## Facts

- Frederick Geiger obtained record title to real property and recorded a purchase-money deed of trust in favor of Hancock Savings and Loan Association.
- Geiger later executed a grant deed conveying the property to GTB Properties (GTB), but GTB’s deed was not recorded for nearly a year.
- Before GTB appeared in the recorded chain of title, GTB executed a deed of trust in favor of Mary P. McLaughlin and Barbara L. Nicholls; McLaughlin recorded it while GTB was still off-chain.
- On the same day GTB’s deed was ultimately recorded, a purported reconveyance of McLaughlin’s deed of trust was recorded, but it was executed by an entity that was not the named trustee and was therefore void.
- Also on that date, GTB conveyed the property to the Stapletons, and the Stapletons gave Far West Savings and Loan Association a purchase-money deed of trust securing a loan; the loan proceeds paid off the prior Hancock lien.
- After the Stapletons defaulted, Far West foreclosed nonjudicially and acquired title.
- Far West sued for a declaration that its deed of trust was superior to McLaughlin’s earlier-recorded deed of trust; the trial court granted summary judgment for Far West.

## Issues

1. Whether a deed of trust recorded before the trustor appears in the chain of title gives constructive notice to a subsequent encumbrancer for value when it is never rerecorded after the trustor’s deed is recorded.
2. Whether the subsequent lender had actual or imputable notice of the earlier off-chain deed of trust sufficient to defeat bona fide encumbrancer status.

## Decision

- The Court of Appeal affirmed summary judgment for Far West.
- McLaughlin’s earlier-recorded deed of trust, recorded outside the chain of title, did not provide constructive notice to Far West because it was not rerecorded after GTB’s deed entered the chain of title.
- Far West lacked actual knowledge or notice of McLaughlin’s deed of trust and qualified as a bona fide encumbrancer for value.
- The void reconveyance did not change the priority outcome; McLaughlin’s lien remained subordinate as against Far West.

## Legal Principles

- An instrument recorded outside the chain of title (a “wild” instrument) does not impart constructive notice to a subsequent bona fide purchaser or encumbrancer for value conducting a reasonable title search.
- A deed of trust executed by an unrecorded grantee will impart constructive notice to subsequent bona fide encumbrancers only if rerecorded after the grantee’s deed is recorded into the chain of title.
- Bona fide encumbrancer status is preserved where the lender gives value in reliance on the recorded chain of title and lacks actual or legally imputable notice of an earlier off-chain encumbrance.
- A reconveyance executed by a party other than the deed of trust’s named trustee is ineffective; however, the invalidity of such a reconveyance does not convert an off-chain deed of trust into constructive notice for later bona fide encumbrancers.

## Conclusion

Because McLaughlin’s deed of trust was recorded before GTB entered the recorded chain of title and was never rerecorded after GTB’s deed was recorded, it did not provide constructive notice to Far West; absent actual or imputable notice, Far West’s later purchase-money deed of trust had priority.


Far West Sav. & Loan Ass’n v. McLaughlin, 201 Cal. App. 3d 67 (Cal. Ct. App. 1988)