Legal Question in Real Estate Law in California

Only if you are. Since you are the sole owner of the LLC, all knowledge you have is imputed to the LLC. So any defects in the sale to you that you would be denied BFP status on, would be denied to the company. Any defects to which you would have a BFP defense, would likewise carry over to the LLC. Because the LLC did not pay you anything for the property, and because the beneficial ownership did not change, you cannot create a BFP sale between you and the LLC. Bona fide purchaser, is short for "bona fide purchaser for value," meaning that you can never create a BFP defense by conveying to a company you own.

The full expression is sometimes given as "bona fide purchaser for value, and without notice", meaning without notice of any title defect. As Mr. McCormick points out, the LLC will be presumed to have all the "notice" that you have, so the BFP rule is probably not going to be available to insulate you from title defects you knew or should have known about. On the other hand, trustee's deeds are generally clean and public policy favors their finality. See the California Supreme Court decision in Stevens v. Plumas Eureka Annex Mining Co., decided in 1935 and reported at 2 Cal.2nd 493. You did not mention any irregularity in the trustee sale which might give rise to a challenge to its regularity and finality, and unless you know of or suspect that the foreclosed-upon borrower is going to raise some issue, I'd say you don't have much to worry about. Even if the borrower has some complaint about the foreclosure process, it is more likely than not, not going to affect the finality of the sale.

I have no idea what Mr. McCormick and Mr. Whipple are talking about. I just got back from the Second District Court of Appeal this morning where I argued this very issue.

What you are referring to is what is known as the regularity of sale. A trustee's deed creates a conclusive presumption that the trustee's sale was regularly held, when it contains such recitals and the trustee delivers the deed to a Bona Fide Purchaser (BFP.) You are the BFP because you were the purchaser at the trustee's sale. The LLC has nothing to do with it. The LLC is the transferee of a BFP, but is not the BFP for this issue.

You are a BFP if you had no notices of any sale defects. Some courts have held that the conclusive presumption of sale applies to the giving of the notice of default and the notices of sale, and others have held in dicta that they may extend to other claimed defects. Several courts have also held that no conclusive presumption applies when it conflicts with evidence on the recorded documents.

If you have a specific concern with respect to this issue, feel free to send me a private e-mail.