CA Foreclosure/Estate Title Issue

[Account Closed]

CA real property owner dies intestate in 2012. Daughter petitions the court, seeking to be made administrator in July 2013. Daughter is representing herself and to date has not yet been made admin or issued letters. There have been hearings about once a month for the last six months where she fails to satisfy some request of the court.

In December of 2013, the daughter borrows $75K from a finance group in So Cal. She borrows in her name as admin. for the estate. The finance group appears to have brokered money for three different trusts at $25K each and given each a 1/3 interest in the loan. First American recorded the deed of trust. The money appears to have been used to pay off an existing lien as that lien was satisfied and reconveyed several weeks later. It doesn't look like a formal refi as there is no title or escrow number indicated. It may have been an accommodation recording for the lender/investor.

Last week, the lenders filed a Notice of Default.

Issues:

1) The lender loaned to someone who wasn't on title and who did not and does not have letters or court authority to borrow or convey title for the estate.

2) I'm assuming no lender's title policy was issued. I can't imagine First American missing that the admin. isn't the admin. and not requiring a copy of the letters to record at the same time.

Questions:

1) Can the lender gain marketable title by foreclosing on the note and deed of trust when the borrower is not on title? Are there foreclosing trustees in CA who will go forward with this once they do a title search and see the loan was made to a party not on title?

2) Assuming the daughter eventually is given letters, can the lender record them now and perfect the loan?

3) If not, can the lenders become creditors of the estate?

4) If not any of the above, how does the lender get paid? Sue the daughter? Sue the estate?

@Rick H. what do you think?

[Rick H.]

Since this is my forte, I can give you a pretty strong opinion based on experience. However, without actually looking at the docs, I can only guess. Please send me an email privately and I'll review.

Without Letters, no one has standing CPA's (capacity, powers and authorization) to encumber the estate asset. With Letters, an encumbrance might be defeated if PR had limited powers without a specific court order authorizing the encumbrance is verboten. And with Letters with full IAEA powers, it can still be possible to defeat an action if proper noticing not followed.

Can it be foreclosed on? I suppose a NOD can be recorded but take it sale? I've done the former but would not risk the litigation of the latter. If the lender did find some trustee and took to sale, I suppose they would have to perfect title later through some sort of QTA, whether TDUS recorded by bene or 3rd party buyer.

If the lender were to be treated as an unsecured creditor, absent affirmative documentation signed by PR, I think the lender could be outmaneuvered. Unfortunately, I don't know a single probate attorney who I'd consider solid on creditor matters. So, they'd probably cave in.

If the lender used language vested as 'after acquired title' as the inheritance advance people sometimes do, the encumbrance could secure the PR's interest that inures as an heir.

I'm happy to review what docs you have and get back to you.