Bona fide purchaser for value


#1

I think I’ve read every post here mentioning a “bona fide purchaser for value” (BPV) and every part of CC 2924 referencing a BPV, such as:

“2924.© A recital in the deed executed pursuant to the power of sale of compliance with all requirements of law regarding the mailing of copies of notices or the publication of a copy of the notice of default or the personal delivery of the copy of the notice of default or the posting of copies of the notice of sale or the publication of a copy thereof shall constitute prima facie evidence of compliance with these requirements and conclusive evidence thereof in favor of bona fide purchasers and encumbrancers for value and without notice.”

The above language seems to state that even if a trustee utterly failed to comply with one or more “requirements of law” above, a BPV would remain unaffected as long as the TDUS states that the trustee complied. Presumably the borrowers might still have claims in such a case against the trustee (but the BPV purchase would remain intact)?

But does any special protection for BPV’s apply to claims of error in the *content* of the NOD or other documents (such as a name typo, if it would not be viewed as legally irrelevant anyway)?

Although various posts state that BPV’s are substantially protected against claims of error, they don’t seem to describe the actual scope of that protection, even in general terms (e.g., what classes of errors are covered). Is the “favored” treatment of a BPV (relative to a beneficiary) limited to the explicit references to that concept in CC 2924, or is there a more general principle (which would be reflected in CA case law) that can apply in other scenarios? Many comments imply a BPV can still lose a property based on trustee error (although the purchase price would be returned). Can anyone explain (even briefly in terms of a general principle) what kinds of error can cause a BPV purchase to be overturned or any BPV liability?


#2

LS … your multi-part questions re BFP (bona-fide purchaser for value) would best be answered by an experienced real estate atty. And you could very well get different interpretations. I’m no real estate attorney (don’t even play one on TV), hence my opinion here is worth what you’re paying for it (i.e. nothin’). With that disclaimer … here goes anyway …

First … a BPF would not be held to account for any errors in NOD or NTS … nor would a NON BFP for that matter, as any such mistakes would be a liability for the lender/trustee or their agents. And you’re right about the presumption in your question - “BPV would remain unaffected as long as the TDUS states that the trustee complied. Presumably the borrowers might still have claims in such a case against the trustee (but the BPV purchase would remain intact)?” < Generally speaking, I would concur.

In the context of a foreclosure (trustee sale) one of the key benefits of being a BFP (aka BPV) is that you are afforded substantial protections from liability should the BFP be named as a defendant in any litigation surrounding a trustee sale. It’s fairly common for a BFP, who is caught up in such a suit, to demurrer (the “Are you kidding me! So what!” defense motion) or move for “summary judgment.” Over simplifying … once a trustee sale buyer has recorded the “trustee’s deed upon sale” and demonstrated to the court that they are a BFP, a litigious homeowner (e.g. seeking to overturn a trustee sale) will have a substantial hurdle to overcome to keep the BFP in the lawsuit. And for that matter, to keep the property. The homeowner may be forced to remove the BFP from the suit and, if they choose, pursue other defendants for alleged damages (e.g. lender, mortgage servicer, or trustee) but a BFP will commonly be given a pass by the courts.

There are a number of cases that help to clarify what/who is a BFP, such as Melendez vs. Investment Inc … Here’s an excerpt from that case:

Definition of Bona Fide Purchaser …
In the context of applying the presumptions applicable under section 2924, however, we have recently held that a BFP ?is one who pays value for the property without notice of any adverse interest or of any irregularity in the sale proceedings.? (Nguyen, supra, 105 Cal.App.4th at p. 442, 129 Cal.Rptr.2d 436.).

??


#3

Danny B, thanks for your thoughts (which I’m sure are worth more than nothing!). I’m confused about the difference between the treatment of BFP’s or non-BFP’s in light of your comment “nor would a NON BFP for that matter”. Presumably, by non-BFP you still mean a 3rd party (i.e., not the foreclosing beneficiary). Since the beneficiary sets the opening bid and anyone can bid, I would expect that almost any winning 3rd party bid, even if far under “normal market value”, would be deemed sufficient “value” for a buyer to be a BFP. In determining whether a buyer is a BFP, I’m wondering if the only issue is whether the buyer had “notice” of some “adverse interest or irregularity in the sale proceedings”, or whether certain types of relationships between a 3rd party buyer and a borrower, lender, or trustee can be relevant (you alluded to the latter issue in your reply to bidder/spammer who wanted to sell early bid info).


#4

You are a very astute observer LS … yes, you noted my comment back to “Bidder” who was suggesting that he/she might have “inside information” on opening bid and sale dates that was not available to the public. IMHO, if you obtained such information, you might (< operative word is “might”) put your “BFP status” at risk if there were some legal challenge. And you picked up the key verbiage. Based on my study, the only two factors that matter to determining BFP status is if the bidder paid consideration and “without notice of any adverse interest or of any irregularity in the sale proceedings” (thereby affirming the holding in Calhoun v. Nguyen (2003)).

Again, I’m not a lawyer, so take my opinions for what they’re worth … nada … but reasonably priced :).


#5

If there was a 2011 Trustee Sale Research & Resource Award it would go to DannyB. Even Sean O’Toole the Founder of ForeclosureRadar is impressed by DannyB. (everyone already knows I am a member of his fan club).


#6

Concordo interamente insieme le idee espresse ancora. Andate avanti similmente.


#7

How can the buyer be considered a BFP under 2924)c) or Mendez - “without notice of any adverse interest or of any irregularity in the sale proceedings” -

I am no lawyer but the key seems to me to be the requirement that the buyer is purchasing “without notice of any adverse interest or of any irregularity in the sale proceedings”. If there is a recorded Lis Pendens on the property, the buyer is on notice. Also whether the buyer is a professional buyer could impact his ability to deny, he didn’t know since as professional in the field it could be argued by the plaintiff that the buyer as a professional should be held to a different standard when he attempts to claim he didn’t know about the Lis Pendens when he purchased the property.

I would think one could argue he was negligent if he claims he didn’t look because under the circumstances since he is in the business of buying foreclosed(step) properties he should know that he should check the records on the property before purchasing.

I would also add not to accept the judge’s ruling in an unlawful detainer action that the buyer can’t be challenged as to whether he was a BFP in an unlawful detainer action. Again I am no lawyer and am not presuming to be giving anyone legal advice, but my reading of the that section of the law saying the buyer can’t be a BFP if he didn’t purchase “without notice of any adverse interest or of any irregularity in the sale proceedings” seems to prima facie that if a judge made such a ruling in an Unlawful Detainer action, he as made an error as a matter of law and should be reversed on appeal. Hence if one gets such a ruling he should immediately appeal.