Brinkman v. Jones
44 Wis. 498 (1878)
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Rule of Law:
In a lien theory jurisdiction, a deed absolute on its face given as security for a debt is a mortgage, and a subsequent purchaser from the grantee has 'actual notice' of the grantor's rights if they have knowledge of facts that would put a prudent person on inquiry.
Facts:
- On August 27, 1870, Jones conveyed his farm to Shove via an absolute deed to secure a $2,300 debt and future advances.
- On the same day, the parties executed a separate written contract confirming the deed was security for the debt, establishing a mortgagor-mortgagee relationship.
- From 1870 to 1876, Jones remained in continuous and exclusive possession of the property, which was commonly known as the 'Jones farm'.
- On July 15, 1874, Jones and Shove created a new contract to replace the 1870 agreement, reflecting an increased debt amount but continuing the security arrangement.
- Shortly before purchasing the property from Shove in 1876, the plaintiff approached Jones's son to buy a portion of the farm.
- During this conversation, Jones's son informed the plaintiff that he had a 'claim to the property' and warned that the plaintiff 'had better let it alone or he would get himself in trouble'.
- In 1876, after being told by the register of deeds that the title was 'all right,' the plaintiff purchased the property from Shove, knowing Jones was still in possession.
Procedural Posture:
- The plaintiff, a grantee from Shove, brought an action of ejectment against Jones in the circuit court (trial court).
- At trial, the circuit judge refused to submit the question of the plaintiff's 'actual notice' to the jury.
- The circuit court entered a judgment in favor of the plaintiff.
- The defendant, Jones, appealed the judgment to the state's highest court.
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Issue:
Does a subsequent purchaser have 'actual notice' of an unrecorded defeasance, thereby forfeiting bona fide purchaser status, when they know the original grantor has remained in long and exclusive possession of the property after the conveyance and have been expressly warned of a competing claim?
Opinions:
Majority - Taylor, J.
Yes. A subsequent purchaser has 'actual notice' of an unrecorded defeasance when they possess knowledge of facts sufficient to put a prudent person on inquiry. The court first established that under Wisconsin's lien theory of mortgages, the 1870 deed and contract only created a lien on the property for Shove, while legal title remained with Jones. The subsequent transactions failed to legally transfer Jones's title. The central issue, therefore, was whether the plaintiff was a bona fide purchaser protected by the recording statute, which requires a lack of 'actual notice' of the unrecorded defeasance. The court rejected a narrow interpretation equating 'actual notice' with 'actual knowledge.' It held that 'actual notice' includes inquiry notice, which is triggered when a purchaser knows facts that would prompt a prudent person to investigate. Here, the plaintiff's knowledge of Jones's long, uninterrupted possession of the farm after conveying it, combined with the express warning from Jones's son, constituted sufficient facts to put the plaintiff on inquiry. A diligent inquiry would have revealed Jones's rights as a mortgagor, and the plaintiff's failure to inquire of Jones demonstrated a lack of good faith. Therefore, the question of notice should have been submitted to the jury.
Analysis:
This decision significantly broadens the definition of 'actual notice' under recording statutes, aligning it with the concept of 'inquiry notice.' It establishes that a purchaser cannot achieve bona fide status by willfully ignoring facts that strongly suggest a competing interest. The ruling emphasizes a purchaser's affirmative duty to investigate suspicious circumstances, particularly the continued possession of land by a grantor, rather than relying solely on the public record and the seller's assurances. This precedent reinforces the equitable principle that recording acts are designed to protect innocent purchasers, not those who act in bad faith or with willful blindness to the rights of others.
