## Facts

- A condominium developer, Choctaw Partnership, financed a condominium project through notes and mortgages, including mortgages later held by Eglin National Bank.
- On April 4, 1973, Waldorff Insurance and Bonding, Inc. entered a written agreement to purchase Unit 111 for $23,550 and paid a $1,000 deposit.
- In April or May 1973, Waldorff took physical possession of Unit 111, placed approximately $5,000 of furniture in the unit, retained keys, and maintained control.
- Waldorff paid ongoing unit-related charges and expenses, including maintenance fees, maid service, garbage pickup, utilities, and repairs, and its possession continued for an extended period.
- After Waldorff took possession, Choctaw granted the Bank additional mortgages that included Unit 111: a $600,000 mortgage dated October 10, 1973, and a $95,000 mortgage dated June 28, 1974.
- In 1974, Choctaw owed Waldorff more than $35,000; the parties agreed that Waldorff’s cancellation of that debt would be treated as payment for Unit 111.
- On March 18, 1975, Choctaw delivered a quitclaim deed to Waldorff, recorded March 21, 1975.
- The Bank filed foreclosure in 1976, joined Waldorff, and asserted its mortgage liens were superior to Waldorff’s interest.
- The trial court entered a supplemental final judgment holding the Bank’s mortgages were superior to Waldorff’s interest.

## Issues

1. Whether Waldorff’s open, visible, and exclusive possession of Unit 111 charged the Bank with constructive (inquiry) notice of Waldorff’s equitable interest when the Bank took mortgages covering the unit.
2. Whether the Bank’s mortgage liens were subordinate to Waldorff’s equitable ownership interest arising from the purchase agreement, performance, and possession.

## Decision

- The District Court of Appeal reversed the supplemental final judgment of foreclosure.
- The court held Waldorff’s interest in Unit 111 was superior to the Bank’s mortgage liens.
- The court concluded Waldorff’s actual, open, visible, and exclusive possession imposed a duty on the Bank to inquire into Waldorff’s claim before taking mortgages on the unit.
- The case was remanded for further proceedings consistent with the ruling on priority.

## Legal Principles

- Actual possession of real property can operate as constructive notice to subsequent purchasers and encumbrancers of the possessor’s rights.
- When possession is open, visible, and exclusive, a later lender or purchaser has a duty to inquire into the nature of the possessor’s interest; failure to inquire defeats claimed priority as a purchaser or mortgagee without notice.
- An equitable ownership interest arising from a purchase contract and performance, coupled with such possession, can take priority over later-recorded mortgages taken with inquiry notice.
- The duty of inquiry applies in condominium developments; practical difficulty in checking individual units does not eliminate the legal effect of visible possession.

## Conclusion

The court held that Waldorff’s longstanding, visible, and exclusive possession of the condominium unit gave the Bank inquiry notice of Waldorff’s equitable interest, so the Bank’s later mortgages could not take priority over Waldorff’s claim.


Waldorff Insurance & Bonding, Inc. v. Eglin Nat’l Bank, 453 So. 2d 1383 (Fla. 1st DCA 1984)