## Facts

- Sheila Weisman (formerly Sheila Peters) and Marc Peters bought a residence in Campbell, California.
- After their divorce, Peters refinanced the property, but lender requirements kept both parties on record title as tenants in common.
- Sheila remarried, moved out permanently, and did not live at the property thereafter.
- Peters remarried; Peters and his second wife openly and continuously lived in the home as their family residence.
- In 1986, Sheila executed a quitclaim deed conveying her record interest to Peters, but the deed was not recorded before the Weisman's 1988 Chapter 7 bankruptcy filing.
- At the petition date, record title still showed Sheila as a co-owner, while actual possession was exclusively by Peters and his wife.
- The Chapter 7 trustee sued to avoid the unrecorded transfer under 11 U.S.C. § 544(a)(3), claiming the rights of a hypothetical bona fide purchaser.

## Issues

1. Whether, under California law, open and exclusive possession inconsistent with record title places a purchaser on inquiry notice of the possessor’s interest.
2. Whether such inquiry notice prevents a bankruptcy trustee from qualifying as a bona fide purchaser under 11 U.S.C. § 544(a)(3) and avoiding an unrecorded deed.
3. Whether the existence of circumstances sufficient to trigger inquiry notice under California law is a factual determination subject to clear-error review.

## Decision

- The Ninth Circuit reversed the district court and reinstated the bankruptcy court’s judgment for Peters.
- The court held that Peters’s and his wife’s visible, exclusive possession was inconsistent with record title showing Sheila as a co-tenant, triggering a duty of inquiry under California law.
- Because a prudent purchaser would have been charged with constructive notice of facts an inquiry would reveal (including Peters’s full ownership claim), the trustee could not claim bona fide purchaser status under § 544(a)(3).
- The court concluded the district court erred by displacing the bankruptcy court’s factual determination on inquiry notice absent clear error.

## Legal Principles

- A bankruptcy trustee’s “strong-arm” power under 11 U.S.C. § 544(a)(3) gives the trustee the status of a hypothetical bona fide purchaser, but the scope of that status is defined by state property and notice law.
- Under California Civil Code § 19, a purchaser with notice of circumstances that would lead a prudent person to inquire is charged with constructive notice of facts a reasonable inquiry would disclose.
- In California, open, visible, and exclusive possession that is inconsistent with record title generally imposes a duty on a purchaser to inquire into the possessor’s interest.
- Whether circumstances are sufficient to require inquiry notice under California law is treated as a question of fact, reviewed for clear error.

## Conclusion

Because exclusive, owner-like possession by Peters and his wife was inconsistent with record co-ownership, California inquiry-notice rules charged any purchaser—and thus the trustee—with constructive notice of Peters’s interest, defeating § 544(a)(3) bona fide purchaser status and barring avoidance of the unrecorded deed.


Robertson v. Peters (In re Weisman), 5 F.3d 417 (9th Cir. 1993)