A “wild deed” is defined as a deed “not in the chain of title because it was executed by someone other than the record owner.” F.D.I.C. v. Taylor, 2011 UT App 416, ¶ 33, 267 P.3d 949. A purchaser whose “chain of title is founded on a wild deed cannot be a bona fide purchaser under Utah’s Recording Statutes” because the purchaser is charged with record notice that the grantor is not the owner of the property. Id. (citing Salt Lake County v. Metro West Ready Mix, Inc., 2007 UT 26, ¶ 17, 89 P.3d 155. However, if the grantor of the wild deed later acquires fee title in the property, then the after-acquired title statute “permits [the] wild deed to become retroactively valid.” Pioneer Builders Co. of Nevada, Inc. v. K D A Corp., 2012 UT 74, ¶ 63, 292 P.3d 672. What would happen if there were multiple competing wild deeds on title? In F.D.I.C. v. Taylor, the Utah Court of Appeals discussed how priority of wild deeds is determined through the after-acquired title statute, the recording statutes, and bona fide purchaser status.
In F.D.I.C. v. Taylor, an individual (“Taylor”) and a bank both supplied funds for a property and both parties expected to have a first position lien against the property. Although Taylor wired his funds one day before the bank, Taylor’s trust deed was recorded three days after the bank recorded its trust deed. However, neither trust deeds was executed by the corporation holding fee title to the property, but rather by the controlling member of the corporation in his individual capacity. Thus, the Court ruled that both trust deeds were wild deeds and were ineffective to convey title but, nevertheless, created equitable liens against the Property.
After Taylor learned that his trust deed did not convey title, he obtained a second trust deed executed by the corporation holding fee title. Three months later, the bank also learned that its trust deed did not convey title. However, the bank remedied its defective title through the after-acquired title statute by requesting that the corporation holding fee title execute a special warranty deed in favor of the grantor of the bank’s original trust deed.
Taylor argued on appeal that his second trust deed from the fee title owner was first in time and, therefore, had priority over the bank’s wild deed. However, the Court ruled that Taylor had constructive record notice of the bank’s wild deed. Even though the bank’s original trust deed was a wild deed and failed to convey title, it provided record notice of a conveyance of an equitable lien. Therefore, Taylor was not a bona fide purchaser, and his second trust deed was subject to the bank’s equitable interest.
Next, the bank argued that when the grantor of its original trust deed received fee title to the property, the after-acquired title statute validated its original trust deed. The bank argued that the after-acquired title statute’s phrase “as if the legal estate had been in the grantor at the time of the conveyance” meant that the bank’s original trust deed was valid as originally filed. The Court ruled that the after-acquired title statute could not convey an interest greater than the estate at the time of the special warrant deed’s conveyance. The original grantor conveyed an interest in Taylor’s second trust deed prior to receiving fee title from the corporation through the special warranty deed. Therefore, the special warranty deed transferred the property subject to Taylor’s second trust deed.
Because Taylor’s second trust deed and the bank’s interest via the after-acquired title statute were both subject to previous interests, the Court remanded the case to determine which of the two original trust deeds had priority. Although the bank recorded its original trust deed three days before Taylor, the Court noted that “the priority of the equitable liens is dependent upon which first accrued” and not solely based on the recording statute. Taylor argued that in determining the accrual time, the test should be which lender “first delivered its funds to the title company.” However, the Court ruled that the proper inquiry is when “the money was released to the borrower for the acquisition or improvement of the Property,” which would render that lender’s equitable lien as having priority.
F.D.I.C. v. Taylor shows the many obstacles and traps which arise when parties attempt to correct a wild deed. A wild deed is deemed an equitable lien and, if recorded, conveys record notice of its defect. Therefore, parties must consider the effects of the after-acquired title statute, the recording statutes, and whether bona fide purchaser status has been negated.