Trustee Rescinding Sale - California

[Mark Hamilton]

The facts are straight forward:

1. I bought a Home Equity Loan in foreclosure. It was in the first position because a subsequent 'first' loan did not have a subordination agreement recorded. I received and recorded the Trustee Deed.

Three weeks later I found out that one week before the foreclosure sale the beneficiary/trustee of the 'second' position filed a suit against the bene/trustee of the first (the Home Equity Loan) claiming that the order ought to be reversed because the 'second' bene paid the first off the home equity loan 7 years ago but that it was never recorded and the Home Equity Loan was maintained active when it should have been closed.

3. Although the suit was filed, the lawyers for the 'second' forgot to file a Lis Pendens SO I bought the 'first' Home Equity Loan being unaware their was a suit disputing the seniority.

4. The Trustee now wishes to rescind the sale - which is not something I am sure that I want. Here is my take:

First, it is my understanding that once a trustee deed is issued and recorded there creates a conclusive presumption of validity of the sale in favor of the bona fide purchaser.

Second, if there is a material procedural error in the foreclosure process and it is discovered before the issuance and recording of a trustee deed and it results in a price significantly less that what otherwise might be obtained, the trustee can abort the sale and return the funds (with interest) to the purchaser - but this is not the case. At this point there is no allegation or proof of any material error in the statutory foreclosure process, AND in any event the deed has been delivered and recorded. This sounds like an issue for the title company insurers to work out.

Third, it seems to me that the trustee and beneficiary of the 'first' home equity loan is attempting to create full immunity for foreclosure choices it made prior to the sale. If in 2005 it were negligent in its duties as alleged , and was fully aware the suit against them, and then they chose to go forward then that was their choice within the process (not a flaw in the process itself). A change of heart is not a sufficient reason to pretend the sale and recording did not occur.

Finally, the failure of lawyers of the 'second' trustee/bene to timely record a Lis Pendens prior to the foreclosure sale suggests that if there is a flaw it is that such was not posted in the record and bidders are the ones that should have the option to cancel the purchase. I am unclear if recordation of a Lis Pendens is a statutory foreclosure procedure.

I think I have a strong case for a very valuable property - thoughts? Should I fight it?