Title Assurance/Insurance

Question 1

Recording System

Answer 1

Provides a system to provide publicly accessible records to land title
- protects new buyers of land but does not affect validity of title

Government’s role is not to affect good title, but to serve as a librarian

Question 2

Recording Statues Goal

Answer 2

Gives notice to the world of transactions

Creates incentive for grantees to record their purchases - so future buyers can discover if there have been prior purchasers

Question 3

3 Kinds of Notice

Answer 3

1. Actual - where one is personally aware of a conflicting interest in the property
2. Constructive - if a document is recorded, then it is publicly available and you are effectively put on notice
3. Inquiry - if a person has facts that would cause a reasonable person to make a inquiry into a prior instrument

Question 4

Bona Fide Purchaser for Value (BFP)

Answer 4

Someone who purchases in good faith

• have to pay valuable consideration
• can’t have any notice of title being in someone else or an encumbrance

Question 5

Race Statutes

Answer 5

“Fleet of Foot”

First person to record has superior title regardless of notice of another person with prior title

Question 6

Notice Statutes

Answer 6

“Pure of Heart”

Protects subsequent purchasers who acquire deeds to land without notice of the prior unrecorded deed.

Ex: O conveys deed to A. A does not record. O conveys deed to B. B pays consideration, but does not have notice of A’s deed. B does not record.

• B has title
• But if A recorded, then B would have constructive notice

Question 7

Shelter Rule (Notice Statutes)

Answer 7

Ex: O conveys deed to A. A does not record. O conveys same deed to B. B pays consideration, but does not have notice of A’s deed. Then B transfers to C. C has notice of A’s deed.
- C wins even though he is not “pure of heart” because we want people like B to be able to convey in confidence

Question 8

Race-Notice Statutes

Answer 8

“Fleet of Foot” & “Pure of Heart”

A subsequent purchaser is protected against prior unrecorded instruments only if he is without notice of the prior instrument and records before the prior instrument is recorded

Question 9

Summary: Who is protected among subsequent purchasers of the same property?

Answer 9

Race: only those who record first

Notice: only those who record first without notice of prior purchaser

Race-Notice: only those who purchase without notice and record first

Question 10

How do we record?

Answer 10

1. File Instrument with recording office (filing by itself does not provide any notice)
2. Recorded by Office (public cannot search yet because they are just in a book)
3. Office Indexes (key step)
   - Now the public has access
   - to claim priority, have to establish when your document was indexed

Question 11

Lewis v. Superior Court

Answer 11

Rule: A property interest is not fully recorded until it has actually been indexed.

CA Race-Notice Statute
Lewis wants to quiet title to home against Fontana

(24th) - Fontana filed lis pendens against Lewis.
(25th) Lewis entered contract for sale with Shipley. Paid $350k with promissory note to pay remaining price.
(28th) - Closing - Lewis received deed from Shipley and recorded/indexed.
(29th) - Fontana’s lis pendens was indexed.

SO Lewis wins.

Fontana tried to argue that Lewis did not have good title bc he did not pay full purchase price.
- Court held that because Lewis committed to pay thru the PN, he was a BVP without notice

Question 12

Harper v. Paradise

Answer 12

Rule: Inquiry Notice
Test: Are there already in the record at the tome of recording “facts that would cause a reasonable person to make an inquiry into the possible existence of an interest in real property?”

In 1922, Susan Harper conveyed deed to Maude for life, with remainder to Maude’s children in fee simple.

• the deed was unrecorded then lost and not found until - 1957 - and then it was recorded.
• Susan died in 1927.
• 1928 - Susan’s heirs executed a document which acknowledged both that the deed from Susan to Maude had been misplaced and conveyed Maude their interest in the property - this was recorded
• Maude then defaulted on a loan and Thronton foreclosed on the property in 1936.
• Title to the property continued to pass until the Paradises acquired the deed/title in 1955
• Both claimed to have title

Paradise was fleet of foot bc he recorded first. But not pure of heart because they were put on inquiry notice.
- even though the real 1922 deed was not recorded, the 1928 deed which mentioned the real deed was recorded.

Question 13

Title Insurance

Answer 13

Insurer searches and examines the record to afford some guarantee against any defects in title
- looks backwards in time -protects past defects already in existence before the transaction is made

Question 14

Walker Rogge v. Chelsea

Answer 14

Rule: Title insurance guarantees only against the loss of value through defects of title or liens or other encumbrances against the land. Unless the insured provides the insurance company with a survey and asks for a guarantee of the quantity of land, title insurance policies generally exclude the quantity of land from their coverage provisions. The burden is on the landowner to have a survey conducted and include that coverage in the policy

BUT: Title insurance companies are generally not liable to their policyholders for negligence in the same way that title abstractors are, but they are expected to conduct reasonable title examinations during the course of their dealings. Here, there was evidence that Chelsea, in the course of its reasonable investigation, should have known that the land consisted only of some 13 acres, and did not advise Rogge of this fact.
- so remanded to trial court