Legal Question in Real Estate Law in California

Trust Deed Payout

I gave a $50,000 ''hard money'' loan and had the note recorded against a real property a few years ago. At about the same time the person to who I gave the money refinanced the same house I had the note on but did not disclose it to the bank. This person has since had the house foreclosed on and the bank has sold this property and is now in escrow with a buyer. I received a demand and reconveyance letter from escrow since my note recorded 4 days before the bank's note recorded, thus putting me in first position.

However, I was just told from escrow that the when the refinancing was done the bank took out title insurance in order to be in first position and new nothing about my note. Escrow now tells me that they are no longer obligated to pay me out, it is between the bank and me and the bank does not have to pay me.

Do I have any legal recourse to be paid out, since I truly am the first lien holder on this property with a recorded note? Please help!


Asked on 6/15/09, 4:43 am

2 Answers from Attorneys
Michael Stone Law Offices of Michael B. Stone Toll Free 1-855-USE-MIKE

Re: Trust Deed Payout

Assuming there's no defect in the documents you recorded, it appears you have a good lawsuit against the bank, who in turn will demand a defense and indemnity from the title insurer.

What troubles me about your question is that you didn't ask it of the lawyer who drew up the documents you recorded, which suggests you did it yourself, which suggests you may have messed it up somehow.

The other possible problem is your lawsuit against the bank would only recover the $50,000 plus interest, and not necessarily the attorney fees you will have to expend to get your money back. I suppose you could also sue the borrower for fraud seeking your attorney fees and also punitive damages, if the borrower has any assets you can get at.

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Answered on 6/15/09, 5:04 am
Terry A. Nelson Nelson & Lawless

Re: Trust Deed Payout

Of course you do. You may have to sue to get paid, if they don't do so upon proper demand, but your TD can not be legally ignored by the bank and title company. Feel free to contact me for the legal help you need.

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Answered on 6/15/09, 4:15 pm


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