Real Estate Law 8th Edition by Robert J. Aalberts – Test Bank

 

Instant Download – Complete Test Bank With Answers

 

 

Sample Questions Are Posted Below

 

CHAPTER 8

 

TITLE AND INSURANCE

 

CHAPTER OUTLINE

 

1. Title

 

1. Recording Statutes

 

1. Recording Defined

 

2. Types of Statutes

 

Problems 2, 3, 4

 

3. Electronic Recording

 

4. Chain of Title

 

Problems 1,  6

 

1. Proof of Title

 

1. Abstract and Opinion

 

Problems  5

 

                     Antonis v. Liberti, p. 286

 

2. Title Insurance

 

                     Lawyers Title Ins. v. First Federal Bank, p. 288

 

3. Torrens System

 

                       

1. Property and Liability insurance

 

1. Property Coverage

                                   

Churchill v. Factory Mutual Insurance Co., p. 289

                        Problem  7, 9, 10

 

1. Liability Coverage

 

In Re: Katrina Canal Breaches Litigation, p. 291

 

1. Insurable Interest.

 

Motorists Mutual Insurance Co. v. Richmond, p. 295

 

1. Mortgage Insurance

                        Problem  8

 

1. Commercial Insurance

 

 

TEACHING SUGGESTIONS

 

1. In order to prevent “flyspecking,” bar associations in many states have adopted title standards. A title standard constitutes an agreement by a bar association on how a title problem should be handled. Because the standards are based upon statutes and case law, the courts have generally upheld them.

 

2. For a discussion on flood insurance and Hurricane Katrina, see R. Aalberts, “Hurricane Katrina: Will New Orleans Real Estate Emerge from the Devastation?” 34 Real Estate Law Journal 269 (Winter 2005).

DISCUSSION OF ETHICAL AND PUBLIC POLICY ISSUES

1. On page 277 is an ethical and public policy discussion of whether title insurance should be regulated. Of course the insurance and real estate industries in general are already heavily regulated. Title insurance, on the other hand, is only regulated in a few states such as California and New York. The title insurance business is highly profitable and therefore quite competitive. The market can be a means of controlling costs if information is well distributed allowing consumers to make informed decisions concerning the price and quality of the product they are buying. Title insurance, however, is a product that few people know anything about and so they often depend on their agents for advice. Their agents, as fiduciaries, should be thinking of the client’s best interests but may be inclined to send them to places that “reward” the agents for the continuing business sent to the title companies. In a perfect market if agents continued to send their clients to higher priced title insurance companies they would soon lose business. Unfortunately, in a business in which people use agents only a few times in their lifetime, this is not likely to occur.

 

Therefore the giving of rebates to agents for business that might not be the best interest of their clients is clearly immoral and illegal in some states. It would not bestow the greatest good to the greatest number, since consumers are more numerous than agents and title insurers. It may save consumers time since they don’t have to research prices, but that bestows little relative pleasure.

 

Consumers also have a moral right to be told the truth, as human beings and as citizens and consumers. If the truth about the title insurance’s price is not disclosed, this duty is breached and is immoral.

 

Also, similarly situated consumers are not being treated in a similar manner if some gain the truth and others, who have immoral agents seeking rebates from immoral title insurers, do not. This violates fairness and justice principles.

 

The pros and cons of a public policy regulating title insurance, using the above discussion, may create a good class discussion. If such a law were created, you may want to discuss the price of regulation necessary to create a more transparent environment for consumers. Sometimes the added costs in terms of taxes and fees and the inefficiencies which regulators may impose on the market may begin to outweigh the benefits. The new RESPA laws discussed in detail in Chapter 10 also provides for more disclosure about title insurance and costs in the new HUD-1 as well as the Good Faith Estimates form.

 

 

2. The discussion on pages 279-280 centers on the ethical and public policy issues surrounding federally subsidized flood insurance. This issue has been in the forefront since Hurricane Katrina flooded the New Orleans metropolitan area, as well as years of hurricane damage to other Gulf Coast states particularly in Florida and the Eastern Seaboard. Under a utilitarian argument American taxpayers are each paying a little so that the federal government can supply people who live in these vulnerable areas with affordable flood insurance. This occurs because the private sector will not underwrite the huge risk. The pain is small and spread among American taxpayers, but in the aggregate it is very large. The pain for those whose homes are destroyed, on the other hand, is very large and immediate. It appears that the overall pain is incurred by many more than the pleasure the insurance bestows to the relatively few in the event of a flood. Thus, under a utilitarian argument, making taxpayers pay for flood issue is immoral. However, in a very large flood like in New Orleans, the great pain suffered by an unprecedented amount of people may override the small pain incurred by the millions of taxpayers who subsidize the insurance. This is a good example of Jeremy Bentham’s felicific calculus in which relative pain and pleasure are measured.

 

Under a rights and duties analysis under the law, property owners in flood-prone areas have a legal right and so therefore a moral right to buy flood insurance. This means the taxpayers have a legal and moral duty to supply it. However, is this good public policy? The answer to that might rest on how foreseeable the floods may be. In places that constantly flood it is easy to argue that obstinate people who just won’t face the reality of another flood when there is a high likelihood of it, might not deserve such a right as a citizen. However, in some places, floods are rare and those property owners may be more deserving. In the case of New Orleans the people thought they could depend on the government built levees to protect them even in a city largely residing below sea level. However, subsequent studies revealed that the Corps of Engineers and the local governments might have failed in their assessments of the levees’ strength to withstand hurricanes as powerful as Katrina. When people reasonably rely on the government and it fails, then the government made up of the people, may have to help those who are in need.

 

In a fairness and justice analysis we would need to determine what property owners are similarly situated and then whether the procedures used bestow fair outcomes. If all people in flood prone areas have the same rights to buy it, then it would be fair. However, if a person has the right to buy it and doesn’t, they are no longer similarly situated with those who did buy it. The question then is should the government still aid those who were eligible but did not buy the flood insurance? Aiding them, even in great need, is not fair to those who did sacrifice and paid for protection, as well s the taxpayers who offered (through their elected government) to subsidize the insurance. A counter-argument might be that people in great need have a right as humans and as citizens to be helped anyway. The extent of the help, however, could provoke an interesting debate. For example, should it go so far as to giving these people enough assistance to rebuild, like those who were insured, or should they just be given basics, such as food and temporary shelter?

 

3. The ethics discussion on page 282 is a classic example of moral fairness versus efficiency. Insurance underwriters, who evaluate risk, cannot possibly assess all of their insureds individually and so must look at actuarial data to predict risks and then establish the cost. Those who have bad credit ratings, in the aggregate, pose a greater risk statistically for the reasons stated in the problem. However, even the underwriters would have to admit that many people with bad credit do take very good care of their property and therefore would pose a low risk. Pooling those with good credit apart from those with bad credit may give the greatest good to the greatest number by holding down the overall cost of insurance. Those who suffer the pain, probably a minority of people with bad credit, will now have to pay more or will not be insured at all. If they cannot obtain insurance they also cannot receive a loan from a commercial lender and may be unable to own a home. This may detrimentally affect neighborhoods because of lower home ownership and less money to repair damaged properties.

 

Principles of fairness and justice provide that similarly situated people must be treated the same in regard to process and outcome. In this case, if we classify all homeowners as similarly situated, those with bad credit ratings are burdened more than those with good credit ratings.  However, an argument can be made that they are not similarly situated.

 

The greatest amount of unfairness is imposed on those who cannot gain a good credit rating for reasons other than their bad spending habits. Thus, older and younger persons, and immigrants who have not built up a favorable credit rating would be burdened more even though they may be similarly situated with those with a good credit rating. This is clearly unjust. Moreover, those who receive bad credit ratings due to procedural errors are obviously being treated unfairly from those who are not subjected to these errors. This latter group, however, has rights under federal and state law to correct these errors, while creditors have legal and ethical duties to repair the mistaken reports.

IMPORTANT CONCEPTS AND RELATIONSHIPS FOR STUDENTS TO KNOW

1. Know the history and reasons underlying the principle of recording legal instruments.
   2.         Be acquainted with the concepts of both constructive, actual and inquiry notice.
   3.         Know what a bona fide purchaser is and how such a person relates to two of the three       types of recordation statutes.
   4.         Know how the notice, race-notice and race statutes function and be able to apply them to factual scenarios.
   5.         Know what requirements must be generally contained in a deed before it can be recorded.
   6.         Know what a chain of title is, how a grantor and grantee index and tract works and what happens when a party falls out of the chain of title with a wild deed.
   7.         Be able to compare and contrast an abstract of title, a title opinion, title insurance and the Torrens system.
   8.         Know what a mortgage title insurance policy is, what it protects and what it excludes.    9.            Know what losses a mortgagee title insurance policy cover versus the owner’s title            insurance policy.
   10.       Be acquainted with how a mortgagee loss clause works.
   11.       Know the two basic losses covered under a homeowner’s insurance policy.
   12.       Know what is covered in the three basic forms of property coverage in a homeowner’s      policy and what is commonly excluded.
   13.       Know the two types of limitations-policy limitations and coinsurance clauses- that a         property owner can suffer even with property insurance coverage.
   14.       Know what the various liability provisions in a homeowner’s policy generally covers       and the typical exclusions.
   15.       Know what an insurable interest is and how it relates to homeowner’s insurance.
   16.       Know what mortgage insurance is, whose loss it protects and how it operates if the real    estate is destroyed.

 

         ANSWERS TO TEXT PROBLEMS

 

1. Beta owns Sunnybrook. Beta has no constructive notice of Alpha’s deed because Siedel’s name was misspelled in the deed. In searching the grantor’s index, Beta would find no deeds from Siedel under the proper spelling.

 

2. Randall wins. This is a notice statute. Randall purchased the property without actual or constructive notice of the earlier conveyance. See Randall v. Hamilton, 119 S.E. 595 (1918), and C. Smith & R. Boyer, Survey of the Law of Property 327-328 (2nd ed. 1971).

 

3. Leroy is entitled to ownership because of any one of three reasons:

 

(a) Crafty had constructive notice, based on Leroy’s possession of the farm.

 

(b) Crafty had constructive notice based on Leroy’s recording of the deed.

 

1. c) Crafty was not a purchaser for value–he paid only nominal consideration.

 

See C. Smith & R. Boyer, Survey of the Law of Property 328-329 (2nd ed.

1971).

 

 

1. Terrell is correct. The court in Terrell v. Andrew County, 44 Mo. 309 (1869), noted: “The obligation of giving the notice rests on the party holding title. If he fails in his duty, he must suffer the consequences. If his duty is but imperfectly performed, he can not … lay the fault at the door of an innocent purchaser. [H] ard and uncertain would be the fate of subsequent purchasers if they could not rely upon the records, but must be under the necessity, before they act, of tracing up the original deed to see that it is correctly recorded.” [Despite Terrell, however, the Restatement of Property -Security (Mortgages) § 1. 5 (Tent. Draft No. 1, 199 1) takes the position that later mortgagees, have a duty to inquire about the status of the debt.]

 

5. First, it should be noted that the use of any abstract has the inherent problems noted in the text.

 

Second, with regard to this specific abstract, the title examiner should resolve several potential problems.. For example:

 

(a) Why are the descriptions in the Caption and in entries 2, 3,

and 4 inconsistent?

 

(b) Is the description in entry 7 correct?

 

1. c) Is it important that the deed in entry 9, dated October 17,

1929, was not recorded until April 28, 1930? What is the purpose

of entries 10-15?

 

(d) What is the effect of discrepancies in the names? (Compare,

for example, Joseph Hellman’s name in entry 8 and entries 10- 12.

Or McCowen’s name in entry 5 and entry 6. Or Sylvester Hellmann’s

name in entry 9 and entries 11 and 16.)

 

(e) What problems might arise from the easement grant at entry 16?

 

See 0. Browder, R. Cunningham & J. Julin, Basic Property Law 935 (2nd ed.

1973).

 

6. This case presents a dilemma in that Morse would prevail over Clark, who had actual notice of the unrecorded deed. However, the purchaser from Clark (Curtis) had no actual notice and, in the course of a normal title search, would not discover Morse’s deed because it had been recorded after Clark’s deed.

 

In Morse v. Curtis, 2 N.E. 929 (1985), the court found that Curtis had superior title to the land. The court ruled against constructive notice in this case stating “it would be a hardship to require an examiner to follow in the index of grantors the name of every person who at any time, through perhaps a long chain of title, was the owner of the estate.” The court established a rule which provided that “if a purchaser, upon examining the registry, finds a conveyance from the owner of the land to his grantor which gives him a perfect record title, complete by what the law at the time it is recorded regards as equivalent to livery of seizing, he is entitled to rely upon such recorded title; and is not obliged to search the record title, afterwards made, to see if there has been any prior unrecorded deed of the original owners.” See also C. Smith & R. Boyer, Survey of the Law of Property 334-335 (2nd ed. 1971).

 

7. Dolly does not have a valid claim. The court in Russell v. Williams, 374 P.2d 827 (1962), held that: “[A] policy of fire insurance does not insure the property covered thereby, but is a personal contract indemnifying the insured against loss resulting from the destruction or damage of that property.” The court also noted that “there is no obligation upon the part of one cotenant to insure the other cotenant against loss of the latter’s interest in their jointly held property…. In the instant case, even though the amount of the proceeds obtained from the policy of insurance represented the full value of the property destroyed, no equitable considerations exist which require a determination, as a matter of law, that the plaintiff was entitled to any portion thereof”

 

8. Putnam can recover under the fire policy. The court in Pulaski Savings & Loan Association v. United States Fidelity and Guaranty Company, 539 S.W.2d 602 (1976), ruled that “knowledge” means actual knowledge, not constructive knowledge. Furthermore, the court stated that “it is equally clear that if plaintiff had actual knowledge of the transfer of the property and did not . . . notify the defendant of the change the policy would be void.” Here Putnam did not have actual knowledge of the ownership transfer.

 

9. In Fiess v. State Farm, 202 S.W.3d 744 (Tex. 2006) the court stated that if a policy provision has only one reasonable interpretation and it is unambiguous and it must construe as a matter of law. However, if an exclusion has more than one reasonable interpretation, it must construed in favor of Fiess the insured as long as that construction is not unreasonable. Moreover, the language is interpreted by the ordinary, everyday meaning of the words to the general public.

 

The court ultimately ruled in State Farm’s favor stating that “it is hard to find any ambiguity in the ordinary meaning of ‘We do not cover loss caused by mold.’ While the ensuing-loss clause that follows may be difficult to parse, few ordinary people would imagine that it changes the meaning of the first sentence to read ‘We do too cover loss caused by mold.’”

 

10. This question is designed to engage your class in a discussion of the ethics and public policy of the various recording statutes.  The scenario presented has happened to those who live in race statute states. Few people, like the foreign student Yakamoto, are aware that they must, in these states, even as mere lessees, protect their property rights from others through the recording of leases.

 

The states that use race statutes argue that they promote certainty and efficiency in establishing the priority of rights. To comply with them, all you have to do is to examine the public record and whoever records first has priority, regardless of whether they act in good faith. That is why Thistle possessed rights superior to Yakamoto’s. Thus, Yakamoto could not legally challenge Thistle’s lease by proving that Thistle knew Yakamoto had already leased Flaherty’s apartment.

 

An opponent of race-notice and notice laws would also argue that a person’s good faith can be falsely called into question, thus precipitating expensive litigation. Ultimately the party with the best lawyer and most money may win over the party who was honest. Race statutes likely reduce litigation and costs. Moreover, the risk is generally easy to manage. Lenders, through their closing agents, make sure they record deeds and mortgages for their mortgagors immediately after the closing. Commercial lessees, who are often sophisticated in legal matters, routinely record their property interests. Thus, these problems are very rare in these common but important transactions. In the end, it could be argued that race statutes confer the greatest good to the greatest number, although occasionally a person such as Yakamoto might fall through the cracks and suffer a loss.

 

On the other hand, it could be argued that a person with non-freehold property rights, such as Yakamoto, should be protected. Others owe him a moral and legal duty to respect his property rights. So, even though he has no legal right to keep Thistle from occupying the apartment he leased from Flaherty, Thistle has a moral duty to respect Yamamoto’s property rights once he became aware of their existence. Flaherty has a legal and moral duty to respect the leasehold rights he conveyed to Yamamoto and so he breached this duty when he subsequently leased the apartment to Thistle.

 

Principles of fairness and justice provide that similarly situated persons should be treated in a similar manner in regard to process and outcome. Yakamoto is not accorded the same protection as would, say, a person in neighboring Virginia, a notice state, where Thistle’s actual notice would disqualify him as bona fide lessee.  Thus, we have similarly situated lessees experiencing different outcomes determined by geography. This is unfair and unjust to Yakamoto. Of course this argument must be tempered by the reality that the various states have the rights to create disparate laws and as they see it in promoting the best interests of the state.

 

Test Bank

 

      ESSAY QUESTIONS

 

1. On January 25, 1904, Harris purchased certain property at a sheriff s sale and received a sheriff’s deed, which was recorded at the time of the purchase. Paul later claimed ownership of the same property under a deed signed by the owner on December 8, 1898, and recorded on December 21, 1903. Who has the superior title to the property in question under a notice recording statute? A race-notice statute? A pure race statute?

 

2. J.D. purchased real estate in Russell County, Alabama from T.W. on August 19, 1992 to conduct an automobile salvage business. The deed was recorded on that date. Ethel had purchased the same land in October, 1982 but did not record her deed until May, 1993. Ethel did, however, have the property assessed for tax purposes and paid taxes for a number of years, unknown to J.D. The state statute provided, in part: “The recording in the proper office of any conveyance of property … operates as a notice of the

contents of such  conveyance . . . . All conveyances of real property, deeds, mortgages … are inoperative and void, as to purchasers for a valuable consideration … without notice, unless the same have been recorded before the accrual of the right of such purchasers.” Who owns the property? Why?

 

3. Beta deeded his farm to Alpha, who did not record the deed. Alpha then deeded the farm to Sy, who immediately recorded his deed. Later Beta deeded his farm to Phi who immediately recorded her deed. Assuming that no one took possession, who owns the farm? Why?

 

4. A fraternity built a float on the back of a truck at the fraternity house for use in a parade. During the parade, part of the float fell and injured a woman stationed on the float. Assuming that the members of the fraternity were negligent in constructing the float, is the insurer of the fraternity liable? Why?

 

5. First Bank held a mortgage on a house that was destroyed by fire was covered under a homeowner’s insurance policy that contained a modern mortgagee loss payable clause. However, the insurance company refused to pay the bank for the loss because the homeowner failed to give the company notice of the loss within sixty days, as required by the policy. May the bank recover from the insurance company? Why?

 

 

 

 

 

 

 

              TRUE-FALSE QUESTIONS

 

6. Before recording statutes were enacted, the common law rule provided that the first purchaser to take possession had priority over other purchasers. FALSE

 

7. A person can acquire actual notice of a prior sale that is not recorded in the public record simply by hearing about it in a conversation. TRUE

 

8. In many states, a grantor must acknowledge a deed before a public official such as a notary public before the deed can be recorded. TRUE

 

9. X deeds his property to Y on June 1 and to Z on June 3. Z is aware of the earlier conveyance made to Y, but records first in the public record. In a “Race Statute” state, Z’s deed will prevail over Y’s. TRUE

 

10. Nearly all the states use a “Race-Notice Statute” since it combines both the attributes of fairness with efficiency. FALSE

 

11        A grantor-grantee index is much easier to use in tracing title than a tract index. FALSE

 

12. An abstract of title lists and summarizes legal instruments, such as deeds and mortgages, and renders an opinion as to their legal validity. FALSE

 

13. In order to be protected by a lender’s title policy, a home purchaser must pay for the coverage. FALSE

 

14. The Torrens System which was used in many states in the 19^th century, is now used in only a few states and is considered to be too expensive and burdensome as a practical alternative to existing practices. TRUE

 

15. Although a vendor may assign his insurance coverage to a vendee, the assignment is not effective until the insurance company approves the assignment. TRUE

 

16. Insurance practices usually provide for the full cost of repair or replacement up to policy limits in the event of loss, regardless of the size of the limits. FALSE

 

17. Most homeowner policies provide for liability coverage, but only for damages resulting from accidents on the homeowner’s property. FALSE

 

18. With property insurance, an insurable interest need only exist at the time the coverage is purchased. FALSE

 

19. The Comprehensive Form (HO-3) homeowners insurance covers all possible risks, including floods and earthquakes. FALSE

 

 

20. Under the modern mortgagee loss clause, a mortgagee-bank will be covered by an owner’s insurance policy even when the mortgagor intentionally destroys the property by arson. TRUE

 

 

 

MULTIPLE CHOICE QUESTIONS

(Answers in boldface are correct)

 

21. Title registration systems, such as the one introduced into Russia after the fall of the Soviet Union, creates the following effect(s):

 

(a) Greater willingness by investors to undertake long-term investments.

 

(b) Greater willingness by lenders to take real estate as collateral for loans.

 

(c) Greater transaction costs for real estate.

 

(d) Two of these. (a and b)

 

(e) All of these.

 

 

22. All of the following are methods for sellers of real estate to prove they have good title, except:

 

(a) title insurance.

 

(b) Torrens system.

 

(c) Basic Form homeowners insurance (HO-1). 

 

(d) abstract and title opinion.

 

 

23. Which of the following recording statutes is used the least among the states.:

 

(a) Race.

 

(b) Race-notice.

 

(c) Notice.

 

(d) None of the above.

 

 

24. Raven owns Blackacre. On October 10, she deeds the property to Alexis. Alexis records her deed on November 1. Raven also deeds Blackacre to Bill on October 20 and he records his deed on November 5. Assume that Bill is a bona fide purchaser. In a state that has a Race Statute whose deed will prevail?

 

(a) Alexis’ deed.

 

(b) Bill’s deed

 

(c) Raven’s deed.

 

(d) No one’s deed will prevail, since deeding property twice violates public policy.

 

 

25. Pete purchases property from Marie, who purchased it from Doris, a

minor. Pete obtains title insurance. Doris, shortly after reaching

the age of majority, wants to reclaim her property.  Which of the

following best describes the result?

 

(a) Doris is entitled to the property and Pete may recover from the insurance company.

 

(b) Doris is entitled to the property and Pete may not recover from the insurance company.

 

(c) Doris is not entitled to the property because Marie sold it to Pete, but Doris is entitled to damages from Marie.

 

(d) None of the above.

 

 

26. Under a mortgagee loss clause, if a mortgagor-owner intentionally destroys mortgaged property:

 

(a) the mortgagee-bank cannot recover from the insurance company.

 

(b) the mortgagee-bank can recover from the insurance company, which can then recover its loss from the owner.

 

(c) the mortgagee-bank can recover from the insurance company, but the insurance company cannot recover its loss from the owner.

 

(d) none of the above.

 

 

 

27. A person purchasing a home should, to protect his investment, purchase the following:

 

(a) Title insurance.

 

(b) Homeowner’s insurance.

 

(c) A bond for the notary public.

 

(d) None of the above.

 

(e) Two of the above. (a and b)

 

 

28. Generally, before a deed is allowed under law to be recorded:

 

(a) in many states it must be acknowledged by the grantee before a notary public.

 

(b) the grantee must pay all outstanding income taxes.

 

(c) the grantee must produce identification.

 

(d) the grantee must prove that the grantor’s signature on the deed is valid.

 

(e) none of the above.

 

.

29. The owner’s title insurance policy developed by the American Land Title Association insures the owner against all of the following losses except:

 

(a) when the property loses value due to zoning and building ordinances.

 

(b) when the owner lacks a right of access to his property.

 

(c) when the property is subject to a lien or encumbrance.

 

(d) when the land actually belongs to someone else.

 

(e) when the title to the land is not marketable.

 

 

 

 

 

 

 

 

30. Peter bought the old Whiteacre mansion for $100,000. Due to the fact that it had an antique carved façade and other unique features inside the house, it would cost Peter $120,000 to replace the house  if it were destroyed by fire. Peter, however, only insured it for $70,000. A fire from the stove destroyed the kitchen, which incurred an actual loss of $1,000. The cost of replacing the kitchen, however, is $4,000. If he had an 80%  coinsurance clause in  his homeowner’s policy, Peter would receive:

 

(a the full $4,000.

 

(b) less than the $4,000 loss because  Peter’s insurance coverage was less than 80%  of the purchase price of Whiteacre.

 

(c) less than the full $4,000 loss because  Peter’s insurance coverage was less than 80% of the full replacement cost of Whiteacre.

 

(d) nothing, because–since  Peter insured Whiteacre for less than 80% of the home’s replacement value–he can collect on the policy only if there is a total loss.

 

 

 

ANSWERS TO INSTRUCTOR’S MANUAL QUESTIONS

 

ESSAY ANSWERS

 

1. Paul wins under each of the three statutes because his deed was recorded before the sale to Harris. In Harris v. Paul, 174 N.E. 615 (1930), the court noted that “the deed under which the defendant Paul claims was placed of record on December 21, 1903…. The plaintiff did not receive his sheriff’s deed until about January 25, 1904. Under the circumstances, he took it with constructive notice of the existence of the Paul deed and

therefore subject thereto.”

 

2. The court in Lawton v. Stillwell, 155 So.2d 311 (1963), ruled in favor of J.D. The court stated that “the burden is on the holder of an unrecorded deed to show that a subsequent purchaser for value had notice or constructive notice of his equity.” Ethel argued that J.D. was not a bona fide purchaser for value because there were facts sufficient to put him on inquiry. The court disagreed with Ethel and stated that it knew of “no authority which holds that her assessment of the property for taxation can operate to impute to [J.D.] Stillwell any notice of her claim to the property.”

 

3. Phi owns the farm. Under the recording statutes Phi would have no notice of Sy’s recorded deed because there is nothing on record to link Sy’s deed to Beta. See C. Smith & R. Boyer, Survey of the Law of Property 330-331 (2nd ed. 1971).

 

4. The insurer is not liable. In Loker v. Tulane University, 363 So.2d 1305 (1978), the court ruled that the injury resulted from the use of a motor vehicle, which was excluded from the fraternity’s coverage.

 

5. The bank may recover. Under the modem mortgagee loss clause the mortgagee’s insurance is not invalidated by acts of the homeowner that would cancel coverage. See Decatur Federal Savings &, Loan Association v. York Insurance Company, 250 S.E.2d 524 (1979).