Recording act protection turns on fair consideration paid by subsequent purchaser

The North Carolina Court of Appeals held that summary judgment was improper where the record contained conflicting evidence on whether a later purchaser paid fair consideration for property already subject to unrecorded purchase agreements.

The dispute arose after the plaintiffs entered into unrecorded agreements with the original owner to buy the same parcel and related mobile homes. The plaintiffs alleged they paid substantial sums and took possession of parts of the property, but title was never transferred. The original owner later conveyed the full parcel to the defendant, which recorded its deed. The plaintiffs then sought equitable relief, including quiet title, constructive and resulting trusts, and damages. The trial court granted summary judgment to the defendant and entered default judgment against the original sellers.

The court affirmed the trial court’s refusal to impose a constructive trust against the original sellers. It found no abuse of discretion in awarding monetary damages instead of that equitable remedy. But the court reversed summary judgment for the defendant. Although North Carolina’s recording statute generally protects the party who records first, that protection applies only to an innocent purchaser for value.

Here, the court found the evidence on consideration was too uncertain to resolve as a matter of law. Testimony reflected changing purchase prices, possible incomplete payment, and ambiguity over whether the transaction covered only the land or also the mobile homes. In light of those factual disputes, a reasonable factfinder could conclude that the defendant did not qualify as a bona fide purchaser for value.

Because that issue was material to whether the defendant could claim protection under the recording statute, the court remanded for further proceedings. The default judgment and damages award against the original sellers otherwise remained intact.

The 20 page opinion is Figueroa v. Monsivais, Lawyers Weekly No. 011-077-26.