Watts v. HSBC Bank USA, N.A.
Annotate this CaseTimothy Watts sold real property to the Marions, who financed the purchase with one loan from PrimeLending and a second loan from Watts. Watts signed a subordination agreement agreeing to subordinate his loan to the PrimeLending loan. The Marions subsequently signed a deed of trust to PrimeLending and a trust indenture in favor of Watts. The Marions defaulted on the loan originating with PrimeLending, which assigned its interest in the loan to HSBC Bank. After a trustee's sale, HSBC purchased the property. The Marions also defaulted on the loan from Watts. Claiming to be unaware of the previous HSBC trustee's sale, Watts held his own trustee sale and was purchaser of record. After discovering HSBC claimed ownership of the property, Watts filed a complaint against HSBC and other parties claiming an interest in the property, seeking to quiet title to the property. The district court granted Watts' motion for summary judgment against HSBC, finding that the Marion debt to PrimeLending was no longer in the first priority lien position because the debt had been assigned to HSBC. The Supreme Court reversed, holding that HSBC's deed of trust in the property was clearly entitled to priority over Watts' subordinated trust indenture.
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