of what more could the Appellee and Ms. Horvath have done? Were they supposed to be savvy enough in legal matters to understand the consequence of their “out of chain of title” de