O conveys Blackacre to A for value, but A does not record the deed. Thereafter, O conveys Blackacre, to B for value. B, without knowledge of the prior conveyance to A, promptly records his deed in the local county records. O has skipped town and is nowhere to be found. Who has superior title to the property? A or B?
Race, Race-Notice, and Notice
Under the common law, the principle of “first in time, first in right” controls. Therefore A, being the first to receive Blackacre, would receive superior title over B. However, over time the common law has been supplemented by statutory enactments and equitable doctrines, the two often overlapping. Recording statutes limited the common law rule and were enacted to provide notice regarding the state of title and protect subsequent bona fide purchasers by providing an equitable remedy. A bona fide purchaser is someone who purchases land for value, and without notice of any prior conveyance. There are three basic types of recording statutes: race, race-notice, and notice.
A race statute protects a subsequent purchaser who records their conveyance first, regardless of whether the subsequent purchaser had notice of any prior conveyances. Therefore, if A records before B, A acquires superior title, regardless of any type of notice or knowledge of other conveyances. A race-notice statute protects a subsequent purchaser who purchased land for value, without notice of any prior conveyance, who records first. Therefore, if A purchases land for value, without notice of any prior conveyances, and records first, A acquires superior title. A notice statute protects a subsequent purchaser who acquires an interest in property without notice of a prior unrecorded conveyance. Therefore, if A acquires land without notice of any prior conveyances, actual or constructive, A acquires superior title.
The Texas Recording Act can be found in Section 13.001 of the Texas Property Code, which provides:
(a) A conveyance of real property or an interest in real property or a mortgage or deed of trust is void as to a creditor or to a subsequent purchaser for a valuable consideration without notice unless the instrument has been acknowledged, sworn to, or proved and filed for record as required by law.
(b) The unrecorded instrument is binding on a party to the instrument, on the party’s heirs, and on a subsequent purchaser who does not pay a valuable consideration or who has notice of the instrument.
The Texas Recording Act is a “notice” statute, meaning a subsequent bona fide purchaser, without actual or constructive notice, will receive superior title to the property.
What is Actual Notice vs. Constructive Notice?
To qualify as a bona fide purchaser, an individual must purchase land for value and without notice of any prior conveyance. In short, a purchaser can be charged with two types of notice: actual and/or constructive notice. A party possesses actual notice when they have personal information or knowledge of a prior conveyance. For example, A knows that O sold Blackacre to B because B told him. Constructive notice is imputed to a party who lacks personal information or knowledge and arises from the proper recordation of instruments in the local county clerk’s office. A party has constructive notice of every instrument recorded within their chain of title, as well as every recital, reference, reservation, and attachment included in or with those instruments. Additionally, an instrument properly filed for record but not yet indexed or not properly indexed nevertheless imparts constructive notice upon filing.
What About Blackacre?
Now that we have discussed the basic principles of recording statutes, we can analyze our example above and determine whether A or B would prevail in a notice jurisdiction like Texas.
There are two questions we must ask: (1) did B acquire Blackacre for value? (2) did B have notice of the first conveyance of Blackacre to A? The answer to the first question is simple: Yes, B acquired Blackacre for value. The next question is whether B had actual or constructive notice of the prior conveyance to A. According to the facts, B acquired title to Blackacre with no knowledge of the prior conveyance to A and A did not record his deed. Therefore, B did not possess actual knowledge and because A failed to record his deed, B also had no constructive knowledge of the prior conveyance to A. In conclusion, B would prevail over A because he is a bona fide purchaser who acquired Blackacre for value and without notice of the prior conveyance to A.