When Notice Is Not Enough – Maintaining a Bona Fide Purchase with Inquiry

This article examines the ability to maintain protections afforded to bona fide purchasers by engaging in sufficient inquiry after limited notice of a potential claim. If you have any questions about status as a bona fide purchaser in Florida or Miami, please contact Bernhard Law Firm at www.bernhardlawfirm.com, abernhard@bernhardlawfirm.com, 786-871-3349.

A bona fide purchase is one in good faith belief of right, without fraud or deceit, after sufficient inquiry under the circumstances. Broche v. Cohn, 987 So. 2d 124, 127 (Fla. 4th DCA 2008) (holding buyer was bona fide purchaser despite notice of a claim); Hagelin v. U.S. Funding Group, LLC, 198 So. 3d 53, 57–58 (Fla. 2d DCA 2015) (holding buyer could not be subjected to alleged easement where record did not sufficiently show the creation of the easement, under process required by Declaration, on a sufficiently identifiable estate, despite alleged notice).

There is a legal presumption that a purchaser acquires his title in good faith and without sufficient notice of prior unrecorded conveyances or other matters that are not clear in the record. McCahill v. Travis Co., 45 So. 2d 191, 192–93 (Fla. 1950) (holding buyer was bona fide purchaser where claimant withheld his deed from buyer despite inquiry). Given this legal presumption of bona fide purchase, a purchaser need not show or prove lack of notice of a specific claim; record title is prima facie sufficient. Id.; Lesnoff v. Beckner, 135 So. 146, 147 (Fla. 1931) (holding buyer was bona fide purchaser despite that notice of competing deed was given to buyer’s agent).

Generally, a buyer has the right to rely on the plain language in the record title of his grantor. McCoy v. Love, 382 So. 2d 647, 648 (Fla. 1979). The burden is on the party challenging the bona fide nature of a purchase to show proper and sufficient notice of a specific and valid right; particularly where the challenger is claiming under an erroneous record, in order to overcome the presumption of a bona fide purchase. Feinberg v. Stearns, 47 So. 797, 798–99 (Fla. 1909); Rambo v. Dickenson, 110 So. 352, 353 (Fla. 1926) (holding possession of land by a tenant is not sufficient notice of a claim so as to overcome bona fide purchaser status).

Under Florida law, “those who by their conduct or neglect in permitting the record to mislead others must bear any consequent loss, rather than the one who in good faith may have acted with reference to the record as being in accord with actual facts.” Van Eepoel Real Estate Co. v. Sarasota Milk Co., 129 So. 892, 895 (Fla. 1930); Rabinowitz v. Houk, 129 So. 501, 511 (Fla. 1930); Rabinowitz v. Keefer, 132 So. 297 (Fla. 1931) (one who has withheld his deed from record, allowing purchaser to be misled, is estopped to question the right of such subsequent party).

Even after notice of a potential claim, a buyer can retain entitlement to bona-fide-purchaser status where there is no evidence of fraud or bad faith on the part of the purchaser, and the purchaser had taken steps to clarify the potential claim and eliminate it as a sustainable claim, or the claim itself is ultimately not viable. Broche, 987 So. 2d at 127 (holding that trial court was correct in awarding property to buyer as a bona fide purchase, even though buyer had notice of potential claim, where the buyer took steps to clarify the potential claim, and the claimant ultimately did not have a proper equitable interest in the property because it belonged to the claimant’s corporation rather than the claimant personally). Thus, a claimant challenging a buyer’s status as a bona fide purchaser must first prove that the claimant has a clear interest and right in the property, supported by legal documentation effecting specific rights. Id.

Some notice may notbe sufficient to overcome status and rights of a bona fide purchaser. Florida Masters Packing, Inc. v. Craig, 739 So. 2d 1288, 1290 (Fla. 4th DCA 1999) (holding buyers were bona fide purchasers, where original parties had made mutual mistake in legal description, and buyers had searched records but could not have discovered the error or intentions of original parties, and thus did not have sufficient notice to overcome bona fide purchase). A claimant’s mistakes in the record do not overcome a buyer’s status as a bona fide purchaser. Id.

Limited disclosures do not always create a duty on part of purchaser of pursuing investigations extrinsic to public records in order to discovery negligently maintained documents, and thus a party is estopped then from asserting title against those that have relied on the record. Chatlos v. McPherson, 95 So. 2d 506, 509–10 (Fla. 1957) (recording release did not create duty of investigations extrinsic to public records to discover true nature of challenger’s claim and deed).

The Florida Supreme Court has made clear that vague references do NOTsuffice notice:

“Irwin does not deny, but admits having conversationswith Kemp, but does not remember distinctly what was said. Inasmuch, however, as neither Kemp, Caves, nor Vann undertakes to describe the land about which the conversation occurred by the legal numbers, but only as east of Kemp’s place, and as it appears that complainants owned other lands as shown by the records at that time east of Kemp’s land, separated from it only by the land in dispute, and inasmuch as Irwin might reasonably have understood the land referred to was the land for which he afterwards found title of record in complainants, we do notthink this conversation was sufficient to put him on notice of the unrecorded deed of complainants to the land in dispute. . . . Girardeau evidently sold and conveyed the land to O’Brien under the honest conviction, after considerable inquiry, that he had a right to sell it.”

Hopkins v. O’Brien, 49 So. 936, 941 (Fla. 1909). As even the Flanigan’scourt stated:

“To constitute notice of an unrecorded property interest or its release, ‘the information must come from some one interested in the estate, or from some authoritative source;’ ‘vague reports and rumors from strangers are not sufficient foundation on which to charge a purchaser with notice.’”

Flanagan’s Enters., Inc. v. Shoppes at 18th & Commercial, Inc., 954 So. 2d 758, 763–64  (Fla. 4th DCA 2007) (quoting Hopkins v. O’Brien, 49 So. 936, 941 (Fla. 1909)).

Where notice of a claim allegedly comes from a document’s line-item or clause in the record, and the buyer has made inquiry but not received a clear response as to the effect of that line-item or clause, the issue of notice should notbe determined by summary judgment and instead should be upon trial examination of the witnesses as to what more could have been done to determine the exact claim before purchase. Starlines Int’l Corp. v. Union Planters Bank, N.A., 976 So. 2d 1172, 1177 (Fla. 4th DCA 2008) (holding dragnet clause could not be enforced against buyer unless he knew and understood what was included within the grasp of the clause).

Even if the circumstances surrounding a purchase suggest the need for inquiry, if the search, even though not conducted, was certain to be futile, the presumption of the duty to inquire is rebutted, and no notice should be imputed. Tempay, Inc. v. Biltres Staffing of Tampa Bay, LLC, No. 8:11-cv-02732-T-27AEP, 2013WL12097458 at *5 (M.D. Fla. Jan. 18, 2013) (quoting Smith v. Fed. Deposit Ins. Corp., 61 F.3d 1552, 1558 (11th Cir. 1995)); Camena Investments & Property Mgmt. Corp. v. Cross, 791 So. 2d 595, 597 (Fla. 3d DCA 2001).

It is a question for the fact-finder upon trial examination of witnesses as to whether a prudent buyer, upon learning from initial search for potential issues in connection with the property, should have made even further inquiry into the exact state of the title, and whether such inquiry would have actually revealed the claimant’s exact claim against the property. McCausland v. Davis, 204 So. 2d 334, 334 (Fla. 2d DCA 1967) (even knowledge of note was insufficient notice of mortgage, and thus buyer was bona fide purchaser). If not, then the buyer is entitled to protection as a bona fide purchaser, despite some notice of a potential claim. Id.

Where conflicting inferences can be drawn from the circumstances, or questions as to the credibility of witnesses exist, the issue of notice should be determined by a trier of fact upon trial examination of witnesses, not at summary judgment. Joseph Bucheck Const. Corp. v. W.E. Music, 420 So. 2d 410, 413 (Fla. 1st DCA 1982) (aff’ingfinding that buyer did not have sufficient notice of contract by recorded lien, so as to overcome status as bona fide purchaser, despite actual notice).

If you have any questions about status as a bona fide purchaser, please contact Bernhard Law Firm at www.bernhardlawfirm.com, abernhard@bernhardlawfirm.com, 786-871-3349.

Bernhard Law Firm

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