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Unauthorized Cancellation or Satisfaction; Documents of Rescission by Ed Urban

August 2008

1. Mortgages and deeds of trust - Unauthorized cancellation or satisfaction and reinstatement

There are several reported cases dealing with unauthorized cancellation of record and its effect on purchasers and lenders, not to mention title examiners.

In Household Realty Corp. v. Lambeth, the most recent case citing the others, a recorded deed of trust was given by Lambeth, the owner, to a trustee for Axiom and Axiom assigned the note and deed of trust to Household. Household recorded its deed of trust assignment. Lambeth quitclaim deeded the property to Heineman and Johnson, trustees of the Lambeth Family Trust. The opinion indicates that, in a wild set of facts, even Lambeth became a substitute trustee of record improperly, Heineman as trustee of the deed of trust improperly executed a “Full Reconveyance” which the court characterized as an unauthorized cancellation, which also reconveyed the property to the Lambeth Family Trust. Months later, Fremont, relying on the public records, recorded its deed of trust from “Lambeth” securing a new loan. (The opinion is not clear whether Lambeth or the Lambeth Family Trust was in title.) Subsequently, in litigation, judgments were entered reinstating the Household deed of trust as of its original recording and establishing its priority ahead of Fremont’s deed of trust. The Court of Appeals affirmed, holding for Household, citing prior cases and analyzing them. The published cases cited were First Financial Savings Bank, Inc. v. Sledge, Monteith v. Welch, and Union Central Life Ins. Co. v. Cates.

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