Effect Of Persons In Possession Of Real Estate Other Than The Owner/Vendor On A Buyer's Status As A...

2 of 266 DOCUMENTS

AnalysisAs of: Jul 10, 2014

Baldwin County Federal Savings Bank v. Central Bank of the South, et al.

No. 89-1457

Supreme Court of Alabama

585 So. 2d 1279; 1991 Ala. LEXIS 670

June 28, 1991

SUBSEQUENT HISTORY: [**1] Released for Publication September 18, 1991.

PRIOR HISTORY: Appeal from Baldwin Circuit Court, No. CV-88-500166; Thomas B. Norton, Judge.

DISPOSITION: AFFIRMED.

CASE SUMMARY:

PROCEDURAL POSTURE: Appellant savings bank sought review of judgment from the Baldwin Circuit Court(Alabama) that declared that the interest and title of appellees, central bank and landowners, in and to the property,respectively, were "paramount and superior" to the rights of the savings bank and its successors and assigns.

OVERVIEW: Appellees filed a declaratory judgment action against the savings bank to determine the status of twoliens against undeveloped beachfront property that was owned by the landowners. Appellees asked the trial court todeclare that their separate interests in the property were superior to any rights the savings bank might have had in theproperty by virtue of its judgment against the grantor of the property. The trial court entered a judgment declaring thatthe landowners' title to the property, as described in the deed from the grantor, and the central bank's interest in theproperty, obtained through the mortgage from the landowners, were "paramount and superior" to the rights of thesavings bank and its successors and assigns. On appeal, the court affirmed the judgment. The court held that the trialcourt's implicit finding that the savings bank had constructive notice of the landowners' deed and also of the centralbank's mortgage was not clearly erroneous, but it was supported by credible evidence.

OUTCOME: The court affirmed the judgment of the trial court that declared the central bank's and the landowners'interest in the property and title to the property, respectively, were "paramount and superior" to the rights of the savings

Page 1

bank and its successors and assigns.

CORE TERMS: notice, deed, judgment creditor, certificate, recorded, mortgage, purchaser, conveyance, recording,constructive notice, unrecorded, redemption, mortgagee, sufficient to put, tenus, ore, subject property, new trial, greatweight, actual knowledge, credible evidence, tax sale, undeveloped, beachfront, lienholder, probate, visited, void

LexisNexis(R) Headnotes

Civil Procedure > Appeals > Standards of Review > Clearly Erroneous ReviewEvidence > Inferences & Presumptions > Presumptions > Presumption of Regularity[HN1] Where evidence has been presented orally, a presumption of correctness attends the trial court's conclusion onissues of fact, if these conclusions were based totally or in part on oral testimony. The court will not disturb the trialcourt's conclusions unless they are clearly erroneous and against the great weight of the evidence.

Real Property Law > Deeds > General OverviewReal Property Law > Financing > Mortgages & Other Security Instruments > Mortgagee's InterestsReal Property Law > Priorities & Recording > Bona Fide Purchasers[HN2] All conveyances of real property, deeds, mortgages, deeds of trust or instruments in the nature of mortgages tosecure any debts are inoperative and void as to purchasers for a valuable consideration, mortgagees and judgmentcreditors without notice, unless the same have been recorded before the accrual of the right of such purchasers,mortgagees or judgment creditors. Ala. Code 35-4-90 (1975).

Real Property Law > Priorities & Recording > Bona Fide Purchasers[HN3] The principle that recording first creates superior rights only when the recording party does not have actualknowledge or constructive notice of prior unrecorded conveyances is an equitable principle of long standing that hasbeen consistently applied in cases involving judgment creditors.

Real Property Law > Nonmortgage Liens > Mechanics' LiensReal Property Law > Priorities & Recording > Bona Fide Purchasers[HN4] The character or quality of possession that is sufficient to provide notice has been described as whatever issufficient to put a party on inquiry concerning possible competing claims to the property.

Real Property Law > Estates > Present Estates > Fee Simple Estates[HN5] An owner is not required to physically reside on property in order to establish possession. Instead, he need onlymake use of the property in a manner that is consistent with its nature.

COUNSEL: For Appellant: Claude E. Bankester and Daniel T. Bankester of Wilkins, Bankester, Biles & Wynne, BayMinette, Alabama.

For Appellee: Daniel G. Blackburn of Stone, Granade, Crosby & Blackburn, Bay Minette, Alabama.

JUDGES: Almon, Shores, Adams, and Ingram, JJ., concur. Steagall, J., concurs in the result. Maddox and Kennedy,JJ., dissent. Houston, J., recused.

OPINION BY: PER CURIAM

Page 2585 So. 2d 1279, *; 1991 Ala. LEXIS 670, **1

OPINION

[*1280] Baldwin County Federal Savings Bank ("BCFSB") appeals from a judgment in favor of the plaintiffs,Steve Odom, Diane Odom, and Central Bank of the South ("Central"), in a declaratory judgment action. The complaintwas filed by Central and the Odoms to determine the status of two liens against undeveloped beachfront property inBaldwin County that is owned by the Odoms. 1

1 The complaint named an additional lienholder as a defendant. However, a default judgment was enteredagainst that defendant and it has not appealed. Therefore, only the lien asserted by BCFSB will be discussed.

[**2] On March 30, 1986, the Odoms bought the subject property from Gulf Sun Investments, Inc. ("Gulf Sun").They did not immediately record their deed. On May 15, 1986, the Odoms mortgaged the property to Central. As withthe Odoms' deed, the mortgage held by Central was not immediately recorded. On June 4, 1986, BCFSB, which had onMay 22 obtained a judgment against Gulf Sun, recorded a certificate of that judgment. On July 16, 1986, the Odoms'deed and Central's mortgage were recorded.

After learning that BCFSB had filed its certificate of judgment against Gulf Sun, Central and the Odoms filed acomplaint wherein they asked the court to declare that their separate interests in the property were superior to any rightsBCFSB might have in the property by virtue of its judgment against Gulf Sun. After an ore tenus hearing, the trial courtentered a judgment declaring that the Odoms' title to the property, as described in the deed from Gulf Sun, and Central'sinterest in the property, obtained through the mortgage from the Odoms, were "paramount and superior" to the rights ofBCFSB and its successors and assigns. That judgment did not contain specific findings of fact. The court denied [**3]BCFSB's motion for a new trial, and BCFSB appeals.

BCFSB argues that, because it recorded its certificate of judgment before the recording of the Odoms' deed andCentral's mortgage, its rights in the property are superior to those held by the Odoms and by Central. 2 Alternatively, itargues that the court's implicit finding that the Odoms' possession was such as to give it notice of the Odoms'unrecorded deed and Central's unrecorded mortgage before it filed the certificate of judgment is not supported by theevidence.

2 There is no indication that BCFSB made any effort to have a lis pendens notice filed against this propertyduring the pendency of its action against Gulf Sun, see Ala. Code 1975, 35-4-131; neither has BCFSB made aclaim or defense in this action that Gulf Sun's conveyance to the Odoms was made with intent to defraudcreditors, see 8-9-6.

At the outset, we note that the scope of this Court's review regarding the resolution of fact questions in ore tenuscases is restricted:

"It is the law in [**4] Alabama that [HN1] where evidence has been presented orally, a presumption of correctnessattends the trial court's conclusion on issues of fact, if these conclusions were based totally or in part on oral testimony.This Court will not disturb the trial court's conclusions unless they are clearly erroneous and against the great weight ofthe evidence. Cougar Mining Co. v. Mineral Land & Mining Consultants, Inc., 392 So. 2d 1177 (Ala. 1981); Raidt v.Crane, 342 So. 2d 358 (Ala. 1977); Adams Supply Co. v. United States Fidelity & Guaranty Co., 269 Ala. 171, 111 So.2d 906 (1959)."

First Alabama Bank v. Martin, 425 So. 2d 415, 425 (Ala. 1982). In addition, in cases such as this one, where the courtdid not make specific findings of fact, this Court will assume that the court made the findings necessary to support itsjudgment, unless such findings would be clearly erroneous [*1281] and against the great weight and preponderance ofthe evidence. Hand v. Stanard, 392 So. 2d 1157, 1159 (Ala. 1980).

BCFSB's first argument concerns the provisions of Ala. Code 1975, 35-4-90(a). It contends [**5] that, pursuantto that section, once a judgment creditor records its certificate of judgment, all subsequently recorded conveyances are


void as to that judgment. It directs this Court's attention to Johnson v. Haleyville Mobile Home Supply, Inc., 477 So. 2d328 (Ala. 1985), as support for its argument.

We do not agree. Section 35-4-90(a) gives judgment creditors, purchasers, and mortgagees priority over an earlierexecuted deed that has not been recorded only when the judgment creditor, purchaser, or mortgagee records itsinstrument without actual knowledge or constructive notice of the earlier conveyance. Therefore, simply winning therace to the courthouse and recording first is not enough to give a lienholder priority. It is also necessary that thejudgment creditor, whose rights, if any, attach upon the act of recording, record its judgment without notice of theearlier deed. Smith v. Arrow Transp. Co., 571 So. 2d 1003 (Ala. 1990); Department of Revenue v. Price-Williams, 545So. 2d 7 (Ala. 1989); Gulf Oil Corp. v. Beck, 293 Ala. 158, 300 So. 2d 822 (1974).

The language of 35-4-90(a) [**6] indicates that it was drafted, at least in part, to prevent the result argued for byBCFSB:

[HN2] "All conveyances of real property, deeds, mortgages, deeds of trust or instruments in the nature ofmortgages to secure any debts are inoperative and void as to purchasers for a valuable consideration, mortgagees andjudgment creditors without notice, unless the same have been recorded before the accrual of the right of suchpurchasers, mortgagees or judgment creditors."

Ala. Code 1975, 35-4-90 (emphasis added).

[HN3] The principle that recording first creates superior rights only when the recording party does not have actualknowledge or constructive notice of prior unrecorded conveyances is an equitable principle of long standing that hasbeen consistently applied in cases involving judgment creditors. Smith v. Arrow Transp. Co., supra; Gulf Oil, supra; W.T. Rawleigh Co. v. Barnette, 253 Ala. 433, 44 So. 2d 585 (1950); Burt v. Cassety, 12 Ala. 734 (1848). In Gulf Oil, thisCourt noted:

"'It results from this view, that as the judgment creditor had, by the possession of the complainant, [**7]constructive notice of her title, he acquired no lien upon the land, in virtue of his judgment.'"

293 Ala. at 160, 300 So. 2d at 823 (quoting Burt, supra, at 739; emphasis in original).

[HN4] The character or quality of possession that is sufficient to provide notice has been described as "whatever issufficient to put a party on inquiry" concerning possible competing claims to the property. Gamble v. Black WarriorCoal Co., 172 Ala. 669, 672, 55 So. 190, 190 (1911); Jefferson County v. Mosley, 284 Ala. 593, 226 So. 2d 652 (1969).Under 35-4-90(a), judgment creditors and purchasers are "on the same footing." Gulf Oil, supra; Burt, supra;Therefore, the quantum of possession needed to put a judgment creditor on notice is no greater than that which isdeemed sufficient to put a purchaser on notice. Id.

In addition, BCFSB's reliance on our opinion in Johnson, supra, is misplaced. The sole issue addressed in Johnsonwas whether a judgment creditor's rights had accrued upon the recording of the certificate of judgment [**8] eventhough the judgment debtor thereafter filed a motion for new trial. 477 So. 2d at 328. That opinion mentioned onlysummarily that the judgment creditor did not have notice of the deed that had been executed before it recorded itscertificate of judgment. Id., at 329-30. Thus, Johnson did not address the issue that is central to the instant case, i.e.,whether the judgment creditor had notice of unrecorded conveyances before it recorded its certificate of judgment.

BCFSB also argues that the evidence does not support the trial court's implicit finding that there was sufficient[*1282] evidence of the Odoms' possession of the property to put it on notice of the Odoms' deed and, by inference,the subsequent mortgage to Central. 3 The determination of whether BCFSB was chargeable with notice of theOdoms' possession was a question of fact within the equity jurisdiction of the court. Hodges v. Beardsley, 269 Ala.280, 283-84, 112 So. 2d 482, 484-85 (1959). Because the ore tenus rule applies to this case, the court's resolution of thatquestion will not be reversed unless it is clearly erroneous or unsupported by [**9] credible evidence. May v.

Page 4585 So. 2d 1279, *1281; 1991 Ala. LEXIS 670, **5

Campbell, 470 So. 2d 1188 (Ala. 1985).

3 Where a third party is in possession of property, a purchaser of that property or a judgment creditor ischarged with constructive notice of the nature of the third party's title. Smith, supra; Gamble, supra. Therefore,if BCFSB had notice of the Odoms' claims, it also had notice of the Odoms' mortgage to Central.

The most important evidence supporting the trial judge's decision showed that the Odoms had redeemed theproperty from a prior tax sale before BCFSB recorded its certificate of judgment. As a result, a certificate of redemptionin the Odoms' names, dated May 19, 1986, was issued by the Baldwin County tax collector's office. 4 Documents thatshow the payment of such taxes have been held to be competent evidence of the payor's claim of title. Gantt v. Phillips,262 Ala. 184, 77 So. 2d 916 (1955). Mr. Odom testified that the property had been [**10] assessed in the Odoms'names from the time of the redemption. Thus, it appears that BCFSB had notice through the tax assessor's records thatthe Odoms claimed the property and had assessed it in their names.

4 Although there is nothing in the record on this point, we note that the redemption of property that had beensold at a tax sale is a matter within the jurisdiction of the judge of probate. Ala. Code 1975, 40-10-120 et seq.Records concerning such redemptions are kept by the judge of probate. 40-10-127.

There was also evidence of the Odoms' occupancy of the property that supports the trial court's determination thatthey "possessed" the property in a manner sufficient to put BCFSB on notice of their deed. [HN5] An owner is notrequired to physically reside on property in order to establish possession. Instead, he need only make use of the propertyin a manner that is consistent with its nature. Hand, supra, at 1160; Turnham v. Potter, 289 Ala. 685, 271 So. 2d 246(1972). [**11] The subject property is undeveloped beachfront property. Steve Odom testified that, during the periodbetween the date of the deed and the date that BCFSB recorded its certificate of judgment, he and his wife repeatedlyvisited the property and walked its boundaries. They had it surveyed and had the corners marked with stakes. They alsovisited the property with real estate agents to discuss how to develop it and used it for family outings, picnics,swimming, and sunbathing.

This Court has recognized "that it is difficult, if not impossible, to lay down any general rule as to what facts will inevery case be sufficient to charge a party with notice or put him on inquiry." Jefferson County v. Mosley, 284 Ala. at599, 226 So. 2d at 656. However, in light of the evidence set out above, we cannot say that the trial judge's implicitfinding that BCFSB had constructive notice of the Odoms' deed, and therefore also of Central's mortgage, Smith, supra,was clearly erroneous or not supported by credible evidence. Therefore, the judgment is due to be affirmed. Hand,supra.

AFFIRMED.

Steagall, J., concurs in the result.

[**12] Maddox and Kennedy, JJ., dissent.


3 of 266 DOCUMENTS

AnalysisAs of: Jul 10, 2014

Betty Ruth Smith v. Arrow Transportation Company, Inc., and Mel Bailey, asSheriff of Jefferson County

No. 89-572


571 So. 2d 1003; 1990 Ala. LEXIS 701

September 7, 1990

PRIOR HISTORY: [**1] Appeal from Jefferson Circuit Court; CV-88-503-987MC; Marvin Cherner, Judge.


CASE SUMMARY:

PROCEDURAL POSTURE: Plaintiff joint tenant appealed the decision of the Jefferson Circuit Court (Alabama),which granted summary judgment in favor of defendant judgment creditor in an action to quiet title.

OVERVIEW: The joint tenant acquired property through marriage, but title was held in the name of her husband'scorporation. The joint tenant remained in possession of the property at all times. The judgment creditor obtained a lienagainst that corporation. When the corporation filed for bankruptcy, the bankruptcy court entered an order of stay toprotect the judgment creditor. An execution on that judgment was issued and the sheriff scheduled a sale of theproperty. The joint tenant filed an action to quiet title, and the property was sold to the highest bidder. The trial courtentered judgment for the judgment creditor. On appeal, the court affirmed. The court held that the judgment creditorwas entitled to judgment as a matter of law because the joint tenant's deed was recorded one year after the certificate ofjudgment was recorded and the judgment creditor did not have constructive notice of the joint tenant's claim to theproperty.

OUTCOME: The court affirmed the summary judgment in favor of the judgment creditor.

CORE TERMS: deed, recorded, certificate, notice, judgment creditor, constructive notice, purchaser, conveyance,

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grantee, summary judgment, visible, recordation, mortgagees, real property, substantial evidence, purportedly,recording, conveyed, defeat, void, marriage, quiet, matter of law, record owner, subject to levy, executed deed, jointpossession, valuable consideration, change of possession, unambiguously


Real Property Law > Deeds > General OverviewReal Property Law > Financing > Mortgages & Other Security Instruments > Mortgagee's InterestsReal Property Law > Priorities & Recording > Bona Fide Purchasers[HN1] Ala. Code 35-4-90(a), (b) (1975) provides: (a) All conveyances of real property, deeds, mortgages, deeds oftrust or instruments in the nature of mortgages to secure any debts are inoperative and void as to purchasers for avaluable consideration, mortgagees and judgment creditors without notice, unless the same have been recorded beforethe accrual of the right of such purchasers, mortgagees or judgment creditors. (b) Subsection (a) of this section includesabsolute conveyances of real property defeasible by a defeasance or other instrument, in which case such defeasance orinstrument must be recorded, according to its character, within the time limited in subsection (a) of this section or it isvoid as to purchasers for a valuable consideration, mortgagees and judgment creditors of the original grantee withoutnotice. Ala. Code 35-4-90 (1975).

Contracts Law > Types of Contracts > Bona Fide PurchasersReal Property Law > Financing > Mortgages & Other Security Instruments > Mortgagee's InterestsReal Property Law > Priorities & Recording > Bona Fide Purchasers[HN2] A deed that is unrecorded is good between the grantor and grantee, but is void against bona fide purchasers forvalue, mortgagees, and judgment creditors without notice. Therefore, if a judgment creditor without notice perfects alien against the property, he is protected against subsequently recorded instruments, regardless of the date of executionor delivery of those other instruments.

Commercial Law (UCC) > Secured Transactions (Article 9) > General OverviewReal Property Law > Deeds > General OverviewReal Property Law > Nonmortgage Liens > Judgment Liens[HN3] Ala. Code 6-9-210 (1975) sets out the procedure for recording a certificate of judgment.

Bankruptcy Law > Case Administration > NoticeCivil Procedure > Judgments > Entry of Judgments > Enforcement & Execution > Writs of ExecutionCommercial Law (UCC) > Secured Transactions (Article 9) > General Overview[HN4] Every judgment, a certificate of which has been filed as provided in Ala. Code 6-9-210, shall be a lien in thecounty where filed on all property of the defendant that is subject to levy and sale under execution, and such lien shallcontinue for 10 years after the date of such judgment. No insolvency proceedings or declaration of insolvency shallaffect or impair such lien, except bankruptcy proceedings instituted within four months after the filing of the certificateof judgment for record as provided by law. The filing of said certificate of judgment, as provided in 6-9-210, shall benotice to all persons of the existence of the lien thereby created. Ala. Code 6-9-211.

Real Property Law > Nonmortgage Liens > Judgment LiensReal Property Law > Nonmortgage Liens > Lien Priorities[HN5] The recording of a certificate of judgment creates a blanket lien on all of the property of the defendant that islocated in the county of recordation and is subject to levy and sale. The judgment creditor's rights in the property attach


upon the act of recording the certificate of judgment and have priority over all rights arising out of subsequentlyrecorded instruments.

Civil Procedure > Judgments > Entry of Judgments > Enforcement & Execution > General OverviewReal Property Law > Nonmortgage Liens > Judgment LiensReal Property Law > Nonmortgage Liens > Lien Priorities[HN6] In order for a judgment creditor to have priority over a prior executed deed, it must be shown that the creditor'srights accrued before the prior executed deed was recorded and that he did not have notice of the deed at the time of thejudgment. The burden of proof is on the person holding under an unrecorded deed to show notice in order to defeat therights of the judgment creditor.

Real Property Law > Nonmortgage Liens > Judgment LiensReal Property Law > Priorities & Recording > Bona Fide Purchasers[HN7] Where a third party is in possession of the premises, a purchaser of those premises or a judgment creditor ischarged with constructive notice of the nature of the third party's title. However, for possession to operate as notice, itmust be open, visible, exclusive and unambiguous, not liable to be misconstrued or misunderstood. Consequently, it isuniformly held that where there is no open and visible change of possession, it does not operate as notice. Hence,where the possession of the vendor and vendee is joint at the time of the sale and conveyance (or recordation of thecertificate of judgment), the rule does not apply. The joint possession does not operate as constructive notice, becausethere would be no visible act that is calculated to put a stranger on inquiry as to the changed attitude or status of thetitle.

Real Property Law > Deeds > Construction & InterpretationReal Property Law > Deeds > Covenants of Title[HN8] A basic rule of construction of deeds is that when subsequent words or markings are of doubtful import, theycannot be construed so as to contradict preceding words that are certain.

COUNSEL: J. N. Holt of Holt, Cooper & Upshaw, Birmingham, Alabama.

Ralph H. Smith and Michael L. Hall of Johnston, Barton, Proctor, Swedlaw & Naff, Birmingham, Alabama.

JUDGES: Almon, Justice. Hornsby, C. J., and Maddox, Adams, and Steagall, JJ., concur.

OPINION BY: ALMON

OPINION

[*1004] This is an appeal from a summary judgment entered in favor of the defendants/counter-claimants, ArrowTransportation Company, Inc. ("Arrow"), and Mel Bailey, sheriff of Jefferson County, and against theplaintiff/counter-defendant, Betty Ruth Smith, in an action to quiet title. 1

1 Although Arrow's present corporate name is Merchants Transportation, Inc., we will refer to the corporationas Arrow in order to maintain consistency with the trial record. Mel Bailey, the sheriff of Jefferson County, wasalso named as a defendant in Betty's complaint in an additional count requesting a permanent injunction againstthe levy and sale of the subject property. However, Bailey's involvement in this case was minimal, and he hasnot filed an appellee's brief.

[**2] Facts


There are a number of conveyances, alleged conveyances, and other transactions that directly affect each party'sinterest in the subject property, which consists of a residential lot and house. Those events are briefly summarizedbelow. A table with the dates of the relevant transactions follows that summary.

Betty married Charles Ross Smith on April 15, 1982. Prior to that marriage she had purportedly executed a contractto purchase the property. That contract was not recorded, and when a deed was executed purportedly pursuant thereto,title to the property was not taken in Betty's name, but was instead taken in

the name of Trico [*1005] Fuels, Inc. ("Trico"), a corporation operated by Charles's family. Nonetheless, Bettyentered into, and remained in, possession of the property at all times relevant to this appeal. Betty alleges that title to theproperty was put in Trico's name as a "safeguard" until she and Charles were sure that their marriage would besuccessful. She also alleges that once the marriage proved to be a success the property was to be conveyed to her. Shecontends that this agreement between her, Charles, and Trico was evidenced by the inscriptionof [**3] her initials"B.R.H." next to Trico's name as grantee on the deed. 2 That deed was properly recorded.

2 Betty's maiden name was Betty Ruth Harper, hence the initials "B.R.H."

Trico remained the record owner of the property for more than two and one-half years after that deed was recorded.During that period Arrow obtained a judgment against Trico and recorded a certificate of judgment in Real volume2533 in the Jefferson County probate court. After the certificate of judgment was recorded, a deed that indicated thatTrico had conveyed the property to Charles was recorded. Six months later, another deed, showing a conveyance fromCharles and Betty to each other as joint tenants with right of survivorship, was recorded.

Trico later filed a bankruptcy petition. An order of stay was entered by the bankruptcy court to protect Trico'sassets from creditors. Arrow filed a motion in the bankruptcy court for relief from stay so that it could exercise its rightsagainst the property as a judgment creditor. Arrow's motionwas [**4] granted. An execution on Arrow's judgmentagainst Trico was issued and the sheriff scheduled a sale of the property. Betty filed this action to quiet title to theproperty, and Arrow filed an answer and counterclaim to quiet title. The property was sold to Arrow as the highestbidder and that corporation recorded a sheriff's deed. Summary judgment was later entered in favor of Arrow.

TransactionsDescription Date Date Recorded

1. Contract of sale to Betty Ruth Smith(nee Harper) 01/04/82 Not recorded

2. Deed to Trico as grantee 01/12/82 01/20/823. Entry of judgment for Arrow

against Trico 05/30/84 06/29/844. Deed from Trico to Charles 01/05/84 09/14/845. Deed from Charles and Betty

to each other as joint tenants 03/19/85 03/20/856. Petition in bankruptcy filed by Trico 05/06/85 N/A7. Lift of stay in bankruptcy in favor

of Arrow 05/23/88 N/A8. Execution on Arrow's judgment against

Trico delivered to Sheriff 06/28/88 N/A


9. Sheriff's sale of property to Arrow 10/17/88 10/21/88

Issues

Betty argues that there was evidence that Arrow was not a judgment creditor or purchaser without notice of anadverse claim to the property and, therefore, that [**5] summary judgment was not proper. She advances twoarguments to support that contention. In order for us to address those arguments, we must review the relevant statutesregarding the recordation of deeds and other instruments affecting title to real property, as well as the effect that theproper recordation of a certificate of judgment has on the defendant's property.

[HN1] "(a) All conveyances of real property, deeds, mortgages, deeds of trust or instruments in the nature ofmortgages to secure any debts are inoperative and void as to purchasers for a valuable consideration, mortgagees andjudgment creditors without notice, unless the same have been recorded before the accrual [*1006] of the right of suchpurchasers, mortgagees or judgment creditors.

"(b) Subsection (a) of this section includes absolute conveyances of real property defeasible by a defeasance orother instrument, in which case such defeasance or instrument must be recorded, according to its character, within thetime limited in subsection (a) of this section or it is void as to purchasers for a valuable consideration, mortgagees andjudgment creditors of the original grantee without notice."

Ala. Code [**6] 1975, 35-4-90 (emphasis added). [HN2] A deed that is unrecorded is good between the grantor andgrantee, but is void against bona fide purchasers for value, mortgagees, and judgment creditors without notice.Alexander v. Fountain, 195 Ala. 3, 70 So. 669 (1916). Therefore, if a judgment creditor without notice perfects a lienagainst the property, he is protected against subsequently recorded instruments, regardless of the date of execution ordelivery of those other instruments. Johnson v. Haleyville Mobile Home Supply, Inc., 477 So. 2d 328 (Ala. 1985).

[HN3] Ala. Code 1975, 6-9-210, sets out the procedure for recording a certificate of judgment. Betty does notcontend that Arrow failed to comply with the requirements of that statute. The effect that properly filing a certificate ofjudgment has on the defendant's property is set out in 6-9-211:

[HN4] "Every judgment, a certificate of which has been filed as provided in section 6-9-210, shall be a lien in thecounty where filed on all property of the defendant which is subject to levy and sale under execution, and such lienshall continue for 10 years after the [**7] date of such judgment. . . . No insolvency proceedings or declaration ofinsolvency shall affect or impair such lien, except bankruptcy proceedings instituted within four months after the filingof the certificate of judgment for record as provided by law. The filing of said certificate of judgment, as provided insection 6-9-210, shall be notice to all persons of the existence of the lien thereby created."

(Emphasis added.) [HN5] The recording of a certificate of judgment creates a blanket lien on all of the property of thedefendant that is located in the county of recordation and is subject to levy and sale. Kiker v. Nat'l Structures, Inc., 342So. 2d 746 (Ala. 1977); Shrout v. Seale, 287 Ala. 215, 250 So. 2d 592 (1971); Second National Bank v. Allgood, 234Ala. 654, 176 So. 363 (1937). The judgment creditor's rights in the property attach upon the act of recording thecertificate of judgment and have priority over all rights arising out of subsequently recorded instruments. Johnson,supra; Reuf v. Fulks, 219 Ala. 252, 122 So. 14 (1929); [**8] Goodbar & Co. v. Blackwell, 170 Ala. 232, 54 So. 532(1911); Galloway v. State ex rel. Payne, 371 So. 2d 48 (Ala. Civ. App. 1979).

[HN6] In order for a judgment creditor to have priority over a prior executed deed, it must be shown that thecreditor's rights accrued before the prior executed deed was recorded and that he did not have notice of the deed at thetime of the judgment. Johnson, supra; Goodbar & Co., supra; Hall v. Griffin, 119 Ala. 214, 24 So. 27 (1898). Theburden of proof is on the person holding under an unrecorded deed to show notice in order to defeat the rights of thejudgment creditor. Wiggins v. Stewart Bros., 215 Ala. 9, 109 So. 101 (1926).


It is not disputed that Arrow recorded its certificate of judgment before the deeds that purportedly transferred theproperty from Trico to Betty and Charles were recorded. Therefore, unless Betty could present evidence that Arrow hadactual or constructive notice of her claim to the property, Arrow would be entitled to a [**9] judgment as a matter oflaw. Sadie v. Martin, 468 So. 2d 162 (Ala. 1985). Because Betty's complaint was filed after June 11, 1987, she musthave produced "substantial evidence" that showed the existence of a genuine issue of material fact in order to defeatArrow's motion for summary judgment. Ala. Code 1975, 12-21-12(d); Posey v. Posey, 545 So. 2d 1329 (Ala. 1989).

Betty puts forth two arguments in support of her contention that Arrow had at [*1007] least constructive notice ofher claim to the property: (1) she contends that her continuous possession of the property, from 1982 until the present,gave Arrow actual or constructive notice that she claimed an interest in the property; or (2) she argues that theinscription of the initials "B.R.H." on the 1982 deed to Trico gave Arrow actual or constructive notice that someoneother than Trico claimed an interest in the property.

As a general rule, [HN7] where a third party is in possession of the premises, a purchaser of those premises or ajudgment creditor is charged with constructive notice of the nature of the third party's title. Gamble v. Black WarriorCoal Co., 172 Ala. 669, 55 So. 190 (1911). [**10] However, as this Court stated in Lightsey v. Stone, 255 Ala. 541,547, 52 So. 2d 376, 381 (1951):

"For possession to operate as notice, it must be open, visible, exclusive and unambiguous, not liable to be misconstruedor misunderstood. Consequently, it is uniformly held that where there is no open and visible change of possession, itdoes not operate as notice.

"Hence, we have held that where the possession of the vendor and vendee is joint at the time of the sale andconveyance [or recordation of the certificate of judgment], the rule does not apply. The joint possession does notoperate as constructive notice, because there would be no visible act which is calculated to put a stranger on inquiry asto the changed attitude or status of the title."

(Emphasis added.) See Pake v. Lindsey Mill Co., 208 Ala. 569, 94 So. 573 (1922); Holly v. Dinkins, 202 Ala. 477, 80So. 861 (1919); Autauga Banking & Trust Co. v. Chambliss, 200 Ala. 87, 75 So. 463 (1917); Sloss-Sheffield Steel &Iron Co. v. Taff, 178 Ala. 382, 59 So. 658 (1912); [**11] Christopher v. Curtis-Attalla Lumber Co., 175 Ala. 484, 57So. 837 (1912); Langley v. Pulliam, 162 Ala. 142, 50 So. 365 (1909); O'Neal v. Prestwood, 153 Ala. 443, 45 So. 251(1907); Kindred v. New England Mortgage Security Co., 116 Ala. 192, 23 So. 56 (1897); Munn v. Achey, 110 Ala. 628,18 So. 299 (1895); Motley v. Jones, 98 Ala. 443, 13 So. 782 (1893); and McCarthy v. Nicrosi, 72 Ala. 332 (1882).

For more than two years before Arrow recorded its certificate of judgment, both Trico, as the record owner of theproperty, and Betty, as the occupier of the property, were in joint possession of the property. Betty's possession wasattributable to the ownership of the property by the corporation owned by her husband's family and therefore did notunambiguously serve as notice of a claim by her that was inconsistent with the recorded title in Trico's name. The onlydeed conveying an interest [**12] to Betty was not recorded until almost one year after Arrow had recorded itscertificate of judgment. At the only relevant time, the date that Arrow recorded its certificate of judgment, there hadbeen no visible change of possession or "any visible act . . . calculated to put [Arrow] on inquiry" as to Betty's possibleclaim. Therefore, her possession could not operate as notice. Lightsey, supra. See First Nat'l Bank of Birmingham v.Culberson, 342 So. 2d 347 (Ala. 1977); Wiggins, supra; Autauga Banking & Trust Co. v. Chambliss, 200 Ala. 87, 75 So.463 (1917); Harris v. Hanchey, 192 Ala. 179, 68 So. 276 (1915); O'Neal v. Prestwood, 153 Ala. 443, 45 So. 251 (1907);McCarthy v. Nicrosi, 72 Ala. 332 (1882).

Betty's second argument is based on the inscription of the initials "B.R.H." following the grantee clause in the 1982deed to Trico. She contends that those initials gave Arrow notice that someone [**13] other than Trico had a claim tothe property. In his order, the trial judge rejected that argument, stating:

"To say that these initials should raise a question as to the name of the prospective purchaser is to indulge in


unbridled speculation and conjecture. The placing of initials on a deed without anything more cannot be considered assufficient to put anyone on notice of a claim of title in the property conveyed contrary to or inconsistent with the termsof the deed itself."

We agree. [HN8] A basic rule of construction of deeds is that when subsequent words or [*1008] markings are ofdoubtful import, they cannot be construed so as to contradict preceding words that are certain. Johnson v. Harrison,272 Ala. 210, 130 So. 2d 35 (1961); Kettler v. Gandy, 270 Ala. 494, 119 So. 2d 913 (1960). In the instant case the deedunambiguously named Trico as the grantee. The handwritten initials following that clause are certainly of "doubtfulimport" and cannot be used to contradict the clear meaning of the deed. Id. Those initials, standing alone, do notconstitute substantial evidence of Betty's [**14] claim to the property and could not defeat Arrow's motion forsummary judgment. Posey v. Posey, 545 So. 2d 1329 (Ala. 1989).

After reviewing the record, this Court agrees that Betty did not present sufficient -- i.e., "substantial" -- evidenceshowing that Arrow had constructive notice of her claim to the property. Arrow was therefore entitled to a judgment asa matter of law. The summary judgment is affirmed.

AFFIRMED.


4 of 266 DOCUMENTS

CitedAs of: Jul 10, 2014

United Companies Financial Corporation v. Ella Wyers

No. 86-606


518 So. 2d 700; 1987 Ala. LEXIS 4540

September 25, 1987, Filed

PRIOR HISTORY: [**1] Appeal from Walker Circuit Court.


CASE SUMMARY:

PROCEDURAL POSTURE: The Walker County Circuit Court (Alabama) entered judgment in favor of appelleewidow in her action against appellants, a mortgage company and her boyfriend, alleging fraud, breach of contract, lackof capacity, and duress. The company appealed.

OVERVIEW: After the widow's husband died, she met her boyfriend, who professed his love for the widow andoffered to marry her. Later, the boyfriend took the widow to a law firm's offices and she conveyed her home to theboyfriend. Upon receiving the deed, the boyfriend attempted to obtain a loan from the company. The company learnedthrough a title search that the boyfriend had recently obtained a title by deed. As a result, the company had the widowparticipate in the mortgage process by requiring her to attend the closing and to sign the mortgage along with theboyfriend. Thereafter, the widow filed a lawsuit against the boyfriend, alleging fraud and breach of contract, and againstthe company, alleging lack of capacity to contract and duress. The trial court set aside the mortgage. On appeal, thecourt determined that the trial court's judgment setting aside the mortgage was supported by evidence of incapacity andduress. The court also found that the company demonstrated its awareness of a potential problem in the conveyancewhen it required the widow, who no longer had title to the property, to co-sign the mortgage. Therefore, the courtupheld the trial court's judgment.

OUTCOME: The court affirmed the trial court's judgment in favor of the widow in her action against the company andher boyfriend alleging fraud, breach of contract, lack of capacity, and duress.

Page 13

CORE TERMS: mortgage, duress, notice, conveyance, deed, incapacity, default judgment, undue influence, bona fidepurchaser, bias, injunction, colorable, evidence presented, medication, burden of proving, oral evidence, best position,abuse of discretion, extreme duress, sufficient evidence, mortgagor, mortgaged, voidable, grantor, abused, void, finaljudgment, capacity to contract, foreclosure, professed


Civil Procedure > Judicial Officers > Judges > Disqualifications & Recusals > General OverviewCivil Procedure > Appeals > Reviewability > Preservation for ReviewCriminal Law & Procedure > Appeals > Reviewability > Preservation for Review > Failure to Object[HN1] Failure to object to bias at the trial level precludes that issue from being raised on appeal.

Evidence > Procedural Considerations > Rulings on Evidence[HN2] When oral evidence is presented to the trial court, it is in the best position to weigh the evidence, judge thecredibility of witnesses and testimony, and make any findings of fact. Where such evidence is presented to the trialjudge, his findings have the effect of a jury verdict.

Civil Procedure > Judicial Officers > Judges > DiscretionContracts Law > Defenses > Duress & Undue Influence > General Overview[HN3] Duress involves improper pressure by another party which overcomes his will and coerces him to comply withdemands to which he would not yield if acting as a free agent.

Contracts Law > Types of Contracts > Bona Fide PurchasersReal Property Law > Financing > Mortgages & Other Security Instruments > Definitions & Interpretation[HN4] A mortgage entered into under extreme duress may render the mortgage void. Less extreme duress may renderthe mortgage voidable at the option of the mortgagor. However, a mortgage will not be voidable or void against a bonafide purchaser, for value, and without notice.

Contracts Law > Types of Contracts > Bona Fide PurchasersReal Property Law > Priorities & Recording > Bona Fide Purchasers[HN5] A purchaser has constructive notice if the facts surrounding the transaction give notice, or are such that areasonably prudent person would inquire further.

COUNSEL: Robert L. Austin, for Appellant.

Jeff Sacher of Legal Services Corporation of Alabama, for Appellee.

JUDGES: Adams, Justice. Torbert, C.J., Jones, Shores, and Steagall, JJ., concur.

OPINION BY: ADAMS

OPINION

[*701] United Companies Financial Corporation (hereinafter "United"), appeals from a final judgment settingaside United's mortgage and divesting United of any interest in the property of appellee, Ella Wyers.


Wyers is a 59-year-old woman whose husband died in January 1985, leaving her with no income. However, Wyersdid own her home free of any mortgage. A few months after her husband's death, Wyers met a 29-year-old man, DannyJ. Gilreath. Allegedly, Gilreath professed his love for Wyers and offered to marry her. Gilreath also offered to helpWyers with her finances by obtaining a loan for her.

This case involves an allegedly fraudulent conveyance of Wyers's property to Gilreath and a subsequent attemptby Gilreath to mortgage the property through United. Gilreath told Wyers that he needed her to sign some papers. OnOctober 28, 1985, Wyers was taken to a law firm's offices to sign some papers that she believed regarded [**2] a loan.What Wyers signed was a deed conveying her home to Gilreath. There was allegedly no consideration for theconveyance and Wyers alleged that she did not know or understand that she was deeding her home to Gilreath. Wyerscontinued to live in her home.

Upon receiving the deed, Gilreath attempted to obtain a loan from United. He told United in his loan applicationthat he was a relative of Wyers's and had inherited the property. However, United learned through a title search thatGilreath had recently obtained a title by deed and that Wyers was still in possession of the home.

Though there is some dispute about United's actual notice of the alleged fraud, the trial record indicates that Unitedexpressed a concern that it "wanted to make sure that the person [Gilreath] acquired the property from was aware ofwhat was going on with the transaction." (R. 15.) However, the deed was in Gilreath's name and Wyers supposedly hadno interest in the property other than possession. To alleviate its "concern," United contacted Wyers and had herparticipate in the mortgage process by requiring her to attend the closing and to sign the mortgage along with Gilreath.A check for $ 13,775.00 [**3] was made out jointly to Wyers and Gilreath, but was given to Gilreath.

There is also testimony in the record indicating that Wyers has a limited ability to read and write, and that she hadbeen threatened by Gilreath. In addition, on the day she signed the mortgage she was taking three medications thatallegedly impaired her ability to think and reason. Furthermore, Wyers testified that she did not understand that she wasmortgaging her house when she was told by United to attend the closing. Finally, after Gilreath and four friends madesome threatening remarks and brandished loaded guns while Wyers was in Gilreath's apartment on the day of theclosing, Gilreath allegedly controlled [*702] Wyers's conduct by driving her to the closing and demanding that she notgive him any trouble at the closing or answer any questions and that she do as she was told.

In addition to the mortgage agreement, the record also includes evidence of some agreement between Gilreath andWyers whereby Gilreath was to pay $ 2,000.00 to Wyers upon obtaining the mortgage, and an additional $ 300.00 permonth for three years. It is unclear from the record whether that agreement was part of the agreement [**4] for theinitial conveyance or was entered into later and prior to the mortgage. After the check was cashed, Gilreath gave Wyers$ 300.00. That was the only money received by Wyers. Wyers has since tendered to United the $ 300.00 that shereceived.

United never received a mortgage payment from Gilreath or Wyers, and set March 26, 1986, as the date offoreclosure on the property.

On March 21, 1986, Wyers filed suit against Gilreath, alleging fraud and breach of contract, and against United,alleging lack of capacity to contract and duress, as grounds to set aside the mortgage.

A temporary injunction was granted on March 21, 1986, enjoining United from foreclosing on Wyers's propertypending a final hearing on the merits. A subsequent motion to dissolve the injunction was denied.

Gilreath filed a motion to dismiss, which was denied on June 23, 1986. Subsequently, Wyers filed a motion fordefault judgment against Gilreath for failure to show for a deposition. The motion was granted on August 4, 1986.

Gilreath filed an answer on July 30, 1986, and moved to set aside default judgment. The motion was denied onSeptember 3, 1986. Gilreath has since disappeared.


After a hearing [**5] on the merits, United appealed from the judgment setting aside the mortgage. It bases itsappeal on the following grounds:

1. That the trial court erred in setting aside United's mortgage on Wyers's property based on the allegations inWyers's sworn complaint and on the evidence presented regarding Wyers's capacity to contract and regarding the duressshe was subjected to that led to her signing of the mortgage note.

2. That the trial court erred in not requiring Wyers to tender the sum of $ 13,775.00 given to Gilreath at theclosing, in return for cancellation of the mortgage.

3. That the trial court evidenced bias toward Wyers and had knowledge of the case acquired outside the pleadingsand evidence presented in court.

4. That the trial court erred in granting an injunction because it failed to adhere to Rule 65, A.R.Civ.P.5. That the trial court erred in granting the default judgment against Gilreath.Because the last three issues can be answered quickly, we will address them first.

Appellant, United, states in its brief that the trial judge notified counsel for United and Wyers, prior to the hearing,that he had talked to Wyers's neighbor prior to the filing [**6] of the claim, but had come to no conclusions other thanthat Wyers needed to obtain counsel. No party made any objection to the trial judge's continuing to sit in the case.

The law is quite clear that [HN1] failure to object to bias at the trial level precludes that issue from being raised onappeal. Ross v. Luton, 456 So. 2d 249, 255 (Ala. 1984); Mowery v. Mowery, 489 So. 2d 1113, 1114 (Ala. Civ. App.1986). If United had objected at trial, the judge might have recused himself. Since United did not raise the question ofbias at any time during the trial, issue 3 is precluded on appeal.

United also argues that the court erred in enjoining foreclosure until final judgment, on the grounds that the trialjudge did not comply with the security requirement of Rule 65, A.R.Civ.P. Though United recognizes that the issue ismoot, since the court has entered a final judgment setting aside the mortgage, United claims that failure to require abond further evidences the bias of the trial judge. Because the injunction issue is moot, and for the [*703] reasonsstated in regard to issue 3, we find no error in regard to issue 4.

Issue 5 regards the default judgment against Gilreath. [**7] United has no standing to appeal from a defaultjudgment against the co-defendant, Gilreath. Therefore, we find no error.

The remaining issues are central to this appeal. United's issue is whether Wyers failed to meet her burden ofproving that the medication and her education, as well as duress by Gilreath, made her incapable of entering into a validcontract. Issue 2 is whether the trial court abused its discretion in setting aside the mortgage without requiring Wyers totender the entire sum of $ 13,775.00 to United.

[HN2] When oral evidence is presented to the trial court, it is in the best position to weigh the evidence, judge thecredibility of witnesses and testimony, and make any findings of fact. Where such evidence is presented to the trialjudge, his findings have the effect of a jury verdict. Chrisman v. Brooks, 291 Ala. 237, 279 So. 2d. 500 (Ala. 1973).Regardless of how this Court might view the evidence, it must affirm the trial court's judgment if it is fairly supportedby credible evidence, unless it is plainly erroneous or there has been an abuse of discretion. Chrisman, supra. "This rulehas been applied in numerous cases where a deed was sought to be set aside [**8] because of the incompetency of thegrantors, or undue influence or both." Wyatt v. Riley, 292 Ala. 277, 293 So.2d 288 (1974), citing Chrisman, supra.

United argues that the trial judge abused his discretion because there was insufficient evidence of duress orincapacity to justify setting aside the mortgage. Generally, [HN3] duress involves improper pressure by another party


"which overcomes his will and coerces him to comply with demands to which he would not yield if acting as a freeagent." Head v. Gadsden Civil Service Board, 389 So. 2d 516, 519 (Ala. Civ. App.), cert. denied, 389 So. 2d 520 (Ala.1980). [HN4] A mortgage entered into under extreme duress may render the mortgage void. Less extreme duress mayrender the mortgage voidable at the option of the mortgagor. Royal v. Gass, 154 Ala. 117, 45 So. 231 (1907). However,a mortgage will not be voidable or void against a bona fide purchaser, for value, and without notice. Gass, supra.

Incapacity is tested by whether the mortgagor has sufficient capacity to understand, in a reasonable manner, thenature and effect of her actions. Hall v. Britton, 216 Ala. 265, 113 So. 238 (1927); W. T. Smith Lumber Co. [**9] v.Foshee, 286 Ala. 524, 243 So. 2d 361 (1970).

The evidence presented indicated that Wyers was a widow, with a limited education and reading ability, who hadbeen strongly influenced by a young man who professed his love for her and offered to help her with her financialtroubles. There was also evidence that Wyers's life was threatened by Gilreath, and that Wyers was on three differentmedications that may have influenced her ability to make a choice. Furthermore, there was testimony that United neverattempted to explain to Wyers what was going on, and that when she was asked by United if she understood what washappening, Gilreath hit her under the table, and she nodded in the affirmative.

On the other hand, there is evidence supporting United's argument that Wyers understood that there was going to bea mortgage on her house and that she participated willingly. Not only did she nod in the affirmative when asked if sheunderstood, but she never said she was confused. In addition, in return for the conveyance, she was allegedly supposedto receive $ 2,000.00 immediately and an additional $ 300.00 per month for three years from Gilreath, and Gilreath wasto pay off the mortgage. [**10] Wyers also testified that if she had received the money from Gilreath, "It would havebeen fine." (R. 46.)

The trial court was in the best position to evaluate this oral evidence and make findings of fact. This Court haspreviously held that one seeking to cancel a mortgage on grounds of mental incapacity has the burden of provingincapacity by a preponderance of the evidence. Blair v. Jones, 201 Ala. 293, 78 So. 69 (1918). We find that there wassufficient evidence, if believed, to meet that burden of proof, and [*704] we find no abuse of discretion by the trialjudge. Therefore, we cannot reverse on the appellant's argument that the judgment setting aside the mortgage wasunsupported by evidence of incapacity or duress.

United's issue 2 is whether the trial court could set aside the mortgage without requiring Wyers to return the full $13,775 United had paid to Gilreath. It is undisputed that Wyers has tendered $ 300.00 to United.

Our decision on this issue primarily rests on a determination of whether United was a bona fide purchaser, actingin good faith and without notice of any claim against the house that was to be mortgaged. First Alabama Bank v.Brooker [**11] , 418 So. 2d 851 (Ala. 1982). In order to be a bona fide purchaser, United must have had noknowledge that Gilreath's title to the mortgaged property was merely colorable, i.e., not genuine. United is not requiredto have actual knowledge in order to have notice of colorable title. [HN5] A purchaser has constructive notice if thefacts surrounding the transaction give notice, or are such that a reasonably prudent person would inquire further.Brooker, supra at 856; See Touchstone v. Peterson, 443 So. 2d 1219 (Ala. 1983). Knowledge that the grantor retainedpossession of the conveyed property and received nominal consideration is sufficient to place the mortgagee on notice.Touchstone, supra; Brooker, supra; Cumberland Capital Co. v. Robinette, 57 Ala. App. 697, 331 So. 2d 709 (Ala.1976).

There are no allegations of bad faith on the part of United, only that it had notice of a potential problem in theconveyance between Wyers and Gilreath and allowed the mortgage in spite of this knowledge. If United was not a bonafide purchaser because it had notice, Wyers should not be required to tender more than the $ 300.00 she actuallyreceived. It follows that United should not [**12] be able to protect itself merely by requiring Wyers to sign themortgage, because that does not avoid the problems of duress in the initial conveyance. In other words, if there wasduress or undue influence in the conveyance of the deed, then Gilreath might use undue influence and duress to obtain


Wyers's signature on the mortgage. In fact, there are facts presented, which, if believed, would support that theory.Wyers testified that Gilreath had threatened her life and told her not to tell her sons about the transaction. Further,Gilreath drove Wyers to the mortgage closing and allegedly told her on the way not to get upset during the closing, notto answer any questions, and to do as she was told. At the closing, when United's agent asked whether Wyersunderstood what was happening, Gilreath allegedly hit Wyers under the table, indicating to her that she should beagreeable. Whether these factors were sufficient to constitute duress or undue influence was a question for the trialjudge.

The record also states that United conducted a title search and concluded that the property had recently been deededto Gilreath. This was discovered after Gilreath allegedly told United that he [**13] had received the property as aninheritance, and that he was a relative of Wyers's. In addition, United knew that Wyers still maintained possession of theproperty. Though the remaining facts are disputed, it appears other circumstances aroused United's suspicions enoughso that they contacted Wyers and required her to participate in the mortgage process. This is an unusual act, consideringthat the deed to the property was only in Gilreath's name. Regardless of what factors aroused the suspicions, Uniteddemonstrated its awareness of a potential problem in the conveyance when it required Wyers, who no longer had title tothe property, to co-sign the mortgage.

We hold that there was sufficient evidence before the trial judge, which, if believed, would support the factualconclusion that United was aware that Gilreath had merely colorable title. For the foregoing reasons, we affirm the trialcourt's judgment setting aside the mortgage.

AFFIRMED.

Torbert, C.J., Jones, Shores, and Steagall, JJ., concur.


8 of 266 DOCUMENTS

PositiveAs of: Jul 10, 2014

J. M. Touchstone and Ben Touchstone v. Rosa Lee Peterson

No. 82-642


443 So. 2d 1219; 1983 Ala. LEXIS 5089

December 2, 1983

PRIOR HISTORY: [**1] Appeal from Washington Circuit Court.

DISPOSITION: REVERSED AND REMANDED.

CASE SUMMARY:

PROCEDURAL POSTURE: Appellant brothers challenged an adverse judgment from the Washington Circuit Court.(Alabama) in an ejectment action brought by appellee individual. The brothers were in possession of a 10-acre tract ofland for over 20 years. Although the brother who owned the land sold it by warranty deed, intending to reserve forhimself a life estate, the deed did not reflect the oral understanding, and a correction deed was never executed.

OVERVIEW: The purchaser later married; upon their divorce the ex-wife was awarded the property. The courtreversed the judgment for the ex-wife, holding that the circuit court erred in denying the brothers' counterclaim forreformation. It was clear from the testimony, taken together, that all of the parties to both deeds orally agreed andunderstood that the brother retained a life interest in the 10-acre tract and had acted upon this understanding Thebrothers met their burden of proving that the intention they sought to substitute was that of all parties to the deeds inquestion. Because the ex-wife had both actual and constructive knowledge of the brothers' prior equity before acquiringthe legal title to the property, she could not be deemed a bona fide purchaser. Thus, the trial court erred in denyingreformation on the basis of prejudice to rights acquired by a third person in good faith and for value pursuant to Ala.Code 35-4-153. Laches did not apply because the brothers were in peaceable, uninterrupted possession of theproperty.

OUTCOME: The court reversed and remanded the judgment of the circuit court.

Page 19

CORE TERMS: deed, reformation, notice, purchaser, acre, bona fide purchaser, ejectment, divorce, laches, equitable,divorce decree, disputed, life interest, good faith, register's, tract, continued possession, life estate, equitable right,constructive notice, counterclaim, conveyance, omission, warranty deed, facts sufficient, executed and delivered, rightsacquired, actual knowledge, actual notice, chargeable


Contracts Law > Defenses > Ambiguity & Mistake > Mutual MistakeReal Property Law > Deeds > EnforceabilityReal Property Law > Purchase & Sale > Fraudulent Transfers[HN1] Ala. Code 35-4-153 (1975) provides as follows: When, through fraud, or a mutual mistake of the parties, or amistake of one party which the other at the time knew or suspected, a deed, mortgage or other conveyance does not trulyexpress the intention of the parties, it may be revised by a court on the application of the party aggrieved so as toexpress that intention, insofar as this can be done without prejudice to rights acquired by third persons in good faithand for value.

Contracts Law > Types of Contracts > Bona Fide PurchasersReal Property Law > Deeds > EnforceabilityReal Property Law > Priorities & Recording > Bona Fide Purchasers[HN2] A written instrument is not subject to reformation as against the rights of a bona fide purchaser, without notice,and for value. Reformation or correction of a written instrument will generally be granted, however, as againstsubsequent purchasers who obtain their title or lien with notice of the existing equitable right to reformation.

Contracts Law > Types of Contracts > Bona Fide PurchasersReal Property Law > Priorities & Recording > Bona Fide Purchasers[HN3] In order to constitute one a bona fide purchaser and entitle him to the protection of the rule, as against a priorequity or conveyance, it is essential: (1) that he is the purchaser of the legal as distinguished from an equitable title; (2)that he purchased the same in good faith; (3) that he parted with value as a consideration therefor by paying money orother thing of value, assuming a liability or incurring an injury; (4) that he had no notice, and knew no fact sufficient toput him on inquiry as to complainant's equity, either at the time of his purchase, or at, or before the time he paid thepurchase-money, or otherwise parted with value.

Real Property Law > Deeds > Covenants of TitleReal Property Law > Deeds > Types > WarrantyReal Property Law > Priorities & Recording > Bona Fide Purchasers[HN4] In order that a purchaser of land shall be protected against equities of third persons, he must have acquired at thetime of such purchase the legal title by warranty deed. As a mere equity, that he acquires must be subordinate to olderequities.

Contracts Law > Types of Contracts > Bona Fide PurchasersReal Property Law > Deeds > EnforceabilityReal Property Law > Priorities & Recording > Bona Fide Purchasers[HN5] Generally, actual notice on the part of the subsequent purchaser of the error to be corrected in the deed is notnecessary in order to permit reformation of the instrument as against him, provided he had constructive notice, or thefacts were such as to put a prudent person on inquiry as to title, charging him with notice of all facts to which


diligent inquiry and investigation would have led him.

Real Property Law > Priorities & Recording > Bona Fide Purchasers[HN6] A purchaser with sufficient information to stimulate inquiry which would lead to knowledge of adverse orhostile and superior claim or title, and fails therein, the injury is the result of his own folly -- he is wanting in goodfaith, an indispensable element of a purchaser (for value) without notice -- and a court of equity will not protect suchreckless purchaser.

Real Property Law > Priorities & Recording > Bona Fide Purchasers[HN7] Whenever a party, dealing as a purchaser or encumbrancer with respect to a parcel of land, is informed or knows,or is in a condition which prevents him from denying that he knows, that the premises are in the possession of a thirdperson, other than the one with whom he is dealing as owner, he is thereby put upon an inquiry, and is charged withconstructive notice of all the facts concerning the occupant's right, title, and interest which he might have ascertained bymeans of a due inquiry.

Real Property Law > Priorities & Recording > Bona Fide Purchasers[HN8] To put a purchaser upon inquiry and to operate as constructive notice, possession must exist at the time of thetransaction by which his rights and interest were created. Such possession must be open, visible, exclusive, andunambiguous, not liable to be misconstrued or misunderstood. If the possession of the grantor, after making aconveyance, is long continued, it may be more reasonable to refer it to his right to occupancy rather than to thesufferance of the grantee. Possession, therefore, for an unreasonable period after a conveyance may well be sufficientto put persons upon inquiry as to the occupant's rights.

Civil Procedure > Pleading & Practice > Defenses, Demurrers & Objections > Affirmative Defenses > Laches[HN9] Lapse of time alone does not establish laches. To be affected by laches, the delay must have been with notice ofthe existence of the right, resulting in disadvantage, harm, or prejudice to another, or have operated to bring aboutchanges in conditions and circumstances so that there can no longer be a safe determination of the controversy. Thus,special facts which make the delay culpable must appear.

Civil Procedure > Pleading & Practice > Defenses, Demurrers & Objections > Affirmative Defenses > Laches[HN10] Laches cannot be imputed to one who has all the while been in the peaceable possession of the property withregard to which relief is sought.

COUNSEL: Marc E. Bradley, Fairhope, Edward P. Turner, Jr., Chatom, for Appellant(s).

S. J. Laurie, Chatom, for Appellee(s).

JUDGES: Beatty, Justice. Torbert, C.J., Maddox, Jones and Shores, JJ., concur.

OPINION BY: BEATTY

OPINION

[*1221] This is an appeal by J. M. and Ben Touchstone, defendants-appellants, from an adverse judgment in anejectment action brought by Rosa Lee Peterson, plaintiff-appellee. We reverse and remand.

In July 1953, appellant J. M. Touchstone purchased from Joe M. Pelham and his wife the ten-acre tract of landwhich is the subject of this dispute and went into possession of the ten acres at that time. Appellant Ben Touchstone


began living with his brother, J. M., in August 1954, and both have continued in possession of the property since thattime. On October 5, 1955, J. M. Touchstone sold by warranty deed these ten acres of land to Randolph and UhbernKirkland, intending to reserve for himself a life estate in the property. The deed, however, did not contain thisreservation as, it was later discovered by the parties, such omission being the result of an error made by the scrivenerwho [**2] prepared the deed. Despite this fact, a correction deed was never executed, since J. M. Touchstone and theKirklands had orally agreed and understood at the time of the sale that J. M. Touchstone had reserved the right forhimself and Ben to live on the property for their lives. Accordingly, J. M. Touchstone, relying upon this oralunderstanding, failed to have the deed corrected.

On February 13, 1956, Randolph Kirkland married Rosa Lee Peterson, the plaintiff-appellee in this case. OnMarch 13, 1969, Uhbern Kirkland and his wife conveyed all their interest in the disputed ten-acre tract by warranty deedto Randolph Kirkland. Although this deed again failed to mention J. M. Touchstone's life interest in the property, therewas an oral reaffirmation of his rights between the Kirklands and J. M. Touchstone.

On January 10, 1977, Rosa Lee Peterson and Randolph Kirkland were divorced. Pursuant to the terms of thedivorce decree, she was awarded the disputed ten-acre tract; however, it was not until May 2, 1979, that the register'sdeed conveying the property to Peterson was executed and delivered to her. Sometime in January 1977, after thedivorce decree was entered, Rosa Lee [**3] Peterson visited the home of J. M. and Ben Touchstone, advised them shehad been awarded the ten acres on which they resided, and requested that they move from the property. They refused todo so. Two and one-half years later, on May 2, 1979, Peterson gave J. M. Touchstone notice by registered letter tovacate the premises within ten days. When the Touchstones again failed to vacate, upon proper complaint filed byPeterson, the District Court of Washington County issued a writ of ejectment on June 12, 1979. A hearing was held onthe ejectment complaint in the district court on October 23, 1979, after which judgment was entered against theTouchstones. Thereafter, the Touchstones appealed to the Circuit Court of Washington County wherein they filed acounterclaim against Peterson, seeking reformation of the deed given to Peterson's predecessor in title (her ex-husbandRandolph Kirkland) by J. M. Touchstone, so as to reflect the life interest in the ten acres reserved by J. M. Touchstone,the original grantor. In Peterson's answer to this counterclaim, she set up the special defense of laches, among otherthings. She also amended her complaint to add a claim for unlawful detainer.

[**4] At trial, on February 24, 1982, evidence on the counterclaim for reformation was presented ore tenus to thecircuit court. Thereafter, on March 11, 1982, the court entered an order denying reformation of the deed in question,finding such reformation barred by the doctrine of laches, and also under Code of 1975, 35-4-153, that reformationwould result in prejudice to rights acquired by a third person in good faith and for value. The ejectment and unlawfuldetainer claims were then tried to a jury on March 30, 1982, and, at the conclusion of trial, a verdict was returned infavor of Peterson. Prior to the time the circuit court entered judgment on the verdict, [*1222] the Touchstones filedmotions for rehearing and for a new trial or, in the alternative, for judgment notwithstanding the verdict. Subsequently,on January 18, 1983, the court entered judgment on the verdict for Peterson, and on February 24, 1983, after theTouchstones refiled their motions for rehearing and for a new trial or, in the alternative, for judgment notwithstandingthe verdict, these motions were denied by the circuit court. It is from the denial of these motions that the Touchstonesappeal.

[**5] The controlling issue raised by the Touchstones on appeal is whether the circuit court erred in denying theTouchastones' counterclaim for reformation. The first question presented is whether the circuit court correctly foundRosa Lee Peterson to be a bona fide purchaser for value under 35-4-153, i.e., that she was a purchaser of legal titlewithout actual knowledge of the Touchstones' prior equity, or that she did not have knowledge of facts sufficient to puther on inquiry regarding the Touchstones' prior equity before or at the time she was granted the property by the divorcedecree or when she later received the deed to the property.

[HN1] Section 35-4-153 provides as follows:

"When, through fraud, or a mutual mistake of the parties, or a mistake of one party which the other at


the time knew or suspected, a deed, mortgage or other conveyance does not truly express the intention ofthe parties, it may be revised by a court on the application of the party aggrieved so as to express thatintention, insofar as this can be done without prejudice to rights acquired by third persons in good faithand for value." (Emphasis added.)

In order to reform the deed to [**6] express the intentions of the parties thereto, under 35-4-153, the Touchstoneshave the burden of proving with clear, convincing, and satisfactory evidence that the intention they seek to substitutewas that of both parties to the deed. Fidelity Service Ins. Co. v. A. B. Legg & Sons Burial Ins. Co., 274 Ala. 94, 145 So.2d 811 (1962); Taylor v. Burns, 250 Ala. 218, 34 So. 2d 5 (1948); Hyatt v. Ogletree, 31 Ala. App. 8, 12 So. 2d 397(1942).

All the parties to both deeds in question (the 1955 deed from J. M. Touchstone to Uhbern and Randolph Kirkland,and the 1969 deed from Uhbern Kirkland to Randolph Kirkland) were properly joined and testified at trial. It is clearfrom their testimony, taken together, that all of the parties to both deeds orally agreed and understood that J. M.Touchstone retained a life interest in the ten-acre tract and have since acted upon this understanding. The testimonywas uncontroverted as to this intention and it was uncontroverted that a defect in the deed existed due to the omission ofthe life estate. The only conflicting testimony had to do with when the defect in the original deed from J. M. Touchstoneto Randolph and Uhbern [**7] Kirkland was discovered. Thus, the Touchstones have met their burden of proving thatthe intention they seek to substitute was that of all parties to the deeds in question. The only remaining issue, under thelanguage of 35-4-153, supra, is whether Peterson obtained bona fide purchaser status in acquiring her rights in thesubject ten acres.

The portion of the statute italicized above codifies the rule of law long recognized in this state: [HN2] a writteninstrument is not subject to reformation as against the rights of a bona fide purchaser, without notice, and for value.Reformation or correction of a written instrument will generally be granted, however, as against subsequentpurchasers who obtain their title or lien with notice of the existing equitable right to reformation. Gilmore v. Sexton,254 Ala. 560, 49 So. 2d 157 (1950); Walling v. Moss, 240 Ala. 87, 197 So. 30 (1940); Copeland v. Warren, 214 Ala.150, 107 So. 94 (1926). As explained by this Court in Lightsey v. Stone, 255 Ala. 541, 546, 52 So. 2d 376, 381 (1951):

[HN3] "In order to constitute one a bona fide purchaser and entitle him to the protection of the rule,as against a prior equity or conveyance, [**8] it is essential: '* * * (1) [*1223] that he is the purchaserof the legal as distinguished from an equitable title; (2) that he purchased the same in good faith; (3)that he parted with value as a consideration therefor by paying money or other thing of value, assuming aliability or incurring an injury; (4) that he had no notice, and knew no fact sufficient to put him oninquiry as to complainant's equity, either at the time of his purchase, or at, or before the time he paid thepurchase-money, or otherwise parted with value * * *.' Craft v. Russell, 67 Ala. 9, 12, and cases cited. . .."

Accord, First National Bank of Birmingham v. Culberson, 342 So. 2d 347 (Ala. 1977); Murphree v. Henson, 289 Ala.340, 267 So. 2d 414 (1972).

The first element enumerated above is that the purchaser acquire the legal title to the property; this element, readtogether with the fourth element, would require the purchaser to obtain legal title to the property before he had actualknowledge of a prior equity, or learned of facts sufficient to put him on inquiry concerning the complainant's equity.Peterson testified at trial that it was not until January 1977, after [**9] the divorce decree was entered granting her theten acres, that she learned of the Touchstones' claim to a life interest in the property. The following testimony byPeterson to this effect was elicited at trial by her attorney on direct examination:


"Q. Did you have any discussions after you got the divorce with the Touchstones?

"A. Yes.

"Q. All right. Did ya'll ever have any discussions about this land?

"A. Yes.

"Q. All right. Can you tell me at what point in time you had the discussions?

"A. Well, it was in January of '77. I went and told them that I would like for them to move becauseI was going to move the house from the property and have it torn down and moved because I planned tohave my land pushed off because I was building me a house and this house they lived in is between myhouse and the road, and I planned to clear the land between my house and the road and I would like tomove the house.

"Q. In relationship to the divorce, was that after or before?

"A. That was after.

"Q. After the divorce.

"A. Uh-huh.

"Q. Had you got that deed yet?

"A. No.

"Q. How long a period of time was it from the time you got your divorce until you actually [**10]got the deed out from Randolph?

"A. Wall, I got my divorce the tenth day of January and May the second of 1979, I finally got mydeed.

"Q. Better than two years later?

"A. Yes.

"Q. Now, when you went to the Touchstones on that occasion, did they make nay statements to youconcerning the deed from them to the Kirklands -- Randolph and Uhbern?

"A. No, not the deed.

"Q. All right. What did they tell you, if anything, on that occasion when you asked them to move,that you wanted to push your land --

"A. They just said they had a right to live there."Q. They had a right to live there?

"A. That it was a verbal agreement that they had a right to live there.

"Q. That there was a verbal agreement. Was there any time in that conversation the subject of thisold deed that was made that was supposed to be a reservation of some sort of right to live or life estate


in?

"A. No, there was no such conversation.

". . . .

"Q. During your marriage, did you and Randolph ever have any discussions about an error in a deedor about an oral agreement to allow them to live on the land?

"A. No, we never discussed it.

[*1224] "Q. When is the first instance, if [**11] there is any, when your husband might havebrought to your attention that there was some 'right' that the Touchstones had?

"A. Well, it was the week following the divorce. He called me.

"Q. Are you talking about January of '77.

"A. Right.

"Q. All right. Who called you?

"A. He called me and informed me that --

"Q. Who called you?

"A. Randolph.

"Q. Okay.

"A. The water pump at the house where I was living was on his property.

"Q. Where were you living at the time?

"A. I was living in the house that I got, on the five-tenths of an acre, right down under the hill fromwhere he lived.

"Q. All right. Would that be in a different location?

"A. That's a different location.

"Q. All right. What else if anything did he tell you?

"A. And then he told me, and by the way, I guess you know that J. M. and Ben are supposed to livethere. And I said, no, I didn't. And he said, well, that's your problem.

"Q. Is that the first occasion you had ever become aware of any right from your husband that theTouchstones had?

"A. Yes."

It is significant to her status as a bona fide purchaser that she learned of the Touchstones' claim prior to the [**12]time the register's deed to the ten acres was executed and delivered to her on May 2, 1979. It is also significant to point


out that it was not until after she received the deed on May 2, 1979, that approximately one week later, on May 7, sheserved the Touchstones notice to vacate on the Touchstones, and subsequently petitioned the district court for a writ ofejectment on June 12, 1979 -- an action which can only be brought by the record owner of the disputed property.Therefore, when the divorce decree was entered, Peterson acquired only an equitable title to the subject ten acres; it wasnot until the register's deed was executed and delivered to her that her equitable title "ripened into a full legal title asagainst all equities and claims not known to her or notice of which she was not legally chargeable." Larkins v. Howard,252 Ala. 9, 39 So. 2d 224 (1949) (emphasis added). In Mallory v. Agee, 226 Ala. 596, 600, 147 So. 881, 883 (1932),this Court explained:

[HN4] "In order that a purchaser of land shall be protected against equities of third persons, he musthave acquired at the time of such purchase the legal title by warranty deed. . . . 'As a mere equity, that[**13] he acquires must be subordinate to older equities. . . .' Shorter v. Frazer, [64 Ala. 74 (1879)]"(Citations omitted.)

And, in the earlier case of Manning v. House, 211 Ala. 570, 574, 100 So. 772, 775 (1924), this Court, in applying theforegoing principle to the facts in that case, stated:

"W. E. Manning cannot be considered a bona fide purchaser of lot No. 7 without notice of itsdedication. Beside the physical evidences of public use, it sufficiently appears that before his purchasehe was advised of the controversy by his vendor, and that the landowners protested to him before heacquired a deed to the property." (Emphasis added.)

Thus, since Rosa Peterson had actual knowledge of the Touchstones' prior equity before acquiring the legal title to theproperty, she cannot be deemed a bona fide purchaser.

Beyond the element present here of actual notice of prior claims before acquiring legal title, it is apparent that RosaLee Peterson would further be deprived of bona fide purchaser status under the constructive notice doctrine as well.[HN5] Generally, actual notice on the part of the subsequent purchaser of the error to be corrected in the [**14] deedis not necessary in order to permit reformation of the instrument as against him, provided he had constructive [*1225]notice, or the facts were such as to put a prudent person on inquiry as to title, charging him with notice of all facts towhich diligent inquiry and investigation would have led him. See generally, 79 A.L.R.2d 1180 (1961); Holly v.Dinkins, 202 Ala. 477, 80 So. 861 (1919). See also, Leslie v. Click, 221 Ala. 163, 165, 128 So. 170, 172 (1930), wherethis Court stated as follows:

[HN6] "A purchaser with sufficient information to stimulate inquiry which would lead to knowledgeof adverse or hostile and superior claim or title, and fails therein, the injury is the result of his own folly-- he is wanting in good faith, an indispensable element of a purchaser (for value) without notice -- anda court of equity will not protect such reckless purchaser. Taylor v. A. & M. Ass'n, 68 Ala. 229. . . ."

Accord, Adams v. Adams, 346 So. 2d 1146 (Ala. 1977); First National Bank of Birmingham v. Culberson, supra;Murphree v. Henson, supra; Lightsey v. Stone, supra.

Furthermore, it is settled law in this state that, where a purchaser [**15] buys land and has knowledge that a thirdperson is in possession thereof, he is charged with notice as to the nature of that party's title, including the occupant'sequitable rights. This principle is stated in Holly v. Dinkins, supra, as follows:

[HN7] "Whenever a party, dealing as a purchaser or incumbrancer with respect to a parcel of land, isinformed or knows, or is in a condition which prevents him from denying that he knows, that thepremises are in the possession of a third person, other than the one with whom he is dealing as owner, he


is thereby put upon an inquiry, and is charged with constructive notice of all the facts concerning theoccupant's right, title, and interest which he might have ascertained by means of a due inquiry. 2 Pom.Eq. Jur. 615. . . ." 202 Ala. at 479, 80 So. at 863.

Accord, Lightsey v. Stone, supra; Walling v. Moss, supra; Sulzbacher v. Campbell, 219 Ala. 191, 121 So. 706 (1929);Copeland v. Warren, 214 Ala. 150, 107 So. 94 (1926). In Gilmore v. Sexton, supra, reformation of deeds was upheld asagainst third parties who had purchased the disputed land with notice that it was occupied and possessed by thecomplainant. [**16] There, this Court said that such continued possession is notice of all the equitable and other rightsof the possessor. See also, Cumberland Capital Corporation, Inc. v. Robinette, 57 Ala.App. 697, 331 So. 2d 709(1976); Hill v. Taylor, 285 Ala. 612, 235 So. 2d 647 (1970).

However, [HN8] to put a purchaser upon inquiry and to operate as constructive notice, possession must exist atthe time of the transaction by which his rights and interest were created. Holgerson v. Gard, 257 Ala. 579, 60 So. 2d427 (1952). Such possession must be open, visible, exclusive, and unambiguous, not liable to be misconstrued ormisunderstood. Lightsey v. Stone, supra. Nevertheless, in Evans v. Bryan, 202 Ala. 484, 485, 80 So. 868, 869 (1919),this Court said:

"If the possession of the grantor, after making a conveyance, is long continued, it may be morereasonable to refer it to his right to occupancy rather than to the sufferance of the grantee. Possession,therefore, for an unreasonable period after a conveyance may well be sufficient to put persons uponinquiry as to the occupant's rights." (Emphasis added.)

See also, A. Shiff & Son v. Andress, 147 Ala. [**17] 690, 40 So. 824 (1906), holding that where the complainantcontinued in possession of land after having been induced to convey the same such possession constituted notice of herequitable rights to purchasers from her grantee.

The evidence in the present case shows the continued possession by the Touchstones of the property in questionfrom 1953 to at least 1979, when the writ of ejectment was issued. During this time, they resided on the property, raisedgardens, kept dogs, cut firewood and some timber, and did other acts not inconsistent with their equitable rights in theproperty.

[*1226] Rosa Lee Peterson, by her own testimony, admitted that in 1956, the year of her marriage to RandolphKirkland, she learned that Ben Touchstone had conveyed the disputed ten acres to her husband, Randolph Kirkland, andhis brother Uhbern in 1955. She further testified that she knew the Touchstones had continued to live on the propertysince before her marriage to Randolph Kirkland through 1977, the year their divorce was granted, and up to the presenttime, although she never inquired as to the nature of the Touchstones' interest in the property. Apparently she did notinquire as to [**18] the Touchstones' rights in the property even during the divorce settlement negotiations when sheexpressed her interest in receiving the ten-acre tract.

Accordingly, it is clear that she had notice of the continued possession of the property by the Touchstones, and,under the foregoing authorities, she was under a duty of inquiry as to their interest in the property, at least during thedivorce settlement negotiations when she assumed the posture of "purchaser for value." Having failed to do so, she ischargeable with an implied notice of everything to which her inquiry would have led, especially the nature of thepossessor's interest in the property. Consequently, it cannot be concluded that Peterson, either upon the granting of thedivorce decree or upon her subsequent receipt of the register's deed, acquired the rights of a bona fide purchaser. Thus,the trial court erred in denying reformation on the basis of "prejudice to rights acquired by [a third person] in goodfaith and for value," pursuant to 35-4-153.


The circuit court further based denial of reformation on its finding that the Touchstones were barred by the doctrineof laches. [HN9] Lapse of time alone does not establish [**19] laches. Darden v. Meadows, 259 Ala. 676, 68 So. 2d709 (1953); Ellis v. Stickney, 253 Ala. 86, 42 So. 2d 779 (1949). T

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