Legal Question in Real Estate Law in California

You have a whole lot of issues jumbled together here and some confusing information. First and foremost, there is no way the bank could lien the properties again without new papers signed by you and your partner. They may or may not be allowed to change their minds about requiring collateral, depending on the terms of your loan documents, but they cannot re-record released deeds of trust. If they have the right to demand the leins go back on, they have to record new deeds of trust with your new signatures. If they try to enforce the lien on the property you sold, the title company will defend the title. If they have a right to collateral and you cannot give it, however, that will be a further default on the loan. As for whether the bank has a case against you personally, well, if you havent' paid the debt, then of course they do.

I think you mean the Recorder's Office, not the Assessor's. Also, how was the lien supposedly released? If the real property was put up via a deed of trust, the normal way to release it is by a reconveyance of the deed of trust. Anything short of a recorded reconveyance is of doubtful effect........I have recently read cases questioning whether a quitclaim deed from the trust deed beneficiary to the trustor (borrower) is effective. In any event, whatever the lender recorded needs to be read, and read in overall context, to determine its true significance. My guess since your buyer was able to insure his title is that the release is effective, but the lien of the DofT might have been an exception to the title insurance.