Real Property Title Litigation Involving $1.125 Million Deed of Trust ​Secured by Newport Beach Property​
November 2012

In 2006, a Borrower secured a loan in order to purchase a $2.2. million home in Newport Beach, California.  Borrower was the president and sole shareholder of the company that originated the loan.  The promissory note and deed of trust securing the loan were assigned to the Plaintiff, which was the Trustee of a residential mortgage backed securitized trust into which thousands of residential mortgage loans were transferred and used as investment tools.  The assignment of Borrower's mortgage loan into the trust was not recorded in the public records.   Borrower reconveyed the deed of trust to himself from his company when he realized that the assignment had not been recorded.  He then conveyed the unencumbered property to his girlfriend.  In 2010, the girlfriend sold the house to third party purchasers ("Third Parties") who Davis Law represented in the litigation that later ensued by Plaintiff in 2011. 

In the 2011 litigation, Plaintiff claimed that defendant Borrower impaired Plaintiff’s security interest by reconveying property to himself and selling the property and accepting sales proceeds without notifying the Third Parties of Plaintiff’s lien. Plaintiff further claimed that Plaintiff was entitled to a first position lien on the property, ahead of the $1.125 million lien securing repayment of Third Parties purchase money loan.  Third Parties claimed that they took title to the property without notice of Plaintiff's lien, and without notice of Borrower's fraud.

Before trial, Davis Law moved for summary adjudication on behalf of Third Parties.  Davis Law argued that Third Parties were bona fide purchasers as a matter of law since they purchased the property without notice of Plaintiff's unrecorded lien.   The Court granted summary adjudication in favor of Third Parties on those grounds and Third Parties were excised from the case before trial.