Bank of Mississippi v. Hollingsworth
609 So. 2d 422, 1992 WL 303147 (1992)
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Rule of Law:
Open, visible, and actual possession of real property provides constructive notice of the possessor's ownership claim, which is sufficient to protect the possessor's rights against a subsequent creditor for value, even if the possessor's deed is unrecorded at the time the creditor's lien is recorded.
Facts:
- On April 11, 1983, Mamie Walters Robinson conveyed a 27-acre parcel of land to Wayne and Debbie Hollingsworth via a warranty deed.
- In 1983, Wayne Hollingsworth erected a fence around the entire 27-acre parcel, including the 18 acres in dispute. The fence posts were distinctively painted white at the top.
- On January 19, 1984, Bill Robinson applied for a loan from the Bank of Mississippi, offering 60 acres of land owned of record by Mamie Robinson as security, which included 18 acres previously sold to the Hollingsworths.
- The Bank received a title certificate indicating Mamie Robinson was the record owner, but noted the title was subject to 'any facts which a physical survey of the premises would reveal.'
- The Bank of Mississippi did not perform a physical inspection or survey of the property before approving the loan.
- On January 24, 1984, Mamie Walters Robinson and others executed a deed of trust to the Bank for the 60 acres to secure a $45,000 loan.
- On January 27, 1984, the Bank of Mississippi recorded its deed of trust.
- On April 30, 1985, more than a year after the Bank recorded its lien, the Hollingsworths recorded their warranty deed.
Procedural Posture:
- On June 16, 1989, Wayne and Debbie Hollingsworth filed a complaint against the Bank of Mississippi in the Chancery Court of Jones County, seeking an injunction to stop a foreclosure sale and to cancel the Bank's deed of trust on their property.
- The Chancellor (trial court) granted the Hollingsworths a Temporary Restraining Order on June 19, 1989.
- The Bank moved to dismiss and answered, arguing its recorded deed of trust had priority over the Hollingsworths' unrecorded deed.
- After a trial, the Chancellor entered an order on December 6, 1989, granting a permanent injunction against the Bank and cancelling its lien on the 18 acres in question.
- The Bank filed a Motion to Reconsider, which the Chancellor overruled.
- The Bank of Mississippi (appellant) appealed the Chancellor's final judgment to the Supreme Court of Mississippi. The Hollingsworths are the appellees.
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Issue:
Does the open and visible possession of real property, such as by enclosing it with a fence, constitute sufficient constructive notice to a subsequent creditor to defeat that creditor's later-recorded deed of trust, even when the possessor's own deed is unrecorded at the time the deed of trust is executed and recorded?
Opinions:
Majority - Justice Banks
Yes. The open and visible possession of property by a claimant provides constructive notice to the world of that claim, protecting the claimant's rights against subsequent purchasers or creditors even if the claimant's deed is unrecorded. The court reasoned that Mississippi law has long held that actual possession of real estate provides notice of title to the same extent as a recorded deed. This common-law principle is not overridden by recordation statutes. For possession to serve as notice, it must be of a character that would 'arrest attention.' The court found that enclosing the land with a fence satisfies the requirement of 'actual, open, notorious, and visible' occupancy, similar to standards used in adverse possession cases. Therefore, the Chancellor's factual finding that the Hollingsworths' fence was sufficient to put the Bank on notice of their claim was not manifestly wrong and must be affirmed.
Analysis:
This case reaffirms a significant common-law exception to the general rule of 'first in time, first in right' established by recording statutes. It underscores that lenders and purchasers cannot rely exclusively on record title and have a duty of inquiry that includes a physical inspection of the property. The decision places the risk of loss on a creditor who fails to conduct such due diligence, as visible indicators of possession can reveal unrecorded interests that take priority. This precedent solidifies the principle that possession serves as constructive notice, compelling parties in real estate transactions to look beyond the courthouse records to the land itself.
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