Court Opinion

ID: 9756535
Source: CourtListenerOpinion
Date Created: 2023-08-28 21:35:28.276529+00
Date Added: 2024-06-11T07:28:25.177080
License: Public Domain

RTert L. Brown, Juhe majority opinion dissenting. I dissent because The majority opinion essentially nullifies inquiry-notice as this state’s standard for real estate title searches and in doing so overrules more than one hundred years of real estate property law. The majority holds that a purchaser of land (Bill’s Printing) is a bona-fide purchaser for value without notice even when the chain of title shows that the land he bought was vested in a third party (the Carders) by limited-warranty deed. The majority does so based on a cancellation deed issued by the Land Commissioner to the Carders and a redemption deed issued to the original owners (the Scholeses), even though it is clear that the Land Commissioner had no authority by statute to issue either deed. In doing so, the majority opinion runs roughshod over our statutes and case law, because it does not adhere to this state’s time-honored test that a would-be purchaser should diligently inquire into a third-party’s claim to the land. The majority appears to have abandoned this rule of property in the process. a. Arkansas Law The majority cites no case law for the proposition that Bill’s Printing was completely absolved of all further inquiry into the Carders’ claim because of the Land Commissioner’s unauthorized cancellation and redemption deeds.1 Rather, the majority opinion relies on the principle that public officers are presumed to commit valid acts, and because of this, prospective purchasers can rely on those acts, even when they are ultra vires and even when that purchaser has a duty to inquire. The apposite principles of title law, which apply to this case, have been adhered to in this state almost from its inception. See D. R. Varn, Supplement to Jones’ Arkansas Titles § 102 (1959); Paul Jones, Jr., The Arkansas Law of Title to Real Property § 102 (1935). From the section on bona-fide purchasers of land in both Jones’ and Varn’s treatises, the following principles can be gleaned: • absence of notice is an essential element of bona-fide purchaser status. Ellis v. Nickle, 193 Ark. 657, 101 S.W.2d 958 (1937); Manchester v. Goeswich, 95 Ark. 582, 130 S.W. 526 (1910). • every purchaser is bound by whatever appears in the chain of title. Tisdale v. Gunter, 194 Ark. 930, 109 S.W.2d 1267 (1937). • notice of facts that would put a person of ordinary intelligence on inquiry is equivalent to knowledge of all the facts that a reasonably diligent inquiry would disclose. Trinity Royalty Company, Inc., v. Riggins, 199 Ark. 939, 136 S.W.2d 473 (1940); Gaines v. Summers, 50 Ark. 322, 7 S.W. 301 (1887). • whatever puts a party on inquiry amounts to notice where the inquiry becomes a duty and would lead to knowledge of the requisite fact by the exercise of ordinary diligence and understanding. Dial v. Armstrong, 195 Ark. 621, 113 S.W.2d 503 (1938); Waller v. Dansby, 145 Ark. 306, 224 S.W. 615 (1920). In addition to these bedrock principles, our statutory law provides the following regarding constructive notice to would-be purchasers of all recorded deeds: (a) Every deed,... affecting the title,... to any real... property, within this state which is,... required by law to be acknowledged or proved and recorded shall be constructive notice to all persons from the time the instrument is filed for record in the office of the recorder of the proper county. Ark. Code Ann. § 14-15-404(a) (Repl. 1998). Arkansas is clearly an inquiry-notice state and has been for over one hundred years. The doctrine is defined as follows: . . . Under the doctrine of inquiry notice, a purchaser of real estate is held to have a duty to make inquiries where the purchaser has actual knowledge from any source or constructive notice of facts that would have aroused the suspicions of a prudent purchaser and caused that purchaser to make further investigations. The purchaser is deemed to have notice of all facts that such investigations would have revealed. 11 David A. Thomas, Thompson on Real Property § 92.09(c)(3) (2d ed. 2002) (internal citations omitted). A case that illustrates the inquiry-notice doctrine in Arkansas is Woods v. Wright, 254 Ark. 297, 493 S.W.2d 129 (1973). In Woods, we held that a subsequent purchaser was not a bona-fide purchaser for value without notice, because he had been told of a previous sale, which should have put him on inquiry. A diligent inquiry would have led him to a previous contract of sale and to the fact that only one prior purchaser had defaulted on the contract and not the other prior purchaser. We observed that the subsequent purchaser apparently had accepted at face value the prior owner’s statement about cancelling the contract. In holding as we did, we first referred to the standard about a reasonable person being put on inquiry due to notice of certain facts. We then added: Whatever is notice enough to excite attention, put a party on guard and call for inquiry is notice of everything to which the inquiry might lead, and whenever one has sufficient information to lead him to a fact he shall be deemed conversant with it. Woods, 254 Ark. at 302, 493 S.W.2d at 131. We held that the subsequent purchaser should have contacted both parties to the contract, and because he did not, he was not a bona-fide purchaser for value without notice. As in Woods, Bill’s Printing was charged with notice that the Carders had a legitimate claim to Lot Fifteen and that the Scholeses had failed to redeem the land within thirty days of the tax sale, as required by Ark. Code Ann. § 26-37-202(e) (Repl. 1997). These facts easily defeat Bill’s Printing’s claim to be a BFP without notice. b. Trial Court’s Finding The circuit court found by a preponderance of the evidence that Bill’s Printing was on notice of facts that would, following a diligent inquiry, disclose the Carders’ claim to Lot Fifteen. The circuit court was correct. Under § 14-15-404(a), Bill’s Printing had constructive notice of the Land Commissioner’s limited-warranty deed issued to the Carders, which had been recorded one year previously on October 7, 1999. It further had notice, based on that limited-warranty deed, that real estate taxes had been delinquent on Lot Fifteen since 1994. Without question, a limited-warranty deed held by a third party like the Carders would put a person of ordinary intelligence on inquiry to determine its validity, especially when the sellers (the Scholeses) only received a quitclaim deed in the form of a redemption deed from the Land Commissioner. See Massey v. Wynne, 302 Ark. 589, 791 S.W.2d 368 (1990). There is, too, the obvious point that a cancellation deed issued to the Carders raises a red flag as to what interest of the Carders was being cancelled by the Land Commissioner and by what authority. As already mentioned, the Land Commissioner had no statutory authority to issue the cancellation and redemption deeds. As was the case in Woods v. Wright, supra, Bill’s Printing knew of the Carders’ interest in the land, because it was in the chain of title, and that, no doubt, is why Bill’s Printing was granted a general warranty deed from the Scholeses, even though the Scholeses only got a quitclaim deed from the Land Commissioner. The majority holds that the circuit court was clearly erroneous in finding that Bill’s Printing was put on notice by the redemption and cancellation deeds and should have inquired further. The majority does so solely based on the fact that the Land Commissioner is a state official. Amazingly, the majority does not believe a diligent inquiry would include checking into the Carders’ claim to the land or into the fact that the Scholeses failed to redeem the land within thirty days of the tax sale under Ark. Code Ann. § 26-37-202(e) (Repl. 1997). I cannot sanction such a truncated search into the chain of title. c. Foreign Case Law Bill’s Printing cited this court to no case law to support its theory that the Land Commissioner’s actions, invalid though they may be, trump a purchaser’s duty to make diligent inquiry in order to be a bona-fide purchaser without notice. Without Arkansas authority to support it, the majority waltzes into foreign case law to salvage its decision. See State ex rel. State Tax Cmm’r, v. Garcia, 77 N.M. 703, 427 P.2d 230 (1967); Aluminum Co. of America v. Mineral Holding Trust, C.A., 157 Tex. 54, 299 S.W.2d 279 (1957). Neither case, however, involved a recorded deed in favor of a third party. In Garcia, the grantor of the land who deeded it to the bona-fide purchasers had defrauded the state to obtain title. No third-party claimant with a recorded deed in the chain of title was involved. In Aluminum Co. of America, the Texas Supreme Court held that failure to include judgment for penalties and interest in a foreclosure deed did not put purchasers at a tax sale on notice of irregularities or fraud. Again, that case did not concern notice occasioned by a third-party deed in the chain of title. d. Conclusion In short, the majority opinion concludes that Bill’s Printing need go no further in its “diligent inquiry” than the Land Commissioner’s deeds. I disagree. As already set forth, Bill’s Printing was deemed to have notice of the Carders’ claim and Arkansas statutes and that was enough to deny it BFP without notice status. A diligent inquiry would have exposed the fact that the Land Commissioner had acted ultra vires when issuing those deeds. Arkansas law is radiantly clear and has been for decades. We are an inquiry-notice state. Our statutes and case law underscore that what is in the chain of title places a potential purchaser on diligent inquiry. After hearing testimony, assessing witness credibility, and receiving the evidence, the circuit court found that Bill’s Printing was put on notice. I cannot say that the court was clearly erroneous in this finding. Nor would I abandon the doctrine of inquiry-notice. For these reasons, I respectfully dissent.   The Land Commissioner has authority to issue a cancellation deed and redemption deed under Ark. Code Ann. § 22~6-109(b) (Repl. 2004) and § 26-37-303 (Repl. 1997). Section 22-6-109 only allows cancellation for non-payment of the purchase price, and § 26-37-303 provides for redemption deeds but only after the statutory conditions for redemption have been met, such as tendering owed taxes and penalties within thirty days of the tax sale under Ark. Code Ann. § 26-37-202(e) (Repl. 1997). There is no statutory authority to do what the Land Commissioner did in this case.