A owned five parcels of land. She obtained a
$100,000 loan from B in exchange for their promissory note and mortgage, which was promptly recorded.
Upon payment of $10,000, the bank released lot one from the mortgage. A altered the instrument of release to include lot five as well as lot one and recorded the release. A thereafter sold lot 5 to C, an innocent purchaser for $20,000
The bank discovered the alteration of the instrument of release and moved to set it aside. . The woman did not defend against the action, but C did.
The recording act provides: "No unrecorded conveyance or mortgage of real property shall be good against subsequent purchasers for value without notice, who shall first record."
A. C, because the bank was negligent in failing to verify the recordation of its release
B. C, because the purchaser is entitled to rely on the recorded release
C. B, because the purchaser could have discovered the alteration.
D. B, because the alteration of the release was ineffective.
----------
The instrument was fraudulent and thus void ab initio. Consequently the bank's mortgage quite rightly applies to the conveyed lot.
Notice that the mortgage is a property right, arising out of the original contract. Thus it applies as much to the land -- and thus to successors in interest -- as it applies via contract to the initial contracting party. This is why the bank has a remedy against the subsequent good faith purchaser here.
Recordation means actual notice or lack thereof is irrelevant! However, the instrument must be duly recorded: at least non-fraudulent, though the better view is strict compliance with all legal formalities (timestamps, dates, notarizations). Forging any part of a recorded instrument renders the whole instrument unduly recorded. Failing to correctly record despite "formality" should best be seen as providing no constructive notice.
Since actual notice is irrelevant when the instrument is properly recorded C is wrong.
Think of recordation as a kind of strict liability, which ignores actual facts and only looks to the letter of the law, which is why the legal formalities of recordation must be strictly complied with. Of course, equity may intervene in cases where the recordation works a forfeiture! ("the common law abhors a forfeiture").
The purchaser is entitled to rely only on DULY recorded instruments. Fraud such as forgery render the recordation undue, that is, ineffective!
Note also: parties in pari delicto have no equitable remedy and the court will leave them as it finds them: "There is no honor among thieves".
In sum: the instrument was not properly recorded and thus does not provide constructive notice as it is of no effect due to fraud.
D, here, is thus the best choice.
Upon payment of $10,000, the bank released lot one from the mortgage. A altered the instrument of release to include lot five as well as lot one and recorded the release. A thereafter sold lot 5 to C, an innocent purchaser for $20,000
The bank discovered the alteration of the instrument of release and moved to set it aside. . The woman did not defend against the action, but C did.
The recording act provides: "No unrecorded conveyance or mortgage of real property shall be good against subsequent purchasers for value without notice, who shall first record."
A. C, because the bank was negligent in failing to verify the recordation of its release
B. C, because the purchaser is entitled to rely on the recorded release
C. B, because the purchaser could have discovered the alteration.
D. B, because the alteration of the release was ineffective.
----------
The instrument was fraudulent and thus void ab initio. Consequently the bank's mortgage quite rightly applies to the conveyed lot.
Notice that the mortgage is a property right, arising out of the original contract. Thus it applies as much to the land -- and thus to successors in interest -- as it applies via contract to the initial contracting party. This is why the bank has a remedy against the subsequent good faith purchaser here.
Recordation means actual notice or lack thereof is irrelevant! However, the instrument must be duly recorded: at least non-fraudulent, though the better view is strict compliance with all legal formalities (timestamps, dates, notarizations). Forging any part of a recorded instrument renders the whole instrument unduly recorded. Failing to correctly record despite "formality" should best be seen as providing no constructive notice.
Since actual notice is irrelevant when the instrument is properly recorded C is wrong.
Think of recordation as a kind of strict liability, which ignores actual facts and only looks to the letter of the law, which is why the legal formalities of recordation must be strictly complied with. Of course, equity may intervene in cases where the recordation works a forfeiture! ("the common law abhors a forfeiture").
The purchaser is entitled to rely only on DULY recorded instruments. Fraud such as forgery render the recordation undue, that is, ineffective!
Note also: parties in pari delicto have no equitable remedy and the court will leave them as it finds them: "There is no honor among thieves".
In sum: the instrument was not properly recorded and thus does not provide constructive notice as it is of no effect due to fraud.
D, here, is thus the best choice.
No comments:
Post a Comment