Deutsche Bank National Trust v. Pyle

Facts: A property owner obtains a mortgage secured by a trust deed on their property. The owner later defaults on the mortgage. The property is sold at a trustee’s sale and a trustee’s deed is recorded. The owner files a court action to set aside the trustee’s deed and obtains a default judgment. The mortgage holder then obtains a judgment to void the owner’s default judgment. During the mortgage holder’s court action, the owner sells the property to a buyer without disclosing the actions affecting title to the property.

Claim: The mortgage holder seeks to quiet title to the property, claiming the buyer does not hold title as a bona fide purchaser since the voided default judgment nullifies any transfers of title.

Counter claim: The buyer claims they are protected from a title challenge as a bona fide purchaser since the owner’s default judgment quieted title to the property prior to the mortgage holder’s voided default judgment.

Holding: A California court of appeals holds the buyer is not a bona fide purchaser and the mortgage holder may quiet title to the property since the voided default judgment — not a quiet title judgment, as claimed by the buyer — nullifies any transfer and does not pass title free of liens subject to the judgment, which the buyer had record notice of due to the trustee’s deed remaining in the chain of title. [Deutsche Bank National Trust v. Pyle (July 13, 2017)_CA4th_]

Read the case here.